India will soon sign a Comprehensive Economic Cooperation Agreement (CECA) with Malaysia. This will be the second bilateral CECA that it signs with a Southeast Asian country. Earlier, in August 2005, India had signed a CECA with Singapore. The agreement with Singapore has been one of India?s more successful bilateral trade deals. India also has a Free Trade Agreement (FTA) with Thailand and is negotiating a bilateral trade pact with Indonesia. These are in addition to an FTA in goods with the Association of Southeast Asian Nations (Asean) that came into force earlier this year. The Asean FTA is expected to assume a much more comprehensive proportion by including services and investment in its fold. Negotiations on services are currently under way.
It is perplexing for many that India is simultaneously engaging in both regional and bilateral negotiations with Southeast Asia. Its efforts to build a comprehensive framework agreement with the Asean has been accompanied by equally, if not more pressing efforts to strike bilateral deals with individual Asean members. In terms of negotiating strategy, this does appear confusing.
What could be the possible reasons behind the apparently paradoxical posture? One of the reasons is the realisation that talks at the WTO are unlikely to yield much benefit. This is not to suggest that India will dissociate itself from the multilateral trade framework. But the failure to get the Doha Development Agenda (DDA) moving indicates poor prospects of obtaining breakthroughs in market access negotiations. As a result, India, like many other developing countries, has been forced to devote more emphasis on regional and bilateral negotiations. This explains India?s eagerness to not only build bridges with Southeast Asia but also with other parts of the world, particularly Asia-Pacific and Latin America.
In so far as simultaneous engagements in regional and bilateral trade negotiations are concerned, they are again results of India?s keenness to not leave any stone unturned in gaining market access. In terms of the ease of thrashing out contentious issues, bilateral negotiations are more effective than regional ones, which, however, are probably more effective than multilateral discussions. Several sensitive issues have better chances of being resolved bilaterally than regionally. In earlier negotiations with Asean on the FTA, India had major differences with Malaysia and Indonesia over tariff rates on palm oil exports to India. There were also differences with Vietnam on the import of spices. Though the issues were finally resolved within the operational framework of the trade pact with Asean, it was clear that Malaysia, Indonesia and Vietnam were Southeast Asian economies with whom India?s trade interests could conflict. Such differences experienced at regional negotiations, however, have not stopped India and Malaysia, or India and Indonesia from talking trade with each other bilaterally. All countries realise the importance of expanding the frontiers of trade and are prepared, if necessary, to have parallel negotiations for achieving quicker and better results.
There is another benefit in the simultaneous pursuit of bilateral and regional negotiations. India?s success in clinching a trade deal with Malaysia, for example, can help it in future negotiations with Asean. Bilateral trade pacts forged by a country with individual members of a regional block can be effective confidence-building measures for facilitating trade talks between the particular country and the regional block. India?s CECAs with Singapore and Malaysia give all involved partners confidence and trust in each other that can be carried forward to the regional talks. As India develops more bilateral links with individual Asean members, it can look forward to less obstructions and delays in the ongoing trade negotiations with Asean.
While there are benefits of engaging simultaneously on bilateral and regional fronts, there are downsides as well. Parallel efforts require negotiating strengths and capacities of the country doing so to be spread thin. The same negotiators have to double up at different forums. Often they have to defend contradictory postures in different forums, which, however, might include the same members. An Indian negotiator, championing a defensive strategy in bilateral trade talks with a particular Southeast Asian country, for example, might need to push an offensive posture at the regional trade talks with Asean, where the earlier trade partner being negotiated bilaterally will also feature. Switching between such postures with the same members on different occasions is not easy and can affect the quality of negotiations. The second problem in simultaneous negotiations pertains to cost. Multiple discussions increase costs, both in terms of involvement of manpower as well as in the frequency of talks.
Nonetheless, India?s preference is obviously for a strategy that combines ?one-to-one? with ?one-to-few? and ?one-with-all?. That should be good as long as it lasts.
The author is a visiting senior research fellow at the Institute of South Asian Studies in the National University of Singapore. These are his personal views
