Analysis of India's Free Trade Agreement with ASEAN
Indian industries are advocating for more protectionist policies, urging the government to reconsider or abandon the Free Trade Agreement (FTA) with the Association of Southeast Asian Nations (ASEAN), which has been in effect since 2010. However, this protectionist stance is considered backward-looking, as India would benefit more from deeper integration with Asian markets.
Concerns and Challenges
- Dumping of Chinese Goods: There is a significant concern about the dumping of Chinese goods in India through Southeast Asia. This issue is shared across Southeast Asia, with countries like Vietnam implementing anti-dumping measures against China.
- Rules of Origin: It's essential to ensure that rules of origin promote transparency without hampering trade efficiency. The existing rules, developed in an earlier era, need updating to reflect the complexities of modern manufacturing and increased service content.
Strategic and Economic Outlook
- Integration with Global Value Chains: India needs to pursue agreements that facilitate integration into global value chains, enhancing competitiveness. The approach should be to upgrade and deepen trade agreements rather than withdraw from them.
- Stakeholder Impact: The FTA affects not only large, domestically-focused businesses but also exporters and consumers. For instance, disengagement from ASEAN could influence the volatility of cooking oil prices in India.
- Agricultural Exports: The decline in India’s agricultural exports to ASEAN, especially in bovine meat, is attributed more to domestic policy than international trade policy.
Geopolitical Considerations
ASEAN is a crucial strategic partner in the Indo-Pacific region. India must work towards ensuring that the region aligns with and supports its strategic vision, rather than dismissing ASEAN as aligned with China.