ASEAN-India Trade in Goods Agreement: Expected to Increase Export Turnover of Vietnam

Opening the conference, Director of VCCI-HCM Vo Tan Thanh said Vietnam's trade deficit with India has decreased considerably in recent years. In 2008 the deficit was US$1,705 million; US$1,215 million in 2009; US$753 million in 2010; US$793 million in 2011, and US$330 million in the first six months of 2012. Also, trade between the two countries has a stable legal framework and the two countries have signed a number of cooperation agreements creating favourable conditions for bilateral economic, trade and investment relations. Especially since the ASEAN-India Trade in Goods Agreement (AITIG) was signed, the relations between the two countries have become stronger, creating good conditions for Vietnamese enterprises to boost exports to India.

 

According to Mr Thanh, India is one of the top 10 markets of Vietnam and the two-way trade reached US$3.9 billion in 2011; and US$1.85 billion in the first six months of 2012. By 2015, it is expected that bilateral trade turnover will have reached US$7 billion. However, the current trade balance is tilted toward India, Vietnam still has import surplus from India with a total export turnover of Vietnam to India accounting for only 0.3 percent compared to India's total imports.

 

The main reason is India's tax rates remaining high, an average of about 30 percent, despite the route of tax cuts under the AITIG. Many export items in which Vietnam has advantages are on the list of protected products or subject to have high tariffs such as agricultural products (rice, tea, pepper, coffee, etc.). This has not stimulated Vietnamese enterprises to boost exports to this large market. In addition, there are still many Vietnamese enterprises which have not paid adequate attention to the Indian market; they have had limited understanding of the market and their partners, also limiting Vietnam's exports to the Indian market. He expressed the hope that in the future, the two countries will strengthen exchange and cooperation to develop in a more balanced way, beneficial for both sides.

 

The Indian Ambassador to Vietnam, Mr Ranjit Rae, said India is implementing “Look East” policies not only on the field of culture, history, and education, but also to promote economic cooperation commitments through road, water and air routes, creating a bridge for comprehensive development cooperation with the ASEAN community, including Vietnam. Mr Ranjit Rae said India always sees Vietnam as an important pillar of its "Look East” policy and endeavours to build close relations with Vietnam on both bilateral and multilateral levels, to make Vietnam become a waypoint to reach out to the entire ASEAN region.

 

India-ASEAN trade reached US$80 billion under the AITIG Agreement. As of December 31^st 2013, India pledges to reduce tariffs to 0 percent for over 60 percent of the tariff lines of goods imported from Vietnam, and by 2016, it will increase to more than 70 percent of tariff lines. As a new member country of ASEAN (CLMV), Vietnam can reduce taxes on the itinerary for more than five years compared to other ASEAN countries and India. Despite a longer route, Vietnam still enjoys full privileges from tariff reduction commitments of India and other ASEAN countries.

 

Accordingly, by December 31^st 2018, 80 percent of India's tariff lines of goods to Vietnam will be reduced to 0 percent. The negotiation process on "sensitive" goods, as well as the strengths of the two countries, such as tea, coffee, pepper, seafood and garments, and the roadmap tax cuts will be implemented from 2019. Under which India agrees to reduce the tax to 45 percent for coffee and black tea, and 50 percent for pepper by 2018. India's exclusion list includes 489 tariff lines, accounting for 5 percent of the trade value.