The Hindu Business Line : India-Asean FTA glitches

In New Delhi earlier this week, the Union Commerce Secretary said that the free trade agreement with Asean was all set to be concluded by the time the Prime Minister, Dr Manmohan Singh, goes to Singapore in November to attend an Asean summit. Exuding much-needed optimism as far as the India-Asean FTA is concerned, the official (who led the Indian delegation at the recently-held trade talks with Asean at Manila) added that the Manila meeting was productive with both sides m aking “positive movements”. He said efforts were being made to tie up “all modalities by September 30”.

This is no doubt a happy situation, especially considering the problems the FTA negotiations have been through in recent times. In fact, there has been substantial progress — on rules-of-origin and classification of goods — which has pulled the negotiations back from the brink of failure, as it were. But the point of concern is that while New Delhi is looking forward to a successful denouement in the weeks ahead, the view from Asean does not seem to be equally encouraging. Asean officials have said that the “modalities” put forward by New Delhi in Manila (a Ministerial meeting which the Union Commerce Minister, Mr Kamal Nath, did not attend) were “not... meaningful enough” and that the prospects of the differences being settled before the November summit were bleak. Specifically, New Delhi would like five products — petroleum, palm oil, coffee, tea and pepper — to be treated as “special products” vis-À-vis which t ariffs will not be eliminated. On his part, the Asean secretary-general has stated unequivocally that the five products comprised “a lot of our trade with India”, adding, “if you don’t want to give it to us, then what is the point of doing an FTA?” Asean is thus attaching inordinate importance to concessions being made by India on the “special products” issue.

It can therefore be safely said that, at this point of time, the outlook for the India-Asean FTA is decidedly bleak, which is perhaps to be expected given the rigid stance adopted by both the sides on specific items such as palm oil and auto ancillaries. And yet there is little doubt that an FTA between the two sides will be of immense long-term value, mainly as a boost to production efficiency in this part of the world. In view of all this, a failure to reach an agreement by November should not be treated as a setback because it is always better to have an FTA that is delayed but fully tied-up rather than to rush into one that may have many problem areas which could lead to frequent disputes and detract from its usefulness.

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