The Hindu Business Line : Negotiating FTAs

If New Delhi is able to complete Free Trade Agreements (FTAs) with Japan and South Korea in the wake of the accord with Asean that has just been sewn up, India’s trade relations with its principal Asian counterparts will, no doubt, take a quantum leap. Only a similar agreement with China would then be awaited which would complete an appropriate Asian trading grid for the India of the 21st Century. Having said this, however, the point must also be made that the path t owards the FTAs-in-waiting should be trod with care, the sole objective in every case being extraction of the best mileage for the national economy.

Earlier this week, the Union Commerce Secretary, Mr G. K. Pillai, exuded hope that FTAs with both Japan and South Korea would be finalised successfully by the end of the year, the inference being that the way ahead was relatively easy with the major problems having been sorted out. There are, however, a number of problems outstanding with both countries that need to be settled before the final documents are signed. While it is true that there are no major farm exports from Japan that could create problems for India farmers — as was the case with Asean — Tokyo has already shown that it is a difficult negotiator when it comes to allowing certain Indian agricultural exports into Japan. Indian sesame seed exports, for instance, have been facing severe problems ever since DDT traces were detected in some consignments in the early 1990s. The main problem is the tough phyto-sanitary standards which the Japanese employ in screening farm imports. Chemicals and leather exports are also facing stiff non-tariff barriers in entering Japan. Computer-related and IT services, which form an important thrust area for New Delhi, too face tax and other problems which need to be sorted out. Services have turned out to be a difficult area with South Korea as well despite the fact that the negotiations, begun in 2005, have been unusually smooth till now. With agreement on the broad contours of the deal having already been reached, hopefully, it is now only a matter of time before the framework is fleshed out.

Cheap professional expertise is India’s advantage and New Delhi should pull out all the stops to get the best deal in this area. The overarching objective should be to increase the already sizeable South Korean and Japanese investments in India , which are certain to have beneficial spin-offs on the Indian economy. Clearly, haste in striking the accords is in order but it should be without losing sight of the national interest.

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‘FTA with Asean, EU to boost India’s outward investments’
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