India may consider terminating Asean Pact as FTA review drags
NEW DELHI : The Association of Southeast Asian Nations’ (Asean’s) lackadaisical approach in reviewing the free trade agreement with India despite nine negotiating rounds could force New Delhi to consider invoking the termination clause of the 2009 pact as India Inc’s patience is running thin with massive Chinese dumping through this route, people in the know said on Sunday.
India’s interests have been hurt by the “one-sided” FTA with Asean and a large section of domestic industry wants New Delhi to exit the pact if revision efforts failed in the 10th round, the people said, requesting anonymity because of the confidential nature of the move. The 10th review meeting of the
Asean-India Trade in Goods Agreement (AITIGA) is expected to be held in New Delhi mid-next month. The deal was signed by the then Commerce Minister Shri Anand Sharma on August 13, 2009
The FTA, that came in force on January 1, 2010, adversely impacted India, particularly because of its weak provisions for “rules of origin” that led to massive dumping of Chinese goods via some of the 10 Asean countries —- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, they said.
“The Narendra Modi Government put its foot down when the trade deficit between India and Asean jumped to $43.57 billion in 2022-23 in favour of the latter, from $5 billion in 2010-11,” one of them said. On India’s request, the first FTA review meeting took place in May 2023.
According to a second person, some Asean members are deliberately dragging the matter as the FTA is hugely benefiting them at the expense of India. “This attitude, if continued, may force India to adopt a tough stand,” he said citing close-door deliberations and industry-government review meetings. The FTA has a termination clause saying that either India or Asean member states collectively can give a “written notice” to terminate it. Upon the notice, the agreement shall be terminated in 12 months, it added.
“The Narendra Modi Government put its foot down when the trade deficit between India and Asean jumped to $43.57 billion in 2022-23 in favour of the latter, from $5 billion in 2010-11,” one of them said. On India’s request, the first FTA review meeting took place in May 2023.
According to a second person, some Asean members are deliberately dragging the matter as the FTA is hugely benefiting them at the expense of India. “This attitude, if continued, may force India to adopt a tough stand,” he said citing close-door deliberations and industry-government review meetings. The FTA has a termination clause saying that either India or Asean member states collectively can give a “written notice” to terminate it. Upon the notice, the agreement shall be terminated in 12 months, it added.
Due to these asymmetries, Indian firms are unable to fully utilise the trade agreement and violations of ROO (rules of origin) are rampant, the first person said. “India’s AITIGA utilisation is barely 30-40% but Indonesia, Cambodia and Vietnam have utilised 65-70% of the FTA,” he added.
The spokespersons of the commerce ministry did not respond to specific queries on this matter.
A government official working in an economic ministry said that Asean may expedite the review process as more than two years have passed. “Both sides had agreed to support and expedite the review of AITIGA to make it more effective, user-friendly, simple and trade facilitative for businesses, aiming to achieve a substantial conclusion in 2025,” he said, asking not to be named.
India has been candid about the asymmetrical nature of the 15-year-old deal at various fora. Speaking at the India Global Forum in London on June 19, Union Commerce Minister Shri Piyush Goyal criticised the then UPA government for signing FTAs with competing economies such as Asean, which is termed as the B-team of China. Reacting the next day, Congress leader Anand Sharma said in a post on X: “Union Commerce Minister Piyush Goyal’s statement belittling India ASEAN Trade Agreements is unwarranted, ill-advised and unfortunate.”
Indian industry is hopeful that Asean nations would correct the anomalies in the 10th round before it is too late. “We have to see to what extent Asean is ready to make it a balanced outcome. Any bilateral engagement cannot be one sided. India should strongly push for a comprehensive review and renegotiation of the agreement and take a call on the basis of Asean’s review offer,” said Jasbir Singh, co-chair of the Ficci electronics and white goods manufacturing committee.
said many sectors have expressed apprehensions regarding the issue of inverted duty structure arising from the India-Asean trade agreement. “Thus, while engaging in renegotiations with Asean counterparts, it is vital to revisit tariff lines to address such distortions and secure more equitable market access for Indian products. Additionally, ensuring that Asean exporters strictly comply with India’s BIS (Bureau of Indian Standards) requirements will help protect local manufacturers and consumers from sub-standard imports,” he said.
Deepak C Mehta, Chairman Ficci National Chemical Committee and CMD Deepak Nitrite Ltd , said the domestic industry is seeing “an influx of duty-free imports” that is discouraging domestic manufacturers to invest. “Hence, it is important to ensure that FTAs have a limited life of 5 to 6 years,” he said.
He added: “There have also been instances where some of the Asean countries have imposed non-tariff barriers to disallow imports from India, while the same items are being exported freely to India and we have so far not been able to address this asymmetry. India’s attempts to undertake FTA reviews have not been successful so far.”
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