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India should not rush into FTA with China: FICCI

Press Trust of India | 18 October 2007

India should not rush into FTA with China: FICCI

New Delhi, Oct 18 (PTI) — Apex business chamber FICCI today said India should not rush into a Free Trade Agreement with China, warning that ambitious tariff cuts can derail the growth momentum in bilateral trade.

FICCI said India should also not grant the ’Market Economy Status’ to China for the time being.

"The idea of a full-blown FTA with China is much ahead of its time and India must wait before considering market economy status for its eastern neighbour, which is characterised by a different operating environment for business and range of subsidies," the chamber said.

It is imperative to have a level-playing field between businesses of India and China before initiating negotiations towards a possible bilateral trade agreement, FICCI said in its study on ’Granting Market Economy Status to China: Views from Corporate India’.

The Chinese industry has an unfair advantage over its Indian counterpart due to factors like across-the-board state support for domestic companies, array of tax exemptions and artificially undervalued Chinese currency.

"The practice of managing the Chinese Yuan at a low level and preventing it from moving upwards amounts to an effective export subsidy, putting Indian businesses at a relative disadvantage vis—vis supplies from China," the industry body said.

It quoted a research paper which stated that an FTA would lead to sizable welfare gains for China and losses for India.

While welcoming the upswing in trade between the two nations, FICCI said a careful and gradual approach should be adopted for the FTA to ensure that the growth momentum of two-way trade remains sustainable. PTI

 source: PTI