Asean FTA needs more hard talk: PM

PM IN SINGAPORE

With his long training as a bureaucrat, Prime Minister Manmohan Singh's statements are often laced with heavy officialese.

But aboard Air India's Tanjore, on his way to Singapore to attend the 6th India-Asean and the 3rd East Asia summits, he was categorical that the proposed free trade agreement (FTA) with Asean would require more negotiations and demands were being made on India that could impact a large number of its farmers.

"There are some problems in giving final shape to the FTA with Asean countries. Some demands are being made with regard to some sensitive agricultural products that can adversely affect our subsistence farmers and certain crops," he said, adding, "We are trying to persuade our Asean friends. I am hopeful that the process will reach a satisfactory outcome."

In the 24 hours or so he will be in Singapore, Singh is slated to meet half-a-dozen Asian premiers, attend gala events and watch an exhibition on Nalanda. If he can pull off the FTA too, the visit will be worth the effort.

Trade Minister Kamal Nath and his team have been negotiating with Asean officials for the past few days, before the prime minister arrived.

For Nath and his men, the key is to get Malaysia to come on board. It is an open secret that the trade deal is being stoutly resisted by Malaysia, which recently concluded its own FTA with Pakistan. To get over the resistance, India is talking of some special assurances for Malaysia.

The bone of contention is India's list of highly sensitive items. India has offered to bring down the import duty on coffee from 100 per cent to 50 per cent, on pepper from 70 per cent to 50 per cent, on crude palm oil from 80 per cent to 50 per cent and on refined palm oil from 90 per cent to 60 per cent.

The Asean negotiators, most notably Malaysia, want India to make larger cuts, especially on palm oil. In both the categories (crude and refined), they want the duty to be reduced to 35-40 per cent.

And this is where Indian trade negotiators need to walk the political tightrope. Any cut in duty is likely to impact coconut farmers in Kerala, which is ruled by the Left. Government officials said this had all the makings of another flashpoint, given the current bad blood between the ruling United Progressive Alliance and the Left parties.

Kerala has already said the proposed FTA will ruin its pepper farmers and coffee growers. West Bengal, another Left-ruled state, could join the bandwagon saying the FTA would adversely impact its tea plantations.

These are tricky issues and the prime minister needs to strike the right balance. After all, it was he who had talked of a single Asian market from the Himalayas to the Pacific a little over three years ago.

The Indo-Asean FTA is vital for India's "Look East" policy, which was formulated in 1991 after the Cold War ended and India lost its most important trading partner, the Soviet Union.

While India has been negotiating with Asean for a while and has also missed deadlines for concluding the talks, the trading block has signed FTAs with China and South Korea, India's rivals for foreign investment.