BEIJING: Indian exporters are faced with a new challenge as the free trade agreement between China and members of the Association of Southeast Asian Nations became operational on Friday. It will mean nearly zero duty trade between several Asian nations making it difficult for Indian businesses to sell a range of products.
India has been planning to enlarge its trade basket to include several commodities that are now supplied to China by ASEAN countries. These products include fruits, vegetables and grains. Indian products, which will face 10-12 per cent import duty, may find it extremely difficult to survive the competition from ASEAN nations.
China is cutting tariffs on imports from ASEAN nations from an average of 9.8 percent to about 0.1 percent. The original members of ASEAN -- Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand –- have also agreed to dramatically cut import duty on Chinese products from an average of 12.8 per cent to just 0.6 per cent.
The newly created free trade area involves 11 countries will a total population of 1.9 billion and having a combined gross domestic product of $6 trillion.
The successful implementation of the FTA is bound to force New Delhi to expatiate similar trade agreements with countries in the ASEAN region besides China. India is in the process of discussing trade agreements with several countries including China. New Delhi has also inked agreements with Beijing on the supply of fruits, vegetables and Basmati rice. But they remain to be implemented.
At present, 58 per cent of Indian exports to China consists of iron ore with very little component of value added goods. India has been trying to widen the trade basket to include manufactured goods, fruits and vegetables. This effort might be severely hit because goods from ASEAN nations will now cost much less to the Chinese consumer.
China begun pushing ASEAN nations for a FTA way back in 1999 and it is only now that the agreement has become operational.
ASEAN Secretary General Surin Pitsuwan recently said the FTA will act as a spur to resolve the financial crisis and enhance cultural exchanges and integration in the region.
Source : TOI