FTA with Asean faces deadlock over tariff cuts

Negotiations between India and Asean over the proposed Free Trade Agreement are deadlocked, with the latter now asking India to prune its list to just 60 items on which it will offer no tariff cuts. Asean has also rejected New Delhi's offer for a Tariff Rate Quota on palm oil, tea and pepper.

TRQ is a concession under which the import duty would be marginally lowered for a fixed quantity of a product being imported into India. Also, Asean has made clear that it wants India to include palm oil in the tariff reduction list.

According to the tariff reduction roadmap suggested by Asean, India would have to bring the tariffs on palm oil to zero by 2011. India has rejected this suggestion.

With talks reaching an impasse, senior commerce ministry officials said the ministry would now go back to the Prime Minister's Office and the trade and economic relations committee for deciding the next course of action.

During the negotiations held in Singapore last week, New Delhi had submitted a revised negative list of 854 items. India had originally submitted a list of 1,414 items which was later pruned to 991 items. Following objections raised by Asean, the negative list was further revised to 854 items.

"This is as far as we can go. There is no possibility of India pruning its negative list further since the negative list is far higher for other countries with which India has or is in the process of finalising bilateral agreements," an official said. The proposed negative list is 1,072 for Bimstec and nearly 5,400 for Singapore.

Officials said Asean, which had just concluded an FTA with China, wanted the India-Asean FTA to offer more concessions than its FTA with China. Interestingly, Asean has close to 2,000 items on which it offers no tariff concessions to China.

While New Delhi offered to hold the next round of discussions in August, Asean officials said they would revert to India after obtaining a mandate from the Asean ministers.