The review, which was expected to be finalized at next month’s Jakarta meeting of India and the Association of South East Asian Nations, has stalled since India’s offer of a unified duty structure does not find favour among Asean members, two people aware of the development said.
“This shift in Asean’s approach comes in response to India’s proposal for a unified tariff schedule for all member states—a suggestion that has met with resistance from several countries within the bloc,” one of the two people cited above said on the condition of anonymity.
While the trade agreement has been instrumental in boosting regional economic ties, differing priorities and approaches between India and Asean members could prolong the review, leaving the future of the pact uncertain.
The Asean Trade in Goods Agreement (ATIGA) was signed in 2009 and implemented a year later. Following repeated demands from members, a review was agreed and its scope finalized in September 2022, leading to discussions that began in May 2023. The review aims to enhance the agreement’s trade facilitation measures and maximize benefits for businesses across the region.
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“India, on its part, is keen to revisit tariff concessions granted under ATIGA, particularly those favouring Vietnam. These concessions currently facilitate zero-tariff imports of mobile phone components into India, a point of concern for domestic manufacturers. By reassessing these terms, India aims to safeguard its industries and create a more equitable trading environment,” the person cited above said.
India’s trade with Asean saw significant growth following the signing of the agreement. However, trade balance remains heavily tilted in favour of Asean, a global manufacturing hub.
The Asean bloc comprises Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, but India’s trade with the bloc remains concentrated in five key countries: Indonesia, Singapore, Malaysia, Thailand and Vietnam.
“A common external tariff for all Asean members appears challenging due to the fact that Asean is not a customs union. Member countries do not share identical tariff structures, which complicates efforts to harmonize external trade policies. This disparity in tariff rates has led to calls for separate negotiations, similar to the approach adopted during previous trade discussions,” said Biswajeet Dhar, economist and Distinguished Professor at the Council for Social Development.
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“We were aiming to close the discussion by February, as it was expected. However, I think the dialogues will continue a little longer as all the member countries of the Asean bloc want to discuss their concerns separately,” the second person added.
A commerce ministry spokesperson didn’t respond to emailed queries.
Earlier, India had expressed frustration at the Asean goods agreement due to what it sees as imbalanced trade. Under ATIGA, tariff elimination was proposed for 74.2% of tariff lines, while a reduction in tariffs was agreed for an additional 14.2% of tariff lines. No tariff concessions were provided for the remaining 11.6% tariff lines. Tariff lines are items listed in a country’s tariff schedule.
“The Asean agreement…is the most ill-conceived agreement. If anyone would have read that, it is so unfair to Indian industry,” commerce minister Piyush Goyal said at an industry event in 2023.
India’s trade with Asean saw significant growth following the signing of the agreement. However, trade balance remains heavily tilted in favour of Asean, a global manufacturing hub. Between FY09 and FY23, India’s exports to Asean grew 130.4%, while imports surged 234.4%. Over half of India’s imports from Asean consist of coal, palm oil, and other raw materials.
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In contrast, India’s exports to the bloc include refined petroleum products, commercial vehicles, telecommunications equipment, bovine meat, animal feed, agricultural goods, steel, plastics, and engineering products.
