‘Regional grouping will boost mutual gains’

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: for India. The new members of Asean were given additional five years timeframe to eliminate the duties for India.

A trade negotiating committee (TNC) was constituted to carry out the negotiations. The Asean side was led by Malaysia. The framework agreement prescribed that the negotiations on goods be concluded by June 2005, however due to the differences on the issues relating to rules of origin, modalities for tariff reduction or elimination and listing of items in India’s exclusion and highly sensitive lists the negotiations got delayed.

The differences on modality were on account of India maintaining a large list of items in its exclusion list initially. Initially, India wanted an exclusion list of around 20% and Asean wanted no exclusion list.

Apart from that India was not agreeable to eliminate tariffs on items like crude and refined palm oil, coffee, tea and pepper and they were kept in the highly sensitive category where a limited preference was offered. These items were of greater export interest to Malaysia, Indonesia and Vietnam. India had also objected to Asean’s offer where items were kept in a category, which did not give any effective market access to India as the MFN tariffs and preferential tariffs were kept at the same level of 5%. This meant that India’s offer on tariff liberalisation was much better than the combined offer of Asean.

After more than three years of negotiations Asean and India could agree to the following modalities: duty-free treatment to be given on 80% of total tariff lines within three-six years. The tariffs to be reduced to 5% in six-seven years. Also, items on which no tariff concessions would be offered—that list would not have more than 490 items and would not cover more than 5% of the trade value. While India will maintain only one common list for Asean, each Asean member will maintain separate list.

Another important feature of the deal is that while India shall maintain one single exclusion list for Asean as a group, each Asean member shall maintain its own exclusion list for India.

Since the start of negotiations, the trade between India and Asean have also seen a quantum jump. While India’s exports saw an average annual growth of 34% between 2003-07; its imports from Asean rose by about 45% during the same period.