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India, Asean toiling for pact on negative items under FTA

Financial Express, India

India, Asean toiling for pact on negative items under FTA


16 February 2006

NEW DELHI, FEB 15: India and Asean (Association of South East Asian Nations) are struggling to reach an agreement on the list of sensitive items for the proposed free trade agreement (FTA) between the two sides. The sensitive or negative list contains items which will not be subjected to duty cuts agreed under the FTA.

While India is desperately trying to bring down this list below 1,000 from the initial list of 1,500 items, Asean members want it to be not more than 500. Asean, on the other hand, is yet to come up with its own sensitive list.

The on-going meeting of the trade negotiations committee in Hanoi will attempt to bridge the gap between expectations and demands of both the sides, but officials warn that members may have to meet several times before the issue is satisfactorily settled. The agreement is scheduled to be implemented from Jan 1, 2007.

The India-Asean FTA has faced roadblocks right from its inception. The early harvest scheme which was to proceed the FTA had to be dropped because of disagreement over the issue of rules of origin (ROO). ROO is very important as it determines which product should qualify as originating from the member countries and hence be eligible for preferential tariff treatment.

The ROO issue for the FTA has been finally settled with both sides agreeing on a compromise. While the Asean has decided to retain the twin criteria for determining ROO as demanded by India instead of a single criteria, the latter agreed to make the twin criteria less stringent.

The problem India faces in pruning its negative list of items stems from the fact that no industry is agreeing to pull out its products from the proposed initial list of 1,500 items.

The commerce ministry has started holding consultations with industry representatives on the issue, but it has not managed to deliver substantial results so far.

Officials said that although the Asean raised a hue and cry over India’s tentative sensitive list of 1,500 items, it is yet to come up with its own list. The week-long meeting of the trade negotiations committee will throw more light on where things stand.