Industry To Seek Indo-Us Free Trade Agreement

Indian industry is going to renew its pitch for an Indo-US free trade agreement during Prime Minister Atal Bihari Vajpayee's trip to the US. It is looking for political backing for the proposal at home.

An in-principle agreement is required between the two governments. Confederation of Indian Industry's Tarun Das told Business Standard that an Indo-US free trade agreement would be an important part of the presentation the CII would make before US business in New York on September 7. The meeting will be attended by General Electric chief executive officer Jack Welch, Ford's Nasser and 300 other top American CEOs.

 

Das says the main objectives of the FTA will be elimination of tariff barriers, identification and phasing out of restrictive trade regulations and harmonisation of rules and procedures. Indian business believes Indo-US trade should encompass information technology, bio-technology, genetics and the services sector.

There are compelling reasons for free trade between India and the US. The US has a huge budgetary surplus and is looking for ways to make it work for the US economy. India, given its fiscal deficit, is looking for investment and trade. After US President Bill Clinton's India visit, the free-traders argue, the next logical step in creating geopolitical and strategic synergy is to open up trade.

However, others argue that an Indo-US FTA is a pie in the sky, given the political climate in the country and the US trade representative-driven private sector business practices.

Cutting across party lines, Indian political parties take a dim view of the current mergers and acquisitions of Indian companies.

There is a fear that US and multinational companies will gobble up Indian companies and there will be no room for Indian goods in the market. The CII version of the proposed free trade agreement only serves to underscore feelings of fear and insecurity.

In a paper, CII says there should be zero-duty access for all goods from the US in 15 years, giving Indian industry time to prepare itself for competition. Tariff elimination should be carried out in three stages. The first set of items would be freed within five years of the agreement, typically items without the import of which India would have serious problems. The second batch of items should be freed 10 years after the start of the agreement and the remaining items in 15 years.

For each of the items, a road map would have to be drawn up preparing Indian industry for zero tariff access.

The paper also suggests elimination of non-tariff barriers. There should be specific proposals regarding anti-dumping measures, subsidies and countervailing duties. The free trade agreement should provide a bilateral dispute-solving mechanism with specific articles on antidumping measures, subsidies and social clause.

Further movement on a free trade agreement is likely to stir up another political hornet's nest. How the government and the opposition will handle the issue will have a bearing on the future of the proposal.