Trade deals not to be inked without services, says India

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Jun 11 2010, 05:39am hrs
Unhappy with its FTA partners who backtrack on promises to amplify the scope of these agreements with liberalisation of trade in services, New Delhi has decided not to enter into such agreements unless talks on services and goods are concluded simultaneously.

Commerce secretary Rahul Khullar told FE that having drawn lessons from previous trade agreements, India is going to take up an everything-or-nothing approach when it negotiates bilateral trade and investment treaties in future. He said that any future trade agreement has to be a single undertaking which has to include a list of commitments to reduce tariffs for goods as well as liberalise trade in services.

We have learned (from our previous trade agreements) that it is not advisable to separate services negotiations from the talks on goods. Everything should be a single undertaking. If you separate the deal, you will have to give away in goods first and then you could end up struggling to get your due in the area of services. If it is one composite package, then they (the trading partners) have to give it, Khullar said.

In the free trade agreement with ASEAN, though the two sides have dropped duties on a select list of goods from January 1, 2010, negotiations on services are yet to begin. The initial understanding was to conclude negotiations on services by December 2009. Khullar said that the ministry was no more willing to compromise on India's advantageous position in services. With its vast and surging resources of professional expertise, India has much to gain in terms of free movement of its doctors, nurses, accountants and engineers to FTA partners and the recognition of their degrees by their designated agencies.

If there is no services (in the agreement) then there is no deal, he asserted.

Not too many deals have been concluded so far. The rest are in the pipeline...these are taking time precisely because of this reason. Why does it take so many rounds for us to conclude a deal Because we have our own priorities, he said.

Currently, India is negotiating FTAs with European Union, Japan and Australia. India and Canada are expected to discuss a comprehensive economic partnership agreement when prime ministers Manmohan Singh and Stephen Harper meet ahead of the G-20 meeting in Canada to release the joint study group report.

Khullar also pointed out that India was not going to enter into any early harvesting agreement with other countries. These refer to the schemes under which reduction of tariffs in one set of products is done with the promise of expanding the product base at a later date.

I think we have learnt that early harvest agreements don't work doing some tariff lines at one particular time and some later. If you are going to move to a zero-tariff regime, there has to be one cut-off date for that rather than three different dates, he said.

Under India's early harvest agreement with Thailand in 2005, the two countries decided to cut duties across only 82 products, with the commitment that more products would be added to the list. There has been no progress on this front since then, a trade analyst who spoke on condition of anonymity said.

Assistant secretary-general of industry body Ficci Manab Majumdar said that any move that would increase India's services exports would be beneficial. Until now, it has been observed that an agreement on trade in services comes at a later date than the trade in goods. In view of India's strong competitive advantage in services, it will be useful if the gap is minimised. This will give a more balanced outcome, he said.

Trade expert RS Ratna, professor at Delhi-based Centre for WTO Studies, said due to a higher duty structure in India, any agreement that focuses only on liberalisation in goods would not be enough and India would be the net loser. In Japan and EU, duties are 3-4%; therefore, India does not have much to gain, he added.

India has FTAs with Sri Lanka and ASEAN. In 2005, the country signed a comprehensive economic cooperation agreement with Singapore and a comprehensive economic partnership agreement with South Korea in 2006. However, government sources said that little progress has been made on the agenda of liberalising services trade in regard to both these pacts.