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New FTA policy: Everything or nothing

India Express

New FTA policy: Everything or nothing

By Ronojoy Banerjee

11 June 2010

New Delhi : Unhappy with its free trade agreement (FTA) partners who backtrack on promises to amplify the scope of these agreements with liberalisation of trade in services, the government has decided not to enter into agreements unless talks on services and goods are concluded simultaneously.

Commerce secretary Rahul Khullar told FE that having drawn lessons from previous trade agreements, India is going to take up an “everything-or-nothing” approach when it negotiates bilateral trade and investment treaties in future. He said that any future trade agreement has to be a single undertaking which has to include a list of commitments to reduce tariffs for goods as well as liberalise trade in services.

“We have learned (from our previous agreements) that it is not advisable to separate services negotiations from the talks on goods. Everything should be a single undertaking. If you separate the deal, you will have to give away in goods first and then you could end up struggling to get your due in the area of services. If it is one composite package, then they (the trading partners) have to give it,” he said.

In the free trade agreement with ASEAN, though the two sides have dropped duties on a select list of goods from January 1, 2010, negotiations on services are yet to begin. The initial understanding was to conclude negotiations on services by December 2009. Khullar said that the ministry was no more willing to compromise on India’s advantageous position in services. With its vast and surging resources of professional expertise, India has much to gain in terms of free movement of its doctors, nurses, accountants and engineers to FTA partners and the recognition of their degrees by their designated agencies.

“If there is no services (in the agreement) then there is no deal,” he asserted. “Not too many deals have been concluded so far. The rest are in the pipeline...these are taking time precisely because of this reason. Why does it take so many rounds for us to conclude a deal? Because we have our own priorities,” he said.

Currently, India is negotiating FTAs with European Union, Japan and Australia. India and Canada are expected to discuss a comprehensive economic partnership agreement when prime ministers Manmohan Singh and Stephen Harper meet ahead of the G-20 meeting in Canada.

Khullar also pointed out that India was not going to enter into any early harvesting agreement with other countries. These refer to the schemes under which reduction of tariffs in one set of products is done with the promise of expanding the product base at a later date.

“I think we have learnt that early harvest agreements don’t work – doing some tariff lines at one particular time and some later. If you are going to move to a zero-tariff regime, there has to be one cut-off date for that rather than three different dates,” he said. Under India’s early harvest agreement with Thailand in 2005, the two countries decided to cut duties across only 82 products, with the commitment that more products would be added to the list. “There has been no progress on this front since then,” a trade analyst who spoke on condition of anonymity said.