The Hindu Business Line : Expectations from Asean

The revised deadline of this month-end for finalisation of the India-Asean free trade agreement is unlikely to be met once again, this time reportedly because of the persisting unwillingness of countries such as Indonesia to come up with further concessions. However, it is said that a lot of progress has already been made in the negotiations, with the result that an agreement is round the corner, perhaps in April, when the Asean countries are expected to make offers matchi ng the concessions made recently by New Delhi.

This is certainly an encouraging development, considering that the FTA has been in the works since the two sides agreed to work on an agreement in November 2002. Undeniably, progress has been made in specific areas which can justify, to an extent, the note of optimism about the future, such as a resolution of the rules-of-origin problem. But the disturbing fact is that a small but critical part of the canvas still remains the subject of dispute which, since it affects core economic interests on both sides, may take some time to resolve. The time-line that is operative here can be gauged from the fact that it has taken more than two years to get the majority of Asean countries to agree to have 80 per cent of total traded products between the two sides tariff-free against an initial demand of 90 per cent, an arrangement that is still being resisted by Jakarta. (In early January, New Delhi was talking about a tariff-free coverage of 73 per cent.) The much more important issue involves getting the Asean side to appreciate both New Delhi’s gesture last week in slashing duties on palm oil and its compulsions in not being able to offer further import concessions on such sensitive items as pepper, tea and coffee — an understanding that is critical if the free trade agreement is to be worked out successfully.

Last August, after official-level discussions in Manila, New Delhi had said that the two sides were as close as possible to an agreement, with 95 per cent of the road already covered. As is usually the case with such negotiations, the last five per cent of the journey promises to be the most harrowing because it has to deal with issues which are almost “non-negotiable”. As far as New Delhi is concerned, further concessions on “sensitive items” is quite impossible with elections round the corner and also because of the attendant problems likely to arise from extension of the most-favoured nation principle to other, non-Asean trading partners. This apart, there is no indication whatever that reciprocal concessions are in the pipeline with regard to Asean-sensitive products of interest to New Delhi. Clearly, Asean will have to offer more than what it has already put on the table if the FTA is to see the light of day, not to mention the complex subject of inclusion of services and investments in which India has an advantage.

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