DHARMASHASTRA NATIONAL LAW UNIVERSITY

JABALPUR (M.P)
Academic session (2022-2023)

SUBJECT

INTERNATIONAL ECONOMIC LAW

TOPIC

INDO-ASEAN FREE TRADE AGREEMENT

SUBMITTED TO: Ms. Dr. Iram Hashmi

SUBMITTED BY: Muskan Rathore , SEM 8th , BAL/128/19

1
 ACKNOWLEDGEMENT

I would like to place on record my deep sense of gratitude to Dr. Iram Hashmi(Assistant

professor of law) and Dr. Isha Wadhwa (Assistant professor of law) for their generous

guidance, help, and useful suggestions. I express my sincere gratitude to Professor V.

Nagaraj (Vice Chancellor) of Dharmashastra National Law University, Jabalpur to provide

us the platform to learn through projects. I wish to extend my thanks to my fellow mates

for their insightful comments and constructive suggestions to improve the quality of this

report. They are very motivational and creative and I am sure I have learned a lot from

them.

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Table Of Contents
Introduction to study………………………………………………………………………………4

Aims and objectives of Asean......................................................................................................... 4

Evolution of India-ASEAN Relations ............................................................................................ 5

Concept of Regional Trade Agreements ......................................................................................... 6

Principles of Regional trade agreements......................................................................................... 6

INDO-ASEAN FREE TRADE AGREEMENT ............................................................................. 7

The Argument in Favour of AIFTA................................................................................................ 7

Indo - ASEAN Trade will be beneficial in the development of North East States of India: ...... 7

Welfare gain through Indo-ASEAN FTA ................................................................................... 8

Positive impact on Growth rate................................................................................................... 8

Tariff Reduction under Indo-ASEAN Free Trade Agreement ....................................................... 8

India's Tariff Commitment.............................................................................................................. 9

LOOK EAST POLICY OF INDIA AND THE FTA.................................................................... 10

Trade in Services........................................................................................................................... 10

Energy Security ............................................................................................................................. 11

India-Asean FTA challenges......................................................................................................... 12

Conclusion .................................................................................................................................... 14

Bibliography ................................................................................................................................. 15

3
 INTRODUCTION TO THE STUDY

Unprecedented The growth of regional trade agreements occurred as a result of the WTO's
sluggish progress. These trade blocs around the globe have sparked a wave of regionalism that is
opposed to the WTO's multilateral growth agenda. India is also actively working to strengthen its
position in international trade by integrating its economy and politics. India negotiated bilateral
agreements with Sri Lanka, Singapore, South Korea, and Thailand while keeping in mind the
"Look East Policy."1 India inked a regional trade deal with ASEAN (Association of South East
Asian Nations) on August 13 that became effective on January 1 of 2010 for the first time in its
history. Any free trade agreement is anticipated to enhance production, improve specialization,
increase consumer & producer surplus, and contribute to many other long-term welfare
improvements, according to the theoretical underpinnings of regional trade agreements. Yet, in
reality, things do not go in the same manner. Several agreements in the past did not perform as
intended.
The purpose of this research work is to analyze the impact of the INDO – ASEAN Free Trade
Agreement on Indian export. The reason for choosing this theme is to investigate the pains and
gains of India’s decision of signing an agreement with 10 ASEAN countries. In the end of the
study, strengths, weaknesses, opportunities and threats are identified.

RESEARCH OBJECTIVES

• To study about benefit of indo-asean trade relation to india

• To study about tariff commitment ,trade in services and energy security of indo asean
free trade agreement
• To study about the challenges of Indo-Asean FTA

AIMS AND OBJECTIVES OF ASEAN

Association of Southeast Asian Nations (ASEAN) 26 was established on 8 August 1967 in

Bangkok, Thailand, and was marked by the signing of the ASEAN Declaration (or Bangkok
Declaration) by its founder members, namely Indonesia, Malaysia, the Philippines, Singapore
and Thailand. Brunei Darussalam joined on January 7, 1984; Vietnam on July 28, 1995; Laos
and Myanmar on 23 July 1997, and Cambodia on April 30, 1999. ASEAN currently has ten (10)
member countries. ASEAN's economic integration serves both political and economic purposes.
In the 1960s and 1970s, geopolitical factors in the ASEAN region that supported regional
cooperation in the political and security environment in Southeast Asia inspired ASEAN leaders

1
FICCI, (2011), “India ASEAN Free Trade Agreements: Implications for Indian Economy” A Delloite – FICCI
White paper, P

4
to work together to bring about peace and security in Southeast Asia. Some territorial disputes
among Southeast Asian countries also aided the ASEAN region's economic market unification of
economic markets in the ASEAN region.2
ASEAN follows the principle of “ASEAN way” 3 . Meaning, (a) Musyawarah and Mufakat
[deliberation and consensus], In their relation with one another, member nations have adopted
Treaty of Amity and Cooperation in Southeast Asia (TAC) was signed in 1976. TAC provides
the guiding principles of ASEAN:
(i) they’ll not interfere in the internal affairs of one another,
(ii) they’ll not use threat or use of force to settle differences / disputes
(iii) they‟ll settle of differences or disputes by peaceful means,
(iv) They’ll effectively cooperate among themselves.
(v) They‟ll mutually respect each other’s independence, sovereignty, equality, territorial
integrity and national identity
(vi) Every State has right lead its national existence free from external interference,
subversion or coercion. ASEAN's evolution can be traced from the signing of a regional
economic cooperation agreement in 1992 that created Free Trade Agreements (FTAs) to
the creation of an ASEAN Economic Community (AEC) blueprint by 2015. The
ASEAN Free Trade Area (AFTA) was established by ASEAN member countries to
establish a regional trade area with the goal of improving ASEAN's regional economic
competitiveness and making the region a world production base in 15 years.

Evolution of India-ASEAN Relations

In an effort to increase its engagement with East Asian countries, India announced its "Look
East" policy in 1991. As a result, it joined the Association of Southeast Asian Nations' sectoral
dialogue in 1992. (ASEAN). India was designated as a Full Dialogue Partner ASEAN in 1995
and a member of the ASEAN Regional Forum (ARF) in 1996. The ASEAN-India Summit in
Phnom Penh, Cambodia, in 2002, strengthened the relationship even further. The ASEAN-India
Summit has been held annually since then. All of this happened in a decade, demonstrating the
importance of the dialogue partnership to ASEAN and India, as well as the progress made in
cooperation. On October 8, 2003, at the 2nd ASEAN-India Summit, India and ASEAN signed a
Framework Agreement, the Comprehensive Economic Cooperation Agreement (CECA), to
provide an institutional framework for economic cooperation. This Framework Agreement laid a
sound basis for the establishment of an ASEAN- India Free Trade Area (FTA), which includes
FTA in goods, services and investment.4 Multi-Sectoral Technical and Economic Cooperation
Initiative (BIMSTEC). India and ASEAN began negotiations on a trade agreement in goods in

2
ibid
3
Kawai, M; Wignaraja, G. (2010) “Free Trade Agreements in East Asia: A Way toward Trade Liberalization?”
Asian Development Bank, Briefs No. 1
4
Asher, M., R. Sen and S. Srivastava, “ASEAN-India: Emerging Economic Opportunities,” in F. Grare and A.
Mattoo (eds.), Beyond the Rhetoric: The Economics of India’s Look-East Policy, (CSH-Manohar: New Delhi, 2003)

5
March 2004. After six years of negotiations, the India-ASEAN Free Trade Agreement (AIFTA)
was signed on 13 August 2009 in Bangkok during an ASEAN Economic Ministers meeting.5
The signing of the ASEAN-India Trade in Goods Agreement paves the way for the creation of
one of the world‟s largest free trade areas (FTA) - market of almost 1.8 billion people with a
combined GDP of US$ 4.6 trillion.6

Concept of Regional Trade Agreements

In general, it refers to the union of several nation-states into a larger whole. On the one hand,
regional integration can be defined as a dynamic process involving a country's willingness to
share or unite as part of a larger whole. The level of integration is determined by the extent to
which it shares and what it shares. 7
The primary reason countries form Regional Trade Agreements is to ensure trade liberalization.
There has always been debate about RTAs and whether they can divert rather than create trade,
despite the fact that records show little diversion and more trade liberalization. Regional
agreements have been effective in encouraging wider trade liberalization and as a tool for market
access among member countries.8
Regional Trade Agreements are agreements in which two or more countries join forces to bring
their economies closer together. These agreements aim to remove artificial trade barriers
between integrating economies, such as tariffs and quantitative restrictions.9These arrangements
are significant in the international business environment and are envisioned as a foundation for
member countries' economic development.10

Principles of Regional trade agreements

• Trade is based on the principle of discrimination
• Nations within the bloc show special preferences not granted to nations outside the bloc
• Protection is often provided through quantitative restriction as well as tariffs
• Basic ideas include economic nationalism or regionalism, bilateralism and trade often based on
strategic trade theory and neo-mercantilism
• The bloc may function as an exclusive that generates ‘a versus them us’ psychology

5
ibid
6
Razeen Sally and Rahul Sen “Whither Trade Policies in Southeast Asia? The Wider Asian and Global context,”
ASEAN Economic Bulletin 22 no. 1, (April 2005):92-115
7
http://asean.org/asean/about_asean/overview/
8
Rupa Chanda and Sasidaran G, “Understanding India’s Regional Initiatives within Asia,” ISAS Working Papers,
2008
9
ibid
10
ibid.

6
• In the view of some advocates, blocs are a way of building a stronger multilateral system in the
long run11

INDO-ASEAN FREE TRADE AGREEMENT

The Association of South East Asian States and India have evolved their partnership in new
ways since the historic signing of the Indo-ASEAN Free Trade Agreement. Although it only
recently warmed up, some ten years ago, the relationship between India and ASEAN has
developed pretty quickly since then. When the initial request for free trade was made by the three
ASEAN countries before India in 2003, the friendship became even stronger. After a full six
years of deliberation and consideration on both sides, the India-ASEAN Free Trade Agreement
(FTA) was ultimately signed on August 13, 2009 in Bangkok and took effect on January 1, 2010
with regard to Malaysia, Singapore, and Thailand.12
The signed agreement set the way for the establishment of one of the largest free trade zones
(FTA) in the world, which will include a market of about 1.8 billion people and a combined GDP
of US$2.75 trillion. Ninety percent of the items exchanged between India and ASEAN have been
liberalized as a result of the agreement.13 The likely beneficiaries in India are the exporters of
machinery, steel, oilcake, wheat, buffalo meat, auto components synthetic textiles, refined
petroleum products, organic chemicals, pharmaceuticals, gems and jewelry.14

The argument in Favour of AIFTA

While trade with Asian nations was not considerable, India's reliance on the United States and
Europe was growing quickly. In terms of trade, ASEAN ranks behind the United States, the
United Kingdom, and Europe. India focuses its efforts on the promotion of the Regional Trade
Block in an effort to lessen its steadily growing reliance on these nations. Signing Indo-ASEAN
agreement is step towards Asian economic community. With this initiative, India will enter into
Asian market from where it can expand its wings in other countries of Asia. The Asia-pacific is
one of the most dynamic regions of the world and India cannot afford not to integrate with her
economy with this fast growing region which expected to become ASEAN economic union.

Indo - ASEAN Trade will be beneficial in development of North East States of

India:

It has been predicted that this deal will have a substantial impact on the regional economy,
particularly in North-East India, which shares 98% of its border with neighbouring countries like

11
(2007): Regional Economic Outlook: Asia and Pacific" (Washington DC: IMF), October.
12
Economic Briefing to the Penang State Government, ‘The India - ASEAN Partnership.
13
ibid
14
Krugman, P.R., Obstfeld M. and Melitz, M. J. (2012) 'International Economics: Theory and Policy', Ninth Edition,
Addison-Wesley. P.187

7
Myanmar. Due to the proximity of the two regions, it has been suggested that it could serve as a
gateway for further integration between Southeast Asia and India. It has been stated that an FTA
will aid the area in expanding the sizable and expanding ASEAN market, opening up
opportunities for industry and growth.

Welfare gain through Indo-ASEAN FTA

The Indo-ASEAN Free Trade Agreement cut tariff rates gradually. About 4000 products had
their tariff rates decreased, and 3200 of those products had their tariff duties reduced by the end
of 2013, with the remaining products having their duties reduced to nil or almost zero by the end
of 2016 as a result of this FTA.

Positive impact on Growth rate

The FTA's implementation is anticipated to have a positive impact on India's productivity and
economic growth, especially in the country's manufacturing sector. This will expand business
linkages and job prospects. This would then lead to an increase in trade.

Tariff Reduction under Indo-ASEAN Free Trade Agreement

In order to create an India-ASEAN Regional Trade and Investment Area (RTIA), which
encompasses a Free Trade Area (FTA) in commodities, services, and investment, both India and
ASEAN countries started into negotiations in 2003. The primary goal of this agreement on trade
in goods is to deepen and improve economic cooperation by gradually removing tariffs and non-
tariff obstacles in nearly all trade in products.15
To accelerate the expansion of goods trade, the Parties agree to enter into negotiations in which
duties and other restrictive commerce regulations will be substantially eliminated on all goods
trade between both parties to the agreement. This agreement took six years to complete and reach
a consensus because each nation party to the agreement had to give its individual consent for the
Indian tariff line.16
Every time an inconsistency arose regarding a sensitive issue of negative list. Initially, India kept
1400 items on the negative list, mostly agricultural products, which were eventually reduced to
489 items. Both parties agreed that trade liberalisation would apply to 75% of two-way trade
beginning in January 2010 and that the FTA would result in the elimination of tariffs on
approximately 4000 products, including electronics, chemicals, machinery, and textiles.17

15
Nagesh Kumar, Rahul Sen and Mukul Asher, “India-ASEAN Economic Relation — Meeting the Challenges of
Globalization,” ISEAS Working Paper, 2004
16
Ibid.
17
Aekapol Chongvilaivan, “India’s Ties to ASEAN Must Look beyond Trade in Goods”, The Nation, 4 November
2008

8
It has been mutually decided by all the signatory countries that custom duties on imports from
signatory countries would be reduced in phased manner.18 The objective of the agreement is to
reach a zero customs duty regime for ‘substantially all trade’ between India and ASEAN
countries. The time frame for phasing out of tariffs varies by country and product grouping.19

India's Tariff Commitment

The tig agreement between India and ASEAN takes a number of measures to improve trade flow
between the regions. According to the agreement, the involved countries will not institute or
maintain any non-tariff measure on the importation of goods from other members of the FTA.
They have also pledged to reduce tariff rates on a large number of tariff lines Here we study the
general tariff reduction schedule of India, which is relevant for the nine ASEAN countries.20
The ASEAN-India fta or aifta classifies the tariff lines into four broad heads. These are:
Normal track (nt): The applied mfn rates will be reduced and subsequently eliminated. This is
divided into 2 sub categories called Normal track 1 (nt-i) and Normal track s (nt-2). The
difference between the two is that nt-2 has a longer implementation period (till 2021) than nt 1
(till 2018).i
Sensitive track (st): For the first stage of implementation, applied most favored nation (mfn)
rates that are above 5% will be reduced to 5% in accordance with the country-specific reduction
schedules.
Special products: These refer to some select products for which India has decided to reduce tariff
rates at a much more gradual pace than either the normal track or the sensitive track.
Exclusion list (el): For these products, no reduction commitments have been made. But it has
been mentioned in the agreement that the exclusion list shall be subject to an annual tariff review
with a view to improving market access.
The next category is the negative list or the "Exclusion List". This has probably been the focus of
most attention since the framework agreement for the fta was signed in 2003. In a preferential or
fta, countries are allowed to keep a small number of products out of the coverage of the
agreement. These are generally sensitive products where trade liberalisation can have serious
negative economic impact. For these products, no duty reductions are offered. This is called the
"negative list" or the "exclusion list" (el).21

18
ibid
19
Sasatra Sudsawasd and Prasopchoke Mongsawad (2007), ‘Go with the Gang, ASEAN!’ ASEAN Economic
Bulletin 24 no.3 ISEAS 339–35
20
FICCI, (2011), “India ASEAN Free Trade Agreements: Implications for Indian Economy” A Delloite – FICCI
White paper, P
21
WTO allows an RTA if the RTA has a "significant trade coverage". This essentially means that the exclusion list
in an RTA cannot be very large and the products in the exclusion list should not account for a high percentage of
total bilateral trad

9
 LOOK EAST POLICY OF INDIA AND THE FTA

The expected benefits of the FTA have been cited as a step forward in India's "Look East" policy
Without a doubt, the FTA helps to institutionalize the two regions' growing economic
relationship It is consistent with India's increasing integration with the global economy as a
result of increased trade liberalization Moreover, while India remains a WTO member, the FTA
reflects the realisation that regional and bilateral agreements must be given their rightful place as
important instruments in the country's economic engagement with the rest of the world.22
With the West still not out of the woods in terms of the economic slowdown, East Asian
countries may be able to provide the necessary stimulus as a substitute export market for India in
place of the traditional EU and US markets.23 The FTA gives India access to an additional 600
million people market. However, before we laud the trade pact as a tool for expanding India's
trade with ASEAN, the gains must be weighed. India's share of ASEAN trade is negligible. It
accounts for about 2% of ASEAN's total trade In recent years, India's imports from ASEAN have
increased faster than India's exports to the regional bloc. Furthermore, India's tariff levels are
currently such that the FTA's concessional treatment will imply clear benefits for the ten-country
regional bloc, as will the 1 billion-person Indian market that will be opened up to ASEAN
member countries as a result of the FTA.24
‘ASEAN tariffs, on the other hand, have been low for some time, and FTA concessions may not
be forthcoming” In terms of additional gains, this means a lot for India. The meager gains that
the current deal is thus likely to yield for India in terms of goods trade have apparently been
accepted because India anticipates larger gains in the future through the yet-to-be-negotiated
services and investment component of the two regions' comprehensive economic
partnership/cooperation pact. Indeed, there is a lot of room for services trade and investment’
India is one of the top ten service-exporting countries in the world, while ASEAN is a major
importer ASEAN's imports in this sector are nearly half as large as those of the United States, at
$150 billion. However, given the length of time it took for the goods arrangement to take shape,
the gains from services and investment may not be certain or imminent. The ASEAN countries'
concerns about increased labor mobility exacerbate this fear.’

Trade in Services

A treaty involving services will be extremely important for India as well, as India sees asean as a
large market for its service exports. India is currently one of the top service exporters, ranking
10th in the world, ahead of ASEAN countries such as Singapore (ranked 16th), Thailand (ranked

22
ibid
23
FICCI, (2011), “India ASEAN Free Trade Agreements: Implications for Indian Economy” A Delloite – FICCI
White paper, P
24
ibid

10
27th), and Malaysia (ranked 2nd) In 2006, India's service exports totaled around $74 billion
India is particularly strong in information technology (it) and information technology-enabled
services (ites), telecommunication services, professional services, healthcare, financial services,
and distribution services, and Asean is a large market for service imports. It is a net importer of
services, according to the World Trade Organization (2007) , total import of services by ASEAN
In 2006, members spent close to $150 billion. To put this figure in context, the United States
imported around $300 billion in services in the same year, and Asean has a significant export
interest in some service sectors Tourism is one of the most important trade services for ASEAN
nations. Aside from that, they are significant exporters of air transportation, construction,
logistics, insurance, and financial services.25
Given ASEAN’s market size, India's competitiveness in services exports, and asean countries'
lack of openness in the services sector, a comprehensive economic cooperation agreement
(covering goods, investment, and services) with asean has a significant potential gain
Negotiations between India and ASEAN on trade in services have only recently begun, and it
will be up to Indian negotiators to ensure that the lack of tangible benefits accruing to India in
the goods sector is offset by an agreement on trade in services.26 A number of studies have
pointed out that there is significant complementarity between India's service-oriented economy
and Asean’s light manufacturing driven economy.27
‘The Indo-Asian fta should thrive in order to balance these complementarities and produce a
mutually beneficial deal A services agreement with Asean is also expected to create significant
opportunities for cross-border mobility of Indian professionals One of the major impediments to
skilled professional mobility is a lack of qualification recognition among nations To avoid this
issue, it is critical that trading partners have Mutual Recognition Agreements (mras) Asean
countries have signed (MRAs) in several fields, including engineering, architecture, medicine,
and accounting India has a strong export interest in these sectors, and Indian negotiators must
investigate whether a common MR with ASEAN members is feasible.’28

Energy Security

‘Aside from these concerns, stronger economic and political ties with Asean are likely to aid
India's quest for energy security. India is heavily reliant on oil imports from West Asia, a
geopolitically volatile region of the world. India is currently the world's sixth largest energy
consumer and Asia's* third largest oil and gas consumer, trailing only China and Japan Oil
imports account for approximately 72% of total oil consumption in India, with 67% sourced

25
Palit, M. (2015), “India-Southeast Asia Relations: Enhancing Mutual Benefits,” Brookings India Impact Series,
Brookings Institution India Center. P-6
26
Sikdar, C. and Nag, V. (2011), “Impact of India-ASEAN free Trade Agreements: A cross Country Analysis using
Applied General Equilibrium Modeling” Asia Pacific Research and Training on Trade (ARTNet) Working paper no.
107., P.4
27
(Sen et al 2004; Kumar 2002; Bhattacharya and Arif)
28
Mikic, M. and Gilbert, J. (2007), “Trade Statistics in Policymaking: A handbook of Commonly Used Trade
Indices and Indicators”, Economic and Social Commission for Asia and the pacific (ESCAP), UN Publications, P.45

11
from the West As a result, on the external front, India is attempting to diversify supply sources
and significantly increase oil and gas exploration India currently imports crude oil from
Malaysia and Brunei, accounting for 5.4% of its total crude imports from the rest of the world
India also imports lpg from Malaysia, which accounts for only 3.5% of total LPG imports
Indonesia, Malaysia, and Vietnam, on the other hand, have about 1% of the world's proven oil
reserves and 3% of the world's proven gas reserves.’
To summarise, while the Indo-ASEAN trade in goods agreement may not be beneficial to India
in the short term, it can be viewed as part of a long-term strategy to strengthen India's economic
and strategic presence in the region.29
Despite the fact that India shares a land border with Myanmar as well as maritime borders with
Indonesia and Thailand, the asean countries have never been economically close to India. Indeed,
India and the ASEAN countries are not regarded as natural trading partners In contrast, China
has established a distributed regional network of production and trade in this region. Jndo-
ASEAN fta can be perceived as an initial step towards increased eco-nomic integration of India
with south-east Asia From a broader perspective, the Indo-Asean Free Trade Agreement can be
seen as another cog in the wheel of increasing south-south cooperation This is significant
because the global economic system is currently undergoing significant changes On the one
hand, the developed world is experiencing a severe economic slowdown and major financial
problems.30
On the other hand, there is speculation that developing countries such as China and India will
emerge as key drivers of southern economic growth. Though China has a much greater impact on
other developing countries, India can play a complementary role While China provides a large
market for exports to other Asian countries via a manufacturing supply chain, India has the
potential to become a hub of services-led growth. Increased cooperation with Asean makes
strategic sense if India aspires to play a prominent role in the global economy and governance.31

India-Asean FTA challenges

Negotiating a Free Trade Agreement (FTA) between India and ASEAN (Association of
Southeast Asian Nations) countries is a complex process that involves overcoming several
challenges. Some of the key challenges associated with an India-ASEAN FTA are:
Negotiating sensitive issues: One of the most difficult aspects of negotiating an FTA between
India and ASEAN is addressing sensitive issues. Tariffs on agricultural goods, trade in services,
and intellectual property rights are among the issues addressed.32

29
ibid
30
ibid
31
Mikic, M. and Gilbert, J. (2007), “Trade Statistics in Policymaking: A handbook of Commonly Used Trade
Indices and Indicators”, Economic and Social Commission for Asia and the pacific (ESCAP), UN Publications, P.45
32
ibid

12
Uneven bargaining power: Because ASEAN is a much larger trading partner for India than India
is for ASEAN, ASEAN may have greater bargaining power during negotiations. As a result,
India must ensure that its interests are protected during the negotiations.33
Variable levels of development: ASEAN countries have varying levels of development, which
can make negotiating an FTA that benefits all parties difficult. Less developed countries may be
concerned about the impact of increased competition on their domestic industries.
‘Implementation difficulties: Even if an FTA is successfully negotiated, it may face difficulties
in implementation. This could include difficulties enforcing intellectual property rights or
ensuring fair and transparent trade practices.’
Political difficulties: Negotiating an FTA can be a politically sensitive issue, and getting all
stakeholders on board can be difficult. There may be concerns about the FTA's impact on local
industries or the loss of sovereignty.

Domestic issues: Finally, there may be domestic issues associated with an FTA, such as
opposition from interest groups or concerns about the agreement's impact on specific sectors of
the economy.
Many problems have arisen as a result of tariff reductions or eliminations under the AIFTA.
These are expected to disrupt many Indian industries, particularly plantation industries; many
ASEAN countries have a comparative advantage in products such as pepper, tea, coffee, and
palm oil. Fisheries and marine industries are also likely to suffer. Some agricultural products are
sensitive. As a result of the increased supply of agricultural and allied commodities, bargaining
power is reduced, and prices fall. Indian farmers and SMEs are suffering as a result of increased
competition in many agricultural products such as palm oil, spices, and a variety of sea foods,
chemicals, apparel, textiles, and so on. Many concerned parties have expressed their concerns in
this regard on numerous occasions. Many other challenges exist, such as the issue of origin rules,
the lack of an advance ruling mechanism, the exclusion or inclusion of items classified as
sensitive or negative, and the specification of differential time lines for specific products or
countries.

Overall, negotiating an FTA between India and ASEAN will require careful consideration of
these and other challenges, and a willingness to engage in open and constructive dialogue to find
mutually beneficial solutions.

33
Kawai, Masahiro and Ganeshan Wignaraja (2009): "Asian FTAs: Trends and Challenges", ADBI Work ing Paper
Series

13
 Conclusion

According to the international trade indices, there is room for more trade engagements between
India and ASEAN. There is complementarity in many sectors and commodities, and cooperation
could be expanded further. India has a comparative advantage in a number of product categories.
Based on its comparative advantage, India can export agricultural, food, fuel and mining, iron
and steel, chemical, pharmaceuticals, textiles and clothing while importing machinery and
transport equipment, office and telecom equipment, electronic data processing, telecom,
integrated circuits and electronics, and automotive.
The signing of the ASEAN-India Free Trade Agreement is a significant milestone in the history
of India-ASEAN trade relations. There are numerous provisions in this agreement that give India
a competitive advantage. The agreement's commitment to reduce / eliminate tariffs in a phased
manner for approximately 90% of the products has been viewed as a distinguishing feature.
While the free trade agreement provides prospects and opportunities for Indian businesses in the
form of a larger duty-free export market, it also poses numerous challenges to India. The main
challenges are dealing with the potential negative impact on agriculture and allied sectors, small
businesses, and infrastructure bottlenecks such as connectivity, logistics, and transaction barriers.
To fully realize the benefits of AIFTA and effectively integrate into the ASEAN market, India
must implement consistent and effective reforms in the economic, institutional, administrative,
and infrastructural sectors.
While the free trade agreement provides prospects and opportunities for Indian businesses in the
form of a larger duty-free export market, it also poses numerous challenges to India. The main
challenges are dealing with the potential negative impact on agriculture and allied sectors, small
businesses, and infrastructure bottlenecks such as connectivity, logistics, and transaction barriers.
To fully realise the benefits of AIFTA and effectively integrate into the ASEAN market, India
must implement consistent and effective reforms in the economic, institutional, administrative,
and infrastructural sectors.

14
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