To sharpen its negotiating stance with the ten-member ASEAN , the Commerce Department has sought more inputs from various industry and export promotion bodies on items where deeper tariff concessions can be demanded ahead of the next round of negotiations on the ASEAN-India FTA review in Indonesia next month, sources said.

“Commerce Ministry officials are meeting industry and export body representatives to get their views on the items to focus on for greater market access. Other inputs, include those related to non-tariff barriers, are also being solicited,” the source 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 which India wants to correct through the review.

In 2023-24, India’s trade deficit with the bloc widened to $38.46 billion from $7.5 billion during the implementation of the agreement in 2010. India exported goods worth $41.2 billion to the region while its imports were valued at $79.66 billion.  

New Delhi is seeking greater market access for its goods, more flexibility in determining rules of origin (ROO) for products through product specific rules, and redressal of non-tariff barriers, to address its growing trade deficit with the bloc, sources have said.

“Since the ASEAN countries, too, are seeking more market access for their goods as part of the review despite India’s attempt to level the uneven field, our negotiators have to pro-actively demand lower duties wherever there is a scope. That is why Commerce Ministry officials are holding meetings with the industry so that there is a better understanding of what it wants,” the source said.

The ten-member ASEAN includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia.

Review of AITGA

India had been asking for a review of the AITGA for a long time as its trade deficit with the bloc widened significantly since the trade pact was implemented in January 2010. 

Four meetings of the `joint committee’ for the review of AITIGA have already taken place while the fifth is scheduled in Jakarta on July 29-31, 2024.

In the earlier meetings, India sought product specific rules (PSRs) in ROO determination so that the requirements could be relaxed for high value items where the value addition is low.  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 the raw material is of high value. 

Under the AITGA, both sides agreed to progressively eliminate duties on about 75 per cent of goods and reduce tariffs on around 15 per cent of goods. However, the commitments made by the ten ASEAN countries varied considerably. While an open economy like Singapore committed to almost 100 per cent elimination, countries like Indonesia and Vietnam offered much less.

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