Stacks of containers pictured at a port area in Kolkata. The trade balance between India and ASEAN is tilted heavily in favor of the 10-member Southeast Asian bloc. © Getty Images
Negotiators from the two sides are holding talks in the Indian capital as part of the fourth round of the agreement review meeting, which is scheduled to last through Friday.
The ASEAN-India Trade in Goods Agreement (AITIGA) was inked in August 2009 and entered into force in January 2010. The review process was initiated in September 2022 with an aim to better facilitate trade to the benefit of both parties. The two sides hope to complete the review by next year.
ASEAN — which comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — is a significant trading partner for India with about an 11% share in the South Asian nation’s global trade. However, the trade is tilted heavily in favor of ASEAN. India’s exports to the grouping amounted to $41.2 billion while imports touched $80 billion in the last financial year ended in March.
“We are trying to maximize our trade volume with [ASEAN] countries and trying to see that the trade is more balanced,” Indian Commerce Secretary Sunil Barthwal said on Thursday. Whatever trade agreements India has signed, there is always a follow-up in terms of their utilization, the nature of imports and exports, and how the trade between the two sides can be improved, he added.
On the New Delhi review meeting, Rajesh Agrawal, additional secretary in the Department of Commerce, said that India expects to make progress on multiple tracks. “The key drivers of this AITIGA agreement, the key challenging areas, are rules of origin and market access,” he said. “That is something that we want to see — that some of the basic ground principles … on these two are agreed upon in this [round].”
An Indian government source told Nikkei Asia that they are hopeful of meeting the deadline for review completion in 2025. “[We are] confident that it can be done. … It’s a tough negotiation, it’s not easy because you have 10 countries to deal with, but we have to try our best.”
“It took us many years to start the review, that itself was a [tough task],” the official added. “It’s not that we are running [toward review completion], but we are progressing.”
India is seeking flexibility in some tariff concessions in sectors that are being hurt by a significant surge in imports. “Steel is one such sector,” said Raj Kumar Sharma, a senior research fellow at NatStrat, a New Delhi-based think tank.
“It’s a concern that Chinese steel can be rerouted to India via our FTA (free trade agreemen) with ASEAN countries,” he told Nikkei, adding the low-priced imported steel hurts domestic manufacturers at a time when the Indian government’s infrastructure development is leading to a surge in domestic steel demand. “This means the Indian government cannot ignore the concerns of its local industry.”
According to Prerna Gandhi, an associate fellow at India’s Vivekananda International Foundation think tank, China’s desire to upgrade its trade agreement with ASEAN, incorporating e-commerce and supply chain expansion, “adds exigency to India’s own goal of concluding the long-drawn review of the ASEAN-India FTA.”
“Already, structural differences give advantage to ASEAN economies, which are primarily export-oriented with a strong manufacturing base, in contrast to India, which has a mixed economy [where services sector, including information technology, is more predominant than manufacturing] that hasn’t been able to fully capitalize on the FTA,” she told Nikkei.
She pointed out that India’s trade deficit with ASEAN widened from around $5 billion in the April 2010 to March 2011 period, the first full year of operation of the trade agreement in goods, to over $38 billion in the last financial year.
“With the Chinese economy unable to expand its domestic consumption, its need for export markets remains strong,” Gandhi said. “The inequitable nature of provisions granted under the China-ASEAN FTA and the India-ASEAN FTA naturally raise concerns of de facto Chinese goods trickling in via ASEAN.”
People walk in late August near construction of what will become Noida International Airport in northern India. Infrastructure projects around the nation are boosting demand for steel. © Reuters“However, India does understand [that] FTA agreements, though being economic, have regional and bilateral implications. Thus, a timely upgrade is most pragmatic,” she added.
Sharma of NatStrat said that there are also concerns regarding tariff asymmetry between the two sides. “India has reduced tariffs on about 74% of its tariff lines for ASEAN countries, the latter has reciprocated for only about 56% of their tariff lines in sectors like agriculture and textiles. This creates a major disadvantage for India.”
On India’s ballooning trade deficit with ASEAN after the trade agreement was implemented, he said there are many factors behind this trend, like low market access for Indian goods, high non-tariff barriers (NTBs), cheaper imports from ASEAN and fewer exports of comparative-advantage products from India.
Last month, Indian Commerce and Industry Minister Piyush Goyal called upon the bloc to do away with NTBs, “curb misuse of FTAs by third parties” and allow reciprocal concessions to imports from India to correct the skewed trade imbalance in favor of ASEAN.
“It is unfortunate that in the recent past we had to deal with several restrictive barriers on our exports to the ASEAN region, particularly in the agriculture and auto sectors. I think these only result in reciprocal action from other countries, including from India, and will hurt the long-term desire of our leaders to expand trade between the two countries,” he said in a video conference at a special plenary session with trade ministers of the region.
“India has currently been witnessing exponential growth in imports from the ASEAN region while our exports [to them] have been impeded by non-reciprocity in FTA concessions, NTBs, import regulations, quotas and export taxes from ASEAN countries,” the minister said, according to an official statement.
The review of the India-ASEAN trade pact also figured in Prime Minister Narendra Modi’s 10-point plan to further boost ties with Southeast Asian countries during his address at the 21st India-ASEAN Summit in Laos in October, as he underlined the need to complete it in a time-bound manner toward harnessing greater economic potential for the benefit of the two sides.
“The review of the [AITIGA] should be completed by 2025,” Modi said. “This will strengthen our economic relations and will help in creating a secure, resilient and reliable supply chain.”
source : asia.nikkei