India’s China loophole concerns fuel Asean free trade deal rethink

“While there is a case [to raise import duties], we will have to tread carefully,” Dhar said. “Any talk of increasing duty will be like jarring notes,” he added, noting that FTAs also signify strategic partnerships that extend beyond just economic ties.

India’s coming talks with the Association of Southeast Asian Nations, scheduled for July 29-31 in Jakarta, will test its ability to strike this balance.

The Asean bloc, which includes some of the region’s fastest-growing economies, presents a formidable challenge for India. Chinese firms have a strong presence across the 10 nations – Indonesia, Malaysia, Singapore and Thailand among them.

In the broader context of maintaining strategic partnerships, Delhi should avoid taking drastic measures to avoid pushing the bloc deeper into Beijing’s rival sphere of influence, Dhar warned.

Bilateral trade under the Asean-India Trade in Goods Agreement reached US$122.67 billion last financial year. The pact, signed in 2009 after six years of negotiations, aims to achieve a free flow of goods and deeper economic integration.

As India reassesses its trade ties with Asean, one solution on the table is strategic tariff adjustments within the Asean-India Free Trade Area framework.

“India might consider adjusting import tariffs on specific items, such as mobile phone and automobile parts,” said Soumya Bhowmick, an associate fellow specialising in sustainable development and globalisation economics at the Observer Research Foundation think tank.

“The agreement allows certain products to be included on ‘highly sensitive lists’ and ‘exclusion lists’, which can be reviewed annually. This flexibility enables India to manage the impact on domestic industries by adjusting tariffs to support local