Mechanism to scan impact of FTAs soon
Economic Times | 6 Dec 2007
Mechanism to scan impact of FTAs soon
G Ganapathy Subramaniam, TNN
NEW DELHI: Responding to the increasing political resistance to trade liberalisation, the commerce & industry ministry is planning to set up a special mechanism to monitor the impact of free trade agreements (FTA). Academic institutions like IIFT and RIS would be assigned the task of analysing the impact of FTAs while the commerce department would put up a quick-response system to negate any adverse impact on India Inc and farmers.
The move is significant since the domestic industry as well as farmers have been facing increased competition from overseas due to liberal imports. Political circles apprehend that an adverse impact on farmers due to liberal import of agricultural products would lead to criticism of the government’s trade policy. Appreciation of the rupee has also added to the political sensitivity since cheaper imports are posing increasing competition to domestic producers.
“Trade agreements definitely result in macro gain. However, they could also result in micro pain,” said minister of state for commerce Jairam Ramesh. When contacted by ET, he acknowledged that there was resistance to import liberalisation from various quarters. “Since India is engaged in negotiating a large number of trade pacts, it was necessary to have a mechanism to monitor impact of imports,” Mr Ramesh said.
India has already implemented five FTAs and half-a-dozen preferential trade agreements (PTAs). When imports from Sri Lanka surged, the government had to impose a cap of 2,500 tonnes per annum on imports of pepper. Similarly, imports of vanaspati under the trade pacts with Sri Lanka and Nepal is restricted to 1 lakh tonnes and 2.5 lakh tonnes, respectively. The auto component industry has been complaining against increased import competition from Thailand.
According to data available with the government, imports from Thailand have tripled to $302 million in one year after India implemented an ‘early harvest’ scheme under the PTA with the south-east Asian country. However, exports from India have only doubled to $101 million during this period.
“In some cases, trade pacts are not based only on commercial considerations. Political and strategic considerations are also taken into account,” Mr Ramesh said. In the case of Sri Lanka, the balance of trade was in favour of India in the ratio of 1:10. After the FTA, now being upgraded to a comprehensive economic partnership agreement (Cepa), was implemented, the ratio declined to 1:5.
