India Has Signed Free Trade Agreement With Which Two Asian Countries

After six years of negotiations, the ASEAN-India Free Trade Agreement was signed on 13 August 2009 in Bangkok, Thailand. The agreement was intended only for trade in goods and did not contain software and information technology. Negotiations for a free trade agreement in the services and investment sector began in October 2008 and ended on 20 December 2012. Following the virtual meeting of ASEAN and India economic ministers last month, at which the decision to review the goods trade agreement was reiterated, India continued its urgency with a letter to ASEAN Secretary General Lim Jock Hoi. Overall, India`s experience in trade with its major free trade partners, with the exception of SAFTA, has not been very encouraging. While India has significantly increased its exports from its free trade agreement with SAFTA countries, the EPA with Korea and the ECSC with ASEAN have been more beneficial to these economies. However, in the case of the EPA with Japan, bilateral trade declined or stagnated after the first year of implementation, but with Japan, too, the trade deficit increased considerably. In addition to a number of domestic factors that have hampered the competitiveness of Indian exports and prevented India from using preferential market access in these partner countries, a number of FTA-related issues are responsible for a less favourable development of India`s trade relations with ASEAN, Korea and Japan. These issues include erroneous obligations, stricter rules of origin, a lack of awareness of free trade agreements and high compliance costs. It is therefore important that India is not satisfied with the opening of a review of the India-ASEAN free trade agreement, but the existing EPA provisions with Korea and Japan should also be evaluated to make them more trade-friendly and business-friendly. However, it is equally important that India at the same time develop all necessary measures to remove barriers to the overall competitiveness of exports in the country. In order to mitigate losses resulting from the early stages of trade, the Indian government must be able to effectively redistribute some of the wealth to industries that are suffering from increased competition with ASEAN markets.

[9] In this way, india`s Welfare Gains Package would increase and India would ultimately benefit from trade with ASEAN. Another interesting observation in the paper is that India`s net exports to non-trade countries were only slightly lower than its net exports to countries with free trade agreements. On the other hand, imports from countries with trade agreements were much larger, resulting in a trade deficit for India.

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