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| India-ASEAN dilemma on trade | | |
P.S. Suryanarayana
The reasons could be the India-China comparisons, in which Beijing scores high as a major economic player, or the doubts about New Delhi's longer-term priorities towards East Asia.
ANCIENT INDIA has often been seen across East Asia as the pioneer that rode an early wave of globalisation that spread Buddhist philosophy. However, some East Asian countries today tend to look at India's credentials for the latest economic globalisation with a degree of scepticism.
The reasons can be traced to the now-fashionable India-China comparisons, in which Beijing scores high as a major economic player, or indeed the unspoken doubts about New Delhi's longer-term priorities towards East Asia. It is in this overhanging political ambience that the Association of South East Asian Nations (ASEAN) and a few among its dialogue partners in the forum of the East Asia Summit (EAS) interact with India on some basic commercial issues.
So, the ongoing parleys between India and the ASEAN, as also some of its EAS partners, can be seen as a game of trading just ideas on how best to buy and sell each other's goods. The ASEAN-India trade negotiations on the services sector have not yet begun, and the entire process was jump-started under a Framework Agreement signed by the two sides in 2003 at the highest political level.
Now, dark and cloudy was the political weather on the eve of the late-August meetings, in Kuala Lumpur, among the senior Economic Ministers representing the 10 ASEAN states and their dialogue-partners including India. And, after the meetings, Commerce Minister Kamal Nath sounded optimistic that India and the ASEAN had now identified "the way to a resolution" of the difficult issues. In essence, the dispute is about the size and scope of India's "sensitive list" of goods for tariff concessions. Linked to this is the corresponding ASEAN catalogue. But some ASEAN states, notably Malaysia and Indonesia, at one level, and the Philippines and Vietnam, at another, have raised the stakes over the Indian list.
At this, India looked beyond what it saw as the ASEAN-created political haze and dramatically reduced the number of "sensitive items" to 560 from over 1,500. For New Delhi, it was essential not to be portrayed by the ASEAN as being far behind Beijing as a potential partner, although the prime issue was not whether India and China should compete to be second to none in this field. Nonetheless, it was also obvious that India now wanted to give itself the political space to see how eager the ASEAN as a collective entity would be to clinch a final deal through detailed negotiations.
At one stage, it looked as though India might seek to call the bluff of some ASEAN states by offering to negotiate with each one of them an exclusive accord on the product of most concern to them. Palm oil fell in this category of dear interest to Malaysia and Indonesia. Another proposal was that India could offer tariff reduction quotas for this product.
However, as the ASEAN insiders point out, Indonesia and Malaysia know that the collective forum will be their best bet to strike a good bargain with India over palm oil or any other product. In this sense of a political balance of forces, India and the ASEAN settled, for now, to avert a gathering crisis.
On the larger EAS canvas, Tokyo has proposed a study about the feasibility of forming a huge free trade area comprising India, China, Japan, South Korea, Australia, New Zealand, and all the 10 ASEAN countries. India quickly welcomed and supported the Japanese initiative.
As a result, New Delhi, while still finding the going tough for a trade pact with just the ASEAN now, felt happy to trade big ideas on regional trade in the future. Surely, Prime Minister Manmohan Singh had, in 2004 itself, suggested that a pan-Asia economic bloc be formed in the fullness of time. However, his interlocutors quickly saw the proposal as a disguised plea for India's admission to the EAS, which was then being considered as only a potential forum.
According to ASEAN secretary-general Ong Keng Yong, the EAS, in existence for less than a year so far, has now "agreed to the general principle" that the new Japanese proposal be studied.
China is "cautious" while South Korea is lukewarm in its response. Will this lead to a Japan-India line-up in a field where China can exercise an informal veto?
Some Chinese analysts such as Lin Limin have identified economic development as a key goal of Beijing's security strategy as well, and Japan is known to have played a part in China's economic revival in recent decades. Yet the question is whether China will agree with Japan that the proposed EAS free trade area is a longer-term win-win formula for all concerned. India may, therefore, need to measure its steps on the slippery political surface.
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