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India closer to FTA with ASEAN

ASEAN members accept proposal to keep negative list of items, but FTA is still distant, reports Prerna K Mishra.

india Updated: Jan 15, 2007 01:44 IST
Prerna K Mishra
Prerna K Mishra

The government's plans to forge a free trade agreement with ASEANnations moved a notch ahead on Sunday after trade ministers of the 10-nation grouping from South-East Asia accepted India's proposal to maintain a negative list of 490 items which shall be significantly exempt from the free trade provisions.

Officials of the two sides meeting at a trade summit in Cebu have also agreed that trade coverage under the negative list will not exceed 5 per cent of the total trade on a reciprocal basis. But that is only half the battle won as India and the Association of South-East Asian Nations wrangle over ironing out a fresh set of issues.

India's bilateral trade with ASEANcountries has more than doubled
in the past three years, having increased to $21 billion in 2005-06 (April-March) from $ 9.7 billion 2002-03. Free trade offers high prospects, but is riddled with details that need to be addressed.

Even though India has put its best foot forward, there is a lot of room left
for negotiations, especially in getting Malaysia, Philippines, Cambodia,
Brunei, Lao, Indonesia, Myanmar, Singapore, Thailand and Vietnam on the same
page on the so-called "sensitive" and "highly sensitive" lists of tradeable items on which the partners reserve the right to impose protectionist tariffs.

With an agreement concerning rules of origin of products and that on the negative list out of the way, further talks will revolve mainly around the modalities for tariff reduction and elimination, officials said. The negotiators are expected to meet and resolve the outstanding issues, preferably by July 2007.

ASEANcounterparts have gone on an offensive over India's offer to reduce tariffs on 700-odd products in the sensitive list in atime-bound manner. India proposes to reduce tariffs on the sensitive items to 5 per cent by 2015 but ASEAN wants to push the deadline to 2018.

The other bone of contention between the two sides remains the highly
sensitive list of four items – black tea, pepper, crude palm oil and refined
palm oil.

"The formula is to leave the tariff structure untouched for the first five years and reduce the tariffs to 50 per cent in the case of tea, pepper and crude palm oil by 2022 and 60 per cent for refined crude oil in the same period," Commerce Minister Kamal Nath said on the sidelines of the fifth India-ASEANSummit on Sunday.

ASEAN, however, is pressuring the Indian side to bring the tariffs down
earlier without a five-year start-up moratorium.

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First Published: Jan 14, 2007 17:12 IST