India and ASEAN Set to Review Modernize their old FTA

Context: India and ASEAN will begin negotiations in February 2024 to modernize their old free trade agreement (FTA).

India and Asean FTA 

• Objective: The objective of the FTA modernization is to bring down the trade deficit for India. 
  • Trade Deficit: India’s trade deficit with the ASEAN region, which was $7.5 billion per annum when the pact was implemented, has since ballooned to $43.57 billion

• • India’s exports were $44 billion, while its imports were $ 87.57 billion.
• New Elements such as product specific rules and trade remedies will be brought in to make the FTA more efficient.
  • Trade Remedies: A chapter on trade remedies will provide a safety net for domestic industry against unfair trading practices or unforeseen surges in imports of goods
  • Changes in the Rules of Origin (ROO): It can work in favor of India by increasing market access. It will also block China’s possible re-routing of goods through the ASEAN countries into India. 
  • ROO is the criteria to determine the origin of a product and establish if it qualifies for duty cuts under an FTA.

• Focus Sectors: Chemicals and alloys, plastics and rubber, minerals, leather, textiles, gems and jewelry sectors will be revamped to balance the FTA. 
• Timeline: The first round of negotiations of the ASEAN India Trade in Goods Agreement (AITGA), will be on February 18-19 in New Delhi to wrap up by 2025.
  • ASEAN India Trade in Goods Agreement (AITGA) is the official name of the new FTA
• Same Scope: No new areas, such as environment, labor, MSMEs or gender, will be added to the AITGA.

About ASEAN

• It is a regional grouping in the Indo-Pacific region, to promote economic and security cooperation among its members. 
• Members: Ten-member includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia, 
• Trade with India: ASEAN accounted for 11.3 percent of India’s global trade in 2022-23.
• Established: Founded in 1967 in Bangkok, Thailand.
• Secretariat: Located in Jakarta, Indonesia. 

Read More about  ASEAN-India Trade 

Source: Business Line