The Hindu : Business : ASEAN FTA: negative list will protect farmers, industry

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ASEAN FTA: negative list will protect farmers, industry

Sandeep Joshi

India’s duties on 10,885 tariff lines will be reduced between 2010 and 2019 under various tracks

Agriculture sector to become more competitive
Mechanism in place to address sudden surge in imports

NEW DELHI: The signing of the Free Trade Agreement (FTA) in goods between India and the Association of Southeast Asian Nations (ASEAN) marks a successful completion of hard bargaining by the government under which the 10-member regional trade bloc has agreed to a ‘negative list’ of items that takes care of the interests of India’s farm sector as well as its industry.

Pointing out ASEAN has not accepted the ‘negative list’ concept in its FTAs with any other country, senior Commerce Ministry officials said it took over five years for India and ASEAN to iron out their differences over the tariff structure.

And now, India has the cushion of a gradual reduction of tariffs that would give time to both its farm sector and industry to improve production and become more competitive. A ministry official pointed out that India has managed to safeguard the interests of both its farmers and industry through a large ‘Negative and Exclusion’ list of 489 items, which includes 303 items of agriculture sector; 81 items of textiles sector; 50 items of auto sector and 17 items of chemical sector. Moreover, gradual reduction of tariffs has been provided in the FTA, where India’s duties on 10,885 tariff lines would be reduced between 2010 and 2019 under various tracks and different timelines. While the first four years would see tariff being eliminated on 7,788 tariff lines (mostly with duties from 7.5 to 10 per cent would be reduced on an average by 1.5 to 2 percentage point annually); on 1,252 lines, tariff would be eliminated in seven years (most of which having the duty in the range of 7.5 to 10 per cent, would have an annual average reduction of 1-1.5 percentage point), the official said.

MFN tariff rates

Referring to critical items of interest to India, particularly to the farming community of southern States, the official said in products like crude palm oil, refined palm oil, coffee, black tea and pepper, tariff cut would be effected with reference to high prevailing rates of 2005. Even MFN (Most Favoured Nation) tariff rates are nil for crude palm oil and 7.5 per cent for refined palm oil, the official said.

On the other hand, India would gain market access for machinery and machinery parts, steel and steel products, agricultural produce such as oilseeds and wheat, buffalo meat, auto parts, chemicals and synthetic textiles, while ASEAN would stand to gain market access for its non-agricultural products.

Rules of Origin

Similarly, a tougher regime for ‘Rules of Origin’ — which would ensure that a product would be counted for import from a particular country if there is at least 35 per cent value addition in that country — will avoid routing of products made in China through ASEAN.

The FTA also provides for bilateral safeguard mechanism to address sudden surge in imports. In such an eventuality if it hurts a domestic industry, safeguard measures including imposition of safeguard duties may be put in place for a period of up to four years. The flexibility to invoke the safeguard measures will remain available for both sides for 7 to 15 years, the official said.

Though ASEAN would stand to gain more than India on FTA in goods when its comes into effect from January1, 2010, India would have an edge when the trade agreements on services and investments are signed as it would help India Inc. explore the 10-nation market for its strong services sector, besides attracting investments.

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