Date:21/11/2006 URL: http://www.thehindubusinessline.com/2006/11/21/stories/2006112104070100.htm

Back `Free trade pact with China not now'

Our Bureau

New Delhi , Nov. 20

The Minister for Commerce and Industry, Mr Kamal Nath, today made it clear that a free trade agreement (FTA) with China was not on the cards now, but was an issue worth examining.

"Let us not call it a FTA, call it an economic co-operation agreement," the Minister told presspersons on the eve of the visit of the Chinese President, Mr Hu Jintao.

The Government has in its possession a report by a Joint Study Group which has disfavoured a FTA between India and China. China being a non-market economy, the report said that interest rates in that country could be as low as two per cent, power rates were not commercial, tax rates were different and the Chinese currency was not completely linked to market movement.

Since Indian industry does not enjoy any of these privileges, opening up bilateral trade on the basis of FTA could severely impact Indian industry, the report is understood to have pointed out.

Industry sources also maintained that unless Indian exports to China — comprising mainly ores and commodities — were not diversified, bilateral trade would remain unstable. As of now, iron ore represents about 52 per cent of Indian exports to China and any increase or decrease in the export of this item would alter the trade balance drastically, the sources pointed out.

"Till such time as conditions prevailing in China are not available here, a FTA could be to the disadvantage of Indian industry,'' they contend.