Rules of origin discord delays pact with Asean

Disagreement over the issue of rules of origin has derailed plans to implement an early harvest scheme between India and Asean (Association of South East Asian Nations) from April 1.

The two sides are now working on initiating the Comprehensive Economic Cooperation Agreement (CECA) without an early harvest scheme.

Confirming the development to Business Standard, senior officials of the Ministry of Commerce and Industry said the two sides could not come to an agreement over the rules of origin, even though the draft rules of origin proposed for Asean is among the most liberal with only a 40 per cent value-addition norm without any change in the tariff heading.

India was keen on stricter norms for select products, which was not agreeable to Asean. Commerce Minister Kamal Nath is expected to resolve the issue after the announcement of the annual supplement to the foreign trade policy on March 31.

The CECA with Singapore has also not been inked following India's decision not to concede Singapore's demand in the telecom and financial services sector.

"From our side there is no problem. However, the Reserve Bank of India has raised some concerns. Singapore is now discussing the issues in the financial sector and telecom with North Block," a senior official said.

The two sides have concluded 12 rounds of discussions and had earlier set a deadline of November 2004 for completing the deal.

Around 106 items were slated to get concessional duty benefits under the early harvest scheme. While most of the items would have had a 40 per cent value addition with no change in tariff heading, there were around 40 items - including chemicals - for which India was seeking a change in tariff heading along with the value addition norm, officials said.

India was also willing to offer unilateral tariff concessions to Cambodia, Laos, Myanmar and Vietnam (CLMV) on around 100 tariff lines.

The framework Agreement on Comprehensive Economic Cooperation between the Asean and India was signed on October 8, 2003 in Bali, Indonesia.

As per the agreement, the tariff reductions will start from January 1, 2006 and the most favoured nations (MFN) tariff rates will be gradually eliminated. India will eliminate tariffs by 2011 for Brunei Darussalam, Cambodia, Lao PDR, Indonesia, Malaysia, Myanmar, Singapore, Thailand and Vietnam.

Brunei Darussalam, Indonesia, Malaysia, Singapore and Thailand will eliminate the tariffs for India by 2011 and new Asean member states, that is CLMV, will eliminate tariffs for India in 2016. India and Philippines will eliminate tariffs for each other on a reciprocal basis by 2016.

Key elements of the Framework Agreement on Comprehensive Economic Cooperation between the Asean and India cover FTA in goods, services and investment, as well as "areas of economic cooperation".

Asean has a membership of 10 countries namely Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.