THE COMPREHENSIVE ECONOMIC Cooperation Agreement between India and Singapore will mark a watershed in ties between the two countries because of the novelty surrounding the exercise. For, this is the first time that the two are entering into such an agreement. Singapore's initiative is all the more important because that primarily a trading country should strike such an all-encompassing deal points to the importance it attaches to India's growing economic clout. Barring the limited information on the civil aviation aspects (a bone of contention between the two sides), the comprehensiveness of the exercise is evident from the "integrated package governing trade in goods and services, an agreement on investment, mutual recognition agreements in services, and cooperation agreements in areas such as e-commerce, the media and intellectual property".

There had been fears that the negotiations were getting nowhere. Indeed, when the Manmohan Singh Government took office there were reports suggesting that quick progress on the CECA (which was to be ratified by December 2004) could not be expected because the new government did not share the perceptions of the Vajpayee regime on the utility of free trade agreements. It was also suggested that while growing economic ties with India formed an important part of the agenda of the then Singapore Prime Minister, Mr Goh Chok Tong (who was said to be suffering from an "India fever"), there was no guarantee that it would be so for his successor, Mr Lee Hsien Loong. However, all such doubts are now history. On the crucial issue of Rules of Origin, New Delhi appears to have had its way in getting Singapore to accept the applicability of all the three ROO criteria — minimum value addition (in Singapore); change of tariff heading at the 4/6-digit level, according to the WTO harmonised system code defining the product concerned; and specification of the precise nature of the value-addition involved. Earlier, reports were that Singapore had argued for a product-specific relaxation of the "generic" use of the ROO rules for more than 480 items, including electronics, chemicals, petrochemicals, processed food and automobiles.

The Commerce Minister, Mr Kamal Nath, says that "sufficient safeguards have been built into the agreement" to prevent third-country products coming into India via Singapore. This means a big concession by Singapore, which is after all a premier trading hub. Another score for New Delhi is Singapore agreeing to accept movement of natural persons (Mode 4 services), with Mr Nath saying that 120 professions "are being recognised" for this purpose. Further, while Singapore has offered to extend zero-duty status to "all products made in India", New Delhi has produced a "negative list" of 6,551 tariff lines on which no duty concessions have been offered. For Singaporethe lure is mainly the foreign direct/institutional investment and banking opportunities offered to it. While Singapore is now the third largest FDI source for India (after the US and Mauritius), Mr Nath feels that, within the first year of the agreement's implementation, Singapore FII could rise to $5 billion with another $2 billion for the infrastructure sector. As the chairman of the Singapore Indian Chamber of Commerce and Industry said, the CECA represents a "win-win" situation for both economies, and should be exploited to the full.

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