Date:04/09/2006 URL: http://www.thehindubusinessline.com/2006/09/04/stories/2006090402050300.htm

Back ASEAN meet: Indian move will pay off in long run

G. Srinivasan

New Delhi , Sept. 3

At a time when multilateral trade negotiations under the WTO auspices are floundering, the need to be not left out of the growing web of regional trading arrangements by even trade majors was demonstrated at the just concluded 38th meeting of the ASEAN Economic Ministers (AEM), where along with the 10 members of the South-East Asian Nations, Australia, New Zealand, South Korea, Japan, China and India took part.

The Kuala Lumpur AEM is significant in that the US, after engaging with ASEAN for almost four years, signed a trade and investment pact with South-East Asian countries - the Trade and Investment Framework Agreement (TIFA), a precursor to a full FTA with ASEAN.

ASEAN also inked an FTA with Australia and New Zealand to be ready by 2007 after Economic Ministers collectively suggested the timetable following their 11th consultations. ASEAN minus Thailand also signed an FTA with South Korea in Kuala Lumpur.

Stung by this spurt of trading arrangements that parcel out trade concessions among participating countries, India had little option but to take part actively in the AEM to ensure that its own stalled talks with ASEAN on a FTA does not flounder for want of accommodation.

So, when Malaysian Trade Minister Ms Rafidah Aziz - on behalf of ASEAN - and Union Commerce and Industry Minister Mr Kamal Nath met, they decided to resume the suspended talks for a free trade agreement.

Negotiations to forge an FTA remained in abeyance after India issued a long exclusion list from tariff concessions of 1,414 products, which would see a range of ASEAN exports excluded from tariff cuts.

However, just prior to the AEM, New Delhi submitted a list reducing the number of products to 560 though its timetable for reduction of tariffs is rather slow from the perspective of ASEAN.

For items such as crude palm oil, refined palm oil, pepper and black tea, the standstill or no tariff concessions is up to 2012 and thereafter over a span of 10 years the duty would be cut to 50 per cent on crude palm oil, 60 per cent on refined palm oil, 50 per cent on pepper and 50 per cent on black tea.

India currently slaps 70 per cent tariff on crude palm oil and 80 per cent on refined palm oil.

No wonder that Ms Aziz was critical of India's proposal to exclude some products of interest to ASEAN, including ceramics, wooden furniture and agricultural products, and India's proposal to reduce tariffs on palm oil products over 16 years.

As the Malaysian resentment over the revised offer on palm oil and palm oil products appeared to threaten the talks on FTA in the future, Mr Kamal Nath indicated a new proposal to strike a separate deal on palm oil imports with Malaysia and Indonesia in order to expedite free trade agreement with ASEAN by January 1, 2007.

He persuaded Malaysia that there was no question of market access barrier and tariffs were not raised to put palm oil at a disadvantage over soyabean or other edible oil, since palm oil continues to be the preferred oil by a large section with imports rising by 30 per cent to 3.3 million tonnes last year.

As advantages of latching on to RTAs outweigh any loss in one area or on few products, trade analysts contend that India's proposed Comprehensive Economic Co-operation Agreement (CECA) with ASEAN covering goods and services and investments in the long run would be effectively served if some give-and-take in negotiations is made at the preliminary FTA phase.

They said that in all trade negotiations, the voice of those who are going to gain is not heard - the most dynamic Indian exporter is going to gain, he is sought to be well off anyway.

The weakest producers are the ones who tend to lose and this always happens in any trade negotiations.

If India cannot compete against Sri Lanka, Vietnam or Malaysia in coconut, pepper and rubber, tea and edible oil, there is some thing basically wrong with the system in relation to cultivation of these commercial crops that needs to be set right before engaging with others on evolving FTA or CECA.