PM set to look into trade agreements

Domestic industry's apprehensions core issue

Prime Minister Manmohan Singh has sought a review of India's free trade agreements (FTAs) and preferential trade agreements (PTAs) in the wake of apprehensions aired by the domestic industry.

According to officials, Singh has called a meeting of senior officials of the commerce and external affairs ministries this week to discuss the provisions of the treaties, which are hurting the domestic market.

The finance ministry had also expressed its concern over the probable revenue loss on account of such pacts, the officials said.

The prime minister has convened the meeting ahead of his maiden overseas visit to Thailand for the Bimstec (Bhutan, India, Mayanmar, Sri Lanka and Thailand economic cooperation) meeting on July 30.

The officials told Business Standard that the meeting was expected to discuss the bottlenecks in the way of implementing the FTAs, many of which would be effective over the next couple of years.

Several issues like rules of origin, treatment of out-of-quota rates, non-tariff barriers and safeguard measures have posed major hurdles in negotiations of bilateral FTAs with Thailand and Singapore.

There was also a perception in some quarters that the previous National Democratic Alliance regime had shown undue haste in entering into agreements with various countries, the officials said.

"There is a view that we do not have sufficient manpower and know-how to implement FTAs. There are also issues pertaining to implementation of tariff lines "" namely the basis for inclusion and exclusion of items for zero duty, extent of tariff reduction and the time frame for expanding the list of items for concessional duty," an official said.

The meeting is also expected to discuss, whether India can have a zero-duty regime for some items in FTAs or opt for a standard lower-duty regime across the board for all FTAs.

Sources said the meeting was also likely to discuss the tariffs in sensitive areas like agriculture, where India was not prepared to reduce the tariffs on farm and dairy products since the interests of farmers could be at stake.

Over the last one year, India has committed to a host of FTAs and PTAs, including those with Thailand, Asean, Bimstec, Mercosur and Singapore, where the comprehensive economic co-operation agreement will cover goods and services.

The Mercosur group comprises Brazil, Argentina, Uruguay and Paraguay. In addition, India has received requests from Israel and it is also considering FTAs with Brazil and South Africa.

Due to the rise in FTAs, a number of tariff anomalies had also crept into the system. For instance, the government recently changed the duty structure in the steel and aluminum sector to remove the anomalies that had crept in for auto component manufacturers following the signing of a framework agreement for an FTA with Thailand.

Also, due to the FTAs, the customs machinery and the commerce department were facing difficulties regarding standardisation of norms.