India and Thailand are on the threshold of entering into a free trade pact to enable the opening up of their markets to each other. Both countries recognise the imperatives of WTO, towards which the world has been inching, requires a world without trade borders.

Prime Minister Dr Manmohan Singh, on his three-day visit for the BIMST - EC Summit (Bangladesh, India, Mauritius, Singapore, Thailand economic community) met his Thai counterpart Thaksin Shinawatra to iron out the details and discuss his apprehensions on the matter.

The trade agreement would essentially entail the reduction of tariff (half of what it was) for 82 items of bilateral trade from September 1, 2004. By September 2005, the tariff will be down by 75 per cent and will be wiped out by the next year in September, 2006.

Some of the items included in the list of 82 items ranging from agricultural produce to electronics like mangosteens, mangoes, durians, grapes, rambutan, longans, apples, pomegranates, drum wheat, other wheat and meslins, salmon, crab, chromium ores & concentrates, aluminium hydroxide, parts of seats, wrist watches, tv picture tubes, video monitor, printed circuits, aerials, parts of telephonic/telegraphic apparatus, other lighting or visual signalling equipment, flywheels and pulleys, other appliances for pipes, boiler shells, tanks, plywood, spindles, some office machines, compression-type refrigerators, household air conditioning machines, parts of air / vacuum pumps, compressors, fans, pumps, dust and powder of diamonds, precious stones and semi-precious stones, self-adhesive plates, sheets, film, foil, tape, strip and other flat shapes of plastics.

All products where the most favoured nation (MFN) tariff rates are applicable and were zero per cent would remain so.

Initially there were 84 items on the list, which included polypropylene and polyethylene which were later struck off. These two items are produced by the Reliance group in India and by Indo Rama in Thailand. This move will be beneficial to the Thai company's interests..

India 's main fear of goods from other countries, especially those that have a similar pact with Thailand, finding their way in to India, were met by the Thai government's assurance that the rules of origin of the product would be followed strictly and only those goods that have been enhanced up to 40 per cent will be allowed to avail this benefit.

Prime minister Singh also assured his counterpart that the agreement would be accepted by all the Indian states unlike the Thai experience with China where a similar agreement was not valid in certain states.

The proposed free trade agreement (FTA) between India and Thailand has experienced a few hitches and differences over rules of origin for import of goods under concessional duty. There are still a few creases to the ironed out before the agreement becomes operational. Talks are still on to ensure a smooth transition to to a free trade regime between the two countries.
"This is the first part of the agreement, what we call early harvest protocol. By 2010 we hope to have a comprehensive free trade agreement covering all items," said commerce minister Kamal Nath

Nath said the free trade agreement on bilateral trade between India and Thailand will be signed next month during the visit to of Thailand's commerce minister Watana Muangsook.

The India Thailand agreement will be a forerunner to another one to be drawn between India and Singapore and the Asean regions as a whole. India also looks forward to other such agreements with some Africa and South American countries. The success of this agreement is being watched with keen interest since it is the first in the line between India and its regional neighbours.

Prime minister Shinawatra also suggested opening of the skies between the two countries to increase business and tourism traffic. Dr Manmohan Singh has promised to consider this initiative.

The trade pact with Thailand was originally scheduled to be signed in March but was delayed because of the elections. Till commerce ministry officials in both countries iron out the wrinkles, inking the final agreement is still some time away.

The Indian markets will see an onslaught of goods over the next year, especially electronic and auto parts, for which consumer durable majors are already preparing to change their sourcing patterns and reworking their cost and pricing strategies in order to meet the foreign competition head-on.

According to minister of state for commerce and industry, E V K S Elangovan, the FTA will further strengthen the economic ties with the South East Asian nation. It will also help the local manufacturers to test themselves in the global competitive scene.