Indian ASEAN FTA comes into effect on 1 Jan 2010

Trade Minister Anand Sharma Signs Deal

Anand Sharma, Union Minister of Commerce & Industry, signed ASEAN-India Free Trade Agreement in Goods following the meeting of the ASEAN-India Economic Ministers, held in Bangkok on 13 August. ASEAN is a major trading partner for India and accounts for about 10% of its global trade. In the last financial year, bilateral trade between India and ASEAN was more than US $ 40 billion. India and ASEAN have set an ambitious target of achieving bilateral trade of US $ 50 billion by 2010. India initiated the “Look East” policy in 1992 under the PM Narasimha Roa. Negotiations for the India FTA began in 2005 to culminate in the August deal.

The Trade in Goods agreement focuses on tariff liberalization on mutually agreed tariff lines from both the sides and is targeted to eliminate tariffs on 80% of the tariff lines accounting for 75% of the trade starting from 1st January, 2010. India has excluded 489 items from the list of tariff concessions and 590 items from the list of tariff elimination to address sensitivities in agriculture, textiles, auto, chemicals, crude and refined palm oil, coffee, tea, pepper etc. ASEAN countries have also maintained similar exclusion list from the proposed tariff concessions or eliminations.

Indian exporters of Machinery and machine parts, Steel and steel products, agriculture products such as Oilcake, Wheat and Buffalo Meat, Auto Components, Chemicals and Synthetic Textiles expect additional market access as a result of tariff liberalisation by ASEAN. Indian manufacturers would also be able to source products at competitive prices from the ASEAN countries.

The Agreement also provides for bilateral safeguard mechanisms to address sudden surge in imports after the Agreement comes into force. In such an eventuality if it hurts a domestic industry, safeguard measures including imposition of safeguard duties may be put in place for a period up to 4 years. The flexibility to invoke the safeguard measures will remain available for both the sides for a period of 7 years to 15 years from the date, the Agreement comes into force.

India-ASEAN trade was around US$ 40 billion during 2007-08 making ASEAN the 4th largest trading partner of India (after EU, US and China). The India-ASEAN trade has grown rapidly in recent years (27% CAGR since 2000).