Thai trade talks run aground

Ministers to sort out rules of origin row

Thailand has raised fresh objections to India's proposal of a substantial change in product classification for imports from the country, under the free trade agreement (FTA) between the countries.

With officials unable to come to an understanding on the issue under the rules of origin norms, the matter will now be taken up at the ministerial level during Commerce and Industry Minister Arun Jaitley's visit to Pattaya this weekend to sign the agreement on BIMSTEC (Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Cooperation) free trade area.

India has been insisting on putting in place a stringent 'rules of origin' mechanism under the FTA, for which a Framework Agreement was signed last year, so that no third party products are routed from Thailand.

India has demanded a 40 per cent value addition norm for products and a substantial change in the four digit product classification level, which will mean manufacturing instead of just labeling and packaging.

Officials said while Thailand had initially agreed to the proposals, they have now gone back on the clause on change in product classification.

They said Thailand wanted to consult its domestic industry before committing to anything. The officials added India wanted to put in place a common rules of origin clause in all FTAs with its trading partners.

"You can't have a separate set of rules for Nepal and Sri Lanka and another for Thailand and Singapore. This will only add to confusion at Customs ports and create difficulties for exporters from both," an official said.

The officials, however, said the FTA was not going to be affected due to the differences as India and Thailand had already committed to it.

"These are not differences but different points of view. We would stick to the deadline of March 1 for implementing the Early Harvest Scheme," an official said.

Under the Early Harvest Scheme, Customs duties on 84 products are to be reduced from March 1. While 47 items are of India's interest, 37 have been inserted keeping in mind the competitive advantage of the Thai industry.

The FTA is to be operational from 2006 and the interim rules of origin have already been agreed upon, which will be replaced by a final set of rules that are currently under negotiation.

What India wants

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• Putting in place a stringent 'rules of origin' mechanism under the FTA, for which a Framework Agreement was signed last year, so that no third party products are routed from Thailand
• A 40 per cent value addition norm for products and a substantial change in the four digit product classification level
• To stick to the deadline of March 1 for implementing the Early Harvest Scheme, under which Customs duties on 84 products are to be reduced