India in process to channelise �??Free Trade�?? with US: Kamal Nath

Amidst many announcements at Pravasi Bhartiya Divas, the government mulls over a bilateral trade agreement to start with the US . Commerce and industry minister Kamal Nath said on the closing day ceremony that bilateral trade agreements were currently in the pipeline with at least 10 potential partners ranging from ASEAN, EU , US and Canada.

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�??We are in talks with US and Canada for free trade agreements,�?� said Union Commerce Minister Kamal Nath.

India has set a global engagement target of $550 billion in comparison to $450 billion at present that includes trade and investment flows, he said.

However it is vague whether US was also showing the same interest for the bilateral trade. Even government departments have differing views on the matter.

There was a mixed response from industry, with the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) offering different views.

�??Bilateral free trade agreement with the US would be good for India and not affect Indian manufacturing units,�?� said FICCI trade analyst Anjan Roy.

�??The products from the two countries would not be competing against one another and would provide a window of options for the consumers,�?� he said.

On the other hand ASSOCHAM secretary-general D.S. Rawat keeping contrasting views, said India should move cautiously in negotiating a free trade agreement with the US as such a pact could affect the interest of domestic industry.

What India is asking now, the US in the past had demanded something alike such as greater liberalisation and pre-investment national treatment, but India had so far rejected the proposal. But, under present norms India is willing to accord the same status to foreign as well as local entities.

If the trade pact comes in operation, it will open the doors for the US to seek more presence in banking and insurance sectors, where Washington has adopted a strong stance and Indian banks find it tough to operate freely.

Till now, India has only managed to sign bilateral trade deals with Sri Lanka , Singapore and a limited agreement with Thailand.

While the pact with Sri Lanka has come in for criticism due to liberal import of certain commodities, and the framework agreement with Thailand has seen steep rise in white goods imports and prompted companies to operate from the East Asian country instead of setting up shop in India .

Political pressure has meant that the government has had to tread with caution in negotiating a deal with ASEAN with edible oil and plantations being the most contentious areas. Similarly, progress in trade pacts with Japan and South Korea have been slow, while the demands from Gulf countries have forced India to put the proposed pact on the backburner.

Fearing cheap imports from China that could flood the Indian market, the industry has already managed to make the government to move slowly on a trade deal with China .

However the final outcome would depend on how Prime Minister Manmohan Singh tackle pressures from Beijing during his visit that will start from coming Saturday.

Nevertheless, the possible pacts with US and Canada are still in nascent stage, negotiations with others have already been launched and talks are said to be on the bank of conclusion.