PM panel issues dictum for trade talks, cautions against diversions

Written by Ronojoy Banerjee | Ronojoy Banerjee | Rajat Guha | Rajat Guha | New Delhi | Updated: Aug 10 2010, 05:04am hrs
The Trade & Economic Relations Committee (TERC), headed by Prime Minister Manmohan Singh, has directed the commerce ministry and its negotiators to guard against possible trade diversion and creation of inverted duty structures by Indias FTA partners. In a July 5 meeting the TERC, of which commerce minister Anand Sharma and secretary Rahul Khullar are a part, made recommendations which were to be followed as dictum for trade negotiations. Among the several recommendations made, the TERC has said that if raw materials or intermediate product is kept out of the purview of FTAs then the related finished product, too, should be kept out of tariff liberalisation commitments.

Also, the committee has said that India should avoid entering early harvest agreements as part of a trade agreement. Early harvest refer to the schemes under which reduction of tariffs in one set of products is done with the promise of expanding the product base later.

According to sources, India has been long wary of the increasing trend of non-tariff barriers imposition by countries in a bid to restrict trade in the form of strict standards and sanitary and phytosanitary issues. The latest being the move by some countries to impose a carbon tax on commodities manufactured in emerging economies like India and China.

Interestingly, the committee also discussed Indias progress in bringing down the duty structure in trade with the Asean countries following the FTA. The committee noted, The duty on raw materials and intermediate inputs tends to be very high. This needs to be brought down over a definite period of time. The commerce ministry would via a quick study analyse how far India has progressed in aligning the countrys tariff structure with its Asean countries.

Khullar also made a presentation to the TERC on the current state of play in Indias progress in negotiations with FTAs that are in the pipeline. He said that FTAs with Japan and EU were nearing conclusion. Earlier, in an interview to FE, Khullar had said that India would not enter into an FTA with a country until and unless it is comprehensive in nature. He explained that often FTA partners do not honour their commitments when it comes to allowing Indian working professionals to practice in their countries.

We have learned (from our previous 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, he said. For instance, while Indias FTA with Asean kick started from January 1, no progress so far has been made on services so far.