India, ASEAN clinch a free trade agreement...

India and the Association of Southeast Asian Nations (ASEAN) have clinched a trade pact that took nearly six years of talks to finalise. This will create a new free trade area of 1.7 billion people and cover 11 countries, India and the ten ASEAN states, with a combined Gross Domestic Product of $2.3 trillion as of now.

The conclusion of negotiations on the trade-in-goods agreement was announced here on Thursday, following the latest annual ASEAN-India consultations among economic ministers. The fine text will now be firmed up, and the target timeline for signature is the ASEAN-India summit in Bangkok in December.

Hailing India’s trade-in-goods accord with ASEAN, Union Commerce and Industry Minister Kamal Nath and Singapore’s Trade and Industry Minister Lim Hng Kiang said here on Thursday that talks on the proposed services-and-investment pact would start soon. The target timeline for this is December 2009. Indonesian Minister Mari Pangestu said the new deal reflected a level of understanding that was never before experienced in the India-ASEAN engagement.

Sharing the euphoria, Mr. Lim said: “[The pact] can unlock the potential. Our economies are growing very strongly [and] I look forward to greater investment flows between our two entities.”

Not wishing to describe the trade pact as “a sudden breakthrough,” though, Mr. Lim said the two sides “deeply appreciate each other’s economies,” more so now than at any time before. These negotiations, involving “countries with very similar economic structures,” were marked by the principles of “respecting sensitivities and exercising flexibility,” he emphasised. The task might have been easier if the economy of India, on one side, and those of the ASEAN countries on the other, were “complementary in structure.” So, India deserved “tremendous credit and tribute” on this outcome.

Mr. Nath traced the path of these protracted negotiations to the manner in which India intensified its “unilateral liberalisation.” In the end, it was sheer “determination” on both sides that helped pull off the pact.

Projecting a “quantum jump” in the overall India-ASEAN trade from the present level of $38 billion, he said the target of $50 billion by 2010 would be “surpassed.”

Mr. Nath said: “Five years ago, India itself had not moved so much on further liberalisation. When you talk of palm oil, [a sensitive product for Malaysia and Indonesia], our [India’s] applied rates today on crude oil is zero.

At that time, five years ago, our applied rate was 50 per cent or 60 per cent. Similarly on goods, our tariff rates four years ago were 20-25 per cent; today, our peak tariff rates are an average of 9.7 per cent. [So], time [also] really helped in this process of negotiation.”

On the “exclusion list” in the present accord, Mr. Lim said the “disparate” range of products, as severally applicable to different countries, numbered only 489 out of a total of thousands. “This is a very manageable number; and, as we constantly review the agreement, we will try to bring these tariff lines to a smaller number. This is five per cent in trade value [now].” And the “onus is on us [Singapore and Malaysia] to gather our [ASEAN] team and propose a date” for starting talks on services and investments.

Malaysia’s International Trade and Industry Minister Muhyiddin Yassin said India and ASEAN would now “eliminate import duties on 71 per cent of the products by 31 December 2012.” Another nine per cent of the product range would be covered by 2015. The import tariff on “sensitive items,” now in the range of eight per cent to 10 per cent, would be lowered to five per cent by 2015.

Source: The Hindu