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After pushing back against India’s food security programme at the recently concluded WTO’s 13th Ministerial Conference in Abu Dhabi, Thailand is learnt to have objected to India’s custom regulations that New Delhi implemented in 2020, a government official said. The regulation, CAROTAR, is aimed at strictly verifying the rules of origin under the free trade agreements (FTAs) to guard against misuse of benefits.
Thailand’s objection was flagged during the ongoing India-ASEAN FTA review where India is trying to boost exports to Association of Southeast Asian Nations (ASEAN) countries and bridge the ballooning trade gap. India-ASEAN trade gap in FY23 surged to $43.57 billion in favour of bloc countries, growing sharply by over 40 per cent compared to $25.75 billion in FY22.
Trade experts said that the India-Asean trade gap has been rising as several multinational companies are increasing investments in ASEAN nations as part of their China-plus-one policy. Moreover, the production-linked incentive (PLI) schemes have also increased demand for intermediate products that are being sourced from Asean countries.
However, Thailand’s objection also comes in the backdrop of growing Chinese influence in the country with China becoming the largest source of foreign direct investment (FDI) during the last calendar year followed by Singapore and the US. Beijing and Bangkok have also expanded defense cooperation during the last decade.
“Our trade deficit has gone up with ASEAN countries. India had sought the review of the India-ASEAN FTA and we are looking for better market access and they are also looking to fast track trade facilitation. Because of CAROTAR – Customs (Administration of Rules of Origin under Trade Agreements) Rules – their exports are affected. Thailand has especially objected during the review meeting,” a government official said on condition of anonymity.
“They are also looking to increase coverage of tariff elimination. And we are also looking for liberal Product Specific Rules (PSRs) in electronics, chemicals and textiles. Besides, we are looking to streamline non-tariffs barriers that have been a concern for our exporters,” the official added.
In trade parlance, PSRs determine the circumstances in which goods imported from a member, that have components or inputs from a non-member, are still eligible for preferential tariff treatment. PSR rules are negotiated to simplify the use of FTA as India’s utilisation rate of ASEAN FTA has remained weak over the years.
“The China plus one strategy being adopted by several MNCs in recent years, including by some Chinese firms which are also increasing their investments in ASEAN countries, are already seeing a rise in the manufacturing and export capacities in ASEAN,” V S Seshadri former Indian Foreign Service (IFS) officer and Joint Secretary for WTO matters in India’s Ministry of Commerce from 1999 to 2003 said in a report.
Seshadri in his report for the think tank Delhi Policy Group also pointed out that India’s high tariffs have also resulted in greater advantage to ASEAN countries and wider trade deficit.
“Due to the generally higher level of average tariffs prevailing in India, coupled with the fact that India had thus far entered into fewer FTAs worldwide than ASEAN countries, the margins of tariff preferences enjoyed by the ASEAN countries in the Indian market under India-ASEAN FTA have been far greater than the margins of tariff preferences that Indian companies have secured in the ASEAN markets,” Seshadri added.
