The Hindu Business Line : Array of trade pacts a cause for concern: India Inc

What they say
Multiplicity of `rules of origin', negative lists will result in confusion.
Besides the technical difficulties, industry says the Indian market will be vulnerable to imports from non-FTA partners, especially from China.

New Delhi , April 25

With instances of more than one trade pact being inked with a single country under the Government's bilateral and regional trade agreements policy, Indian industry is apprehending confusion in import clearances arising from multiplicity of `rules of origin' norms and `negative lists' applicable on imports from the same country under the numerous agreements signed with it.

For instance, India has signed separate Free Trade Agreements (FTA) with Thailand and Singapore. Both countries are also members of ASEAN, with which India is working out a framework agreement on Comprehensive Economic Cooperation. Similarly, with Nepal, India already has a preferential trade arrangement (the Indo-Nepal Trade Treaty) while two more trade agreements with the same country could be on the anvil -- the agreement on South Asia Free Trade Area (SAFTA) and Bay of Bengal Initiative for Multi Sectoral Technical and Economic Co-operation (BIMST-EC FTA).

FTA WITH SRI LANKA

Similarly, India already has an FTA with Sri Lanka (operational since March 2000), while the country is also part of both BIMST-EC and SAFTA blocs, resulting in the possibility of three sets of `rules of origin' norms and `negative lists' for imports from the island nation in the future. Two sets of norms could be applicable in case of Bangladesh under the BIMST-EC and SAFTA while in case of Myanmar two sets of rules could apply since the country is part of both ASEAN and BIMSTEC.

Certificate of Origin

While the Government contends that the Certificate of Origin would be the overriding factor in deciding preferential access from a country, industry says that the Certificate of Origin norm is already under "misuse" by countries such as Nepal, resulting in imports from the country in sectors where Nepal lacks any noteworthy domestic industry.

Besides the technical difficulties, industry has also raised concerns regarding the opening up of the Indian markets to imports from non-FTA partners, especially from China. "There is a window open to China for imports through the proposed BIMST-EC, SAFTA and the ASEAN agreements since Nepal and Myanmar form part of all the three regional agreements. For instance, Nepal has emerged as one of the leading garment exporters to India despite not having any significant garment industry of its own, clearly indicating that other countries are utilising the duty concessions available through the Nepal route," an industry representative said.

The Government had already received representations from domestic industry regarding surge in imports of certain electronic items under early harvest implemented in the pact with Thailand. Sources said the National Advisory Council has also sought the analysis of the impact of free trade agreements before such pacts are concluded in light of grievances raised by the industry.

SAFTA SIGNED IN 2004

The framework agreement on SAFTA was signed in January 2004 and was to come into force from January 1 this year and will be fully operational by 2016.

The pact, however, awaits ratifications by some of the member countries. India is in the process of finalising the Comprehensive Economic Cooperation Agreement with ASEAN and negotiations are on to reduce and eliminate tariff between January 2006 and December 2011 vis-à-vis all countries except the Philippines.