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FTAs ridden with difficulties

— FILE PHOTO

PALM FRESH: A palm oil nursery in Indonesia.

It was quite clear that the India-ASEAN (Association of South East Asian Nations) Free Trade Agreement (FTA) would not be signed at the Singapore summit, despite the goodwill and desire on both sides to conclude the deal. As Prime Minister Manmohan Singh said on his way to the summit, some unreasonable demands were being made on “some sensitive agricultural products.”

As the Doha round of talks at the World Trade Organization (WTO), agriculture and farm products seem to be the main hitch in inking the FTA, though it has been on the works for a few years now. Commerce Minister Kamal Nath sounds optimistic in hoping to conclude the agreement by March 2008.

Sources familiar with the negotiations say that aside from the sensitivities of the Indian farm sector and political spectrum, a major hurdle is the fact that while individual ASEAN countries were coming up with separate lists of sensitive items of trade, India was expected to present a common list for all the Southeast Asian countries. This makes it doubly difficult because each country in that region had a different basket of imports and exports. They cannot be treated together on the same platter.

After several rounds of official and then even ministerial level talks, the differences have been considerably narrowed down to a limited basket of commodities such as palm oil, tea, coffee, and pepper. A certain degree of convergence is possible on all other items, including petroleum products.

Over the past decade, successive governments at the Centre have tried to lower the taxes as well as the non-tariff barriers to trade. Alongside the obligations under the WTO, India has attempted to bring its tariffs on a par with the ASEAN level as an objective to meet the more stringent WTO rules when they come into full play. As such, the sources argue that only the “sensitive lists” need to be worked on from both sides and this should be possible by March or April next year. An interim solution arrived at seems to be to settle for a “most sensitive list,” but this too needs to be sorted out in due course. “If the current discussions on the Doha round of talks do make progress and we are able to clinch an agreement, things will be so much easier for this or any other FTA, because the key agriculture sector will be sorted out in these negotiations,” a senior official explains.

India-ASEAN trade has already reached the $30-billion mark and with a push through an FTA, it can easily climb to the $50-billion level. Singapore, Malaysia, Indonesia, and Thailand are the major trade partners in Southeast Asia, while Vietnam has also shown great potential. With an FTA, Indian trade with the other countries — Brunei, the Philippines, Myanmar, Cambodia, and Laos — should also pick up.

Officials concede that it is not just the India-ASEAN FTA that has made halting progress and involved some tough bargaining. Earlier experiences, especially in the neighbourhood, with Sri Lanka, for instance, have run into rough weather even after an agreement was signed. It is only the “political will” of two countries or sides that enables a bilateral FTA to achieve fruition. It may be that much simpler to hammer out a bilateral pact rather than a country-to-region agreement, as in this case with ASEAN. When even the South Asian Free Trade Agreement (SAFTA) has been in the making for years, with new deadlines being set after each delayed summit, it is understandable that the India-ASEAN FTA is getting delayed.

Industry and trade sources say that mere political compulsions should not lead to the signing of an FTA. The private sector, which accounts for the bulk of trade and investments, needs to be taken into confidence, and consulted at every stage. This was happening and trade and industry are conveying both their concerns and demands to the government through a consultative mechanism. “If tea and rubber emerged as the major concerns in the FTA with Sri Lanka, it is again the plantation sector that has become a grey area with ASEAN.

We need not feel bad or hesitant to bargain. Our complaint is that India has been far more liberal in granting concessions than most of its trade partners. So we must toughen our bargaining position to clinch a mutually beneficial agreement. At a time when the farm sector here is passing through a very critical phase, the government has to protect its interests. Similarly, domestic industry, in some areas, requires protection for a while longer, before it can stand up to global competition,” a spokesman for the Confederation of Indian Industry reasons.

V. JAYANTH

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