Plan for big-bang FTAs bites dust
Financial Express, India
Plan for big-bang FTAs bites dust
By Arun S
3 December 2008
New Delhi. Even as uncertainty prevails over the WTO’s Doha Round negotiations with countries hardening their stance against opening up their markets due to the financial crisis and demand slowdown, India’s plan to boost its global trade ties with a slew of free trade agreements (FTA) is losing momentum, either due to major differences or political volatility.
The India-Asean FTA, to be inked by Prime Minister Manmohan Singh and his counterparts on December 17 in Bangkok, is stalled as the Asean Summit has been postponed to March due to the stand-off between government and protesters in Thailand. The summit will now be held in March, 2009, say officials. Asean comprises Indonesia, Malaysia, Singapore, Thailand, Vietnam, Brunei, Philippines, Cambodia, Laos and Myanmar.
The India-Korea Comprehensive Economic Partnership Agreement (Cepa)-which was also to be signed on the sidelines of the Asean Summit-would now be delayed indefinitely due to differences between India and Korea over clauses regarding Rules Of Origin (ROO). The two countries had earlier said they had ironed out all their differences and concluded the Cepa talks. However, differences on certain crucial provisions cropped up during the legal vetting of the final text.
Talks for the India-Japan Cepa have stretched to the 11th round that begins on Wednesday in the capital. However, with Japan yet to yield on market access for Indian pharma products, little headway is expected. On the other hand, India is opposing Japan’s demand for provisions on government procurement and competition policy in the Cepa text.
Meanwhile, India-European Union FTA talks that were to be concluded by this year, have only taken off in services with India Inc holding stakeholder consultation on services recently. Differences of opinion on industrial goods and agriculture mean talks haven’t progressed on those fronts.
Amidst a protectionist mood, the Cabinet has decided to constitute an inter-ministerial committee to look into the non-tariff measures (NTMs) of the developed countries and develop a similar set of steps to be taken as retaliatory measures to block the goods from the Western world, officials told FE.
The inter-ministerial committee comprises officials from the departments of animal husbandry, agriculture, chemicals, pharmaceutical, commerce, industry, heavy industries, food processing, small and medium industries and consumer affairs. The committee would soon tabulate the prevailing NTMs of developed countries and update such a centralised data for future use.
Rajiv Kumar, director and chief executive, Indian Council for Research on International Economic Relations (Icrier) said, “This is the time for the government to remove procedural and other bottlenecks. The government should do a comprehensive value-chain analysis of all Indian industries to identify critical constraints that are preventing Indian industries from being globally competitive. Also, nothing should be done to reduce the openness which is already achieved, or else it will amount to backtracking.”
The Centre had also decided to study the impact of the 30 free trade agreements (FTA), which India has with various countries and regions, on the consumers as well as India Inc. These FTAs are either concluded, under negotiation or in the proposal stage. According Asian Development Bank data, currently India tops the list of Asian countries with FTAs, followed by Singapore with 26, China and Korea with 22 each, and Japan (19). Out of India’s 30 FTAs, eight are with the integrating Asian region, while and 22 are outside of Asia
India-Asean FTA
India and Asean had wrapped up talks for the landmark FTA on August 28 after six years of discussions marked by differences, especially on duty cuts in items like palm oil, coffee, pepper and tea. The agreement on the modality for tariff reduction and/or elimination to facilitate the creation of an open market in a region was to take the total Asean-India trade from the present $38 billion to $50 billion by 2010. The implementation of tariff reduction commitments was to start from January 1, 2009. However, it would be pushed to April 2009. The ministers had in August also agreed to negotiations on trade in services and investment as a single undertaking, and to work towards the conclusion of substantive discussions on these two agreements by 2009 to bring about a complete Asean-India Comprehensive Economic Cooperation Agreement.
India-Korea Cepa
After concluding the negotiations following 12 long rounds and coming very close to the signing stage, India-Korea Cepa would now be delayed as both sides differ on Rules Of Origin (ROO). In a bid to prevent trade diversion, initially there was an understanding on tight standards on ROO of goods to protect sensitive sectors in both countries. The ROO norms would be a combination of value addition norms and change in tariff heading. But differences sprung up as the Indian side insisted that ROO should be applied to all imported goods that go into a product. The Korean side is for a ‘roll up’ principle, in which imported raw materials are not counted as part of the value addition. The principle, the Indian side says, may result in goods from China or other countries being routed to India through Korea, as the Cepa accords lower or nil duties on products from Korea.
India-Japan Cepa
The 11th round of talks ,to be held on Wednesday will focus on the Indian pharmaceutical industry’s list of problems in getting market access in Japan. The negotiations for the Cepa were stuck in the last lap with Japan refusing to give market access to low-cost drugs from India. Last month, the government had held a high-level meeting with the pharma industry captains on Japan’s strict and time-consuming drug approval procedures, stringent sanitary and phytosanitary standards (that apply to animal and plant health measures and food safety), technical barriers to trade and environmental norms that have been hampering Indian exports. Officials told FE that India is now pushing for clauses including simpler registration process for Indian drug cos in Japan, fast track process for registration and approvals that enable pharma firms to start selling generic drugs from a year of filing their application. Currently, it takes 5-7 years.
India-EU FTA
The talks on agriculture have hit a roadblock with differences over India’s demand that EU should bring down their high tariff and support on agricultural products. On the industrial goods front, India is against EU’s demand to cut industrial tariffs. India has also said that it wants non-trade and extraneous issues like animal welfare and labour to be kept out of talks. The other outstanding issues include India’s opposition to inclusion of open and competitive public procurement policy as well as clauses on competition policy and EU’s reluctance to mutual recognition pacts on services and on laboratory testing standards. EU is against making their safety and health measures of farm products friendlier to Indian exports and is allegedly evading discussions on mutual recognition pacts on services and on laboratory testing standards.
