Impact of PTAs & FTAs on Kerala's Agri-sector

Implications of Indo-ASEAN FTA

Indo –ASEAN free trade agreement is most likely to be materialised by July 2007. This another agreement that will have a far reaching impact on in Indian Economy and Agriculture especially for Kerala

The major threat is due to indoASEAN –FTA’s for crops from Kerala, like rubber, palm oil, black pepper, cashew nut, green coffee, mace, nutmeg, cardamom, pineapple, vanilla, arecanut and tea. According to the present pattern of exports, ASEAN accounts for 31.56% of copra, 82.41% of coconut oil, 64% of desiccated coconut and 92% of natural rubber.  Vietnam alone accounts for 45% of the world pepper exports.

Intra-ASEAN trade is roughly around one fourth of the total trade of ASEAN members as they have already reduced the tariffs for intra-ASEAN trade sharply to facilitate transformation into a free trade area.  India’s ability to penetrate into the growing intra-ASEAN trade in plantation crops, spices and rubber depends on a number of factors such as (a) extent of reduction in tariffs and the time frame for reduction (b) product diversification to cater to the ASEAN market (c) trade promotion measures (d) coverage of items in the sensitive lists of ASEAN members and (e) quality and price competitiveness of Indian exports.

The degree of trade development and trade orientation in ASEAN is better than that of India.  Most of the countries have their inherent strength in few products.  Vietnam has good production base in all major plantation crops, nuts and spices which are produced by Kerala.  Hence, it is necessary to develop effective safeguard measures to prevent excessive imports of these products into India under the FTA agreement. 

Since part of it is taking place as intra-ASEAN trade, India’s potential for enhancing export is also not very bright.  But, much depends on India’s price competitiveness on the one hand and trade promotion measures on the other.

So if a cautious move to safeguard the interest of Kerala’s farmers is not taken, it may lead to further distress and agony

FTA with ASEAN should take special safeguards not only to include them under negative list, but also to get it continued under negative list for a prolonged period.