The ASEAN-India Free Trade Agreement Preferential Tariff: What You Need to Know
The ASEAN-India Free Trade Agreement (AIFTA) was signed on August 13, 2009, with the objective of increasing trade and investment flows between the two regions. One of the key provisions of the agreement was the introduction of preferential tariffs for trade in goods.
Under this agreement, India and the ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) have agreed to reduce or eliminate tariffs on a wide range of products. These include agricultural products, textiles and clothing, pharmaceuticals, chemicals and petrochemicals, and electronic items.
The preferential tariff scheme was introduced to promote greater trade between the two regions, encourage investment flows, and increase economic cooperation. The scheme has been in effect since January 1, 2010, and has had a positive impact on trade and investment flows between ASEAN and India.
Some of the key features of the preferential tariff scheme under the AIFTA include:
1. Tariff reduction or elimination: The AIFTA provides for the reduction or elimination of tariffs on a wide range of products. This helps to reduce the cost of imports and exports, making them more affordable for businesses and consumers.
2. Phased implementation: The tariff reductions are implemented in a phased manner, with some products seeing immediate reductions while others will take longer to implement. This is to allow for the adjustment of businesses and industries to the new tariff regime.
3. Rules of origin: To qualify for the preferential tariff scheme, products must meet specific rules of origin criteria. This ensures that only products that are produced or manufactured within the ASEAN and India regions are eligible for the preferential tariffs.
4. Dispute settlement mechanism: The AIFTA establishes a dispute settlement mechanism to ensure that disputes between the two regions are resolved in a fair and timely manner.
The AIFTA preferential tariff scheme has had a positive impact on trade and investment flows between ASEAN and India. Since the implementation of the scheme, bilateral trade between the two regions has increased significantly. In 2019, bilateral trade between ASEAN and India stood at US$ 97 billion, representing a 10% increase from the previous year.
The AIFTA preferential tariff scheme has also helped to promote greater investment flows between the two regions. Many Indian businesses have invested in ASEAN member states, and vice versa, taking advantage of the lower tariffs and favorable business environment.
In conclusion, the ASEAN-India Free Trade Agreement Preferential Tariff has been a game-changer for businesses and investors in the two regions. The scheme has helped to promote greater trade and investment flows, reduce tariffs, and create a more favorable business environment. As trade and investment continue to grow between the two regions, the AIFTA preferential tariff scheme will remain a crucial element in promoting economic cooperation and growth.