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India-Thailand FTA delayed

Business Standard, India

India-Thailand FTA delayed

By Rituparna Bhuyan, New Delhi

19 June 2007

Talks may go on till October; negotiations on services & investments pending, say officials.

Negotiations for the proposed free trade agreement (FTA) covering goods, services and investments between India and Thailand, which were supposed to conclude by this month-end, are likely to go on till October.

Prime Minister Manmohan Singh and his Thai counterpart Suryaud Chulanont, who is visiting India from June 22, were supposed to make a joint statement on the operationalisation of the agreement on June 26.

“It is unlikely that a joint statement on the operationalisation of all the aspects of the proposed FTA would be possible. In recent negotiations, Thai trade negotiators wanted to complete talks on goods and then move on to services and investments. However, the Indian side insisted on negotiating in all the three areas at the same time,” said a government official.

Commerce Minister Kamal Nath had recently announced that the negotiations for the proposed free trade agreement were to be concluded by June, 2007.

While negotiations on goods are at an advanced stage, government sources maintain that talks on services are still lagging behind. With the June deadline in mind, negotiations between the two countries had speeded up, with two rounds of talks in May and June.

“The meeting between the two prime ministers will be crucial, where they could iron out the sticky points in the negotiations, thereby giving a boost to bilateral relations,” the official added.

Even if negotiations would have concluded by June-end, it would have taken another two months to complete formalities to get the Union Cabinet’s approval. But with negotiations stuck, Indian officials maintain that the proposed FTA may not be signed by October, by when Thailand will have entered election mode (the nation goes to polls in December) and major policy decisions may not be taken.

During the FTA talks, Thailand has been demanding greater market access in natural rubber, as it is a major exporter of the product. "Natural rubber will continue to be in the negative list, in which no tariff cuts will be made," the official said. The Thai PM is likely to raise the issue in his talks with the Indian PM.

In the negotiations on goods, the Indian side has agreed to eliminate tariff on more than 4,000 products in a phased manner, while 500 others will be in the sensitive list, which will see partial duty cuts, over a period of time. “Nearly 500 other items are in the negative list, which would not see any tariff cut, so as to protect the interests of the domestic industry,” the official added.

India and Thailand signed a framework agreement to establish a free trade area between them in 2003.

According to this agreement, both the countries agreed to introduce an early harvest scheme, on the basis of which tariff was reduced on 84 items. The commerce ministry data show that Indian exports under the scheme grew by 40 per cent, while that of Thailand increased by 80 per cent.