22/11/2007 (The Economic Times), Singapore - Prime Minister Manmohan Singh has pushed hard for an early resolution of some of the key problems which are holding up the India-ASEAN free trade agreement. Commerce minister Kamal Nath met the ASEAN trade ministers and, after prolonged negotiations, it was decided that the FTA could be finalised by May 2008. The original deadline for finalising the agreement was July 2007.

The tricky issues relating to India offering lower tariffs to ASEAN nations on highly-sensitive agriculture products, like Palm oil, tea, pepper and coffee, will be resolved by the end of this year, commerce secretary GK Pillai has said. He said there was a significant movement forward in negotiating tariffs for these sensitive items.

When India began the tariff negotiations with ASEAN two years ago, tariffs on sensitive products like Palm oil, tea, coffee and pepper ranged between 80% and 100%. India is now trying to persuade ASEAN nations, especially Malaysia, Indonesia and Vietnam, that it could cut tariffs on these items to 45% by 2018. Officials said Malaysia and Indonesia are showing signs of coming around to appreciate India’s sensitivity on these agri items, especially from the standpoint of millions of subsistence farmers.

It is also possible that by 2018 India could autonomously reduce the tariffs on these agriculture items even more if rapid industrialisation leads to shift of labour from agriculture to industry. For instance, India began its negotiation when tariffs of palm oil was over 90%, but has autonomously brought down the tariffs to keep inflation under control.

So, in future, it is quite possible that to feed the growing requirements of its population, India may resort to lower tariffs on its own. This logic may make the ASEAN nations come around to accepting 45% import duty on these critical agriculture items for now.

Otherwise, India has made a generous offer of bringing down import tariff to zero on 80% of the tariff lines by 2018. On this, there is no dispute and this part of the agreement stands sealed.

Meanwhile, the Prime Minister in his address at the India-ASEAN summit today emphasised that exports of ASEAN countries to India has grown at a phenomenal rate of 65% last year, and this shows India is a willing partner in the Asian integration process. The Prime Minister also told the ASEAN leaders that India was determined to conclude the agreement and will show necessary flexibility on that count.