Bangkok Post

India sees Thai free trade talks faltering

25 November 2007

New Delhi (Agencies) - With India-Asean free-trade talks faltering, the Indian government said on Saturday it might have to get directly involved again to try to make the proposed India-Thailand free trade agreement (FTA) operational.

Negotiations on the proposed FTA between Thailand and India were supposed to be concluded by last June. Both countries have formalised modalities involving tariff cuts on goods.

Simultaneously, India is in the process of starting bilateral FTA talks with Malaysia and Indonesia, both members of Asean. A joint study group including officials from both sides has started a feasibility study for an India-Indonesia FTA this October, while another set of officials have already given the go ahead for an FTA with Malaysia.

Sources said, "India will start formal FTA negotiations with Malaysia in early 2008." They added that in the "hypothetical" event of the failure of the Asean talks, India might re-negotiate the provisions of the proposed FTA with Thailand.

A source said, "Thailand has been asking for flexibilities, which are in excess of whatever has been offered to the Asean trade bloc. If the Asean FTA fails to take off, India will renegotiate with Thailand. In any case, India will proceed with the Thai FTA only after it knows of a definite status of the Asean one."

The source added, "Thailand is scheduled to have elections in December and there would be no further talks (with Bangkok) until there is a new government. We expect to finalise the Asean FTA by March and sign it by June next year. The Thai FTA will happen only after that."

In the negotiations with Thailand, the Indian side has agreed to eliminate tariffs on more than four thousand products in a phased manner. Another 500 will be on a sensitive list and receive partial duty cuts over a period of time. Nearly 500 other items are on the negative list, and are to receive no tariff cuts in order to protect domestic industry.

Taking advantage of the Early Harvest scheme, exports from Thailand has been increasing at around 60%, while that from India has risen by 40% since 2004. A source said, "In some chemical products produced by India, the increase in exports has been as high as 1,000 per cent."

Meanwhile, India expects some flexibility from their Asean counterparts. "The initial indications point out towards reducing the Asean highly sensitive list, which has more than 1,200 items. India has only five items in the negative list, which is common for all the Asean members."