AP: India Exploring Free Trade Deals
Associated Press
3 September 2004
AP: India Exploring Free Trade Deals
India wants to explore possible free trade agreements with Japan, China and the United States, as negotiations on such deals with Southeast Asian countries progress, the commerce minister says.
India, a country of 1 billion people, has a meager 0.7 percent share in global trade, largely because past socialist governments relied less on exports for economic growth and shunned free trade.
However, India is now trying to catch up with its East Asian neighbors, who have made free trade pacts a cornerstone of their development strategies.
In an interview Friday with The Associated Press, Commerce Minister Kamal Nath said he intended to pursue free trade accords with more countries.
"We have set up a joint study group with Japan. We could also look at China," Nath said. "There is also a proposal from the India-U.S. Joint Business Council for a free trade pact in services."
In recent years, U.S. companies have been increasingly transferring software-related back-office operations to India in an effort to cut costs.
To date, India has only one free trade accord - with Sri Lanka. But it is negotiating deals with several Southeast Asian countries.
This week, New Delhi began slashing duties on select imports from Thailand to expedite a free trade pact with that country. Negotiations with Singapore and the 10-member Association of Southeast Asian Nations are also going well, Nath said.
"I am encouraged by the progress," he said, adding he hoped talks with ASEAN would be concluded soon.
Nath will be meeting economic ministers of ASEAN countries on Sunday in Jakarta, Indonesia’s capital, to discuss a trade pact.
Nath said the government also wants to make India a regional trading hub by creating special zones where foreign companies can set up manufacturing facilities and warehouses.
Earlier this week, the minister proposed creating Free Trade and Warehousing Zones where foreign companies would build warehouses and store and sell their products there free of tax.
On Friday, he told AP that the government would also introduce legislation to revamp Special Economic Zones, which were set up several years ago but have failed to take off.
The zones, which allow foreign and domestic companies to set up export facilities and offer them tax exemptions, have flopped because of rigid labor laws. Exporters say they don’t have the freedom to hire workers only when they get orders and lay them off when there are few contracts.
The federal government has not been able to do much because labor laws come under the purview of state governments.
Nath said he is optimistic that "states will change their views and make such provisions in their labor laws, which is desired by promoters of the special economic zones."
