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Trade: India, Asean resolve differences over FTA

	June 01, 2009

The last remaining differences between India and the Association of South East Asian Nations (Asean) on the ambitious Free Trade Agreement (FTA) on merchandise goods have been resolved and the deal is ready for signing.

According to government officials, the Asean FTA, as well as a similar pact with South Korea involving free trade of goods, services and investment, could be signed on the sidelines of the summit of Asean nations, scheduled in October this year.



Early this year, Asean demanded duty cuts twice a year if the treaty was to be signed in 2009. This was because, according to the original schedule, the FTA was to be signed in December 2008, with duty cuts being carried out in predetermined slabs placed at 12 months starting January 2009.



Since the treaty could not be signed, Asean members wanted the first round of duty cuts to be implemented as and when the deal was signed in 2009, followed by the next round in January 2010, according to the original schedule. However, India declined to undertake duty cuts twice in a period of one year.

According to official sources, these differences have been sorted out now. India will undertake duty cuts only once in a period of 12 months.

The new arrangement on Asean FTA is likely to lead to the first round of tariff cuts being implemented a year later than the original schedule. Thereafter, the tariff cuts will be announced in various slabs every January.

The India-South Korea Comprehensive Economic Partnership Agreement (CEPA) is also ready for signing, sources added.



“Representatives from India and South Korea will attend the forthcoming Asean summit in Thailand and hence, both the deals could be signed there. Such high profile summits are favoured for announcing or inking deals,” the official said.



Both the FTAs will need approval from the Union Cabinet before they are signed.

The proposed India-Asean FTA has been delayed several times owing to differences over issues like that of restricted list of goods, duty cut in farm products like palm oil and norms related to value addition.

Negotiations on the South Korean CEPA have been comparatively smoother, apart from some issues related to enhanced market access in services-related sector like healthcare.



Both the free trade deals will be signed at a time when world trade is expected to shrink by 9 per cent in 2009.

The trade deals will be the first ones to be signed during the present UPA regime, which in its earlier term had initiated about 15 negotiations on similar pacts with other countries and economic blocs like the European Union.

“The FTA with Asean will lead to closer economic integration, taking the level of cooperation between both the sides several notches higher. Moreover, the CEPA with South Korea will get India locked into the growth dynamic seen in the region,” said Biswajit Dhar, director general, Research and Information System for Developing Countries.



Asean, which accounts for nearly 11 per cent of India’s exports and 9 per cent of imports, is seen to have strategic importance for the country.

India to intensify global trade engagement

The new Commerce and Industry Minister Anand Sharma said on Friday last that

India will intensify its global economic engagement in sync with the country's profile and the Government will take "every possible step" to give a filip to the industry, "We shall see to it that in the global context our economic engagement is intensified as it is expected of a country of India's profile," Sharma said in his first interaction with reporters after being appointed as the Commerce and Industry Minister.



Sharma, who was Minister of State for External Affairs in the previous UPA Government, said he would benefit from his earlier assignment.



"I will benefit from my earlier experiences, particularly from the External Affairs Ministry," he said adding economic diplomacy was a part of the global engagement.



India firm on duty-free access to EU market



According to a commerce ministry spokesperson, India would stick to its demand for duty-free access to 95 per cent of the outward trade from India to the European Union (EU), against 90 per cent of that from the EU to India, for a Free Trade Agreement (FTA).

It is to be noted, the sixth round of EU-India trade negotiation in Delhi in March ended without any substantial progress because of the tariff-related issues.

The EU is India’s largest trading partner and the total bilateral trade stood at over $70 billion in 2008-09.

Apart from the EU, India is also negotiating an FTA with the European Free Trade Association (EFTA) that includes Switzerland, Norway, Iceland and Liechtenstein.



The India-EFTA two-way merchandise trade touched $4.1 billion in 2008. Some of the major items imported by EFTA from India are organic chemicals, precious stones, textiles and clothing, machinery and mechanical appliances, among others.