India, ASEAN Agree To Review FTA by 2025

Relevance: GS 2- Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

(Source: The Hindu, 08/22/23)

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Why in the news?

• Recently, India and the Association of Southeast Asian Nations (ASEAN) have agreed to conclude the review of the existing Free-Trade Agreement (FTA) in goods by 2025
• The FTA between India and the 10-nation bloc came into effect 13 years ago. Indian businesses have long been pushing for its review

History

• The ASEAN India Trade in Goods Agreement entered into force on January 1, 2010. It created 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 in 2015.
• India’s trade balance with ASEAN has deteriorated after the implementation of the FTA.
• While there was a surplus in trade balance with some ASEAN countries like Cambodia, Lao PDR, the Philippines, and Myanmar, a trade deficit emerged with countries like Vietnam. The trade balance has raised concerns due to the increasing asymmetry.

What does review encompass?

• A review exercise typically includes matters like
  • implementation issues,
  • rules of origin;
  • verification process and release of consignments;
  • Customs procedures;
  • further liberalisation of trade in goods; and
  • sharing and exchange of trade data.

Trade between India and ASEAN:

• Exports: In 2022-23, India’s exports to ASEAN increased to $44 billion from $42.32 billion in 2021-22. India's non-oil and non-mineral export to ASEAN continued to increase
• Imports: The imports jumped to $87.57 billion in 2022-23 against $68 billion a year ago. These imports have been dominated by non-oil and non-mineral products. The imports include products like textiles, electronic goods, chemicals, and machinery.
• These products are vital to India’s manufacturing and services sectors, and the significant increase in their imports in 2021 suggests the growing demand for these products in India.

What is the purpose of reviewing FTA?

• Eliminate trade barriers: India has asked for a review of the agreement with the aim to eliminate barriers of the ASEAN India Trade in Goods Agreement, which came into effect on January 1, 2010.
• Prevent Misuse of tariffs: Goods from third countries are being channeled through ASEAN member nations to capitalize on duty advantages provided by trade agreements
• Address trade deficit: The trade deficit widened to $43.57 billion in the last financial year, from $25.76 billion in 2021-22. It was just $5 billion in 2010-11.
• India's exports to ASEAN have been affected due to non-reciprocity in FTA concessions, non-tariff barriers, import regulations and quotas.
• Non-reciprocity: According to India the trade agreement with ASEAN was an “ill-conceived” agreement and unfair to the Indian industry.
• India's exports to ASEAN have been affected due to non-reciprocity in FTA concessions, non-tariff barriers, import regulations and quotas.

India- ASEAN Relations

• Act East policy: India's relationship with ASEAN is a key pillar of our foreign policy and the foundation of our Act East Policy
• Indian PM at the 12th ASEAN India Summit and the 9th East Asia Summit held in Nay Pyi Taw, Myanmar, in 2014, formally enunciated the Act East Policy.
• Member of Regional forums:Apart from ASEAN, India has taken other policy initiatives in the region that involve some members of ASEAN like BIMSTEC, MGC etc.
• India is also an active participant in several regional forums like the Asia-Europe Meeting (ASEM), East Asia Summit (EAS), ASEAN Regional Forum (ARF), ASEAN Defence Ministers' Meeting + (ADMM+) and Expanded ASEAN Maritime Forum (EAMF).
• Economic Cooperation: India-ASEAN trade and investment relations have been growing steadily, with ASEAN being India's fourth largest trading partner. India's trade with ASEAN is approx. 10.6% of India's overall trade. India's export to ASEAN stand at 11.28% of our total exports.
• ASEAN India Business Council (AIBC) was set up in March 2003 in Kuala Lumpur as a forum to bring key private sector players from India and the ASEAN countries on a single platform for business networking and sharing of ideas.
• Connectivity: Trade and connection with Southeast Asian countries via the North East have been a priority. The India-Myanmar-Thailand Trilateral Highway is one example along with these:
  • Kaladan Multimodal Transport
  • Mekong Ganga Corridor
  • The BCIMM Corridor.
  • IMT Highway

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FAQs

MCQ

Question: The term ‘Regional Comprehensive Economic Partnership’ often appears in the news in the context of the affairs of a group of countries known as (UPSC-2016)

(a) G20

(b) ASEAN

(c) SCO

(d) SAARC