The India-ASEAN Free Trade Agreement

In a show of commitment to trade liberalization and after six years of talks, the Association of Southeast Asian Nations (ASEAN) and India have signed a historic free trade agreement that will open new opportunities for trade and cooperation between the two regions. This milestone agreement provides a significant incentive to foreign businesses that can manufacture in India and now export freely to ASEAN countries. ASEAN was formed in 1961 to foster intra-regional cooperation in South East Asia and compromises Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam.

The agreement will go into effect in January 2010 and remove tariffs on 80 percent of the goods traded (4,000 products) between ASEAN and India by 2016. The first 3,200 products will have duties removed by December 2013 with the remaining 800 products brought down by December 2016. There are still, however, 489 sensitive products that will not fall under the agreement and still carry significant restrictions. These items are primarily farm products, automobiles and certain categories of auto parts, machinery, chemicals and textile. Agricultural products considered to be sensitive, such as palm oil, tea, coffee and pepper, will be covered by the FTA but tariff cuts will be applied in staggered steps within ten years.

To read the full version of this article, please purchase the complete issue of India Briefing, which can be found in the Asia Briefing Bookstore. Companies requiring assistance may contact any Dezan Shira & Associates' five national offices at india@dezshira.com for advice or visit www.dezshira.com.