ASEAN India Free Trade Agreement

Free Trade• Free trade is a policy in international markets

in which governments do not restrict imports or exports.

• Key features are - a) Trade of goods without taxes (including

tariffs) or other trade barriers (e.g quotas on import).

b) Trade in services without taxes or other trade barriers.

ASEAN

• Stands for Association of South East Asian Nation.

• A political and economic organization of 10 countries.

• Formed in 1967 by Indonesia , Malaysia , the Philippines , Singapore and Thailand.

• Brunei , Cambodia , Laos , Myanmar and Vietnam were included later.

ASEAN India Trade Relations• 1993-2003 : ASEAN-India bilateral trade grew at an

annual rate of 11.2%, from US$ 2.9 billion in 1993 to US$ 12.1 billion in 2003.

• 2008 : total volume of ASEAN-India trade was US$ 47.5 billion. ASEAN’s export to India was US$ 30.1 billion – a growth of 21.1 per cent as comparison to that of 2007. ASEAN’s imports from India were US$ 17.4 billion – a growth of 40.2 per cent in comparison to that of 2006.

The Free Trade Agreement

• Second ASEAN-India summit 2003: ASEAN-India Framework Agreement on Comprehensive Economic Cooperation signed.

Paved way for FTA in goods , services and investment.

• 19 August 2009 : ASEAN India Trade In Goods Agreement signed.

Entered into force on 1 January 2010.

Key Features

• The goods are divided into different types :1. Normal Track-1 > Tariffs drop to zero by 31 December 2013. > 70 % of total tariff lines.2. Normal Track-2 > Tariffs drop to zero by 31 December 2016. > 8.9 % of total tariff lines.

3. Sensitive Track > Tariff drops to 5 % by 31 December 2016. > 11.1 % of total tariff lines.

4. Special Products > 0.1% of total tariff lines. > Include crude & refined palm oil, tea, coffee and pepper.

5. Exclusion List > 9.8 % of total tariff lines.

• The trade-in-goods FTA eliminated tariffs for about 4,000 products (including electronics, chemicals, machinery and textiles) between the regions. Duties for 3,200 products will be reduced by December 2013, and duties on the remaining 800 products will be brought down to zero or near zero by December 2016.

• There are a total of 489 items excluded from the list of tariff concessions pertaining to farm products, automobiles, certain auto-parts, machinery, chemicals, and crude and textile products.

Growth Before and After FTA

• 2005-2009 : Trade grew at over 22 percent annually.

• 7th ASEAN-India Summit on 24 Oct 2009 : Bilateral trade target revised to US $ 70 billion for next two years.

• 2011-2012 : Trade increased by more than 39 percent to US $ 79 billion.

S. No. Name of Country

April-2010-March-2011 April-2011-March-2012 April-2012-March-2013%Growth in INR %Growth in US$

Value in INR Lacs Value in US$ Million Value in INR Lacs Value in US$ Million Value in INR Lacs Value in US$ Million

1 BRUNEI 106,485.70 234.17 285,369.97 605.02 440,597.91 814.80 54.40 34.67

2 CAMBODIA 3,637.69 8.01 3,463.66 7.27 6,469.52 11.90 86.78 63.69

3 INDONESIA 4,513,629.30 9,918.63 7,041,989.62 14,765.93 8,096,569.76 14,879.49 14.98 0.77

4 LAO PD RP 100.53 0.22 44,065.07 89.26 76,479.58 138.64 73.56 55.32

5 MALAYSIA 2,974,590.44 6,523.58 4,538,502.77 9,473.64 5,419,876.33 9,951.06 19.42 5.04

6 MYANMAR 465,115.40 1,017.67 661,401.33 1,381.15 770,118.21 1,412.69 16.44 2.28

7 PHILIPPINES 195,046.60 429.39 212,544.32 441.38 274,358.42 504.00 29.08 14.19

8 SINGAPORE 3,254,576.75 7,139.31 3,970,847.55 8,388.49 4,076,395.09 7,486.38 2.66 -10.75

9 THAILAND 1,945,991.14 4,272.09 2,532,484.41 5,283.84 2,911,298.10 5,352.61 14.96 1.30

10 VIETNAM SOC REP 484,759.06 1,064.90 832,325.93 1,722.87 1,259,442.24 2,314.78 51.32 34.36

Total 13,943,932.60 30,607.96 20,122,994.63 42,158.84 23,331,605.17 42,866.36 15.94 1.68

Imports to India

S. No. Name of CountryApril-2010-March-2011 April-2011-March-2012 April-2012-March-2013

%Growth in INR %Growth in US$

Value in INR Lacs Value in US$ Million Value in INR Lacs Value in US$ Million Value in INR Lacs Value in US$ Million

1 BRUNEI 10,525.05 23.07 406,235.77 895.49 21,830.06 40.02 -94.63 -95.53

2 CAMBODIA 30,483.23 66.94 47,753.35 99.45 60,998.60 112.28 27.74 12.90

3 INDONESIA 2,592,440.79 5,700.78 3,210,069.61 6,677.99 2,899,608.70 5,331.30 -9.67 -20.17

4 LAO PD RP 5,943.51 13.11 7,320.34 14.97 15,712.71 28.91 114.64 93.12

5 MALAYSIA 1,767,721.05 3,871.17 1,910,321.00 3,980.36 2,414,350.85 4,444.07 26.38 11.65

6 MYANMAR 145,903.12 320.62 264,450.60 545.38 296,070.66 544.66 11.96 -0.13

7 PHILIPPINES 400,462.19 881.10 476,321.82 992.91 646,549.08 1,187.19 35.74 19.57

8 SINGAPORE 4,473,173.31 9,825.44 8,036,299.98 16,857.71 7,399,496.63 13,619.24 -7.92 -19.21

9 THAILAND 1,034,625.66 2,274.21 1,425,353.49 2,961.01 2,031,024.16 3,733.17 42.49 26.08

10 VIETNAM SOC REP 1,204,507.36 2,651.44 1,808,498.30 3,719.09 2,156,284.25 3,967.37 19.23 6.68

Total 11,665,785.27 25,627.88 17,592,624.27 36,744.36 17,941,925.71 33,008.21 1.99 -10.17

Exports from India

Criticism

• High trade deficit of India with ASEAN.

• Domestic products suffer.

• May lead to specialization and total trade dependence for certain goods.

Country Net Exports (US $ million)

BRUNEI - 774.78CAMBODIA 100.38 INDONESIA -9,548.19LAO PD RP -109.73MALAYSIA -5,506.99MYANMAR -868.03PHILIPPINES 683.19SINGAPORE 6,132.86THAILAND -1,619.44

VIETNAM SOC REP 1,652.59Total -9,858.15

Net Indian exports (2012-2013)

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Live animals except fish

Meat & preparations

Dairy products & eggs

Fish, shellfish, etc.

Cereals & cereal preparations

Vegetables & fruits

Sugar, sugar prep. , honey

Coffee, tea, cocoa, spices

Animal feed Tobacco & manufactures

IND India MAL SIN THA VIE

RCA Index (In 2010) Revealed Comparative Advantage

Future Prospects

• TIG may prove to be beneficial in the long run.• FTA in services and investments may soon be implemented.• Service oriented economy of India.• $ 100 billion mark by 2015.

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