India-Asean FTA stalls
Bangkok Post
India-Asean FTA stalls
Political turmoil in Thailand, dithering by Philippines responsible for delay, writes Tony Arora in New Delhi
8 November 2008
The ongoing political crisis in Thailand is putting question marks on whether the India-Asean Free Trade Agreement (FTA) will be signed by the year-end.
Indian tariffs on crude and refined palm oil are a major concern for Indonesia, but problems insome other Asean countries are a bigger worry for Delhi.
One of the key reasons for the delay is that some Asean states, including Thailand and Philippines, have to get the agreement ratified by their legislatures. This will involve approving lists of goods that will be traded duty free.
Negotiators had closed talks in after six years of painstaking dialogue. But now officials at the Indian Federal Ministry of Commerce and Industry say the ambitious FTA is likely to miss the target effective date of Jan 1, 2009.
The India-Asean summit is to be held at Bangkok on Dec 17 and the agreement is expected to be signed there. As speculation continues on whether the venue will be changed, Indian concerns also centre on Thailand’s ability to complete the internal formalities for signing against the backdrop of ongoing political crisis.
For Thailand, domestic approval - which is a requirement for each signatory - means the support of the Parliament which has been disrupted.
"It seems that Philippines too may need some time in this process. Other countries may also need some more time in getting ratification from their respective Parliaments," said an Indian government official.
The deal is likely to abolish customs tariff of around 80% of goods to zero, including raw materials like iron ore as well as aluminum, plastic and certain kinds of machinery.
During the course of talks in recent weeks, many contentious issues cropped up, including the content of negative list on which there would be no duty cut, as well as duty cuts on palm oil, tea and coffee, among others.
India expects to have a clear picture on the response from the Asean members soon. "If the ratification process takes time, the signing of the agreement, which was scheduled on Dec 17, may get delayed," the official added.
In India, the deal does not need to be ratified by Parliament, and will be cleared by the federal cabinet headed by prime minister Manmohan Singh. "The cabinet will give the nod, when the Asean countries will submit their lists to India," the official added.
Trade analysts will keenly observe the developments over the next few days because if general elections are announced in India for early 2009, the moral code of conduct will kick in, as a result of which the country will not be able to sign the deal.
Other operational issues include preparation of the list of items out of a total of over 5,000. Some will not see any cut, while others will see partial slashing of duty. But a majority of the items will see complete elimination of duty.
The deal is expected to add $12 billion to India-Asean bilateral trade by 2010. The talks had started during the previous National Democratic Alliance (NDA) regime. Both sides had signed a framework agreement on the FTA in late 2003.
Thailand’s political troubles have been going on for years with lots of issues still unresolved. Parliament is wary of making major decisions as elections are likely in the near future. Prime Minister Somchai Wongsawat is adamant that a vote will be held if and when the drafting the of new constitution is finished.
Analysts in Delhi agree the political turbulence in Thailand has the potential to disrupt the FTA timetable.
"It’s not going to affect the FTA but it might delay ratification from the Thai side," said Dr Shankari Sundararaman, associate professor at Jawaharlal Nehru University. As far as the trade negotiations go, India has the least of problems with Thailand.
Even though negotiations between India and the Asean are said to have concluded, there are still last-minute hitches related to agreed lists with certain countries. This was confirmed by the Indonesian ambassador to India, Andi M. Ghalib, who said that Jakarta wanted India to reduce tariffs on five items.
"Indonesia’s problem is in five areas: tariff on crude palm oil, pepper, refined palm oil, tea and coffee. We want India to reduce tariffs. For this we have reservations," Mr Ghalib said.
But, he said, the Indonesian government has no problem with continuing the discussion on these five items even after the India-Asean FTA is signed.
"The good news is that the negative list keeps decreasing. And by the time everybody is ready to sign, hopefully the number of items will be less," he said.
Mr Ghalib said there was a will among the Asean countries to sign the FTA as soon as possible.
