ASEAN seeks deeper tariff cuts as India pushes FTA review to narrow trade deficit
Trade agreements are a favourite in CLAT GK, so here's an update. India and the ASEAN bloc are reviewing their free trade agreement, formally called AITIGA, the ASEAN India Trade in Goods Agreement. ASEAN wants deeper tariff cuts from India, while India wants better market access because its trade deficit with ASEAN has ballooned from about 7 billion dollars in 2010 to 45.2 billion dollars in FY25. Here's the thing, India feels the original deal favoured ASEAN exporters, so it's pushing a rebalance. So for your CLAT prep, just remember AITIGA review, the 45 billion dollar trade deficit, and India's push for fairer trade with Southeast Asia.
India’s trade deficit with ASEAN has widened sharply to $45.2 billion in FY25 from about $7 billion in 2010
The ASEAN bloc is pressing for greater tariff concessions from India as negotiations to review the ASEAN-India Trade in Goods Agreement (AITIGA) gather momentum, with New Delhi weighing calibrated tariff reductions in return for improved market access to address its widening trade deficit with the region, sources said.
“While the ASEAN acknowledges the need to bridge India’s trade deficit by offering greater market access to Indian goods, it too wants lower tariffs in India for some of its products. The Department of Commerce is taking inputs from the industry on products where tariffs can be further reduced or eliminated without adversely affecting domestic manufacturers,” a person tracking the matter toldbusinessline.
India’s trade deficit with ASEAN has widened sharply to $45.2 billion in FY25 from about $7 billion in 2010 when the AITIGA was implemented. This has been driven by lower tariff reduction commitments undertaken by some member countries, such as Thailand and Vietnam, as well as poor utilisation of the pact by Indian exporters, experts said. The ten-member ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam
India has been seeking a more balanced agreement that improves market access for its exports while addressing concerns over the growing trade imbalance.
As part of the review process, the Department of Commerce has sought stakeholder feedback on products being considered for further tariff liberalisation or elimination. The Department has tried to select items that are not significantly sensitive from an India-ASEAN trade perspective, with India being a net exporter in these categories while ASEAN countries and China are net importers. Many of these products have already been liberalised under India’s existing free trade agreements, and in several cases China’s share in ASEAN imports is relatively low, the source said.
Industry feedback will help determine which products can be offered for deeper liberalisation under the revised agreement, the source added.
New Delhi also wants stronger safeguards against the alleged misuse of rules of origin, which it believes has enabled cheap Chinese goods to enter the Indian market through ASEAN countries.
Speaking at a recent media briefing, Ministry of External Affairs Secretary (East) Rudrendra Tandon said the review was aimed at making the agreement more relevant to current economic realities. “It’s a multilateral agreement, so it requires all ASEAN countries together. We of course discussed with all our ASEAN partners about the importance of upgrading, reviewing the ASEAN-India Trade in Goods Agreement, which is a very old agreement and probably does not reflect the structures of the economies either in India or in ASEAN,” he said.
Tandon added that the review seeks to achieve “greater liberalisation on both sides,” with the objective of expanding market access for businesses in India and ASEAN while ensuring that any changes are agreed upon by all member countries.