Context

Despite holding nine rounds of discussions over the past year, India and ASEAN have made no tangible progress in reviewing their bilateral trade agreement.

Background

• FTA Signed: The ASEAN-India Trade in Goods Agreement (TIG) was signed in 2009 and implemented in 2010.
• Tariff Liberalisation:
  • India liberalized 71% of its tariff lines.
  • ASEAN members opened less: Indonesia (41%), Vietnam (66.5%), Thailand (67%).
• Trade Trends:
  • Over 15 years, India’s exports to ASEAN have doubled, but imports have tripled.
  • This trade imbalance has prompted the need for a review.
• Review Process:
  • A formal review of the FTA began in 2024, led by a joint committee.

About ASEAN

• Established: 1967, in Bangkok.
• Founding Members: Indonesia, Malaysia, Philippines, Singapore, Thailand.
• Current Members: 10 (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam).
• Headquarters: Jakarta, Indonesia.
• Dialogue Partners: Includes India, USA, China, Japan, Australia, EU, etc.

India-ASEAN Relations Overview

Evolution of Ties

• 1992: Sectoral Dialogue Partner
• 1996: Full Dialogue Partner
• 2012: Strategic Partnership
• 2022: Comprehensive Strategic Partnership

Policy Framework

• "Look East Policy" (1990s) → "Act East Policy" (2014): Shift from engagement to action.

Key Areas of Cooperation

• Trade & Investment:
  • ASEAN is India’s 4th largest trading partner.
  • Bilateral trade: USD 110.4 billion (2021-22).
• Connectivity Projects:
  • India-Myanmar-Thailand (IMT) Trilateral Highway
  • Kaladan Multimodal Transit Transport
• Defense & Security:
  • Joint exercises like ASEAN-India Maritime Exercise
  • Participation in ADMM+
  • Integration of ASEAN in India’s Indo-Pacific strategy (SAGAR)
• Cultural Exchange:
  • Students exchange programs, training for diplomats, think tank networks.

ASEAN-India Free Trade Agreement (AIFTA)

Key Components

• Framework Agreement: Signed in 2003.
• Trade in Goods Agreement: Operational since 2010.
• Trade in Services & Investment Agreements: Signed in 2014.

Provisions

• Gradual tariff elimination on 76.4% of goods.
• Investment protection, fair treatment, and dispute settlement mechanisms.

Key Challenges

1. Widening Trade Deficit
   • India’s deficit with ASEAN rose from $8B (2013) to $44B (FY23).
2. Limited Market Access in Services
   • Sectors like IT, healthcare, and professional services remain restricted.
3. Non-Tariff Barriers (NTBs)
   • Regulatory obstacles (e.g., standards, licenses) hinder Indian exports.
4. Rules of Origin Loopholes
   • Lax rules allow Chinese goods to enter India via ASEAN, hurting domestic manufacturing.
5. Agricultural Disadvantages
   • Indian farmers face quota restrictions and SPS standards, while ASEAN exports cheaper agricultural products.
6. Negotiation Asymmetry
   • ASEAN negotiates as a bloc; India negotiates individually, limiting leverage.

Way Forward

• FTA Review: Initiated in 2022 to rectify imbalances.
• Safeguard Mechanisms: Strengthen rules of origin and trade protections.
• Strategic Leverage: India’s growing role in the Global South and Indo-Pacific provides an opportunity to recalibrate terms.
• Enhanced Engagement: Since 2024, India has actively increased its outreach to Southeast Asia for balanced and sustainable trade relations.

Source: The Hindu