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IS INDIA'S FREE trade agreement with Sri Lanka fast becoming the favourite whipping boy of those frustrated with the dynamics of a free market? Why else should the FTA come under renewed attack from different quarters — especially people's representatives? The Commerce Minister, Mr Arun Jaitley, deserves to be complimented for defending the Indo-Sri Lanka FTA in the Lok Sabha. According to him, the agreement is designed to ensure that each country gains in some commodities though it may not in some others. The issue, however, goes beyond mere trade numbers.

Many countries are working on bilateral trade agreements to improve mutual economic prospects, especially in the context of the stalemate of trade negotiations under the World Trade Organisation. India should not miss the bus. Recent government initiatives to drive trade agreements, as with Thailand, are in the right direction. It is surprising that some people blame India's FTA with Sri Lanka for the ills of India's plantation sector. This sector has been going through a bad phase for three years now, with falling prices, shrinking exports and competition from imports. However, to hold the FTA responsible for the sorry state of affairs is barking up the wrong tree. It is possible the blame game is an attempt to obfuscate the real issues. For, the root causes of the plantation sector's problems are more internal than external, and any attempt to externalise the cause could be self-defeating. Whether it is tea, coffee or pepper, producers have failed to service the large domestic market while chasing the ephemeral exports. While the going was good until three years ago producers neither ploughed back profits nor stepped up production efficiencies. Even the policy support for the plantation sector was biased in favour of exports.

Insulation from the vagaries of the global market has thinned in the meanwhile. After removal of quantitative restrictions on imports, there is increasing integration of domestic and global markets. However, producers here have not learnt to cope with competition. The government-supported promotional agencies must surely bear some of the blame. They have failed to read the signals and been too bureaucratic in their approach to trade promotion. There is no evidence that efficient methods of production or cost-saving technologies have been widely disseminated.

Vietnam could be the model for India. That country has come a long way in the last five years in producing and exporting plantation crops such as coffee and pepper at very competitive prices, which now threaten to invade India's traditional markets. Indeed, some Indian traders have set up shop abroad to deal in Vietnamese produce because Indian plantation crops have become uncompetitive. As structured now, the commodity boards are barely up to providing solutions to the plantation sector. Their role will have to be redefined, their management professionalised and governmental interference reduced. An integrated solution keeping in mind the poorly serviced domestic market is necessary. A buoyant economy this year should be ideal for taking up the much-needed revamp.

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