News Brief
With China’s ASEAN Export Routes Under US Scrutiny, India Pressures Bloc To Fix Skewed Free Trade Pact: Report
Prime Minister Narendra Modi and Chinese President Xi Jinping.
As the United States targets Chinese transshipment through Southeast Asia with steep new tariffs, India is reportedly intensifying pressure on ASEAN to fix longstanding asymmetries in their free trade pact — a deal that has enabled indirect inflows of Chinese goods into India for years.
India’s free trade agreement (FTA) with the Association of Southeast Asian Nations (ASEAN), signed in 2009 and implemented from January 2010, has come under scrutiny for its weak provisions on rules of origin (ROO).
These loopholes have allowed large-scale rerouting of Chinese goods through ASEAN countries, contributing to a sharp rise in India’s trade deficit with the bloc — from $5 billion in 2010–11 to $43.57 billion in 2022–23.
A tenth round of review meetings for the ASEAN-India Trade in Goods Agreement (AITIGA) is scheduled for mid-August in New Delhi.
However, if no substantial revisions are achieved, New Delhi has the option to invoke the pact’s termination clause, which allows either party to end the agreement with 12 months’ written notice.
Meanwhile, the US has announced plans to impose tariffs of up to 40 per cent on goods from several ASEAN countries — including Cambodia, Thailand, Indonesia, Laos, and Myanmar — which are known hubs for Chinese transshipment.
Laos and Myanmar face the steepest proposed tariffs, effectively rendering them unviable as re-export routes for Chinese firms trying to bypass existing US duties.
The move has already disrupted the plans of several Chinese exporters who had shifted or planned to shift production to Southeast Asia.
Industry analysts say the impact will be particularly severe for sectors without robust local supply chains in the affected countries.
For India, these developments coincide with its own effort to recalibrate trade relations with ASEAN.
India’s average tariff elimination under the deal stands at 74.2 per cent, while some key ASEAN economies — including Indonesia and Vietnam — have offered much lower commitments of 50.1 per cent and 69.7 per cent, respectively.
While countries like Singapore offered 100 per cent tariff elimination under the FTA, it brought no additional benefit since the island nation was a zero-duty country.
Smaller ASEAN economies, despite offering higher concessions, contributed limited trade advantage for India due to their scale.
India’s utilisation of the FTA remains low at around 30–40 per cent, in contrast to 65–70 per cent utilisation by countries like Indonesia, Cambodia, and Vietnam.
Violations of rules of origin provisions and instances of under-invoicing have also been flagged by domestic industry associations.
The commerce ministry has not issued an official statement on the possibility of withdrawal, but the 10th round of review talks may be a critical juncture.
A government official confirmed that both sides had earlier committed to expediting the review, with an aim to achieve “substantial conclusion” by 2025, Hindustan Times reported.
Union Commerce Minister Piyush Goyal had also raised the issue in June at the India Global Forum in London, criticising earlier FTAs signed by the previous government with competing economies such as ASEA.
As both the US and India apply pressure through separate channels, ASEAN’s role as a preferred transshipment and manufacturing base for China is facing renewed challenges — with direct implications for regional trade dynamics.
