’Govt must not relent on Rules of Origin’

The Statesman, India, 18 July 2005

‘Govt must not relent on Rules of Origin’

Statesman News Service

NEW DELHI, July 17.- The government must not relent under any pressure from ASEAN countries to dilute the Rules of Origin (ROO) that India has framed before signing the Comprehensive Economic Cooperation Agreement (CECA) with Singapore, the Associated Chambers of Commerce and Industry (Assocham) has said.

Such a compromise would adversely affect the India’s Free Trade Agreement (FTA) with ASEAN vis-à-vis other regional groupings such as BIMST-EC and SAFTA, the Assocham said in a paper ‘India ASEAN Rules of Origin: an Industry Perception’.

In the paper, submitted to the commerce and industry ministry, the chambers suggested that India should have a standard format of uniform rules of origin that should be applied to its all future trade partners either regional or bilateral with whom government wishes to enter into preferential and free trade agreements (FTAs).

Releasing the Paper, Assocham president, Mr Mahendra K Sanghi said “If the Rules of Origin with ASEAN are relaxed, it would have adverse impact on the RORs for the Indo-Thai FTA, India-Singapore CECA. Besides it will have cascading affects for the proposed SAFTA and BIMSTEC agreements.” The ROO for ASEAN, therefore, have to be identical. No preferential treatment needs to be reserved for a particular country, Mr Sanghi felt.

“Assocham strongly feels that India represents a huge market opportunity, which should not be handed over to ASEAN countries with a relaxed ROR. If the ASEAN countries are keen to have FTAs with India, these nations will have to agree with the terms and conditions offered by India purely because of its market size,” he added.

India should effectively leverage its huge market size to gain strict Rules of Origin with ASEAN, the Assocham chief noted. In case, some of the ASEAN countries disagree with India on its ROR, protected negotiations should be carried out to put in place require safeguards before framing ROR on certain conditions. “India is not in any position of weakness, but has a strong position because of its large market size that it is offering to ASEAN,” the Assocham paper emphasised.

Mr Sanghi said India should recognize that whatever RoRs are decided now for the Indo-ASEAN FTAs would become a benchmark for all future FTAs and it may become very difficult for India to negotiate stricter ROOs in future FTAs. Even Singapore, Thailand may demand the relaxed ROO in line with the Indo-ASEAN FTA as it does not make sense to have strict rules individually with Singapore, Thailand and liberal rules with ASEAN.

The chamber also believes that globalization and trade-policy reforms must go hand-in-hand with domestic reforms. At the top are administrative and legal reforms, along with reforms at the level of state governments. Within the Indian economy there are considerable barriers to efficiency and competitiveness, and to make FTAs effective the government should ensure necessary domestic reforms.

Infrastructure reforms, especially in energy (including electricity) should be completed at the earliest. Labour reform will allow it to get rid of excess labor without political or legal interference. India is at a stage of transformation where it is vital for it to build its core-competencies to establish a strong foundation of skill development.

source: The Statesman