India welcomes ASEAN's positive response to review of free trade pact2 min read . Updated: 03 Nov 2019, 03:32 PM IST
- PM Modi said the free trade pact will make our economic links stronger and will make our trade more balanced
- The 'RCEP represents a significant economic and trade opportunity for all partners' said Indian officials
Prime Minister Narendra Modi on Sunday welcomed a decision for a relook at a free trade agreement (FTA) between India and the 10-member Association of Southeast Asian Nations (ASEAN). India and ASEAN last month initiated a review of the bilateral free trade agreement in goods to make it “more user-friendly, simple and trade facilitative".
In 2003, India and ASEAN signed a Framework Agreement on Comprehensive Economic Cooperation between to establish an ASEAN-India Regional Trade and Investment Area, which would provide a basis for subsequent FTAs covering goods, services and investment. The India-ASEAN Trade in Goods Agreement (AITIGA) was signed in 2009 and it is this that both sides have agreed to review.
Modi said he welcomed “the decision to re-examine the India-ASEAN FTA. “This will make our economic links stronger and will make our trade more balanced," he said.
In his initial remarks at the India-ASEAN meeting in Bangkok on Sunday, Modi said that an “integrated, unified and economically developed ASEAN served India’s fundamental interests."
“We are committed to building stronger links between India and ASEAN with surface, maritime and air and digital connectivity," Modi said, adding, India had extended a $1 billion line of credit to bolster these links. “Our intention is increase the two way flow of people for education, research, business and tourism," Modi said underlining India’s intent to integrate itself further with Southeast Asia.
The comments come at a time when India is engaged in tough negotiations with the ASEAN and five other countries – Japan, South Korea, Australia, New Zealand and China – to establish a regional trading bloc, the Regional Comprehensive Economic Partnership (RCEP).
New Delhi has its concerns though – given that its FTA with ASEAN is stacking up trade deficits with several ASEAN partners.
According to a recent paper put out by India’s government policy think-tank NITI Aayog, “India’s trade deficit with ASEAN, Korea and Japan has widened post-FTAs."
“Overall it can be concluded that India’s quality of trade has not improved under AIFTA (ASEAN-India FTA)," it added.
It is against this backdrop that India is negotiating the RCEP, widely seen as a China-supported alternative to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which covers 11 countries across the Pacific. Indian commerce minister Piyush Goyal is in Bangkok for meetings with his counterparts for the crucial talks.
India’s concerns stem from the fact that it already has a bilateral trade deficit of over $50 billion with China. Under the liberal rules of origin under RCEP, India apprehends that items on which Beijing doesn’t enjoy lower duties, may end up entering its shores via other RCEP member countries. India wants a tariff differential mechanism to prevent this.
According to Indian officials, the “RCEP represents a significant economic and trade opportunity for all partners."
“There are some critical issues still outstanding and efforts are being made to resolve them to provide a fair and transparent trading environment," Vijay Thakur Singh, Secretary East, in India’s foreign ministry told reporters last week.
“These issues are extremely important for our economy and livelihood of our people. It is therefore imperative that these issues are resolved satisfactorily," she had said adding: “India remains engaged to find a resolution of these issues."