India-ASEAN FTA Discussions

• 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.

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.