Bridges Weekly Trade News Digest • Volume 13 • Number 3 • 28th January 2009

India-ASEAN Trade Pact to Be Finalised Soon

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India is poised to sign a free trade agreement with the Association of Southeast Asian Nations (ASEAN) during the group’s upcoming February summit in Thailand. The agreement will give the ten-nation bloc a massive trading partner, and will create a free trade area of over 1.7 billion people, with a combined gross domestic product of roughly US$2.3 trillion.

Under the FTA, the two entities will slash their trade barriers – aiming to eliminate Indian tariffs on 3,666 imported items produced by Southeast Asian nations by the end of 2012. Some of the items included are refrigerators, jewelry, ornamental goods and rubber products, although roughly 600 Indian agricultural goods will be excluded.

Leaders from both sides expect the partnership will significantly increase levels of trade between New Delhi and the ASEAN bloc. Kamal Nath, India’s trade minister, projected a “quantum jump” in overall India-ASEAN trade from the present level of US$ 38 billion, and predicted that the 2010 target of US$ 50 billion would be “surpassed.”

Many observers expect the move to promote greater economic stability in the region.

“The agreement will strengthen the market, exports and investment flows, in a sense you create an island which has lesser dependence on the volatility of the West,” said Rajeev Chandrasekhar, president of the Federation of Indian Chambers of Commerce and Industry.

Notably, the constitution of ASEAN member Thailand requires parliamentary approval of all international agreements, a final prerequisite for the FTA. However, all other members of the bloc have already agreed to the deal, and Bangkok has signaled its confidence that its lawmakers will follow suit.

“I always believe in the good judgment of parliamentarians…There is no reason to postpone the summit,” Deputy Prime Minister Suthep Thaugsuban said.

The pending agreement with New Delhi comes amid a flurry of activity from ASEAN, which took a significant step towards creating an integrated regional community with the signing of a charter in December (see BRIDGES Weekly, 17 December 2008, http://ictsd.net/i/news/bridgesweekly/36580/).

The main objective of the charter is to establish a single market for the free flow of goods, services, investments and skilled labour by 2015, a goal likely to be significantly advanced by the agreement with India.

ICTSD Reporting; “ASEAN, India to ink FTA soon, boost trade by 30%,” JAKARTA POST, 27 January 2009; “ASEAN pacts ‘on track’ for passage,” BANGKOK POST, 27 January 2009; “ASEAN-India free trade agreement depends on Thailand,” THE ECONOMIC TIMES, 26 January 2009; “India, ASEAN clinch a free trade agreement,” THE HINDU, 29 August 2008.