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No FTA with India for now, says US

February 21, 2008 11:45 IST

Not willing to tread the path taken by EU and ASEAN for market-opening trade pacts with India, the US on Thursday said it is not ready for a free trade deal with the world's second-fastest growing economy as it cannot fully open agricultural imports from American farmers.

"Quite honestly, it would be quite difficult, at this point of time for India to imagine doing that kind of a deal with the United States considering its sensitivities in agriculture," US Trade Representatives Susan Schwab said on the sidelines of India-US Summit for Small and Medium Enterprises in Chicago.

India is at advanced stages of negotiations on economic cooperation agreements with the EU, its largest trading partner, and ASEAN.

Commerce Secretary Gopal K Pillai said India's free trade agreement with the European Union encompasses "substantial" trade, but Schwab said the US wants "almost 100 per cent" coverage.

This means, if India desires to have an FTA or economic cooperation agreement, it has to allow a zero duty market for everything, including highly-sensitive agriculture products. Protecting its subsistent farming from cheap imports has been one of the key areas of concerns for India under the Doha Round of multilateral negotiations for a global trade deal.

Schwab said there was no comparison between her country and the EU when it comes to a free trade pact with India. "EU is not a major agriculture producer, although they do a lot of export of value-added (products). Same thing is with a lot of ASEAN countries," she said.

But the US would closely watch the progress of agreements that India is working on with the EU and ASEAN. "We will see how those (India-EU and India-ASEAN) play out," Schwab said, adding that the US follows quite different approaches to such deals.

"At some point in future, we could well do it," she said. Schwab said since the processes of trade agreements were tedious and difficult, the priority for now was to use the alternative ways to enhance the bilateral trade, which was at $ 41 billion last year.

"Both of us felt that we wanted to do a lot more to expand bilateral trade and investment and to do that there were better ways at this point of time than to start negotiations on a Free Trade Agreement that might take many years," she said.

India has also begun the process of talks for possible deals with the Gulf Cooperation Council and Japan, in the absence of slow movement of a multilateral trade agreement under the World Trade Organisation.

While no formal proposal was mooted from either side, the idea of an India-US FTA has quite often been floated by private sector companies and politicians including some of the Congressmen in America.

As she rejected the possibility of an FTA, the USTR said her country was keen on enhancing trade and investment with India for which the two nations have set up a high-level Trade Policy Forum, co-chaired by their trade ministers.

The Forum, also comprising senior officials of the two countries, held its meeting in Chicago on Wednesday and reviewed a number of issues and bottlenecks that need to be removed for stepping up trade. The India co-chair is held by ICRIER Chairperson Isher Judge Ahluwalia. 

Prakash Chawla in Chicago
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