Election shadow over Asean, S Korea FTAs

Ambitious free trade agreements (FTAs) with Asean and South Korea, in final stages of negotiation, could be held up if the general election is announced by the end of this year.

Negotiations for these FTAs must be concluded by August-September for the Union Cabinet to approve them by December. However, this cannot happen if the election code of conduct kicks in.

Policy-makers are not worried about the FTAs, for which negotiations can resume after the election. What is causing concern is the hardening of negotiating positions that could follow a break in talks.

The most sensitive is the FTA with Asean, where member countries, and not the organisation, secure and give trade concessions. The Asean FTA is currently stuck because of new demands by some member countries.

"Indonesia has revived the issue of additional duty concessions on palm oil even after India offered a cut. Malaysia has made a new demand for lowering import duties on crude oil and gas. India cannot give more concessions," said a source involved in the negotiations.

India has already allowed a slew of concessions to Asean, including pruning of the negative list of goods on which there will be no duty cuts. Concessions were also made on rules of origin. The rule ensures that products of other countries are not routed to India through the Asean FTA.

Trade ministers from both countries are likely to meet on August 28 to sort out these differences. "Negotiators will try to tackle the issues. The remaining differences will be dealt by the respective trade ministers. If the talks are not concluded soon, they may spill over to the next government. This will complicate matters," said a government official.

A similar trade deal with South Korea, covering goods, services and investment, is at an advanced stage. "The deal could be concluded in two rounds of talks if both sides agree to the content. But this has to be done in the next 2-3 months," the official added.

The trade agreement with South Korea is unlikely to be an ambitious one. "Usually, FTAs cover nearly 90 per cent tariff lines. But the figure for the Korean one is much lower," said an official.

Moreover, South Korea has agreed to allow access to Indian IT professionals but not to nurses and doctors. "In any case, the deal should be concluded soon as talks have been going on for more than two years," the official added.