News Update

'Look East Policy' Should be Pursued Without Stumbling

AUGUST 31, 2017

By TIOL Edit Team

PARLIAMENTARY Standing Committee (PSC) on Commerce has done well to study and find flaws in India's three free trade agreements (FTAs) with 10-country Association of Southeast Asian Nations (ASEAN).

The agreements are 1) India-ASEAN Trade in Goods Agreement (IATGA) that was signed in August 2009, 2) India-ASEAN Agreement on Trade in Services and 3) India-ASEAN agreement on Investment - both signed in November 2014.

The flaws identified fall in the domains of rule of origin, tariff reduction progress, preferential treatment by ASEAN to certain imports from China and Japan and non-tariff barriers against Indian exports.

PSC should turn torchlight on other FTAs and preferential trade agreements (PTAs) or their variants with other countries/trade blocks as sustained robust growth in exports of goods and services is the key to solving India's unemployment problem.

Turning India's perennial trade deficit into trade surplus is equally important for generating wealth and shoring up foreign exchange reserves.

In its report on trade with ASEAN submitted to Rajya Sabha on 25th August 2017, PSC has noted that Department of Commerce has undertaken comprehensive review of IATGA. The Review was done to identify gaps in implementation of this agreement.

It is unfortunate that the Department did not supply a copy of the Review to PSC. In spite of this handicap, PSC has done well to pinpoint factors that have worked against India, resulting in trade deficit of $ 9.56 billion in 2016-17.

PSC says: "Although India-ASEAN Trade in Goods Agreement has been implemented, India ASEAN Trade in Services Agreement and India ASEAN Trade in Investments Agreement have not been ratified by some of the ASEAN countries. The Committee expects that the Government of India should impress upon these countries for early ratification of the Agreements".

India has been following a lackadaisical approach in its bilateral and multilateral negotiations on trade in services, thereby not tapping fully World Trade Organization (WTO's) General Agreement on Trade in Services (GATS).

GATS provides four modes for supply of services. These are: 1) cross-border trade such as Internet-driven banking and knowledge-driven services; 2) visitors from one country availing services such as healthcare in another country (consumption abroad); 3)service companies opening office in another country (commercial presence) and 4) deputation of persons from one country in another country to execute specific assignments/contracts.

The fourth avenue is the least tapped in services trade and is the most important for India for realizing much-flaunted demographic dividend.

PSC has done well to urge Government to take up the issue of numerous hurdles encountered in movement of Indians to overseas assignments.

Referring to services trade with ASEAN, PSC observes: "professional qualification, training and other requirements including professional standards have been used as a barrier for movement of accounting services from India, though, the Indian requirements in this regard meet the international standards."

PSC continues: "It is noted that trade in accountancy services suffers impediments such as only few countries have made full bound commitment; Limitations on national treatment as well as market access limitations imposed by several countries; visa restriction; restrictions on the mobility of personnel; impediments to technology and information transfer; 'Buy National' public procurement practices; nationality requirements; residence/establishment requirements and professional certification/ entry requirements".

PSC has aptly flagged the problem in Indian IT professionals getting work visas in Singapore. It has advised Commerce Department to urgently resolve this problem.

India should take up promptly these hurdles with ASEAN keeping in view the progress made by ASEAN countries in bilateral trade in services.

Asian Development Bank (ADB) has dwelt on this subject in its report captioned 'Open Windows, Closed Doors-Mutual Recognition Arrangements (MRAs) on Professional Services in the ASEAN Region' released during December 2016.

The Report notes: "By jointly setting standardized rules for mutual recognition and renouncing, in part or in full, their national discretion to assess foreign qualifications, ASEAN Member States have potentially made it easier for professionals to have their qualifications recognized across the region. If fully implemented, the MRA would also directly support the ASEAN goal of facilitating skill mobility".

India has been following 'Look East Policy' since 1992, for economic and social integration with Asian tigers and dragons in East and Southeast Asia.The Policy was transformed into 'Act East Policy' in 2014.

Referring to India's north-east region's affinity to South-East Asia & its potential as export gateway to the East, PSC has suggested: "Government of India should realize that culture is an important tool of 'Act East Policy' and should be used as a means for strengthening its relationship with ASEAN.

Time is now ripe to act wisely on this policy with focus on India's demographic dividend,which can turn into disaster if unemployed millions don't get work opportunities.