Navigating the ASEAN-India FTA Review: Key Insights

Review of the ASEAN-India Free Trade Agreement

India and the Association of Southeast Asian Nations (ASEAN) have recently reached an agreement to review their existing free trade agreement (FTA) by 2025. This FTA, implemented 13 years ago, is crucial for enhancing trade relations between India and the 10-member ASEAN bloc.

Key Highlights of the Agreement

The decision to review the ASEAN-India Trade in Goods Agreement (AITIGA) was a focal point at the 20th ASEAN-India Economic Ministers' meeting held in Semarang, Indonesia. A joint committee meeting prior to this ministerial gathering established a roadmap for the review, finalizing the terms of reference and work plan for the upcoming negotiations.

Objectives of the Review

The primary aim of this review is to enhance and diversify trade between India and ASEAN while addressing the current trade asymmetry. The ministers have committed to a quarterly negotiation schedule, aiming for completion by 2025.

Current Trade Trends

In the fiscal year 2022-23, India's exports to ASEAN reached $44 billion, up from $42.32 billion the previous year. However, imports from ASEAN surged to $87.57 billion, resulting in a significant trade deficit of $43.57 billion, compared to $25.76 billion in 2021-22.

Challenges and Criticisms of the FTA

Criticism of the FTA has focused on concerns regarding its fairness towards Indian industries. Many stakeholders have raised issues about the routing of goods from third countries through ASEAN nations to exploit duty benefits. India's Commerce and Industry Minister, Piyush Goyal, referred to the FTA as "ill-conceived" and highlighted its unfair impact on domestic industries.

ASEAN Member Countries

The FTA involves ASEAN members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. This diverse group aims to foster economic cooperation while addressing trade challenges with India.

Addressing trade imbalance and Misuse Concerns

The review of the FTA is essential to address trade imbalances and concerns regarding the misuse of the agreement. The agreement, while initially intended to boost trade, has faced scrutiny over its effectiveness in achieving fair trade practices.

Concerns Regarding Misuse

• Misrouting of Goods: India has raised issues about goods being routed through ASEAN countries to benefit from lower duty rates, undermining the FTA's objectives.
• Trade Deficit and Competition: The widening trade deficit poses challenges for Indian industries, which face increased competition from cheaper imports.
• Non-Tariff Barriers: Despite tariff reductions, non-tariff barriers such as strict regulations hinder Indian exports to ASEAN markets.
• Impact on Sensitive Sectors: Sectors like dairy are particularly vulnerable to competition from cheaper ASEAN products, affecting local farmers.
• Safeguard Measures: India has implemented safeguard measures on certain imports to protect domestic industries from unfair competition.

Conclusion

The upcoming review of the ASEAN-India FTA holds significant strategic importance for both sides. India aims to ensure the agreement supports its domestic industries and promotes fair trade practices, while ASEAN countries seek to maintain balanced trade relations that foster their economic growth.

Frequently Asked Questions (FAQs)

Q1. What is the ASEAN-India FTA?
Answer: The ASEAN-India Free Trade Agreement (FTA) is a trade agreement aimed at enhancing economic relations between India and ASEAN member countries by reducing tariffs and promoting trade in goods.

Q2. Why is the review of the FTA important?
Answer: The review is crucial to address trade imbalances, ensure fair trade practices, and enhance the benefits of the agreement for both India and ASEAN nations.

Q3. What challenges has India faced with the FTA?
Answer: India has faced challenges such as a significant trade deficit, concerns over unfair competition, and the misuse of the FTA by routing goods through ASEAN countries.

Q4. How does the trade imbalance affect Indian industries?
Answer: The trade imbalance leads to increased competition from cheaper imports, which can hinder the growth of domestic industries and negatively impact local producers.

Q5. What measures has India taken to address these issues?
Answer: India has implemented safeguard measures on certain imports and is calling for a comprehensive review of the FTA to ensure fair trade practices and protect domestic industries.

UPSC Practice MCQs

Question 1: What is the primary goal of the ASEAN-India FTA review?
A) To increase tariffs
B) To diversify trade and address imbalances
C) To eliminate all trade agreements
D) To limit imports from ASEAN countries
Correct Answer: B

Question 2: Which Indian minister criticized the ASEAN-India FTA?
A) Arun Jaitley
B) Nirmala Sitharaman
C) Piyush Goyal
D) Suresh Prabhu
Correct Answer: C

Question 3: How much did India's exports to ASEAN reach in 2022-23?
A) $44 billion
B) $68 billion
C) $87 billion
D) $42 billion
Correct Answer: A