Tuesday, April 8, 2008

Take Indian Inc. into confidence before concluding FTAS - ASSOCHAM

by Jo Black

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) while supporting the government in exploring possibilities for Free Trade Agreements (FTA) has simultaneously cautioned it to go slow towards FTAs unless Indian Inc. is taken into confidence.

Releasing the study brought out by the ASSOCHAM on India’s FTA’s and the Indian Industry, its President Mr. Venugopal N. Dhoot emphasized that Preferential Trade Agreement (PTA) should first be concluded before FTAs are finalized to protect interests of Indian Inc.

Mr. Dhoot said that trade and comprehensive economic agreements have been signed in the past with various countries and regional blocks that have resulted into a few fallacies and hurt economic interest of Indian industry. This should not be repeated as far as proposed FTA with China is concerned, cautioned Mr. Dhoot.

The ASSOCHAM chief opposed FTA with China in one go, advising the government that a comprehensive prior consultation with Indian Inc. is necessary before such an FTA is agreed upon, which ought to be preceded by PTA.

The Chamber has prescribed a minimum period of 5 years before India and China finalise their FTA with extremely cautious approach towards it to help India nurture its business interests since India’s tariff structures are much higher as compared to China and can flood India with China’s products.

The ASSOCHAM President said that the ultimate goal should be an FTA with free flow of products and capital but in view of comparative disadvantage of India’s manufacturing sector, a much lower tariff structure in China and its higher degree of openness, India-China FTA trade cooperation should start with an PTA with reduced tariff in a phased manner.

The study points out that apprehensions are that since India’s tariff levels are much higher than China, any reduction in tariff will open the floodgate of cheaper imports from China. On the other hand, China’s tariffs are already fairly lower than India. Therefore Indian producers can expect no serious market benefits from China through FTA. Any reduction in China’s tariff will not increase India’s imports to China in a significant way.

In 2004, China’s simple mean tariff was 9.8% and weighted tariff was 6.0% whereas the corresponding figures for India were 28.3% and 28% respectively. India has reduced it peak tariff to 12.5% which is nearer to the ASEAN level. Even then Indian exporters cannot expect significant market benefits after an FTA whereas Chinese exporters can expect good gain from their exports, further points the Study.

In view of the comparative disadvantage of India’s manufacturing sector, a much lower tariff structure in China and its higher degree of openness, a India-China FTA trade cooperation should start with a PTA with reduced tariffs in a phased manner. The ultimate goal should be an FTA with free flow of products and capital. It, however, says that India and China trade has been growing very rapidly. In 1994-95 India’s export to China was $254.3 million which increased to $5344.88 million in 2004-05. India’s imports from China went up to $6768.92 million in 2004-05 from $761.04 million. Total trade between India and China was $18 billion in 2005 and is expected to reach $50 billion by 2010.

The problem for India is that the trade deficit with China has been growing from $506.74 million in 1994-95 to $1424.04 million in 2004-05. India’s export to China consists of Iron ore, primary and semi-finished iron and steel, plastic and linoleum products, processed minerals etc. India’s imports from China have been generally electronic goods, coal, coke and lubricants as well as organic chemicals, silk yarn and fabrics, non-electrical machinery etc.

According to ASSOCHAM study, in June 2003, India and China formed a Joint Study Group to expand trade and economic cooperation between the two countries. In March 2005, the JSG prepared a report and recommended a China-India Regional Trading Arrangement.

 

 

Add to Bookmarks:

  • ADD TO NETSCAPE
    •    
  • ADD TO DEL.ICIO.US
    •    
  • ADD TO DIGG
    •    
  • ADD TO FURL
  • ADD TO STUMBLEUPON
    •    
  • ADD TO YAHOO MYWEB
    •    
  • ADD TO GOOGLE
    •    
  • ADD TO SPURL

 

Stories related to: Take Indian Inc. into confidence before concluding FTAS - ASSOCHAM

 

 

Visited 212 times, 1 so far today