Category: Economics

Exactly a year ago, I caught a piece of news on a proposed ASEAN-India free trade agreement. ASEAN however rejected the Indian initial offer because India wanted too many items that fuel ASEAN economy excluded from the FTA. By July 2006, the talk was suspended by ASEAN because the Indian list — down to 850 as of July 2006 from 1400 items as of December 2005 — was still too long:

KUALA LUMPUR, JULY 25: The Association of Southeast Asian Nations (Asean) has suspended free-trade talks with India because of New Delhi’s reluctance to open its markets, Malaysia’s trade and industry minister said on Tuesday.

By August 2006, the Indian list was reduced to 560 items. The lists were supposed to be finalized in June 2005 while the FTA itself was expected to come into force by January 2007.

The latest development on the FTA this month reveals that negotiation doesn’t look too good:

NEW DELHI, NOV 30: Asean has given a jolt to India by deciding to almost double its negative list for the proposed free trade agreement (FTA) with India.

“The negative list which they gave us in August was 2,700 which, after subtracting the overlapping items in the country-specific list, came to a consolidated figure of 600. But on November 17, they came up with a revised list of 6,900 which amounts to a consolidated list of 1,000 plus,” commerce secretary GK Pillai told media on the sidelines of the International Chamber of Commerce of the World Council Meeting here on Thursday.

I’m unsure what ASEAN is trying to do by increasing the size of its list but the increase is unfair to India, especially when the India has been trying hard to reduce the list length, though admittedly, I myself prefer to see a much shorter Indian list; I prefer a more liberal market for both sides with almost no exclusion list at all. But when the Indian proposes something like:

Ramesh [Indian Minister of State for Commerce] added that India will not compromise the interests of its farmers by pruning the list. India’s negative list of 560 does not include palm oil, pepper and black tea on which the country has proposed to gradually bring down duties to 50 percent.

I think we shouldn’t call this agreement as an FTA. A 50%-tariff is still way too high, no matter what the initial level is. Perhaps, the reason why ASEAN increases the length of its list is due to frustration. I’d be frustrated too if I were in the negotiation, looking at a “liberalized” market with a 50%-tariff staring back at me.

This latest development looks very different from the optimism we all saw back in early 2005:

KUALA LUMPUR, Mar 28 2005 India and Malaysia are on the verge of signing a comprehensive economic co-operation agreement by year-end. It will include free trade between the two nations.

The signing may be done during a visit by Indian Prime Minister Dr Manmohan Singh to Malaysia in December.

Indian High Commissioner to Malaysia R.L. Narayan said both sides had worked hard on the matter following Prime Minister Datuk Seri Abdullah Ahmad Badawi’s visit to India last December.

In the past three months, they have charted a “road map” of the broad parameters of the agreement.

Let’s hope the negotiation won’t end here because prosperity comes from trade, not isolation.

Apart from India, Malaysia, as far as I know — on its own or as part of ASEAN — is in FTA negotiation with Australia, Chile, Pakistan, People’s Republic of China, South Korea and the United States. There’s rumor of a Malaysia-Canada FTA but Canadian officials have ruled them out, at least from the next one or two years.