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Rediff.com  » Business » After WTO, India skips signing Asean services trade pact

After WTO, India skips signing Asean services trade pact

August 27, 2014 10:48 IST

Nirmala SitharamanIndia has bucked another trade pact. On Tuesday it put off the free trade agreement that was to be signed with the 10-member Association of Southeast Asian Nations (Asean) in services and investment.

The move came even as the country was already facing sharp criticism in the international trade arena for scuttling the World Trade Organisation's Trade Facilitation Agreement.

Minister of state (independent charge) for commerce and industry Nirmala Sitharaman was supposed to be here for three days of consultation with the Asean economic ministers.

On the agenda was the signing of the trade agreement in services, as well as investment.

The signing ceremony was to happen at the end of the second day at the Asean economic ministers meeting here.

The stage was set, and so was the audience, including media, from all the 10 Asean countries, to witness the signing of the agreement that was long due.

However, at the very last moment, Sitharaman cancelled her trip and decided not to attend the meeting.

According to Ravi Capoor, joint secretary in the commerce department, the minister was not able to come due to "domestic compulsions", since she had to be present on August 28 for the launch of the Pradhan Mantri Jan Dhan Yojana, a financial-inclusion scheme through which the government intends to provide every household with a bank account and insurance cover.

Sitharaman has been made incharge of this scheme.

Capoor added the Philippines Parliament had not yet ratified the deal. Asean comprises Singapore, Malaysia, Laos, Cambodia, the Philippines, Brunei, Vietnam, Myanmar, Thailand and Indonesia.

Sitharaman on Tuesday posted on microblogging site Twitter: "PM to launch Mega Scheme for financial Inclusion -- an ambitious scheme - at least one bank account/family. . . Unfortunately, had to cancel attending Myanmar AEM meet."

However, it is learnt the National Democratic Alliance government, which came to power in May, did not want to take a chance by signing the trade pact so early in office.

The deal was negotiated and agreed upon in December 2012 under the United Progressive Alliance government regime.

As a result, the government did not want to sign the deal in haste before analysing the pros and cons, officials told Business Standard.

India and Asean already have a free trade agreement in goods that got implemented from January 2010. This, too, has not been ratified by all Asean members.

India had come under scathing attack over the deal for not being able to increase its exports, while imports from most of the Asean member states like Singapore, Malaysia, Thailand and Indonesia kept rising.

Once signed, the FTA will automatically get converted into a Comprehensive Economic Partnership Agreement, encompassing trade in goods, services and investment.

Since the talks began, the Philippines and Indonesia were apprehensive of India eating away their jobs market.

Under the services deal, India had been pushing for more leeway in Mode 4, which refers to the movement of professionals in trade parlance.

Besides, another problem is that while countries like Thailand and Malaysia are ready to give greater access to their services market to India, they are not keen to give the same leverage to other Asean members.

According to officials in the commerce & industry ministry, India was able to gain significantly in services trade when it established a trade agreement with Malaysia separately compared with what it got under the larger Asean agreement.

Under the goods FTA, Asean member countries and India had decided to lift import tariffs on more than 80 per cent of traded products by 2016.

The FTA collectively covers a market of nearly 1.8 billion people and proposes to gradually slash tariffs for over 4,000 product lines.

Image: Nirmala Sitharaman; Photograph, courtesy: Business Standard

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