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India Seeks ASEAN FTA Expansion

by Mary Swire,, Hong Kong

07 May 2010

Following the entry into force of India’s free trade agreement (FTA) in goods with the Association of Southeast Asian Nations (ASEAN) from January 1 this year, the Indian government is now lobbying for its extension to trade in services.

India’s FTA with the ASEAN was signed in August last year, after six years of negotiations. It creates one of the world’s largest FTAs – a market of almost 1.8bn people with a combined GDP of USD2.75 trillion. It will see tariff liberalization of over 90% of products traded between the two regions.

It was stipulated that the ASEAN-India FTA would enter into force on January 1, 2010, if India and at least one ASEAN member state had notified completion of their internal ratification process. Only three of the ASEAN countries – Singapore, Thailand and Malaysia – had approved participation by that date, but those countries make up over 90% of the USD44bn in India-ASEAN total trade. The remaining seven ASEAN members are expected to ratify the FTA in due course.

India’s interest in extending the FTA to services arises from the importance of that sector to its economy. It is said to be looking, in particular, for the free movement of professionals. However, there are known to be reservations on this within ASEAN due to the competitive edge that India is seen to have in that area.

The beginning of negotiations to extend the FTA to services was reported to have taken place last month, with optimism being expressed that they would be concluded by August this year. India’s Commerce Secretary, Rahul Khullar, hoped that the extension to the agreement could enter into force by the end of 2010.

TAGS: tax | free trade agreement (FTA) | Brunei | India | tariffs | Laos | Philippines | Singapore | Thailand | agreements | professionals | Cambodia | Indonesia | Malaysia | trade | Vietnam

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