Govt may revisit Thailand FTA as Asean talks falter

No headway in negotiations on free trading of goods.

The proposed India-Thailand free trade agreement (FTA) will have to wait for some more time to become operational, as there has been no headway in negotiations on the India-Asean treaty on free trading of goods.

India and Thailand have an operational Early Harvest Scheme since August, 2004, as per which 82 goods are traded at zero duty. Negotiations on the proposed FTA between the two countries were supposed to be concluded by June this year. Both countries have formalised modalities involving tariff cuts on goods.

Simultaneously, India is in the process of starting bilateral FTA talks with Malaysia and Indonesia, both members of the Asean. While a joint study group, comprising officials from both sides has initiated a feasibility study for an India-Indonesia FTA this October, another set of officials have already given the go ahead for an FTA with Malaysia. "India will start formal FTA negotiations with Malaysia in early 2008," said sources in the know of the developments.

Sources added that in the "hypothetical" event of the failure of the Asean talks, India may re-negotiate the provisions of the proposed FTA with Thailand. "Thailand has been asking for flexibilities, which are in excess of whatever has been offered to the Asean trade bloc. If at all the Asean FTA fails to take off, India will renegotiate with Thailand. In any case, India will proceed with the Thai FTA only after it knows of a definite status of the Asean one", said a source.

"Thailand is scheduled to have elections in December and hence there would be no further talks until there is a new government. We expect to finalise the Asean FTA by March and ink it by June next year. The Thai FTA will happen only after that," added the source.

In the negotiations with Thailand, the Indian side has agreed to eliminate tariff on more than 4,000 products in a phased manner, while 500 others will be in the sensitive list, which will see partial duty cuts, over a period of time. Nearly 500 other items are in the negative list, which would not see any tariff cut, so as to protect the interests of the domestic industry.

Taking advantage of the Early Harvest scheme, exports from Thailand has been increasing at around 60 per cent, while that from India has risen by 40 per cent since 2004. "In some chemical products produced by India, the increase in exports has been as high as 1,000 per cent," said the source.

Meanwhile, India expects some flexibility from their Asean counterparts. "The initial indications point out towards reducing the Asean highly sensitive list, comprising more than 1,200 items. India has only five items in the negative list, which is common for all the Asean members".