India and ASEAN to Modernize Trade Agreement: Zero-Tariff Concessions Under Review
Introduction
India is set to review its Free Trade Agreement (FTA) with the ASEAN bloc, focusing on zero-tariff concessions, particularly for mobile phone imports. The review aims to modernize the ASEAN Trade in Goods Agreement (ATIGA), with final changes expected by the end of the year.
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Review Talks in Jakarta
The review discussions are scheduled for July 29-31 in Jakarta, Indonesia. A team led by Rajesh Aggarwal, Additional Secretary in the Commerce Ministry, will represent India. The goal is to finalize the updated agreement by the end of the year, according to informed sources.
Revisiting Tariff Concessions
India will re-evaluate the zero-tariff concessions granted to ASEAN countries, especially Vietnam, for mobile phone components. This move aims to protect and encourage the growth of domestic industries by potentially adjusting these concessions.
Modernizing the ATIGA
“There is a need to modernize the ASEAN Trade in Goods Agreement (ATIGA) signed over a decade ago,” a source mentioned. The ATIGA, signed in 2009 and implemented between 2010-2011, proposed tariff elimination for 74.2% of tariff lines and reduction for an additional 14.2%. No concessions were provided for the remaining 11.6% tariff lines.
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Trade Dynamics Between India and ASEAN
India's trade with ASEAN has grown significantly since the agreement's inception. However, the trade balance favors ASEAN, a manufacturing hub. Between FY2009 and FY2023, Indian exports to ASEAN rose by 130.4%, while imports grew by 234.4%.
Over 50% of India's imports from ASEAN include coal, palm oil, and other raw materials, while exports comprise refined petroleum products, commercial vehicles, telecommunication equipment, and other goods.
Addressing the Trade Deficit
India's trade deficit with ASEAN has grown from $7.5 billion annually in 2011 to approximately $44 billion in FY23. During the review, India will focus on reducing imports from ASEAN.
For example, notable imports from Singapore include plastics, iron and steel, gold, and fertilizers—products that Singapore does not produce. This raises questions about the Rules of Origin and the use of value addition norms for electronics and gold imports.
Conclusion
As India and ASEAN prepare to review their trade agreement, the focus will be on updating and modernizing the ATIGA to better reflect current economic realities. With significant trade imbalances and sector-specific concerns, the upcoming discussions in Jakarta are crucial for shaping the future of India-ASEAN trade relations. The anticipated changes aim to protect domestic industries and address the growing trade deficit, ensuring a more balanced and mutually beneficial trade relationship.
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