Bangkok, July 30: India and Thailand today finalised a path-breaking agreement on free trade in 82 items under an “early harvest scheme” to push their bilateral trade upwards.
This scheme would result in a duty-free regime for the agreed items — with tariffs going down by 50 per cent in the first year, 75 per cent in the second year of the agreement and finally to zero by September 1, 2006.
Thai commerce minister Watana Muangsook will sign the protocol for implementing the scheme with his Indian counterpart Kamal Nath in August when he visits India.
The early harvest scheme is a priority component of a fuller free trade agreement (FTA) with Thailand, expected to come into force by 2010.
Prime Minister Manmohan Singh and his Thai counterpart Thaksin Shinawatra took stock of the negotiations for the scheme when they met on the sidelines of the first Bimstec (Bangladesh-India-Myanmar-Sri Lanka-Thailand Economic Cooperation) summit here today.
The Thai Prime Minister paid fulsome compliments to India when he told Singh: “India is regarded as a knowledge economy and today India is led by two knowledge leaders — a scientist as President and an economist as Prime Minister.”
He said Thailand would “welcome India’s knowledge workers with open arms”.
Singh told Shinawatra that when he had met A.P.J. Abdul Kalam to brief him about his visit to Thailand, the President had told him that “in the knowledge economy of today, India and Southeast Asia have a great scope for working together in areas like biotechnology, IT, pharmaceuticals and management.”
Shinawatra also raised the issue of open skies (removing restrictions on operations of airlines) and sought access to more Indian airports for Thai aircraft. Singh agreed to examine the issue.
The most important achievement of the day, however, was announcement of the completion of the negotiations for the early harvest scheme under the framework agreement for establishing an FTA between the two countries.
The scheme had been held up because both sides had sought clarifications. India was concerned about two issues — the country of origin of the goods reaching its shores and the value added to them locally.
Indian worry has been that since Thailand has free trade agreements with several other countries, including China and Australia, there ought to be a mechanism to prevent goods from third countries finding their way to India in the guise of free trade with Thailand. The negotiations over the rules of origin and local value added have now been sorted out to the satisfaction of both sides.
The Thais were worried about the potential for some Indian states objecting to the free trade protocol. They wanted assurances that Indian states would not raise objections to the early harvest scheme or the framework agreement on FTA. Their fears had a basis in their experience with an FTA with China and the subsequent problems with the Chinese province of Yunan. Provinces in China enjoy considerable autonomy in foreign trade decisions.
Commerce minister Kamal Nath said the Thais were told: “Our foreign trade policy is decided by the Centre and is binding on the states.” So even this issue was resolved. Because of the concerns of the two sides the scheme had already missed its earlier deadline for implementation of March 2004.
Kamal Nath described the scheme “as another milestone” in bilateral trading arrangements India was forging with other countries.
