Phnom Penh, Nov. 5: Asean leaders today supported a proposal by Prime Minister Atal Bihari Vajpayee to work towards the creation of a free trade area in 10 years.
The tentative agreement came a day after the regional grouping and China signed a pact that committed them to build the world’s largest free trade zone by 2008 which will have 1.7 billion consumers and a combined economy of $2 trillion.
Foreign minister Yashwant Sinha refused to admit that India was under pressure to forge closer economic ties with Asean now that China — which joined the World Trade Organisation last December — was becoming more assertive in spreading its sphere of influence over the Asian region.
“We are not in competition with any country or group of countries to forge links with Asean or anybody else,” Sinha told reporters after the first Asean-India summit-level talks here today.
A joint India-Asean task force that was formed at a meeting of the region’s economic ministers in Brunei in September has been asked to prepare the roadmap for the creation of the free trade area. The meetings of the task force are co-chaired by India and Malaysia.
The task force will be asked to submit its report at the summit-level talks that will be held at Bali in Thailand next October.
India has found its greatest support from the new members of the Asean —Cambodia, Laos, Vietnam and Myanmar — and intends to draw “an early harvest” from a closer trade relationship with the four least developed countries of the region.
“We will provide preferential and free trade concessions to these four countries earlier than the 10-year timeframe that has been set for the creation of a free trade area with Asean as a whole,” Sinha said.
Sinha also said the overtures to Asean were “not guided by anything happening in Saarc or any other bilateral relationship”. India has been critical of the way Pakistan has set obstacles to stymie Saarc from attaining its original objectives of promoting trade and business opportunities in South Asia.
India has a peak customs tariff of 30 per cent but the rate is as high as 315-400 per cent on items like liquor and 150 per cent on cars. It will have to slash duties dramatically to bring them in line with Asean levels where tariffs on most products range between zero and 5 per cent.
India has already committed to pulling down its tariffs to Asean levels in three years, but there are business lobbies at work in India that will almost certainly push for the retention of some form of protection.
Although Sinha has chosen to be blasé about the threat posed by China, there’s another cause for worry: on the sidelines of the Asean meetings that preceded India’s summit-level talks, Chinese premier Zhu Rongji had proposed a separate free trade area encompassing Japan, South Korea and China which would unify the three large East Asian economies.
Japanese Prime Minister Junichiro Koizumi and South Korean Prime Minister Kim Suk Soo have agreed to participate with private think tanks to assess the economic impact such an undertaking would have on their respective countries.
At the Asean-India talks, which Sinha said were “held in an exceptionally warm and a cordial atmosphere”, Vajpayee thanked the region’s leaders for upgrading India’s status from a full dialogue to a summit-level partner.
Vajpayee told the Asean leaders that the current level of economic and trade ties between the region and India did not reflect the true strengths of either. He stressed the need for a mutually beneficial exchange of technology and promotion of two-way investments through greater business-to-business contacts.
The first step in this direction will be through a liberalisation of the visa regime to make it easier for businessmen from India and Asean to go back and forth. Emphasis will also be placed on creating road links with Asean through a highway that will connect India, Myanmar and Thailand.
Malaysian Prime Minister Mahathir Mohammad, who led the Asean delegation to last month’s business summit in India with meetings in New Delhi and Hyderabad, said India had helped develop the railway network in Malaysia while the Malaysians were building highways in India. This was exactly the sort of mutually beneficial partnership that India and Asean should seek to build.
Singapore Prime Minister Goh Chok Tong said Asean was a jumbo jet that was ready to fly. Sinha quoted him as saying: “The body of the jet is provided by the 10 Asean member-countries. One of the wings is formed by Japan, South Korea and China (the three summit-level partners that have the closest links with the regional body). India has joined us today to form the other wing. The Asean jumbo will now fly well and in all weather.”