ASEAN goods influx: new safeguard window to protect domestic industry

The Finance Ministry has put in place a new legal framework for investigating and recommending safeguard measures on goods imported from ASEAN countries.

Industry representation “Over the past few months, sections from the Indian industry, especially representatives of the metals sector such as copper and aluminium, have been complaining about a surge in imports from some of the ASEAN countries. Imposition of safeguard duties could be an effective way of checking such imports in case injury to the specific sector can be established,” a government official told BusinessLine .

The India-ASEAN Trade in Goods Agreement (part of the larger Comprehensive Economic Cooperation Agreement) — signed in 2010 — provided for imposition of safeguard measures with respect to members of the regional grouping.

But the provision has not been utilised till date by India.

However, now India has come up with a dedicated framework, enabling domestic industry to seek imposition of safeguard duty specifically against injurious imports from the 10-member ASEAN bloc — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

This is significant as once any safeguard duty is imposed against a member country of ASEAN, it would not be applicable on countries outside the grouping on a most favoured nation (MFN) basis, official sources said.

The safeguard mechanism provided under the India-ASEAN pact is aimed to protect domestic producers against a sudden surge in imports due to tariff concessions that would substantially cause, or threaten to cause, serious injury to the domestic industry.

Tariff rate This allows a country to suspend the further reduction of any tariff rate or increase the tariff rate on the goods concerned to the applied MFN tariff rate (non-preferential tariff rate applicable to all countries outside the FTA) level of January 1, 2010 and maintain this protection for up to four years. Nitish Sharma, Partner-Indirect Taxation, Nangia & Co, said this was a good move that could help protect domestic industry.

“It would enable domestic manufacturers whose businesses are affected by increased influx of goods from any of ASEAN countries to approach the safeguard authorities and seek relief only with respect to those countries within the grouping,” Sharma said.

Trade flows In the case of ASEAN FTA, India has benefitted on both sides of trade flows with a statistically significant 33 per cent increase in exports and 79 per cent increase in imports. The Indian industry has been complaining about disproportionate benefits going to the ASEAN countries.

Of all the FTAs signed by India, the one with ASEAN has had the biggest trade impact as this arrangement saw the greatest reduction in Indian import tariffs.

In the case of ASEAN, the average import tariffs maintained by India stood at 11.3 per cent prior to the signing of FTA. This has sharply reduced to 4.7 per cent after FTA.

Within the set of FTA countries, ASEAN growth rate of trade after the enactment of FTA is much higher than other FTA countries.

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