{ Economics Articte ) India and ASEAN Trade Ties —Sanjeev Sirohi ASEAN comprises ten nations and they are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailanel and Vietnam. It has been capturing, the news headlines as just recently of ‘August 13, 2009 India emerged to ink, a landmark Pree Trade Agreement ‘with it after 6 gruelling years of hare bargaining, The Free Trade Ageevs ‘comes into force on January 1, and will, in 6 years, minimise oF fend all trade harriers and thus will give a huge boosting to two way trade, ASEAN is now India’s fourth largest trading partner in the world, Here it is imperative to mention, that ever since March 2004 when the India ASEAN trade negotiation com: mittee was formed, many meetings have boon hel to iran out differences, (on Various contentious insu ranging, from rate of reduction of import tari ‘on various products, operational certification procedure, rules origin, ate interests of the producers on crops and most impor ullueal- products a great seal of give and take ane compromises alsa rade by both sides in the format of the agecement, bul negotiations an set vices and investments are still going, on between both sides. It Ik only when they too come under the Fre Trade Ageoement’s ambit, will India be able to extract full enetits, It is but obvious that any such agreersent immediately cores under the scanner ‘of domestic special interest groups, and therefore here also the Free Trade ‘Agreement with ASEAN nations has ‘encountered fierce eppesition from some political, industrial and agri- cultural groups in not only India but also in some of the ASEAN nations, ‘Owing to such opposition, the num- ‘ber of items kept under the ‘sensitive list” remains quite large, with the deadline for sceapping them extend ing to 2019, ‘The Free'Trade Agreement (FTA), ing only to goods, was signed by Union Commerce and Industry Minister Anand Sharma and_his ASEAN (Association of South East ‘Asian Nations) counterparts at a cere mony in Bangkok after the two sides held annual consultations, This has ‘opened usa L7 billion people market for businesses from both the sides The accord, India’s first with a trade bloc, will cover 11 countries with a ‘combined Gross Domestic Procluct of ‘over $2 trillion, Co-Chaleperson of the ASEANsAndia ‘Trade Negotiating Committee, Reber, later told media that nine members of the L0-nation regional trade blac signed the pact on August 13, 2009, India ond Vietnam, according to Rebwecs, had already agreed to sign a memorandum of understanding on this issue. The implementation of the Free Trade Agreement would, therefore, take off from Jonuaty 1, 2010 as now agreed upon, she emphasised ‘The press stotem the nigning of the FTA alsa said that the mutually agreed taeff liberali sation would gradually eover 75 per ceont af the two way trade, beginnlng. from January 2040, India-ASEAN ade was af the order of $40 billlon in the 2007-08 accounting year, It should further geow sigaifieantly in the coming years ax the trade relo> tions betwoen Indiaand ASEAN have improved a lot, Rebecea said the ASEAN woul now seek a "ast-track’ approach for talks with India for a ‘single’ follow up accord on Mbevalis- ing the two way flow of services aid investments, The hope’ was to finalise the deal in about a year’s line. The ASEAN’s expectation w. that the tariff cuts under the FTA, a6 now signed, would be fully implemented by the end of 2013 and 206 in respect of two narmal Hacks’ ‘4 timeline had also been agreed upon for the ‘sensitive ist’ of ilems, she said, ‘The Free Trade Agreement would ring down tariffs an electronics, chemicals, machinery and textile goods, according to a commerce ministry statement. Interestingly, talks on software and information technology services have been pos ponesl for December 2009. This is certainly one area where Indian exporters of servic could have brought in good business and all offset the setbacks received in the ‘European and US markets during the downtum. OF the total $ 936 billion worth of ASEAN imports, impart of services account for $ 180 billion which isthe primary focus of Indian lawdusiey, Very strong lobbying from the domestic industry has led. to fndia excluding 449 items from the fist of tariff concessions and 830 ilems from thelist of tari elimination to address sensitivities iv agriculture, textiles, futo, chemicals, erude and refined palm oll cote, tea, paper ete, Under the trade pact, Ilia has inelucle 489 items from agriculture, textiles and chemicals in the mgative list, means Jing these products will be kept out of the sluty ecluction. Adalressing legit mate concerns of domestic planters, black tea, coffee, pepper and rubber have been inchuded in the sensitive list, which soukd well mean that duties will be cut by 2019 only, However, duty on these items at 00 time willbe eliminates, Farmers in South India, expe- élally Kerala are worvies aot as they fear lower duty on plantation erops like coffee and pepper would obviously lend toa deluge of imports from ASEAN memberslike Indonesia, Malaysia, which could leave domestic Indian farmers vulnerable to unequal competition, There is a significant overlap in farm produce of these countties and Kerala—tea, coffee, rubber, pepper and cardamom. Under the agreement, India has ageced to cut import duties on tea and coffee to 45 per cent, pepper to 50 per cent, crude palm oil to 375 per cent and refined palm oil to 45 per cent. And, rubber has been inchided in the negative list. There are huge dif ences in prostuctivity, tabour costs, inputs and quality in the paring souniries, which can't be sasily bridged. For instance, in Kerala productivity of pepper is 380 kg per hectare, while in Vietnam itis 1,000 1g per hectare and in Indonesia 3,000 kg. “How can we compete with them all of @ sudden 2 asked Sreedhacan Nambiar, a pepper producer from Thalasserey in nowth of Kerala. Even the Kerala Finance Minister Thomas Tasane remarked “It has tobe dane in a calibrated way. But the Centre rushed in (to sign the pact), exposin the ailing farmers to greater risk. Defence "Minister A.K. Antony, a Rajya Sabha: member from Kerala also supported their concerns which cannot be easly overlooked However, Union Commerce and Industry Minister Anand Sharma endorsed it fully saying *This is a historic development given the incroaning engagement between India and ASEAN countries andthe enhanced economic cooperation, This agreement definitely will open new opportunities and new pathway’ for multi-sectoral engagement, We ean say that negotiations have been "the negotiator have ur senaitive areas where we had cancers are dully addressed. The agreement was well balanced asd was in harmony with India’s Look East Policy. The whole debate of the Comprehensive Eeonomic Cooperation Agecement adversely Impacting domestic planters. was based on uninformed speculations". The bulk of trade between India and. ASEAN include textiles, steel, proces sed food, plantation crops, iron and steel, readymade garments and chemicals. The Federation of Indian ‘Chambers of Commerce and Incustry (FICCH, which had accompanied Mr. ‘Sharma, Commerce Minister in lead ing.a business delegation said that the agreement would provide access to the huge ASEAN market to India, “It wll give Indian business access to the Jange ASEAN market: Indian industry does not have many concerns (and) ‘sensitivities on agri products have bbeen taken care of” FICCI business delegation leader O. P. Lohia, present atthe signing ceremony said, The tworsides—India_ and. ASEAN have set on ambitious target cof achieving an increase of $ 10 billion worth of trade in the first year from, PD/ecember/2009/1037 $40 bition at preven after the agreo- rent comes into force from January 2M0, This agreement would even- tually eliminate duty om 80% of the goods traded at present by 2016. Now we would like to give some suseful dats and figures which are os follows : Indian-ASEAN Trade | $0 Fr} we | wo | ‘Apr: 2000-Mar. 2001 ‘Apr: 2007-Mar. 2008 ‘Ap: 2008-Fels.2000 Exports Om) Country | aproeee oF Siogapore Ea Matayla ” Indorala 2 Thala W Viena i Philippines o Myavumar 02 ‘The Free Trade Agreement pro- vide for duty-free import and export ‘0f 4,000 products, ranging from stool to apparels to sugar andl tobacco over 4 period of eight years. Trade between dia and the ASEAN is expected to re to 8 60 billion from the $ 40 Billion last year. In India, it is the ‘exporters of machinery, stel,oilcake, wheat, buffalo meat, auto compo nents, chemicals and synthetic textiles who wil benefit. In case of sudden surge in imports which hurt domestic industry, both sides are free to impose safeguard. dutios for four years, This Flexibility remains upto 15 years, Here we would mention again that after intense negotiations of 6 years. the pact on trade in goods under the Comprehensive Economic ‘Cooperation Agreement (CECA) was Exports ASEAN Share of ‘otal Export India’s Trade with other Major Economie: Ra eee coum | | an] it | AES | oa] thee 8, Korwa, Mw 1008 ry 7 | wa MM ASEAN Country wise Breal ‘i Share| Apr’os-ret ‘a | signed on August 13, 2009 at Bangkok by Union Commerce and Industey Minister Anand Sharma and Eeono- mic Ministers of the ASEAN. The agreement, whose provisions are due to take effect next year, will cancel lasiffs on most of the trade between ASEAN and India by 2016, starting Tinpors from ASEAN sta | s Share of Tom Import “ %0 ¥9 65 01 06 27 “ m4 Imponta (8 8 ‘% Share a5 28 ES) 09 on ” 20 MW 10 0 ow oor “ 3 {n 2013, according to a statement by ASEAN. It didn't give a timeframe far reaching the $ 60 billion level cited, Duties for as many as 489 ‘very products will be retained, trade agreement serves as a signal to the international economic community that the ASEAN member countries and India remain commit= ted to trade liberalization. 60 | oF | a | a | | I ASEAN is pursuing trade deals with other nations inthe region in a bid to bolster exports as the global recession drags on demand. ASEAN has already inked such deals with China Japon, Australia, New Zealand and South Korea. It i worth men- tioning here that ASEAN's own rember states, trace with the rest of the world has virtually doubled which we cannot ignore in an era ofglobalisation, ‘Singapore, Malaysia and Indonesia are currently India’s three targest trading partners within ASEAN, Trade with Thailand, which ranks fourth in imports to India, may grow to $ 10 billion by the end of 2010, fcom about § billion currently. ‘Our govemment has set up a group of ministers (GoM) to assess the impact of the India-ASEAN (ree trade agreement on the domestic market, particularly the plantation, sector and to address domes cers. I is pertingnt to mention here that free trade agreement with ASEAN does not include software andl infotech, In the last seven yeas, there has been 20 per cent rise in ‘economic engagement with ASEAN nations, The FICCI Secretary General ‘Amit Mitra says, India should work tosecure to 10 per cent of ASEAN's $1 trillion import, After all, Indian goods and services too will have access to that market at 5 por cont duty initially and Zoro shuty before tong. Hailing the mew trade pact with ASEAN as India's most ambitious ‘economic accord with an external player so far, Union Commerce and Industry Minister Anand Sharma affirmed that the interests of India's plantation sector have been fully protected and ity concer have been fully addrossed. He said, "The GoM. will look into the structural issues of the plantation secior and also linio) what more needs to be done to restore and rehabilitate that sector’ The objective was to ‘tejuvenate’ the ‘entire plantation spectrum and make it‘more competitive’ in the lomestic and global markets, In all, ‘the considered view’ ofthe Union Cabinet was that the ‘structural laws! of this sector, ‘not related to the India- ASEAN free trade agreement’ had to be really Tooked into’. As forthe FTA. itself, India's ‘negative lst signifying, no tariff reductions on imports, covered commodities like rubber, coconut. turmeric. copra and the lke, Ihe sai do lasteate how the concerns were met. In addition, some other plantation-related items were placed in India's “highly sensitive list’ of safeguarded tariff cuts which would rot at all lead to a total elimination of import duties. Tariffs would be PDMecember/2009/1038 reduced over 10 years om procucts described 35"highly sensitive, includ. ing palm oil and coffee. Kerala had strong, objections to slashing duties ‘on fish, rubber, palm oil, pepper, ta land coffee What really came aso feather in the cap of Indian diplomacy was the “negative list” concepts inclusion in Free Trade Agreement (FTA) in ‘goods between India and ASEAN. India bargained hard to include 489 items inthe ‘negative is, The items in the ‘negative list include marine and fish products, coconut, cashew, ‘vanilla, nutmeg, cardamom, eorian der, cumin, ginger, turmeri, s930, ceopra, palm nuts, coconut ail and tobacco, Similarly, rubber plantations have also been provided protection by placing natural cubbor in the ‘negative list, A lange number of teatllog and auto products abo were included in the lst to safeguard the Interests of the tie. ledusteis in ‘whieh some ASEAN nations have an sedge over India, While pointing out that ASEAN haw not accepted the ‘nqgetive list! concept in tts ETAS swith ony other country, senlor Gam: merce Ministry officials told media that i took over five years for Kno and ASEAN to iron out their dil fences over the tarif sticture Hero, lot uv also nat be oblivious ‘ofthe comforting fact that Lia has the vole advantage of « praca and not immediate redvetion of taritls that would give tine to bod it fazm sector and industry to prove pro ‘duction and become more competi tive, Lat us ako not forget that lads hay managed to safeguard the interests of both its farmers and industry through a lange ‘Negative sind Exclusion Hist of A89 items as pointed out earlier also which Includes 303 items of ageiculture sector; BI items of textile sector; 50 items of auto sector and 17 tems of chwmical sector, Moreover, gradual feduction of tariffs has been provided inthe FTA, where dias duties on USKS tariff Lines would be reduced ‘between 2010 and 2019 under various tracks and different timelines. While the first four years would see tariff bing eliminated on 7,788 tariff lines {ovosity with duties from 7°5 to 10 per ‘cent would be reduced on an average bby 15 to2 percentage point annually) (0m 1 252 ines, tariff would Be elimina- ted in seven years most of which having the duty in the range af 75 to 10 per cent, would have an annual average reduction of T-1-5 percentage point. On evitical items of interest to India, tariét cut would be effected wilh reference lo prevailing rates of 2005, which were in the range of 80 per cent far crude palm oll, 90 per cent for refined palm oil, 100 per cent for coffee and black tea ans! 70 per cent for pepper. Even MEN (Most Favoured Nation) tariff rates are nil for crude palm oll and 75 per cent for refined palm oil, India would gain market access for machinery and machinery parts, steel and steel products, agricultural produce such ‘os ollsewcs and wheat, bul ‘auto parts, chemicals and synthetic textiles, while ASEAN would stand to ain market access for its griculeural proxtucts, The FTA alo provides for bila feral safeguard mechanism to address sueldon surge in imports, Im sueh an oventuality if it hurts a domestic rulustey, safeguard measures includ ing imposition of safe-guaed duties may be put in place for a upto four years, The flexibility 40 Invoke the safeguard measures will fwmain available for both sides for 7 0.15 years While itis true that the ASEAN would have an upper edge lover Inala on ETA inv goosts when It ‘onion into effect from January 1, 2010 but certainly ever the worst critics would concur that India too would have an edge when the trate agree vents on services and investinents fre signed as it would help tndia In. explore the 10-nation market for its strong nerviees sector, besides attract ing irestinents, = fi Unique Book on Personality Development JUPRAR'S HOW TO ADD NEW DIMENSIONS TO YOUR PERSONALITY (Prof) RP Chaturvedi Code No, 1521 Rs. 65! 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