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Trade pact with Thailand by July

business Updated: Apr 12, 2007 04:54 IST
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India and Thailand hope to conclude their proposed free trade area (FTA) by this July with trade negotiators of the two countries hoping to smooth out contentious issues before then.

Commerce and industry minister Kamal Nath had a bilateral meeting with Thai counterpart Krirk-krai Jirapeet here on Wednesday.

“We hope to conclude the negotiations and sign the final trade agreement by the end of June. Another round of meetings will be held in May, and there should be greater convergence on many points. There is a need to enlarge the basket, at the same time ensuring the sensitivities of both sides are protected,” said Nath.

A framework agreement for establishing a free trade area (FTA) between the two countries was signed by the two governments in October 2003 in Bangkok. The framework provides for an early harvest scheme (EHS) under which common items of export interest to the sides have been agreed for elimination of tariffs on a fast track.

The tariff concessions on 82 items of EHS list have been implemented from September 2004 with the signing of the protocol between India and Thailand in August 2004.

The early harvest programme includes auto parts, electronic goods and fruits, for which tariffs were cut in September 2004.

Sources indicated that Thailand wants to increase the number of items eligible for tariff cuts to about 5,500 under the FTA, while a commerce ministry official said the India would be offering tariff concessions to about 2,800 items. India has sought tariff concessions on items such as marine products, chemicals (including drugs and pharmaceuticals) and iron & steel.

Nath said the India-Thailand FTA framework agreement has led to a significant rise in bilateral trade over the past few years. “India’s exports to Thailand registered a growth of almost 20 per cent over the previous year, while imports from Thailand has risen by about 39 per cent,” he said.

Thailand has sought greater market access to India through tariff reductions for commodities such as rubber. “India’s demand for rubber is increasing and about 5 per cent of its total demand is met through imported rubber, 40 per cent of this is currently coming from Thailand,” said Nath.

The EHS however has triggered protest in the domestic industry that feel it has resulted in an inverted duty structure. Inverted duty structure refers to a situation where the duty or tax on the finished product is lower than that on raw materials and intermediate products. This acts as a disincentive for the domestic manufacturer, as he has to pay a higher price for the raw material in terms of duty while the finished product is imported at lower duty, thus giving stiff competition to domestic manufacturers.