Kerala protests ASEAN deal

  • 01/11/2009

  • Business India (Mumbai)

Battered and shamed in the recent Lok Sabha polls and gaping at the cracks in its own front, Kerala's ruling Left Democratic Front (LDF) is going against the Free Trade Agreement (FTA) that India has signed with ASEAN. It formed a 550 km 'human chain' across the state to demonstrate its protest. Under banners which said 'dump the ASEAN pact in the Arabian sea', the leaders and supporters of the LDF reiterated that the FTA is a blow to Kerala's fishermen and farmers who rely on cash crops like spices, rubber, tea and coffee. "Kerala is a chronically food-deficit state," says Thomas Isaac, the state's finance minister. "The farmers here cultivate cash crops, sell the products and buy rice and sugar. If the farmers are hit by the FTA, they will have to struggle to meet their food needs." The agreement becomes operative from January 2010. "The Centre has bypassed its constitutional duty to take Kerala and other states into confidence before deciding to go ahead with this deal," says V.S. Achuthanandan, Kerala's chief minister. Isaac shares his view, saying that reintroducing the statutory universal Public Distribution System and evolving a compensation mechanism are the solutions for saving farmers from the impact of the FTA. A Central package for increasing productivity of cash crops should also be introduced, the minister feels. The supporters of the pact argue that Indo-ASEAN trade is a critical process that has seen a rise in levels from $6.93 billion to $39.4 billion per annum between 2000 and 2008. They also say that the agreement will see a phased reduction in tariffs to zero on over 4,000 of the 5,000 goods that are now under trade. There would also be a negative list to protect certain items until some level of parity is achieved. However, the finance minister argues that the negative list and sensitive list in the pact is not going to do any good for Kerala. "The taxes on the products included in the negative list can't be increased," protests Isaac. "That will be detrimental to our interests. Even though rubber sheet is in the negative list, synthetic rubber and latex are not included in it. Excluding preserved fish from the list amounts to allowing duty-free import of fish." S. Sarma, fisheries minister, picks out a specific point to underline that the negative list is an eyewash. "Our revenue from the export of fisheries products touched an all-time high at Rsl,587 crore last year," says the minister. "And 30 per cent of this amount was from tuna. But tuna is not included in the negative list." The FTA will spell disaster not only for Kerala, but for the entire country and its domestic market, points out K.M. Seethi, director, School of International Relations, Mahatma Gandhi University. "The government of India has patently ignored the realities of Indo-ASEAN trade during the past several years," he says. "The trade deficit for India has risen from $3.5 billion to $14.5 billion during this period," adds Seethi. "While exports to ASEAN countries have increased from 6 per cent to 22 per cent, imports from these countries registered a 66 per cent growth. Today, the trade deficit with ASEAN amounts to 15 per cent of India's overall world trade deficit. This is a significant pointer, considering the abysmally low level of India's share of world trade, which is just 1.1 percent. It is argued that through the pact, India would gain access to machinery, steel products, chemicals and synthetic textiles and also gain business opportunities in ASEAN countries, while opening up the bloc's services sector. Anand Sharma, Union minister for commerce and industry, during his recent visit to Kerala, has said that the agreement would improve the domestic market. He has added that India is the only country that has allotted 489 items in the negative list. But, Thomas Varghese, chairman, Kerala Agriculture Prices Board, won't buy such claims. "Such arguments are all very well, but the ground realities are different," he says. "There are huge differences in productivity, labour costs and inputs in the participating countries which cannot be easily bridged." Since the UPA government in Delhi is determined to go ahead with its commitment to 'Look East', it won't be surprising if Kerala sees more protests to redeem some political pride out of an economic policy.