Asean FTA may be a no-show

NEW DELHI: The much-hyped proposed free trade agreement (FTA) between India and Asean seems to be running into trouble. Asean’s demand that India bring down Customs duties on four sensitive agricultural commodities to levels much lower than what New Delhi finds ‘acceptable’ has put a question mark over the deal. According to commerce and industry ministry officials, India is not ready to be pushed around any further and would choose to opt out of the agreement if Asean doesn’t lower its demands.

In an official-level meeting last month-end, both India and Asean decided to make last-ditch efforts to save the proposed pact. However, sources said nothing could move till the Asean countries gave up their demands. Asean has said India should cut Customs duties on palm oil to 30% and on tea, coffee and pepper to 20%.

India feels this demand is unrealistic. “India has already agreed to bring down duties on all four products to 50% from about 100% at the time negotiations began. It is totally unrealistic of the grouping to expect India to agree to lower levels. We have to protect the interests of our farmers,” a commerce ministry official said.

Since Asean countries, especially Malaysia and Indonesia (the prime producers of palm oil), are unwilling to budge, it seems unlikely that a bilateral agreement between India and the Asean countries would be ready by the Asean summit in Singapore scheduled for the third week of November. The 10-member Asean comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The framework for an comprehensive economic cooperation agreement (CECA) between India and Asean was signed in October 2003 during the second Asean-India summit. The idea was to move towards a free trade regime for trade in goods and services.

The going for the deal was rough from the beginning as the early harvest programme involving duty cuts for a handful of items, which was to precede the FTA, had to be dropped due to differences over rules of origin (ROO).

The ROO defines which products should qualify as products originating from the partner country and which should be treated as imports from third countries.

India finally agreed to water down its version of the ROO to coax Asean to move ahead with talks. Although the two sides ultimately agreed on a ROO, there were differences over the negative list of items (items to be excluded from the FTA) which India wanted to maintain.

Officials said since India agreed to prune its negative list to just 490 items, the shortest list it has maintained with any country or bloc, it was proof enough of its interest in making the FTA happen.

“The ball is in Asean countries’ court. They either accept what has been offered or forget the deal altogether,” the official said.