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  • Context (TH): India and the Association of South East Asian Nations (ASEAN) will begin negotiations to “modernise” the 15-year-old free trade agreement (FTA).
  • ASEAN accounted for 11.3% of India’s global trade in 2022-23.
  • The ASEAN India Trade in Goods Agreement (AITGA) is expected to be completed by 2025.

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Need to Renegotiate FTA

  • After the FTA, India’s trade deficit with ASEAN rose from $7.5 billion annually to $43.57 billion in FY23.
  • Incidences of re-routing of goods by China through the ASEAN countries cause duty losses.

New Expected Provisions

  • New elements of product-specific rules will make FTA more efficient.
  • Rules of Origin will be incorporated to increase market access and to stop Chinese circumvention.
  • Trade remedies will protect domestic industry against unfair trade practices or unforeseen surges in imports of goods.
  • No new areas, such as environment, labour, MSMEs or gender, will be added to avoid new issues.
  • Rules of Origin are the criteria used to determine the origin of a product to establish duty charges.

Types of Trade Agreements

  • Trade Agreement: Cooperation between two or more countries for specific trade or investment terms.

Free Trade Agreement

  • Two or more countries provide preferential trade terms, tariff concession, etc., to the partner country.
  • It is more detailed than a Preferential Trade Agreement with a “Negative list” of excluded items.

Preferential Trade Agreement (PTA)

  • Preferential right of entry is given by reducing duties on “Positive list” items.
  • Tariffs may be reduced to zero for some products, even in a PTA.
  • India signed a PTA with Afghanistan.

Comprehensive Economic Partnership Agreement (CEPA)

  • Besides the above cooperation, CEPA also includes the regulatory aspect of trade.
  • India has signed CEPAs with South Korea and Japan.

Comprehensive Economic Cooperation Agreement

  • It covers negotiation on trade tariffs and “Tariff Rate Quota” only.
  • It is not as comprehensive as CEPA.
  • India has signed CECA with Malaysia.

Framework agreement

  • Framework agreement primarily defines the scope and provisions of the potential deal.

Early Harvest Scheme

  • It is a precursor to an FTA/CECA/CEPA between two trading partners.
  • Before the conclusion of the actual FTA, countries identify certain products for tariff liberalisation.
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