India, Asean Sign Free Trade Deal

MUMBAI — India and a group of Southeast Asian nations signed a free trade pact Thursday that slashes tariffs on goods and aims to boost the $40 billion in annual trade between the two regions, India's Ministry of Commerce said.

The agreement, which takes effect January 1, 2010, will gradually eliminate tariffs on 80 percent of traded goods. Agreements covering trade in services—crucial for India's large information technology sector—and investment should be concluded by December, the Ministry of Commerce said in a statement.

Trade between the two regions has grown an average of 27 percent a year, compounded, since 2000, reaching $40 billion last fiscal year. It is expected to grow to $60 billion by 2016, according to Thai Commerce Minister Pornthiva Nakasai.

The ten nations that make up the Association of Southeast Asian Nations account for 10 percent of India's global trade and are India's fourth-largest trading partner, after the European Union, the United States and China, the ministry said.

The agreement "comes at an opportune time as part of the region's response over the growing concern of a global economic and financial crisis," the bloc said in a statement.

But some farmers in India, particularly from the southern state of Kerala, had protested the deal, fearing cheap imports would undermine domestic production.

The agreement, signed on the sidelines of a meeting of Asean economic ministers in Bangkok, provides two safeguard mechanisms that illustrate the delicate political balance India, long suspicious of the promises of globalization, must strike as it seeks to deepen trade ties and spur growth.

First, countries can exclude items deemed domestically sensitive from the tariff reductions. India is excluding more than 1,000 items to placate domestic textile, auto, chemical, oil, coffee, tea, and pepper producers, the ministry said.

Second, special "safeguard" duties can be put in place for up to four years to prevent sudden surges in imports.

India signed an ambitious free trade agreement with South Korea last Friday and a similar agreement with Singapore in 2005.

All further India's drive to deepen trade links with its Asian neighbors.

In addition to singing the trade deal, India's Minister of Commerce Anand Sharma met with Thai Prime Minister Abhisit Vejjajiva, and ministers of trade and commerce from Thailand, Indonesia and Singapore.

Associated Press writer Grant Peck contributed to this report from Bangkok.