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INDIA-ASEAN FTA POSTPONED


India recently announced that it is postponing the signing of a Free Trade Agreement (FTA) with ASEAN  until at least April, when the country will hold its general elections. The Indian government said it wanted to give itself enough time for political transition, saying that it takes at least six weeks for the newly elected government to settle in.


India recently announced that it is postponing the signing of a Free Trade Agreement (FTA) with ASEAN  until at least April, when the country will hold its general elections. The Indian government said it wanted to give itself enough time for political transition, saying that it takes at least six weeks for the newly elected government to settle in.

It was similarly reported that Prime Minister Dr. Manmohan Singh was believed to have directed all the ministries not to make any offers on free trade with any nation and refrain from signing any agreements until a new government takes office by the end of May. It is believed that the Prime Minister put an embargo on the FTAs as model code of elections had come into force, and such important policy issues would need to be looked into after the polls.

The delay comes as a surprise as India had confirmed early this year that it would proceed with the agreement, which would be the world’s second largest FTA after ASEAN and China signed one in 2007.

But there were also earlier reports in February, that the India-ASEAN FTA was being postponed due to last minute differences over the number of times in a year tariff cuts should be brought about.

The India-ASEAN FTA has been six years in the making. Under the agreement, ASEAN and India would be committed to liberalizing 95 percent of their trade in goods, consisting of over 40,000 items. About 75 percent of tariffs in the trade of agricultural and industrial products will be gradually reduced to zero by 2012, while tariffs for another 10 percent will be eliminated by 2015. The rest of the products will be renegotiated as they consist of sensitive trade items such as farm products.

The initial goal was that the FTA on goods would be finalized by 2005 and negotiations on the FTA on services would end in 2007. But several events delayed the signing of the agreement. In June 2006, India released its ‘negative list’ of over 900 industrial and agricultural products that it wanted to be excluded from tariff reductions. Concern about the negative impacts of the FTA on farmers in both regions continued to hinder negotiations that year. In 2007, tariffs on palm oil, one of Indonesia’s and Malaysia’s main exports, became a central blockage point. The signing of the agreement was further delayed in 2008 because of the political crisis in Thailand.

In 2008, trade between India and ASEAN reached over $40 billion, up from $37 billion in 2007, making India the region’s seventh largest trading partner. Under the FTA, trade is expected to reach $50 billion by 2010. The FTA would also create a combined market of over 2.3 billion people.

Thailand has expressed its concerns about the postponement, arguing that it would disrupt trade proposals between the region and India. Thailand also objected to the postponement as they would have to seek new ratification from the parliament for any new date of signing.

Indonesia shared the same concerns. “We hope India will provide us with a new date immediately to allow Thailand to propose it to their parliament for ratification,” Indonesian Trade Minister Mari E. Pangestu said. “The signing will be conducted at either the ASEAN Economic Ministerial Meeting in August or at the next ASEAN Summit, in Vietnam.”

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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