India seeks expanded tariff cuts, stricter rules of origin in ASEAN FTA review

  • Industry News
  • Aug 20,24
On the ASEAN side, there are expected demands for more concessions on items where India has not yet offered duty cuts or tariff eliminations.
India seeks expanded tariff cuts, stricter rules of origin in ASEAN FTA review

India is pushing for deeper tariff cuts on key export items like chemicals, metals, machinery, plastics, textiles, leather, and gems and jewelry as part of a comprehensive review of its Free Trade Agreement (FTA) with the Association of Southeast Asian Nations (ASEAN). In addition to tariff reductions, India aims to tighten the Rules of Origin (RoR) provisions to address concerns over the influx of goods from third countries exploiting preferential access routes under the FTA.

On the ASEAN side, there are expected demands for more concessions on items where India has not yet offered duty cuts or tariff eliminations. Both parties aim to complete the review process by 2025.

By next month, a draft text will be prepared, forming the basis for negotiations across eight key areas, including market access and RoR. India plans to make the RoR chapter more detailed, aligning it with current trade agreements under negotiation. The extent of value addition required for products originating from the exporting country varies by product in these new agreements, unlike the existing India-ASEAN FTA, which mandates a 35% domestic value addition based on FOB (Free on Board) value.

The review will also explore opportunities for high-value exports, such as gems and jewelry, where the current value addition requirement is a significant barrier. Eight sub-committees have been established to focus on different aspects of the review, including national treatment, market access, standards, technical regulations, sanitary and phytosanitary measures, legal and institutional issues, customs procedures, trade facilitation, trade remedies, and technical cooperation.

In the fifth joint committee meeting held in Jakarta last month, four of these sub-committees began textual negotiations, achieving some convergence. By the next round of the Joint Committee meeting in India in November, the negotiations are expected to advance, potentially closing some chapters.

India sought this review to address the nearly tenfold increase in the trade deficit with ASEAN, which widened from $4.98 billion in 2010-11 to $39.4 billion in 2022-23. Through discussions on market access and other technical regulations, India aims to secure better access for its products, particularly in the face of barriers like food certification requirements in ASEAN markets.

India's exports to ASEAN reached $41.2 billion in the last financial year, with imports dominated by electronics, machinery, coal, and palm oil, much of which are part of global value chains heavily influenced by China.

(Financial Express)

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