Indo-Asean FTA needs a fillip

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: Last week’s failure to initial India’s FTA with Asean will cost the economy dear. That is because a week may be a long time in politics, but such delays in long-awaited trade treaties span an eternity in matters of political economy.

Just how fast matters have been moving might be seen from the fact that Indo-Asean bilateral trade grew at an annual rate of 11.22% rate, from $2.9 billion to $12.1 billion, over 1993-2003. That took up an entire decade. But, later on, it has taken just four years for the trade figure to reach $30 billion. No wonder, Prime Minister Manmohan Singh expressed confidence that the $50 billion benchmark will be attained by 2010. But delays have been plaguing the FTA and that seems to be a default scenario.

Worst of all, India is behind on the FTA simply because it is jealously protecting certain commodities like coffee, tea, palm oil and pepper. That explains why the FTA’s finalisation date is being put at 2008, although the full extent of tariff harmonisation will extend the process right up to 2018. That is indeed slow-going for a proposal which had been mooted in 2004, and was expected to be ratified by 2005. Such ‘stop-go’ progress on liberalising the plantation sector is also, doubtless, a reflection of dissonance within the commerce ministry between the convictions of Kamal Nath and Jairam Ramesh.

So the two key questions are—what, in the foreseeable future, will be India’s role vis-à-vis the East Asian economies? And, how far will it stand to gain from undertaking what seems to be expected of it?

The answers are disappointing—but it is through no fault of Asean’s. In fact, the consensus there seems to be that an India that is unwilling to immediately engage in the fray of the marketplace should devote itself to training others and be the coach instead. It can, at best be said that this is an entirely unforeseen denouement of India’s Look East Programme (LEP).

The beneficiaries have even been shortlisted. They comprise the economies of the Greater Mekong Sub-region (GMS)—Cambodia, Laos, Myanmar, China, Thailand and Vietnam. Four of them—the CLMV economies of Cambodia, Laos, Myanmar and Vietnam, are still at the nascent stages of business development, and the Asean would like India to mentor the CLMV in acquiring the softer skills fore which it is well known. They include education, skill-formation, planning and religious instruction.