The Hindu Business Line : Hard work on Asean FTA

Those who are expecting substantive progress in the India-Asean negotiations on a free trade agreement during the visit by the Prime Minister to Cebu, in the Philippines, for the Asean summit later this week must have been chastened by the recent offers made by Asean that are exactly the opposite of what New Delhi is hoping for.

The clearest indication of Asean's inability, or unwillingness, to respond appropriately to New Delhi's gestures of compromise and accommodation came late November, when the negative list drawn up by the grouping was suddenly increased from the 2,700 items it had offered in August to as many as 6,900 items (in consolidated terms, from 600 to 1,000). This came despite consistent efforts by New Delhi to prune its negative list — from an original list of 1,414 items to the current 460 items, a whopping 67.5 per cent reduction — the latest cut being effected in the last week of December, that is, after the Asean list's expansion. According to the Union Commerce Secretary, Asean's August list was the one the grouping had offered China in its FTA with that country, New Delhi's entirely reasonable stand being that India should be treated at par with Beijing. This apart, in December 2005, at the fourth India-Asean summit in Kuala Lumpur, the Malaysian Prime Minister had asked Dr Manmohan Singh to shorten the Indian negative list because it excluded from the proposed FTA "a substantial portion of trade" between the two sides. Since Asean has not softened its stand (in fact, it has reversed it) following, as the figures indicate, New Delhi's more than adequate response, the strong suggestion is that Asean's focus is not just on the proportion of total trade to be brought under the FTA but on specific products, such as palm oil, on which it would like duties to be reduced sharply and as early as possible. Even here, New Delhi has been accommodative in that it has both lowered the existing duty and shortened the period over which the duty will be cut to zero. But clearly this has had no effect on Asean's negotiating stance.

With time, it is becoming increasingly clear that Asean is perhaps too loose and diverse an economic unit to engage in a detailed FTA at the bilateral level with external trade partners, the writ of which will run across all the 10 members of the grouping. Instead, a preferential arrangement could perhaps be more useful as regards trade (in goods and services) and investment, with issues such as tariffs on specific products settled at the bilateral level with individual member countries. It is against this background that the efforts being made to wrap up the India-Asean FTA — which incidentally should have been operational by now — should be seen.

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