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Decks cleared for India-Asean free trade pact

Last updated: 26 July, 2009
Aditya Raj Das, New Delhi: 1:14 IST

Cabinet overrules objections over ‘adverse impact’ on plantation sector

The Union Cabinet has approved the controversial Free Trade Agreement (FTA) with the Association of South East Asian Nations (Asean), brushing aside concerns expressed by some ministers about its likely ''adverse impact'' on the country’s economy.

After debating the pros and cons of the much-talked-about India-Asean FTA, the draft of the pact was “finally” approved by the Cabinet at its late night meeting chaired by Prime Minister Manmohan Singh on Friday, official sources told Deccan Herald.

Since Parliament is in session, a formal official statement regarding the Cabinet decision could not be issued, sources said.

It is learnt that the meeting witnessed expression of “concerns” by some ministers over the likely adverse impact of the agreement, which proposes to drastically reduce or remove import duties on over 4,000 items of mutual trade.

Safeguards

The ministers reportedly argued that “without adequate safeguards”, the pact with the 10-member Asean countries would badly hit the plantation sector comprising cardamom, pepper, coffee, rubber and cashew and would also affect the livelihood of small and marginal growers of these products in states like Kerala, Karnataka and Tamil Nadu and other tea-producing states. Sources said it was also pointed that the small and medium enterprises in auto component sector would also come under pressure since most of the Asean countries have established themselves as global hubs for the manufacture of a wide range of auto components. The removal of import restrictions would make the Indian auto component industry vulnerable to cheap import of these products.
There were also fears expressed that the Indian market could be flooded with a wide range of consumer electronic durables since most Asean countries have already acquired a high level of competitiveness in this sector.

In favour


But another group of ministers was learnt to have argued in favour of the FTA saying that India had already committed itself to signing the FTA with the Asean countries, negotiations for which had been going on for the last eight years.

They argued that any further delay on India’s part in signing the FTA would give an upper hand to China, which was working hard to forge such a trading arrangement with the Asean countries.

It was pointed out at the meeting that apart from these factors, the government had taken into considerations the suggestions made by a committee set up in the past to study the concerns of plantation growers as well as other stakeholders in the Indian industry.

The committee had recommended measures to safeguard the interests and livelihood of plantation growers as well as other segments of Indian trade and industry without in any way abrogating the commitments under the FTA to progressively liberalise the tariff even in case of sensitive items. The Cabinet was also told that under the India-Asean FTA, a10-year period was being provided to prepare the stakeholders of the sensitive products to adjust themselves to the gradual lowering of import duty.

DH News Service

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