Economic diplomacy blooms in FTA season
economictimes.indiatimes.com INDRANI BAGCHI TIMES NEWS NETWORK [ SATURDAY, JANUARY 11, 2003 04:13:57 AM ]
NEW DELHI: When Vajpayee invited the Singapore prime minister, Mr Goh Chok Tong to India last year, Mr Goh put in a rider. “Lets sign a free-trade agreement,� he said, “and I’ll come for the signing.� Not one to miss the opportunity, Mr Vajpayee is reported to have said, “Done�.
In April, then, India and Singapore will be signing a free-trade agreement that has been dredged out of the garbage heap. By the end of this year, India will have signed a similar agreement with Thailand.
During last year’s India-Asean summit, Mr Vajpayee offered a free trade agreement with the Asean in the next decade. The Mexican foreign minister, Mr Jorge Castaneda, who was here last month with an olive branch, to make up for a faux pas his UN ambassador had made, he too offered a free-trade agreement to the prime minister, which Mr Vajpayee readily agreed to.
India is negotiating with Mercosur for a similar pact, while a deal with South Africa is moving out of the drawing board and into the decision stages. And Brazil’s new president, Mr Lula, has India in his radar screen as one of the four countries for trade pacts.
And then there is the big whopper: a free trade agreement with the US. It was proposed by Senator Sam Brownback recently and hailed enthusiastically by the business community.
It remains to be seen whether the government finds the idea as attractive. For the present, however, several task forces are in action: with Singapore, Thailand and the Mexico panel will be meeting shortly.
Is India suddenly discovering the world, you wonder, after years crouched in a protectionist shell? The mindset is clearly changing and free trade as a tool of economic diplomacy is gaining ground in the MEA at least, largely the effort of a foreign minister with a finance background.
But the changed outlook is also a comment on India’s zero achievement in securing bilateral free trade agreements, all the rage in the international arena.
Whatever the reservations of the mandarins of the commerce ministry, India is beginning to realise that it will virtually fall off the map of global trade if it does not get its act together and cobble together some effective bilateral trade agreements with certain key countries.
The multilateral arrangement, WTO, is going nowhere, getting clogged with too many countries, too many issues and too many disputes. Therefore the “quad� (US, EU, Canada and Japan) are working furiously on bilateral arrangements to speed up trade.
Robert Zoellick, USTR, is racing with crusading zeal through nations as varied as Chile and Singapore to tie up free-trade arrangements that are more forward looking than the WTO.
Where does India fit into this trading matrix? Nowhere actually. SAARC is virtually a dead letter, while India is concentrating its energies on economic arrangements by keeping Pakistan out.
This means an extra interest in BIMSTEC, which feeds into Asean, while New Delhi is in the throes of an FTA II with Sri Lanka. Nepal and Bhutan get economic concessions anyway, so India’s next target country in the region is Bangladesh and some big ticket concessions can be expected soon.
An FTA with Sri Lanka was almost derailed by protectionist lobbies here, other countries will face a great deal more scepticism. Therefore, the government is looking at a new way of making these FTAs more palatable.
First, the tariff harmonisation will have longer lead periods. Second, India will be hawking its services to tie up R&D and outsourcing projects under the rubric of an FTA. Singapore is not unwilling. The FTA will be named comprehensive economic co-operation agreement rather than a straightforward FTA.
The way a Mexico or South Africa FTA is being sold within the government is by pointing out the advantages of securing other markets, the US and southern Africa/SADC, respectively.
The Indian government reckons that in sectors like textiles or pharmaceuticals, Indian companies would benefit hugely by an FTA with Mexico.
Singapore will be the test case, because, with zero tariffs, Singapore and India will not only have to resolve issues of local origin but even issues like accessing the rest of Southeast Asia.
According to Indian officials, Southeast Asia is ripe for the picking, because these countries want a counter to China which is not only the factory of the region but also the largest market.
Only India’s size can make it comparable. Does India have what it takes? Watch this space.