India and ASEAN Set to Review Modernize their old FTA

26 Dec 2023

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.

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

 

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