The ASEAN-India Trade Agreement and Its Discontents

The ASEAN-India Trade in Goods Agreement, or AITIGA, is a regional trade pact signed in 2009 by India and ASEAN. It makes trade easier by reducing or eliminating tariffs on qualifying goods. It also signals closer economic cooperation between India and Southeast Asia.

The agreement covers fewer products than most comparable ASEAN+1 deals. Its promised tariff-elimination coverage was about 79 percent, while other agreements covered more than 90 percent. AITIGA also imposed unusually demanding origin requirements before goods could receive preferential tariffs.

India wanted the agreement to demonstrate commitment to its Look East policy without exposing domestic industries to excessive competition. That choice made AITIGA a shallow agreement. Its narrow scope and complex compliance rules meant many exporters avoided using it, limiting the practical trade benefits for both India and ASEAN.

AITIGA promised tariff elimination coverage of around 79 percent. That was substantially lower than the more than 90 percent coverage promised in the other ASEAN+1 agreements. The difference shows that AITIGA was designed as a relatively narrow trade arrangement rather than a broad market-opening pact.

India pushed for this limited scope during difficult negotiations. It wanted closer ties with ASEAN, but it also wanted to shield domestic businesses from intense foreign competition. ASEAN, meanwhile, wanted wider access to the Indian market. The final agreement reflected India’s more defensive position.

The restricted coverage had practical consequences. It reduced the number of goods receiving preferential treatment and made the agreement less commercially attractive. Combined with stringent rules of origin, the narrow tariff commitments encouraged exporters to avoid using AITIGA. The agreement therefore delivered less market integration than most comparable regional deals.

India began running a trade deficit with ASEAN in 1996, well before AITIGA was signed in 2009. This timing challenges the idea that the agreement itself created the deficit. The imbalance reflected broader economic changes in Southeast Asia rather than a sudden failure of Indian negotiators.

ASEAN economies were shifting from agriculture toward manufacturing. That transformation increased the region’s ability to export manufactured goods to India. The 1997 Asian Financial Crisis then triggered currency devaluations across the region, making Southeast Asian exports more competitive and further boosting the deficit.

The deficit’s absolute value grew over the following three decades. However, the India-ASEAN imports-to-exports ratio remained broadly similar to its level in the 1990s. The article therefore presents AITIGA as a weak explanation for the imbalance, while emphasizing longer-running structural and financial forces.

India wanted to join ASEAN’s new wave of regional integration, but it did not want to open its market widely. Its economic managers preferred shielding domestic industries from excessive international competition. AITIGA therefore had to balance diplomatic engagement with domestic protection.

The negotiating positions differed sharply. ASEAN wanted a broader agreement that would provide greater access to the Indian market. India instead sought to limit the agreement’s scope. Indian businesses were also lukewarm about pursuing more market access in Southeast Asia, reducing pressure for ambitious concessions.

The final result reflected those priorities. AITIGA became the shallowest ASEAN+1 agreement, with roughly 79 percent tariff-elimination coverage rather than more than 90 percent. The article treats this as a deliberate Indian choice, not evidence that inexperienced negotiators were tricked into accepting an unfair deal.

Rules of origin are requirements used to identify where a product was made or sufficiently transformed. They matter because only goods meeting those requirements can receive an agreement’s preferential tariff treatment. AITIGA’s rules are especially demanding compared with other ASEAN+1 agreements.

For AITIGA, exporters must satisfy two tests at once: at least 35 percent local content and a change in tariff subheading. Meeting both conditions requires firms to track inputs, production processes, and product classifications carefully. A product that fails either test cannot claim the agreement’s preference.

That dual compliance raises paperwork, verification, and administrative costs. When those costs outweigh the tariff savings, exporters may simply use normal tariffs instead. The article identifies AITIGA’s complex rules, alongside its limited coverage, as a reason exporters avoided using the agreement. This weakened the pact’s practical trade impact.

AITIGA compared poorly with the broader ASEAN+1 agreements that ASEAN negotiated with its major regional neighbors. It had about 79 percent tariff-elimination coverage, while the other agreements promised more than 90 percent. The article also places the ASEAN-China agreement in this wider comparison, noting that China began negotiating with ASEAN around the same time as India.

The key mechanism behind the diplomatic damage was not simply the agreement’s design. India had deliberately limited its scope, then began criticizing AITIGA almost immediately after signing it. India and ASEAN agreed to review the pact in 2015, but the review remains unfinished.

That unresolved process weakens India’s image as a reliable and capable regional partner. It also creates unnecessary tension with Southeast Asia. The article argues that India’s story of being duped is inaccurate: AITIGA largely delivered the protection Indian negotiators sought, even if that outcome was economically debatable.

The dispute has affected more than one trade pact. By portraying AITIGA as a deal in which India was duped, New Delhi undermines confidence in its own negotiating competence. The article argues that this narrative damages India’s credibility as a reliable and capable regional partner.

The clearest example is the unfinished review. India and ASEAN agreed to review AITIGA in 2015, but the process has still not concluded. India also began criticizing the agreement almost immediately after signing it. These repeated complaints and delays create diplomatic friction and make cooperation appear difficult.

The wider consequence is a climate of irrational fear around economic cooperation with Southeast Asia. That fear can make India more cautious about regional trade initiatives, despite its renewed interest in free trade agreements. The article says the resulting acrimony is unnecessary and that the myth is costing India diplomatically.