Indo-Asean FTA may miss target date

The implementation of the ambitious India-Asean Free Trade Agreement (FTA) is likely to miss the target date of January 1, 2009. Negotiators from both the countries had closed talks this August, after six years of painstaking dialogue.

One of the key reasons for the delay is that some Asean members, including Thailand and Philippines, have to get the agreement ratified from their respective Parliaments. This will involve a nod from the legislatures of these countries for a list of goods that will be traded duty free.

“It seems Philippines may need some time in this process. Other countries may also need some more time in getting ratification from their respective Parliaments,” said an Indian government official.

The deal is likely to abolish customs tariff of around 80 per cent of goods to zero (see chart), including raw materials like iron ore as well as aluminum, plastic and certain kinds of machinery.

During the course of the talks, many contentious issues had cropped up including the content of the negative list on which there would be no duty cut, as well as duty cuts on palm oil, tea and coffee, amongst others.

India expects to have a clear picture on the response from the Asean members by October 31. Both the sides had agreed to sign the agreement on December, 17.

“If the ratification process takes time, the signing of the agreement, which was scheduled on December 17, may get delayed,” the official added.

In India, the deal does not need to be ratified by the Parliament, and will be cleared by the Union Cabinet. “The Cabinet will give the nod, when the Asean countries will submit their lists to India,” the official added.

Trade analysts will keenly observe the developments over the next few days because if general elections are announced in India for early 2009, the moral code of conduct will kick in, as a result of which the country will not be able to sign the deal.

Other operational issues include preparation of the list of items as out of a total of over 5,000. Some of these items will not see any cut, while others will see partial slashing of duty. But a majority of the items will see complete elimination of duty.

The deal, which was signed after six years of negotiations is expected to add $ 12 billion to India-Asean bilateral trade by 2010. The India-Asean talks had started during the National Democratic Alliance regime. Both sides had signed a framework agreement on the FTA in late 2003.