Indo-Asian News Service
Jairam Ramesh cautions on free trade pacts
April 10, 2006
By Indo Asian News Service
New Delhi, April 11 (IANS) India must tread cautiously while signing free trade pacts with other countries and a similar agreement with China will be suicidal, Minister of State for Commerce Jairam Ramesh said here Monday.
’The macro benefits of free trade agreements may not match their micro economic costs,’ Ramesh told an interactive session with the Forum of Financial Writers, citing the adverse impact of the trade agreement with Sri Lanka on Kerala.
’Our free trade agreement with Sri Lanka may benefit India and Sri Lanka but may not have a positive impact on the state of Kerala,’ he said, referring to the problems faced by plantations such as tea, pepper and cardamom in the southern state.
Free trade agreements permit duty-free import of specified merchandise goods by the signatories by a certain time frame, and allow for progressive tariff cuts in the interim period - called the early harvest mechanism.
According to Ramesh, free trade pacts were being used as what he called political instruments. ’We want to tell the world that India has changed,’ he said, adding free trade pacts have both economic and political dimensions.
India has a comprehensive economic cooperation agreement with Singapore, a free trade pact with Sri Lanka and a similar agreement with Thailand, with commitment to a South Asian Free Trade Area (SAFTA).
Prime Minister Manmohan Singh wants such pacts to not only cover every country in the region from the Persian Gulf to the Malacca Straits, but also Mauritius, Israel, Russia, South Korea, the African Union and the European Union.
Making specific comments on India’s negotiations with the Association of South East Asian Nations (ASEAN) and countries in the region, Ramesh said palm oil, tea, pepper, coffee and textiles were some areas where the country must be cautious.
’We cannot afford to have textiles and agriculture products on the early harvest scheme. These items cannot be frontloaded,’ he said, assuring that negotiations with the respective officials were looking into this aspect.
Referring to the growing economic engagement with China, Ramesh said India also could not afford to emulate that country for a free trade agreement in the East Asian region, despite stringent rules of origin.
’Let us take textiles. One factory in China exports more than all of India put together,’ he said. ’A free trade agreement with China will be suicidal.’