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Farmers get a shield in India-EU FTA

Economic Times | 22 Oct 2007

Farmers get a shield in India-EU FTA

Rajeev Jayaswal & G Ganapathy Subramaniam, TNN

NEW DELHI: The free trade agreement (FTA) component of the India-European Union comprehensive economic cooperation agreement (CECA) is likely to exclude nearly 150 farm products to shield Indian farmers from increased competition posed by subsidised goods.

The draft negative list for the farm sector includes 156 agri goods including dairy products, sugar, fruit, vegetables, honey, mushroom, egg products, fish, poultry, saffron, coriander seeds, meat products, maize, vanaspati, and cocoa powder. Wines & spirits are also in the negative list, said sources. As many as 246 items from the manufactured goods segment and raw materials category have also been included in the draft negative list. The commerce & industry ministry has circulated the draft list to other government departments and the final list would be compiled after consultations, the sources said.

CECA specifies that FTA negative list should not cover more than 10% of total imports, fixing a ceiling of 520 items for exclusion by India. Since the current draft includes only 402 items, there is scope for excluding more products from FTA but small industries emphasised at a recent consultation organised by UNCTAD that they do not want a large negative list. Small and medium units are interested in tariff concessions on a larger number of items since it could make raw materials cheaper.

The government is in the process of consulting stakeholders through internal discussions and consultations organised by UNCTAD. Trade between India and the EU, now estimated at $50 billion for merchandise, is growing at a swift pace and both sides are keen on inking the proposed CECA without delay.

During the consultations, there was special emphasis on certain areas like textiles & clothing, marine products, textile machinery, rubber, sugar and peaches. In the case of fish, for example, the negative list was narrowed down to just a few categories as India’s export interests weigh more than import competition apprehensions of some sections of the industry from Kerala. The key objective of the consultations on the negative list is to balance the interests of the domestic industry as well as exports. If India follows a rigid approach, officials feel EU would reciprocate with a defensive list, partially negating the purpose of FTA.

In the case of manufactured goods, the draft negative list contains automobiles like cars, commercial vehicles and two wheelers, apart from electric motors, gen sets, furniture and chemicals. The government is keen to adopt a cautions approach to the EU FTA in view of the controversy generated by the Asean FTA plan which is still hanging fire. With resistance from various quarters intensifying against increased import competition for the farm sector, the government is doing a balancing act in the case of Asean. Congress president Sonia Gandhi had expressed concerns over impact of import competition on farmers and Asean members complicated the issue by seeking enhanced market access for sensitive products like edible oil, rubber and spices.

In the case of EU, the government feels significant benefits would arise from the services component of CECA. India will benefit through increased investments into India because of the pact and increase in market access for Indian companies and professionals tapping the European market.

 source: Economic Times