People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 33

August 16, 200

Indo-ASEAN FTA will Harm Kerala’s Interests



A delegation led by the chief minister of Kerala, V S Achuthanandan, comprising Food and Civil Supplies minister, Agricultural minister, vice chairman of the Planning Board and Sitaram Yechury, Vijayaraghavan, Karunakaran and C Achutan, MPs, met the prime minister and Commerce minister on August 3 in New Delhi. The following memorandum was submitted to the government of India.


The government of India is about to sign a Free Trade Agreement with the ASEAN, which, by bringing down tariffs on a range of commodities produced in Kerala, will have a serious impact on the livelihoods of the working people in the state. To this date however, let alone being consulted on the matter, the government of Kerala is totally unaware of the terms of the agreement.


In the United States all such agreements have to be ratified by the Legislature before becoming effective. In India this has not been the practice, though some experts question the constitutional propriety of the executive unilaterally signing such agreements without any ratification by the legislature. In particular, in matters where the states’ interests are involved, the constitutional propriety of the central government signing such agreements unilaterally, without consulting the state governments becomes even more questionable.


At the very least, even leaving aside issues of constitutional propriety, sheer healthy democratic practice demands that the central government must make public the terms of the agreement before it is signed, so that its terms can be publicly debated, and rectified if necessary ; and the state government can make its opinion heard on the basis of proper information. In matters affecting their livelihood the people must not be presented with a fait accompli. We urge the central government to make public the terms of the Indo-ASEAN Free Trade Agreement immediately. This becomes necessary also for avoiding possible misleading impressions.


One such possible misleading impression is that commodities of interest to Kerala are in the “negative list” of the FTA. But according to newspaper reports there are two “negative lists” in the Indo-ASEAN FTA: for commodities covering 10 percent of trade, there is no obligation to bring down the tariffs at all; for another 10 percent, tariff rates are to be reduced to 5 percent by 2019; and for the remaining 80 percent, they are to be brought down to zero by 2016. A host of Kerala’s commodities figure in the second list, which, though it can nominally be counted as a “negative list” is hardly much different from the third list of zero tariff items. Our apprehensions in this regard, which persist despite the recent assurances by the Commerce minister, can be easily allayed if the lists are made public and we do indeed find that commodities of interest to Kerala figure in the first “negative list”.


The government of India has often justified this FTA on the grounds that it promotes South-South trade and helps poor countries of South-East Asia like Vietnam to expand their trade possibilities, which India, given its commitment to the cause of the third world, is obliged to do. While we are in agreement with the view that promoting South-South cooperation is India’s obligation, helping our poor brethren in South East Asia at the expense of the poor people of Kerala can scarcely be justified. Until 2006 Kerala had seen a spate of peasant suicides, which have now been stopped. We do not wish to see a resumption of this tragedy all over again.


It is often argued that the FTA opens up possibilities in both directions, as much for foreign producers to capture our markets as for our producers to capture foreign markets, so that there is no cause for despondency, especially if we can reduce our costs by improving “efficiency”. An increase in “efficiency” it is held can prevent any damage to the interests of the Kerala producers. There are two problems with this argument: first, “efficiency” cannot be defined independent of the exchange rate which is subject to the influence of speculative financial movements. India being a favoured destination of speculative finance is at a disadvantage in this regard compared to many ASEAN countries, a disadvantage that, under the FTA, will be visited upon the hapless working people of Kerala. Secondly, ASEAN countries systematically use non-tariff barriers in addition to tariffs, in a way that India generally does not. The presumption that “efficiency” will determine market share therefore is unfounded.


In addition to the Indo-ASEAN FTA, the government of India is currently negotiating additional and separate FTAs with Malaysia, Indonesia and Thailand, whose commodity exports again pose a threat to Kerala. These FTAs are obviously being negotiated because they would entail additional measures for “freeing” trade, over and above what the FTA with ASEAN entails. The threat to Kerala’s economy, serious under the Indo-ASEAN FTA, will be even more serious when these additional FTAs are signed. The government of Kerala is deeply concerned about all these FTAs. It urges the central government not to go ahead with the Indo-ASEAN agreement, and any further agreements of this type without consultations with the government of Kerala, after making the terms of such agreements public. Any damage to the interests of the producers in Kerala must be prevented.