Asean FTA to open new vistas for India Inc

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New Delhi, Aug 29 : A day after successfully concluding negotiations with the 10-member Association of South East Asian Nations (Asean) for a landmark free trade agreement (FTA) in goods, t he government on Friday said the pact will not only help India to integrate itself with the globally competitive trading region of East Asia, but also boost India Inc's prospects in the Asean market in crucial sectors like steel, auto, machinery, farm products, auto parts, chemicals and synthetic textiles.

The government also sought to allay the fears of India Inc and apprehensions of states like Kerala that the FTA will severely hurt their industry due to import of cheaper goods from Asean countries comprising Indonesia, Malaysia, Singapore, Thailand, Vietnam, Brunei, the Philippines, Cambodia, Laos and Myanmar.

“We stand to gain in the elimination of duties because India’s manufacturing abilities are increasing. We believe that there will be a quantum jump in market access for Indian manufactured products in these countries,” commerce and industry minister Kamal Nath said.

The minister said that the government had adequate and wide-ranging consultations with the industry and has kept in mind their sensitivities during negotiations.

In the total 489 items in India’s negative list (list including items that will not be subject to any tariff cuts from their present levels) 288 are agriculture goods, 81 belonging to textiles sector, 50 auto products and 70 items from the chemicals sector, he said. Among items in the negative list are coconut, spices, natural rubber, cashew, fish and fish products, bananas, wheat, maize, rice, oils, processed food, poultry, milk and milk products, textile and textile products and auto products, he pointed out.

Asked about opposition from certain sections in Kerala who alleged that their farmers will be hit due to duty cuts in several products like cash crops, edible oil and spices, Nath said while the applied duty on palm oil today is zero per cent, the FTA has only agreed to keep palm oil duties at 37.5% and that too in 2018.

“So what are we opposing? We can’t lower it more than the present 0%, can we? So they are opposing it without understanding it. They are not being informed correctly. We (the government) understand our sensitivities,” he countered. “The entire duty cuts (for other products) will happen over a period of ten years from now. So if the duty cuts are to happen by 2018, at 1% or 2% a year, that is not much of a difference,” the minister said.

According to the FTA, by 2018, India’s duties on refined palm oil will come down from 90% to 45%, while duties on crude palm oil will be cut from 80% to 37.5%. Also, by 2018, duty on pepper will come down from 70% to 50%, while duties on black tea and coffee will come down from 100% to 45%.

The majority of trade will be liberalized by 2012. By 2015, India will reduce duties to 5% in 585 tariff lines.

Nath said it is extremely important for India to engage in regional economic cooperation with the Asean countries, as Japan and China are already engaging with them. “India cannot isolate itself from regional trade cooperation. The FTA with Asean should be seen in this context.”

He also pointed out that when Japan mooted the idea of a larger East Asia Economic Area three years ago, India was the first country that supported it. Nath said East Asia is a very globally competitive trading bloc and has large markets with huge populations in Indonesia, Vietnam, China and India.