New Delhi: The Union cabinet has approved a free trade agreement with the Association of Southeast Asian Nations (Asean) despite dissent by some ministers.
The cabinet, however, decided to set up a committee of ministers to study the pact’s likely impact, said a person familiar with the development, who declined to be named.
A minister from the Congress party, who was present at the Thursday meeting, said some ministers were of the view that the government should not go ahead with the agreement without looking into its adverse impact on the Indian market.
However, according to two ministers including the one who attended the meeting, Prime Minister Manmohan Singh insisted that the cabinet clear the deal because it would otherwise isolate India. The two ministers spoke on condition of anonymity.
The ministers who opposed the deal said the trade agreement would adversely affect farmers cultivating cash crops and the country’s competitive advantages in services would not show up immediately as discussions on that front are yet to start.
Lending support: Prime Minister Manmohan Singh. Shahbaz Khan / PTI
Foreign minister S.M. Krishna had earlier indicated that India might sign the trade pact in October when it meets Asean countries in Thailand.
The Asean agreement was due to be inked in December last year but was postponed following political instability in Thailand. Later, the government deferred a decision on the deal in February in the wake of an economic slowdown and impending general election.
The free trade negotiations with the 10-nation bloc began in 2001 and concluded in August. The pact will come into effect from 1 January, when both sides will do away with tariffs for nearly 4,000 of the 5,000 currently traded items.
A negative list of 489 items, where import tariffs would not be cut, across sectors such as agriculture, textiles, machinery and automobiles, has also been agreed upon.
G. Manicandan, a member of the Forum on FTAs, which campaigns against the impact of free trade agreements on labour and livelihoods, said the trade pact will affect cash-crop producers and small auto parts makers as duty is proposed to be substantially reduced on such items.
“Indian producers will not be able to match the Asean countries as the industry there is highly developed,” he said. Import of cheap auto components and apparel is feared to badly affect small and medium enterprises, he said.
Manicandan also said that after India entered into a bilateral trade pact with Thailand, its trade surplus with the country has turned into negative. “India should take lessons from this experience.”