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).
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- 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
26 Dec 2023
