9/7/706 (The Economic Times)  -  NEW DELHI: The India-ASEAN free trade agreement (FTA), the largest trade pact negotiated by India so far, has run into trouble. Both sides have dug in their heels over key issues, which need to be resolved to kick-start the accord from January 1, ‘07.

India has put the ball in Association of South East Asian’s (ASEAN) court by emphasising that no more concessions would be granted and the negative list — comprising goods not covered under the pact — will not be cut down below 800 items. New Delhi has also categorically rejected free import of palm oil — a major demand of important ASEAN members like Malaysia and Indonesia.

The ASEAN, on its part, has not agreed to inclusion of services and investment in the pact — which will convert it into a comprehensive economic co-operation agreement (CECA). The negative list of 854 items is also not acceptable to ASEAN and it wants it to be pruned to 60.

With both sides hardening their stands, India has refused to budge even if it means derailment of the ASEAN FTA. The ball is now in ASEAN’s court, highly-placed government officials said. “The Prime Minister’s Office has categorically said that the negative list would remain at around 800 to 850 items.

In the case of sensitive farm goods, we will impose tariff-rated quotas,” the sources said. The issue has become sensitive since Congress chief Sonia Gandhi has emphasised that FTAs should not affect the livelihood of farmers.
Palm oil, tea, coffee and pepper are some items which India wants to restrict through TRQs.

The finance ministry is of the view that even after TRQs, reduction in import duty on palm oil would lead to revenue loss of Rs 1,400 crore. “The offer that has been placed before ASEAN is quite accommodating and India has made its share of compromises. The ASEAN has to come forward now,” the sources said.

TRQs were brought in to accept ASEAN’s demand for coverage of 80% of the trade with India under the FTA, they added. The shift in government’s stand is clear as diplomatic pressure was pushing India to accommodate ASEAN’s demands till now. At one stage, the PMO even conceded that revenue considerations cannot drive coverage of FTAs.