Duty cuts likely to end Asean FTA deadlock

NEW DELHI: India may decide to give some more concessions to Asean to move the stalled bilateral free trade agreement (FTA) negotiations. Talks have been stuck over the Asean’s demand for sharper cuts in four key agriculture products including palm oil, pepper, coffee and tea.

India had agreed to bring down duties on the four products to 50%, but Asean wanted the cuts to be higher. The country now seems to be ready to bring down duties further, the extent of which will be decided in the trade and economic reforms committee (TERC) meeting next month.

Speaking to ET, commerce ministry sources said that the Asean wants the duties on the four products to be reduced to at least 40%. “The commerce ministry negotiates only after getting a nod from the TERC. The TERC will have to decide what further cuts we can commit to,” the official said.

Sources added that while India might not agree to go the whole way and reduce duties to 40%, it could bring them down to 45%. India has already agreed to halve the duties from 100% to 50% at the time when the negotiations began.

The ten member Asean countries, especially Malaysia and Indonesia, are mainly interested in bringing down duties on palm oil. While India has managed to exclude the four agriculture items from formula duty cuts, the deal cannot happen till India agrees to a substantial reduction in duties.

India, too, has recently made additional demands from the Asean for the FTA. It has said that the Asean countries should provide improved market access to 783 items including key manufactured goods like auto parts.

The enhanced market access should not only be in the form of tariff reductions but also incorporate removal of non-tariff barriers. A number of agriculture products are also part of the list which has been submitted to Asean.

The India-Asean FTA talks have faced turbulence right from the word go. The early harvest programme, which was to preceed the FTA, had to be abandoned because of disagreement over the rules of origin which determine which product originate from the member country and should qualify for the preferential treatment and which are third country products and should be excluded.