India and Asia Pacific Trade Agreement (APTA)

In June 2016, it was reported that the Government of India is keen on expanding its trade ties with neighbours via exchange of tariff concessions under the Asia Pacific Trade Agreement (APTA), a less known but very old trade agreement. In September, 2016, the cabinet has gone ahead to approve these concessions.

About Asia-Pacific Trade Agreement

Signed in 1975, the Asia Pacific Trade Agreement (APTA) is the oldest preferential trade agreement (PTA) between seven countries of Asia-Pacific region viz. Bangladesh, China, India, Lao PDR, Mongolia, South Korea, and Sri Lanka. It was originally known as Bangkok Agreement and was renamed in 2005 as APTA. The APTA region covers a market with GDP of $15 trillion and comprises nearly 3 billion people. Here are some other notable trivia about APTA

• It was launched in 1975 as Bangkok Agreement as an initiative of ESCAP {Economic and Social Commission for Asia and the Pacific}.
• It is open to all developing countries and so far has been joined by 7 countries. Mongolia was the latest to join this group in 2013.
• It is considered to be the first pluri-lateral agreement between developing countries; and has longest effective implementation period.
• APTA is also the ONLY operational trade agreement which links India and China.

Since it is a PTA, the basket of items and extent of tariff concessions are enlarged during the trade negotiating rounds from time to time. So far three rounds have taken place.

Questions & Answers

• What has been India’s role in APTA so far in terms of trade concessions?
• APTA is the only operational trade agreement that links China and India. To what extent, increasing interest in APTA can help India to handle the lopsided trade balance with China?

What has been India’s role in APTA so far in terms of trade concessions?

The above description makes it clear that so far three rounds of negotiations have taken place towards APTA trade concessions and India has offered concessional tariff on 570 items @23.9% while 48 items @39.7%. By September 2016, the Union Cabinet has approved concessional tariff on 3142 items  @28.01%. This shows that India is keen to expand trade ties between its neighbours and it should be welcome.

APTA is the only operational trade agreement that links China and India. To what extent, increasing interest in APTA can help India to handle the lopsided trade balance with China?

India’s trade with China is highly in favour of China. The trade deficit is expected to nearly double to $60 billion in next two years if market access constraints and non-tariff barriers are not addressed; and if India’s exports are not competitive. Currently, Indian goods face non-tariff barriers in China. Via APTA, India has pushed for tariff concessions from China in oil seeds, textile items and marine products in the fourth round negotiations, mainly to correct the imbalance. Further, India has also offered duty concession on rail rolling stock, nuclear reactors and fissile material to gain benefit from China as well as South Korea. It is yet to be seen to what extent these concessions result in gains for India. Further, currently the RCEP negotiations are still under discussion and will take some time to be implemented.