The Hindu Business Line : Free trade pact with ASEAN may be ready by July

Deal says...
Two sides agree to have a list of products that would not be subject to any tariff cuts till 2022.
India is expected to bring into this list some 490 items that include rubber and coconut.
ASEAN would also have its own sensitive list.

Cebu , Jan. 14

The "contentious" Free Trade Agreement between India and ASEAN is likely to be ready by July this year, the Union Commerce Minister, Mr Kamal Nath, announced on Sunday, but there was no clear word yet that Malaysia was ready to accept the terms offered by India on palm oil.

Speaking to the media at the conclusion of talks with leaders of the ASEAN here at the tropical Philippines resort, Mr Nath said that the two sides agreed to have a list of products that would not be subject to any tariff cuts till 2022. The traded value of these products would not exceed 5 per cent of the total.

India is expected to bring into this list some 490 items that include rubber and coconut. ASEAN would also have its own sensitive list.

Least cuts

On all the other goods, which would make up 95 per cent of the trade there would be either elimination or reduction of duties.

The least cuts in duties would come on the four items — crude palm oil, refined palm oil, pepper and tea — which both sides found highly sensitive, for different reasons. The duties on these will be brought down to 50 per cent by 2022.

On tea, for instance, it will come down from 100 per cent to 50 per cent. On these goods, India says the duty reductions will commence only after five years, but ASEAN is apparently seeking an earlier date.

Mr Kamal Nath was at pains to note the special significance of palm oil because of its influence on domestic prices of edible oils. Palm oil forms 20 per cent of India's imports from ASEAN. India imported $1.7 billion worth of crude palm oil a year from Malaysia and Indonesia. "When we exclude palm oil, we are offering 90 per cent of the traded items in the normal track for reduction in duties," he said.

Sensitive items

On the sensitive items, which comprise another 700 items, including many engineering and chemical products, the duties will fall to between zero and 5 per cent by 2018.

On all the other goods that will be on the "normal" track, import duties will be reduced from the date the agreement is signed. India will bring these down to zero by 2011 for less developed countries in the ASEAN and by 2015 for the other countries.

The Minister explained that, "For India and ASEAN, a free trade agreement (which implies) a greater engagement in the economic area, both in trade and investment is vital. The mass of economic activity is slowly shifting to Asia both in terms of competitiveness and the growth in the manufacturing sector. It is important, therefore, that East Asian countries engage with one another not only with greater intensity but in more creative ways."

China signs deal

On a day when India and ASEAN struggled to come to terms on FTA, China signed an agreement on trade and services with ASEAN that will be effective from July . This would enable greater flow of services such as telecom, banking and construction. ASEAN countries and China would provide national status to investors in the region.

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