Introduction

India–China trade in the near future is likely to take place against the backdrop of an emerging, uncertain network of Asian Free Trade Agreements (FTAs). This chapter takes a look at the contemporary history of regional trade negotiations. It traces the influence of a third party; namely, ASEAN's efforts to build links to the rest of Asia through a complex network of FTAs. That influence suggests a disturbing possibility – the exportation of a tariff acceleration device developed during the ASEAN–China negotiations to the rest of Asia. The ASEAN–China FTA contains a tariff acceleration clause and similar devices which would allow separate bilateral deals between China and the individual ASEAN nations to be cut beneath the larger umbrella of the China–ASEAN FTA.

These devices are significant because ASEAN has become something of a common medium for India and the ‘Plus 3’ nations to join in the build-up of a regional network of Asia-wide FTAs. In the near to medium term, the Plus 3 are unlikely to have bilateral agreements between themselves. There is no evidence that China, Japan and South Korea will be aiming for FTAs between themselves anytime soon. Instead, they appear content to trade with each other on preferential terms through their individual FTAs with ASEAN and the ASEAN nations instead. If these become as heavily bilateralized as the China–ASEAN FTA, the result could be an ‘MFN black hole’ in intra-Asian trade liberalization.