ASEAN-INDIAASEAN-INDIAFree Trade AgreementFree Trade Agreement

Status of negotiation Modality for goods liberalization Progress to date and the way ahead

The MANDATE: The MANDATE: Framework AgreementFramework Agreement

8 Oct. 2003 - Framework Agreement (FA) on the Comprehensive Economic Cooperation was signed by the Leaders at the 2nd ASEAN-India Summit in Bali, Indonesia

The FA serves as the basis for establishing the ASEAN-India Free Trade Area (FTA)

- by 2011 for ASEAN 5

- by 2016 and beyond for RP and CLMV with flexibility on sensitive sectors / commodities

Negotiation TimeframesNegotiation Timeframes

Trade in Goods: 2004-2008 * Series of deadlocks due to unresolved issues on

Modalities and ROO hence the Leaders’ extension of timeline

Trade in Services and Investment: 2008-2009

Other Areas of Economic Cooperation: Negotiations to proceed at a pace acceptable to all Parties concerned

Trade in Goods AgreementTrade in Goods Agreement

FA: Provides for the substantial reduction & elimination of tariffs and other barriers to establish the ASEAN-India FTA

With the delay in the negotiations: Current modality timelines for the tariff elimination (NT1 and NT2)

2012 and 2015 for A-5 & India 2017 and 2018 for RP and India 2017 and 2020 for CLMV & India

AIFTA –TIG ModalityAIFTA –TIG ModalityGeneral modality - tariff reduction/ elimination:General modality - tariff reduction/ elimination:

A. Normal Track (NT) - NT1 and NT2

The MFN tariffs of products listed under this track will be eliminated

B. Sensitive Track (ST)

The MFN tariffs of products listed under this track shall consist of products whose applied MFN rates shall be reduced or eliminated in accordance to agreed end rates and dates

Includes: Sensitive List (SL), Highly-Sensitive List (HSL) and Exclusion List (EL)

AIFTA –TIG ModalityAIFTA –TIG Modality

Lib. Track

Modality

Normal Track (NT)

Normal Track = 80% TL and 75% TVNT1 = 71% TL and 71.71% TV

Elimination by 31 Dec 2012 for ASEAN 5 and India; 31 Dec 2017 for the Philippines and India; and 31 Dec 2017 for CLMV.

NT2 = 9% TL and 3.37% TV

Elimination by 31 Dec 2015 for ASEAN 5 and India; 31 Dec 2018 for the Philippines and India; and 31 Dec 2020 for CLMV.

AIFTA –TIG Modality (AIFTA –TIG Modality (contcont.).)

ST SL:

Sensitive Track = 20% TL and 25% TV(1) Reduction of tariffs to 5%

ASEAN 5 and India by 31 Dec 2015; Philippines and India by 31 Dec 2018; CLMV by 31 Dec 2020.

(2) Elimination of tariffs (4% TL of ST)

ASEAN 5 and India by 31 Dec 2018; Philippines and India by 31 Dec 2021; CLMV by 31 Dec 2023.

(3) Standstill

50 TL at MFN 5% will be at standstill; remaining TL will be reduced to 4.5% upon EIF; subsequent reduction to 4% by 31 Dec 2015 for ASEAN 6 and India.

Note: Philippines end-date would be 31 Dec 2018

AIFTA –TIG Modality (AIFTA –TIG Modality (contcont.).)

HSL

EL

Reduction of tariffs according to 3 categories:

A. reduction to 50%

B. reduction by 50%

C. reduction by 25%

End date: 31 Dec 2018 for ASEAN 5;

31 Dec 2021 for the Philippines; 31 Dec 2023 for CLMV

489 TL and 5% TV

PROGRESS to date Held four (4) years of trade negotiations for goods liberalization (which

commenced in 2004) marked by series deadlocks relating to issues on modality issues ROO (India’s proposed exclusions of ASEAN’s export interests)

Completion of the negotiations on TIG Modality for tariff reduction/ elimination - (Announced during the 40th ASEAN Economic Ministers’ Meeting in Singapore, Aug. 2008)

* Succeeding TNC meetings at substantive critical stage

THE WAY AHEAD

Firming up and submission of Parties’ schedule of tariff concessions within the agreed modality by first week Oct.

Finalization of the TIG Agreement (21st AITNC meeting in Oct.) and legal scrubbing (Nov.)

Signing of the AIFTA’s TIGA (Leaders’ Summit in December 2008)

AIFTA’s EIF is envisaged in 2009

ASEAN-INDIAASEAN-INDIAFree Trade AgreementFree Trade Agreement

[ Additional Notes on FTA’s Economic Gains ]

Additional Notes: Econ. Gains

The FA hopes to establish the world’s 2nd largest FTA of 1.55 billion consumers with regional GDP of about US$1.1 billion, and total trade estimated at US$820 billion

The FTA provides for: Enhanced economic efficiency Greater Intra-ASEAN Trade Deepened specialization in production based on

comparative advantage

Additional Notes: Econ. Gains

Trade creation as a result of lowering of tariffs

Improved factor mobility

Enhanced intra-ASEAN bargaining power

Improved regional real income

Greater market access resulting to economies of scale

Additional Notes: Econ. Gains

Lower prices and a greater variety of goods and services made available by market liberalization and increased competition

Enhanced strategic alliances between ASEAN and India’s industries

Greater foreign direct investment in the region

Increased cooperation in R&D