Indian Express | Saturday, October 23, 2004
NCAER slams India-Thailand FTA
Think-tank says India hasn’t done its homework before signing up with Thailand
ENS ECONOMIC BUREAU
NEW DELHI, October 22 — Economic think-tank National Council of Applied Economic Research (NCAER) has questioned the usefulness of the Free Trade Agreement (FTA) which India had signed with Thailand.
According to NCAER, “The FTA might create more problems than it solves.” FTAs often become expensive because of misunderstanding, misinterpretation, and the resulting corruption emanating from the complicated books of Rules of Origin (ROOs). They also create massive problems in trade facilitation, said the NCAER analysis.
The NCAER has also accused the government of not doing proper homework before signing the FTA with Thailand. “It is worth asking, however, if sufficient serious thought went into analysing the benefits and costs for India in signing such agreements”, it said.
Thailand does not figure among the Top 20 trading partners of India. It accounts for only 1.4 per cent of India’s total merchandise exports and for 0.7 per cent of India’s total merchandise imports. India had been doing fine in its trade with Thailand from 2000 to 2003, the three years preceding the signing of the Framework Agreement in October 2003.
India’s exports to Thailand grew at an average rate of 16.6 per cent per annum during 2000-01 to 2002-03 as compared with 13.3 per cent growth in India’s exports to the world. The corresponding growth rate for imports from Thailand was only 6.8 per cent, which was also lower than the 7.6 per cent growth in India’s non-oil imports from the world during the same period.
Clearly, stressed the NCAER analysis, “India was performing relatively better in its bilateral trade with Thailand, both when compared to Thailand’s trade performance with India as well as India’s trade performance with the world.”
NCAER has also questioned the compatibility of the Early Harvest Schemes with World Trade Organisation (WTO) stipulations. The Indo-Thailand FTA, it said, has not begun well since it has commenced with a partial opening up of only 82 commodities under the Early Harvest Scheme. The 82 six-digit items under the Harmonised System of 5,000 plus six-digit items do not pass the test of “substantially all trade” under GATT.
NCAER analysis further said “although India seems to have decided to move in the direction of RTAs, it is fairly evident that the degree of homework required before actually entering into an agreement has not been done.”
Political reasons appear to be at work and, in the long run, this approach could cost Indian trade more than it benefits it, warned the NCAER analysis.