The Impact of ASEAN-India Free Trade Agreement on Palm Oil Export Performance: A Comparative Study of ASEAN-3

Abstract

India is the world’s largest importer of palm oil, with a significant share sourced from ASEAN-3 countries—Indonesia, Malaysia, and Thailand. The ASEAN-India Free Trade Agreement (AIFTA), implemented in 2010, aimed to strengthen trade ties by reducing tariffs on palm oil. However, previous studies have produced mixed results regarding AIFTA’s effectiveness, highlighting the need for further analysis. This study examined the impact of AIFTA on the palm oil export performance of ASEAN-3 countries by evaluating their competitiveness in the Indian market using Revealed Comparative Advantage (RCA), Export Product Dynamics (EPD), and Ordinary Least Squares (OLS) gravity models. Utilizing secondary data from 2007 to 2021 sourced from UN Comtrade, the World Bank, and CEPII, the study assessed competitiveness, identified export trends, and explored trade creation and diversion effects. Findings from the RCA and EPD analyses indicate declining competitiveness for Indonesia and Malaysia, while Thailand shows notable improvement. Despite tariff concessions under AIFTA, the gravity model reveals no significant trade creation effect, suggesting that non-tariff factors—such as India’s domestic production policies, export duties, and geographic proximity—play a more influential role. The study concludes that AIFTA’s impact on the palm oil trade remains limited. To enhance export performance, ASEAN-3 countries must pursue product diversification, sustainability initiatives, and strategic trade reforms. These insights offer valuable guidance for policymakers aiming to optimize FTA outcomes and navigate evolving market dynamics.