India Tea Industry Concerned About ASEAN Trade Agreement

GOLAGHAT, ASSAM

ASEAN Member Countries

India’s domestic tea industry is sheltered from foreign competition by tariffs as high as 110 percent.

A $10 kilo of tea imported from Kenya or Malaysia, China, or Japan, for example, is taxed $11 bringing the cost to $21 for wholesalers or larger retailers. Nepal is an exception, and not every type of tea is included, but the barrier remains formidable.

Tariffs on many goods including coffee, tea, palm oil, and pepper, negotiated a decade ago by the 10 member-nations of the Association of Southeast Asian Nations (ASEAN) security and trade block, are soon to take effect. This group of nations, whose combined economies are valued at $2.7 trillion, are working with six non-affiliated trade partners, including India. The new free trade agreement seeks to reduce import tariffs on agricultural goods by 50 percent by 2019. India is negotiating a separate agreement with Sri Lanka.

India tea planters fear that going forward with the agreement would flood the Indian market with cheap tea from ASEAN countries, making Indian tea no longer competitive due to its relatively high cost of production.  The treaty, however, would also open foreign markets that protect their own domestic tea industries. This could be of benefit to larger plantations already engaged in foreign trade. Smallholders do not export appreciable quantities of tea.

At the biannual general meeting of North-Eastern Tea Association (NETA) this month, the chairman of Tea Board of India, Prabhat Bezboruah, explained that the ASEAN free trade agreement was signed in 2007-08.  “The government has referred the matter to the Tea Board for our comments and inputs and we have sent our reply objecting to the same with emphasis on the potential risks to our industry,” Bezboruah said.

The dignitaries at the dais during the biennial general meeting of Northeastern Tea Association held at Golaghat town in eastern Assam.

NETA advisor Bidyananda Barkakoty articulated the basic concern: “Our land and labor productivity are low; we have high input costs. We as planters do not have control over the input cost. Cheap tea from foreign countries will flood India. Bangladesh, Vietnam, and Indonesia can sell tea at a very much lower price.”

Kenya represents a significant threat, said Barkakoty: “There will be threat from African countries — particularly Kenya — in the event import tariffs are lowered.”

“The agreement must include appropriate measures to not only check cheap imports from ASEAN countries but also prevent entry of Chinese tea into Indian markets. Experts underscored the need to revisit the provisions regarding the rules of origin to avoid the Chinese imports taking advantage of the lower tariff envisaged under the Trade in Goods Agreement,” according to news reports in the Assam Tribune.

Paras Desai, executive director of Wagh Bakri tea and President of the Western India Tea Dealers’ Association (WITDA), disagrees. “In the era of globalization, we cannot stop a commodity from coming to another country. Reducing the tariff is an international commitment made by India and that must be honored. Initially there will be apprehension, but we are strong enough to withstand the competition. It is a time to strategize and make ourselves strong before the tariff is lowered. Let people have a choice.”

India’s tea exports to ASEAN countries have traditionally ranged from 1.6% to 2.5% of total exports. That increased to 10% in 2016 but “opportunities for India to expand its tea exports to ASEAN countries are limited,” according a report titled ‘Trade with Association of South East Asian Nations (ASEAN)’ prepared for the Commerce and Industry Ministry.

Manoj Jallan, chairman of NETA, said that the tea industry would formally notify the Commerce Ministry that lowering the import tariff will adversely affect local tea industry. “We will ask the government to reconsider the decision,” he said.

The Economic Times reported that Mrigendra Jalan, chairman of Bharatiya Cha Parishad (BCP) said, “Personally I feel lowering of tariff will not impact the local tea industry. Our tea prices are lowest, and tea consumption is annually growing at the rate of 3 percent. Orthodox tea from Sri Lanka can pose some challenge to our orthodox variety. Barring that, I do not see any major threat.”

ASEAN was established in 1967 as a regional inter-governmental organisation that now includes Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar, and Cambodia.  The organization, staffed by 500, encourages cooperation and facilitates economic, political, military, educational and cultural integration among its members.

Sources: Assam Tribune, Economic Times