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India in center of effort for world’s largest free trade area

World Peace Herald

India in center of effort for world’s largest free trade area


Published March 21, 2006

NEW DELHI — India is pushing ahead on negotiations for free trade agreements with a series of Asian and Middle East countries that are expected to result in the emergence of the world’s largest free trade area by population.

India, along with Bangladesh, Pakistan, Sri Lanka, Nepal, Bhutan and Maldives, launched the South Asian Free Trade Area (SAFTA) in January. The New Delhi government is also making headway in negotiations to reach a free trade agreement with the Association of Southeast Asian Nations (ASEAN) in time for a launch scheduled for January 2007.

India is also initiating talks for a free trade agreement with the Gulf Cooperation Council (GCC), composed of six Arab oil-producing countries including Saudi Arabia.

Under the SAFTA agreement, tariffs will first be lowered by India, Pakistan and Sri Lanka, which are the relatively more prosperous countries among the seven SAFTA members. All member countries will lower tariffs to the same level by 2016.

This will create the world’s largest free trade area, with more than 1.4 billion people.

India is pursuing an multi-directional diplomacy that focuses on economic and trade issues. It is trying to be the leader in an effort for a region-wide economic revival in South Asia. At the same time, India is paying close attention to relations with Southeast Asia to the east and Arab countries to the west.

India’s Prime Minister Manmohan Singh met the heads of states of ASEAN countries in mid-December in Kuala Lumpur, Malaysia, during an ASEAN Summit and the East Asia Summit. During these meetings, Singh characterized his country’s relations with ASEAN as being at the center of New Delhi’s "Look East Policy." He appealed for an expansion of economic cooperation with ASEAN through a free trade agreement.

India launched its "Look East" policy in the early 1990s. Particularly in the past few years, India’s economic exchanges with ASEAN countries have expanded rapidly. Trade between India and ASEAN countries grew from $2.5 billion in 1993 to more than $20 billion in 2005.

Singh has set a goal to increase trade with ASEAN to $30 billion by 2007.

India and the GCC oil-producing countries have agreed to start FTA negotiations later this month. The volume of trade between India and GCC excluding crude oil and petroleum products was about $7.5 billion in 1990. It increased to about $20 billion in 2004.

India wants to raise up its own economy by attracting GCC countries, which possess abundant funds for investment and enormous purchasing power as a result of the rising price of oil.

If the free trade agreement between India and GCC is expanded to cover the service sector, it will open a new economic horizon in IT and financial sectors. It will diversify the trade relationship currently focused on raw materials such as oil and metals.

 source: World Peace Herald