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Don’t confuse subsidies with tariffs: India

Don’t confuse subsidies with tariffs: India
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First Published: Fri, Jun 29 2007. 01 40 PM IST
Updated: Fri, Jun 29 2007. 01 40 PM IST
PTI
Washington: India has warned the developed world not to confuse subsidies with tariffs and said if a country like the US wants “headroom” for distortions in subsidies the developing world will be seeking the same for tariffs.
“Subsidies are distortions, tariffs are not,” Union Minister for Commerce Kamal Nath told reporters here.
“So, we need to correct subsidies. And while subsidies are being corrected I don’t see why we should be looking at tariffs,” he said at the Embassy of India.
Nath said that while India could afford to be more flexible given its low tariffs, he indicated that there were other nations that couldn’t afford to have the same degree of flexibility as India. He hinted at the possibility of forming separate groups of such nations but said India would continue to push for a successful conclusion to the Doha Round of trade talks.
“The US must also be demonstrating because this town talks of effective cuts in trade distortions. What does that mean? Effective cuts do not mean the right to be able to increase your subsidies,” he said.
“The G-20 offer (on agricultural subsidies) is 12.1. That’s where it stands at the moment. There was a big gap between 12.1 and 17. Now, since the US wants some headroom, there are countries that are saying that if you want headroom in your subsidies, we want headroom in our tariffs,” Nath said.
“So you can’t have headroom for distortions without having headroom for tariffs. In any case market access for subsidised products is very different from market access for agricultural products,” the Minister said.
Nath would not get into the specifics of what India is offering on the NAMA (Non-agricultural market access) negotiations but maintained that when the talks are on commerce and trade, there can be no negotiations over distortions.
“What was offered was based on what was on the table. Certainly all countries will have flexibilities but flexibilities are contingent upon other things,” Nath said.
“When you are negotiating commerce, there is an exchange rate, but when you are negotiating livelihood and security, you are not negotiating commerce. When you are negotiating distortions, you are not negotiating commerce,” the Minister maintained making the point that NAMA has to be discussed as a stand alone with market access.
“The framework agreement talks of less than full reciprocity and whatever percentage cuts the developed countries take, I would take 10% less. But they want us to double the cuts they are doing. I am happy to do 10% more cuts than what the developed countries want to do, if that is acceptable to them,” he said.
“At the end of the day, what is the reduction rate?... But let them say what they are willing to do. But they can’t say I’ll do 25, you do 50,” Nath maintained.
The Indian Minister disputed the notion that no consensus came out of Potsdam and pointed out there was indeed some consensus on food aid, disciplines and export competition.
“...But there are headline issues such as Trade Distorting Support (TDS), product specific gaps. At the end, every formula...has to translate into something. If you reduce your subsidies but do not have product specific caps, it may not be good for Brazil,” Nath added.
“It is not just India or Brazil, even Australia, Canada, and the European Union won’t do it until they find reciprocity by the US,“ Nath said.
Earlier, at the Carnegie Endowment Nath argued that India very much seeks to strengthen the rules-based international system as it was “extremely crucial” for the country to strengthen the rules based system and the edifice of the WTO.
“Which country other than India would want this?” Nath posed pointing to the enormous challenges of the country where some 350 million people lived on less than $1 a day and 80% of the agricultural population living on subsistence agriculture.
A country like India is “batting for protection of livelihood,” he said.
There is a lot of difference between the Uruguay Round and the present Doha Round as presently a lot of countries want to be engaged as opposed to a “handful” during the earlier scheme of things,” he said.
Nath said that his advice to the US Trade Representative is not just to talk to India “but to 30-40 other countries”.
“I believe that there is determination. All countries recognise the importance of a rule based trading system,” Nath added.
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First Published: Fri, Jun 29 2007. 01 40 PM IST
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