The Hindu Business Line : Issues stalling free trade pact with Asean resolved

India has concluded negotiations for a free trade agreement (FTA) with the Association of Southeast Asian Nations (Asean), with the deadlock over certain ‘outstanding issues’ that were stalling the pact from taking off being finally resolved.

Agency reports quoted the Asean Secretary-General, Mr Surin Pitsuwan, as saying that the ‘last-mile’ talks, held between the two sides on Thursday morning, had managed to overcome the ‘remaining outstanding issues’ coming in the way of the FTA, which was originally scheduled for implementation from January 1, 2007.

The details of how exactly these stumbling blocks were resolved at the meeting of top officials from India and the 10-member trade bloc at Brunei is not clear as of now. What was ultimately clinched will be known when the Commerce Secretary, Mr G.K. Pillai, returns on Friday from the successful talks, paving the way for the Indo-Asean FTA to come into force from January 1, 2009.

Tariff cut on agro products

The negotiations up to now were bogged down essentially over India’s tariff cut offers on crucial agro-products that were considered insufficient by Asean members. India, for instance, offered to bind its import duty on palm oil from Malaysia and Indonesia at 45 per cent, as against the current 300 per cent ‘bound rate’ (i.e. the maximum duty it is entitled to impose under the commitment to the World Trade Organisation). The two countries, however, sought it to be set still lower at around 30 per cent.

“They would probably have settled eventually for something in between”, official sources said. India was also willing to reduce the duty on coffee and tea from 100 per cent to 50 per cent and from 70 per cent to 50 per cent in case of pepper. But in return, it sought concessions from the Asean side, involving a significant pruning of the list of negative items, which members wanted to be excluded from the FTA’s ambit.

Import duty on petroleum crude

Another issue on which concerted negotiations took place was the import duty on petroleum crude. Currently, in the backdrop of skyrocketing oil prices, India does not levy any tariff on crude, just as it has done away with the duty on imported crude palm oil.

But in the event of a softening on international prices, there is always the flexibility to raise import duties.

“Both Brunei and Malaysia have demanded that India permanently eliminates duties on oil and gas imported from them. This is not fully acceptable to us given the revenue implications involved, but may be one could make an exception for Brunei”, the sources noted.

India annually imports around two million tonnes of oil from Brunei.

While this represents just one per cent of India’s total oils, it accounts for more than 20 per cent of Brunei’s oil exports.

During 2007-08 (April-March), India’s exports to the Asean countries were estimated at $15,713.10 million, with imports being higher at $22,658.08 million. The Asean members include Malaysia, Indonesia, Singapore, Thailand, the Philippines, Vietnam, Cambodia, Laos, Myanmar and Brunei.

The FTA with India would be the fourth by Asean with a dialogue partner, following Japan, China and South Korea.

Mr Surin was optimistic that similar negotiations with Australia and New Zealand could be concluded in the coming months.

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