India will be worst hit among other Asian countries if China makes a pre-emptive entry into the Asean due to trade diversion, a study by Indian Council for Research on www.zjbag.com
International Economic Relations (Icrier) stated. India should therefore, hasten its process of negotiations for an early conclusion of the India-Asean FTA. China is bound to enter the Asean considering the Early Harvest programme (EHP) is already in effect and the FTA would be the first to be implemented, the study said. www.zjbag.com
Among the plus four economies of China, Japan and Korea, India will be the most adversely affected due to trade diversion. The EHP of the Asean-China FTA offering tariff concessions on commodities of sectors 1-8 (HS) will have a negative impact on India. Products like marine products, fish and molluscs, and leguminous vegetables are likely to suffer. www.zjbag.com
Once the Asean-China FTA is fully implemented, the maximum number of products likely to suffer export diversion in India belong to the cotton sector, the study said. Commodities like cotton sewing thread, plain weave cotton, cotton yarn, twill weave cotton, and woven fabric of cotton may suffer maximum export diversion. www.zjbag.com
In the long run, the Asean-China FTA may also limit India's export potential to Asean in product groups like textiles, man-made filaments, and footwears and gaiters, which are largely unskilled-labour intensive commodities. www.zjbag.com
The study also examined India's prospects in entering a trade bloc of Asean+4 (China, Korea, Japan, India) vis a vis Asean+1 framework where each country negotiates with Asean separately. The study said the most cost-effective way for a country would be to first enter into an Asean+1 framework and then enter the Asean+4 trade bloc. www.zjbag.com
However, if Asean+1 agreements of the plus four economies are compatible with each other would there be hope of linking these agreements to constitute a regional economic entity in Asia in future. Compatibility is possible as the elements of the +1 agreements are still being negotiated. "A greater focus on harmonisation and consistency within Asean is required, say for example, with respect to the rules of origin that at present may be scattered," the study said.