India-ASEAN Trade Agreement Assessment, what does it entail?

Regarding

The initial contract was executed in 2009.

India has made 71% of its tariff lines accessible to the ASEAN nations, while Indonesia has opened 41%, Vietnam 66.5%, and Thailand 67%.

Over the past 15 years, India's exports to ASEAN have increased twofold, while imports have surged threefold.

These elements required a reassessment of the agreement.

The evaluation by a combined committee started in 2024.

Overview of India-ASEAN Ties

Foundation: Collaboration started in the 1990s.

Motivated by common economic and strategic goals.

Additionally, a reply to China's increasing power in the area.

Policy Framework: The “Look East Policy” launched in the 1990s evolved into the “Act East Policy” in 2014, signifying a more proactive strategy to strengthen relations with ASEAN.

Key Achievements in the Partnership:

1992: India became a Sectoral Dialogue Associate.

1996: Promoted to Full Dialogue Partner.

2012: Elevated to a Strategic Partnership.

2022: Upgraded to a Comprehensive Strategic Partnership.

Trade and investment: A Free Trade Agreement (FTA) has been signed between India and ASEAN, greatly enhancing trade and investment.

ASEAN is India's fourth biggest trading partner, with total trade amounting to US$110.4 billion in 2021-22.

Regional connectivity: India is enhancing links with ASEAN via initiatives such as the India-Myanmar-Thailand (IMT) trilateral highway and the Kaladan Multimodal Transit Transport project.

Defense and security: The defense relationship between India and ASEAN has strengthened through collaborative military drills like the ASEAN-India Maritime Exercise and involvement in the ASEAN Defense Ministers’ Meeting Plus (ADMM+).

India positions ASEAN at the core of its Indo-Pacific strategy for regional security and development (SAGAR – Security and Growth for All in the Region).

Socio-cultural collaboration: To enhance connections among individuals, India and ASEAN have advanced numerous cultural initiatives, including the ASEAN Students Exchange Programme, training sessions for ASEAN diplomats, and the ASEAN-India Think Tank Network.

India-ASEAN Free Trade Agreement

The Framework Agreement on Comprehensive Economic Cooperation between India and ASEAN was signed in 2003, creating the legal basis for future agreements.

These agreements comprise the goods trade agreement, services trade agreement, and investment agreement, which collectively establish the ASEAN-India Free Trade Area (AIFTA).

The Trade in Goods Agreement between ASEAN and India was signed and became effective in 2010.

According to this agreement, ASEAN countries and India pledged to progressively liberalize their markets by cutting and eradicating tariffs on 76.4% of products.

The Trade in Services Agreement between ASEAN and India, established in 2014, encompasses terms related to transparency, domestic regulations, market access, national treatment, recognition, and dispute resolution.

The ASEAN-India Investment Agreement, which was also signed in 2014, provides investment protection, including fair and equitable treatment for investors, non-discriminatory practices regarding expropriation or nationalization, as well as assurances of just compensation.

Difficulties with AIFTA

Expanding Trade Deficit: India's trade deficit with ASEAN has steadily increased since the FTA.

Indian imports from ASEAN increased at a higher rate than exports, resulting in unbalanced benefits.

India's trade deficit with ASEAN has grown to $44 billion in FY23, up from $8 billion in FY13.

Restricted Market Access for Indian Services: Though India excels in services, ASEAN nations provided minimal liberalization in areas such as IT, professional services, and healthcare.

Non-Tariff Barriers (NTBs): Member countries of ASEAN frequently implement intricate standards, licensing criteria, and additional regulatory obstacles.

These negate tariff advantages and limit Indian exports, particularly in farming and pharmaceuticals.

Rules of Origin Problems: Lenient rules of origin permit third countries (such as China) to transship goods through ASEAN to India, taking advantage of tariff advantages.

This weakens local production under Make in India.

Restricted Advantages for Indian Agriculture: Indian agricultural goods encounter stringent sanitary and phytosanitary regulations and quota limitations.

At the same time, ASEAN nations export inexpensive palm oil, rubber, and spices, negatively impacting Indian farmers.

Negotiation Disparity: India frequently struggles to obtain equivalent trade-offs.

ASEAN functions as a group, while India engages independently, resulting in diminished negotiating power.

Path Ahead

In 2022, India and ASEAN decided to examine the FTA to resolve imbalances.

More robust protective measures and tighter origin regulations are necessary.

As India’s diplomatic clout grows and it takes a leading role in the Global South, a stronger collaboration with ASEAN provides reciprocal advantages and enhances regional stability.

Starting in 2024, India has notably enhanced its involvement with Southeast Asia.