India-EU FTA talks to commence in September

New Delhi, August 1, 2013: The Ministry of Commerce and Industry has identified Latin America, Africa, ASEAN, Far East and the CIS countries as emerging markets where the Indian automotive sector needs to scale up its share compared to the traditional markets of US and Europe.

The Ministry has also asked the automotive sector including the component sector to do their homework on what further incentives are needed for the auto sector. This includes giving exclusive focus to the automotive industry in the Trade Policy, S R Rao secretary, Department of Commerce, Ministry of Commerce and Industry told Autocar Professional on the sidelines of an ACMA Conference on Leveraging Export Growth held today in the capital city.

The next level of the India-EU Free Trade Agreement talks will commence in September with the commerce ministry of both the countries meeting at that time. The FTA had got caught in an imbroglio when the EU insisted on the import of automotive CBUs being included in the FTA, at a much lower duty structure than that prevailing. The Society of Indian Automobile Manufacturers (SIAM) has raised fears that such an FTA would curtail investments and adversely affect local automotive manufacturing. This would subsequently impact employment and technology development that would in turn affect the component sector. Imports of fully built cars would also be stepped up. By opening up the automotive sector to the EU countries when the auto sector is still developing, would also not allow the domestic industry to be competitive besides growing the trade deficit. “International negotiations are conducted in privacy and I cannot get into them. All I can say is that the current speculation has no place. We are aware of those concerns and those concerns are misplaced,” clarifies Rao.

While the concurrent views on the India-EU FTA get thrashed out, the commerce ministry is moving up to the next level with the Association of South East Asian nations (ASEAN) with the proposed Regional Comprehensive Economic Partnership (RCEP). ASEAN plus six countries are now partnering in a trade agreement for which negotiations have just started. Going forward, the RCEP will enable the Indian automotive industry to get access to a much wider market. “At present our exports to the ASEAN markets are just 20 percent but we wish to increase our share to this region. The RCEP will take a couple of years to finalise as we are still at a preliminary stage,” elaborates Rao.

The ASEAN-India Free Trade Area (AIFTA) is a free trade area among the 10 member states of the ASEAN and India. The initial framework agreement was signed on October 8, 2003 in Bali, Indonesia and the final agreement was on August 13, 2009 after six years of negotiations. The free trade area came into effect on January 1, 2010. ASEAN-India trade grew at over 22 percent annually during the 2005-2011 period. Trade between India and ASEAN in 2011-2012 increased by more than 37 percent to $79 billion, higher than the targeted $70 billion set in 2009.

At the 10th ASEAN-India Summit at New Delhi on December 20, 2012, India and ASEAN concluded negotiations for FTAs in services and investments. The two sides expect bilateral trade to increase to $100 billion by 2015, and $200 billion within a decade.

SHOBHA MATHUR