The Hindu Business Line : India confident of free trade pacts with Asean, Thailand soon

New Delhi, July 5 India is hopeful of wrapping up two big ticket free trade agreements in goods with ASEAN (Association of South East Asian Nations) and Thailand soon with nitty-gritty issues getting revved up for early resolution so that the FTA could be launched from January 1, 2008.

Talking to Business Line here, the Commerce Secretary, Mr Gopal K. Pillai, said official level meeting between India and ASEAN would be held in Vietnam on July 20, to be followed by the ASEAN Economic Ministers (AEM) meeting in the Philippines in August.

Working on negative list

He further said negative list to cover their respective sensitivities has been agreed at the last summit meeting.

“We have no problem on the negative list which is subject to a maximum number of 490 tariff lines and an import value cap of 5 per cent. There is no dispute on that. The dispute is on some tariff concessions and how fast you can do it. We have some flexibility which we will try to see how much we can give”.

Palm oil still a problem

Stating that palm oil is still a problem as it has been so for many years, Mr Pillai said: “We cannot reduce palm oil tariff to zero because it affects domestic oil industry. We give ASEAN market access because we are buying 54 per cent of our requirement is in any way met through imports. But we are not able to reduce the tariff because it affects the domestic price.”

Asked about the Prime Minister’s Trade & Economic Relations Committee (TERC) which met on July 3 here, Mr Pillai said the meeting focused on the various ongoing FTAs, highlighting the status of negotiations and the strategies to be adopted for concluding these negotiations. He said: “We have apprised the Prime Minister of the status of negotiations with all trading partners with whom we are forging FTAs.

The discussion was about what they are asking for and what we could offer”.

When his attention was drawn to how all these FTAs/regional trading agreements look like a “noodle bowl” with intricate arrangements, Mr Pillai said it is in the very nature of trade and trade negotiations to be so complicated. “What you do if you do not have the WTO agreement? You have to move forward as trade gives opportunities for employment and earnings in foreign exchange.”

Trade diversion

To a query about the trade diversion effect of FTAs, Mr. Pillai said: “That is why we are having our FTAs with a much wider range of countries ASEAN, Mercosur, Latin America, European Union, East Asia, Japan and Korea and Gulf Cooperation Council (GCC) so that trade diversion possibilities get limited. By the end of next year, if everything goes well, most of these things (FTAs) should be in place—Asean, Japan, Korea and the EU”.

EU team coming

On the recent launch of first round of India and EU negotiations on a broad-based Bilateral Trade and Investment Agreement in Brussels, Mr Pillai said the EU team would come here in October for the second round.

He said in services negotiations, “we want WTO plus in areas we are interested.” He further said that today if our strength is in Mode 1 (cross border supply) and Mode 4 (Movement of Natural Persons) and EU’s in Mode 3 (commercial presence), “our strength is also going up slowly in Mode 3 because we are also asking for branches of Indian banks now and some of our insurance companies will also start going out”.

On investments, he said it is “a two-way process. The EU companies are investing here and we are also investing there with a lot of Indian companies going to Europe”.

The bottlenecks or procedural impediments for investment flows between India and EU and vice versa would need to be removed for which negotiations have begun, he added.

Export growth

Commenting on the very subdued export growth in rupee terms during the first two months of the current fiscal, Mr Pillai said the impact of appreciating rupee vis-À-vis US dollar is a concern and the Prime Minister and the Finance Ministry are seized of the problem.

“We are hopeful that within next two weeks some announcements would be made, providing some relief to exporters” on this score.