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Now, FTA with Gulf runs into trouble

TIMES NEWS NETWORK | Friday, June 09, 2006

Now, FTA with Gulf runs into trouble

NEW DELHI: If it’s edible oil which is delaying India’s free trade agreement (FTA) with Asean, petrochemical products and plastics are proving to be a stumbling block for a bilateral trade pact with the six oil-rich members of the Gulf Cooperation Council (GCC).

Domestic players have come under one umbrella to petition the commerce ministry, following demands from GCC members - Saudi Arabia, Kuwait, Oman, Qatar, Bahrain and the United Arab Emirates - to cut the import tariff on petrochem products.

The petrochemical industry is claiming that its investments estimated at nearly Rs 50,000 crore would be affected if India permitted lower duty imports, more so due to access to cheaper gas for complexes in the Gulf.

The government is finding itself in a bind having to contend with domestic pressures and at the same time looking at simpler visa rules for Indians, in addition to the promise of billions of dollars of investment flowing into IT and manufacturing sectors in the country.

The government is looking at a significant presence in the services sphere in the six countries in return for offering lower import tariffs for some of the GCC products.

Besides, GCC is trying to put negotiations for an FTA with China on a fast track while seeking similar benefits from India’s neighbour.

"Though duties are low, Chinese goods will have have a 5% advantage on an average,"said an official. GCC’s FTA proposals have proved to be a problem due to its insistence on reduction of import duty on petrochem and oil products.

The six-member bloc has been negotiating a bilateral trade agreement with the European Union for nearly two decades, while the deal with China has been in the pipeline.

Though only one round of negotiations have been held between Indian and GCC representatives, no proposal on the extent of tariff cuts has so far been received.

But GCC, hoping for a trade pact, has already moved ahead with steps like removal of import curbs on Indian marine and meat products. The initiatives are also putting pressure on the government to favourably consider the deal.

 source: Times of India