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India is negotiating with the ten-member ASEAN for greater market access for its goods, more flexibility in determining origin of products through product-specific rules and redressal of non-tariff barriers. This comes as part of the India-ASEAN FTA review initiated by New Delhi to address its growing trade deficit with the bloc, sources have said.
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“India had been urging the ASEAN for a review of the FTA as its trade deficit with the region ballooned since the trade pact was implemented in January 2010. The negotiating team has its list of demands ready for increasing India’s exports but the ASEAN, too, has its own wants. So a balance will have to be struck,” an official tracking the matter told businessline.
The India-ASEAN FTA, formally known as the ASEAN-India Trade in Goods Agreement (AITGA), has resulted in disproportionate gains for the ASEAN countries.
Towards greater exports
In 2022-23, India exported goods worth $44 billion to the region while its imports were valued at $87.57 billion. Trade deficit in 2022-23 was $43.75 billion compared to $7.5 billion during the implementation of the agreement. The ten-member ASEAN includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia.
Seeking product-specific rules (PSRs) in the rules of origin (ROO) determination is one solution being pursued by India for greater exports. ROO are the criteria to determine the origin of a product and establish if it qualifies for duty cuts under a FTA. PSRs can be introduced in the ROO chapter for relaxing rules for certain items where meeting the prescribed ROO is difficult.
“In the India-ASEAN FTA, the ROO calls for value addition of 35 per cent whereas for certain industries, like gems and jewellery, the value addition that takes place is less than 10 per cent because of the very nature of the raw materials. To get market access for such items, it is important to have PSRs where relaxations could be given,” the official explained.
But the ASEAN, too, wants its own set of PSRs for items such as electronics, chemicals and textiles. “India has to negotiate carefully here to see that a proper balance is maintained between the two sides,” the official said.
Moreover, the ASEAN is unhappy with the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020) rules introduced in India which aims to supplement the operational certification procedures related to implementing the ROO as prescribed under the respective trade agreement. “The ASEAN, especially Thailand, is unhappy with CAROTAR 2020. They say their exports are getting hindered because of it and want it to be addressed,” the official said.
Indian negotiators have made a note of the non-tariff measures which the ASEAN countries need to address for meaningful market access. “For instance there are requirements such as food certification, including meat, that act as barriers to ASEAN markets. These need to go,” the official said.
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India is also looking for tariff cuts in items such as chemicals, metals and alloys, machinery, plastic and rubber, textiles, leather and gems and jewellery, the official added.
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