ASEAN inks partnership pact with India, but delays early tariff cuts

Asian Economic News, Dec 13, 2004

VIENTIANE, Nov. 30 Kyodo

Leaders from the 10-member Association of Southeast Asian Nations and India on Tuesday signed a comprehensive partnership pact to deepen cooperation between the two sides at their summit here.

But plans for early trade liberalization for certain goods under a free trade area proposal have been delayed by India's demands on rules of origin, ASEAN officials said.

The comprehensive agreement, called ''ASEAN-India Partnership for Peace, Progress and Shared Prosperity'' includes a plan for the establishment of an ASEAN-India free trade area by 2011 for five ASEAN member countries and a later date of 2016 for the Philippines, Cambodia, Laos, Myanmar and Vietnam.

However, it makes no mention of the date for their early harvest program for earlier trade liberalization for some products.

Officials said the target date was postponed from this month to April 1 next year after the two sides reached a compromise on ''interim'' rules of origin, namely a local content of 40 percent.

Earlier, India demanded a more complicated rule since it stands to lose huge revenue from the severe tariff cuts. Tariff barriers in India are generally higher on average than those in Southeast Asia.

The 10 ASEAN members and India have agreed to reciprocally slash tariffs on 105 items -- mainly chemical products, some industrial goods, and processed food such as canned tuna and pineapple juice, compared with about 500 items agreed between ASEAN and China.

India has also unilaterally offered another list of 111 items -- both farm and industrial goods -- merely for Cambodia, Laos, Myanmar and Vietnam, they said.

Besides strengthening economic cooperation, the partnership document also outlines political, counterterrorism and other areas of cooperation.

The plan of action lays special emphasis on infrastructure and transport development and cooperation in gas-related projects. It calls for expediting completion of India-Myanmar-Thailand trilateral highway and its extension to Laos and Cambodia.

It also calls for strengthening air connectivity, establishment of bilateral agreements for investment promotion and double taxation avoidance, and linkages between national standards and conformity bodies and technical regulators for mutual recognition of assessment procedures.

''This is a visionary document, which will chart our relations in the next two to three decades,'' said an ASEAN official.

ASEAN sees India as a strategic partner and a potential engine of growth for the region, along with China, the official said.

''Of course, in some areas, they are competitors. We are in a global world. We have to work together. In the future, India will be one engine of growth like China, so China and India put together will be very important players,'' he said.

India's rigid adherence to rules of origin seems to be due to India's fear that products from China could find a backdoor to India through ASEAN countries, ASEAN officials said.

''The problem with India is they want to sell to the whole world, but they don't want to buy because they feel that they can make it from their own country,'' said the ASEAN official.

However, ASEAN officials expressed optimism about the broad-based relationship with India, and noted that India has been contributing substantially to help poorer ASEAN member countries.

India recently opened an entrepreneurial development center in Laos and plans to open similar centers in Cambodia, Myanmar and Vietnam.