India, ASEAN Review Trade Pact At Laos Meet

21 Sep 2024

A Trade Pact Review between India and ASEAN nations during the India-ASEAN Economic Ministers Meeting (IAEMM) was recently held in Vientiane, Laos.

Background

  • Existence of AITIGA : The ASEAN-India Trade in Goods Agreement (AITIGA) came into effect on January 1, 2010, establishing one of the largest free trade areas globally.
    • The need for a review was first raised by India in 2015, and ASEAN agreed to it in 2019.
  • Trade Deficit Concerns: The trade deficit with ASEAN has increased significantly, from $4.98 billion in 2010-11 to $38.4 billion in 2023-24, although it has shown a decrease from $43.5 billion in the previous year.

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ASEAN

  • Establishment: ASEAN was established on August 8, 1967, in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by its founding members: Indonesia, Malaysia, the Philippines, Singapore, and Thailand.
  • Chairmanship: The chairmanship of ASEAN rotates annually among member states, following the alphabetical order of their English names.
  • Member States: ASEAN comprises ten Southeast Asian countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.
  • Delhi Dialogue: Delhi Dialogue is a premier annual track 1.5 event since 2009 to discuss politico-security and economic issues between ASEAN and India
    • Track 1.5 Diplomacy: Track 1.5 Diplomacy is a form of diplomacy that occurs when government representatives and non-governmental experts engage in dialogue or meetings together in less formal ways

Key Points from the 21st India-ASEAN Economic Ministers Meeting (IAEMM)

  • Trade and Investment: In 2023, two-way trade between India and ASEAN reached USD 100.7 billion, with India being ASEAN’s eighth largest trade partner.
  • Foreign Direct Investment (FDI): India contributed USD 5.6 billion in FDI to ASEAN in 2023.
  • Action Plan for Review: A detailed action plan was finalised, with a target deadline of 2025 for completing the review process.
  • Urgency in Upgrading AITIGA: India noted the necessity of upgrading AITIGA to prevent diversion of bilateral trade to other regions as India integrates with other economies through Free Trade Agreements (FTAs).

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Specific Demands by India

  • Non-Reciprocity Issues: India asserts that its exports to ASEAN are hindered by non-reciprocity in FTA concessions, non tariff barriers, import regulations and quotas in FTA concessions etc.
  • Rules of Origin: Strict adherence to the Rules of Origin provisions of the agreement is a critical demand from India.
  • Rules of origin are the rules to attribute a country of origin to a product in order to determine its “economic nationality”.

Future Engagements

  • Upcoming Meetings: India is set to participate in the 12th East Asia Summit Economic Ministers Meeting (EAS EMM) and will hold bilateral discussions with counterparts from ASEAN nations, including Laos, Korea, Malaysia, Switzerland, and Myanmar.
  • Focus on Strengthening Business Ties: Discussions will also involve enhancing business engagement through meetings with the ASEAN-India Business Council delegation.

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Conclusion

India is actively pursuing reforms to AITIGA to better align trade practices with its economic interests, emphasising the need for equitable tariff structures and reduced trade barriers to bolster its position in the ASEAN market.

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