The Hindu : Front Page : Not for regional trade pact: CII chief

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Sunday, Jan 13, 2008
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Not for regional trade pact: CII chief

Pallavi Aiyar

Dumping of Chinese goods feared

“India should use utmost restraint during negotiations”
Task force may suggest deferring RTA implementation

Beijing: Indian industry is “strongly opposed” to a Regional Trade Agreement (RTA) with China, president of the Confederation of Indian Industry and Chairman of Bharti Enterprises, Sunil Bharti Mittal, told The Hindu.

He went on to urge the Indian government to use “utmost restraint” when negotiating the matter with China.

In recent years, Beijing has been pushing for such an agreement arguing that it would provide bilateral trade a strong fillip. According to Mr. Mittal, however, the consensus among Indian business is that more time is needed to ascertain that any such agreement would not be used to swamp Indian markets with cheap Chinese goods.

India is already one of the largest instigators of anti-dumping investigations against China. An RTA would also probably involve recognition of China as a market economy, something India is reluctant to grant, given continued suspicions regarding the transparency of Chinese pricing and accounting systems.

Were New Delhi to grant market economy status (MES) to China, it would mean that India would compulsorily have to accept pricing figures supplied by Beijing, leading to fears of further large-scale dumping of Chinese products. Currently, some 80 countries have granted China MES, although none of the large trading powers such as the United States, the European Union or Japan have done so.

Mr. Mittal is of the opinion that Sino-Indian trade is increasing strongly even in the absence of any trading agreement which, coupled with the fact that India’s duty structure at present is already quite low, militates against any urgent need to sign an RTA.

The joint task force set up by the two countries to study the feasibility of an RTA will make public its recommendations during Prime Minister Manmohan Singh’s visit to Beijing. It is widely expected to suggest deferring the implementation of any RTA while not ruling it out altogether.

While stressing the opinion that India Inc. was no longer running scared of Chinese competition in the way that it did a few years ago, Mr. Mittal said the Indian industry was still in “the process of getting adjusted to China’s participation in the Indian market.”

Trade deficit

On the subject of India’s widening trade deficit with China, currently to the tune of some $10 billion, he said it was likely to continue in the foreseeable future. The reason, he explained, was that the Indian and Chinese markets were not obviously complementary.

Thus while India’s advantages lay in services such as telecommunications, this was a restricted sector in China. Similarly, banking, where India has certain strengths, was also strictly regulated in the mainland. In manufacturing, on the other hand, China had a strong lead over India, so Indian products found it hard to find a market there.

Increasing exports

The CII president thus concluded that the best scope for increasing Indian exports to China lay in commodities. While iron ore already made up the bulk of China’s imports from India, Mr. Mittal said there was a strong case for selling more agricultural products from India.

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