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8th March 2024 (13 Topics)

India-ASEAN FTA review

Context

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.

1: Dimension- Objective behind India’s demand

  • 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 India-ASEAN FTA, formally known as the ASEAN-India Trade in Goods Agreement (AITGA), has resulted in disproportionate gains for the ASEAN countries.

2: Dimension- India’s solutions

  • 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.
  • 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.

3: ASEAN’s demands

  • ASEAN too wants its own set of PSRs for items such as electronics, chemicals and textiles.
  • Moreover, the ASEAN (especially Thailand) 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.

Data

  • 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.
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