Govt functionaries meet on the sidelines of the economic ministers’ conference at Semarang, Indonesia.
India and the Asean trade officials will meet at Semarang in Indonesia today to start the formal ministerial review of the bilateral free trade agreement signed between them more thirteen year ago.
Because of the unequal gains accrued to the either party in the agreement (with Asean gaining and India losing), Commerce and Industry Minister Piyush Goyal had stated earlier that the the agreement was the “most ill-conceived one.”
The Asean-India Trade in Goods Agreement (AITGA) entered into force on 1 January 2010, creating one of the world’s largest free trade areas. This was followed up by the ASEAN-India Trade in Services Agreement and another pact on investments both of which were implemented from 2015.
Asean economic ministers’ conference and related meetings are scheduled between August 17-22 in the Indonesian . After the economic ministers of the trading block ended their discussions Saturday, their meetings with trade partners started. On Sunday meetings with the European Union and Canada were held.
The India-Asean trade meeting is being held on the sidelines of the ongoing meeting of the economic ministers of the 10-nation Association of Southeast Asian Nations (ASEAN), and an Indian delegation is already there.
Members of the Asean include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
“AITGA review has been under consideration for a number of years. Joint committee on review has been constituted. Joint committee has done two meetings virtually so far on the issue,” the official said.
Within five years of the agreement on goods being activated India had started asking for a review of the pact and the scope of review was first discussed in 2015. However, for Asean this was not a priority and being the big beneficiaries, their leadership had been dragging its feet over it. The review was finally agreed to in 2019. By 2022 the scope of the review was agreed to. It included making it more user-friendly, simple and trade facilitative.
India maintains that its exports to Asean have been impeded by non-reciprocity in FTA concessions, non tariff barriers, import regulations and quotas. Another Indian demand is strict adherence to Rules of Origin provisions of the agreement by Asean.
Rules of origin provisions lay down the quantum of value addition that should be done to a product in an exporting country to to qualify for concessional duty in the importing country.
India is wary of countries that are not part of the trade agreement routing their products through Asean. The grouping has a much deeper economic engagement with China through the Asean China Trade and Goods Agreement.
In the Asean trade agreement India agreed to eliminate tariffs on 75% of its tariff lines and tariff reductions covered 88.7% of its lines. While these commitments were matched by most of the countries of the bloc, the largest economy in Asean Indonesia only eliminated tariffs on 50% of its tariff lines and agreed to tariff reduction on 67%.
On agriculture India took a defensive position and kept its duties high while giving away bigger concessions on industrial products. Asean offered less tariff concessions on industrial products like auto, machinery and transport equipment.
In the first full year of the FTA in 2010-11 India’s exports to Asean increased to $ 25.7 billion from $ 18.11 billion in the previous year. Much of the increase seen was due to the sudden jump in exports of petroleum products. Since then only gain for India has been in the exports of meat and marine products while in other areas like chemicals, machinery and steel the growth has been very marginal. In 2022-23 total Indian goods exported to Asean stood at $ 44 billion.
Imports from Asean were $ 30.6 billion in the first year of FTA in 2010-11 and it has grown to $ 78.57 billion in FY 23. In the years since the goods trade agreement was signed, the growth logged by Asean during much of that period is more than double of what India has achieved.
The trade deficit with Asean has widened from $ 4.98 billion in 2010-11 to $43.57 billion in 2022-23. The widening of the deficit by $ 17.51 billion in the last financial year is alarming as in 2021-22 the deficit was $ 25.76 billion.
While traditional exports of Asean to India like venerable oils from member countries like Thailand, Malaysia and Indonesia have grown at the expected pact, the 10-member has logged huge gains in sale of machinery and electrical machinery and equipment to India.
In FY 23 Asean’s exports of machinery and electrical equipment, that includes consumer and IT products alone was $ 17.5 billion. Among Asean Singapore is the big exporter of electronics to India.
Machinery and electronics imports from the 10-nation block were stagnating around 7.8 billion between 2010-11 and 2017-18. From the year 2018-19 these imports have zoomed.
Source:financialexpress.com