With the Doha round of global trade talks dragging on, it is but natural for countries to look at bilateral and, more so, regional free trade agreements (FTAs). This explains the keenness which India and the 10-member Association of South-East Asian Nations (Asean) have displayed in promptly concluding the protracted negotiations on the proposed FTA, in the official-level meeting at Brunei last week. The deal now seems set to be announced at the forthcoming meeting of the trade ministers of India and the Asean countries, in Singapore later this month, and formally signed into a treaty during the India-Asean summit in December, in Bangkok, which will be attended by Prime Minister Manmohan Singh.
The noteworthy point is that both sides seem to have conceded considerable ground to resolve contentious issues, and perhaps this would not have been possible but for the fresh sense of urgency imparted by the collapse of the Geneva talks on the Doha round. India, on its part, has agreed to lower import duties on nearly 96 per cent of the items it trades with Asean, while protecting nearly 490 highly sensitive products in the agriculture, textile and chemicals sectors. Asean, too, has shown ample flexibility in accepting some Indian positions though it had, in the last annual India-Asean summit in Singapore in November, virtually ruled out further negotiations until India came up with substantially better offers. Most of the group’s members were unwilling to allow protection for over 400 items and especially not to the ones of interest to them in agriculture as well textile and chemicals. These included, besides palm oil, items like pepper, tea and coffee. However, all that is past, though in the process Asean has also got concessions from India to shield its turf when it comes to automobiles and steel. In the case of the almost intractable issue of duties on palm oil and its derivatives, equally critical for a major importer like India as it is for exporters like Malaysia and Indonesia, the two sides have agreed to follow a middle path, agreeing to a tariff ceiling of 37.5 per cent for crude palm oil and 45 per cent on its refined version. In the event, this turned out to be the clinching point for the pact.
The India-Asean FTA should be viewed in a much broader context, as what Asean aims to achieve ultimately is a European Union-style single market, roping in countries beyond its core members. With that end in view, it has already inked trading deals with countries like Japan, South Korea and even China, and is currently in talks with Australia and New Zealand as well. The ties with India will let Asean, perched between China and India, strike a strategic balance in trade which till now has gradually been tilting towards China. With the inclusion of India, Australia and New Zealand, the extended Asean will emerge as the world's geographically most ambitious and perhaps most formidable trading alliance, making the European common market look small in comparison. For India, it will be another milestone in its look-east policy, stretching it far beyond its existing agreements with Thailand and Singapore. Moreover, considering that the South Asian Free Trade Agreement (Safta) between the Saarc member-countries is unlikely to get off in the way that it should, primarily because of Pakistan's reluctance to treat India at par with its other trading partners, the FTA with Asean assumes even greater importance. In any case, unlike the fragile Saarc, Asean is a vibrant trading club with an envious, four-decade old, conflict-free record.