Nath: Meeting point

New Delhi, Aug. 28: India today concluded negotiations on a free trade agreement (FTA) with the Association of Southeast Asian Nations (Asean). The agreement will take effect next January.

The Indian government has kept some automobile items out of the trade pact, as a sop to Indian industrialists.

“It took six years for India to understand the sensitivities of Asean and for the Asean to understand the sensitivities of India,” commerce minister Kamal Nath said in Singapore at a joint press conference of India-Asean economic ministers.

“The countries of East Asia are important drivers of growth, with large consumption to drive global economies,” Nath said. The FTA will be signed at a joint summit in Bangkok in December.

The talks had got stalled over tariff cuts on sensitive farm products such as palm oil, tea, coffee and rubber.

India commenced negotiations with a proposal to keep 1,400 items out of the pact but, finally, whittled the list down to 300 items. In addition to automobiles, the list of 300 also includes agricultural, textiles and chemical products.

In palm oil, after hard bargaining, India proposed a tariff of 37.5 per cent which was accepted by Indonesia and Malyasia, the two key producers of the crop.

India also agreed to a phased reduction in import duties on tea, coffee and rubber over the next 10 years.

Under the pact, India and Asean will eliminate import duties on 71 per cent of products by December 31, 2012 and another 9 per cent by 2015. Within 10 years, India will open its market to about 96 per cent of its products that are traded with Asean.

India’s trade with Asean is 9.6 per cent of its global trade, while Asean’s trade with India makes up 2 per cent of its global trade. Nath said this showed there was considerable scope for “enhanced economic engagement” between the two.

Trade with Asean reached $38 billion and grew 25 per cent last year, Nath said, adding that the target was $50 billion by 2010.

Negotiations to expand the pact to services and investments are expected to be completed by the end of 2009. Malaysia will co-chair the working group on investment, while the working group on services will be co-chaired by Singapore.

“India is ready. The onus is on Asean to gather its team and start negotiations on services and investment,” Singapore’s trade minister Lim Hng Kiang said.

According to Ficci secretary-general Amit Mitra, “The FTA in goods will be vital for expanding the space for economic engagement between our two economies. There is a need for an early start of negotiations in services and investment so that we can reap the full benefits of a comprehensive economic co-operation agreement.”

Asean comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.