India Reviewing Malaysia Trade Pact.

In light of the growing trade deficit with Southeast Asian Country Malaysia, India has initiated a review process of its trade agreement with Malaysia and is examining the rules of origin under the agreement. The India- Malaysia Comprehensive Economic Cooperation Agreement was signed in fiscal year 2011, when the trade deficit was $2.6 billion, which doubled to $5.5 billion in FY24. Officials said the commerce department is also preparing a list of non- tariff barriers faced by Indian industries while exporting to Malaysia. The pact is a comprehensive agreement that covers trade in goods and services, investments, and the movement of natural persons. The government plans to conduct extensive consultations with the trade and industry sectors and aims to discuss flexibility in the rules of origin to achieve a higher share in global value chains. Rules of origin are the criteria that determine the national source of a product and thereby provide duty connections. According to an industry representative, besides balancing trade, the review will help identify new products and resolve issues in the petrochemicals, plastics and pharmaceutical sectors . The review is significant because both countries offered additional tariff cuts beyond those in the India- ASEAN free trade agreement. Malaysia is a part of the 10 member ASEAN. India’s major exports to Malaysia include petroleum products, aluminium products, buffalo meat, organic chemicals, and electrical machinery and equipment, while key imports are vegetables oil, electrical machinery and equipment, petroleum products, nuclear reactors, boilers, machinery and mechanical appliances, and chemicals. Light naphtha has emerged as a new export product to Malaysia. We are discussing with exporters if there are issues with the rules of origin and non- tariff barriers such as sanitary and phytosanitary standards and technical barriers to trade, as these impact the trade deficit, said an official.