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The Analyst Magazine:
IndoAsean FTA : Micro Pains, Macro Gains
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A step towards the ultimate goal of Asian economic integration and a push to Indias dream to join a major Asian trading bloc, the IndoAsean Free Trade Agreement (FTA), should have come long back.

 
 
 

The announcement that the IndoAsean FTA will become a reality early next year has raised a lot of excitement as well as anxiety in the country's trade and economic circles. This is because India's free trade agreement with Asean will open up a number of opportunities as well as challenges. On the one hand, the Indian consumer will benefit from low prices and greater variety of merchandise and the industry will get access to markets of Southeast Asian nations, but on the other hand, the agreement will test India's competitiveness in several areas of trade in the near future. There have been apprehensions from within the government and resistance from the industry representatives over the "too ambitious" FTA and its possible negative impacts on agriculture and small scale industry. India's existing FTAs with Singapore, and Thailand have resulted in painful consequences for auto parts manufacturing and electronic goods companies and crude palm oil was worst hit due to the Sri Lankan FTA.

First, many countries around the world, be it the European or the North American countries, are increasingly getting into groups and forming regional trade blocs to get access to wider markets at cheaper tariffs and exploit economies of scale. (At present, there are some 300 FTAs globally and more than 60% of the world trade is done on a preferential basis through FTAs). It is more so with Asia as its member countries are aiming to move towards a single economic community in the next decade or so. With globalization paradoxically leading to regionalization, India cannot afford to be left alone.

Second, the Asean countries (a group of 10 dynamic economies, which includes Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) have declared to form a single market by 2015. Currently, the combined per capita GDP of Asean is double that of India. A unified market would only enhance its future growth prospects, making it a very lucrative market for the Indian producers. While linking up with the region through an FTA will give India a firm foot in the market, an early agreement will place it in a better position compared to its close competitors like China and Korea, who are also planning to ink similar agreements with Asean.

 
 
 

The Analyst Magazine, IndoAsean FTA, Small Scale Industry, Comprehensive Economic Cooperation Agreement, CECA, International Trade, Small Scale Industry, SSI, Agricultural Products, Financial Services, Econometric Modeling, Asian Economic Community, Market Share, Asian Economies, Global Liberalization, World Trade Organizations, WTOs.