Tariff barriers with ASEAN will hurt India’s trade: study
While Singapore will emerge as a major trade partner for India in the ASEAN in services, banking and legal profession, its trade prospects in other ASEAN countries such as Thailand, Malaysia, Indonesia, Philippines and Vietnam will suffer because of protective measures, both tariff and non-tariff, which these nations are unlikely to lift until the Free Trade Agreement (FTA) between India and ASEAN is executed by 2012.
These findings have been revealed in a study conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) on "India-ASEAN FTA: Business Complimentarities, Trade Advantages & Rules of Origin", which has been submitted to the Ministries of Commerce and Industry and Finance.
Though India and ASEAN signed FTA in 2003 and the former has already started rationalising its tariff structure by bringing them down from 40% to 20%, Thailand, Malaysia, Indonesia, Philippines and Vietnam have not responded as was desired in rationalising their protective measures against India’s exports to them in areas like transport and electrical equipment, copper products, polyethylene, textile products, cement, rubber, tea, steel, dairy products and refined sugar etc., according to the study.
ASSOCHAM President, Mahendra K. Sanghi says that ASEAN members like Malaysia, Indonesia, Philippines, Vietnam and Thailand continue to impose tariff barriers on these items of Indian exports, ranging from 17.6% to 47.6%, and on textile and watches, the tariff exceed 50%. On the other hand, on an average India’s tariff structure against these countries does not exceed 20%. In such a scenario, it will be extremely difficult for India to accelerate its trade prospects with these countries, adds Sanghi.
The nine priority sectors identified by ASSOCHAM, where integration would help closer cooperation between India and ASEAN countries include Medical Research & Pharmaceuticals, Tourism, Infrastructure, Energy, Food Security, ICT services, Entertainment and Educational Services. India enjoys strong business complimentarities and trade advantage in these sectors, says the industry chamber.
Singapore is one country which has ratioanlised its duty structure as per the expectations of India after the two countries have signed comprehensive economic and trade agreement in the recent past clearly identifying the areas and their duty structure, says Sanghi.
ASSOCHAM study points out that India’s trade with Singapore as on now is close to about $8bn which will have potential to more than double because of complimentarities that exists between Singapore and India in areas of services, tourism, information and communications technology, telecom and food & food related products.
While India’s trade with ASEAN has increased to $13bn and projected to go up to $30bn by 2007-08, the trade balance remains in favour of ASEAN. India’s trade deficit with the region has come down from $2.3bn in 1999-2000 to $1.3bn in 2003-04 but there is tremendous scope to reduce it further if trade barriers are removed.
The study has identified the Philippines as a major problem with import duties on textiles, watches, clocks and electric equipment fixed at 50%. The difficulties faced by Indian exporters should be resolved while negotiating FTA with ASEAN, feels ASSOCHAM President, Sanghi.
On India’s trade with Thailand, the study points out that Thailand enjoys a strategic location right at the heart of Asia. It serves as a gateway to Southeast Asia and the Greater Mekong sub-region, where newly emerging markets offer great business potential. From Thailand, it is convenient to trade with India, China and the rest of Asia.
ASSOCHAM is of the view that as per India’s vision of becoming a developing nation by 2020, the Government should be committed to policies that enable us to work more closely with our neighbours and to support the efforts of the state governments in promoting business-to-business links between India and South East Asia.
The existing complimentarities between ASEAN and India are substantial and still are not fully exploited, says ASSOCHAM. Moreover, India should integrate its trade with ASEAN region and make it an economic partner for striking gains which are mutually beneficial, it adds.