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UPA’s FTA success rate 1 out of 15

Business Standard | February 25, 2009

UPA’s FTA success rate 1 out of 15

Rituparna Bhuyan

The United Progressive Alliance (UPA) government, which initiated talks on about 15 free trade agreements (FTAs), could sign only one of them during its current tenure.

Opposition from the domestic industry lobby in some FTAs and inconclusive negotiations in other cases were reasons for slow progress in finalising FTAs with trade partners, experts said.

Government sources said that at least three of the proposed trade treaties, negotiations on which were concluded last year, would be cleared by the new government that takes charge at the Centre in a few months.

The present regime signed the Comprehensive Economic Partnership Agreement (CEPA) — which covers goods, services and investment — with Singapore in mid-2005.

Duty-free trade agreements covering goods, services and investments:
• Talks Completed with Asean (FTA on goods), South Korea and Sri Lanka
• Ongoing talks with Japan, European Union, European Free Trade Association, Southern African Customs Union, Gulf Co-operation Council, Malaysia, Thailand and New Zealand
• Joint study group formed with China, Australia , Russia and Indonesia

“The fact that not many FTAs were sealed shows the cautious approach of the policy makers,” said Ram Upendra Das, fellow, Research and Information System for Developing Countries (RIS). “But India has recognised that these duty-free agreements are the order of the day as other countries are engaging in similar deals. Indian exporters will be left out if the nation does not engage in these type of agreements with its trading partners”, he added.

Government sources said that the ambitious FTA with the Association of South-East Asian Nations (Asean) and a CEPA with South Korea were unlikely to be cleared by the Union Cabinet. Talks on both these agreements were concluded successfully in 2008. After successful conclusion of talks, the agreement has to be approved by the Union Cabinet before it can be signed.

“The call on these two agreements is likely to be taken by the next government,” said a government official, adding the Cabinet had met probably for the last time on Monday before dates for the elections are announced next week.

There was no announcement on the South Korean and Asean duty-free agreements. Once elections are announced, the Cabinet will not be able to clear any proposals.

Sources added that the government was facing a lot of opposition from the industry on these two FTAs, as it is wary of any cheap imports at a time when the domestic economy is going through a downturn in the wake of the global economic crisis. The Asean FTA was to be signed in December 2008, but was postponed because of a domestic strife in Thailand, an Asean member.

Moreover, a separate CEPA with Thailand could not materialise as India first wants to sign the deal with Asean. “Thailand has also asked for some additional concessions,” officials said. Meanwhile, Both the countries have are trading through a Early Harvest Scheme (EHS), which translates to duty free trade of about 84 goods.

Experts maintain that given the present economic situation, FTAs could wait. “We do not know how things will shape up in the near future. It probably makes sense at times of uncertainty to calibrate policy to suit domestic needs,” said Bishwajit Dhar, head of centre for WTO studies at Indian Institute of Foreign Trade.

But Das feels that as the United States and Europe see a downturn, India needs to diversify its exports and imports.

Significantly, a CEPA with Sri Lanka could not materialise because of the political developments in the island nation. The agreement was to be signed on the sidelines of the SAARC meeting in Colombo in August 2008. Government officials maintained that Sri Lanka did not want the CEPA due to opposition by some political parties. Both the countries already have an operational FTA, covering goods, since 1998.

An agreement with Japan, which was scheduled to be concluded by the end of 2008, is also stuck. The bone of contention was the reluctance of the island country to allow easy market access of Indian pharmaceutical products.

 source: Business Standard