Indo-ASEAN free trade agreement and beyond

In a major development, India and the ASEAN (Association of South-East Asian Nations) signed a Free Trade Agreement (FTA) in Bangkok on August 13, 2009. The FTA, restricted only to goods, is India’s first with a trade bloc and will cover 11 countries with a combined Gross Domestic Product of over US$2 trillion.

It is set to take effect from January 1, 2010, but there is a small glitch. While nine members out of the 10-nation ASEAN have signed the FTA, Vietnam has indicated that it will do so after its formal recognition by India as a “market economy”. ASEAN is presently India’s fourth-largest trading partner after the European Union, United States and China. Indo-ASEAN trade stood at $38.37 billion in 2007-08 and is projected to rise to $ 48 billion in 2008-09.

To protect its interests in the agriculture sector, India has kept 489 items, mostly farm products, out of the trade pact. There are some other items like processed food and fruit juices, rubber, textile and textile products, petrochemicals and automotive products in India's negative list in the proposed FTA, where India will not be offering tariff concessions. The FTA is expected to give a huge fillip to sectors like banking, information technology, telecom, education and tourism.

One of the major stumbling blocks to increased trade between India and the ASEAN has been resolved with India agreeing to slash import duties on crude palm oil by 37.5 per cent and on refined palm oil by 45 per cent by the year 2018.

The FTA is the latest in a series of steps the Indian government has taken after the launch of its much-vaunted “Look-East Policy” (LEP) designed to improve its ties with the ASEAN countries and beyond. Throughout the annals of its history, India has had deep cultural, economic and political ties with the South-East and East Asian nations. However, in the years immediately after its independence, this region was completely overlooked by India for various reasons. India supported the anti-colonial movement in South-East Asia - the convening of the Asian Relations Conference in 1947, a special conference on Indonesia in January 1949, Chairmanship of the International Control Commission on Indo-China in 1954 and the sponsoring of the Bandung Conference: all these reflected India’s deep involvement in the freedom struggle being waged by the countries of the region. But the growing pro-Soviet tilt of India’s foreign policy drove a wedge between India and the South-East Asian nations. However, India’s membership of the Non-Aligned Movement (NAM) afforded a greater degree of interaction between India and many countries which it had neglected in the immediate years after its independence.

India’s close relations with the former Soviet Union acted as a dampener to developing close ties with the countries of South-East Asia. India’s position on the Soviet presence in Afghanistan and the recognition given to the Heng Samrin regime in Cambodia hindered the development of close ties with these countries. However, India ultimately succeeded in becoming a sectoral dialogue partner of the ASEAN in 1992 and a full dialogue partner in 1996.

The end of the Cold War was a major factor in the turnaround in India’s relations with ASEAN. The breakup of the erstwhile Soviet Union, its withdrawal from Cam Ranh Bay and the American withdrawal from the Subic Bay Naval Base created a security vacuum in the region. Meanwhile, ASEAN was also on the lookout for new partners and untapped markets.

The quantum leap in Indo-ASEAN relations came with India’s effort to develop closer links with the South-Eeast Asian countries after 1991, when India embarked on its economic liberalisation program. This period also saw the launch of its “Look-East Policy”. ASEAN emerged as a major actor in the politics of the Asia-Pacific after the end of the Cold War. It was felt that India needed a long-term partnership with the ASEAN countries in the interests of its stability and security.

On the strategic front, there has been a remarkable improvement in the ties between India and the ASEAN member countries. Singapore has made use of India’s missile testing facilities at the Chandipore-on-sea. Last year, India and Singapore signed a bilateral agreement for conducting joint Army training and exercises in India. IAF (Indian Air Force) pilots and technicians have trained Malaysian Air Force Pilots, weapon system operators and maintenance staff in the smooth induction and operation of their Su-30 MKM fighter aircraft.

ASEAN and India share a range of concerns, including energy security, sustainable development, the protection of the environment and the fight against terrorism. There can be no doubt that a closer partnership between India and ASEAN will be a win-win situation for both the parties.