India, Asean likely to ink free-trade pact on Feb 26

NEW DELHI: India and the Asean, a grouping of 10 southeast Asian nations, are expected to sign a free-trade agreement on February 26 to eliminate tariffs on around 4,000 products traded between the two sides.

Commerce and industry minister Kamal Nath has been invited by the economic ministers of Asean to sign the pact, provided it is approved by all 10 Asean countries. The signing will take place at the Hua Hin beach resort, 130 kilometres southwest of Thailand’s capital Bangkok, a day before the 14th Asean summit begins there.

The treaty will result in the abolition of tariffs on a variety of manufactured items ranging from consumer electronics and farm products to metals and chemicals. A commerce department official said the Asean members will have to get the agreement ratified by their respective parliaments before the trade ministers sign it. He said the Asean countries are expected to get their domestic clearances by February 10.

“India will try its best to ensure that the FTA is signed next month as it will be the last chance for the current government to conclude the pact,” the official said. Asean is India’s fourth-largest trading partner after the EU, US and China. Indo-Asean trade, which has been growing at a compounded annual rate of 27%, stood at $38.37 billion in 2007-08. It is projected to reach $48 billion in 2008-09.

The FTA provides for the elimination of tariffs on 80% of the items traded between the sides in a phased manner by 2015. For about 10% of additional items on the sensitive track, the tariffs will not be eliminated, but brought down to 5%. India has 489 items, mostly farm products, on the sensitive list which will not be subject to tariff cuts.

The 10 Asean members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Asean and India will gradually turn their free-trade agreement into a comprehensive economic cooperation agreement that will also include services and investment.

India already has a comprehensive economic cooperation agreement with Singapore and an early harvest programme with Thailand wherein the two sides have reduced duties on 82 products.