India, ASEAN sign free trade agreement

India and the Association of South East Asian Nations on Thursday signed a Free Trade Agreement, which took nearly six years to negotiate. The FTA, relating only to goods, was signed by Union Commerce and Industry Minister Anand Sharma and his ASEAN counterparts at a ceremony in Bangkok after the two sides held annual consultations.

The accord, India’s first with a trade bloc, will cover 11 countries with a combined Gross Domestic Product of over $2 trillion. The combined population is of the order of 1.6 billion.

Co-Chairperson of the ASEAN-India Trade Negotiating Committee, Rebecca, later told that nine members of the 10-nation regional trade bloc signed the pact. Vietnam would do so after its formal recognition by India as a “market economy.”

India and Vietnam, according to Dr. Rebecca, had already agreed to sign a memorandum of understanding on this issue.

The implementation of the FTA would, therefore, take off from January 1 next year, as now agreed upon, she emphasised.

The press statement said the mutually agreed tariff liberalisation would “gradually” cover 75 per cent of the two-way trade, beginning from January 2010. India-ASEAN trade was of the order of $40 billion in the 2007-08 accounting year. The regional bloc was now India’s fourth largest trading partner.

Dr. Rebecca said the ASEAN would now seek a “fast-track” approach for talks with India for a “single” follow-up accord on liberalising the two-way flow of services and investments. The “hope” was to finalise the deal in about a year’s time. The ASEAN’s expectation was that the agreed tariff cuts under the FTA, as now signed, would be fully implemented by the end of 2013 and 2016 in respect of two “normal tracks.” A timeline had also been agreed upon for the “sensitive list” of items, she said.

Under the trade pact, India has included 489 items from agriculture, textiles and chemicals in the negative list, meaning these products will be kept out of the duty reduction.

Addressing concerns of domestic planters, black tea, coffee, pepper and rubber have been included in the sensitive list, which could mean duties will be cut by 2019 only. However, duty on these items at no time will be eliminated. Farmers in South India, especially Kerala, fear lower duty on plantation crops like coffee and pepper would lead to a deluge of imports from ASEAN members like Indonesia, Malaysia, which could leave domestic farmers vulnerable to competition.

Mr. Sharma had said on Wednesday that the agreement was well balanced and was in harmony with India’s Look East Policy. “I can say negotiations have been painstaking. The negotiators have ensured that our sensitive areas where we had concerns are fully addressed,” Mr. Sharma had said.

He had also said the whole debate of the CECA adversely impacting domestic planters was based on “uninformed” speculations.

The bulk of trade between the two regions include textiles, steel, processed food, plantation crops, iron and steel, ready-made garments and chemicals.

The Federation of Indian Chambers of Commerce and Industry (FICCI), which has accompanied Sharma, leading a business delegation, said that the agreement would provide access to the large ASEAN market to India.