Will Pakistan comply with its WTO obligation and give India the benefit of the MFN clause?
Two days after announcing that Indian exports to Pakistan would be treated similar to exports from its preferred trade partners, is the Pakistan government backtracking under domestic political pressure? The latest report from Reuters suggests that India may not yet get unconditional MFN.
This is what Pakistan’s commerce secretary has stated:
Assuring the local industry, Mehmood said that the government has taken all the chambers of commerce in the country onboard to discuss the reservations of the local industry on opening up trade with India.
“We need to look whether our reservations are based on reality or on fears and assumptions,” he said, “At the same time I assure that if any of our industry affects from this trade, we have always an option to put dumping duties on Indian products.”
“We are analysing what Indian exports are and whether they can dump those products in Pakistan or not,” he added.
Touching another important issue, Mehmood said, “Pakistan is preparing a negative list for some industries that we feel are nascent and need protection. We will first protect our industry which is any country’s right even after granting MFN status.”
Although negative lists are against WTO laws when one country grants MFN status to another, even then to protect our industry, we will prepare a negative list, he assured the industry.
He also said that Pakistan and India have agreed to take similar positions in WTO to protect their interests. Similarly, in the upcoming WTO session on November 7, 2011, India will support Pakistan after which Pakistan will get the European Union duty package that it had asked for after the 2010 floods.
Mehmood also said that trade between Pakistan and India will be most beneficial for consumers who will get cheap products. “Pakistan is hopeful to get GSP plus status by 2013 for which we have lobbied,” he added.
“Exciting” India-China economic and trade relations
I have earlier blogged about trade relations between India and China. Mr. Mao Siwei, Consul General of China in Kolkata made some interesting remarks recently at an Industry chamber meeting. Here is what he said about India-China trade:
Ladies and gentlemen, after talking so long about world meltdown, let’s talk about something exciting. That is about China-India economic relations. For the first time, China has become India’s largest trading partner and the bilateral trade reached 51.8 billion US dollars in the calendar year 2008. Ten years ago, the figure of China-India trade in 1998 was only 1.9 billion US dollars. This is a nearly 30-fold increase in just ten years. And also the first time in history, India has become the biggest overseas market for Chinese companies undertaking contract projects. Last year, Chinese companies were awarded contracts worth 12.9 billion US dollars for various construction projects in India.
We are in the era of globalization where economic ties constitute the basis of overall relations between countries. It is very much true for China and India.
China and India are two of the largest economies and both have established their comprehensive industry systems. But at the same time, the economic strengths of our two countries are very much complementary to each other.
India is strong in knowledge-based industries, especially in IT and pharmaceuticals. So many Indian companies in these sectors have established their offices, laboratories and factories in China and their business is doing quite well.
China is strong in manufacturing and infrastructure and many Chinese companies are doing business in these fields in India.
Mr Siwei does not give any figures for Indian businesses operational within China. These would have been interesting too.
Here is what he said about energy security and India-China cooperation in the power sector:
Recently I have found a phenomenon in economic cooperation between our two countries, which has been emerging in the power sector. Here I would like to talk a little bit more about it.
Indian economic growth has been on fast track these years and the issue of shortage of electricity needs to be addressed in a very urgent manner. The Government of India has set up an ambitious target with a time frame of ten years. That is: by year 2012, all electricity demand will be fully met; per capita availability of electricity will be increased to over 1000 units; and accordingly new electricity generation capacity of 100,000 MW will be added during the period from 2002 to 2012.
Now I am sure that this target will be achieved on time or even before the due date. One of the reasons is that the Electricity Act 2003 of India has opened the door for international competition and China’s major power equipment producers and power plant builders have been quite active in the Indian market since then. Now Chinese companies have obtained many contracts for power equipment and EPC power projects. According to an incomplete statistics, over 30,000 MW of equipment will be supplied by Chinese companies in the coming few years, which accounts for over 30 per cent of the capacity addition target of 100,000 MW.
This is really a new phenomenon in the history of China-India economic relations and is a win-win situation.
For China, after 20 years’ hard efforts, its capacity of producing power equipment and building power plants is now much larger than the domestic demand. At the end of last year, the total installed power capacity in China was almost 800,000 MW, which was 5.4 times that of India at the same time. And last year also, 133,000 MW of equipment was manufactured in China, which was nearly as much as the total installed power capacity of 147,000 in India at the beginning of this year. So to maintain and develop the capabilities of power equipment manufacturing and power plants construction, Chinese power industry has to go abroad. They have found many large markets in the world, but the Indian market is one of the largest.
For India, to achieve the target of addition capacity of 100,000 MW by 2012, international cooperation is very much needed and China is a natural choice for many reasons: one, nowadays in the world, only China and India are two large economies which still rely heavily on coal-fired power generation, and in this field major Chinese companies have the latest know-how; two, Chinese equipment is reasonably cheap while its quality is comparably good; and three, because of their large capacity and rich experiences, Chinese companies can deliver goods on time and do the job faster.
Power plant is a strategic project in terms of its long life of about 30 years and its significance to millions of people. So it is understandable that the Indian side has to attach great importance to the quality issue. Recently a few Indian newspapers reported some problems of power projects constructed by Chinese companies and suspected the quality of Chinese equipments. According to my knowledge, the reported problems are teething problems and all the power equipment producers and power plant builders, no matter they are Indians or foreigners, might have the same problems. But it may not be fair that just because you are newcomers, your problems are easily the news to the media. As I know, most of the contracts the Chinese companies obtained have been awarded by Indian companies in the private sector. Definitely, it is not an easy decision for private business people to make to invest billions of Rupees in a power plant. They have to do their homework seriously and have to make their research all over the world. Finally they have been convinced that to choose Chinese equipment is in their best interests. We don’t need to doubt about their wisdom.
Recently our Indian friends have been talking very much about energy security. Now I have a feeling that in a short term, or in next ten to twenty years, if there is one foreign country which will contribute the most to the development of India’s power sector, that country must be China.
Here is an interesting Business Standard story about little Chinatowns coming up in the Indian countryside for Chinese workers building power plants in India. I have highlighted some interesting bits.
Little ‘Chinatowns’ are springing up at different locations in India as more and more Chinese companies bag contracts to build steel and power plants in the country.
“We have executed, for a major secondary steel company, a township for 2,000-odd Chinese workers at a location in Jharkhand, where they would be erecting, commissioning and operating a combined steel and power unit,” the chairman of a leading architecture and civil engineering firm told Business Standard.
“The quarters are quite spartan, with basic sleeping and recreation rooms, and shower ranges and attached toilet units, but with the requisite engineering to permit a large number of people to use the facilities simultaneously,” added the architect.
He said it was the largest such township to be built in the country and the standards and designs were different and much closer to the Western designs than similar complexes built for Indian workers at offsite project locations.
While the steel company refused to be identified, or to name the Chinese party (saying it was commercially sensitive information), the chief financial officer (CFO) of the company confirmed that the Jharkhand unit would be using Chinese technology and rely on a core manpower team from that country to operate at the levels of efficiency promised by the Chinese equipment supplier. “We understand that the Chinese government has unofficially told their equipment suppliers that if they desired to draw support from government agencies like their export financing institutions, they would do well to use Chinese workers at offsite locations instead of using local workers as it would support jobs and families in their country,” said the CFO.
He said he estimated 3,500 Chinese workers were in East India alone, and another couple of thousand more in other locations in the country. Such residential zones for Chinese workers were coming up at three locations in West Bengal, with as many as five plants being set up using technology from the communist nation.
When contacted, two Chinese supervisors with English-speaking skills serving at projects in Bengal, said while they had problems with the quality and speed of work done by Indian workers, they found the working and living conditions comparable to the Chinese facilities.
“We find many of the foods we prefer and have collectively hired domestic staff from our country, while 60-70 of us have moved our families to Kolkata as well,” said Jin Bao, one of the two engineers. Chinese contractors acquired a formidable reputation after the EPC firm, Dongfang Electric Corporation, won at Rs 2,750 crore, the contract for the West Bengal Power Development Corporation’s 2×300 Mw Sagardighi coal-based power plant in the Murshidabad district.
The first Sagardighi unit began power generation in end-2008 with power load factor of 80-90 per cent, while the second unit’s synchronisation is due.
When contacted, sources in the Chinese consulate in Kolkata refused to comment.
Foreign teams working at projects is not new — Russians worked to build the Bokaro Steel Plant and some ordnance factories, the Germans set up the Bhilai and Rourkela steel plants and the British built the Durgapur steel plant in the past.
However, these expatriates usually lived in mixed areas in bungalows comparable to those provided to Indian officers, and not usually in separate enclaves. Besides, they were usually highly skilled supervisory staff and not expatriate blue-collar workers completely manning project erection responsibilities.
The Business Standard report also mentions allegations of violent conflict with local workers over and this is quite interesting “the quality and integrity of the work executed by local workers”.
Interestingly, a secondary steel project in Bengal recently acquired sudden notoriety after 70-odd Chinese engineering workers allegedly beat up Indian workers following sharp differences over the quality and integrity of the work executed by local workers like fabricators and welders.
The conflict was so violent that the local police had to intervene, hospitalise a group of Indian workers and arrest some Chinese supervisors on specific assault charges, said a highly-placed bureaucrat in the West Bengal government. But he added that he did not expect such an incident to slow down the rush of Chinese project teams coming to India.
More from the Financial Times on Chinese involvement in India’s power infrastructure development.
Making Indian trade policy: Indian NGOs demand access to India’s FTA negotiations
The sixth round of India-EU FTA negotiations in New Delhi has Indian NGOs demanding access to “secret” FTA negotiating texts. The Times of India reports that protestors were detained outside the office of the European Commission in New Delhi. A body called the Forum on FTAs (described elsewhere as an umbrella group of 75 organizations) is spearheading these Indian civil society protests. An entity called FTA Watch-India has sprung up recently.
While I cannot comment specifically on the demands of this group in the EU-India FTA context, a discussion on how India makes its trade policy and whether it adequately consults with domestic stakeholders in formulating negotiating positions is much needed. Domestic stakeholders who ought to be consulted include not only NGOs, but also parliament, business, labor unions, farmers groups and consumers. Not much literature is available on the Indian trade policy-making process. There is however an interesting paper by Biswajit Dhar on this in a publication by IISD available here. See Biswajit Dhar and Murali Kallummal, “Trade policy off the hook: The making of Indian trade policy since the Uruguay Round”, in Halle and Wolfe (eds.) Process Matters: Sustainable Development and Domestic Trade Transparency, IISD 2007.
I had earlier posted on a news report on the low appetite in India these days for new FTA commitments given imminent elections and the domestic impact of the global economic downturn. An Economic Times story shows that the concerns about the EU-India negotiations are not limited to civil society, but also emanate from business and agricultural economic interests.
Speaking to ET last week, a commerce ministry official sought to allay the growing concerns in domestic circles over the proposed India-EU economic agreement. “There are strong complementarities between the EU and India. After all, we have not yet reached the stage of making the trade-offs and so the fears being expressed now are unfounded,” said the official, who was busy preparing for the sixth round of India-EU bilateral talks beginning Tuesday.
This, however, could be an over-simplistic view. There is clearly a need for greater involvement of all stakeholders in the negotiation process. The high-level trade group which had drawn the broad contours of the agreement was not representative enough.
The EU is India’s largest trading partner, accounting for a fifth of India’s total trade and also one of the largest sources of foreign investment in India. As opposed to this, India currently accounts for less than 2% of the EU’s total trade.
Clearly, as things stand now, India has much to lose (or gain) from the agreement as compared to the EU. Note that the agreement would cover a gamut of areas—trade in goods and services, IPRs, cross-border investments, competition policy, government procurement etc. So India’s policymakers ought to be more chary of the proposed pact than their European counterparts. There is a need for more transparency as well as greater involvement of all stakeholders in the negotiations.
Going by the high-level group’s report, India might need to go WTO-plus in the area of trade in goods, with no commensurate reciprocal gestures from the EU side. The agreement would, as things stand now, allow India to keep just 10% of the tariff lines—which include both agricultural and industrial goods—outside its scope.
It may be noted that India has been resisting the multilateral (WTO) trade liberalisation deal even as it did not have to cut tariffs on 5%f agricultural tariff lines and only make less-than-average reductions in another 7%, and looked close to getting the freedom to keep 5% of industrial tariff lines outside tariff reduction formula. Besides, India has already got preferential (zero) access to EU in case of several tariff lines under the GSP system, which reduces the scope for India to gain in terms of reduction in tariff barriers by the EU.
India China establish joint panel to defuse trade tension and resolve toy imports issue
India and China are in bilateral official-level talks in New Delhi. China is now India’s largest trading partner and India is China’s 10th largest trading partner. There is a huge trade surplus favoring the Chinese side, but China says it does not intentionally seek a trade surplus with India. From the new developments it seems unlikely that China will go in for formal WTO dispute settlement on the toy imports issue. The Indian government has admitted that the safety standards applicable at present exclusively to toy imports from China, need to be extended to imports from other countries and that comparable standards need to be put into place for Indian-made toys as well.
Xinhua reports:
During the talks, both sides agreed to set up a joint working team to coordinate and communicate regularly on the problems of bilateral trade, said the sources
The Chinese side expressed great concern over India’s frequent trade remedy probes against Chinese products, especially the prejudicial restrictive measures against Chinese toys, and asked India to avoid abusing trade remedy measures to over-protect its domestic products, and to uplift the restrictive measures on Chinese products, which were imposed merely out of prejudice and contradicted the WTO rules, said the sources.
The Chinese side also hoped that the two sides should solve bilateral trade disputes through government-to-government communications and coordination and strengthening of dialogue between the industrial sectors of the two countries, said the sources.
Vice Minister Zhong said at a media conference that China reserves the right to resort to the WTO dispute solution authorities over India’s ban of Chinese toys, but still believes the two sides have the capability and wisdom to solve this problem through communications and coordinations
Secretary Pillai said that according to Chinese statistics, bilateral trade between India and China has attained a volume of 51.8 billion U.S. dollars in 2008, so China has overtaken the United States as India’s largest trade partner.
Pillai expressed his hope that both sides expand bilateral trade and investment, and stand up against trade protectionism, saying India is willing to solve the problem of on-going anti-dumping and anti-subsidy investigations against Chinese products through coordination at the level of the joint working team.
In order to avoid possible prejudice against Chinese toys, India will also study and make up as soon as possible the safety standards for toy products, so that all imported toys and domestically made toys will all abide by the standards, he added.
The Indian side also hopes that China will solve as soon as possible the problem of quarantine and safety tests for Indian agricultural products and beef products bound for Chinese market, and take concrete measures to expand import of such products from India.
The Chinese side said that China does not intentionally seek trade surplus with India and wants to have a balanced development of bilateral trade and push forward the solution of the problem of quarantine for Indian food products.
According to statistics of Chinese Ministry of Commerce, from October 2008 to February 2009, India has launched 17 trade remedy probes, including those of anti-dumping and anti-subsidy, against Chinese products, covering industrial salt, steel, auto parts, coal products, porcelain products, textile and rubber products, which means a total loss of more than 1.5 billion U.S. dollars for the Chinese producers and traders.
Moreover, the Indian government has imposed restrictions on imports of Chinese steel, chemical and textile products and declared a six-month ban of Chinese toys in January. But due to opposition of home toy dealers, India has eased the ban on boys and allows import of products with international safety certificates.
India in the USTR 2008 Annual Report – a spotlight on India-US bilateral trade ties
The USTR has released its 2009 Trade Policy Agenda and 2008 Annual Report (these can be accessed here) and the section on India would be of interest to this blog’s readers. This is extracted below:
5. India
a. General
The United States and India completed another year of active dialogue on trade policy in 2008. The bilateral trade agenda continued to expand to support the significant opportunities for bilateral trade and investment that U.S. and Indian companies are pursuing. The Civil Nuclear Agreement signed on October 10, 2008, opens the door even wider for U.S. exports to help India meet its tremendous energy needs. That said, many challenges to trade and investment in India persist, and USTR continued to work with the Indian government to address such concerns as India’s tariff and tax regime, intellectual property rights policies, investment climate and regulatory hurdles. India continues to limit market access in various sectors through non-tariff barriers such as high border taxes and tariffs, foreign direct investment caps, non-transparent procedures, and discriminatory treatment of imports. Despite these barriers, trade expanded rapidly. In 2008, bilateral goods trade totaled $45 billion. Bilateral services trade totaled $19 billion in 2007.
b. Trade Dialogue
Ambassador Schwab and India’s Minister of Commerce and Industry Kamal Nath convened the fifth ministerial-level meeting of the United States-India Trade Policy Forum (TPF) in February 2008 in Chicago, Illinois. The discussions under the TPF cover bilateral trade, investment and related issues and also address multilateral issues such as the ongoing WTO Doha Round negotiations. The TPF is part of the overall Economic Dialogue between India and the United States. Through regular dialogue under the TPF, the United States and India seek to remove impediments to bilateral trade and investment by anticipating potential trade problems and jointly resolving concerns.
The TPF serves as the umbrella for five Focus Groups: Agriculture, Tariff and Non-Tariff Barriers, Services, Investment, and Innovation and Creativity (focusing on intellectual property rights issues). Ongoing Focus Group discussions in 2008 addressed priority issues such as foreign direct investment caps, intellectual property rights protection and enforcement, restrictive Indian telecommunications policies and market access for a wide range of manufactured and agricultural products and services. Noteworthy developments in 2008 included the agreement to launch negotiations on a bilateral investment treaty and India’s withdrawal of certain import restrictions on fresh fruit.
Another development in the 2008 bilateral U.S.-India trade dialogue was the Private Sector Advisory Group’s (PSAG) identification of key policy issues on which it would provide strategic recommendations and insights to the TPF. The membership of the PSAG includes trade experts and representatives of private sector organizations in the United States and India with in-depth knowledge of international economic and trade policy. The PSAG identified completion of a bilateral investment treaty as its top recommendation.
In addition to the February 2008 TPF meeting, Ambassador Schwab and Minister Nath met a number of times in the context of the Doha Round negotiations in an effort to find common ground in the pursuit of an ambitious outcome.
With regard to intellectual property rights, the United States has been working constructively with India to improve its IPR regime. The U.S. dialogue with India takes place through the TPF’s Focus Group on Innovation and Creativity, the Commerce Department-led High-Technology Cooperation Group, and work by the U.S. Government’s Intellectual Property attaché stationed in New Delhi and other government officials from multiple U.S. Government agencies. There has been some progress in India’s protection of intellectual property rights, including through the introduction of the proposed Drugs and Cosmetics (Amendment) Bill 2008 that will increase penalties for spurious and adulterated pharmaceuticals, and create a Customs recordation system. However, India still needs to improve its copyright regime to address issues related to protection of digital works on the Internet, strengthen its patent regime, including by clarifying the scope of patentable subject matter, provide effective data protection for pharmaceutical and agricultural chemicals, and increase enforcement against piracy and counterfeiting.
Indian FTAs – little success
The Business Standard has an article with an update on India’s FTA negotiations. The outgoing government has only signed 1 out of the 15 proposed FTAs on which it initiated talks.
Here’s the article in full:
UPA’s FTA success rate 1 out of 15
Rituparna Bhuyan / New Delhi February 25, 2009, 0:56 IST
The United Progressive Alliance (UPA) government, which initiated talks on about 15 free trade agreements (FTAs), could sign only one of them during its current tenure.
Opposition from the domestic industry lobby in some FTAs and inconclusive negotiations in other cases were reasons for slow progress in finalising FTAs with trade partners, experts said.
Government sources said that at least three of the proposed trade treaties, negotiations on which were concluded last year, would be cleared by the new government that takes charge at the Centre in a few months.
The present regime signed the Comprehensive Economic Partnership Agreement (CEPA) — which covers goods, services and investment — with Singapore in mid-2005.
* Talks Completed with Asean (FTA on goods), South Korea and Sri Lanka
* Ongoing talks with Japan, European Union, European Free Trade Association, Southern African Customs Union, Gulf Co-operation Council, Malaysia, Thailand and New Zealand
* Joint study group formed with China, Australia , Russia and Indonesia
“The fact that not many FTAs were sealed shows the cautious approach of the policy makers,” said Ram Upendra Das, fellow, Research and Information System for Developing Countries (RIS). “But India has recognised that these duty-free agreements are the order of the day as other countries are engaging in similar deals. Indian exporters will be left out if the nation does not engage in these type of agreements with its trading partners”, he added.
Government sources said that the ambitious FTA with the Association of South-East Asian Nations (Asean) and a CEPA with South Korea were unlikely to be cleared by the Union Cabinet. Talks on both these agreements were concluded successfully in 2008. After successful conclusion of talks, the agreement has to be approved by the Union Cabinet before it can be signed.
“The call on these two agreements is likely to be taken by the next government,” said a government official, adding the Cabinet had met probably for the last time on Monday before dates for the elections are announced next week.
There was no announcement on the South Korean and Asean duty-free agreements. Once elections are announced, the Cabinet will not be able to clear any proposals.
Sources added that the government was facing a lot of opposition from the industry on these two FTAs, as it is wary of any cheap imports at a time when the domestic economy is going through a downturn in the wake of the global economic crisis. The Asean FTA was to be signed in December 2008, but was postponed because of a domestic strife in Thailand, an Asean member.
Moreover, a separate CEPA with Thailand could not materialise as India first wants to sign the deal with Asean. “Thailand has also asked for some additional concessions,” officials said. Meanwhile, Both the countries have are trading through a Early Harvest Scheme (EHS), which translates to duty free trade of about 84 goods.
Experts maintain that given the present economic situation, FTAs could wait. “We do not know how things will shape up in the near future. It probably makes sense at times of uncertainty to calibrate policy to suit domestic needs,” said Bishwajit Dhar, head of centre for WTO studies at Indian Institute of Foreign Trade.
But Das feels that as the United States and Europe see a downturn, India needs to diversify its exports and imports.
Significantly, a CEPA with Sri Lanka could not materialise because of the political developments in the island nation. The agreement was to be signed on the sidelines of the SAARC meeting in Colombo in August 2008. Government officials maintained that Sri Lanka did not want the CEPA due to opposition by some political parties. Both the countries already have an operational FTA, covering goods, since 1998.
An agreement with Japan, which was scheduled to be concluded by the end of 2008, is also stuck. The bone of contention was the reluctance of the island country to allow easy market access of Indian pharmaceutical products.
On EU-India FTA
IPS in a report on the EU’s ambitions on FTAs with Asian partners writes about the FTA with India that the EU is currently negotiating. Some excerpts:
Mauro Petriccione, a director in the European Commission’s trade division, said on Oct. 6 that the lack of progress made in discussions with ASEAN has meant that the idea of negotiating a deal with just a few of its 10 member countries is being explored. ASEAN groups Singapore, Malaysia, Thailand, Burma, Vietnam, Laos, Cambodia, the Philippines, Brunei and Indonesia.
And while the European Parliament, the EU’s only directly-elected institution, called last month for an FTA with India to be finalised by the end of 2008, Petriccione acknowledged that attaining such a deal will be very difficult.
One of the problems is that the EU had started the negotiations on the tail of a reform movement in India, he told a seminar organised by the European Policy Centre, a think tank in Brussels. ‘’If it (the movement) is not stopping, it is at least slowing down.’’”
Petriccione was alluding to an economic liberalisation process initiated by Manmohan Singh, now India’s prime minister, when he held the finance portfolio in the 1990s. Under this process, the country’s investment rules were relaxed in order to entice multinational firms into the country.
In recent times, however, the Indian government has adopted a more cautious approach towards international commerce. India’s demand that it be allowed to restrict food imports in order to protect its farmers was blamed by the United States for the failure of efforts to revive the Doha round of world trade talks in July.
India has also taken a tough line in its bilateral dealings with the EU. It has, for example, been urging that the liberalisation of trade in services should enable its skilled professionals to work freely in the EU, despite efforts by the Union to curb immigration.
A paper published by the European Commission last year predicted that securing trade deals with Asia would bring major benefits to both continents. The combined effect of agreements with India, South Korea and ASEAN should be worth an extra 40 billion euros (54 billion dollars) to EU exporters per annum, the paper predicted. The Asian economies, meanwhile, should see their exports to the Union grow by between 18 and 36 percent, according to the Commission.
But a new analysis by ‘Traidcraft’, a British organisation promoting fair trade, contends that a free trade deal with India could have harmful consequences for the country’s poor. Losses in government revenue due to a lowering in tariffs on imports could lead to cutbacks in spending on health and education, says the report, while the opening up of the economy to large retail chains could jeopardise up to 40 million small shopkeepers or hawkers.
Sophie Powell, a Traidcraft campaigner and author of the report, said that the EU is wrong to depict India as its economic equal. Even though it has more than double the EU’s population size, India’s gross domestic product is only about six percent of the Union’s. Powell noted, too, that the EU’s own assessments of the likely implications of a free trade deal forecast that millions of Indians will lose their jobs in sectors ranging from paper to car-making.
The EC’s gung-ho approach to trade negotiations with India present clear risks to millions of India’s most marginalised people, she said. A fundamental rethink of EU trade policy is needed.”
Razeen Sally, an academic working in the University of Hong Kong, said it was probably a mistake to launch free trade negotiations between the EU and India.
India is not serious about FTAs, he claimed. Its unilateral reforms have stalled under the present government since 2004. India has been very defensive in the WTO (World Trade Organisation) and its track record on existing FTAs, except for one with Singapore, has been very bad, he added. ”
The Traidcraft report can be found here.
Interesting article on the future of India-China trade
Continuing on the topic of the previous post, an American Professor of Strategy and Organization, School of Business, University of Maryland, (Ralph J Tyler) had an interesting opinion piece in the Economic Times earlier this year in January. He writes that by 2050, the bilateral trade relationship between India and China will be the most important economic relationship in the world. Tyler argues that India should grant China market economy status because:
While government subsidies do remain an issue in some industries in China, there is no evidence that this problem is endemic throughout large sectors of the Chinese economy. Also, other countries (such as Russia) which suffer from similar problems already enjoy a Market Economy Status.
Whether or not a country grants MES to China has minimal impact on trade balance with China. Take the US as an example. Even though the US has not granted MES to China, its trade deficit with China was $162 billion in 2004, $202 billion in 2005, and $232 billion in 2006. Thus, from China’s point of view, whether or not a country grants MES to it has little substantive value. The value is entirely “symbolic” and, as we know well, symbolism is a hugely valued commodity in China.
In any case, China will automatically get the Market Economy Status around 2015-16. Thus, for China, the symbolic value of getting MES goes down with each passing year. If India were to grant MES to China now (rather than after Japan, the US, or the EU have done so), the symbolic value to China will be much greater than if India were to be a mere follower.
Granting MES to China will not take away India’s rights to file legitimate anti-dumping cases. Even after China is granted MES, it has to provide verifiable information to the country filing an anti-dumping complaint. If such information is not provided, the latter retains the right to use the best information available, including third-country (surrogate) information. As it is, the current anti-dumping cases filed by India against China total less than 5% of China’s annual exports to India. In short, the substantive value of granting or not granting MES to China is insignificant not just for China but also for India. Yes, India will have a $9-10 billion trade deficit with China in 2007; however, MES has little if anything to do with the trade deficit.
Substance aside, if India were to grant MES to China before Japan, the US, and the EU do so, the symbolic value to China will be very high. If India is smart, it should exploit this opportunity to the maximum by getting quid-pro-quo concessions from China on issues that matter enormously to India (e.g., a settlement of the border disputes). In essence, India should look at MES for China as an issue whose salience rests almost totally in non-economic rather than economic domains.
We agree that, at the margins, granting MES to China will put greater pressure on Indian manufacturers to become more efficient (and on the Indian government to accelerate the elimination of India’s disadvantage in infrastructure).
However, this pressure is likely to be a net plus. India’s political and business leaders have always responded with vigour to external economic pressures and competition. Look at the country’s response in 1991. Or, look at the accelerated pace with which India’s IT giants are globalising their footprint and moving up the value chain in response to an appreciation of the rupee and growing competition from other countries.
On the growing importance of India China trade he writes:
Each country’s aggregate international trade is expanding by 23-24% annually. In comparison, India-China trade grew at a 50% rate during 2002-2006 and will increase by a further 54% during 2007 to reach $37 billion.
Second, after adjusting for partner GDP (i.e., bilateral trade divided by the trading partner’s GDP), India’s trade with China is greater than that with Japan, the US, or the entire world. After similar adjustments, China’s trade with India is only slightly below that with Japan, the US, or the entire world.
Third, China already is (or will shortly become) India’s number one trading partner. From China’s side, India already is one of its top ten trading partners. Also, China’s trade with India is growing much faster than with any of the other nine. Thus, India is rapidly becoming an increasingly important trading partner for China.
Fourth, India’s overall international trade is significantly below that of China’s, in terms of both absolute figures (for 2006, $306 billion vs $1,760 billion) as well as relative to GDP (34% of GDP vs. 65% of GDP).
Fifth, even if the growth rate in India-China trade slows down to 25% annually (a conservative projection) from the current rate of over 50%, bilateral trade between them will be almost $75 billion in 2010 and $225 billion in 2015, i.e., as large as China-US trade just three years ago. These are very large numbers. Political and business leaders need to start getting ready now for this radically different world.
Trade theory tells us that, in an increasingly flat world, trade between two countries should be a multiplicative function of their GDPs. Since it is almost certain that, by 2050, China and India will be the two largest economies in the world, it is inevitable that bilateral trade between them will become the most important economic relationship in the world.
Tyler offers an interesting stance on investment ties between India and China:
At present, investment links between the two countries are relatively modest. Haier and Huawei have significant presence in India. Similarly, Bharat Forge, TCS, and Infosys are building a noteworthy presence in China.
These types of greenfield investments will continue to grow. However, the quantum leap will come as some of the bigger companies from India and China acquire third-country companies that already have a significant presence in the other country (e.g., if an Indian auto company were to acquire a western auto company with significant presence in China). It is certain that, over just the next five years, we will see a growing number of foreign acquisitions by Indian and Chinese companies. As these acquisitions materialise, it is inevitable that investment linkages between India and China will grow rapidly.
India China sign trade deals
According to CCTV.com, India China trade was 39 billion US dollars in 2007 (a 50% increase over 2006). Both countries want to raise this to 60 billion US dollars by 2010. A high level business delegation is visiting India and a number of deals have been signed to help achieve this. CCTV.com writes:
The deals signed covered different sectors including textile machinery, garments, steel, agriculture, and electronics. The total value was about 370 million US dollars.
Besides bolstering two way trade, the deals are also considered a way to escape the deadlock that scuppered ministerial talks at the World Trade Organization in July.
G. K. Pillai Indian, Commerce Secretary, said, “India and China have had a very close cooperation in the WTO as we have supported each other in ensuing a development dimension to the Doha round of talks and we hope to take this cooperation further in our bilateral relationship to increase trade between our two countries.”
The Chinese delegation says the documents signed can help reduce the trade deficit, by at least nine billion dollars, if not more. India has accused China of dumping at WTO conferences, and the Chinese side said increased negotiation and cooperation is important to resolve the problem.
The Financial Express has more:
Opening a new chapter in the India-China business relations, the two countries are expected to sign at least 36 memorandum of understandings (MoU) in different sectors that would be worth $370 million during the maiden Chinese business delegation’s visit to India scheduled for next week.
Talking to FE, sources in Ficci said that the 60-member delegation coming from China will be inking MoUs in various sectors including: Textile machinery, garments, steel, agriculture, science and technology and electronics.
Business delegation from China, comprising all the major Chinese companies, is arriving here next week on the first-ever ‘government procurement’ mission to India that Beijing hopes will reduce the nine-billion dollar plus trade gap that exists between the countries. Chinese vice minister of commerce Gao Hucheng is leading the impressive delegation that will have senior executives of China Chemicals, China Petrol, China Machinery, China Grid and Sino Steel, Sinochem Corporation—all leading state-owned enterprises—as well as other representatives of key Chinese companies.
Representatives from some of the Indian companies which will be signing the MoUs include Reliance Industries Ltd, Allianz India, Bharat Mining Co, Ranbaxy Laboratories Ltd and Kotak Ginning and Pressing Ind Ltd.
The EU is at present India’s largest business partner with trade worth 56 billion Euro. Indian trade with both China and the EU is targetting 100 billion $/Euro by 2013. It is also being reported that a feasibility study for an India China FTA is now complete.
The Economic Times had a few weeks ago, reported on how Indian buyers were increasingly sourcing from low-cost China to beat inflation.
India importers are looking to China manufacturers more and more to fight rising costs, according to dual surveys released by trade publisher and trade show organizer Global Sources.
The surveys, conducted in July and August, tracked the views of thousands of volume importers and purchasing managers who supply India’s retail distribution channels. The surveys focused on consumer electronics and hardware and building materials – two of India’s fastest growing segments.…
“Supply-chain management is becoming more efficient in India. And these buyers are looking to China manufacturers to supply this ever-changing need for products.” Around 90 percent of survey respondents said they felt China suppliers offered end-consumer a wider selection of products at reasonable prices. Over 95 percent of respondents to both surveys indicated they would increase their purchases of products from China in the coming year.
This report also has some more statistics on India China trade:
Last year, China became India’s largest trading partner – overtaking the United States. While Indo-US aggregate international trade is expanding by 23-24 per cent annually, India-China trade grew at 50 per cent during 2002-2006 and increased by 54 per cent during 2007 to reach 37 billion dollar.
And here the Economic Times writes about how China and India need to understand each other better:
Two “distant” neighbours. Decades of communication gap. Lack of connectivity. Inadequate understanding of each other’s cultures, systems and orientation. This is the India-China relationship, or lack thereof, since the early 60s.
In the late 90s, Indian Industry was running scared of competition from China, partly out of ignorance and partly because of lack of competitiveness.
Much of this is past — trade and investment have taken quantum leaps. From $40 bn bilateral trade in 2007 its heading towards $60 bn now. But the basic problem remains. There is still lack of understanding of the Chinese — and China — in India, among Indians.
Call for India-EU FTA to be debated in Indian parliament
The role of the Indian parliament in trade policy making has mostly been marginal. While many countries (both developed and developing) struggle with ensuring democratic control over trade policy making through parliamentary supervision, the issue in the Indian context, needs to be considered in the light of the low quality of parliamentary governance in India in policy making overall. While some (perhaps rightly) argue that more parliamentary supervision in India of trade policy making will make any policy reform impossible and create efficiency concerns, the need for democratic control over trade policy making – a component of governance that affects every citizen, is also an issue that cannot be ignored in the long term.
This call from one of India’s leftist political parties for the India-EU FTA to be debated in Parliament is therefore important. According to the Hindu newspaper:
Ahead of the ninth India-European Union Summit in Marseille, the Communist Party of India (Marxist) on Saturday asked the United Progressive Alliance Government not to make any commitment on the Free Trade Agreement without a debate in Parliament.
As Prime Minster Manmohan Singh leads the Indian delegation for the summit on Monday, the Polit Bureau, in a statement, said it was a matter of concern that while the European Parliament had already discussed the issues related to the proposed FTA, the Indiangovernment was yet to share details of the negotiations with Parliament and people.
…
The draft proposals, existing negotiating positions and studies conducted by the Indian government on the India-EU FTA should be placed and debated in Parliament before it initiated any further step, the statement said.
India-ASEAN FTA talks conclude – deal to be signed in December at ASEAN’s bangkok summit.
Kamal Nath and the Singapore trade minister announced the successful end of the talks in Singpore today. Read more here. Some facts:
Total trade between the 10-member ASEAN and India amounted to 37 billion US dollars in 2007, up 29 percent from the previous year.
India is seventh on the list of ASEAN’s biggest trading partners, trailing Australia, South Korea, China and others, according to ASEAN figures.
The FTA covers only goods, but talks are expected to follow on a services and investment agreement.
The Business Standard reports on the renewed urgency that the Geneva Doha failure of July lent to these talks being finally concluded after having been delayed. It also has more information on what the deal contains:
India, on its part, has agreed to lower import duties on nearly 96 per cent of the items it trades with Asean, while protecting nearly 490 highly sensitive products in the agriculture, textile and chemicals sectors. Asean, too, has shown ample flexibility in accepting some Indian positions though it had, in the last annual India-Asean summit in Singapore in November, virtually ruled out further negotiations until India came up with substantially better offers. Most of the group’s members were unwilling to allow protection for over 400 items and especially not to the ones of interest to them in agriculture as well textile and chemicals. These included, besides palm oil, items like pepper, tea and coffee. However, all that is past, though in the process Asean has also got concessions from India to shield its turf when it comes to automobiles and steel. In the case of the almost intractable issue of duties on palm oil and its derivatives, equally critical for a major importer like India as it is for exporters like Malaysia and Indonesia, the two sides have agreed to follow a middle path, agreeing to a tariff ceiling of 37.5 per cent for crude palm oil and 45 per cent on its refined version. In the event, this turned out to be the clinching point for the pact.
Is the future an Asian common market, with Asean already having signed agreements with South Korea, China and Japan, and negotiating with Australia and New Zealand?
Paper on Chinese Indian cooperation at the WTO
This looks like a very interesting paper on a subject where not much has been published.
See Julien Chaisse and Debashis Chakraborty. “Identifying Mutual Interest Areas at World Trade Organisation: a Sino Indian joint perspective” China Report 41.3 (2005): 267-288. Available at: http://works.bepress.com/julien_chaisse/4
Abstract
China and India, in spite of being signatory members of GATT (1948), witnessed a dissimilar experience in the arena of multilateral negotiations and trade. China lost its membership after the withdrawal of Taiwan from GATT in 1950, but gained steady access in the global market since late eighties. India, on the other hand, in spite of maintaining the membership of GATT, never focused on export promotion strategies before late eighties. Both the countries expect further growth in their exports in coming future, as the tariff and non-tariff barriers (NTBs) in member countries are likely to go down in the post-transitory phase of WTO, which started from January 1, 2005 onwards. However the WTO-compatibilities of several domestic polices of both China and India have been questioned by their trade-partners on various occasions and the debate is likely to continue in the future. Moreover, the exports of both of them are subject to various NTBs in principal markets, which are likely to intensify in the future. This bears serious implications on the export potentials of the two countries. Considering the domestic policies of China and India as well as the barriers on them, the paper attempts to identify material and institutional areas where the two countries could jointly negotiate at the multilateral forum. The paper argues that collective bargaining by the two countries on key issues is likely to provide them an edge in future negotiations.
India on US Priority Watch List for IPR
The Financial Express reports:
… the US government has put India on its ‘Priority Watch List’, along with nine other countries, saying that the country’s failure to protect intellectual property rights (IPR) is putting the health, safety and jobs of its citizens at risk. India has been on this list for a number of years and its continued inclusion does not come as a surprise. Besides India, the US has put countries like China, Russia, Pakistan, Argentina, Chile, Israel, Thailand and Venezuela in the watch list.
Countries on the list will be the subject of close scrutiny during the coming year. In 2007, too, the US administration had put India on its watch list under “section 301” and threatened to impose trade sanctions for violating IPR. Earlier, the Indian government adopted a slew of measures to check violation of IPR, including strong patent laws. The Patent Act, 1970 was amended in 1999, 2002 and then in 2005 to conform to the Trade Related Aspects of Intellectual Property Right (TRIPS) Agreement of the World Trade Organisation (WTO).
India keen on FTA with Australia
According to The Australian, Minister Kamal Nath would like India to conclude an FTA with Australia by 2010. India and Australia are carrying out a joint feasibility study for an FTA. Here’s an extract from this report:
In an interview with The Australian, Mr Nath said that because the Indian and Australian economies were so complementary, an FTA should be relatively easy to achieve.
He believed it should cover trade in merchandise and services and two-way investment.
“We should try and conclude it by mid-2010, or even by the end of next year,” Mr Nath said.
India also wants Australian Uranium for its civil nuclear energy program and Nath touched on this issue as well.
Mr Nath also wants Australia to sell uranium to India, although the Rudd Government has reversed Howard government policy and said it will not sell uranium to India, even if India completes its nuclear energy deal with the US and wins approval for this from the International Atomic Energy Association.
“We do ask Australia to take a practical and realistic view (of uranium sales),” Mr Nath said.
“Australia is not the only source of uranium for India, but (it should be viewed) in the larger context of global warming and the larger relationship between Indian and Australia.”
And what do we make of this comparison with China. (It always used to be India versus Pakistan and now comparisons with China are common.)
Mr Nath said he wanted a much stronger relationship between India and Australia.
The New Delhi Government is known to believe the Rudd Government is obsessed with China and has an unbalanced foreign policy. Mr Nath would not be drawn on such subjects, but said: “The China story is an old story, while the India story is a new story. China opened up earlier so it obviously got a head start.”
India and a future multilateral agreement on investment
Another interesting India related paper on SSRN:
Julien Chaisse, Debashis Chakraborty, Arup Gupta, “Prospects for a Multilateral Framework on Investment – The Indian Bolt” NCCR Trade Regulation Working Paper No. 2007/37
Abstract:
The potential inclusion of a multilateral framework for investment at the WTO aims to coordinate the global regulation on trade and investment. In addition to the difficulties arising during these negotiations, one major concern is the fact that certain countries like India do not have an interest to go for a full-scale Capital Account Convertibility. As a part of the G4, India is currently a major player in the trade-related international regulatory framework. It is argued here that the question of a multilateral framework for investment cannot be solved without taking into account the Indian reluctance to a freer investment regime. There is a historical reluctance of developing countries to establish freer investment regimes. The project on a New International Economic Order already put as a pre-eminent point the sovereignty of States and their necessary control of the private sector notably of foreign capital. But that political approach is reinforced by objective arguments analysed here. First we briefly discuss the debate on having a freer investment framework and foreign investment regime in India. India’s submissions to the WTO on this front are reviewed next. Finally in order to evaluate the legitimacy of India’s concerns, through an empirical model the potential impact of a destabilizing shock on her capital account is analysed. Finally based on the findings, the policy lessons are drawn.
Unravelling India’s bilateral trade and investment agreements
A recent Economic Times article distinguishes between India’s early bilateral trade treaties with developing countries and the treaties being negotiated now, which involve developed economies. Here’s an interesting extract:
The extant arrangements — including time-tested FTA with Sri Lanka, the trade treaties with Nepal and Bhutan and the agreement with Bangladesh — are essentially political and so, economic objectives are only secondary in their construct. (Under the pacts with Nepal, Bhutan and Bangladesh, India gives tariff-free access to their products as an act of neighbourly camaraderie, without any reciprocity for that matter).
Even the early harvest scheme with Thailand (to be converted into a full-fledged FTA), the fledgling SAFTA dispensation, the older APTA and SAPTA frameworks, and a clutch of bilateral pacts on the cards with South Asian (Indonesia, Malaysia), the Gulf (GCC) and Latin American (Mercosur) countries have strong political undertones. The proposed much-touted India-Asean trade and investment agreement also has a robust political content, which could undermine economic right-thinking in defining its contours.
Here’s where the agreements being negotiated now with the likes of EU, Japan and Korea differ in substance. They are almost totally to be products of hard bargaining based on economic self-interests of the parties concerned. Another way to describe these pacts in the offing is as antibodies being administered to the Indian economy to prepare it for the impending comprehensive and near-total opening up, to be culminated in the full float of rupee. Once these bilateral agreements are operational, the Indian industry can more than get a taste of imports free from tariffs from highly competitive economies and foreign investments treated at par with its own by the country’s policymakers. The question is what more would we get from these pacts?
India-EU FTA talks slow down
The Telegraph reports that FTA negotiations between India and the EU might not be concluded by December, unless differences are addressed. What are these differences? The report notes:
However, sources said, there is not enough time, and it is unlikely that the December deadline to finalise the terms of the agreement will be met. There are differences of opinion between the parties over intellectual property rights, competition, agriculture, public procurement, market access and transparency.
…
That list of differences covers almost everything.
An EU-India FTA is reported to be an exchange between goods liberalization for services liberalization, with agriculture excluded.
India wants better access for its services, while the EU desires the same for its goods.
Officials, however, said the agreement would not be affected because of agriculture, since the EU does not export bulk farm commodities such as rice and wheat, on which Indian farmers primarily depend. The EU exports only value-added agricultural products, they said.
Where are the talks at?
It (Europe) has already handed over its initial negative list covering 416 items to India. The items are listed under the categories of chemicals, plastics, rubber, textiles, raw hides, precious stones and metals, computers, electrical machinery and some classes of vehicles. India is in the process of submitting its negative list.
Items on the negative list are subject to high tariffs.
Sources in Indian industry said the EU’s negative list would affect exports of many products such as basic chemicals, petrochemicals, allied chemical products, cosmetics, plastics, ceramics, glassware items, fertilisers and pharmaceuticals. India and the EU had earlier agreed to include at least 90 per cent of traded products in the bilateral agreement. This percentage may get reduced now.
The finalisation of India’s negative list is being delayed by demand from industry to include more products. Even segments of industry that face no direct competition from the EU want their products to be on the list.
A Ficci study notes the concerns:
Some of the barriers to trade and investment are a lack of harmonisation of microbiological standards in the European countries, tough fruit export norms, aflatoxin limits in groundnuts, visa issues, a lack of recognition of qualifications and work experience and value-added tax.
….
There is concern over India’s growing trade deficit with the EU. The deficit rose to $3 billion in 2006-07 from $492 million in 2001-02.
The latest economic survey said there was a need to evolve a clear policy for comprehensive economic cooperation agreements with some developed countries.
Instead of just signing trade agreements, policy-makers should prepare pacts that were integrated with the country’s economic and trade policy reforms, the survey said.
It said the country should seriously consider “making real gains” in global trade talks under the World Trade Organisation while protecting the livelihoods of the poor.
“While safeguarding the interest of India’s low income and resource-poor agricultural producers (which cannot be a trade-off against any gains elsewhere in the negotiations) remains paramount for India, making real gains in services negotiations are no less important,” the survey said.
The need for more policy analysis to guide the choice of FTA partners for India has become a theme in most industry studies on FTAs. The Assocham study that looked at the China FTA prospects also expressed this concern.
Assocham study wary of India-China FTA
A study by industry chamber Assocham is sceptical about benefits to India from an FTA with China. The Economic Times reports
In the case of China, the Assocham study has pointed out that India has a trade deficit and there are apprehensions about cheap imports from the neighbouring country swamping the Indian market. There will be no benefit for Indian industry from the deal, the chamber feels. Most of India’s anti-dumping cases are against China and ‘market economy’ status has not been granted to the country even after it joined WTO. At the same time, China is emerging as India’s top trading partner and is likely to overtake the US soon to capture the apex slot.
“The apprehensions are that since India’s tariff levels are much higher than China, any reduction in tariff will open the floodgates of cheaper imports from China. On the other hand, China’s tariffs are already fairly lower than India.
Therefore, Indian producers can expect no serious market benefits from China through a FTA,” says the study.
While on the issue of bilaterals and India, the Business Standard ran an interesting article ten days ago. Some excerpts:
After political opposition to bilateral trade agreements, it is now the Reserve Bank of India that is raising the red flag on treaties signed by India.
But unlike the objection by the political class, including Congress president Sonia Gandhi, to bilateral trade agreements, the central bank’s concerns are grounded in a the need for a more liberal regime for the banking and financial sector.
…
RBI’s latest objections, according to sources close to the negotiations, pertained to the economic partnership agreement being negotiated with Japan. The central bank had earlier protested against concessions to Singapore.
In its discussions with the finance ministry, the RBI pointed out that the proposed EPA defeats the very purpose of WTO talks, aimed at a liberal services trade framework under the Doha round of negotiations.
Taking a cue in the financial sector, banking licenses for branches and subsidiaries are being granted to various countries on a reciprocal basis. Trade agreements, however, skew the arithmetic and discriminate the allocation of branches and licenses to one particular country. The whole purpose of WTO is being defeated in this sense, sources said.
The RBI is also of the view that there are many issues in the banking and finance sector which are yet to be settled in the comprehensive economic treaty with Singapore.
A case in point is the 10 per cent stake each acquired by Temasek and Government of Singapore Investment Corporation (GIC) in ICICI Bank. The issue has become a bone of contention in both the countries.
The RBI had agreed to consider them as separate entities, as an exception, contrary to its earlier position that both were are same entities. But these two funds have now urged the government to consider them as separate entities for future investment purposes as well.
While RBI is against this proposal, the issue is creating problems for Indian banks including ICICI Bank and State Bank of India in getting a qualified full banking (QFB) license to operate in Singapore.
The RBI has urged other countries such as United Kingdom, United States and Europe to show reciprocity in granting branch licenses to Indian banks as they expect a similar treatment from India.
India Africa April summit could see deeper India Africa trade ties
An India-Africa forum in early April is all set to follow in the foot-steps of last years Africa summit in Beijing. According to a report
India is likely to announce duty free import of select items from some African countries at its first-ever summit with 14 African countries in April here.
The April 8 summit will come out with an action plan for reinvigorating India-Africa ties and a political declaration that will encapsulate broad directions of this partnership in the 21st century, a top official source said.
The action plan will include a broad spectrum of areas, including trade, investment, education, agriculture, mining, infrastructure, education and culture.
‘We are working on a package of duty concessions that may cover some agricultural items for least developed countries of Africa,’ official source said.
Total trade with Africa for 2006-07 was estimated at around $20 billion with exports to Africa growing by more than 180 percent.
The duty-free and quota-free regime for some African countries will be a big step to energise trade ties between India and Africa.
India is leaving no stone unturned to make the upcoming India-Africa forum summit a big success and expects it to be a precursor to a bigger summit with the 53-nation African continent.
Algeria, Burkina Faso, Democratic Republic of Congo, Egypt, Ethiopia, Ghana, Libya, Nigeria, Senegal, South Africa, Uganda and Zambia are among the countries to attend the summit. The participating countries have been chosen by the African Union.
The summit has been structured as a three-tier interaction between senior officials (April 4), foreign ministers (April 7) and 17 heads of states/government of the two sides…
Indian officials differentiate between China’s approach to Africa and that of India. The same report continues:
Although the move appears to have been inspired by a similar summit China held with African states, Indian officials are keen to distinguish their approach, of capacity building and empowerment towards Africa, as different from the trade-driven Chinese approach.
India sees its partnership with Africa as one of empowerment and meeting genuine African needs. Nearly 15,000 African students study in India every year.
‘The summit will showcase the brand image of India in Africa. Africa has changed and so has India. The forum will be appropriate to give a new direction to the partnership between the two sides,’ said an official.
It will also be attended by heads of sub-regional groupings like the Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA) and the Economic Community for West African States (ECOWAS).
India’s help in setting up the Pan-Africa e-network that will electronically link 53 countries of Africa and bring them benefits of tele-education and tele-medicine highlights the new thrust of Indian diplomacy in Africa.
Besides, India has given generous lines of credit to assist the New Partnership for Africa’s Development (NEPAD) and written off the debt owed by the African countries under the HIPC (Heavily Indebted Poor Countries) Paris Initiative.
India has also spent more than $1 billion on providing training to more than 1,000 officials from sub-Saharan Africa under the Indian Technical and Economic Cooperation Programme (ITEC).
Here is what another source had to say
Recognising the immense opportunities for cooperation with Africa, India is likely to announce duty cuts for certain imports from Africa and assistance in developmental projects. As per the official sources, the core of the discussion will be how India and Africa can develop partnership in the first part of 21st century.
“We don’t want our approach tainted by the West approach. We’ll talk about Africa to Africans; we will talk to Brazil about Africa but not to these countries. We should not be seen as exploiters in Africa. We want to be partners in the genuine sense of the word,” said a senior official of the External Affairs Ministry.
While 48 African nations had participated in Beijing summit, only 14 are going to be a part of the Delhi summit. But these countries will have the mandate of the entire continent as they have been chosen by the African Union itself.
However, the significance does not lie in number; in fact it lays in the opinion that Africans hold themselves and who are eager to balance China’s overwhelming and aggressive moves in their continent with India’s gentle touch.
The Beijing summit produced wave of growing concerns for the western countries that realised grip over Africa has been steadily slipping into Chinese hands.
The Beijing summit had culminated into the commercial deals worth $1.9 billion with the African countries and eventually China offered credit lines worth $5 billion. It also declared that it would double aid to Africa by 2009 and pledged to push trade to the USD 100 billion mark by 2010.
Comparatively, India is a rather nervous investor in Africa in all sectors comprising petroleum. Over the past few years, China has managed to edge India out of many contracts. That must change. Indian companies must overcome its fear and lethargic way of dealing trade with foreign countries. They must go forward and forge aggressive step in their engagement with African nations for mutual advantage.
Very few countries in Africa are moving forward with development. Rest of the African countries has been sluggish in mobilizing private sector participation in infrastructure development.
What is significant here is Africa’s development can be accelerated with investments and technology transfer. It has plenty of natural resources comprising crude oil and minerals and the closer relations with the African continents will be proved beneficial for both the nations-India and Africa.
Africa’s demand for manufactured goods and services is on the elevated scale. The region also has millions of young literate and talented people who can be employed in the manufacturing and services sector.
As per the official sources, an Action Plan for furthering cooperation in areas like environment, health, education, energy and mining will be announced at the Summit, which could form a precursor for broader India-Africa Summit.
India has been having low-profile engagement with Africa for the last six decades mainly in terms of assistance in developmental projects and peacekeeping operations. Now the apt time has arrived for the country to grow financial relations with the African countries and Indian companies need to expand their presence overseas, step up and diversify trade with Africa.
Jairam Ramesh, India’s Minister of State for Commerce will visit Africa in March with a trade delegation. The focus will be on collaboration in diamond production and polishing. He was quoted as saying:
“We will visit diamond producing countries of Namibia, South Africa, Botswana and Angola from March 21 to 28 and explore possibilities for partnership for the Indian diamond industry,” Ramesh said on the sidelines of Gems and Jewellery Export Promotion Council function on Friday.
The four African countries are emerging as the key diamond producing regions, with several global firms planning to set up polishing units in the region.
India has been a traditional cutting and polishing hub for diamonds and in return for the rough diamonds that it would import from the African countries, it would provide training in cutting and polishing as well as technical assistance to set up local units there, he said.
Lower freight rates between India and Africa provide an advantage to Indian agri exporters. The Economic Times reports
The low freight advantage that India enjoys over other Asian countries especially China, has boosted commodity exports to Africa. Also substantial quantities of maize and soybean meal have been contracted for exports to South East Asia and Middle East due to low freight costs.
“In addition to other benefits a big factor for trade with India are the low freight charges,” Samwel E Dyelu, the general manager of a Tanzania based company told ET. Citing an example he said, a 20 ft container from China to Africa attracts a freight charge of $2000 while a container being imported from Mauritius would cost around $1000. The Indian freight cost should be around the Mauritius figure, he said.…
The commodities that are now been imported by the African countries include meat, eggs, processed food, non basmati rice and milk powder. “Earlier China had the price advantage but now with increase in freight cost it is losing its share to Indian products which are better in quality,” Agricultural and Processed Food Products Export Development Authority (APEDA) director S Dave said.
Meanwhile talks are on for a possible free trade pact between India and the five member Southern African Customs Union (SACU). See report.
Should India walk down the multilateral road or the bilaterals road?
There haven’t been many detailed studies on comparative gains to India in adopting a multilateral versus a bilaterals focussed trade policy. With the Doha round still stuck, India has been aggressively open to offers for bilateral trade pacts. The Carnegie Endowment for International Peace has published a report (January 2008) titled “India’s Trade Policy Choices: Managing Diverse Challenges” which suggests that the multilateral route would be preferable for India. The key conclusions of the report available here are:
• India’s economy would grow most under a Doha agreement, although the gains would add a very modest 0.25 percent to the economy. Free trade pacts with China or the United States would produce even smaller gains. An agreement with the EU, India’s largest trading partner, would have a slightly negative overall impact on India’s economy.
• Dramatic swings in world agricultural prices—a common occurrence—could have much larger impacts on India if the country lowers its agricultural tariffs. A decrease of even 25 percent in the world price of rice, which has happened repeatedly, would negatively impact all but the top 10 percent of Indian households, with the poorest households losing the most.
• The EU, the United States, and China would each gain more from free trade agreements with India than would India itself, but in all cases, gains would be a modest and would represent a very small percentage of the affected economies. While China would gain more overall than India from a bilateral agreement, India would see a greater increase in exports than China.
• All of the proposed trade agreements would reduce India’s tariff revenue, which accounts for about 11 percent of the government’s total revenue. This would force the Indian government to either reduce spending or increase taxes at the expense of Indian households. An EU-India trade agreement would reduce revenue the most.
• The trade agreements would have a positive but very modest impact for India’s unemployed, currently estimated at 40.4 million. A Doha agreement, which has the most sizeable impact of the simulated agreements, would increase the demand for unskilled labor by 0.9 percent, about 4 million jobs. Job gains would be spread across a number of sectors, including transport, construction, apparel, textiles and a few agricultural commodities. Under free trade agreements with the EU and the United States, job creation would be concentrated in the apparel and textile sectors, with other manufacturing sectors actually shedding some workers.
While this report seems well-timed to “help” the Doha round on its way, an assessment of its findings would be a worthwhile exercise. It would be interesting to read other studies on the same issue.
India China joint task force to discuss FTA in April
The Business Standard reports:
A joint economic group comprising commerce ministers of India and China will meet on April 1 and 2 to discuss the India-China free trade agreement (FTA), Dinesh Sharma, joint secretary, ministry of commerce and industry, said today.
“There are certain outstanding issues that may be resolved across the table in April when the joint economic group meets,” Sharma added.
The two countries had set up a joint task force (JTF) to look into the possibility of enhancing trade ties. The JTF had recommended FTA as a mechanism to boost trade dynamics between the countries.
“The recommendations of the JTF will be considered, and some decision can be expected in early April,” Sharma added.
The Indian industry has been opposing an FTA with China until it gets the status of market economy. “The pricing mechanism in China is not very transparent, and we do not understand it. Until then, the market economy status should not be granted to China. CII is working with our Chinese counterparts in this regard,” said T S Vishwanath, head, CII international trade policy division.
On granting China market economy status
Here’s what today’s Economic Times editorial has to say about Indian discomfort in granting China market economy status.
The Chinese, it is well known, do things their own way. The giant next door may have become a member of the Word Trade Organisation (WTO) –– subjecting itself to norms laid down by the global body –– but officials of our commerce department are convinced that all business across the Great Wall is sarkari, notwithstanding efforts made to paint a different picture.
The cat, in fact, was let out of the bag by the friendly suggestions the Chinese had for their Indian counterparts during a recent interaction. Why do we need to go for time-consuming trade pacts, they innocently queried. “If the import of some item causes problems, just tell us, and it will be stopped.”
Simplicity itself, one presumes. But the offer buttressed the Indian belief that there was no point in trying to see commercial sense in trade with the Dragon. Last heard, officials were wondering how to deal with China’s plea to win market economy status!
Bringing American and Indian business together to discuss "Doha, India and the Issues"
This should be an interesting event:
DOHA, INDIA AND THE ISSUES:
An Indian Business View of the Doha Round Issues
with Responses from Key U.S. SectorsA GBD COLLOQUIUM
Tuesday, February 26, 2008
9:00 – 10:30 A.M.
(Registration opens at 8:30 a.m.)
The St. Regis Hotel (Magnolia Room)
16th & K Streets,
Washington, D.C.
India, like the United States, is a country with big interests in each of the three sectors being negotiated in the Doha Round: it is a powerhouse in services, has 700 million people tied to agriculture, and is increasingly competitive in manufacturing. India’s ability to make the Doha Round work for India will be important for India and for the global economy and quite possibly decisive for Doha Round. And now, like every other WTO member, India must move quickly if the Round is to be completed this year. The views of Indian business on the Round and Indian trade policy will be our focus on February 26….
Speakers
T.S. Vishwanath
Confederation of Indian Industry (CII)Bob Vastine
Coalition of Service IndustriesDavid Salmonsen
American Farm Bureau FederationJohn Meakem
National Electrical Manufacturers Assoc. (NEMA)Moderator
Susan Esserman
Steptoe & Johnson
Here’s more on what the event aims to achieve:
Indian Business Spokesman on the WTO and Trade: 9 A.M. Tomorrow, Feb. 26, at the St. Regis Hotel
WASHINGTON, Feb. 25 /PRNewswire-USNewswire/ -- CII's T.S. Vishwanath will lead off the discussion at tomorrow's GBD colloquium on Doha, India, and the Issues. Mr. Vishwanath, head of international trade policy for the Confederation of Indian Industry, CII, will talk about the trade policy objectives of Indian business. The program will also include comments from three key U.S. sectors: services, agriculture and manufacturing. The Doha Round, the global trade talks that began in Doha, Qatar, in November 2001, is now at a critical juncture, and India's assessment of those negotiations will be critical to the outcome. So too will the assessment of the United States, and tomorrow's colloquium will include key private sector experts from both countries.
Fifth ministerial meeting of the US – India trade policy forum in Chicago
The Economic Times reports:
WASHINGTON: India and the US have discussed key trade issues including a potential bilateral investment treaty, market access for items of interest to both and fostering private sector collaboration between professions.
Trade and investment ties were discussed by Indian commerce and industry minister Kamal Nath and US Trade Representative (USTR) Susan C Schwab February 19 at the fifth ministerial-level meeting of the US-India Trade Policy Forum (TPF) in Chicago.
Kamal Nath and Schwab also “discussed the Doha negotiations, agreeing that the US and India share a commitment to conclude a successful Doha Round in 2008,” a statement issued by the USTR and Indian embassy in Washington Friday said.
“The intensity of interaction within the different focus groups demonstrates the importance of this dialogue to both governments. Consequently, the TPF has been able to address a wide range of issues, at policy as well as operational levels, leading to a number of initiatives which have expanded and deepened ties,” it said.
“The US-India Trade Policy Forum offers an essential venue to move the dialogue forward on trade matters of importance to both countries,” said Schwab.
“The Trade Policy Forum has advanced discussions on a potential bilateral investment treaty and facilitated agreements to provide market access for items of interest to both sides,” she added.
Kamal Nath said: “We have been able to resolve a variety of issues and find mutually acceptable solutions through a dialogue under this forum.”
“This milestone by milestone approach should be maintained to ensure continued progress, including in our bilateral discussions on social security totalisation which were initiated in December 2007 and in our efforts to foster private sector collaboration between professions,” he said.
The US-India Private Sector Advisory Group (PSAG) to the TPF presented its vision statement on key policy areas on which the governments of India and the US could enhance their engagement and further bolster the US-India economic partnership. The PSAG held its first meeting in New York September 24, 2007.
India – United States private sector advisory group on trade
Private sector asked for ways to boost US-India trade
25 Sep, 2007, 1030 hrs IST, IANS
NEW YORK: Indian and US governments have asked a high-powered, bilateral private sector body to recommend incremental steps required to overcome obstacles and enable unfettered trade and investment between the two countries.
The request came from Commerce and Industry Minister Kamal Nath and US Trade Representative Susan C Schwab at the first meeting of US-India Trade Policy Forum’s Private Sector Advisory Group (PSAG) here on Monday.
Nath and Schwab met the PSAG members, all leading trade experts, to discuss ways in which the group could help to inject strategic, policy-related ideas into the Trade Policy Forum.
They asked the group to examine where the two sides want to be over the next two to five years and to provide recommendations on the incremental steps that can be taken to overcome obstacles and enable unfettered trade and investment.
The PSAG is uniquely poised to support the two governments in the effort to strengthen the bilateral trade and investment relationship and, in the process, to deepen the bond between the United States and India, they said.
“The Private Sector Advisory Group provides an opportunity on an institutional basis to identify areas of mutual interest impacting bilateral trade,” said Nath.
“It is a unique arrangement, wherein both sides will engage to evolve a set of core ideas that will provide impetus to the bilateral trade and also promote transparency between the Trade Policy Forum and the private sector.”
“The US-India economic partnership is the strongest it has ever been, and trade has played a vital role in that development,” said Schwab.
“Results have been achieved by the Trade Policy Forum’s government-to-government dialogue. I look forward to taking on board the Private Sector Advisory Group’s recommendations for intensifying trade and investment flows in coming years.”
Members of the PSAG who attended the meeting included Isher Judge Ahluwalia, Chairman, Indian Council for Research on International Economic Relations (Co-Chair); V. Govindarajan, Member Secretary, National Manufacturing Competitiveness Council; Lt Gen (ret) S S Mehta, Director General, Confederation of Indian Industry and Habil Khorakiwala, President, Federation of Indian Chambers of Commerce and Industry from India.
From the American side, the PSAG members present included C Fred Bergsten, Director, Peterson Institute for International Economics (Co-Chair); Carla Hills, Former US Trade Representative, currently Chairman and CEO of Hills & Co; John J Castellani, President, Business Roundtable and Ron Somers, President of the US India Business Council.
Legislation to be introduced in US Congress to push for India-US FTA
US Republican Congressman, David Dreier plans to introduce legislation in the US congress calling for FTA talks with India. Reuters reports on the comments which were made at the World Economic Forum India summit in New Delhi.
Rep. David Dreier, a California Republican, said at the World Economic Forum India summit such a move would be a building block towards the success of the Doha Round of global trade talks or the next World Trade Organisation (WTO) round.
He added:
“It will in large part be a discussion piece for us to just begin talking about this,” he told Reuters after making the announcement to hundreds of delegates at a dinnertime question and answer session with Indian Trade Minister Kamal Nath.
“I don’t want to lead anyone to believe this is going to happen overnight or happen quickly. But the notion of discussing the idea of a U.S.-India FTA I think is important,” Dreier said.
India’s response:
Nath told Reuters afterwards the idea had come up before and it should be examined.
Dreier’s comment that discussions on an India-US FTA could help progress in the Doha round is interesting. It suggests that at least some in US policy circles think that talks on aligning Indian and US trade interests long-term, would prevent clashes in WTO rounds. A US-India FTA would seemingly resolve trade contradictions between the two countries, making it possible for them to adopt joint positions in multilateral fora like the world trade organization. However, as many international trade experts have noted, regulation of agricultural trade is difficult in a bilateral setting and needs multilateral engagement.
Mandelson pushes for an EU-India FTA in leading Indian business daily
Peter Mandelson, the trade commissioner for Europe has published an article in The Economic Times, making the case for an India-EU free trade agreement. He writes:
… Europe is India’s biggest trading partner. India will improve its access to a market of 450 million prosperous Europeans. … Both sides get new markets for their goods and a bigger engine for growth and poverty reduction.
…But there is also a global rationale for an ambitious FTA and it reflects the dramatic way in which India has moved to the centre of the global economy in the last decade. Indian economic growth and poverty reduction is, of course, good for India but it will also be necessary to take up the slack if other parts of the global economy begin to slow.
… When we negotiate together in the WTO Doha trade talks or when we negotiate the trade between us, Europe is well aware of the growing weight on the other side of the table.
…Manufacturing has to be at the centre of an agreement.
… EU exports can also be an important stimulus to the Indian economy. Three quarters of India’s industrial imports are parts or components for the manufacturing or services sectors. India’s average industrial tariff is just above 9% and it acts like a tax on those growing sectors. If we can bring those tariffs down as part of a bilateral FTA we will give India a competitive advantage vis-à-vis some of its biggest competitors. …
…We should also be pushing for an agreement that brings real benefits in services trade and investment. The Indian IT boom and its incredible success in business process outsourcing is built on open markets for these things in Europe, which is the world’s biggest buyer of computer services. We can improve conditions for this trade even further — but we need to see real improvements on the ground for EU companies as well.
…A more open market for services and investment in India can also be a stimulus to growth in India. European services companies bring with them capital, skills and experience that India wants. India gets a tenth of the FDI that flows to China. Further improving the investment climate can only open that tap wider. The Indian government has itself said that it wants to draw heavily on foreign capital in meeting its targets for massive investment in Indian infrastructure and utilities over the next decade. …
Kamal Nath on the FTA in a Hindu report :
India is ready to open 90 per cent of its fast growing market for EU companies, while it would expect its partner to reciprocate with 95 per cent of their market. Agriculture is not an issue with the EU for concluding an FTA which encompasses trade, services and investment, he said.
The Hindustan Times adds
India has stated that it does not want non-trade issues such as animal welfare and labour to be factored into the negotiations. EU, on the other hand, wants more transparency in public procurement and trade facilitation. “We would like to see openness in services and investment trade extended into government procurement in India,” Mandelson said.
As expected, it seems that agriculture is not on the agenda.
India – US bilateral engagement
“Fact Sheet
Bureau of South and Central Asian Affairs
Washington, DC
March 2, 2006
The U.S.-India Economic Dialogue
In July 2005, President Bush and Prime Minister Manmohan Singh agreed to revitalize the U.S.-India Economic Dialogue, giving a major boost to bilateral economic engagement in a wide range of areas. With two-way trade growing at over 20 percent annually, the U.S.-India relationship is increasingly broad, complex and complimentary. The Economic Dialogue provides regular channels to resolve outstanding economic issues, address legacy commercial disputes, develop capacity building and technical assistance programs, and boost bilateral trade and investment. Economic Dialogue working groups have met and corresponded regularly since July 2005.
The Economic Dialogue has four tracks: the Trade Policy Forum, a cabinet level dialogue launched in July of 2005, the Financial and Economic Forum, the Environment Dialogue and the Commercial Dialogue. In July, three new initiatives were launched – the Information and Communications Technology Working Group (ICTWG), the CEO Forum, and the U.S.-India Agriculture Knowledge Initiative (AKI) – and the High Technology Cooperation Group (HTCG) was re-energized. The U.S. and India also established a separate Energy Dialogue to further cooperation on a broad range of energy-related issues.
On March 1, 2006, the Co-conveners of the Economic Dialogue, Assistant to the President for Economic Policy and Director of the National Economic Council Allan Hubbard (U.S.) and Deputy, Planning Commission Dr. Montek Singh Ahluwalia (India), together with U.S. Trade Representative Rob Portman and Commerce Minister Kamal Nath, the Co-Chairs of the Trade Policy Forum, and Undersecretary of State Josette Sheeran Shiner and Foreign Secretary Shyam Saran, the Executive Secretaries of the Economic Dialogue, met to review the Dialogue’s progress and discuss next steps to further enhance our economic relationship. In particular, Undersecretary Shiner and Secretary Saran will host a High-Level Public-Private Investment Summit in 2006 to advance the Dialogue’s economic and commercial goals.
The CEO Forum
The CEO Forum, established in July 2005 as a high-level private sector forum to exchange business community views on key economic priorities, presented its recommendations to President Bush and Prime Minister Singh on March 2. Mr. Hubbard, Dr. Ahluwalia and other senior officials from both governments also met with members of the CEO Forum to discuss the Forum’s policy recommendations. Membership of the CEO Forum consists of ten chief executives from each country, representing a cross-section of industrial sectors. The CEO Forum’s recommendations cover the breadth of the U.S.-India economic relationship, and aim to enhance economic growth and job creation for both countries, to improve market access for goods and services, and to promote bilateral trade and investment. The U.S. and Indian governments welcome the recommendations, and will continue working with the CEO Forum members to address the issues they have raised in the coming months. ”
see http://www.state.gov/p/sca/rls/fs/2006/62493.htm
It would be interesting to study how this kind of high level bilateral engagement with the US has impacted upon how trade policy is made in India.
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