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. |