India, Asean conclude deal for free trade

SINGAPORE: India and southeast Asian trading bloc Asean on Thursday successfully concluded six years of negotiations for a free trade agreement in goods that will create an European Union-like single market.
    
A "key regional milestone" is how Commerce and Industry Minister Kamal Nath described the Trade in Goods (TIG) agreement with the 10-member Asean.
    
The deal would be formally signed during the India-Asean summit in Bangkok in December.
    
"The countries of East Asia are important drivers of growth... with large consumption to drive global economies," Nath said at a joint press conference of India-ASEAN economic ministers, referring to the combined market of over 1.5 billion people that is waiting to be tapped.
    
"It took six years for India to understand the sensitivities of Asean, and for the Asean to understand the sensitivities of India," Nath added.
    
India and Asean currently enjoy a total trade of USD 38 billion and expect it to touch USD 50 billion by 2010.
    
The pact was supposed to have been reached last year, but talks were held up over differences on products that India wanted to exclude from tariff cuts. New Delhi had submitted a list of 1,414 products, while the Asean's target number was 400.
    
Under the pact, India and ASEAN will eliminate import duties on 71 per cent of products by December 31, 2012 and another 9 per cent by 2015. Duties on 8 to 10 per cent of the products that have been kept in the sensitive list will also be brought down to 5 per cent.

Nath said India has already reduced tariffs unilaterally. Its rate on crude palm oil has been cut to zero from 50 to 60 per cent five years ago. India's peak tariff rates now average 9.7 per cent compared to 20 to 25 per cent five years ago.
    
A limited number of products will be excluded from tariff concessions based on the domestic sensitivities of the respective countries.
    
The TIG has provisions for a special track for tariff reduction for five products, which are key to exports of some Asean members. These are for crude and refined palm oil, coffee, pepper and tea.
    
Crude and refined palm oil are key exports of Malaysia and Indonesia, while coffee, pepper and tea are the major exports of Vietnam to India.
    
The two sides will also negotiate trade in services and investment as a single undertaking as soon as possible, said a joint statement issued by the leaders after consultations.     

Malaysia will co-chair the working group on investment with India while the working group on services will be co-chaired by Singapore.
    
"India is ready. The onus is on Asean to gather its team and start negotiations on services and investment," said Singapore's Trade Minister Lin Hng Kiang.
    
At present, India is Asean's seventh largest trading partner. Nath said India's trade with Asean is 9.6 per cent of the country's global trade, while Asean's trade with India is only 2 per cent of the trading bloc's global engagement. "So the potential for enhanced economic engagement between Asean and India  is profound," he said.

Asean sought to strengthen regional trade links after the Doha Round of WTO talks broke down in July because of a dispute between India and the United States over agricultural tariffs.
    
Asean Secretary General Surin Pitsuwan described the conclusion of India-Asean FTA in goods as an "important milestone." He said the move will give impetus to the stalled Doha round of WTO talks which Asean ministers say should be revisited.
    
Malaysia's Trade Minister Muhyiddin Yassin said the FTA would open up huge opportunities with reduced or no import duties beginning next year.
    
Indonesian Trade Minister Marie Pangestu said ASEAN and India had come to "a level of understanding never been experienced before." She said the FTA in goods paved the way for more economic cooperation between the two sides. "This will lead to a greater integration between ASEAN and its dialogue partner," she added.