Asean FTA in a bind over rising demands

NEW DELHI: The Indo-Asean Free Trade Agreement (FTA) is not yet out of troubled waters. Despite India’s offer to increase the number of products on which tariff cuts would be implemented, Asean has not agreed to extend the pact to cover services and investment.

This has led to disappointment within certain sections of the government and political circles, sources close to the development said. India is keen to ensure that services and investment are included in the pact to convert it into to comprehensive economic cooperation agreement (CECA). Without these aspects, India will not benefit adequately from the agreement, it is felt.

While keeping mum on services and investment, Asean is insisting on more tariff cuts. Some of the items of Asean’s interest are agriculture products which are sensitive in nature due to the impact on Indian farmers, sources said. It is due to the apprehensions over the adverse impact on farmers that Congress president Sonia Gandhi has asked for caution on FTAs, especially the one with Asean.

Subsequently, the FTA was reviewed at the highest level and it was decided that the negative list would not be cut beyond 852 items. Due to protests from Asean and a threat by Malaysia to derail the pact, the list was further pruned to 560.
Even the reduction of negative list to 560 has failed to appease Asean. India cannot go on compromising its position without getting anything in return, sources said. The issue is likely to be discussed when commerce and industry minister Kamal Nath visits Kuala Lumpur for the Indo-Asean consultation meeting later this week. It is understood that Prime Minister Manmohan Singh is keen on early implementation of the pact.

Mr Nath’s meeting with Asean economic ministers will throw some light on how the negotiations are poised, sources added. The government has already indicated that it was willing to reduce customs duties on palmoil, pepper and black tea. Malaysia, which is a key player within the Asean, said that India has to improve its offer as its sensitive list contained a number of products of interest to Asean members. It also said that duties on palm oil have to be reduced further.

Speaking to ET, official sources said that there was a growing resentment within Indian polity on Asean’s ’high-handed’ behaviour. Sources said that the finance ministry has said that if Asean refused to include services and investments in the bilateral agreement, then the FTA would not be beneficial for India.

Asean had asked India to reduce its sensitive list to 60 items with each country. India feels that the demand is too harsh as the Asean had allowed China a sensitive list containing 200 items with each member. The Asean is yet to table details of their liberalisation proposal under the India-Asean FTA and has not given any country-wise offer list.