Framework Agreement on Comprehensive Economic Co-operation between India and ASEAN: First Step Towards Economic Integration

ASEAN Economic Bulletin Vol. 20, No. 3 (2003), pp. 283-91 ISSN 0217-4472 Framework Agreement on Comprehensive Economic Co-operation between India and ASEAN First Step Towards Economic Integration Seema Gaur I. Introduction Regional co-operation agreements in the past were regarded as precursors to inward-oriented economic blocs and, therefore, stumbling blocks to multilateral trade. However, they are now considered as complementing and having a positive affect on global trade liberalization (if they are consistent with WTO provisions) and are becoming the order of the day all over the world. Declining market access in the emerging patchwork of formidable regional trading blocs in Europe and America is causing fear of economic isolation in many Asian economies. Driven by challenges of globalization and growing economic interdependence in Asia, both ASEAN and India are actively pursuing free trade agreements with their trading partners within and outside the region. China's emergence as a trade and investment powerhouse and its entry into the World Trade Organization (WTO), affecting competitiveness in exports and foreign direct investment (FDI), have further contributed to the need for closer economic integration with trading partners. The inherent limitations of building up liberalized multilateral trade and the recent collapse of WTO talks in Cancun have added urgency to the process. India has existing free trade agreements (FTA) with Sri Lanka and Nepal and has recently signed a framework agreement towards establishing a FTA with Thailand and is negotiating FTAs with many countries including Singapore.1 ASEAN has signed the framework agreements with China, Japan, and India to set up a free trade area within the next ten years, in addition to seeking bilateral FTAs, with Singapore taking the lead. India is ASEAN's summit partner along with China, Japan, and South Korea. After the initiation of India's "Look East" policy in the early 1990s, coinciding with economic reforms and liberalization, the ASEAN-India ties have grown from a sectoral dialogue partnership in 1992 to a ASEAN Economic Bulletin 283 Vol. 20, No. 3, December 2003 full dialogue partnership in 1995 and subsequently to a summit-level interaction. The first ASEANIndia Summit was held in 2002 in Phnom Penh, Cambodia. The progressively closer relationship has led to the strengthening of not only economic ties between ASEAN and India, but also political and security linkages, with India joining the ASEAN Regional Forum (ARF) in 1996. ASEAN-India partnership aims at exploiting complementarities and synergies in terms of factor endowments, economic structure, and skills and capabilities in diverse areas such as information technology, pharmaceuticals, tourism, entertainment , human resource development, education, research in biotechnology, power, food processing, agriculture, healthcare, financial services, communication, space technology, energy security, industrial parks, real estate management, logistics, infrastructure, and so on. Over the last few years, collaborative initiatives have been launched between ASEAN and India in many of these sectors. Some of the joint projects like development of composites and rare earth magnets for industrial applications are now poised for commercial applications. Apart from merchandise trade, there are bidirectional flows between India and ASEAN in FDI, science and technology, tourism, and manpower. ASEAN's expansion to include countries of the Indochina region (Cambodia, Laos, Myanmar, and Vietnam) enhances the scope for ASEAN-India partnership in the twenty-first century. ASEAN-103 plus India can exploit a large enough market for their goods and services on the basis of their national and region wise competitive advantage (Wadhva 2000). Over the last decade, strong institutional mechanisms for ASEAN-India dialogue and cooperation have been put in place. Two IndiaASEAN Business Summits, held in India during 2002 and 2003, have already brought together business people and officials from both sides to explore business and industry links. To spearhead co-operation in the private sector, an ASEANIndia Business Council (AIBC) comprising of representatives from ASEAN Chambers of Commerce and Industry and apex business organizations in India has been set up. As a major economy with more than a decade of marketoriented reforms behind it, India is poised to intensify its engagement with the dynamic economies of ASEAN. ASEAN and India are drawing up a roadmap called "India-ASEAN Vision 2020"4 for future development ofASEANIndia relations to be adopted at...