MPs fret over trade deficit with ASEAN – BUSINESS

The Parliamentary Standing Committee on Commerce has questioned the government for suggesting that the country’s increasing trade deficit with ASEAN nations is due to imports of essential commodities and has strongly recommended that India seek better market access for its products and services with the 10-nation bloc.

The Association of South-East Asian Nations (ASEAN) comprises of Indonesia, Singapore, Philippines, Malaysia, Brunei, Thailand, Cambodia, Lao PDR, Myanmar and Vietnam.

India has suffered a trade deficit in respect of five ASEAN members — Malaysia, Indonesia, Thailand, Brunei and Lao PDR — over 2015-16 and 2016-17, with the biggest deficit emerging in trade with Indonesia, the committee has noted.

Indonesia tariffs

“Under the existing trade agreement, Indonesia has committed a tariff elimination on 50.1% of its items which is the least in comparison to other ASEAN member States,” the committee said in its report on Indo-ASEAN trade issues released on Friday. “The least tariff elimination by Indonesia has resulted in biggest trade deficit from India amongst all ASEAN member States.”

The committee chaired by BJP MP Bhupender Yadav has said India must seek better market access for goods where India has an edge over ASEAN nations, like leather goods and pharmaceuticals, to improve the trade balance. The committee stressed that its examination of the Indo-ASEAN trade dynamics assumed significance given that this year marks 25 years of the formal partnership.

The Ministry of Commerce apprised the panel that the imports of essential commodities — coal, petroleum and edible oils — from ASEAN constitute a significant percentage of India’s imports and that ‘if these essential commodities are excluded, India will have a better or positive balance of trade position.’

Taking a strong exception to this stance, the committee held that ‘if this approach or argument is subscribed, then there was no need for the trade agreement with ASEAN.’

“The import of essential commodities will continue with or without the trade agreements. The better market access in terms of higher export has not materialised and this is a matter of concern. The Committee would like to impress on the Department that various trade instruments/agreements must aim towards better market access,” it asserted.

As per official data, among the ‘essential commodities’ cited by the government, imports of coal fell by 2.5% in 2016-17 from a year earlier, while vegetable oil imports grew by 3.7% to touch $6.19 billion in 2016-17. Crude petroleum imports rose by almost 50% in 2016-17, but exports of petroleum products (India’s top export product to the ASEAN bloc) surged 58.4%.

Among the other top 10 commodities imported from ASEAN, consumer electronics grew at the highest pace in 2016-17 (18.33%), followed by ships and boats (12.82%), electronic components (11.72%) and telecom instruments (9.17%). India’s second-largest export commodity to ASEAN — buffalo meat — saw a 4.92% increase in 2016-17 to reach $2.78 billion.

Fourth-largest partner

ASEAN is India’s fourth largest trading partner with total trade in 2016-17 at $71.69 billion, constituting almost 11% of India’s overall global trade of $660.6 billion. Total exports to ASEAN in 2016-17 stood at $31.07 billion, while imports were $40.63 billion, creating an adverse trade balance of $9.56 billion.

The committee also found that while exports of agricultural products from India faced high import tariffs and barriers, leading to a sharp drop in trade, India’s food processing sector had raised concerns about the ‘near absence of quality norms’ for import of cheap processed food products from ASEAN countries.

Processed food imports

“The Committee recommends the Department to look into cheap import of poor quality processed food products. It desires that appropriate quality norms may be fixed for import of such products from ASEAN as well as other regions of the world,” its report said.

Similar concerns have been raised by the committee about the imposition of safeguards and non-tariff barriers by ASEAN nations on exports of India’s textiles and pharmaceuticals, while demanding that the government must ensure reciprocity in the reduction of tariffs in products like steel.

It has also sought efforts to improve India’s access to services trade in ASEAN, with a focus on increasing the footprint of Indian banks and financial institutions in the region.

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