India not reckless in CECA talks with ASEAN

NEW DELHI: New Delhi appears to have now responded to the ASEAN’s indifference to its perceived alacrity to conclude the Comprehensive Economic Cooperation Agreement (CECA) talks, commerce minister Kamal Nath stayed away, despite being an invitee, from the ASEAN+three economic ministers’ annual meeting held at Makati City, the Philippines, on August 26, even as Chinese, Korean and Japanese ministers participated to further their trade talks with the union.

Commerce ministry officials here say with Malaysia and Indonesia, two most influential ASEAN members, remaining firm in their opposition to India’s special list of five products for which it wants less rigorous tariff cuts, even the initial agreement of trade in goods was unlikely to be signed at the ASEAN-plus-one summit in Singapore this November.

“To be optimistic, there could be a joint statement at the summit that the talks have been concluded,” said an official. When asked how this statement would be different from the joint pronouncement earlier this year that talks would be concluded by July, he said, rather evasively, that this (the likely November statement) would be clearer, “the two sides would say the negotiations are through, the texts are ready...”

The possibility of even such joint statement, according to the official, however, hinges on both sides “showing a lot of intention to quickly wrap up things.” Of course, even if the heads of governments affirm their resolve, it would take at least a couple of months more for the governments to draft the agreement and get domestic approvals.

The differences are now over the extent of tariff cuts the agreement would mandate on palm oil (crude and refined), coffee, tea and pepper. India wants to treat these products as “special”, considering the domestic sensitivities. India’s plantation lobbies and their political patrons indeed wouldn’t tolerate tariffs on these items to fall sharply.

So what about the negative lists (for items that are to be wholly outside the free trade pact) which have so far kept the two sides not seeing each other eye to eye? Sources say the two have now more or less patched up on this front, thanks to India’s climbing down. Both sides would maintain negative lists of 490 items (for each ASEAN member, there would be separate lists of the same strength).

To be specific, ASEAN wants Customs duty on crude and palm oil to come down to 20-25% at least while New Delhi would not budge: it is firm on 50% (crude) and 60% (refined). Similarly, ASEAN says duty on coffee and tea should be pared to 20% from 100% now and that on pepper from 70% to 20% while, again, India asserts the duty can’t be cut to less than 50% in these cases.

In addition, when it comes to negotiating trade in services and investment liberalisation, the Indian interlocutors have become considerably more demanding. “We want Asean to be more accommodative in the financial sector, permission for our banks to establish/expand their presence by opening of branches, etc,” said the commerce ministry official.

India wants its medical, engineering, computer and para-medical professionals to benefit from the liberalisation while ASEAN’s interest is to get opening in India for their convention and exhibition firms and other contractors.

New Delhi has flagged the idea of the agreement on trade in goods immediately following the comprehensive pact covering services and investment. “The agreement in services should happen in a maximum of a few months after the pact on goods,” said the official.

The Indian policymakers reckon that in services, the country’s comparative advantage is rather widespread, from health and tourism to law and accounting. Attracting large amounts of foreign investments is considered to be vital for accelerating the now-handsome growth in manufacturing. So free trade in goods is not India’s priority while entering into bilateral agreements and this policy shift has apparently made India less obsequious in the talks with the ASEAN. It is not desperate for a deal.