North Block seeks reality check on FTAs
Times of India
North Block seeks reality check on FTAs
By Sidhartha, TNN
6 December 2010
NEW DELHI: Amid the rise of free trade agreements (FTA), the finance ministry has called for a reality check on bilateral pacts involving a reduction in import duty on goods.
Officials said North Block was of the opinion that a review will help the government assess the impact of the preferential arrangements on various sectors of the economy. A government agency such as the Tariff Commission — which has little to do at present — could be roped in to undertake the study.
The suggestion comes at a time when India is close to finalising a trade and investment agreement with the European Union, and is set to operationalise its agreements with Japan and Malaysia. A host of pacts ranging from those with Australia, Canada and Mauritius are in various stages of planning and negotiations.
Though India had earlier voiced its concern over the proliferation of bilateral trade agreements, over the last seven years, it has itself got into the act and is negotiating deals to help Indian exporters and service providers access markets where they have traditionally faced roadblocks. In return, it has offered to cut import duty and harmonise rules.
Though the seeds for bilateral trade pacts were sown by Atal Behari Vajpayee, Prime Minister Manmohan Singh has pushed the arrangements further.
The change in strategy was the result of the stalemate at the World Trade Organisation (WTO) which, for nine years now, has been negotiating liberalised rules for trade in farm goods, industrial products and services. Besides, India has voluntarily reduced customs duty and the government is of the opinion that the move has helped local producers become more competitive.
A finance ministry official said that with trade agreements such as those with Singapore — which is being reviewed for possible further liberalisation — having been in place for a while, the impact could be assessed. An early harvest scheme — a precursor to a free trade agreement — with Thailand was signed before the Singapore pact. But the Thai deal had come under severe criticism from the local industry prompting the government to put its plans for a full-fledged FTA on the backburner.
The official’s counterpart in commerce department, however, said that a study, though welcome, might be premature at present as agreements with Korea and Asean had been signed only recently.
Commerce department is of the opinion that the agreements signed so far have served their purpose, especially in getting Indian service providers such as nurses more access to foreign markets. Besides, it has created competitive pressure. "The agreement with Asean for instance has now resulted in members of the trading bloc coming forward to seek arrangements that go beyond what is currently available," said an official.
Similarly, once you sign an agreement with, say, Asean, you put pressure on the European Union to open its market else European companies would lose out on competitiveness in India as goods from Asian countries can be imported by paying a lower duty, officials explained.
The negotiations themselves have matured over the years and the initial opposition from local producers and companies has worn off as the government has started adopting a more consultative approach.
