Foreign Trade

Economic pact with Asean on fast track

Sanjeev Sharma & Ganapathy Subramaniam
563 words
12 July 2005
The Economic Times
English
(c) 2005 The Times of India Group. All rights reserved.

NEW DELHI: In a move which has significant implications for India's trade diplomacy, the government has decided to impose a freeze on negotiation of new economic pacts. At the same time, the proposed Comprehensive Economic Cooperation Agreement (CECA) with Asean will be put on fast track. India will also focus strongly on long-term ties with the US, the European Union, China and Japan on the trade front.

Decisions to this effect have been taken by the Trade & Economic Relations Committee (TERC) headed by Prime Minister Manmohan Singh. The development is significant since it will have a major impact on India Inc's medium and long-term business plans. The policy direction comes close on the heels of a historic CECA with Singapore which was concluded last month.

The government is also considering merger of Indian Institute of Foreign Trade (IIFT), ICRIER and RIS to create an Indian Institute of World Economy and Trade. The proposed institution will help the government with groundwork on future trade pacts. The government will also look at supporting a centre for trade policy research within any of the economic research institutions that are working on trade and economic policy issues.

It is understood that the suggestion for merger of IIFT, ICRIER and RIS came from the Prime Minister and is aimed at creating a world-class institution which will help the government to assess the impact of trade pacts. The feeling within the government is that the existing mechanisms available for trade policy research is not adequate to meet evolving needs of the government.

The need for speeding up the CECA with Asean was highlighted by the finance ministry and the Planning Commission, highly-placed government sources said. The commerce department has been asked to look at liberal import rules to speed up the proposed agreement. Moves for economic integration with neighbours like Myanmar and Bangladesh will also be considered due to strategic reasons, the sources said. The TERC is likely to call for periodic review of the trade ties with major partners.

The bar on new trade pacts was mooted by the finance ministry, the sources added. The view that the country was negotiating too many trade pacts at the same time was accepted by the Prime Minister.

In case any joint study group recommends a new trade pact, it will be referred to the TERC. No new preferential trade agreement (PTA), regional trading arrangement (RTA), free-trade area (FTA) or CECA negotiation will be taken up without specific approval from the TERC.

As of now, India is looking at trade pacts with various trade partners, including China, Japan, Malaysia, South Korea, Pakistan, Australia, Mauritius, Chile and Israel. Similar pacts are being discussed with Asean, Gulf countries and Latin American countries while India is also part of the BIMSTEC (Bangladesh, India, Myanmar, Sri Lanka and Thailand Economic Cooperation) grouping. Initially, India was lagging in forging trade pacts as the focus was on the multilateral system, but steps have been taken in the recent past to catch up with other countries.

The Prime Minister is of the view that a comprehensive policy should guide negotiation of trade pacts. He feels various government departments should co-ordinate their efforts in line with the country's strategic interests to forge new trade pacts.

Document ECTIM00020050711e17c0005l