Direct effect of WTO law in India
Here is an interesting SSRN paper on the issue of the status of WTO law within the Indian legal system.
Chowdhury, Nupur,The (Absence of) Direct Effect of WTO Law – Current Developments within the Indian Legal System(May 20, 2008). Available at SSRN: http://ssrn.com/abstract=1136585
Abstract:
This chapter gives an overview of the status of international law under the Indian Constitution and its implications for the status of the WTO Agreement and the covered agreements within the Indian legal system. The Indian legal system is dualistic and international legal instruments ratified by the country become part of the national system only when it is transposed into national law. However such a strict interpretation has often been circumvented by the Courts in favor of a direct applicability of international law on the basis of the principle of consistent interpretation as provided for in the Constitution. In that sense it is interesting to note that notwithstanding the dualistic nature of the legal system, the Courts have applied the consistent interpretation, supremacy and the (in)direct effect principles in a varied number of cases to strengthen the conformity of national law with international law. In that sense, the relationship between these principles is dynamic and can be temporally located within the different trends of judicial activism in the Indian courts. Amongst the WTO agreement it is the TRIPS agreement that has been at the center of most legal disputes. Given the considerable economic interests of the Indian biotechnology sector (drugs and pharmaceuticals) and therefore the high stakes, in concomitance with the considerable textual ambiguity, which the TRIPS amendment has created, this is not surprising. It also underlines the currency of such a debate on the application of the principle of direct effect in the present context of the Indian legal system.
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.
Kamal Nath issues new interim trade policy for India
The new Annual Supplement to India’s foreign trade policy was released by commerce minister Kamal Nath on 26 February.
His speech on the occasion can be accessed here. It provides an interesting insight into the trade policy priorities of the Indian government. Incidentally there is no mention of the stalled Doha round and the WTO finds mention only in passing (the Minister quotes the WTO to warn about how the growth rate in global trade in goods and services is expected to decline from 7.2% in 2007 to 4.6% in 2008 and further to 2.1% in 2009).
On Indian FTAs the Minister had this to say:
We concluded a Comprehensive Economic Cooperation Agreement (CECA) with Singapore in 2004. It is India’s first CECA with any country covering goods, services, investment and other areas of cooperation. We are in an advanced stage of negotiations with ASEAN, Korea and Japan and are engaging significantly with SAARC, EU, EFTA and Thailand. These efforts have increased our confidence for a deeper engagement with other trading partners and also to understand their markets for promotion of trade in both goods and services.
The annual supplement with the trade facilitation measures can be accessed here while the Foreign Trade Policy 2004-2009 can be accessed here.
A new full year policy for 2009-2010 will be issued by the new government constituted after elections this year.
Agricultural trade policy making in India
Business Line published an article recently that discusses ministerial turf battles in the way trade policy is made in India. Here is the article in full with items of interest highlighted for those interested in trade policy formulation issues:
Harish Damodaran
New Delhi, Jan. 15 The Centre has rejected the proposal to accord statutory status to the Commission for Agricultural Costs and Prices (CACP) while also extending its mandate to provide advice on tariff policy and other trade-related matters.
The Cabinet Committee on Economic Affairs (CCEA), which met here on Thursday, did not accept the recommendation by an Expert Committee under Prof Y.K. Alagh to confer statutory status to the CACP.
The proposal, had it gone through, would have made it mandatory for the Centre to fix the minimum support prices (MSP) for various crops at levels recommended by the CACP. The underlying idea here was to insulate fixation of MSPs from political pressures and subject these, instead, to rational economic principles.
But the Expert Committee’s suggestion was rejected by the Cabinet, ostensibly at the instance of the Union Agriculture Ministry. The latter held that the CACP recommends MSPs well before the start of the cropping season, whereas the crop gets harvested much later.
‘No flexibility’
If the Centre was bound by the MSPs recommended by the CACP, there would be no flexibility to respond to changing market conditions and fix procurement prices accordingly. In such a situation, it was felt that the CACP’s present status as a purely ‘recommendatory body’ be maintained, official sources told Business Line.
The CCEA also rejected the Expert Committee’s proposal to extend the CACP’s terms of reference so as to include, “To advice from time to time on the tariff structure and other measures relating to imports and exports of agricultural commodities and their processed products”.
This would, in effect, have made it mandatory for the Centre to consider the CACP’s views regarding increases or decreases in import tariffs for any agri-commodity and measures to restrict or ban export/import of particular products.
“The opposition in this case came mainly from the Commerce Ministry, which expressed reservations on any role for the CACP to advice on trade and tariff matters, so as to integrate these with MSP policy,” the sources said.
“The Commerce people felt the CACP cannot be authorised to advice on what the tariff levels for individual commodities should be, so as to maintain the MSPs recommended by it. This may result in trade distortions which go against the basic economic principles of free trade,” they pointed out.
The Commerce Ministry, on the contrary, held that the CACP incorporate a member representing the Ministry. This would, in turn, ensure that the CACP would recommend MSPs and related actions that “do not come in conflict with broad trade objectives” and “are compatible with the World Trade Organisation and other bilateral and multilateral arrangements,” the sources added.
The CCEA also rejected the Expert Committee’s suggestion to expand the coverage of MSP and the official cost of Cultivation Scheme to horticulture crops, i.e. fruits and vegetables.
Methodological issues
The Prof Alagh-headed Committee was constituted by the Agriculture Ministry on May 7, 2003 to study various methodological issues in fixing MSPs of crops. Its terms of reference also included examining the existing mandate of the CACP and whether or not to reposition its role so as to provide greater teeth to its recommendations.
The Committee submitted its report on May 31, 2005, which was then forwarded to other Ministries (Finance, Commerce, Food, Planning Commission) for seeking their views before being placed for the Union Cabinet’s consideration.
The author of the report in question, Prof Alagh discusses ministerial turf battles and the difficulties of policy coordination because of bureaucrats unwilling to give up power. See his comment in the Financial Express here. An excerpt:
Finally the real differences. Apparently the government, or parts of it, does not want tariffs to be integrated with price policy in agriculture. It therefore does not agree with the Alagh Committee’s real concern that integrated policy should be followed to give incentives for a competitive agriculture. The report takes crops, works out the efficient farmer set and shows how within tariff bounds, with some monetary policy built in (the Venugopal Reddy simulation), it is possible to hold the farmer’s hand for the transitional period in which he moves over to a lower cost per unit of output, not land, or in which global trade is modernised following Kamal Nath. The report describes this in terms of ‘efficiency pricing’ or other variants of long-range marginal cost pricing, fully aware that it is not talking of industry. Anybody who reasons against this needs to do serious home work.
There seem to be sections of government that don’t want this. We don’t know why. Turf battles could be one reason. Policy coordination is always easy in a textbook and a report but normal persons don’t like to give up power. Only the exceptional become more powerful by shedding power and coordinating for the larger good. Another reason could be the fear of rule based systems for these can dilute the power play in weak coalition regimes. There is a trend in not having a chapter on perspectives in the Eleventh Plan and not accepting the challenge of creating a medium term environment for competitive agriculture. But then you are in real trouble, for to have MSPs and separately free imports is like pouring water in a leaking bucket. You did this at great cost a few years ago in the grain crisis period. Finally there could be the fear of the unknown.
But we are traveling in uncharted territory. After the dithering of the nineties, we are doing a superb job in the WTO. I am sure whatever the first reaction, having accepted a trade dominated regime, we will finally accept the challenge of the rational transition to it. The friendly ghost of the Alagh Committee will keep on coming back and will be exorcised only when we are fully competitive in our agriculture.
Those interested in going deeper, can find out more about the Commission on Agricultural Costs and Prices (the CACP) here.
Article on Madras High Court decision in Novartis v. Union of India
Castro and Arcuri have an interesting article titled “How Innovative is Innovative Enough? Reflections on the Interpretation of Article 27 TRIPS from Novartis v. Union of India’ on SSRN.
Access it here
Here is the abstract:
In 2006 a major lawsuit was initiated by Novartis AG against the Union of India. Novartis petitioned the High Court of Madras to declare Section 3(d) of the Indian Patents Act, as amended in 2005, to be non-compliant with the TRIPS Agreement and/or to be unconstitutional. Section 3 of the Patents Act identifies the cases of inventions which are not patentable and its letter (d), as amended in 2005, lists as such ‘the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.’ On August 6, 2007 the High Court of Madras reached a verdict rejecting all the petitioner’s requests. In relation to the non-compliance with the TRIPS Agreement, the Court did not enter into the merits of the question as it held to have no jurisdiction on this issue.
The present analysis begins where the verdict of the High Court of Madras ends; while the judgment invites reflection on a number of interesting issues related to the role of WTO law at national level, this paper focuses only on the substantive question (left almost entirely unaddressed by the Indian Court) about the compatibility between Section 3(d) of the Indian Patent Act and the TRIPS Agreement. The core of the question relates to the interpretation of Article 27 TRIPS, and in particular to its paragraph 1 where the criteria for patentability are set (i.e. an invention should be non-obvious, novel and useful); clearly, a narrow or a broad interpretation of these criteria is likely to have a significant impact on patents regimes worldwide. This paper builds an interdisciplinary theoretical framework to answer the compatibility question raised by Novartis AG; it does so by combing a purely legal analysis, based on the general interpretative canons used by the WTO Appellate Body to solve disputes, with an economic analysis that aims at showing the socio-economic impact of different interpretations of the above mentioned criteria. Finally, the paper shows the extent to which this theoretical framework could be applied should such a case ever be brought before the WTO DSB.
Indian government to educate citizens on Doha Development Round through White Paper
With national elections looming, the Indian government will issue a White Paper in October to explain to ordinary Indians and stakeholders what the Doha negotiations are all about, what is at stake and what is India’s negotiating position based upon.
The Financial Express in a report quoting a senior commerce ministry official discloses:
India would give another shot at taking forward the talks next month if the US gives positive signals and then the Centre would come out with the ‘white paper’ by October-end , a senior government official told FE. The ‘white paper’, devoid of all the jargon, would contain the nitty-gritty of the multilateral trade negotiations, India’s stance on all the issues on the table alongwith the positions of other countries as well as the reasons for the failure or success, the official added.
Once again, this proposal shows how trade policy making processes in India have evolved since the Uruguay Round. This move is commendable for promoting transparency about the WTO system at the domestic level. However, the government should encourage transparency in international trade negotiations through similar iniatiatives throughout the WTO negotiation rounds and not just before an election.
Paper on the Indian experience with WTO compliance
Here’s another interesting paper by Julien Chaisse.
It has several themes. These include – implementation of WTO agreements in India; the “direct effect” of WTO law in India; compliance by India with adverse WTO dispute settlement rulings; overview of how domestic Indian law has been influenced by the WTO; and India’s integration into the WTO system.
See Julien L. Chaisse. Ensuring the Conformity of Domestic Law with World Trade Organisation Law – India as a case study. New Delhi (India): Rajdhani Press/CSH, 2005.
Available at: http://works.bepress.com/julien_chaisse/2
Abstract
The World Trade Organisation (WTO), established in 1995, provides a contractual framework within which Member States undertake to implement regulations and legislation for foreign trade which cover a wide range of sectors. The purpose of this study to examine why and how WTO rules tend to be effectively implemented and how much it has changed Indian laws. WTO-conformity of Indian law is made compulsory for two reasons. First, by saying that, “each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements”, the Agreement establishing WTO affirms the obligation for all the Members to ensure such compliance. The legal consequences of such an obligation are discussed in regards with effective adaptation of Indian domestic law. Secondly, WTO is equipped with a new dispute settlement system which controls the correct compliance of domestic law with WTO-conformity. The contribution of this mechanism in ensuring WTO-conformity is evaluated, in regards with India implication in disputes. On the theoretical aspect this study identifies the particular characteristics proper to the WTO which ensure implementations to its law and obliges India as other Members to comply with the international standard. On the practical aspect, it gives an overview of the recent innovations or changes in Indian laws which are presently applicable and simultaneously to assess India integration in international trade governance.
Should there be an Indian Trade Organization?
The Hindu carried a report a few days ago on comments by eminent Indian agricultural scientist Dr. M. S. Swaminathan at a conference. He called for an “Indian Trade Organization” as a “national counterpart to the WTO”. The article does not say more about his ideas and what such an organization would look like or do. India does need trade policy making domestic institutional reform but its structure, functions and organization need to be carefully designed. And the Government has no such revamping plans at the moment. What would be the role of Parliament in such a set-up? Also, would there be a place for a more formalised public-private partnership in trade policy making and in market access enforcement?
For a profile of Dr. M S Swaminathan see here
Also see the M S Swaminathan Research Foundation
Indian participation in the Doha Round – no shortage of material for research studies, books, and PhD theses!
As is now clear, India has emerged as a major player in the WTO and its role in the Doha round is significant. And no doubt, many books, papers, and theses are being planned (once the round gets over) on questions like – How India negotiated? What influence did India exert? Did India adopt a successful negotiating strategy? Did India manage to protect its interests? Has India moved away from representing broad developing country interests to a more self-interested negotiating strategy? How did India define its interests? And was there adequate stakeholder consultation and involvement? What were the turning points when deals were made? And in all this, how did India compare with other important players?
India’s participation in the Doha round could not be more different from its participation in the Uruguay round. And the differences are a result of many changes – India’s growth story; the tectonic shifts in global power; the shifts in power within the WTO; and of course everyone’s favourite “cryptic” Globalisation.
What is certain is that those interested in such themes will face no shortage of material, given the media coverage of the round, and given how contemporaneous examination of India’s role is the subject of seminars and discussion all over the world and perhaps, more importantly, within the country. I keep wanting to archive all this material, but just don’t have the time. However, I am sure someone’s doing this. In any case, the reason for this post was more such media coverage. Here are some extracts and headlines from the last few weeks.
Moneycontrol has this today:
GK Pillai, Commerce Secretary, said, “The next 30 days are going to be crucial, because of the considerable differences, there has to be a considerable hardening of stand on our part.”
But it’s not just the government who will be talking. This time Indian negotiators at the WTO want states and corporates to lobby directly just as industry bodies do in the United States and the European Union.
The Commerce Secretary said, “We will be appealing to industry as well as agriculture to support us in our negotiations. We will try to get all states sensitised to our agri position and will try and get the agri ministry on board.”
The Hindu wrote Lamy’s prognosis on food crisis finds support in India
The Economic Times wrote India ask US, EU to show leadership in Doha talks and Nath to tour Indonesia, New York to sort differences in trade deals and India needn’t rush for an unfair Doha deal
This could go on and on … An article could be written just on the media coverage of the Doha round in India. A list of quotable quotes from this round would also make interesting reading and mark the important milestones and turning points. Remember Susan Schwab’s teen driver quote to describe India and Brazil.
The Budget on trade policy
Business Standard reports on the trade policy changes introduced in the Union Budget (see here) yesterday.
CUSTOMS: Peak rate remains at 10% to protect the Re-hit industry; a few anomalies removed.
Breaking a three-year trend, Finance Minister P Chidambaram kept the peak Customs duty for non-agricultural products unchanged at 10 per cent, a key demand of the domestic industry, which has been facing the brunt of the rupee appreciation.
“The collection rate is the closest approximation to the level of protection to domestic industry, and that rate for all imports stood at 10 per cent in 2006-07. Since April 2007, the rupee has appreciated against the dollar by 9.8 per cent. Consequently, the case for reducing the peak rate at this stage is very weak,” Chidambaram said in his Budget speech.
The government had set a target to bring down the peak Customs duty on non-agricultural products to around 5 per cent by 2010.
However, Chidambaram reduced the Customs duty on some items to “provide a fillip to that industry or to promote value addition or to remove inversion or any other anomaly”.
Trade policy experts said the move could have a positive impact on the country’s trade relations.
“India will have greater bargaining power in negotiations for various free trade agreements. Thus, on non-tariff issues like trade rules, Indian negotiators can ask for more concessions,” said Ram Upendra Das, fellow, Research and Information System for Developing Countries.
The commerce ministry had asked the finance ministry not to reduce the peak Customs duty on all non-agricultural products, but to reduce it on certain items to address the issue of inverted duties (when raw materials attract more duties than finished products).
“This reduction of Customs duties will have a positive impact on export-oriented industries in gems and jewellery as well as sports goods sectors,” said Ajay Sahai, director general, Federation of Indian Export Organisations.
As imports are expected to remain buoyant, Customs collections for 2008-09 have been fixed at Rs 1,18,930 crore, up 18 per cent from the current fiscal’s revised estimate of Rs 1,00,766 crore.
Moreover, the revised estimate of Customs collections for the current financial year is 2 per cent higher than the Budget estimate of Rs 98,770 crore.
There has been a continuous annual reduction in Customs duties since 2004-05 when they were reduced from 20 per cent to 15 per cent. In 2005-06, Chidambaram cut the peak Customs duty on non-agricultural products from 15 per cent to 12.5 per cent and to the current level of 10 per cent in 2006-07.
Chidambaram proposed to do away with import duties on steel melting and aluminium scrap, some components of set-top boxes, specified raw materials used by the IT/electronic hardware industry and the sports goods sector, bactofuges used by the dairy industry, and helicopter simulators.
The items on which Customs duty has been reduced to 5 per cent include specified life-saving drugs and bulk drugs used to make such drugs, phosphoric acid for use as poultry- and cattle-feed ingredient, IT-convergence products, certain machinery used by the sports goods sector, gems and jewellery inputs like rough cubic zirconia, polished cubic, and rough coral.
Chidambaram did away with the 4 per cent additional Customs duty exemption enjoyed by power generation projects (other than mega power projects), transmission, sub-transmission and distribution projects, as well as goods for high-voltage transmission projects. Customs duty exemption on naptha for manufacture of some polymers has also been withdrawn.
research paper on linkages between industrial and trade policies in India
Sharma, Gunjan, “Competing or Collaborating Siblings? Industrial and Trade Policies in India” . Available at SSRN: http://ssrn.com/abstract=964740
SSRN Abstract:
This paper investigates the link between economic de-regulation – domestic as well as trade de-regulation – and firm-level productivity using two unique data sets. We use the industrial licensing regime in India (operating from the 1950s onwards) and its gradual relaxation during the 1980s and 1990s to test whether industrial de-regulation that leads to more competition domestically, affects firm-level productivity. To our knowledge, ours is the only detailed, disaggregated data set on Indian industrial policy at the four-digit level. Our firm-level data for the period 1980-94 is a census of firms in India and has been rarely used in literature. We also use the interesting chronology of reforms in India (industrial de-regulation in the 1980s and trade reforms in 1991) to test whether industries that faced more competition domestically tend to perform better when facing foreign competition. Our identification strategy uses an important institutional feature of Indian policy. Firms with assets below a certain defined rupee threshold were exempt from licensing requirements. This institutional feature provides us within-industry variation that allows us to identify the interaction between de-licensing and exemption status. We find that industrial de-regulation during the 1980s led to a significant rise in firm productivity. Further preliminary results suggest that there exists a strategic complementarity relationship between industrial and trade policies – industries and firms that were de-licensed tend to perform better vis productivity after trade liberalization. Our results are robust to the inclusion of a wide variety of firm and industry fixed effects and controls for policies other than de-licensing that may affect productivity. This paper contributes to the literature by being the only detailed empirical analysis of the industrial licensing regime in India, especially the de-licensing that took place during the 1980s and by providing evidence of the crucial link between trade and industrial de-regulation.
There is an interesting passage in the concluding section:
“Our results have interesting policy implications. An important one is that domestic competitive environment can be used to prepare firms in the economy for trade reforms. Under competition from high-productivity foreign firms, domestic firms that are not productive may want to cut their losses and not invest in productivity-enhancing technology. However a rise in the level of domestic competition can spur these firms to make investments in technology prior to facing competition from abroad and hence prepare them for an even more competitive environment.”
The author suggests that the chronology of reforms was important, in that industrial de-licencing preceded liberalization of trade policy.
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.
A gender sensitive foreign trade policy for India
According to the Economic Times:
The government is considering sops for exporters who train women in skilled activities for their units. Some incentives could also be in store for women entrepreneurs engaged in foreign trade, commerce secretary G K Pillai has said.
Addressing a conference on gender sensitisation in trade policy organised by United Nations Conference on Trade and Development (Unctad) and the department of commerce, Mr Pillai said there has been no mention of gender sensitisation in the FTPs announced so far.
“This time, we are looking at specific gender issues in the FTP. Specific facilities to increase the capabilities of women engaged in the sector will be encouraged,” he said.
Speaking to the media on the sidelines of the event, Mr Pillai said certain incentives could be given to women engaged in export and import activities. Exporters helping women take on high-skill activities in their units could also be given sops, he said. The FTP is likely to be announced in the first week of April.
This might be a good example of how international ideas affect domestic trade policy. Gender sensitization in trade policy has been long championed in international discourse. And now it is starting to filter into India’s domestic trade regulation.
Mr Pillai also commented on how foreign buyers are affecting labour standards in India:
Mr Pillai pointed out that globalisation, in some ways, was bringing about positive changes in working conditions for women in India. He said foreign buyers laid down minimum standards of working condition, which units they sourced their goods from had to follow.
“The minimum standards prescribed are often higher than the domestic standards,” he said, adding that it led to a more favourable working environment for women.
India blocking the Doha round? Its certainly not the only one …
Greg Rushford of the rushford report has criticised India for “threatening” the Doha talks in an article in the Wall Street Journal today. He calls India the “Elephant in the Room” that “can least afford the collapse of the Doha Round”.
Last week, the Indians were back to the rhetoric that has marked their negotiating style throughout the Doha process. The latest spat was over a newly circulated draft negotiating text on “rules,” including possible reforms of protectionist antidumping laws. The measure is controversial, and even the Americans have voiced concerns on some issues. But whereas U.S. officials expressed willingness to negotiate, their Indian counterparts threatened to close the door. Ambassador Ujal Singh Bhatia, India’s top trade diplomat in Geneva, called the draft text effectively an insult. India has been committed to the Doha negotiations, the ambassador said, “but if, God forbid, a time comes when that price of engagement is unpayable by us, then we will have to stand up and say that.”
That’s a rich statement, given India’s negotiating tactics. Rather than express willingness to negotiate gradual, phased-in liberalizations — which is how the Doha process is supposed to work — Trade Minister Kamal Nath has a long list of sectors he has insisted are “non-negotiable” from the get-go, including a “negative list” of politically “sensitive” imports that are discouraged, if not actually prohibited, from fruits and vegetables to grains, edible oils, rubber, cotton and silk.
He suggests:
While the rich Europeans and Americans actually could afford to walk away from the Doha Round, India would pay a dear price for its failure. Consider the gains India has already reaped from earlier rounds of partial trade liberalization.
Is this really a fair assessment? Rushford argues that India needs more tariff and regulatory reforms and better infrastructure to continue to grow, and that without the Doha round, India will have no “pressure to fix those problems”. What he omits to mention is why the United States and Europe need a successful Doha round … Under present WTO rules, agricultural support in both the US and the EC will be open to legal challenge at the World Trade Organization’s dispute settlement body. Thus both the US and the EC want a Doha round outcome that will renegotiate these rules and allow them to continue their agricultural subsidies, albeit at a reduced level. And there are other reasons. All WTO members have a stake in a successful Doha outcome.
And as far as reform goes, India has engaged in unilateral reform before and will continue down that road. The dynamic within India has changed and now the reform agenda finds its strongest supporter within India itself, among Indian business. And bilateral and regional engagements will contribute to that impetus for reform. Almost everyone seems to want an FTA with India these days.
All this is not to say that a balanced Doha round will not bring benefits to India. It will and Indian negotiators and business certainly realise that. But it seems unfair to criticise India for “negotiating”. Its important to understand that domestic trade politics in India has evolved from its non-existent status in the Uruguay Round to a highly informed and contested democratic politics today. And no one would know better than the United States, that domestic trade politics is both important to negotiate a beneficial trade agreement and cannot be ignored. Domestic trade politics is essential for good trade policy making by the government.
Nonetheless, Mr Rushford makes a very valid point when he highlights how India loses out in international business:
The World Bank’s latest Doing Business survey estimates that the cost, including tariffs, poor roads, others customs duties and bureaucratic red tape, for India to export a carton of goods to the U.S. is $820; for China, it’s $390. It costs India $910 to import a carton from America, compared to $430 for China. Overall, the survey ranks India 120 out of 178 for ease of doing business. China ranks 83.
However, some of Mr. Rushford’s advice to India might be too simplistic. For instance he suggests:
Since the economic logic is so powerful, one would think that India’s trade negotiators would be eager to bargain away tariff walls that hurt the country’s competitiveness. Wrong. In the Doha talks, India wants to retain “policy space” — a code word for protectionism — to raise tariffs any time it might find it convenient to prop up this or that uncompetitive domestic industry, like Brazil has been doing. Somehow it doesn’t occur to the Indians that their models on tariffs, instead of Brazil, should be the likes of Singapore and Hong Kong, where tariffs are negligible and economic growth is rampant.
Surely, India’s size and development needs would require trade policy that differs from that of Singapore and Hong Kong?
PHDCCI pushing for common economy for North India
In an interview to the Business Standard, senior vice-president of the PHD Chamber of Commerce and Industry (PHDCCI) said that a common economy for north India would increase the North’s GDP by 2% and add 8-10 billion $ to the economy.
What do the prospects for this happening look like?
It is a difficult process since it involves co-ordination at all levels to ensure free movements of goods, be it regulating mandis and trade, movements of vehicles, quality assurance, processing goods, storage and so on. T K A Nair, principal secretary to the Prime Minister, had called for a standing committee of state secretaries to push this concept. We are hopeful this will be realised in the near future.
… Currently north India contributes nearly 40 per cent of the country’s GDP. We are trying to move towards an integrated market, and want a step-by-step removal of inter-state barriers to trade, apart from promoting e- governance, encouraging hydroelectric projects and so on. All these issues were raised at the chief secretaries’ summit we had this year. Through fora like this we plan to take these issues forward.
While the PHDCCI with a membership base in 10 states in North India is limiting its mandate to a common market in North India, the idea of a common market for India as a whole has also been discussed in other fora.
ICRIER‘s working paper no. 83 titled Domestic Market Integration studied the extent of market integration in India and had come up with the following policy suggestions:
- restriction of the Essential Commodities Act, 1955 for emergency use.
- A new central statute to prohibit controls on movement between states
- abolish octroi and other indirect taxes and levies on food articles across India
- agricultural policy reforms to remove restrictions on movement, tax structure reforms on agri commodities, enlarging coverage under the agri commodities futures market,
- reducing commodity coverage in food subsidy programs
- enhance role of private sector in food procurement
- improve transportation infrastructure
- remove tariff policy distortions that subsidise passenger traffic by overcharging freight
- allow FDI in retail
- tariff rationalization in the power sector, provision of universal access to commercial fuel at affordable prices
- policies aimed at establishing competitive real estate prices for retail sector
The OECD’s Economic Survey of India 2007 also discusses the reforms needed to create a common market for India.
Though difficult to execute within India’s decentralized constitutional and political structure, with Indian federalism witnessing a devolution of power to the states, a common market for India is an idea whose time seems to have arrived.
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