Before I get into the issue of FTA in the particular context of China, I would like to preface this by two statements. One, we must remember that even under the Doha Declaration, we have actually committed ourselves to the elimination of tariffs over the years.

This means that even in a multilateral system, we are going to be eventually eliminating tariffs and make this into a flat world. We are signatories to this Declaration and though no date has been fixed for this, we are committed to ‘moving towards elimination of tariffs’. There is no a priori reservation. There is absolutely no possibility of putting a certain reserved list away without tariff elimination. In the undefined long-term, therefore, all tariffs must go. This is the crux of the multilateral system.

Within that, we must plan our course in relation to the kind of items that we want to be moving into a tariff-free zone and the countries that we want to be dealing with on a bilateral basis while the multilateral system is on its way forward. The second point I would like to make is that given the situation, the right kind of a template for a free trade agreement is where you have complementary competencies. In other words, two countries where the overlap of competition is minimal will be the best suited in terms of an FTA.

COMPLEMENTARY FIT

For example, if the US or European Union have technology and capital and you have labour-intensive capability on the one hand, the fit would be complementary in nature with very little of overlap in terms of competition. It might be a good way of moving forward.

However, FTA is not such a good idea where you have competing competencies. The arc of overlap, in this case, is very large between two countries because they have competencies in the same kind of areas and you are, of course, into a much larger kind of conflict area. Therefore, when you move towards an FTA in such a scenario, you find that competition in both ways has the effect of hurting some segments in the industry.

In such a context, Thailand truly is not the best start ingpoint for an FTA because like India, it has a lot of competencies which are common. In that sense, China is not the best candidate for an FTA either because, again, we have more or less similar competencies.

We certainly have better competencies in services while they have better competencies in manufacturing but there is no doubt that a very large part of our playground is going to be common. In other words, Chinese goods coming into India will end up hurting those very industries which are competitive for the Indian and overseas markets and vice-versa.

Therefore, it is such not a great idea to be looking for an FTA with these countries. These are the two general points I would like to make. In particular, in the case of China, we have two issues. One is that clearly, we do not yet have the confidence that China is a market economy in the sense that it is not subject to pricing/accounting transparencies and a free market situation which is not, in any manner, distorted by any governmental interference.