PALM OIL PROVES STICKING POINT IN INDIA-ASEAN FTA TALKS

Disagreements over palm oil and other sensitive products continue to prevent India and the Association of Southeast Asian Nations (ASEAN) from finalising a free trade agreement (FTA). Negotiators had hoped to be able to conclude a deal in time for Indian Prime Minister Manmohan Singh's visit to the ASEAN summit in Singapore later this week.

The delay is largely due to differences over India's tariff cuts on palm oil. ASEAN wants India to reduce import duties on refined palm oil from 52.5 percent to 30 percent, and on crude palm oil from 45 percent to 40 percent. The Southeast Asian bloc has expressed frustration about India's refusal to do so.

New Delhi insists that it has been more than flexible in the negotiations, agreeing to eliminate tariffs on 80 percent of all tariff lines, accompanied by lenient rules of origin. India claims that ASEAN should not be concerned, since it is already the second largest importer of palm oil in the region. ASEAN is home to Malaysia, the world's largest exporter of palm oil.

Other disagreements have also contributed to the delay. India has objected to the more than 100 products that ASEAN has left on its list of highly sensitive products, which would be eligible for slower tariff reduction. The FTA has also remained limited to goods, despite India's desire to incorporate provisions on services trade and foreign investment.

Nevertheless, both parties remain confident that a deal will be closed, just not before the 17-20 November summit.

According to Indian officials, the FTA holds promise in both economic and political terms. Negotiations are expected to resume in 2008.

Sources: "Indo-ASEAN FTA slips on palm oil," BUSINESS STANDARD, 7 November 2007; "India too flexible for FTA with ASEAN: Ramesh," STATESMAN, 13 November 2007; "India showed extreme flexibility in ASEAN FTA: Ramesh," ZEE NEWS, 13 November 2007.