Industry body warns against free trade agreements

April 5th, 2008 - 8:26 pm ICT by admin  

New Delhi, April 5 (IANS) India should be cautious in signing free trade agreements (FTA) with other countries as they have negatively impacted the economy, said a study by a leading industry body. India should first focus at completing the preferential trade agreements (PTA) and then analyse the implications of going into FTA with a particular region, said the Associated Chambers of Commerce and Industry of India (Assocham).

“Certain countries already have either zero tariff rates or very low tariff rates which has a negative impact on the productivity of industry in countries with relatively higher tariff rates,” Assocham president Venugopal N. Dhoot said here Saturday.

“In short run this will have a negative impact on the local industry,” he added.

So far, India has FTAs with Sri Lanka and Thailand. It also has a similar pact with countries in the immediate neighbourhood to establish the South Asian Free Trade Area (Safta).

Warning against any possible FTA with China, Dhoot said: “The ultimate goal should be an FTA with free flow of products and capital but in view of comparative disadvantage of India’s manufacturing sector, a much lower tariff structure in China and its higher degree of openness, India-China FTA trade cooperation should start with a PTA with reduced tariff in a phased manner.”

The chamber had also cautioned against FTAs with Singapore and Bangladesh by highlighting that traditionally the Indian manufacturing sector has been very protective coupled with heavy regulation that mostly favour large conglomerates.

While signing FTAs the government should also look at other issues such as industrial policies, procedural delays, valuation of exchange rate and fuel cost that has hampered the growth of the manufacturing sector, the study said.

It has also recommended gradual lowering of tariffs with a proper roadmap for the industry to take necessary actions.

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