India has signed a Free Trade Agreement with the ASEAN countries, which would lead to the waiving off of import duties on about 80% of the imports from the ASEAN region.
This article tries to share some concerns about the deal and its implications to the country in general and Kerala in particular.
ASEAN consists of 10 countries- Thailand, Burma(Myanmar), Indonesia, Malaysia, Philippines, Singapore, Laos, Vietnam , Cambodia and Brunei. The collective population of the ASEAN bloc is about 56 million, while in India, its 1.07 billion. So in business terms, the FTA opens a customer base of 56 million for India and a huge base of 1.07 crore for the ASEAN bloc.
According to the deal, signed by the Minister of Commerce and Industries, Anand Sharma and by the Economic Ministers of ASEAN, the import duty of about 80% products-including agricultural products- that these countries export to India would enjoy near zero import tarrifs. Its interesting to note that nowhere it says about the number of goods India would be exporting to these countries.
This article tries to share some concerns about the deal and its implications to the country in general and Kerala in particular.
ASEAN consists of 10 countries- Thailand, Burma(Myanmar), Indonesia, Malaysia, Philippines, Singapore, Laos, Vietnam , Cambodia and Brunei. The collective population of the ASEAN bloc is about 56 million, while in India, its 1.07 billion. So in business terms, the FTA opens a customer base of 56 million for India and a huge base of 1.07 crore for the ASEAN bloc.
According to the deal, signed by the Minister of Commerce and Industries, Anand Sharma and by the Economic Ministers of ASEAN, the import duty of about 80% products-including agricultural products- that these countries export to India would enjoy near zero import tarrifs. Its interesting to note that nowhere it says about the number of goods India would be exporting to these countries.
Poor Negotiation Skills?
An article which was published in Economic Times, says that the deal effectively opens more market place in India for the ASEAN bloc, while India gained nothing significant. About 75% of the Indian goods entering the Asean countries currently attract zero duties, the effective additional market access that India has secured out of the FTA with Asean is mere 21% of its export. While ASEAN gets an import tariff cut of about 80% of the products. The FTA, which will come into force in January 2010, will phase off the import tariff of about 320o proucts by 2013. tariffs on an additional 800 products would be brought down to zero or near zero levels by December 2016
The government claims that India got a good deal by including 489 products in a high sensitive 'negative list', in which there will be no tariff cuts until a level playing field is achieved. But the truth is that the Indian negotiators agreed for one consolidated negative list of 489 items for all Asean countries put together, which means India has about 50 items in its negative list for each Asean country. And India had to concede to each ASEAN countries to come up with a negative list of high sensitive Indian Imports into their countries. In effect, the idea of setting up a negative list back fired; weakening India's position further. This move would also force India to compromise a lot on the Doha Rounds, in which the former Commerce Minister, Kamal Nath had put a great effort in defending India's right in imposing duty on agricultural imports. This clearly raises disturbing questions on the integrity, vision and negotiating skills of the Indian delegation who carried out the deal.
There is also another danger lingering behind the deal. With the ASEAN's FTA, any country, especially countries like Australia, who already have an FTA with the ASEAN, can use those countries as transit points to export products like wheat to India, by bypassing tariff payments.
Although the government claims that the annual trade between the two parties is forcasted to touch 60 billion dollars after the deal comes into effect, the question lingers... who get the benefits? What would this deal do to a 26million who lives under poverty.
Impacts on Kerala's agrarian sector
The ASEAN FTA was vehemently opposed by ruling left government of the state. The Chief Minister, followed by a ministerial delegation met the Prime Minister to share the apprehensions and concerns on the deals negative impact on the state's agrarian system.
Many of the ASEAN countries share the same climatic conditions as of Kerala, which means those countries produce more or less same crops as the kerala farmers. Kerala was always famous for its spices. But today, countries like Vietnam took over the prime position in international spice markets. Kerala spices can no longer fight with the cheap produces from these countries. They have clear advantages, both in labor cost and productivity.
Rubber still forms the backbone of Kerala cash crops. The stability in rubber prices have contributed a lot in the stability of a robust economy- especially in southern kerala. Even a minor price fluctuations in rubber would lead to a drastic breakage of the existing economic system. Southern kerala had seen the negative effects of rubber price drop before, when the rubber prices came down to 26 a kilo in the late 1990s. A lot of small firms was thrown out of business during those years. The domestic comsumption of natural rubber has seen good growth in the last few years. The combined ASEAN bloc is the world's largest rubber producers, which explains why India is a lucrative market for them. There are many huge corporations working on agricultural sectors in these countries. Even though many agricultural products are included in the negative list, the apparent presence of loop holes would make it difficult to control the agricultural products, which forms a big chunk of ASEAN's exports. For example, natural rubber is added in the negative list, but the tariffs of synthetic rubber is to be waived to a near zero level, which will fire up competitions in which Kerala will have a very vulnerable position.
The deal becomes all the more relevant, when the state is slowly recovering from scary days farmer suicides. A loss of confidence again would make it harder for the agrarian sector to revive from the abyss and fight back. This calls for an expeditious administrative and diplomatic level action in finding a solution to the issue.
Finding ways to instill confidence and helping the farmers in developing optimised cultivation technologies through which they can atleast stand up to an influx of foreign goods is the need of the hour. The government shall, at the same time, re negotiate the terms in the FTA, keeping in mind of the farmers' plights.
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