India: FTA concerns
Sify | 9 October 2007
FTA concerns
With elections likely to be held earlier than scheduled, the prospects for progress on the free trade agreements with Thailand and Asean have weakened further.
This is because New Delhi will be even more careful now in granting further concessions to the Asean and Thailand, a gesture the South-East Asians have said they are waiting for if the agreements are to be wrapped up quickly.
Bangkok, for instance, is waiting for New Delhi to make further reductions in the Indian negative list and more concessions in the rules-of-origin stipulation which, New Delhi apprehends, could enable re-export of third-country products with cosmetic “value-addition” made in Thailand.
As a bargaining ploy, the Thais have agreed to drop the demand for a further reduction in the Indian import tariff on their rubber exports, a significant gesture as Thai rubber exporters, facing a rising baht, are under pressure worldwide because of falling rubber prices, making exports from other sources more competitive.
This apart, Indian manufacturers of auto ancillaries, plastic products and electronic components are totally against making it any easier for cheap Thai products to enter the Indian market, a stand that is growing stronger with early elections expected. As far as the FTA with Asean is concerned, the situation is no better - perhaps worse - with some individual member-countries still not submitting their negative list of items.
Not only has India given in its own (revised) list, it has also asked for a lowering of non-tariff barriers (such as the stipulation on compulsory use of domestically-produced auto components), which has not yet evoked a favourable response from the grouping.
While it is true that New Delhi is not prepared to open the domestic market wider to South-East Asian exporters, Bangkok and Asean are also trying to drive as hard a bargain as possible knowing full well that the Indian market is one of the most promising for their exporters.
Recently, the Thai Commerce Minister said that the bilateral FTA would be the “deciding factor” in the promotion of two-way investments”, and that “shared prosperity and shared benefits” should be the cornerstone of trade ties. This applies to Asean as well, and it should ideally accept the Indian proposal to begin negotiations on trade in services this year so that they can be completed by 2008, a proposal resisted on the ground that services and investment should follow the finalisation of the FTA accord. It is in this perspective that the recent moves to promote Thai investments in the North-East should be seen, a step that should serve as a pointer to the authorities in Bangkok and in Asean that a policy of full and fair reciprocity usually delivers the best results.
