New Delhi not to freely ink trade pacts with controlled economies
Economic Times (India) | 18 Dec 2007
New Delhi not to freely ink trade pacts with controlled economies
Rajeev Jayaswal & G Ganapathy Subramaniam, TNN
NEW DELHI: The government may take a cautious approach while negotiating free trade agreements (FTAs) with countries such as China that do not have market economy status and a market-driven exchange rate policy. India is currently negotiating a flurry of FTAs and seven more are under consideration.
The move follows fears expressed by India Inc that free trade with such economies may not leave them with a level playing field. Apprehensions of the domestic industry have been accentuated due to the recent appreciation of the rupee, which is rendering Indian exports uncompetitive.
The government may formulate a policy for negotiating FTAs to safeguard the domestic industry from possible disruption due to various factors, including market-driven exchange rate.
“There must be an understanding also on exchange rate policy before we can have a soundly functioning FTA, as a market-driven exchange rate policy in one partner country cannot co-exist with substantially controlled exchange rate policy in another. These fundamental aspects need to be attended to first before the major FTAs, which we are negotiating, enter into force,” an official source said.
The comment assumes significance, especially in the light of India’s plans to negotiate an FTA with China, which has resisted demands for free float of yuan. India has not provided market economy status to China though Beijing has become a WTO member. Similar is the case with Russia, which is seeking entry into the global organisation.
A broad agreement on the need to temper FTAs has been reached at the top level and a formal approval is expected in the National Development Council (NDC) meeting, an official source said. NDC, chaired by Prime Minister Manmohan Singh, is meeting on Wednesday to approve the 11th Plan.
India has FTAs with Singapore, Nepal, Bhutan, Sri Lanka and Safta. PTAs have been signed with Thailand, Chile, Mercosur, APTA and Afghanistan. India is also negotiating trade pacts with BIMSTEC, Gulf Co-operation Council, South Korea, Japan, Israel and SACU. Under consideration are similar agreements with the European Union, Australia, New Zealand, Malaysia and Indonesia.
India has implemented five free trade pacts and half-a-dozen preferential trade pacts. Efforts are now being made to monitor the impact of these pacts on a continuous basis.
