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DR.

RAM MANOHAR LOHIYA NATIONAL LAW


UNIVERSITY, LUCKNOW (U.P.)

Session- 2017- 2018

Subject: Trade Law

Final Draft

On

Indian ASEAN Free Trade Agreement

SUBMITTED TO SUBMITTED BY

Ms. Kirti singh Gaurav krishna

Assistant Professor (Law) Sec-A, Enroll No-60

Dr. RMLNLU Lucknow


ACKNOWLEDGMENT

First and foremost, we would like to thank to our teacher of this project, for the valuable guidance
and advice. He inspired us greatly to work in this project. His willingness to motivate us contributed
tremendously to our project. Also I would like to thank the authority of Dr. Ram Manohar Lohiya
National Law University for providing us with a good environment and facilities to complete this
project. Also, we would like to take this opportunity to thank to our university for offering this
subject, drafting, pleading and conveyance. Finally, an honorable mention goes to our families and
friends for their understandings and supports on us in completing this project. Without helps of the
particular that mentioned above, I would face many difficulties while doing this.
Introduction

Background

The ASEANIndia Free Area emerged from a mutual interest of both parties to expand their
economic ties in the Asia-Pacific region. India's Look East policy was reciprocated by similar
interests of many ASEAN countries to expand their interactions westward.

After India became a sectoral dialogue partner of ASEAN in 1992, India saw its trade with
ASEAN increase relative to its trade with the rest of the world. Between 1993 and 2003,
ASEAN-India bilateral trade grew at an annual rate of 11.2%, from US$2.9 billion in 1993 to
US$12.1 billion in 2003.[6] Much of India's trade with ASEAN is directed towards Singapore,
Malaysia, and Thailand, with whom India holds strong economic relations.

In 2008, the total volume of ASEAN-India trade was US$47.5 billion. ASEANs export to India
was US$30.1 billion a growth of 21.1 per cent in comparison with that of 2007. ASEANs
imports from India were US$17.4 billion a growth of 40.2 per cent in comparison to that of
2006. As for foreign direct investment (FDI), the inflow from India to ASEAN Member States
was US$476.8 million in 2008, accounting for 0.8 per cent of total FDI in the region. Total
Indian FDI into ASEAN from 2000 to 2008 was US$1.3 billion.

Acknowledging this trend and recognising the economic potential of closer linkages, both sides
recognised the opportunities for deepening trade and investment ties, and agreed to negotiate a
framework agreement to pave the way for the establishment of an ASEANIndia Free Trade
Area (FTA).
India and the Association of South East Asian Nations (ASEAN) negotiated a bilateral free trade
agreement with plenty of difficulty. Under their initial bilateral framework agreement, signed
in Bali on 8 October 2003, the India-ASEAN FTA for goods was supposed to be finalised by 30
June 2005. Negotiations on services would start in 2005 and end in 2007.

After a years delay, discussions ground to a halt in June 2006 when India released its negative
list of items to be excluded from tariff reductions with 900 products, both industrial and
agricultural, figuring on the list. (This was down from Indias initial negative list of 1,410 items.)
Indias agriculture ministry, in particular, was arguing hard to exclude commodities like rubber,
pepper, tea, coffee and palm oil from the deal. Rules of origin have been the other thorny issue.

Two months later, in August 2006, Delhi issued a revised list, pruned down to 560 items.
However, tremendous fears about the impacts of the India-ASEAN FTA on farmers continued to
rattle the discussion.

By early 2007, in the midst of the new bio fuels boom, palm oil became a central blockage point
as Indonesia and Malaysia, both top palm oil exporters, struggled to get India to lower its tariffs.

On 28 August 2008, a deal was finally concluded. The agreement was signed in 2009 and took
effect (trade in goods) with 5 of the countries and India in January 2010, (Singapore, Malaysia,
Brunei, Myanmar and Thailand). India is pushing without much apparent process for a
services liberalization deal with the ASEAN countries.

History

At the Second ASEAN-India Summit in 2003, the ASEAN-India Framework Agreement on


Comprehensive Economic Cooperation was signed by the Leaders of ASEAN and India. The
Framework Agreement laid a sound basis for the eventual establishment of an ASEAN-India
Regional Trade and Investment Area (RTIA), which includes FTA in goods, services, and
investment.

ASEAN and India signed the ASEAN-India Trade in Goods (TIG) Agreement in Bangkok on 13
August 2009, after six years of negotiations. The ASEAN-India TIG Agreement entered into
force on 1 January 2010. The 7th ASEAN-India Summit in Cha-am Hua Hin, Thailand on 24
October 2009 agreed to revise the bilateral trade target to 70 billion USD to be achieved in the
next two years, noting that the initial target of USD 50 billion set in 2007 may soon be surpassed.

ASEAN-India trade grew at over 22 percent annually during the 2005-2011 period. Trade
between India and ASEAN in 2011-2012 increased by more than 37 percent to $79 billion,
which was more than the target of $70 billion set in 2009.

At the 10th ASEAN-India Summit in New Delhi on 20 December 2012, India and ASEAN
concluded negotiations for FTAs in services and investments. The two sides expect bilateral
trade to increase to $100 billion by 2015, and $200 billion within a decade.

ASEAN and India are also working on enhancing private sector engagement. Details on the re-
activation of the ASEAN-India Business Council (AIBC), the holding of the ASEAN-India
Business Summit (AIBS) and an ASEAN-India Business Fair (AIBF), are being worked out by
officials. On 27 April 2010, India informed the ASEAN Secretariat that the Federation of Indian
Chambers of Commerce and Industry (FICCI) would be organising the ASEAN Trade and
Industrial Exhibition at the Pragati Maidan in New Delhi on 811 January 2011, at the sidelines
of the AIBF.

The Fourteenth ASEAN Transport Ministers (ATM) Meeting on 6 November 2008 in Makati,
Metro Manila, Philippines adopted the ASEAN-India Aviation Cooperation Framework, which
will lay the foundation for closer aviation co-operation between ASEAN and India. The
ASEAN-India Air Transport Agreement (AI-ATA) is being negotiated with the implementation
timeline of 2011.

In tourism, the number of visitor arrivals from ASEAN to India in 2006 was 277,000, while the
number of visitor arrivals from India to ASEAN in 2008 was 1.985 million. At the Sixth
ASEAN-India Summit held on 21 November 2007 in Singapore, India proposed to set a target of
1 million tourist arrivals from ASEAN to India by 2010. The 2nd Meeting of ASEAN and India
Tourism Ministers (ATM+India) held on 25 January 2010 in Bandar Seri Begawan positively
responded to Indias proposal to develop an ASEAN-India Tourism Cooperation Agreement and
requested the ASEAN-India Tourism Working Group to further discuss and prepare the draft
agreement. The Ministers also supported the establishment of the ASEAN Promotional Chapter
for Tourism in Mumbai as an important collaborative platform for ASEAN National Tourism
Organisations (NTOs) to market Southeast Asia to the Indian consumers and, at the same time,
create mutual awareness between ASEAN Member States and India

The objectives of this Agreement are to:


1. Strengthen and enhance economic, trade and investment cooperation between the Parties;
2. Progressively liberalise and promote trade in goods and services as well as create a
transparent, liberal and facilitative investment regime;
3 .Explore new areas and develop appropriate measures for closer economic cooperation
between the Parties; and
4. Facilitate the more effective economic integration of the new ASEAN Member States and
bridge the development gap among the Parties.

Measures for Economic Cooperation


The Parties agree to enter into negotiations in order to establish an ASEAN-India Regional Trade
and Investment Area (RTIA), which includes a Free Trade Area (FTA) in goods, services and
investment, and to strengthen and enhance economic cooperation through the following:
Progressive elimination of tariffs and non-tariff barriers in substantially all trade in
goods;
Progressive liberalisation of trade in services with substantial sectoral coverage;
Establishment of a liberal a nd competitive investment regime that facilitates and
promotes investment within the ASEAN-India RTIA;
Provision of special and differential treatment to the New ASEAN Member States;
Provision of flexibility to the Parties in the ASEAN-India RTIA negotiations to address
their sensitive areas in the goods, services and investment sectors with such flexibilities
to be negotiated and mutually agreed based on the principle of reciprocity and mutual
benefits;
Establishment of effective trade and investment facilitation measures, including, but not
limited to, simplification of customs procedures and development of mutual recognition
arrangements;
Expansion of economic cooperation in areas as may be mutually agreed between the
Parties that will complement the deepening of trade and investment links between the
Parties and formulation of action plans and programmes in order to implement the agreed
sectors/areas of co-operation; and
Establishment of appropriate mechanisms for the purposes of effective implementation of
this Agreement.

General Exceptions
Subject to the requirement that such measures are not applied in a manner which would
constitute a means of arbitrary or unjustifiable discrimination between or among the Parties
where the same conditions prevail, or a disguised restriction on trade within the ASEAN-India
FTA, nothing in this Agreement shall prevent any Party from taking action and adopting
measures for the protection of its national security or the protection of articles of artistic, historic
and archaeological value, or such other measures which it deems necessary for the protection of
public morals, or for the protection of human, animal or plant life, health and conservation of
exhaustible natural resources.
Institutional Arrangements for the Negotiations
1. There shall be established an ASEAN-India Trade Negotiating Committee (TNC) to carry out
the programme of negotiations set out in this Agreement.
2. The ASEAN-India TNC may invite experts or establish any Working Group as may be
necessary to assist in the negotiations of all sectors in the ASEAN-India RTIA.
3. The ASEAN-India TNC shall regularly report to the Minister of Commerce and Industry of
India and the ASEAN Economic Ministers (AEM-India Consultations), through the meetings of
the ASEAN Senior Economic Officials and India (SEOM-India Consultations), on the progress
and outcome of its negotiations.
4. The Ministry of Commerce and Industry, Government of India, and the ASEAN Secretariat
shall jointly provide the necessary secretariat support to the ASEAN-India Trade Negotiating
Committee (TNC) whenever and wherever negotiations are held.

Criticism

While there are many benefits to the ASEAN-India FTA, there is concern in India that the
agreement will have several negative impacts on the economy. As previously stated, the two
regions aim to reduce their tariffs on a majority of their traded goods. This will allow them to
increase the market access of their products. It is criticised, however, that India will not
experience as great an increase in market access to ASEAN countries as ASEAN will in India.[8]
The economies of the ASEAN countries are largely export-driven, maintaining high export-to-
GDP ratios (in 2007, Malaysia had a ratio of over 100%[9]).[10] Considering this, as well as the
global financial crisis and India's expansive domestic market, the ASEAN countries will look
eagerly towards India as a home for its exports.[10]

Since the early 2000s, India has had an increasing trade deficit with ASEAN, with imports
exceeding exports by more than US$6 billion in 2007-2008.[10] It is feared that a gradual
liberalisation of tariffs and a rise in imported goods into India will threaten several sectors of the
economy, specifically the plantation sector, some manufacturing industries, and the marine
products industry.[10] As a dominant exporter of light manufacturing products, ASEAN has
competitive tariff rates that make it difficult for India to gain access to the industry market in
ASEAN countries.[11]

Before the agreement was signed, the Chief Minister of Kerala, V.S. Achuthanandan, led a
delegation to the Indian Prime Minister protesting against the FTA. The state of Kerala is an
important exporter in the national export of plantation products. It fears that cheap imports of
rubber, coffee, and fish would lower domestic production, adversely affecting farmers and
ultimately its economy.[12] Kerala has already experienced a flooding of its market with
inexpensive imports under the South Asia Free Trade Agreement of 2006. Cheap coconuts from
Sri Lanka and palm oil from Malaysia has since hindered Kerala's coconut cultivation.[12]

To alleviate the losses that arise from the initial stages of trade, the Government of India must be
able to effectively redistribute some of the wealth to those industries who suffer from the
increased competition with ASEAN markets.[8] This way, total welfare gains in India would
increase and India would ultimately benefit from trade with ASEAN.
Bibliography

http://asean.org/?static_post=asean-india-free-trade-area-3
http://www.asean.org/wpcontent/uploads/images/2012/Economic/AFTA/joint_statement/
Framework%20Agreement%20on%20Comprehensive%20Economic%20Cooperation%2
0Between%20the%20Republic%20of%20India%20and%20the%20Association%20of%2
0Southeast%20Asian%20Nations.pdf
http://www.channelnewsasia.com/news/business/asean-to-sign-hong-kong-free-trade-
deal-in-november-9200940