Hike in EU customs duty to hit Indian exports

New Delhi will ask Brussels to reconsider the decision by the European Commission (EC) to end a preferential tariff system for imports from India and other developing nations. Should the current regime of low customs duties end, it would make Indian goods more expensive with exporters paying anywhere between 6% and 12%. “We have a month’s time before the new GSP (generalised system of preferences) regime to convince the EU,” an official familiar with the development told FE.

The EU has decided to “graduate” exports of several items including textiles, chemicals, minerals, leather goods and motor vehicles from India out of its GSP scheme with effect from January. Preferential or nil customs duty to exports from developing nations under GSP is an exception to the World Trade Organisation obligation of member states to give every other member equal and non-discriminatory treatment under the ‘Most Favoured Nation’ status. Other products to be excluded from the preferential import tariff include bicycles, aircraft, spacecraft, ships and boats. India’s exports to the European Union, which accounted for 17% of the country’s total exports, shrank by over 4% in 2012-13 to $50 billion.

According to official sources, India’s commerce ministry will also protest the EU’s move to simultaneously grant zero customs duty on textile imports from Pakistan from January. This, according to New Delhi, will affect the regional competitiveness of India’s textile industry, its second largest employment creator after agriculture.

“We will take it up with Brussels because for textiles, it is a double whammy. The EU has removed Indian textiles exports from GSP, which means higher duty at EU borders, and they are in the process of giving textile exports from Pakistan GSP Plus status, which means zero duty,” an official confirmed to a news agency.

The move gives clothing, apparel and accessories exports from Pakistan a 10% duty advantage over those from India. The official explained that the EU Parliamentary Committee’s vote on November 5 to give GSP Plus status to textiles from Pakistan will have to be ratified by the European Parliament, which it is expected to do in early December. The EC’s decision to graduate the Indian textile industry out of GSP from January 1 already has the approval of the European Parliament.

The EU’s move to deny India the GSP benefit for certain goods is part of its plan to redesign the scheme. The idea is to exclude advanced developing economies that have integrated into the world trade and to focus on the needs of those that are lagging. Textile exports from India are being phased out of GSP as they exceed 14.5% in value of textile imports into the EU from all beneficiary countries, going by a three-year average up to 2012. For other products the threshold for exclusion is 14.5% as per the EU regulation.
The European parliamentary committee’s vote to grant for GSP Plus status to textile imports from Pakistan and nine other countries is aimed at promoting international conventions on core human and labour rights, environment and good governance. According to overseas reports, a GSP Plus tag for Pakistan would help it create a million new jobs, boost its exports to EU by $500 million and facilitate capital flow to the sector because of the competitive edge from tariff removal.

Ajay Sahai, director general and CEO, Federation of Indian Export Organisations, said the EC’s decision would affect the competitiveness of the country’s exports. “Even though the EC has suspended this preference for both India and China, we would be hit more since China is more competitive," Sahai said.

Indian officials are also worried about the prospect of a decline in forex inflows in a year in which they had to take harsh steps like curbing gold imports to contain the current account deficit to below $70 billion or 3.8% of GDP. "It is important for affected industries to prepare themselves for the change. The cost of specified Indian exports to the EU shall, as a result of the proposed changes, increase and accordingly will impact their competitiveness," said Saloni Roy, senior director, Deloitte in India.

"The US has already given many advantages to Pakistan due to various political reasons and with this suspension from the EU, we might see a shortfall of 2-5% in exports," said Vishwanath, joint managing director of Nath Brothers Exim International, a Noida-based firm exporting garments.

To get broader preferential access to the EU market, India is now negotiating a free trade pact with the EU, which already has such arrangements with about 34 other countries. Talks on the proposed India-EU pact are progressing slowly due to a lack of agreement on areas of market access and its extent.

Read More......

India's imports gained while exports grew negligibly from FTAs: ASSOCHAM study

In the aftermath of signing 15 regional and bilateral free trade agreements (FTAs), while India's imports from these countries and regions increased significantly but our exports to these partner countries either stagnated or registered minimal growth, according to a just-concluded study undertaken by apex industry body The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

India has signed as many as 15 FTAs including preferential trade pacts, while 19 are under negotiations and eight are in the pipeline but India is still grappling with slow growth of exports and sluggish foreign direct investment (FDI) flows from its FTA partners, said Mr D.S. Rawat, secretary general of ASSOCHAM.

These engagements have achieved limited results in terms of increasing trade volumes with member countries and thus main objective of these market opening pacts is only partially being met, said Mr Rawat. There is an urgent need for the government to revisit its strategy of FTAs, bring greater transparency and involve more effective administrative process in their design and implementation to make FTAs more beneficial for India.

Out of the seven major trading partners viz., ASEAN (Association of South-East Asian Nations), Indonesia, Japan, Malaysia, Singapore, South Korea and Sri Lanka with whom India has operationalised FTAs, it has trade surplus with only Sri Lanka and Singapore, highlighted the study prepared by the ASSOCHAM Economic Research Bureau (AERB).

Even on the investment front these free trade pacts have not given any extra edge to India so far as during April 2000-June 2013, India received FDI worth $1.25 billion (bn) and $14.75 bn from South Korea and Japan respectively and this year during April-June, India attracted only $224 million worth FDI from Japan while the figure was $2.23 bn in 2012-13 and $2.97 bn in 2011-12.

Considering the negative impact of these agreements on India's manufacturing sector, ASSOCHAM has suggested that trade agreements should be 'self-regulatory' to evade scope of 'safeguard measures' and the advanced partners must not be allowed to salvage Surplus capacities through exports and exploiting concessional duty rates under trade agreements.

Besides, it should be seen that trade agreements do not become a means to fill the country's short-term supply-deficit through exports made at concessional duty rates as it adds an anti-competitive element vis-vis imports from other countries. Therefore, it needs to be complemented with Specific & Time-bound commitment for inflow of Investment, otherwise the purpose of a Trade Agreement gets defeated, highlighted the ASSOCHAM study.

Considering that India's negotiations for comprehensive FTA with European Union (EU) are at an advance stage, ASSOCHAM has suggested the Ministry of Commerce and Industry to from a special team of experts to negotiate FTAs, besides the government should organize FTA outreach programmes to create awareness amid various stakeholders.

As the feasibility/joint studies conducted by the government before commencing talks for any FTA form the basis of negotiations, ASSOCHAM has also suggested for broadening the base of such studies and inviting participation from various stakeholders like academicians, representatives of the marginal, small and medium enterprises (MSMEs) and state government officials. Besides, Indian embassies in these countries should also be engaged to gather sensitive information while conducting such studies.

Other significant points suggested by ASSOCHAM include - constant updation of publically accessible information, consultation with governments at state level before finalizing the pacts, emphasis should be laid on sectors lucrative for domestic players and tariff rates of specific sectors where Indian traders can penetrate aggressively must be looked at.

So far, India has concluded 10 Free Trade Agreements, 5 Limited scope Preferential Trade Agreements and is in the process of negotiating or expanding 17 more Agreements. Besides, at least 9 more proposals for FTAs are under consideration and when completed, these Agreements would cover over 100 countries spread across 5 continents.

Read More......

Asean FTA can be reviewed to protect farm interest: Antony

NEW DELHI: With Congress’ rivals stepping up attack on the government for signing free trade agreement (FTA) with Association of South East Asian

Nations (Asean), defence minister AK Antony on Tuesday promised to take corrective measures to insulate the agricultural sector.

“If there are shortcomings in the agreement, the group of ministers will recommend corrective measures,” reports from Kochi quoting the minister said.

The Cabinet sub-group, set up to study the impact of the FTA on the agricultural sector, is headed by finance minister Pranab Mukherjee and includes overseas Indian affairs minister Vayalar Ravi and Mr Antony. “This committee will hold talks with the state government and all other parties concerned,” Mr Antony said. “By 2020, we would be able to overcome all shortcomings with the proposed government help,” he added.

There was stiff resistance in the Cabinet over signing the treaty and Mr Antony himself had advocated caution. This opposition had prompted the prime minister to constitute a GoM.

Congress’ opponents have been using the issue to question the government’s commitment to farmers. “The Congress-led UPA has let down the people of this country and, more importantly, the farmers, who are the backbone of our economy, by signing the FTA. It will allow zero duty imports of items from January 1 next year into the country. Within the next four years 70% of imports from Asean will be without import duties and they will account for over 50% of India’s annual import bill. The farmers will be the key sufferers since the Asean countries have a comparative advantage in producing farm crops such as rice, palm oil and other plantation products,” Samajwadi Party general secretary Amar Singh said in a letter to the prime minister.

The SP leader also said the FTA would only make matters worse for the Indian farmer. “Indian exports are contracting (growing by minus 50%) at the moment. Global markets are disappearing. At the same time, India’s domestic demand is doing very well and is therefore bound to be a target of cheap imports. A commerce ministry note has warned that the increased market access for India will be 20% while it will be 75% for Asean. Clearly, the deal is loaded against India,” Mr Singh said. The SP leader said the prime minister or the government have not bothered to take Parliament into confidence.

“This is despite the fact that several Congress ministers raised objections in the Cabinet meeting called to approve the deal. The prime minister has failed the nation yet again by showing that the rest of the world is more important than India, and this deal was signed just 8 days before India’s 63rd Independence Day,” Mr Singh wrote in his letter to the prime minister.

Read More......

India gives away more market access to Asean

NEW DELHI: Indian negotiators who had tried to bargain a good deal with 10-member regional grouping Asean for the last six years finally gave away much more additional market access than their counterparts from the Asian regional trading bloc.

Though India’s and Asean’s offer to each other’s imports is similar at around 96% under the recently signed free trade agreement (FTA), India has actually given much more additional market access than what it got in return.

As about 75% of the Indian goods entering the Asean countries currently attract zero duties, the effective additional market access that India has secured out of the FTA with Asean is mere 21% of its export. In return, India has agreed to provide additional market access of about 75% imports from Asean bloc.

Though, no official in the ministry of commerce and industry, which spearheaded the talks has come on record to admit poor negotiation skills by the Indian team, officials in the ministry agreed in private that it could have been a far better deal.

Whereas both parties agreed to keep 489 items each out of the scope of tariff cuts, Indian negotiators agreed for one consolidated negative list of 489 items for all Asean countries put together, which means India has about 50 items in its negative list for each Asean country. In return, India conceded each individual Asean country to prepare a separate negative list of 489 items each according to each country’s sensitivity to Indian imports, the analysis has found.

According to the agreement, which will be implemented from January 1, 2010, duties will be eliminated on about 3,200 products by December 2013. For the rest 800 products, duty will be zero or near zero by December 2016.

As India has already signed the agreement for goods, without taking into account the services sector, its future power of negotiation on services sector is substantially reduced, an analyst working in a quasi-government organisation said.

“As Indian negotiators have agreed to allow zero duty imports on 80% of items from a large trading bloc like Asean, it will adversely impact India’s long stand on WTO against major duty reduction in agriculture and non-agricultural market access, or Nama sectors,” the analyst said in the condition of anonymity.

Whereas Kerala politicians including heavyweights from the ruling Congress initially opposed to the India-Asean trade pact as it would impact agriculture products from the state, the Left parties have now demanded a white paper on the impact of the pact, saying that it will adversely affect farmers and small industries.

Read More......

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.

Read More......

Downturn may force India to postpone trade pact with ASEAN

The deal between ASEAN and India, which was under negotiations for the last six years, was expected to be signed between the two sides on 27 February in Thailand.

New Delhi: The unexpected setback to exports and the associated problem of domestic unemployment may yet spike the government’s plans to sign a free trade agreement (FTA) with the Association of Southeast Asian Nations (ASEAN), a powerful trade block of 10 countries.

With general election due in the next two months, the Congress-led United Progressive Alliance government may find it difficult to justify a freer trade regime at a time when industry is reeling under the impact of a global recession and contracting domestic demand.

Two senior government officials, in separate interviews, confirmed on the condition of anonymity that FTA with ASEAN along with similar agreements with Thailand and South Korea had been readied and put up to the cabinet for approval. “It is now a political decision,” one of the officials said.

Indian exports contracted for the third consecutive month, declining by 1.1% in December, even as a survey by the labour ministry found that 500,000 people had lost their jobs in export-oriented sectors such as gems and jewellery, back-office services, textiles and handicraft.

Talks were on for the last six years and the deal was expected to be signed on 27 Feb in Thailand. The ASEAN FTA was due to be inked in December, but was put off following political instability in Thailand. However, since then, the global economy has contracted even more sharply, forcing India to scale down estimates of its growth to 7.1% in 2008-09, from at least 9% in the previous three years.

In addition, the agreement has run into a procedural problem. According to the original schedule, the first round of tariff cuts was to come into effect on 1 January. If the deal is signed now, then this will come into effect on 1 June. According to the existing schedule, the second round of tariff cuts is due on 1 January 2010 and India has reservations with this, as it would mean effecting two rounds of tariff cuts in six months.

One of the officials disclosed that some kind of “compromise” would be worked out if the cabinet did indeed clear the agreement. ASEAN’s secretariat could not be immediately reached for comment, and a spokesperson for the Thai embassy could not be reached because he was travelling. According to the agreement between ASEAN and India arrived at after negotiations concluded in August, both sides have agreed to reduce or eliminate tariffs on 95% of the commodities in the trade basket over the next nine years. India had agreed to do this in three phases starting from 1 June 2009 and ending between 2012 and 2018.

For the so-called sensitive items for which tariffs need to reduced to 5%, the agreed time line is 2018, while for other items the tariff elimination was to happen in two phases, by 2012 and 2015. Now, ASEAN has demanded the whole process be completed in two phases.

A commerce ministry official, who, too, declined to be identified, confirmed the development. “There is some talk. We have a viewpoint. They have a viewpoint. However, we are firm on our standpoint.” However, he tried to play down the issue and said it was a “minor” one that would “be resolved”. The deal between ASEAN and India, which was under negotiations for the last six years, was expected to be signed between the two sides on 27 February in Thailand.

Both sides had agreed to reduce tariffs to zero for nearly 4,000 of the 5,000 items that are traded. A negative list of 489 items (where import tariffs would not be cut) across sectors such as agriculture, textiles, machinery and automobiles was also agreed upon. According to the terms finalized, India will also maintain a so-called highly sensitive list for five products: crude palm oil, refined palm oil, black tea, pepper and coffee. By 2018, tariffs for refined palm oil will be reduced by 60%, while those for the remaining four items will be halved.

India remains the seventh largest trading partner of ASEAN, with trade between the two being worth $38.37 billion (Rs1.9 trillion today) in 2007-08. Trade between India and ASEAN has been growing at a compounded annual growth rate of 27% since 2000; it is projected to touch $48 billion in 2008-09. India’s main trading partners in ASEAN are Singapore, Malaysia, Indonesia and Thailand, which account for 90% of the trade. India and ASEAN together have a population of 1.7 billion and a combined GDP (gross domestic product) of $2.4 trillion.

The two sides had also agreed to commence negotiations on trade in services and investment and to work towards the conclusion of substantive discussions on these two agreements by 2009, to bring about a complete ASEAN-India Comprehensive Economic Cooperation Agreement. Asked whether India should open up at a faster rate at a time when the industry is reeling under the impact of a severe slowdown, Nagesh Kumar, director general at think tank Research and Information System for Developing Countries, said, “The current slowdown is a shorter phenomenon whereas such trade agreements looks for long-term gains. By the time the impact of the ASEAN FTA is felt on Indian industry, the current downturn would be over.”

Arguing similarly, Manav Majumdar, who heads the international trade desk at industry lobby Federation of Indian Chambers of Commerce and Industry, said: “Because of the zero duty, if there is a surge in imports, there are safeguard measures available to check that from happening.”

Read More......

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.

Read More......

ASEAN-India economic integration faces difficulties

NEW DELHI, India: Most Southeast Asian countries are surrounded by bodies of water and attention so far has focused on improving port-to-port transportation. But more needs to be done before economic integration can be achieved.

There has been a proposal to set up a rail link from Delhi to Hanoi, the capital of Vietnam, passing through Myanmar, Laos, Cambodia and Thailand.

ASEAN nations and India are also working to achieve an open sky agreement, which will allow all flights to travel freely in the region.

For Southeast Asian tourists, the Indian government will soon provide multiple-entry visas.

Former ASEAN secretary-general, Ong Keng Yong, said: "Good thing is that people are thinking about the European idea - after you enter one country in Europe, you can move around. We are looking at that. But it is something we have to continuously pursue because there are so many considerations."

It takes a long time to finish customs clearances, and export and import procedures remain cumbersome, complicated and expensive. Trucks crossing international borders also require immigration controls, customs and quarantine procedures.

Singapore’s ambassador to Algeria, Zulkifli Bin Baharudin, said: "If you have 10 airports, which are well connected to the world, freedom of movement in and out of India, with the infrastructure that comes with it - custom procedures harmonised, free trade zones, understanding of manufacturing process, support of export-oriented industries - I think all that connectivity we talked about will come to fruition."

Besides infrastructure, a lack of political uniformity is also another barrier to ASEAN-India integration.

A military government in Myanmar and the recent political unrest in Thailand have obstructed the trade corridor.

Laws on taxation and banking too differ in each country. Adopting common standards and even a common currency seems unlikely as most ASEAN countries trade with India on one hand, but are also its rivals on the other hand for the import and investment of dollars in the rest of the world.

ASEAN countries have varying levels of development. This is also proving to be a hindrance in terms of developing effective infrastructure across international borders such as rail, roads and airports.

Read More......

India-ASEAN to sign trade pact on Dec 18: Ramesh

NEW DELHI: India and the 10-nation ASEAN will sign around December 18 this year the Free Trade Agreement in goods, negotiations for which have been wrapped up, Minister of State for Commerce Jairam Ramesh said today.

"We will formally be signing the FTA with ASEAN around December 18," Ramesh said at a seminar on ASEAN-India FTA organised by think-tank RIS and the Asian Development Bank.

The deal will be inked at the India-ASEAN Summit in Bangkok, to be attended by Prime Minister Manmohan Singh.

Ramesh said India has shown "remarkable flexibility" in terms of the Rules of Origin and approach to tariff heading, while negotiating the trade pact with the Association of South East Asian Nations despite having a trade deficit with the bloc.

In 2007-08, India's exports to ASEAN were USD 16 billion while imports were USD 24 billion. After the signing the pact in goods, the two sides would begin negotiations for an agreement in services and investment.

India concluded talks for a FTA with the 10-nation bloc last month. While it would eliminate or substantially reduce duties on almost 96 per cent of the items it trades with ASEAN, India is protecting its sensitive agriculture sector by keeping over 300 items out of the trade agreement.

Read More......

FTA: India, ASEAN sort out differences over tariff cuts

NEW DELHI: India and the ASEAN have finally concluded talks on a free trade agreement (FTA), sorting out long-standing differences over proposed tariff cuts in sensitive farm products such as palm oil.

The India-ASEAN trade negotiations committee, which met in Brunei this week, managed to resolve pending issues and sealed the deal, which would result in tariff elimination on four-fifths of all traded commodities in a phased manner over the next 10 years.

Trade ministers from the 10 Asean countries and India will meet later this month to formally approve FTA, following which the legal framework for the deal will be drafted. The agreement will be signed by heads of states during the next Asean summit in December in Bangkok.

The FTA will be implemented from either January 1, 2009, or June 1, 2009, depending on how soon individual Asean members are able to ratify it, government sources said. The agreement is expected to give a big boost to bilateral trade, currently ruling at $30 billion per annum.

With the free trade agreement in place, ASEAN now seems to be ready to start talks on services and investment, which was initially supposed to be part of a comprehensive economic co-operation agreement.

When trade ministers of India and ASEAN meet on August 28, they will fix a date for beginning negotiations on services and investment. Sources said negotiations in the two areas were likely to begin in September this year with the aim of concluding it by December 2009.

An agreement on palm oil duties was reached after India decided to improve its offer in crude palm oil (CPO) to 37.5% and refined palm oil (RPO) to 45% over its offer of 43% and 51%, respectively, made in January this year, sources said. Indonesia, which had earlier proposed to end rates of 35% for CPO and 42.5% for RPO, agreed to India’s new offer.

Disagreement over tariff reduction in palm oil, rubber, tea and coffee had stalled talks for over a year. India has agreed to bring down import duties on tea and coffee to 45% (from the existing bound rate of 100%) and rubber to 50% (from the existing bound rate of 70%) by 2018.

Tariff negotiations in all trade agreements are based on bound rates, which is a ceiling beyond which a country can never increase tariffs under any situation. The applied tariffs, which are existing duties at a given point of time, are often considerably lower than the bound tariffs.

India-ASEAN trade talks have gone through several rough patches ever since discussions began in 2001. An early harvest scheme, including tariff elimination on a handful of identified products over a relatively short period of time, had to be abandoned due to disagreement over rules of origin (ROO).

ROO is a vital part of any trade agreement as it determines how much value addition to an imported product should be done by the partner country to make it qualify as a product originating there, and hence, eligible for duty concessions in the market of the other partner.

India wanted a strict ROO to prevent third-country goods flowing into the country through ASEAN nations at concessional duties.

ASEAN, on the other hand, wanted ROO to be more relaxed. The disagreement was finally sorted out once the FTA talks began. The 10-member ASEAN includes Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Thailand, Singapore and Vietnam.

Read More......

ASEAN-India FTA talks concluded

After three years of strenuous talks, negotiations for the free trade agreement (FTA) between Association of South-East Asian Nations (Asean) and India were finally concluded Thursday.

Asean secretary-general, Surin Pitsuwan, said the "last-mile" talks, held today, managed to resolve several contentious issues that had been been holding back the two from reaching an agreement.

"I have been just informed that Asean and India have concluded talks on FTA this morning. This will open tremendous synergies between India's one billion population and our 567 million people," he told Bernama on the sidelines of the Asean Energy Ministers' Meeting here today.

Surin said he was happy the deadlock over the issue of agriculture products from Asean members, which had hindered the success of the talks, had been finally solved.

"The FTA with India is Aseans fourth with a dialogue partner, following Japan, China and South Korea," said Surin, who was optimistic that similar negotiations with Australia and New Zealand could be concluded in the coming months.

Asean's Senior Economic Officials (SEOM) met their counterparts from India during the Asean-India Consultations being held during the 4th Meeting of the 39th SEOM in Brunei.

Surin said the FTA with India would offer vast business potential for both the world's largest democracy and the 10-member regional grouping which aimed to create its own European Union-style single market or Asean Economic Community by 2015.

Trade between India and Asean reached nearly US$20 billion (US$1=RM3.28) last year and is expected to grow to US$30 billion by 2010.

Asean and India had signed a framework agreement on comprehensive economic cooperation in October 2003, and negotiations were supposed to be concluded by June 2006.

The trade pact was initially scheduled to be effective on Jan 1, 2007 but differences over agriculture products remained unresolved until today's meeting.

According to previous reports, negotiations were stalled over India's refusal to roll back tariffs on petroleum, palm oil, pepper, tea and coffee in a bid to protect the domestic sector, while Asean members, especially Indonesia and Malaysia, had been pressing for more access for their palm oil exports to India.

At the initial stage, India, which adopted a free market economy in the early 1990s, issued a long exclusion list of 1,414 products in its bid to protect its sensitive agriculture and textile sectors, but later reduced it to about 560 products.

Read More......

Sri Lankan MPs clash over CEPA with India

COLOMBO: Sparks flew in the Sri Lankan parliament as supporters and critics clashed over the proposed Comprehensive Economic Partnership Agreement (CEPA) with India.

India announced in July that the CEPA would be signed on the sidelines of the SAARC summit that ended here August 3.

But Sri Lanka, coming under pressure from the radical Marxist Janatha Vimukthi Peramuna (JVP), postponed the event indefinitely claiming that it needed time to discus the deal with local stakeholders.

If the JVP and its breakaway group led by its former propaganda secretary Wimal Weerawansa breathed fire on the deal and urged the government to abandon it, the pro-Tamil Tiger Tamil National Alliance (TNA) urged the government to go ahead with it without "succumbing to political pressure".

The house took up the issue Tuesday during an adjournment motion moved by MP Wimal Weerawansa, who argued that the proposed agreement would deal a crippling blow particularly to the service sector of Sri Lanka's economy.

According to media reports, Weerawansa expressed fears that the deal, the first of its kind in Sri Lanka, would leave local enterprises in doldrums because of the possibility of Indian investors gaining the upper hand, according to the provisions of the deal.

Bimal Ratnayake of the JVP charged that the government had decided to sign the deal with India in a hurry without consulting the "true industrialists" in the country.

"Today Mahinda Rajapaksa government has knelt before India and is betraying us to India. Today Chinese involvement in Sri Lanka has increased by 10 fold and India is not happy with this situation," the state-run Daily News quoted JVP MP Ratnayake as saying.

Udawatte Nanda Thera, a MP from the Jathika Hela Urumaya (JHU) - an influential party of Budhist monks - has said that the Sri Lanka had benefited "very little" from the Free Trade Agreement (FTA) with Indi and added that CEPA would mean a one-way traffic for Indian entrepreneurs.

Joining the debate, the parliament group leader of TNA, R Sampanthan, claimed that the country "is in a terrible situation with regard to economy and national problem" and stressed that the CEPA should be signed considering the economic benefits to both the countries.

"India is ready to contribute to smaller countries in the SAARC region in a much bigger way. We should go forward," he said.

Colombo district MP of the main opposition United National Party (UNP) Ravi Karunanayake has hailed the CEPA as one that "would help Sri Lanka tremendously", but stressed the need for consultation with the country's chamber of commerce to accommodate their views.

Responding to questions, Minister of Export Development and International Trade, GL Peiris, dispelled the views that India had forced Sri Lanka to conclude the deal in a hurry.

"India has granted a lot of duty free concessions to Sri Lanka and we are aiming to widen and deepen the market access to India. Through this proposed agreement we have access of eight million pieces of fabric to the Indian market," Minister Peiris said.

So far India has signed such CEPA only with Singapore in 2005. It is holding talks with South Korea, Japan and the European Union to enter into the same.

India signed a Free Trade Agreement (FTA) with Sri Lanka in 1999. As a result, Sri Lanka's volume of trade with India increased from $49 mn to $516 mn. India's trade volume with Sri Lanka has increased from $549 mn to $2.7 bn between 1999 and 2007.

Read More......

Bangladesh exports garments to India duty free for first time

DHAKA: Bangladesh has exported garments to India for the first time under a duty-free access deal seen as a breakthrough for the country's fast-growing textile industry, an official said on Monday.

Neighbours Bangladesh and India signed the deal last September, allowing Dhaka to annually export eight million garments duty-free across the border, an agreement hailed by New Delhi as a "milestone" in trade relations.

"Our companies have for the first time in history shipped garments to India this month under a duty-free access deal," said Anwar-ul Alam Chowdhury Parvez, president of Bangladesh Garments Manufacturers and Exporters Association.

"We've exported a small quantity, but it's a giant leap for the industry. It is projected that India's ready-made garments market would top 100 billion dollars by 2012. Our target is to get a slice of this huge market," he added.

Bangladesh, which has a two-billion-dollar trade gap with India, last year exported more than nine billion dollars of textiles, mainly to the United States and the European Union.

The country's textile export market is growing rapidly, spurred by a weak Bangladeshi currency and a sharp increase in production costs in China and Vietnam, its main global rivals.

The improvement in trade relations comes against a backdrop of sometimes tense relations between the neighbours.
India helped Bangladesh win independence from Pakistan in 1971 but ties in recent years have often been soured by border skirmishes for which both sides blame the other.

Indian officials regularly accuse Bangladesh of harbouring militants fighting New Delhi's rule in India's far-flung northeast.

Dhaka denies the charge and says New Delhi allows Bangladeshi criminals to take refuge on its soil.

Read More......

India replaces China as top exporter to Bangladesh

DHAKA: India has regained its position as the number one import source for Bangladesh, beating China, in the first nine months of the financial year ending June 30, official figures said.

This is mainly due to large-scale imports of rice and onion from India after Bangladesh faced a series of natural calamities last year.

Besides, analysts said, India, as the current chair of the South Asian Association for Regional Cooperation (SAARC), has also gone out of its way to woo the least developed countries among the member-nations, of which Bangladesh is one.

China has been the number one import source for Bangladesh during 2005-06 and 2006-07.

"India is set to dominate the Bangladesh market as importers here are shifting from China," a senior commerce ministry official was quoted by the New Age newspaper as saying.

Bangladeshi importers find imports of essentials from the next-door neighbour convenient in many ways, he said.
Bangladesh Bank's figures showed the country imported Chinese goods worth $2,292.12 million during July-March of the current fiscal year that ends this month-end.

The amount was 15 percent of the country's total imports during the period.

But imports from India figured $2,454.83 million or 16 percent of overall imports.

Bangladesh imported $14.64 billion in merchandises in the nine months between last July and March this year.
Food items, especially rice, onions and fresh fruits accounted for the bulk of imports from India.

Traders said surging inflation in India and China were pushing up prices of imports from these two Asian giants, which account for more than 30 percent of Bangladesh's imports.

Indian annual inflation rose to a 14-year high of 11.42 percent for the week ended June 14, while Chinese annual price inflation hit 7.7 percent in May, a 12-year high.

Bangladeshi imports from India amounted to $2,226 million in 2006-07 fiscal year, against $2,537 million-worth imports from China during the same period.

In 2005-06 fiscal, Bangladesh imported Indian goods worth $1,846.91 million while imports from China stood at $2,050.99 million. Once again, the two countries shared about 30 percent of Bangladesh's total annual imports that year.

Until the 2004-05 fiscal, India had been traditionally the biggest source of Bangladesh's imports, mainly foods and raw materials for many industries, including apparels.

Read More......

Industry sees only troubles, no gains from China FTA

NEW DELHI: The government has been urged to adopt a cautious stand on free trade agreement (FTAs), especially in the case of countries like China, and discourage export of raw materials. Import duties should come down gradually under such pacts and India Inc should be enabled to face global competition, says a study by industry chamber Assocham. While acknowledging that India cannot shy away from globalisation, the government has been asked to beef up infrastructure and provide a favourable exchange rate mechanism to ensure a level playing field.

“The government should consult the industry before signing FTAs. It is important to take industry representatives into consideration,” Assocham president Venugopal Dhoot said. The debate generated by the chamber is timely since India is negotiating a flurry of trade deals at this juncture. Since the Doha round talks at the World Trade Organization (WTO) are not progressing, most member countries are focusing on bilateral and regional agreements to boost market access.

In the case of China, the Assocham study has pointed out that India has a trade deficit and there are apprehensions about cheap imports from the neighbouring country swamping the Indian market. There will be no benefit for Indian industry from the deal, the chamber feels. Most of India’s anti-dumping cases are against China and ‘market economy’ status has not been granted to the country even after it joined WTO. At the same time, China is emerging as India’s top trading partner and is likely to overtake the US soon to capture the apex slot.

“The apprehensions are that since India’s tariff levels are much higher than China, any reduction in tariff will open the floodgates of cheaper imports from China. On the other hand, China’s tariffs are already fairly lower than India.

Therefore, Indian producers can expect no serious market benefits from China through a FTA,” says the study.

Apart from China, India is now negotiating FTAs with the European Union, ASEAN, Mercosur, SAARC, Gulf countries, South Korea, Thailand, South Africa and a number of neighbouring countries.

India should start with preferential trade agreements (PTAs) before going on to FTAs, feels Assocham. In the meanwhile, the government should improve infrastructure, bring down import duty levels gradually and reduce income-tax rates. “There should be a gradual lowering of tariffs with some time table so that Indian industry can take appropriate steps. Technology purchases and research programmes should be initiated to take advantage of economics of scale as well as to increase employment,” says the study.

“Threshold of corporate tax be raised and the percentage tax be reduced. The import duty tax and various local taxes should be reduced on fuel so that the prices of petrol and diesel are more comparable to that of other countries,” it has been emphasised. The study is being submitted to the commerce department and the likely to be disseminated for wider debate.

Read More......

India to prune negative list under SAARC trade : Nath

NEW DELHI: India will bring down items in the negative list with regard to the least developed countries -- Bangladesh, Nepal, Bhutan and Maldives -- in the SAARC region to around 500 from 744, as it aims to expand trade in goods in the region.

"India has unilaterally decided to reduce the negative list. We would be in a position to notify the revised negative list within the next few months," Commerce and Industry Minister Kamal Nath told reporters here.

Speaking at the third meeting of the SAFTA ministerial council here, Nath said reviewing of the negative list and enlarging the scope for further trade cooperation were the key elements in enhancing trade within the SAARC region.

He said the other non least developed countries should also consider reviewing the negative list with respect to the LDCs.

India has already reduced imports duty to zero on all items other than those in the negative list for the LDCs with effect from January 1 this year.

He further said the regional study on trade in services has being completed giving the government an opportunity for an effective services agreements among SAARC countries.

Read More......

India, China to work on FTA recommendations

NEW DELH: Trade ministers of India and China will meet in the first week of April to consider the recommendations of the Joint Task Force on the India-China Free Trade Agreement.

"The two trade ministers would meet in the beginning of April in Beijing to look into the recommendations of the Joint Task Force on the India-China FTA," Commerce Ministry Joint Secretary Dinesh Sharma told reporters here on Wednesday.

The ministers would discuss in what way the recommendations of the Task Force have to be worked upon and how to take the process forward, he said, while speaking on the sidelines of a seminar on 'A Road To Chinese Market'.

The 103rd session of the Canton Trade Fair would be organised in April in the Guangzhou in China. To increase imports in China from other countries, an international pavilion has been added in the fair.

About the Indo-China trade, Chairman of the Council of the China Foreign Trade Centre Zhang Zhi Gang said, "The current bilateral trade is $38.6 billion. India is the tenth largest trade partner of China, while China is the second largest trade partner of India."

He expressed hope that trade between the two countries could reach a balanced level.

Every year, about 5,000 Indian professional buyers, which represents around 2.5 per cent of the total number of foreign purchasers, participate in the fair.

Read More......

India, Malaysia free-trade deal set for March 2009

KUALA LUMPUR (AFP) — Malaysia and India have agreed to try to finalise a free-trade agreement by March 2009, Indian officials said Wednesday after the first round of talks.

The two-day negotiations in the Malaysian capital established a roadmap for the deal which is aimed at "forging a long-term, comprehensive and dynamic economic partnership between the two countries", they said.

"Both sides will endeavour to complete the negotiations by March 2009," the Indian High Commission (embassy) said in a statement.

Malaysia has said that a bilateral pact -- which will cover trade in goods and services, investment and economic cooperation -- could boost its exports to India by 1.3 times, or 12 billion dollars, by 2012.

In 2006, India was Malaysia's ninth largest trading partner, ninth largest export destination and 17th largest import source.

The next round of talks will be held in New Delhi on April 10-12.

Read More......

GCC to sign FTA with India this year

DUBAI: The six-member Gulf Cooperation Council (GCC) will sign Free Trade Agreements with India, China and European Union this year, a senior minister has said.

UAE's State Minister for Financial and Industrial Affairs, Mohammed Khalfan bin Kharbash told this to the GCC 11th Conference on 'Future of Gulf Petrochemicals in Abu Dhabi' on Sunday.

At the India-GCC Industrial Forum in Mumbai last year, Minister of Commerce and Industry Kamal Nath had said that India was in the process of negotiating an FTA with the Gulf countries and talks in this regard were likely to be concluded soon.

In the last five years, India's total trade with the Gulf Cooperation Council (GCC) countries has risen more than four-fold from $5.55 billion in 2000-01 to $23.42 billion in 2005-06.

"The period witnessed buoyancy in exports and imports. Signing of the Framework Agreement on Economic Cooperation between India and GCC countries in 2004 was another milestone in the Indo-GCC economic relations," Nath had said.

Read More......

ASEAN softens approach to strike FTA with India

NEW DELHI: After a series of compromises made by India to remove the hitches blocking the India-Asean free trade agreement (FTA), Asean too seems to be doing its bit in the last leg of the negotiations. In its fresh proposals on duty cuts for the five crucial agricultural products holding up the agreement, it has gone down considerably from its earlier demands.

The issue will be resolved as soon as India gives its nod after suggesting “minor” changes in the Asean’s latest proposal. There would be two more meetings between officials––in February and April this year–– following which the agreement is expected to be formally signed by the two sides.

Speaking to ET, official sources said Asean’s new proposal was more acceptable to India than the previous one as it was more or less in line with what was feasible for the country. As per the new demands, import duties on crude palm oil has to be brought down by India to 43% while that on refined palm oil has to be reduced to 51%. Earlier, the Asean had proposed 30% duty for crude and 40% for refined palm oil.

The Asean has also toned down its demands for pepper, tea and coffee where it has asked for duties to be brought down to 50%, 45% and 45%, respectively. “We may ask for some minor changes in the proposed duties, but the agreement is more or less in place,” an official said. The two sides have also come to a compromise on the end date for implementing tariff cuts for the five products.

While India wanted the end date to be December 2018, the Asean wanted the complete tariff cuts by January 2018. “The two sides have decided on a middle date of July 2018,” the official said.

The FTA will include cut in tariffs for all products except a small negative list of items which will be insulated from tariff cuts. India has 489 items in its negative list, the lowest maintained by the country in any bilateral agreement it has entered into so far.

Indian Prime Minister Manmohan Singh is keen to have the FTA in place as it would serve to consolidate India’s position in South and South-East Asia.

Read More......