Sunday, 15 April 2012

India's Fifth Trade Policy Review (2011)

Reproduced from Economic Survey 2012, pgs 174-75.

In order to promote transparency and provide better understanding of the trade policies and practices of its members, the WTO has a mechanism for regular review of their trade policies. Depending upon its share in world trade, each member’s trade policy is reviewed by the WTO at fixed periodic intervals. India’s TPR is carried out  every four years. The TPR offers an opportunity to other WTO members to ask questions and raise concerns on different aspects of policies and practices of the country under review. The Fifth TPR of India was held on 14 and 16 September 2011 in the WTO. Before the meeting, the WTO Secretariat circulated a compilation of India’s written replies to 886 advance questions raised by 26 WTO members.

During the review, most of the members commended the resilience of the Indian economy that smoothly withstood the adverse effects of global financial crisis without taking recourse to protectionist measures.
Members appreciated India for using its trade policy to promote sustainable development and inclusive growth.  Members also noted  India’s positive engagement in Doha Round negotiations.

Summary of Issues raised and Responses given:

The Openness of India’s Trading Regime: Questions were asked about the openness of India’s trading regime. In response India pointed out that year after year, India’s imports had outpaced exports. In terms of percentage of GDP, the country’s merchandise trade deficit is one of the highest in the world. India has been autonomously reducing its tariffs over the years. The simple average most favoured nation (MFN) tariff rate declined from 15.1 per cent in 2006-7 to 12 per cent in 2010-11. Both the average agricultural and industrial average tariffs have declined over time. The tariffs on 71 per cent of India’s tariff lines are between 5 and 10 per cent.

Gap between India’s Bound and Applied Rates on Agricultural Products: Some members mentioned the large gap between India’s bound and applied rates on agricultural products. India responded that the large gap reflected India’s steady and continued autonomous tariff liberalization. During the four years since the last TPR, the tariffs on some agricultural commodities had to be adjusted in the face of high volatility in food prices. In most cases tariffs have been brought down and have stayed down. In a few instances they have been raised again but never above their original levels.

Export Incentives: Questions were asked about export promotion schemes. It was explained that India’s export promotion schemes are based on the concept of duty neutralization and providing a level playing field. These schemes are reviewed regularly.

FDI Policy: To a number of questions on FDI policy, India explained that the continuing thrust, during the period since India’s last TPR in 2007, has been on making the FDI policy more liberal and investment friendly. The FDI guidelines have been significantly rationalized, simplified, and consolidated, with the aim of providing a single policy platform for reference of foreign investors. Several new sectors, such as petroleum and natural gas and civil aviation were either opened up to foreign investment or significantly liberalized during this period. Efforts were also being made to streamline and simplify the business environment and make regulations conducive to business.

India’s IP Policies and Enforcement: On questions related to India’s IP policies, India replied that a number of initiatives have been taken to enhance IP protection and enforcement. The changes proposed in the Copyright and Trademark Acts would enhance protection to intellectual property rights (IPRs) in digital technology particularly with regard to the dissemination of protected material over digital networks. These have been supplemented by administrative as well as judicial measures to strengthen the IPR regime. The provisions on IP protection in these laws are further supplemented by border measures to prevent the import of goods involving copyright piracy and counterfeit trademarks.
Another initiative taken by Indian customs is the facility for online registration by the right holders through the web-based Automatic Recordation and Targeting for IPR Protection System.

Government Procurement: On this subject, India explained that the procurement of high tech items and high value tenders, above US$ 50,000 is generally open to international bidders. Major reforms are on the anvil for increasing coverage, improving transparency and efficiency, and better enforcement, which are triggered by domestic concerns relating to enhancing the value for money. An omnibus procurement law applicable to the entire country and to all procuring entities, including public-sector enterprises, is being deliberated upon.

Sanitary and Phyto-sanitary (SPS) and Technical Barriers to Trade (TBT) measures: In response to question on India’s SPS and TBT measures, India explained that specific trade concerns raised against India have been largely addressed. Regulations adopted in the past have been on the basis of scientific risk analysis.

Export Restrictions: There were some questions on India’s use of export restrictions. India responded that export restrictions have been used on some occasions for purposes of domestic supply management but these have been purely on a temporary basis. The ban on the export of rice and wheat had to be extended in 2009 due to a dislocation in production and again in 2010 due to the severest drought in the country in the last forty years. However, the export of wheat and non-basmati rice is now completely free. The export of basmati rice is and has always been free. Restrictions on cotton exports were imposed for only a brief period last year. Cotton yarn exports have been made completely free. Similarly, cotton is also freely exportable.

Other Issues: There were questions related to customs valuation, tariffs, and other charges, internal taxation, import licensing, and the use of trade remedies. In response it was pointed out that India cannot be accused of protectionist intent in its use of trade remedies. If that were the case, then the easy route of increasing the tariffs up to the bound rates could have been used; that has not been done. Anti-dumping measures are legitimate instruments against unfair trade practices. Investigations are carried out in a fair and transparent manner and subjected to strict scrutiny. As a rule India only imposes the lesser duty and not the full dumping margin as is done by some WTO members. This underscores the fact that trade remedies are not used as a protectionist tool. Despite the fact that many members, with very deep pockets, use subsidies as part of their trade policy, India has not imposed a single anti-subsidy measure. As on date, there is only one safeguard duty in force. In the wake of the economic crisis, there was a spurt in application of safeguard investigations
in 2009. A total of 14 applications were received but in nine cases, investigations were either terminated or a decision was taken not to impose any safeguard duty. Duties were imposed only in five cases and those too have since been withdrawn. Moreover, India has never taken recourse to quantitative restrictions as safeguard measures. Import licensing affects only a few restricted items primarily on grounds of protection of human, animal, and plant life and the environment. The licensing regime is open and transparent. Licences are granted on a non-discriminatory basis. The relevant regulations are all available in the public domain and the DGFT acts as the nodal agency.

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