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Mega FTA with Mercosur, SA union on cards

Economic Times (India) - 21 July 2006

Mega FTA with Mercosur, SA union on cards


NEW DELHI: Even as the government faces the heat over the impact on free trade agreements (FTAs) on farmers, a detailed plan for the country’s first trilateral FTA has landed up at Prime Minister Manmohan Singh’s doorstep.

The proposed three-way pact envisages free trade with nine countries — Brazil, Argentina, South Africa, Uruguay, Paraguay, Namibia, Botswana, Lesotho and Swaziland.

The roadmap for the politically significant pact is being examined by the PM’s trade and economic relations committee (TERC), highly-placed government sources said. The commerce department has submitted a detailed note on the trilateral FTA and it is being watched with interest since this is the first time this type of a pact has been taken up. The proposed agreement envisages free trade with the South African Customs Union (Sacu) and Mercosur.

A formal proposal for the three-way FTA was submitted by Argentina on behalf of Mercosur, the sources said. Sacu comprises South Africa, Namibia, Botswana, Lesotho and Swaziland while Mercosur is a customs union of Brazil, Argentina, Uruguay and Paraguay.

The proposal figured in a meeting of the IBSA (India, Brazil & South Africa) working group on trade in March. Brazil indicated that Mercosur countries would like to be part of the proposed trilateral FTA.

Subsequently, Argentina came up with a formal proposal. While India is keen to boost trade with Latin American countries, enhancing ties with African nations is important in view of the country’s bid for a permanent seat in the UN Security Council.

The commerce ministry feels India needs to tap Latin America on a larger scale; it even gives special concessions to companies that do more trade with the region. Free trade pacts with individual Latin American countries are also under study.

TERC is expected to back the trilateral plan since the prime minister is keen to enhance ties with African nations. In fact, Dr Singh has also proposed unilateral customs duty concessions for poor nations from Africa.

In case the proposed three-way FTA passes muster at TERC, it is likely to be called the SIM (Sacu, India, Mercosur) agreement. While India is yet to take a call, the other constituents of the proposed pact have indicated their willingness to go head. The commerce department has urged TERC to consider Argentina’s proposal for the trilateral FTA.

If the high-powered council clears the plan, a working group comprising representatives of the constituents would be set up. Since India is working closely with these countries at the World Trade Organisation (WTO), the commerce ministry looks at the pact positively, the sources said.

The trilateral pact will be in addition to India’s proposed plan to enter into a trade pact with Gulf countries and the India-Asean FTA which is facing criticism.

The country is also in the process of implementing trade pacts with Thailand, SAARC nations, Singapore and Mauritius while similar agreements with China, South Korea, Russia and Malaysia are under consideration.

 source: Economic Times