DPG Policy Brief

Preparing for a Review of the ASEAN-India Trade in Goods Agreement (AITIGA)

Date: December 30, 2022
India has been calling for a review of the ASEAN-India Trade in Goods Agreement (AITIGA) for some years now. Reports studying impact assessment have also pointed to AITIGA not having delivered commensurate benefits to India[1]. At the 16th ASEAN-India Economic Ministers Meeting (AIEMM) in September 2019, the two sides had agreed to initiate a review of AITIGA. It took another three years for the scope of the review to be agreed at the 19th AIEMM in September 2022, and for the economic ministers to direct the AITIGA joint committee to undertake the review. This has also been subsequently endorsed by the ASEAN-India summit meeting on November 13, 2022 with the relevant para of the joint statement stating the following[2]:
Expedite the review of ASEAN-India Trade in Goods Agreement (AITIGA) to make it more user-friendly, simple, and trade-facilitative, and work together to forge resilient supply chains, explore cooperation on Single Window platform to enhance trade facilitation and integration, and promote the development of MSMEs and start-ups, including through business-matching events with the facilitation by the ASEAN-India Business Council (AIBC).

A plain reading of the foregoing mandate conveys the impression that the idea behind the review will be essentially to make the implementation of the agreement easier, for instance, with simpler and easy to operationalise rules and greater trade facilitation features including single window clearances. In technical terms, this could perhaps translate into less complicated rules of origin (ROO) including setting out product-specific rules that form part of AITIGA’s unfinished agenda, less onerous documentation requirements on ROO certification, easing cumulation rules on ROO to promote supply chains and industry integration, mutual acceptance of conformance assessment testing of standards or other regulations by each other’s designated bodies, and the like. The mandate does not, however, specifically refer to negotiation of any increase in market access commitments by the parties to be undertaken during the review. One can only hope that this is elaborated elsewhere in the more detailed scope that may have been drawn up by both the sides, since a key issue of concern for India is to make the benefits from the agreement somewhat more balanced. Indeed, in the statement that PM Modi made at the ASEAN-India summit meeting in November 2019, he is reported to have said,[3] “I welcome the recent decision to review the India-ASEAN FTA. This will not only make our relations stronger, but our trade will also be balanced”.

Improving the trade facilitation features of the agreement could no doubt contribute in some measure to greater trade efficiency, resulting in trade growth in both directions. But the imbalances still need correction through making the market access commitments more balanced. Furthermore, it is over ten years since the AITIGA came into force in 2010, and much has happened in the interim altering the competitive market access conditions in the region, including through the coming into force of RCEP. India itself is also entering into deeper FTAs with third countries. If AITIGA has to be of relevance for the next decade or so, the review will have to take into account these aspects as well.

In this brief, we flag what could be the key objectives that we can set for ourselves for the review, and what may be the preparations needed by India to be well equipped for such negotiations. Before that, however, the imbalances in existing commitments by the parties to AITIGA need to be recalled, followed by a review of how the actual trade has trended in recent years with the trade balance steadily widening in ASEAN’s favour.

Imbalances in existing market access commitments

Key imbalances in AITIGA, which are also getting highlighted in the present context, include the following:
  • India eliminated tariffs on 75% of its tariff lines and the tariff reductions themselves covered over 88.7% of its lines. While the offers by other major ASEAN countries were somewhat comparable, Indonesia, ASEAN’s largest economy, eliminated tariff on only 50.4% of its lines, with tariff reductions extending also to only 67.6%. (Singapore, a more or less free trade country with mostly zero MFN duties, is of course a unique case);
  • India took a higher level of protection for its agriculture products compared to most of ASEAN’s large economies. On the other hand, the large ASEAN economies generally offered less tariff elimination for their industrial products compared to what was offered by India. This was particularly the case in respect of base metals and their products (HS Section XV), machinery (HS Section XVI), vehicles and transport equipment (HS Section XVII) and miscellaneous manufactured articles (HS Section XX), areas in which India had capacity strengths. For example, for machinery items (HS Chapters 84 and 85) India’s tariff elimination coverage was 89.16%, the coverage by Indonesia was 67.9% and Vietnam 69.32%. In respect of transport equipment (HS Chapters 86-89), a heavily protected section by all parties, India’s tariff elimination coverage was 60.84%, whereas those by Indonesia (26.4%), Malaysia (43%), Philippines (46%), Thailand (32.3%) and Vietnam (27.2%) were much lower; 
  • Due to the generally higher level of average tariffs prevailing in India, coupled with the fact that India had thus far entered into fewer FTAs worldwide than ASEAN countries, the margins of tariff preferences enjoyed by the ASEAN countries in the Indian market under AITIGA have been far greater than the margins of tariff preferences that Indian companies have secured in the ASEAN markets[4]
  • The predominance of Chinese products in both the Indian and the ASEAN markets had an impact on the full benefit that each could derive from the other’s market under AITIGA. But with the ASEAN-China FTA providing even deeper access to China in the ASEAN markets, than India enjoyed under AITIGA, the relative disadvantages to India were greater. In India, China enjoyed certain concessions only under the preferential Asia Pacific Trade Agreement (APTA) which were far fewer[5]
  • The China plus one strategies being adopted by several MNCs in recent years, including by some Chinese firms which are also increasing their investments in ASEAN countries, are already seeing a rise in the manufacturing and export capacities in ASEAN[6]. In setting India’s objectives for the AITIGA review, this aspect also needs to be factored in.
Not all of the aforementioned distortions can be addressed by an AITIGA review. Some rest nationally with India, such as reducing its high tariffs, enhancing its own capacities and competitiveness, and attracting greater investments. But the others need to be suitably addressed.

Trade trends between India and ASEAN

  • India’s exports to ASEAN were US$ 19.14 bn in 2008-09, a year before AITIGA came into force, and reached a high of US$ 42.33 bn in 2021-22, accounting for a CAGR of 5.83%. But India’s imports from ASEAN which were US$ 26.2 bn in 2008-09, climbed to a peak of US$ 68.07 bn in 2021-22, a higher CAGR of 7.06% over the same period. India’s trade imbalance has therefore more than tripled from US$ 7.06 bn in 2008-09 to US$ 25.75 bn in 2021-22 (see Table 1). The forecasts for 2022-23 indicate accentuation of this trend. For the six months of April-September 2022 for which figures are available, India’s exports to ASEAN grew by 11.61%, whereas imports grew by 56.3%. 
  • In 2008-09, India had trade deficits with only five ASEAN countries. This has since increased to seven, with the addition of Singapore and Vietnam from 2018-19 onwards. India, therefore, has a trade surplus position now with only Cambodia, Laos and The Philippines.
Table 1 India’s trade with ASEAN (in US$ billion) as per DGCIS
India’s exports to ASEAN
India’s imports from ASEAN Total trade Trade deficit for India
2008-09 19.14 26.202 45.342 -7.06
2009-10 18.113 25.797 43.91 -7.684
2010-11 25.627 30.607 56.234 -4.98
2011-12 36.744 42.158 78.902 -5.414
2012-13 33.008 42.866 75.874 -9.858
2013-14 33.133 41.278 74.411 -8.145
2014-15 31.812 44.714 76.526 -12.902
2015-16 25.133 39.909 65.042 -14.776
2016-17 30.961 40.617 71.578 —9.656
2017-18 34.203 47.133 81.336 -12.93
2018-19 37.473 59.321 96.794 -21.848
2019-20 31.546 55.369 86.915 -23.823
2020-21 31.485 47.420 78.90 -15.93
2021-22 42.327 68.07 110.39 -25.75
Apr. 2022- Sept. 2022 23.378 46.68 70.058 -23.302
  • The High Level Advisory Group on trade constituted by the Ministry Of Commerce had in its report released in 2018 cautioned against taking too negative a view of the deficit level in India-ASEAN trade and also pointed to how the trade deficit seen in relation to overall trade had in fact decreased from 17.4% in 2009 to 15.9% in 2017[7]. But even this ratio has in subsequent years deteriorated, and was 23.32% in 2021-22.
  • A significant share of imports from ASEAN is no doubt accounted for by energy products (HS 27) and vegetable oils, particularly palm oil, (HS 15) both of whose imports have also grown. But their share in total imports from ASEAN into India has declined from 45% in 2008-09 to 32% in 2021-22, with machinery (both HS 85 and HS 84), plastics (HS 39), organic chemicals (HS 29), iron and steel (HS 72), comprising other major items of import (See the table at Appendix 1).
  • Admittedly, some of India’s imports under AITIGA could also be essential capital goods, intermediates or even raw materials which we may have imported in any case. However, as pointed out by some industry associations and reflected in the impact assessment report prepared by the CII, the tariff concessions under the FTAs have also been used to advantage in several sectors in which the domestic industry in India has been adversely affected. This is particularly so in the chemicals and metals sectors, which had to contend with the increases also through some trade remedy actions.
  • Imports of base metal items themselves (HS 72-83) accounted for over US$ 5.76 bn of imports in 2021-22 from ASEAN, as against US$ 1.33 bn in 2008-09. And imports of steel remain sizeable, even as exporting countries like Indonesia, Malaysia and Vietnam have a substantial part of their steel sector under exclusion or under the sensitive category under AITIGA. In contrast, India eliminated tariffs on all steel items by 2013.
  • India’s exports to ASEAN of buffalo meat (HS 02), fisheries (HS 03), cereals (HS 10) and sugar (HS 17) have done well on the agriculture side over the years, but that did not extend to oil seeds (HS 12) or oil meals (HS 23), which had ranked higher earlier, and which showed decline. Similarly, items like steel (HS 72), machinery (HS 84), organic chemicals (HS 29), vehicles and parts (HS 87) kept pace in terms of growth but electrical machinery (HS 85), ships and vessels (HS 89), other base metal items (HS 73-83), aircraft parts (HS 88) or rubber products (HS 40), that had done somewhat better before AITIGA came into force, did not show much dynamism (see Appendix 2). Items like miscellaneous chemicals (HS 38), plastics (HS 39) and dyes and intermediates (HS 32) also showed good growth, but from smaller bases. Further, while pharmaceutical exports (HS 30) grew and totalled US$ 1.3 bn in 2021-22, India’s generic exports did not experience the same level of traction in the ASEAN markets as in some other countries. Thailand, Vietnam and Indonesia have also placed some of the pharmaceutical formulations figuring in HS 3004 under the excluded or sensitive lists in AITIGA.
  • A detailed assessment of India’s FTAs indicated that when trade flows vis-a-vis ASEAN were organised in terms of product groups based on the degree of processing or the sophistication of technology used in their production, the numbers were unfavourable to India.[8]

What objectives could we set for ourselves for the review?

Based on the foregoing, some of the objectives that India could set for itself for the AITIGA review on a) Market access issues; b) Rules of Origin and certification; c) Customs and Trade facilitation; and d) Standards and regulations, are briefly discussed below.

Objectives for market access issues

A key objective for India in terms of market access in the ASEAN market will be to ensure that in areas in which it has export strengths and capacities, it should secure full tariff elimination or at least a level playing field vis-a-vis third country FTA partners of ASEAN countries. This will not be easy since the ASEAN countries as a group and individually have entered into several FTAs which are quite deep. Even under RCEP, ASEAN countries have undertaken significant levels of tariff elimination and reduction covering over 90% of tariff lines and 92% of the goods trade among the parties. Should India seek a similar level of ambition in the ASEAN markets, there will be reciprocal requests from the ASEAN countries. It is here that a good deal of preparatory work is needed.

The first requirement would be to prepare a request list that India should make based both on its existing strengths and the potential ones, with the latter including products that will get manufactured under the PLI schemes and other recent initiatives. In return, India could consider making a consolidated offer that includes areas or products in which it has extended tariff concessions to only few parties such as Singapore under India-Singapore CECA, or in the FTAs with Japan and Korea, or in the recent FTAs with the UAE and Australia, but not under AITIGA. Extending tariff elimination or reduction in any product to just one or few FTA partners may not bring optimum benefit for their importers in India. Widening the concession among other FTA partners brings in more competition. This will of course require due diligence to take off such products from this consolidated list in which some ASEAN countries may have demonstrated a high level of competitiveness and capacity that can then render them sensitive for Indian manufactures or farm products, and make offering concessions on them inadvisable.

Yet another objective will be to ensure that tariff concessions made are reasonably high by all ASEAN members, with some exceptions for Cambodia, Laos and Myanmar in view of their LDC status. This will be a much-needed correction over the existing commitments in AITIGA.

A third objective, although it may be somewhat early to be specific at this stage, is to see if there are certain elements under the supply chain resilience pillar of the IPEF, that is currently under negotiation, that can get integrated and reinforced under AITIGA. Most ASEAN members are members of IPEF, and India will be hosting the next special negotiations[9] of pillars 2-4 of IPEF from February 8-11, 2023.

Objectives on Rules of Origin (ROO)

There is definitely considerable room for improvement here and it is time to discard the dual requirement of having a) a minimum regional value addition of 35%; and b) a change in tariff subheading as stipulated in AITIGA. The dual criteria makes the exporter submit additional documentation without really tightening the norm. India should consider using the ROO generally used by the ASEAN, which is also the case in RCEP[10], comprising a single criteria of a minimum value addition set at 40%. This makes it easy to administer the rules. 

Second, it will be also important for the AITIGA parties to agree on product specific rules, something that was provided for initially as Annex B in AITIGA but which was never negotiated. Here it will be necessary for India to ensure that product specific rules apply for some of its key exports, like refined petroleum products and cut and polished diamonds, and are defined in such a manner that these exports are able to avail the tariff concessions, unlike in some earlier FTAs. Likewise, some flexibilities for non-originating preservatives need to be provided to ensure that an ROO requiring ‘wholly produced’ for fishery items does not result in Indian marine exports getting disqualified.

Third, the question arises if India should agree to a cumulation provision that allows the exporting ASEAN party to use inputs from other ASEAN parties, irrespective of whether the input itself satisfied the origin criteria. RCEP itself has not agreed to this (but a review of this provision has been built into RCEP to be undertaken in five years’ time), but CPTPP provides for production undertaken on a non-originating good in a party to be taken into account as contributing towards determining the originating content of the final good, regardless of whether that production was sufficient to confer originating status to the input itself. Inclusion of such a provision will strengthen scope for building value chains. It may also enable formation of supply chain units in India that have backward integration inputs coming from countries like China, Korea and Japan. This, however, requires finer analysis to assess the pros and cons.

Fourth, it will be useful to simplify the process of ROO certification and declaration. Here again, RCEP has made some progress allowing authorised exporters to certify. In India’s FTAs signed with the UAE and Australia, while the certificate of origin (COO) is to be issued by a competent authority, as in India’s earlier FTAs, negotiations have been provided for to implement the option for the origin declaration to be made by an approved exporter.  This again could lead to greater efficiency and time/cost saving, but the risk involved needs an assessment.

Fifth, India has had some issues on the verification of COOs. In 2018-19, there was suddenly a spike in imports from Singapore and Vietnam, raising doubts about FTAs being misused for declaring third country goods as originating goods from FTA parties. Earlier, some gold imports from Korea of third country origin were declared as originating goods and India had to impose restrictions. As per the Indian customs website, verification visits to the exporting country on some areca nut imports also led to detection of improper certification. In order to bring greater transparency, India imposed CAROTAR rules in September 2020,[11] that required importers to independently assess the authenticity of origin declaration so that in case the customs authorities had suspicions about a consignment, they could seek such additional information from the importer at first hand before raising the issue of verification formally with the authorities of the exporting country.  This has raised some objections from India’s FTA partners like Indonesia, Malaysia, Japan and Republic of Korea, which voiced them at the WTO Trade Policy Review meeting in February 2021[12]. They complained that this had resulted in excessive demand for submission of origin related information through the Indian importer. Concerns were voiced that this posed a risk from unauthorised parties, such as information leakage under the CAROTAR scheme, even as India conveyed that the scheme did not require the importer to seek cost details which may be business confidential. There can be little doubt that some of the ASEAN countries will raise this issue during the review. An amicable solution needs to be arrived at that can adequately address the concerns about authenticity and transparency on the one hand and confidentiality of business information, speed and efficiency on the other.

Objectives on trade/customs facilitation 

The trade facilitation provisions currently in AITIGA are essentially confined to a single Article 14 on customs procedures, and are couched in best endeavour terms emphasising transparency and simplification in customs procedures and prompt clearance of goods. In contrast, all recent FTAs, including India’s own FTAs with the UAE and Australia, have separate chapters with detailed provisions on this issue.

Trade facilitation is also an area in which ASEAN countries have generally done well, and Chapter 4 of RCEP which addresses this aspect looks well rounded with commitments relating to consistency in implementation, transparency, pre-arrival processing, advance rulings, efficient and expeditious release of goods, introduction of a system of authorised operators and procedures for express consignments. An annex also provides when the different provisions of the chapter will become applicable to each of its parties. If there is one element that is lacking, it is the relatively weak formulation on customs cooperation.

It is not clear if during the RCEP negotiations India had any serious differences with this text. If not, India could consider accepting it as the basis to begin discussions which can then be fine-tuned to mutual acceptance. In any case, the text has several common elements with the corresponding chapters in India’s FTAs with the UAE and Australia.

Objectives on standards and regulations

This is another area in which AITIGA is very brief with a single Article  8 devoted to non-tariff measures, basically requiring such measures to be in conformity with WTO rules, in particular the WTO agreements on technical barriers to trade and SPS measures. This is clearly not adequate. The RCEP chapters on both TBT and SPS are no doubt detailed, but they leave sectoral mutual recognitions for future negotiations. The attempt by India during the AITIGA review will have to gain approval or at least define arrangements for fast track procedures for some of its products. The progress agreed to with the UAE on getting faster procedures for approval for India’s generics (or the MOU that India finalised with Singapore earlier under India Singapore CECA) needs to be attempted with other ASEAN partners. Likewise the opportunity could also be used for mutual acceptance of testing by each other’s authorised testing agencies, including for organic products. India’s exports of agriculture items to ASEAN have shown improvement in recent years and need greater predictability and consolidation, particularly considering that these are proximate markets with lower transit time.

Concluding Note

  1. The AITIGA review is a good opportunity to make it more balanced and relevant to the present context, and to provide a more level playing field to Indian exporters. It could also help mitigate the impact of staying out of RCEP. This review would however need adequate preparations on our side, including on the aspects outlined in the foregoing. In parallel, we must try to ensure that the ongoing efforts by the government in enhancing India’s manufacturing capacities and competitiveness, as well as the improvements being attempted on trade and logistics facilitation, bear fruit. ASEAN markets are competitive, and making inroads will be tough even with a level playing field.
  1. Being a regional group operating on the basis of consensus, negotiating with ASEAN will be slower compared to bilateral deals and requires patience, particularly towards ensuring that commitments by each of its members are commensurate with India’s offers. MRAs are also normally finalised mainly at the bilateral level, but will have to be attempted in parallel with the negotiations so that they all form part of the final reviewed text. In all this, India’s trade negotiating strategy may need to be supplemented with a bilateral diplomatic push, where necessary, to move forward.
  1. India and the ASEAN have elevated their partnership to a Comprehensive Strategic Partnership on the occasion of the 30th anniversary of the dialogue partnership in November 2022. It is important that both sides make the economic and trade pillar of these ties, which has been lagging behind potential, surge forward by securing a balanced, ambitious and mutually beneficial review of AITIGA as early as possible.
  1. It would have been ideal if the review of AITIGA could have also been accompanied by a review of the ASEAN-India Trade in Services Agreement which saw even weaker commitments taken by the ASEAN countries and also carries a number of unfinished in-built agenda items. Perhaps this too could be taken up by India next in the AIEMM. 

Appendix 1 Imports into India from ASEAN of top HS 20 chapter items (in US$ m)

  2008-09 2021-22
HS 27 Mineral fuels, mineral oil etc., 9037 11947
HS 15 Animal or vegetable fats and oils, cleavage products etc., 2739 9770
HS 85 Electrical machinery and equipment, parts etc., 2535 8160
HS 84 Nuclear reactors, boilers, machinery and parts thereof 2535 6597
HS 29 Organic chemicals 1160 3736
HS 39 Plastics and articles thereof 593 3690
HS 72 Iron and steel 474 2379
HS 71 Natural or cultured pearls, precious or semi precious stones, jewellery etc., 332 1907
HS 38 Miscellaneous chemicals 411 1750
HS 40 Rubber and articles thereof 290 1697
HS 90 Optical, photographic and other instruments and parts 384 1503
HS 28 Inorganic chemicals 199 1273
HS 74 Copper and articles thereof 124 1220
HS 89 Ships, boats and floating structures 911 1161
HS 87 Vehicles other than railway or tramway rolling stock and parts 146 904
HS 26 Ores, slag and ash 370 832
HS 07 Edible vegetables and certain roots and tubers 619 784
HS 73 Articles of iron and steel 398 765
HS 76 Aluminium and articles thereof 182 622
HS 44 Wood and articles thereof 763 551
Total of all imports from ASEAN 26203 68070

Appendix 2 Exports from India to ASEAN of top 20 HS chapter items (in US$ m)

  2008-09 2021-22
HS 27 Mineral fuels, mineral oils etc., 4590 10914
HS 72 Iron and steel 712 3252
HS 84 Nuclear reactors, boilers, machinery etc., 917 3252
HS 71 Natural and cultured pearls, semi-precious and precious jewellery 951 2011
HS 29 Organic chemicals 918 1972
HS 87 Vehicles, parts and accessories 361 1440
HS 02 Meat and edible meat offal 478 1412
HS 89 Ships, boats and floating structures 2160 1349
HS 17 Sugar and sugar confectionery 57 1301
HS 30 Pharmaceutical products 275 1300
HS 10 Cereals 403 1241
HS 85 Electrical machinery, equipment and parts thereof 1282 1215
Hs 52 Cotton 203 989
HS 76 Aluminium and articles thereof 451 916
HS 38 Miscellaneous chemical products 261 648
HS 03 Fish and crustaceans, molluscs etc., 86 646
HS 39 Plastics and articles thereof 154 521
HS 32 Tanning and dyeing extracts, dyes, pigments etc., 117 472
HS 90 Optical and other instruments, accessories and parts 163 444
HS 73 Articles of iron and steel 270 439
Total for all exports to ASEAN 19141 42328


[1] See for example the CII report ‘India’s existing free trade agreements: An impact analysis of merchandise trade, July 2018. Another assessment is available in the book by Biswajit Dhar on ‘India’s Comprehensive Economic Partnership agreements with ASEAN, Japan and Korea, Third World Network, 2018.
[3] https://www.mea.gov.in/Speeches-Statements.htm?dtl/31996/Address_by_Prime_Minister_at_the_inaugural_ceremony_of_the_16th_IndiaASEAN_Summit
[4] To illustrate, while the average MFN tariff in India in 2019-20 was 14.9% ASEAN countries had an average duty incidence of only 5.0% under AITIGA. In contrast, in Thailand in 2020, while its average MFN was 14.5%, the average for India was 7.4%. In Indonesia against an MFN average of 10.1% India attracted 4.8% duty. In Philippines and Malaysia while their MFN tariff averages were around 7.5% their preferential average tariffs for India were 5.2% and 3.8% respectively. The average preferential tariff for China in all these countries under the ASEAN-China FTA were significantly lower. All these figures have been taken from the WTO Secretariat report prepared for most recent the WTO trade policy reviews of the respective countries.
[5] For example the average tariff for China under APTA was 13.5% in India as against the prevailing MFN tariff average of 14.9% in 2019-20, not a significant differential. In contrast, the average tariffs for China were 3.5%, 2.3%, 2.7% and 3.8% respectively in Indonesia, Malaysia, Philippines and Thailand as against 4.8%, 5.2%, 3.8% and 7.4% respectively for India.
[6] The World Investment Report 2022 of UNCTAD had this to say about developing trends in South East Asia (ASEAN) in 2021. ’South-East Asia resumed its role as an engine of growth for FDI in developing Asia and globally, with inflows up 44 per cent to $175 billion (a peak compared to earlier years) and increases across most countries. The rise was underpinned by strong investment in manufacturing, the digital economy and infrastructure. Singapore, the largest recipient, saw inflows up 31 per cent to $99 billion, driven by a jump in cross-border M&As.
[8] See Biswajit Dhar on ‘India’s Comprehensive Economic Partnership agreements with ASEAN, Japan and Korea, Third World Network, 2018.
[10] The ROO text of RCEP can be seen at https://rcepsec.org/wp-content/uploads/2020/11/Chapter-3.pdf
[11] See https://www.cbic.gov.in/resources//htdocs-cbec/customs/CarotarBrochure_8thOct2020.pdf. Also Para 5.2 of the brochure refers to the verification visit regarding the arecanut case.