Talking trade with China

The Chinese President is expected to push for a Free Trade Agreement, FTA, but India will not give in. CNBC-TV18 finds out why.

Indian industry is talking approvingly of trade with China, and it has much to cheer about. This year, two-way trade is expected to cross $20 billion from just $2.9 billion at the turn of this decade, surpassing expectations and targets. Some industries like textiles that earlier feared the Chinese, might have no such fear now.

Secretary general of Confederation Of Indian Textile Industries, D K Nair says, "It is not India versus China, or China versus India. Indian exports are growing and so are China''s. India''s are growing faster and both are doing well at the expense of others."

China believes an FTA with eventual zero duties on most products would create a powerful economic bloc. But India is hesitating even though China is not the bugbear it used to be.

"We are considering a broader regional trade agreement. The implication of an FTA with China are being closely studied and at this point, I am unable to commit whether we will have one right now," says Ashwani Kumar, minister of state in the commerce and industry ministry.

A regional arrangement would be more like a preferential trading arrangement, with eventual zero duties on an agreed list of items. India is even comfortable with China joining a regional trading bloc like ASEAN, as there would be barriers for Chinese products to cross like rules of origin, a change in classification and so on. So there will be no free flow that would be injurious to Indian industry.

Iron ore, iron and steel, plastics and organic and inorganic chemicals constitute the bulk of India''s exports to China, while China''s exports are more diversified and show a shift from resource-based manufactured products to advanced technology products like machinery, video monitors and and audio equipment.

A joint study group and a high level task force have examined the issue of FTA, but they have shied away from a recommendation. India still regards China as a non-market economy, with opaque costing. Indian industry also believes that Chinese infrastructure puts it at a competitive disadvantage. So the advice is make haste slowly.