India and ASEAN Set to Review Modernize their old FTA

GS Paper II Indian Economy

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

What is Free Trade Agreement (FTA)?

It is a pact between two or more countries to reduce the barriers of trade among them.
It includes little or no quota, subsidies and tariffs to encourage the trade relations.
Notable FTAs signed by India recently are:
- India-Mauritius Comprehensive Economic Corporation and Partnership Agreement (CECPA)
- India-UAE Comprehensive Partnership Agreement (CEPA)
- India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA).

- 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.

India and ASEAN

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.

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