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India, ASEAN Agree to Review FTA Scope, Address Uneven Market Access

Chief among India’s concerns is that Indian exporters have been denied a level playing field in the Southeast Asian market. Moreover, New Delhi believes that China has taken undue advantage of the ASEAN-India FTA (AIFTA) due to weak rules of origin.

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India, ASEAN Agree to Review FTA Scope, Address Uneven Market Access

The 8th East Asia Summit (Economic Ministers’ Meeting) was held virtually on Friday, followed by the 17th ASEAN-India Economic Ministers Consultations on August 29.

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India’s Commerce and Industry Minister Piyush Goyal and Tran Tuan Anh, Minister of Industry and Trade of Vietnam co-chaired the consultations on Saturday.

As countries around the world deal with the immediate impact of COVID-19 and its long-term economic and healthcare consequences, the India-ASEAN economic dialogue comes at a timely point.

Below we spotlight key points from the two days of economic discussion and virtual dialogue between India, ASEAN, and participating Asia-Pacific countries.

Ten years since its FTA with the Southeast Asian bloc came into effect, India asked the region’s trade ministers to review the scope of the trade agreement.

The Association of Southeast Asian Nations (ASEAN) consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. The ASEAN–India Trade in Goods Agreement (AITIGA), came into effect in January 2010.

The official statement released on Sunday stated: “The ministers from India and ASEAN countries instructed the senior officials to start the discussions to determine the scope of the review at the earliest to, inter-alia, make the free trade agreement more user-friendly, simple, and trade facilitative for businesses.”

Chief among India’s concerns is that Indian exporters have been denied a level playing field in the Southeast Asian market. Moreover, New Delhi believes that China has taken undue advantage of the ASEAN-India FTA (AIFTA) due to weak rules of origin.

India’s exports to ASEAN in 2019-20 were worth US$31.49 billion while its imports from the bloc reached US$55.37 billion. According to a November 2019 report by the Ph.D. Chamber of Commerce and Industry, India’s merchandise exports to ASEAN increased from US$23 billion in 2010 to US$36 billion in 2018 at a compound annual growth rate (CAGR) of about five percent, while its merchandise imports from the 10-member bloc increased from US$30 billion in 2010 to US$57 billion in 2018, thereby showing a CAGR of about eight percent.

One of the barriers to increased trade is ASEAN’s tariffs barriers. According to reporting from the Times of India, while India has offered Indonesia lower customs duty on nearly 75 percent of its products, Indonesia had lowered duties on only 50 percent of Indian exports. India is also treated differently in the ASEAN market when compared to other regional neighbors who have an economic agreement with the regional grouping; for example, Japanese car imports face a five percent duty in Thailand and Indonesia while a 35 percent tariff is imposed on Indian automobiles. Similar tariff discrimination is observed on Indian rice exports when compared to treatment enjoyed by intra-ASEAN traders.

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This article was first published by AseanBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected]

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