India-ASEAN FTA: Implications for India's NorthEast
- Part 4 -

By James R. Ruolngul *

India-ASEAN FTA, Look East Policy and the Northeast

The announcement came after the conclusion of the 6th ASEAN AEM-India Consultations held at Singapore on 28 August 2008. The text of the India-ASEAN Trade in Goods Agreement will be finalised before the India-ASEAN Summit to be held in December 2008 at Bangkok where it will be formally signed into a treaty and will come into force from January 1, 2009. This Summit will be attended by the Indian Prime Minister Manmohan Singh.

This agreement, it is expected, will bring a free trade regime to about two billion people from 11 countries with a combined GDP of $2,381 billion as of 2007. The agreement covering billions of dollars in trade in goods but not in services was supposed to have been concluded last year but talks were bogged down because of differences over products that India wanted excluded from tariff cuts.

India had submitted a list of 1,414 products but ASEAN's target was only 400. In the end, the agreement permits India to have 489 products in the 'exclusion list' and 606 sensitive goods that will come under partial duty reductions.

This agreement is to be viewed against the backdrop of the long drawn-out Doha round of multilateral talks. As the Doha talks continue to drag on, this agreement between India and ASEAN can be seen as a natural course of action for countries refusing to entangle themselves in the protracted Doha round of talks. This agreement, along with the comprehensive FTA between ASEAN, Australia and New Zealand (AANZ FTA), became the first major trade agreement in the post-Doha era of trade policy negotiations.

The India-ASEAN FTA is also the result of recent changes in ASEAN's policy towards its immediate neighbours and other important trading partners all over the world. In recent years, ASEAN has been involved with its major trading partners in concluding FTAs.

In 1999, the ASEAN+3 [vi] was formed for the establishment of a common market and a currency. China was the first to conclude an FTA with ASEAN followed by Japan and South Korea. The present FTA between India and ASEAN, and the AANZ FTA completes this trend. ASEAN will now be able to strike a fine balance in trade among its immediate neighbours.

The India-ASEAN FTA also needs to be viewed in the broader context of global trends towards regional or bilateral trading arrangements (RTAs/FTAs). Out of the 108 RTAs notified to the General Agreements on Tariffs and Trade (GATT) over the period 1948-1994, 33 of them had been established in the early 1990s.

By the year 2000, almost half of the 220 RTAs notified to the World Trade Organisation (WTO) are initiated after the Cold War. Such is the importance accorded to RTAs or FTAs in recent times that no country can ill afford to ignore it. Till July 2007, some 380 RTAs have been notified to the WTO. [vii]

For India, this agreement will be a major milestone in its Look East Policy that began after the collapse of the erstwhile Soviet Union. The current agreement will take India far beyond its existing trade agreements with Myanmar, Thailand and Singapore.

It is in these contexts that India's Northeast came to be seen in a new light. Rajiv Sikri, the Secretary East of the Ministry of External Affairs remarked that the Look East Policy "envisages the Northeast region not as the periphery of India, but as the centre of a thriving and integrated economic space linking two dynamic regions with a network of highways, railways, pipelines, transmission lines crisscrossing the region." [viii]

Myanmar, now being a member of ASEAN and having shared a 1643 km long border with India, is now becoming the major link between India and ASEAN countries. The Northeast states of India have now also been seen as the 'gateway' to the ASEAN countries.

One early outcome of the Look East policy was the Indo-Myanmar Trade Agreement signed in 1994. According to this agreement, border trade between the two is to be conducted through Moreh in India and Tamu in Myanmar; Champhai in India and Hri in Myanmar and other places that may be notified by mutual agreement. Several Indian companies are also engaged in oil and gas exploration in Myanmar.



To be continued ...