Cabinet clears trade pact with Asean bloc


The Financial Express (India)
By Swaraj Thapa, Rituparna Bhuyan
July 25, 2009

Despite serious concerns voiced by his own ministerial colleagues, Prime Minister Manmohan Singh has cleared a significant milestone in his ‘Look East’ policy by approving the free trade agreement (FTA) with the ten-member Asean grouping. The PM steamrolled apprehensions and reservations expressed by defence minister AK Antony and minister of state for environment & forests Jairam Ramesh at the Cabinet meeting on Thursday evening.

As junior trade minister in UPA-I, Ramesh had been seeking a renegotiation of certain aspects of the Asean FTA. Antony’s stand on the FTA is also well known. Surprisingly, former Maharashtra chief minister Vilasrao Deshmukh, who now heads the ministry of heavy industries & public enterprises, also expressed reservations about the FTA’s impact on the domestic auto component industry.

The PM is learnt to have heard out their concerns, but stuck to the government’s commitment to a strategic partnership with the Asean bloc. The nod to the trade pact comes a week after the Cabinet ratified a comprehensive economic partnership agreement covering the free trade of goods, services and investment with South Korea.

Both the communist-led state government and Congress MPs from Kerala have opposed the FTA with Asean, negotiations for which were concluded last August. The opposition stems from fear of large imports of commodities termed ‘highly sensitive products’—palm oil, pepper, tea and coffee—from countries like Vietnam, Indonesia and Malaysia. India has committed that it will not slash duties on these products below 30%-45%.

The ten-member Asean bloc accounts for nearly 11% of India’s exports and 9% of imports. The trade pact has strategic importance, as India wants to increase its engagement with the grouping to counter China’s increasing presence in the region.

According to sources, the proposed trade pact was to be operational from January 1, 2010, a year later than originally scheduled. With the in-principle nod from the Cabinet, details of implementation can now be fleshed out. Once a final go-ahead is obtained, it would take about a month to finalise the contours of the pact, involving duty cuts on about 90% of the 12,000 products that India trades with the rest of the world.

When operationalised, duties on all products would not be slashed immediately, but over several phases.

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