On August 13, 2009 after six years of intensive negotiations,the minister for Commerce and ndustry,Sri.Anand Sharma and his ASEAN counterparts inked the long awaited free trade agreement for duty free import  and export of 4000 products under Comprehensive Economic Cooperation Agreement,2003.The ASEAN India FTA  is the  fifth ASEAN wide FTA. The agreement will kick in January 1, 2010

The agreement  serves as a signal to the international community that the ASEAN  and India remain committed to trade liberalization even  during the current global  economic crisis.The signing of  the ASEAN India Trade in Goods Agreement paves the way for the creation of the world’s  largest free trade areas-market of almost 1.8 billion people with a combined GDP of 2.75 trillion US dollars.The agreement will be a major milestone for India in its Look East Policy after the collapse of Soviet Union. It is an important step in reducing its dependence on  US and EU markets and turnend towards South East Asia will strengthen  its regional dynamics.

The ASEAN comprise of Brunei,Combodia,Indonesia,Laos,Malysia,Singapore, Myanmar,Thailand,Vietnam and Philippines.ASEAN is  now fourth largest trading partner for India after EU,US  and China  and accounts for 10% of  India’s global trade in the last financial year.The bilateral trade between india  and the ASEAN  was more than  40 million US dollars. India and ASEAN have set up an ambitious target of 50 million dollars by 2010. The current agreement  would help to achieve this target. The agreement may also help to integrate the two globally economic blocks for mutually beneficial gains.

Trade In Goods( TIG )agreement focuses upon on tariff liberalization on mutually agreed tariff lines  from both sides.It is targeted to eliminate tariff on 80% of the tariff lines accounting for 75% of the trade in a gradual manner staring from 1st January 2010. The ASEAN India FTA classifies the tariff lines into four broad heads

1.Normal Track: Applied MFN rates will be reduced and subsequently eliminated.This is divided into two sub categories: Normal Track- 1 and Normal track -2.The difference between the two is that NT-2 has a longer implementation period (till 2021 and NT-2  till 2018)

2.Sensitive Track: For first stage of implementation applied MFN rates  will be reduced to 5% in accordance with the country specific reduction schedules.

3.Special products: These refer to some selected products for which India has decided to reduce tariff rates at a much lower gradual space

4.Exclusion List or negative List:For these products no reduction commitments have been made.But it has been mentioned in the agreement that exclusion list shall be subject to an annual tariff review with a view to improving market access.

As ASEAN countries are more competitive in sectors like agriculture,textiles,auto components and electronics and that India will face negative consequences unless sensitive items in these sectors are protected.Consequently India submitted a list of about 1400 products as the negative List.But the negotiators  from the ASEAN insisted on pruning of the negative list.But at the end it was decided that each signatory country  of the Indo ASEAN  FTA can have 489 products in its negative list ,provided that these products do not exceed 5% of the total bilateral imports.

Thus the Agreement has provided flexibilities to India and ASEAN countries to exempt some of the products from tariff concession or elimination to address their sensitivity. India in its part has included 489 items in the negative list , keeping in view  the concerns of vulnerable domestic industries and agricultural producers . No tariff concession has been offered by India for products placed in this list.A 'negative list' is a protective wall, and no tariff  reduction is needed for it. India has 489 tariff lines under the negative list which includes 302 agricultural items, 81 items from textiles and clothing, 52 items from machinery and auto, and 32 items from chemicals and plastics. In addition, there are 22 other items from various other sectors. The major agricultural products included in the negative list are Copra, Coconut oil, Coconut, Rice, Rubber, some fish types like Mathi , Chemmeen, Crab, milk and milk products, honey, cashew, banana, pineapple, mangoes, orange, vanilla, jathi, coriander, jeera, ginger, turmeric, tapioca etc are in the negative list.

The products in the sensitive list will be subject to partial cut over relatively longer period of time till 2019.  It includes 606 items comprising of I6 agricultural products ,304 textiles,52 machinary and auto ,32 items from plastics and chemicals and 22 others.Tariffs on goods in the sensitive lists will be reduced by 5% in 2016.

Highly sensitive list contains five commodities  - Crude Palm  oil (RPO),Refined Palm Oil ( RPO),coffee,black tea and pepper. The duty on items in the highly sensitive list will be reduced in a phased manner.However duty on these items will not be eliminated. Items included in the highly sensitive list will undergo partial duty cut in 2019. Duty on tea and coffee will be brought down to 45%, pepper to 50%, for CPO and RPO it will be brought down to 37.5% and 45% respectively.

The FTA agreement reduces tariffs to zero on 4000 goods out of 5000 that are traded.This will be done in a phased manner over six years.

A tougher regime for Rule of Origin which would ensure that a product would be counted for import from a particular country if there is at least 35% value addition in that country.This Rule of Origin norms will ensure that products from non ASEAN countries like China  are not routed to India under zero duty under FTA

The FTA  also provides a bilateral safeguard  mechanism to address sudden surge in imports.In such an eventuality,if it hurts domestic industry,safeguard mechanism including safeguard duties may be put in place for a period of up to four years.The flexibility to invoke safeguard measure will remain available for both sides  for a  period of seven to fifteen years from the date the agreement comes into force.

The exchange of tariff concessions between India and ASEAN member countries would lead to growth in bilateral trade and investment resulting in economic benefits to India and the ASEAN member countries.Indian exporters of machinery and machine parts,steel products, agricultural products such as oilcake, wheat and, buffalo meat,auto components chemicals and synthetic textiles would gain additional market access as a result of tariff liberalization of ASEAN .Indian manufacturers will also be able to source products at competitive prices,.Further there is huge scope for an increase in trade in engineering and industrial goods between India and ASEAN countries.India has a unique opportunity to upgrade its products to compete with the likes of Japan,the EU, the US and China within the ASEAN  market. The consumers can expect duty free imports of a range of products like capital goods,some textiles,electronic goods and chemicals, next year.

Farmers in South India , especially Kerala fears that lower duty  especially on plantation crops like tea, coffee, tea and pepper would lead to delurge  of imports from ASEAN member countries

which would leave domestic farmers vulnerable to competition.This view hold true because of low productivity in these areas.But in these days of globalization we cannot protect a nation for long .We should  compete the ASEAN countries and use the opportunities for our benefit.  So the India ASEAN FTA should be converted into an opportunity to increase productivity,quality improvement and value addition of farm products. The farmers should be equipped  to face international competition.

Now India has the cushion of gradual reduction of tariffs that would give enough time to both the farm sector and industry to improve production and quality and become more competitive.If imports prove detrimental to agriculture,the centre should put in place the safeguard duty which would make import unprofitable.

The government of India should provide  all necessary and reasonable support  especially  to the unorganized sector like agriculture so that the productive efficiency is brought in line with ASEAN countries.Measures should be taken by the government and the non governmental organization along with self governed bodies of farmers to strengthen the competitveness of agriculture.

The farmers should be compensated through subsidies and various packagesMoreover farmer friendly policies should be adopted to ensure fair price to the farmersThe central government has initiated certain measures to dilute the possible adverse  of the FTA The states should cooperate with the centre and try  to make best  use of the opportunities  offered  by the India ASEAN FTA

Though ASEAN would stand to gain more than India on FTA in goods when it come into effect on January 1,   2010, India would have an edge when the trade agreements on services and investments are signed as it would help India to explore the 10 nation market for its strong service sector,besides attracting investment .India could look forward tapping into the vast services market in the ASEAN  group.