India, ASEAN to review trade agreement; finalize changes by year-end
Mint | 10 July 2024
India, ASEAN to review trade agreement; finalize changes by year-end
by Dhirendra Kumar, Rhik Kundu
New Delhi: India will seek to take a second look at the zero-tariff concessions granted by New Delhi to mobile phone imports in talks to review its free trade agreement (FTA) with the 10-nation bloc of Southeast Asian nations later this
The review talks will be held in the Indonesian capital of Jakarta on 29-31 July. India aims to finalize the deal before the end of the year, two people aware of the matter said.
A team of high-ranking officials led by the commerce ministry’s additional secretary Rajesh Aggarwal will participate in the FTA review from the Indian side.
India will review the tariff concessions granted to ASEAN countries, including Vietnam, which allow zero-tariff imports of mobile phone components, the first first person said. By reviewing these tariff concessions, India can potentially protect and encourage the growth of its domestic industries.
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“There is a need to modernize the ASEAN Trade in Goods Agreement (ATIGA) signed over a decade ago,” the first person mentioned above said, requesting anonymity.
“The plan is to finalise the deal before the end of the calendar year,” the person added.
The ATIGA was signed in 2009 and implemented in 2010-2011.
Under the ATIGA, tariff elimination was proposed for 74.2% of tariff lines, while a reduction in tariffs was agreed for an additional 14.2% of tariff lines. No tariff concessions were provided for in the remaining 11.6% tariff lines.
Tariff lines are items listed in a country’s tariff schedule.
India’s trade with ASEAN
To be sure, India’s trade with ASEAN experienced remarkable growth after the signing of the agreement. But the trade is skewed in favour of the ASEAN region, a manufacturing powerhouse. Between FY2009 and FY2023, exports from India to the ASEAN rose 130.4%, while imports grew by 234.4%.
Over 50% of India’s imports from the ASEAN comprise coal, palm oil, and other raw materials, while India exports refined petroleum products, commercial vehicles, telecommunication equipment, bovine meat, animal feed, agriculture products, steel and plastics, and engineering goods.
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As things stand, India’s trade with ASEAN is concentrated in five countries— Indonesia, Singapore, Malaysia, Thailand and Vietnam.
The ASEAN, unlike the European Union, allows each member country setting its own tariffs under FTAs instead of having a shared one.
Under the FTA negotiations, each ASEAN country typically negotiates its tariff arrangement separately. However, India has offered a single tariff schedule applicable to all ASEAN members.
Experts argue that having a single tariff for all ASEAN countries limits the effectiveness of India’s exclusion list.
A single tariff system with the ASEAN doesn’t address the specific sensitivities of individual countries as effectively as separate schedules would, economic think tank Global Trade Research Initiative (GTRI) said in a recent note on the upcoming ATIGA review talks.
India’s trade deficit with ASEAN has grown significantly, from $7.5 billion annually, when the agreement came into effect in 2011, to approximately $44 billion in FY23.
A spokesperson of the ministry of commerce and industries didn’t respond to emailed queries.
The ASEAN comprises Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam.
These countries together made up about 11% of India’s global trade in FY23.
According to GTRI, India will focus on cutting imports from ASEAN during its review.
For instance, notable imports from Singapore include plastics, iron and steel, gold, and fertilizers, which Singapore doesn’t produce, said GTRI in the note.
“Such imports… need to be investigated as to why they are happening in the first place. Rules of Origin may be checked for use of value addition norms for electronics products, and gold,” it added.
