Exports to ASEAN stagnate while imports up 33%; question mark on FTA

India's exports to the Association of Southeast Asian Nations (ASEAN) have stagnated at USD 25 billion since start of the Free Trade Agreement with the 10-nation bloc from January, 2010 while imports rose by over 33 per cent to USD 40 billion, raising a big question mark over the utility of the trade-opening pact with the common market of south east Asia, according to an ASSOCHAM Paper.

Though the global slowdown also seems to have played a role in no growth in exports to the ASEAN, the same did not hold good for imports from the bloc. For the period between 2010-11 and 2015-16, the share of India's total exports to the South East Asian region also dropped to 9.6 per cent from 10.3 per cent when the FTA came into force.

The impact on increased imports may be even more pronounced on conclusion of the current financial year since tariff is to be eliminated on as many more items as 800 under 1252 tariff lines. Tariff would have already been eliminated on 3,200 products under the Normal Track 1, the paper highlighted.

The India-ASEAN overall FTA comprises two parts - goods and services. The agreement on goods was front-loaded, while services pact was back-loaded. The arrangement did not really help India. Given that Indian tariff levels are generally higher than tariffs of ASEAN , India has relatively less to gain from this trade in goods agreement, the chamber President Mr Sunil Kanoria said, pressing for effective access to market of services in ASEAN for India , an area of advantage to India.

In goods, India's average rate in agriculture is more than 34 per cent against 13 per cent in ASEAN. Likewise, India's average MFN tariffs for manufacturing goods are more than 10 per cent compared to 7.5 per cent for the opposite side.

The ASEAN-India Investment and Services Agreement came into force on July 1, 2015. Though a preferential deal on services trade with the region should bring significant gains to India, the services sector is protected through strict domestic regulations and various restrictive requirements.

Reaching a consensus on liberalizing domestic regulations for services licensing equivalence agreements are more time consuming and complex compared to tariff reduction modalities.

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