Long road for India to match China’s ties with Asean (Comment)

August 28th, 2008 - 3:59 pm ICT by IANS  

Singapore, Aug 28 (IANS) As Commerce Minister Kamal Nath wrapped up the prolonged and tortuous negotiations to liberalise trade with Southeast Asia Friday, India will have to run a lot faster to catch up with China’s vigorous economic engagement with the region.Economic ministers from the Association of Southeast Asian Nations (Asean) and Kamal Nath tied up the last loose ends of an India-Asean Free Trade Agreement (FTA) in goods. It is expected to be formally signed at a summit meeting in Bangkok in December.

China concluded a similar deal with the Asean in 2004 and since then has emerged as the Asean’s largest trading partner. Beijing has also signed an accord on trade in services with the Asean in 2006.

India-Asean trade reached $38 billion and grew by 25 percent last year, Kamal Nath said. “We’ve set a target to achieve $50 billion in trade with Asean by 2010.”

While that may appear impressive, China’s trade with the Asean grouping has been growing steadily — at 30 percent annually. Between 2003 and 2007, China-Asean trade leaped from $59.6 billion to $171.1 billion, according to Asean estimates.

And while India is yet to begin negotiations on services and investment, China and the Asean are all set to conclude their investment accord by the December summit meeting.

Also on the cards is an pact on cooperation in intellectual property and another on technical barriers to trade. Both these are also expected to be inked at the summit.

And not just China, but other countries in the vicinity - Japan, New Zealand and Australia - have also forged ahead. FTAs with New Zealand and Australia are expected to be announced soon.

With the FTA out of the way, India and the Asean member countries plan to turn their attention to the negotiations on services and investment with expectations of completing the talks by end 2009.

The India-Asean FTA talks, which stretched over six years, were stalled over proposed tariff cuts on sensitive farm products such as palm oil, tea, coffee and rubber.

India started out with around 1,400 items to be kept out the trade pact, but finally whittled the list down to 300 items, mostly related to agriculture. Also to be protected will be some sensitive sectors such as textiles and chemicals.

The agreement is expected to become effective by June 1, 2009, allowing countries to implement domestic legislation allowing for the tariff cuts.

The FTA is expected to open up enormous business potential between India’s 1 billion population and the more than 560 million people in the Asean countries. For the Asean countries, India’s rising economic and technological profile offers enormous opportunities for trade, joint ventures and investments.

The FTA negotiations had in recent years become bogged down over tariff reductions on agricultural products. The breakthrough came after much hard bargaining when India made a final offer to push down the tariff on crude palm oil to 37.5 percent.

Indonesia, which along with Malaysia, is a top palm oil exporter, agreed. India made a similar reduction in the tariff on refined palm oil, which was close to the figure Indonesia was pushing for.

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

Most hurdles in the India-Asean FTA agreement were cleared by senior officials of an India-Asean trade negotiations committee when they met earlier this month in Brunei.

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

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