India seeks ADB funding to help FTA-hit firms

Written by Economy Bureau | New Delhi, Sep 29 | Updated: Sep 30 2008, 06:30am hrs
India has asked the Asian Development Bank (ADB) to contribute to a fund to help compensate industries in the country that are adversely hit by the market-opening free trade agreements (FTA) with several Asian countries.

As part of economic integration with Asian region, India has entered into FTAs with the 10-member Association of South East Asian Nations (Asean), Thailand. India is also close to completing Comprehensive Economic Partnership Agreements with Japan and Korea, while it already has in place a Comprehensive Economic Cooperation Agreement with Singapore.

Though these trade pacts bring greater gains at a macro level, they also inflict pains at the micro level, minister of state for commerce and power Jairam Ramesh said, adding that farmers and entrepreneurs in sectors, especially those belonging to the small and medium category, hit by this kind of regional integration will need adjustment assistance.

For instance, due to the India-Asean FTA, the pepper growers in Kerala are under pressure. There are also similar fears in the agriculture and textile sectors. ADB should contribute to the adjustment assistance fund, the minister said, such a fund will offer some solace to these vulnerable industries. The adjustment assistance can be under the categories of cash assistance and injury assistance, he said.

Global bodies like the World Bank and International Monetary Fund also reportedly provides financial help and policy advice for countries and sectors in making such market opening adjustments.

As per the India-Asean FTA, by 2018, Indias 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.

People engaged in these industries have already lodged complaints against cheap goods from Asean countries affecting their business

Ramesh also said advanced economies like Japan, Korea and Singapore should ease labour market rules to allow workers from India to offer services there. Only labour market reforms in such countries will be able to address the fears of asymmetry in the trade in goods category.

There should be more debate about labour market reforms as much as there are on capital market reforms, he said, adding that trade in goods must be supported by trade in services and investment...