The Hindu : Business : India, Thailand to sort out differences in approach to rules of origin

Online edition of India's National Newspaper
Sunday, Dec 19, 2004

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Business

India, Thailand to sort out differences in approach to rules of origin

By R. Gopalakrishnan

CHENNAI, DEC. 18. Differences in the approach to the Rules of Origin preferred by India and Thailand are among matters under negotiation between the two countries with reference to the proposed free trade agreement (FTA), according to Sothitorn Mallikamas, Associate Professor of Economics of Chulalongkorn University, Bangkok.

India wants a combination of the "local content" norm (minimum value addition) and the "substantial transformation" norm (implying a change in the product classification) adopted for eligibility of products for FTA concessions, while Thailand wants only one of the two to be adopted as per international practice, he said.

Talking to The Hindu, Prof. Sothitorn, who is here as part of a 20-member executive trade mission sponsored by the Federation of Thai Industries (FTI), said that while India insisted on adoption of the four-digit Harmonised System of classification, Thailand favoured the six-digit classification.

Being a more open and liberal economy which imported a lot of inputs and exported them after value addition within the country, Thailand preferred a much lower norm of local content than the 40 per cent level preferred by India, he said.

Prof. Sothitorn, who is studying the impact of Thailand's FTAs (existing and proposed) on its iron and steel industry, said the Thai steel industry was nervous about the prospect of FTA with India since it was hardly competitive vis-à-vis its Indian counterpart. Thailand might want steel kept in the "sensitive" category of items, which would be the last to be brought under the FTA to be implemented in stages. (At present, with effect from September 1, 2004, a total of 82 items identified under the Early Harvest programme of the FTA are subject to concessional tariffs, while the FTA proper is still being negotiated.) The Thai steel mills had smaller capacities and his country imported from Japan most of the high-value steel items.

India favoured 25 per cent of the tariff lines brought under the sensitive list, while Thailand wanted no more than 5 per cent, he said. He felt that the trend towards regional trade agreements (RTAs) was inevitable, in view of the poor progress on the agenda of the World Trade Organisation (WTO) and thanks to the fact that it was easier for smaller groups of nations to arrive at mutually acceptable arrangements.

Earlier, members of the Thai delegation, including Thamrong Mahajchariyawong, Assistant Secretary-General of the Board of Investment (BoI) of Thailand, and Anen Aung-aphinant, Vice-Chairman of the FTI, participating in a meeting organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), explained the tax concessions and access to ASEAN (of which it is a member) and Chinese markets that manufacturers in Thailand would enjoy.

A. C. Muthiah, former President of FICCI, said the India-Thai FTA would also cover services, investment, tourism, construction, ICT, human resources and biotechnology.

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