The Hindu Business Line : FTAs: Stirring the hornet's nest

The Prime Minister, Dr Manmohan Singh, has no hesitation in letting the world know that, in his view at least, the ideal economic trade arrangement would be one where import duties everywhere were the lowest — an arrangement that would facilitate the country's exports and also open up the economy to cheap imports. This is the conclusion one draws from Dr Manmohan Singh's latest backing of the Free Trade Area idea contained in his address to the Asian Development Bank annual general meeting held in Hyderabad recently.

Admittedly, Dr Manmohan Singh's focus on the FTAs is nothing new; neither is his harping on the `Look East' policy, which has led to his Government signing a slew of FTAs with regional economies and negotiating fresh ones. The Hyderabad address expanded that vision when it indicated that the FTA arrangement could be pan-Asian in scope, which would include accords with economic giants such as China, Japan and South Korea; ties with such strong economies could lead to a substantial flows of cheap imports. As Dr Manmohan Singh said: "This pan-Asia FTA could be the future of Asia and will open up new growth avenues for our own economy," adding that New Delhi has pursued the policy of external liberalisation with "this vision in mind". Clearly, there can be no two views on the efficacy of FTAs provided they follow the Most-Favoured Nation stipulation of the World Trade Organisation. But the story is entirely different when seen from the point of view of domestic industry and agriculture, which stand to get a beating from the cheap imports that would flow in under an FTA regime. This, however, is not a new point. In two of the latest instances, domestic industry has raised objections — the automobile ancillary units (vis-à-vis the India-Thailand FTA) and the vanaspati industry (Sri Lanka). New Delhi is already having a tough time trying to protect these interests while keeping the spirit of the FTAs in tact — an effort which has now come under siege from the Prime Minister's emphasis in Hyderabad on a "web of (FTA) engagements (which) may herald and eventual free-trade area in Asia".

The hornet's nest has been stirred in right earnest, and no less a person than the Congress chief, Mrs Sonia Gandhi, has told the Prime Minister that her party would like "more effective domestic policy measures" which would "protect and strengthen" farmers and manufacturers. More important, the Prime Minister has been asked to reduce FTA imports and initiate protection measures for those likely to be affected by them which, sadly, is an admission that the Government cannot really tackle the task of improving the competitiveness of the economy and live up to its image of being an Asian economic powerhouse.

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