22/11/2007 (Business Standard) - In a small but significant step forward, Prime Minister Manmohan Singh today said negotiations for the proposed Free Trade Agreement (FTA) with the 10-member Asean would be wrapped up by March next year and that India would show “necessary flexibility” to achieve this goal. 
 
“I want to assure you that on its part India has shown, and will continue to show, the necessary flexibility and determination to achieve this objective,” he told Asean heads of state at the 6th India-Asean Summit. 
 
Yesterday, Prime Minister Singh had said that talks were stuck over sensitive agricultural commodities (palm oil, tea, coffee and pepper) and if India accepted the import duty cuts demanded by Indonesia, Malaysia and Vietnam, the livelihood of a large number of its subsistence farmers could be adversely impacted. 
 
Briefing the media later, Commerce Secretary GK Pillai said that informal bilateral consultations will now be held with the three countries on the duties on these commodities. “There will be some give and take,” he said, adding: “The meeting of minds could happen midway.” 
 
India had offered to bring down the import duty on crude palm oil from 80 per cent to 50 per cent, on refined palm oil from 90 per cent to 60 per cent, on tea and coffee from 100 per cent to 50 per cent and on pepper from 70 per cent to 50 per cent by 2018. 
 
Indonesia and Malaysia have been asking for the duties on crude and refined palm oil to be brought down to 40 per cent and 30 per cent, respectively, while Vietnam is pressing for import duty of 20 per cent on tea and coffee and 30 per cent on pepper. 
 
Palm oil accounts for over a third of the exports from Malaysia and Indonesia to India, while a quarter of Vietnam’s trade with India is in tea, coffee and pepper. 
 
It now seems India is willing to yield a little in its position. “We want to conclude the talks by March and sign the FTA on goods by May. Two years after that, we will conclude the FTA on services and investments as well,” Pillai said. 
 
In addition, India has agreed to cut the import duty on crude oil from Brunei to zero as a gesture of its flexibility. At present, 95 per cent of Brunei’s exports to India are crude oil, though it accounts for less than one per cent of the country’s oil imports. 
 
India has reasons to rush the FTA negotiations. India’s rivals in the global economy – China, South Korea and Japan – have stepped up the pace of their trade negotiations with Asean. While Japan has signed an FTA on goods, South Korea and Japan has concluded talks on an FTA on services as well.