Financial Express, India

Trade pact with Thai hits a fresh bump

AMITI SEN

18 July 2005

NEW DELHI, JULY 17: India’s proposed free trade agreement (FTA) with Thailand has hit a fresh roadblock with the latter insisting on the use of just the value-added criteria for determining rules of origin (ROO) instead of the twin criteria adopted under the early harvest scheme (EHS) presently under implementation.

ROO lays down the rules which determine whether a product originates from the countries participating in the FTA. It is a safeguard against inflow of third-country goods on preferential terms.

While negotiating the EHS with Thailand, India had managed to persuade the country to use both value-added and change in tariff heading (CTH) criteria for determining ROO.

India’s argument was that the value-added criteria alone would not be sufficient to prevent goods from countries like China and Korea flowing into India at preferential tariff rates.

Sources said that influenced by Asean, which is negotiating hard to have just the value-added criteria for ROO in its FTA with India, Thailand, too, is insisting on the single criteria of value addition.

Commerce ministry sources told FE that India is trying to work its way out of the problem by holding extensive talks with Thai officials. “We are trying to arrive at a mutually acceptable solution,” an official said.

The value addition method specifies that 40% of value addition has to be achieved with domestic inputs to make a product eligible for concessional treatment under FTA.