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A political thrust needed

Union Commerce Secretary G.K. Pillai has expressed optimism about India signing a Free Trade Agreement (FTA) with the Association of South East Asian Nations (Asean) at the November summit to be held in Singapore. But Asean Secretary General Ong Keng Yong believes that it would be clinched latest by July 2008. That gap in perception may also signify the differences between the two sides that need to be ironed out at the next round of talks slated for September. Mr. Pillai has said that 98 per cent of the contentious issues have been settled and the rest can be sorted out ahead of the India-Asean summit. And Mr. Ong feels the task of bridging the gap may take few more months to complete and, consequently, operationalisation of the FTA is unlikely to happen before mid-2008. Should the official-level talks next month fail to yield an agreement, the November summit can provide the political thrust and direction the process might need for reaching the goal. When launched about three years ago, the negotiations for an FTA with Asean were expected to proceed on a fast track. But that has not happened. Obviously, the protectionist lobbies working for the retention of certain items in the sensitive or negative list — covering commodities that will not come under the low or no tariff regime — have managed to retard the progress of the exercise.

From the Indian standpoint, palm oil, petroleum products, coffee, tea, and pepper are sought to be kept on a special list because of the sensitivities involved. These five items constitute a good part of the 10-member ASEAN grouping’s trade with India, and therefore it does not want to sign the FTA before some concessions are extracted on their account. It is for Prime Minister Manmohan Singh to intervene and impress on the negotiating team to sort out the differences in the September round of talks so that the agreement could be formalised at the November summit. An FTA can be mutually beneficial and Indian officials themselves estimate that exports can almost treble in five years, from $8 billion to $22 billion. The FTA, as in the case of the Asean Free Trade Agreement (AFTA), will provide for a two-phased implementation — one for the less developed countries such as Vietnam, Cambodia, Laos, and Myanmar, and the other for the rest of South East Asia. The bulk of India’s trade is with Singapore, Malaysia, Thailand, and to a lesser extent with Indonesia. The Philippines and Brunei have to be brought into focus with the advent of the FTA. It will be greatly to India’s overall advantage to clinch the FTA early, despite the pressures on some specific sectors that will be thrown open to competition.

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