Take Indian Inc into confidence before concluding FTAs

07 Apr '08

4 min read

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 here on Saturday, 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 “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”.

Mr. Dhoot argued, “the high tariff regime in India at about 12.5% and low tariff regime of China of less than 6% and FTA between India and China might affect the economic efficiency between these countries as they would exclude and discriminate other counties”.

“This discrimination with work particularly against India because of its high tariff barriers. When India gives duty free access to China, tariff revenue previously collected on its import from China turns into export revenues for the exporting firm from China. In the process, Chinese firms will gain more compared to Indian exporters as Indian exporting firms have less to gain from the tariff free access in China”, added Mr. Dhoot.

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