Goyal asks Asean to bolster rules
Commerce and industry minister Piyush Goyal has asked the Association of Southeast Asian Nations (Asean) to strengthen their “rules of origin” provisions, one of the key concerns of India, which has experienced an influx of Chinese goods routed through some members of the 10-member grouping.
Co-chairing the 17th Asean-India Economic Ministers Consultations on Saturday through video conference, Goyal highlighted that the free trade agreement (FTA) has to be “mutually beneficial” and expressed the need to strengthen the rules of origin provisions, work towards removal of non-tariff barriers and provide better market access, a commerce ministry statement said on Sunday.
He asked for an early review of the Asean-India Trade in Goods Agreement (AITIGA) as the trade pact is hurting India’s interest, particularly because of violations of rules of origin. India is concerned and wants to review FTAs as several Chinese goods are dumped in its market through a third country with which India has a free trade agreement, a government official said, requesting anonymity.
The review is necessary as many items enter the Indian market taking advantage of the Asean-India FTA. Imports at reduced or zero duty put Indian industry at a disadvantage, the official said.
At the Asean-India Economic Ministers Consultations on Saturday, Goyal reiterated India’s consistent position that the review of the FTA has been inordinately delayed. India wants a review of the trade pact as balance of trade is heavily tilted in favour of Asean members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
According to official data, India’s exports to Asean in 2019-20 were worth $31.49 billion while its imports from the group of countries reached $55.37 billion.
An industry study pointed out that India’s imports from Asean countries increased sharply after the signing of the FTA in 2009. India in 2009 signed an FTA in goods – Asean-India Free Trade Agreement (AIFTA) – with the group, and in 2014 inked an FTA in services.
The report, India’s trade and investment opportunities with Asean, prepared by the PHD Chamber of Commerce and Industry in November 2019, said that in the post-AIFTA era, India’s merchandise exports to Asean economies increased from $23 billion in 2010 to $36 billion in 2018 at a compound annual growth rate (CAGR) of around 5%, while its merchandise imports from Asean nations increased from $30 billion in 2010 to $57 billion in 2018 — a CAGR of around 8%. The report also emphasised the need to review the existing trade arrangements for mutual gains.
On Saturday, Goyal asked for closer engagement towards finalisation of the scoping exercise, before the Asean-India Leaders’ Summit scheduled in November 2020 and to start the full review before the end of this year, the commerce ministry said in the statement. Goyal co-chaired the Saturday meeting with Vietnam’s minister of industry and trade Tran Tuan Anh.
A report of the Asean India Business Council (AIBC) was also presented in the meeting. It also recommended a review of the AITIGA for mutual benefit. The ministers from India and Asean countries instructed senior officials to start discussions to determine the scope of the review at the earliest to make the FTA more user-friendly, simple, and trade facilitative for businesses.
Sangita Reddy, co-chair of AIBC (India), said India and Asean should develop a roadmap for collaboration in the health care and pharmaceutical sectors along with knowledge exchange and digital connectivity. “She shared that special incentives for Indian pharmaceutical companies should be introduced for setting up plants in dedicated Asean zones,” the Federation of Indian Chambers of Commerce and Industry (Ficci) said in a statement. The industry association is the Indian secretariat of the AIBC.
Asean ministers reaffirmed their commitment to taking collective action in mitigating the economic impact of the coronavirus disease pandemic and resolved to ensure macroeconomic and financial stability and resilient supply chain connectivity, particularly the unimpeded flow of essential goods and medicines in the region, in compliance with the World Trade Organisation (WTO) rules, the statement said.
AIBC also recommended elimination of non- tariff measures to enable seamless movement of goods and services, Ficci said in the statement. It proposed the introduction of a business travel card which would facilitate business travel between India and Asean countries. It would have minimum 90-day validity.
“A review of all existing FTAs is necessary because of two reasons – the geopolitical dimensions that gives an opportunity to India to become a manufacturing hub for several products such as pharmaceuticals and information technology-enables services, and to check dumping of Chinese products from Asean countries that is hurting our domestic industries,” said chartered accountant Vijay Kumar Gupta, a former central council member of the Institute of Chartered Accountants of India (ICAI).