India, Asean free trade deal likely by July

India and the 10-member trade bloc Asean may sign the ambitious free trade agreement (FTA) by July 2008, a year later than one of the several deadlines, which have been missed.

Prime Minister Manmohan Singh, during his visit to the 13th Asean summit held at Singapore in November 2007, had indicated that India would take a flexible stand in the FTA talks.

According to sources in the know, negotiators from both sides, who met in Bhopal last week, were able to break the deadlock in contentious issues on duty cuts in five highly sensitive farm products of refined palm oil, crude palm oil, black tea, pepper and coffee as well as the negative list of the Asean countries.

"Negotiators from India and Asean will meet again in February and April to take forward the progress in the latest round of talks. If all goes well, the treaty could be signed by July this year," said the source. Negotiators exchanged offers and counter-offers during the Bhopal meet, which will be discussed further.

India had signed a framework agreement on comprehensive economic cooperation with the Asean bloc in October 2003, according to which, negotiations were to conclude by June 2006. With differences remaining unresolved, July 2007 was taken as another deadline, which too did not work out.

India had earlier offered to bring down the import duty on refined palm oil to 60 per cent against the demand "" mainly from Indonesia and Malaysia "" for reducing it to 30 per cent. On tea, coffee and pepper, India has offered a rate of 50 per cent, against the demand of 40 per cent by Asean countries like Vietnam.

Another contentious issue was the highly negative list of Asean countries, which exceed 1,200 items against India's 489. The list is large because the Asean members have individual negative lists. While Vietnam has more than 400 items in its negative list, Malaysia has more than 200 items.

Till recently, Asean has not finalised the list, while India had been progressively pruning it to show its keenness in the FTA. Negotiators from India had objected to a large negative list. According to sources, the Asean bloc is likely to take a softer view on its large negative list and may cut it down.

During the course of the negotiations, India has given several concessions to Asean, which included pruning of its sensitive list to 550 items from the earlier 709, in which import duties would be reduced over a period of time. Most of these products belong to sectors like textiles, machinery and auto as well as chemicals and plastic.

Moreover, India also agreed to compromise on the crucial clause on rules of origin, which provides protection against trade diversion from other countries, with which Asean members have trade ties.