Asean FTA: Kerala CM warns of job losses, Centre says ignorance

Written by Rituparna Bhuyan | New Delhi | Updated: Aug 2 2009, 05:11am hrs
Kerala chief minister VS Achuthanandan has warned Prime Minister Manmohan Singh of at least 1 million job losses in the state if the Asean Free Trade Agreement is operationalised.

Senior government officials and trade diplomats have however dismissed some of these fears as being completely unfounded and having arisen out of ignorance of the trade pact's finer details.

In a letter to Prime Minister on July 27, the chief minister has expressed concern on liberalisation of trade in rubber, fishery products, tea, pepper and edible oils and other commodities on the ground that it could lead to a crash in prices and jeopardise the livelihood of millions of cash crop farmers in the state.

It is learnt that the agreement in its present form does not even have the protection of a negative list, as was envisaged earlier, the letter adds.

But the fact is that there is a 489-item long negative list, where extant duties will be left untouched. Moreover, the key products that the CM as well as some sections of the UPA Cabinet are concerned abouttea, coffee, pepper, refined and crude palm oilhardly face any real threat from Asean members as per officials.

These items are in the list of highly sensitive items where tariffs will only be cut gradually. So gradual and minimal will be the duty cuts on these items that even ten years after the pact is operationalised, they will bear an import tariff of 37.5%-50%. Moreover, we are already importing 5 million tonne of edible oil a year to meet domestic consumption demand, with a duty rate of 0% for crude palm oil and 7.5% for the refined variety, a senior commerce ministry official said.

The chief minister's letter follows recent parleys by top officials in the state government with the commerce and industry ministry. Ministry officials are learnt to have impressed upon state officials that they need to read the pact in totality before raising a hue and cry. According to experts based in Kerala, the root of the fear against the FTA amongst farmers as well as the state officialdom is that there is no information available on the pact a flagship of the Prime Minister's Look East policy.

The most surprising objection raised by Achutandan is about millions of job losses in the fisheries sector. Rubber, fishery products and other assorted spices are in the negative list, where there will be no duty cuts. In any case, expecting all consumers to fall for imported fish over preferred local varieties is unreasonable, an official pointed out.

The Kerala CM is not alone in the campaign against the pact. The Congress' own leaders from the south former chief minister and defence minister AK Antony, minister of environment and forests Jairam Ramesh and law minister Verappa Moily also raised concerns at a Cabinet meeting last week. To dismiss their fears and assure them that the interests of the country have been protected, commerce and industry minister Anand Sharma is learnt to have displayed the negative list for his Cabinet colleagues to see.

The controversy on the FTA is not new, as Congress president Sonia Gandhi had written to Prime Minister Manmohan Singh in mid 2006, asking him to assess the impact of the trade pact.

Officials also maintain that apart form Vietnam no Asean country exports tea, while none of the south-east Asian economic block members sell coffee in overseas markets.

Similarly, the fear of import surge of cheap pepper should not be there. This is because India imports inferior quality pepper berries from Vietnam, is used for manufacture of Oleo-Raisins meant for exports.

As for palm oil, the country has to import over 70% of the commodity. This is a necessity. In fact, at the moment, crude palm oil is being imported at zero duty while refined oil is imported at 7.5%. So why the fear, the official said.

Trade experts maintain that Asean region has higher per capita income and output than India and is a large market for goods produced by India. For macro gains, there would be some micro pain. Overall, interests of the country seem to have been protected in the pact. There are some concerns on relaxed rules of origin, which could allow goods from non-Asean countries into India, said Asean expert Ram Upendra Das, senior fellow, Research and Information system for Developing Countries.

Kerala state planning board member KN Harilal, throws light on why the pact is not welcomed by his home state.

The Asean FTA is like an unknown predator on prowl, as no one knows if their interests are protected. Naturally, there would be concerns, he told FE from Trivandrum .

According to Harilal, the reduced duties on many farm products will expose farmers from the state to international price volatility, which is a cause of concern.

One solution to this is by ensuring fair price for Kerala farmers by the government. But this is very difficult when borders are porous Harilal added.