The Hindu Business Line : FTA: India for framework agreement first with China

EVEN as China is keen on forging a free trade agreement with India, an official study commissioned by both the countries at the ministerial level has suggested an India-China Framework Agreement to begin with to ensure closer cooperation and to surmount initial hiccoughs likely in any giant leap.

Highly placed sources in the Government told Business Line here that a joint study group (JSG) set up by both the countries at the Commerce Ministry level have zeroed in on several strategies for further firming up the relationship between the two countries on an enduring basis.

Even as the Chinese Premier will have one-to-one talk with the Prime Minister, Dr Manmohan Singh, on April 11 here and a spate of agreements would be signed in their presence to lend weight to the existing ties and cooperation in crucial areas of economic cooperation, the sources said that a sort of an India-China Framework Agreement has been proposed by the JSG.

They said that both countries have of late laid emphasis on regional trading agreements (RTAs) as complement to multilateralism. China is negotiating FTAs (free trade agreements) in 8 countries/regions, while India is negotiating comprehensives economic cooperation agreements (CECA)/preferential trading agreements (PTAs) in 7 countries. It is estimated that China-India CECA/FTA would create an aggregate market of 2.3 billion consumers, a combined GDP of $1.8 trillion and trade of $1.2 trillion. Any such cooperation, the sources said, would help India learn from China in promoting industrialisation and China could learn from India in development of service industries.

As FTA aims at progressively eliminating all tariff measures and non-tariff measures substantially in respect of all trade in goods, any rush to conclude FTAs would be a rash proposition as this would affect domestic industries which enjoy some sort of protection through tariffs particularly in areas such as iron ore, primary and semi finished iron and steel and value-added items covering plastic and linoleum products, process minerals and chemicals, drugs and pharmaceuticals and marine products which are the mainstay of India's exports to China. Chinese imports into India consist of electronic goods, organic chemicals, pharma products, besides coal, coke and briquettes, raw silk, madeups and inorganic chemicals.

The sources said, before any such ambitious RTAs/FTAs or CECA could be launched, a lot of preparatory work must precede and the JSG said that India and China should negotiate a customs cooperation and mutual assistance agreement as early as possible to improve customs supervision efficiency through bilateral cooperation and promote trade facilitation. The JSG is understood to have recommended a uniform system of customs valuation, duties and documentation across all ports of entry in both the countries. It is further noted that in line with the spirit of the `principle of national treatment' technical standards should be applied uniformly across imported and domestic products.

The JSG is stated to have plumped for further cooperative efforts to ensure increased frequency of direct shipping routes, reduced costs of transportation and expansion of air cargo facilities between the two countries. Again, direct banking links and bilateral confirmation of letters of credits by Exim Banks of India and China need to be beefed up.

The sources said that the proposed agreement entails an identified undertaking for trade and investment promotion and facilitation, measures for economic cooperation in identified sectors and India-China Preferential Trading Arrangement covering trade in goods, services and investments t be implemented over a mutually agreed timeframe.

As the Chinese Premier, Mr Wen Jiabao, begins his visit to India from Saturday, bringing along a fresh chance to cement ties free from the frictions of the past to talk about border and beyond-border issues to reflect the growing clout of Asia's two most populous countries, the bilateral trade and economic relations are poised to get a shot in the arm.

As it is, the latest trade data show that India's exports to China during this period shot up by 61 per cent at $2959.58 million, against $1837.92 million in the corresponding period of 2003, while India's imports from China grew by 70 per cent at $4836,62 million during Apr-Dec 2004, against $2840.81 million in corresponding months of 2003.

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