The Telegraph
Wednesday , July 30 , 2014
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Modi scanner on UPA’s trade pacts
Plan to tweak ‘unfair’ deals

World Bank president Jim Young Kim with Modi in New Delhi last week

New Delhi, July 29: The Narendra Modi government is reviewing the Free Trade Agreements signed by the UPA government because it thinks the pacts sealed and signed so far have been “unfair” to India.

“Every one of the FTAs signed in the last 10 years has benefited the partner country and not us in terms of quality and volume of trade,” a highly placed government source told The Telegraph.

While the source clarified there was “no question” of rescinding a pact, he said “we would have to look at making mid-course corrections essentially to give our manufacturers a level-playing field without doing anything that can be legally questioned”.

The UPA regime had inked FTAs with Japan, Korea and the Association of Southeast Asian Nations (Asean). The India-Asean FTA was signed in August 2009 and implemented in January 2010 with Malaysia, Thailand and Singapore. It covers a market of 1.8 billion consumers and will slash tariffs for over 4,000 product lines.

The government source, however, said this FTA impacts the automobile sector, a large source of jobs in India.

The Economic Survey 2013-14 noted that such pacts had made manufacturing exports “uncompetitive” because of an “inverted duty structure” and imbalances in the tax incentives that are angled favourably towards the partner countries and not India.

The survey said: “Regional/bilateral FTAs with Japan, South Korea, Asean, etc, have added to a new inverted duty like situation with some final goods of these partner countries having nil or low duty while the material for these items from other countries has a higher duty…. This needs to be avoided and there should be a right balance between different stakeholders.”

The survey rooted for a shift in India’s export basket from being supply-based to demand-driven, something the government is keen to pursue.

On Monday, the commerce ministry had unspooled for the Prime Minister a presentation that was focused on how to bring about a synergy between export-driven commerce and external affairs in keeping with Modi’s belief that economics and commerce had become the cornerstone of global diplomacy instead of “just politics and strategic issues”, a government source said.

Modi, the source said, believes that “trade must be given precedence over strategic diplomacy and India has to go on that route in order to make its economy buoyant”.

At the presentation, also attended by foreign secretary Sujatha Singh, the Prime Minister stressed on a blueprint that would identify overseas markets and link them up with India’s business sectors. He reportedly said states should be “encouraged and empowered” to draw these linkages without overt central intervention. “The commerce and external affairs ministries will be in the picture but the decisions taken by the states will be sovereign,” a source said.

Sources said trade desks at overseas Indian missions would be told to work more closely with the commerce ministry. As part of “re-conceptualising” the work-profile outlook of India’s envoys and foreign service apparatchiks — that a minister remarked was more used to thinking of “the protocol of chaperoning high-ups and esoteric strategic matters” — the government was looking at enlisting more candidates from professional academic streams like management, medicine and engineering in the IFS.

Modi held a meeting with finance minister Arun Jaitley and external affairs minister Sushma Swaraj to discuss his US visit in September.

Sources disagreed with suggestions that India’s hard talk on trade-related issues at bilaterals between commerce minister Nirmala Sitharaman and representatives of the US, the European Union and Canada on the sidelines of a G20 meet at Melbourne would cloud Modi’s visit to the US.

“With the US, the agenda is bilateral, we are talking only on bilateral issues,” a source emphasised.