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Asean deal hits dual hurdle
G.K. PILLAI, commerce secretary

TRADE BLOW
● India, Asean have agreed to reduce or eliminate tariffs on 95% of trade items

● Light engineering, car parts, durables and textiles to suffer

● Growers of palm oil, tea, coffee and pepper are concerned

● Palm and pepper impact to have political consequences

● 489 items outside deal

● Meet with Asean due in April

New Delhi, Feb. 22: The government is likely to delay the free trade deal with Asean to avoid criticism of failing to protect producers during the slowdown.

Besides, with polls round the corner, the government will be loath to promote cheaper imports to the detriment of a section of farmers and industry. Asean is the Association of Southeast Asian Nations comprising 10 countries.

The Centre is expected to leave the decision to the next government.

“The FTAs with Asean and Korea are ready. It has to be a political call. The UPA government would be a caretaker government after the current session of Parliament,” commerce secretary G.K. Pillai said. According to Pillai, even the international community will not be keen on entering into an agreement with a caretaker government.

Analysts said the UPA, due to go to the polls in two months, would find it difficult to justify a free trade agenda.

Last week, stand-in finance minister Pranab Mukherjee had said, “All measures to boost the economy will be taken. The FTAs are at a negotiation stage. These things take time. We should not give out the wrong signals now.”

Commerce minister Kamal Nath said there were certain issues, including duty cuts, which needed to be sorted out.

However, the reason for the delay in signing the FTA seems to be primarily political.

Industry was never in favour of opening up to Asean, fearing competition from cheap imports.

Bajaj Auto chairman and MP Rahul Bajaj had asked the government to go slow on “external liberalisation” by delaying the FTA with Asean “for at least a year”.

The deal will affect domestic industries such as light engineering, auto components, consumer durables and textiles.

Asean countries manufacture these products more cheaply.

The pact can also affect farmers growing palm oil, tea, coffee and pepper as they are cheaper to grow in Malaysia, Vietnam and Indonesia.

Under the terms of the proposed deal, India may not be able to hike the import duty on crude palm oil beyond 37.5 per cent.

The ceiling on refined palm oil is 45 per cent, tea and coffee, 45 per cent, and pepper, 50 per cent.

In the last two years, India has brought down the import duty on crude palm oil in phases to zero from 80 per cent to check inflation.

Palm and pepper are politically sensitive issues in the southern states, especially in Kerala where the Congress hopes to gain from the differences within the CPM.

The deal was to be signed at the Asean summit, initially scheduled for December. The summit was later postponed to February because of political tensions in Thailand. The meet is now slated for late April.

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