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ASEAN-India: Trade In Goods Agreement

In 1991, India announced its ‘˜Look East’ Policy with a view to seeking greater engagement with East Asian countries building upon its historical links with these countries. India became a sectoral dialogue partner of the ASEAN in 1992. India became a Full Dialogue Partner of ASEAN at the 5th ASEAN Summit in Bangkok in 1995 and a member of the ASEAN Regional Forum (ARF) in 1996. With a view to providing an institutional framework for operationalising economic cooperation, India and ASEAN signed a Framework Agreement or Comprehensive Economic Cooperation Agreement (CECA) on October 8, 2003. Negotiations towards a Trade in Goods Agreement commenced in March 2004 and ended in May 2009. In the meantime, ASEAN have signed FTAs with China (2004), South Korea (2006), Japan (2007), Australia & New Zealand (2009).

India-ASEAN Trade in Goods Agreement

On 13th August 2009, India and the ASEAN (Association of South East Asian Nations) comprising Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam signed the Trade in Goods Agreement under the broader framework of Comprehensive Economic Cooperation Agreement (CECA) between India and the ASEAN. The Agreement has come into force on 1st January 2010 in respect of Malaysia, Singapore and Thailand. In the case of other countries, it will come into force after they complete their internal requirements.

Along with the Trade in Goods Agreement, the following related Agreements have also been signed: (a) Protocol to Amend the Framework Agreement on Comprehensive Economic Cooperation between India and the Association of Southeast Asian Nations,

(b) Agreement on Dispute Settlement Mechanism under the Framework Agreement on Comprehensive Economic Cooperation between India and the Association of Southeast Asian Nations and (c) Understanding on Article 4 of the Trade in Goods Agreement under the Framework Agreement on Comprehensive Economic Cooperation between India and the Association of Southeast Asian Nations.

Bilateral Trade

The Trade in Goods Agreement would further boost bilateral trade between India and the ASEAN.  ASEAN is a major trading partner for India and accounts for 9.42% of its global trade. In the financial year 2008-09, bilateral trade between India and ASEAN was almost US$ 45 billion. India and ASEAN have set a target of achieving bilateral trade of US$ 50 billion by 2010 which is likely to be achieved.

Tariff Concessions

Under the Trade in Goods Agreement, Schedules of Tariff Commitments have been drawn by all Parties indicating product-wise tariff concessions or no concessions. The tariff commitments of India are divided in the following categories:

Tariff Elimination: Tariff is gradually eliminated on

Normal Track 1 ‘“ 7775 products (at HS code 8 digit level) through annual cuts between 1.1.2010 and 31.12.2013

Normal Track 2 ‘“ 1252 (at HS code 8 digit level) products through annual cuts between 1.1.2010 and 31.12.2016

Tariff Reduction: Tariff is gradually reduced

Sensitive Track ‘“ to 5% on 1805 (at HS code 8 digit level) products through annual cuts between 1.1.2010 and 31.12.2016

Highly Sensitive Track ‘“ to 37.5% on Crude Palm Oil, 45% on Refined palm Oil, Coffee, Tea and 50% on Pepper through annual cuts between 1.1.2010 and 31.12.2019

Exclusion (Negative) List: No tariff concession is offered for 1297 products (at HS code 8 digit level).

Each country (excluding Singapore) has maintained an Exclusion (Negative) List to address its respective domestic sensitivity. India has excluded a large number of items from the list of tariff concessions to address our sensitivities in agriculture, textile, auto and chemical sectors. It may be noted that India insisted and ensured a large Negative List despite ASEAN’s reluctance.  ASEAN has very small or no Negative List in its FTAs with China, South Korea, Japan, Australia & New Zealand. Key items that have been given protection through the Negative List are:

Vegetables ‘“ Tomato, onion, garlic, ginger, carrot, radish, cauliflower, cucumber, peas, beans, chilli, capsicum, potato, etc

Fruit/Nuts ‘“ coconut, copra, cashew kernel, areca nut, betel nut, banana, pineapple, guava, mango, oranges, grapes, raisin, apple, lemon, watermelon, papaya, cherries, etc

Spices – chilli powder, nutmeg, vanilla, cardamom, fenugreek, coriander seeds, cumin, turmeric, mustard seeds, poppy seeds, etc

Cereals/Grains ‘“ rice, wheat, maize, sorghum, jowar, bajra, ragi, malt, etc

Oilseeds/Oils – soya bean, groundnuts, linseed, rapeseed, sunflower seed, soya oil, groundnut oil, sunflower oil, coconut oil, etc

Fish/Fisheries ‘“ Trout, Sole, Tuna, Herring, Cod, Sardine, Mackerel, Hilsa, Dara, Seer, Pomfret, Cuttlefish, Shrimp, Prawn, Crab, Lobster, processed Tuna, Caviar, etc

Others – natural rubber, tobacco, roses, carnations, orchids, milk, butter, ghee, natural honey, starches, sugar, jaggery, tapioca, etc

Textiles ‘“ Woven Fabrics of Cotton including dhoti, saree, shirting, casement, upholstery, etc, polyester yarn, certain synthetic fabrics of filament yarn, etc

Auto ‘“ Cars, buses, 3-wheelers, lorries, trucks, chassis, brakes, clutches, silencers, safety belts, etc

Chemicals ‘“ Kerosene oil, Diesel, Aviation Fuel, Zinc Oxide, Red Oxide, Distemper, Herbicides, Disinfectants, etc.

Timelines for Tariff Commitments have also been indicated by all Parties along with the annual tariff cuts to be undertaken starting from is January 2010. The end dates for achieving all the desired end-rates of tariff are:

31st December 2019 for India and ASEAN-5 (namely, Brunei, Indonesia, Malaysia, Singapore and Thailand),

31st December 2022 for India and the Philippines and

31st December 2024 for New ASEAN Member States (namely, Cambodia, LaoPDR, Myanmar and Vietnam).

For India’s agreed tariff lines, tariff elimination would be achieved in two phases ‘“ by 31st December 2013 and 31st December 2016.

Safeguard Mechanism

The Agreement provides for a safeguard mechanism to address sudden surge in imports on account of tariff concessions.  When a surge is likely to hurt the domestic industry, safeguard measures including imposition of safeguard duties can be initiated to prevent or remedy serious injury and to facilitate adjustment for the domestic industry.  A Party shall have the right to initiate a safeguard measure any time during the transition period. The transition period begins from the date of entry into force of the Agreement and ends five years from the date of completion of tariff reduction or elimination.  For instance, if a surge in import of palm oil causes or threatens to cause a serious injury to the domestic edible oil industry, India can invoke safeguard measure anytime during 1.1.2010 to 31.12.2024.

Benefits for India

The Agreement would lead to growth in bilateral trade and investment resulting in economic welfare gains to India. Indian exporters of Machinery & Machine Parts, Steel & Steel Products, Oilcake, Wheat, Buffalo Meat, Automobiles & Auto Components, Chemicals, Synthetic Textiles, etc would gain additional market access into the ASEAN countries. Indian manufacturers would be able to source products at competitive prices from the ASEAN markets.

Agreement on Trade in Services & Investment

India and ASEAN are currently negotiating Agreements on Trade in Services and Investment which are targeted to be concluded by August 2010. ASEAN provides a great potential for export of services by India. ASEANs total trade in services is US$ 280.90 billion compared to India’s US$ 137.50 billion in 2006.

*The article is written by P.K. Dash

*The article was earlier published January, 2010.

(Courtesy: Northern Voices Online)

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