The Times of India
India-Asean FTA hits fresh roadblock
Tuesday, June 20, 2006
NEW DELHI: The much touted India-Asean free trade agreement (FTA) is in a limbo with the 10-country trading bloc hardening its stance and seeking more concessions from India. During last round of negotiations late last week, Asean was unwilling to accept India’s fresh negative list.
India softened its stance by offering to reduce the negative list from 991 to 854 items, which would not be subjected to duty cuts. New Delhi had originally proposed to keep 1,414 items on the negative list, which was later pruned.
An unimpressed Asean took an aggressive position proposing a negative list of 60 items something that is untenable to India, given the political sensitivities.
If that was not all, Asean also rejected India’s proposal to use tariff rate quotas (TRQs) for import of products like palm oil, pepper, tea and coffee.
TRQs were expected to provide India the flexibility to allow import of a specified quantity of products at lower of zero duty while the entry of the items above the threshold would be subjected to the normal tariff, which is nearly 90% in case of palm oil.
In fact, TRQs were seen as the way out for the UPA government which had been caught in a bind with Sonia Gandhi asking Prime Minister Manmohan Singh to ensure that the interests of Indian farmers were not affected, while Asean was putting pressure on India to open up its trade.
The Asean stance on TRQs was the result of a tough posture adopted by Malaysia the largest palm oil exporter though officials from Indonesia, which is the second largest exporter, indicated to TOI that they were willing to accept the offer on TRQs to ensure that the deal goes through.
India had opted for TRQs as a concession to Indonesia, Malaysia, Thailand and Vietnam, where these items account for a large share of their trade, since India was bound by its commitment to cover 80% trade of all Asean members.
In case palm oil was left out, then over 50% of Indonesian export and 20% of Malaysian exports would not be covered by the agreement.
With the talks hitting a roadblock, the commerce ministry has decided to lob the ball back into the court of the Trade and Economic Relations Committee headed by the PM.