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Photo: Mint
Photo: Mint

US, EU, Japan question India’s policy tweaks to restrict imports

Developed nations also ask why New Delhi is imposing minimum import prices, safeguard probes on steel products

The US has expressed concern over the Narendra Modi government’s recent budget at the World Trade Organization (WTO), saying it will increase tariffs of 96 products that include capital goods, industrial solar heaters, solar tempered glass, and other hi-tech products, according to people present at the WTO meeting.

The US has also asked India why it chose to increase the basic customs duty on medical devices and withdraw a duty exemption on approximately 70 lifesaving drugs.

Japan and the European Union (EU), along with several other industrialized and some developing countries, asked India why New Delhi was imposing minimum import prices and safeguard investigations on several steel products.

The US, EU and Japan also sought the reasons for the government’s decision in July 2014 to raise duties on several products under the information technology agreement to 10% ad valorem. The products include soft switches, voice over Internet protocol (VoIP) equipment, media gateways, gateway controllers, optical transport equipment, optical transport products and carrier ethernet switches among others.

Japan and the US, participating in a meeting of the WTO’s Council on Trade in Goods (CTG) on Friday, jointly introduced an agenda item titled India import-restricting measures to highlight their specific concerns about India’s Union budget and other policy measures.

Japan wanted to know why India had imposed minimum import prices on over 170 iron and steel products, maintaining that it would cause an adverse effect on its steel exports to India.

Japan informed India that minimum import prices are inconsistent with Article XI of the General Agreement on Tariffs and Trade that seeks to eliminate quantitative restrictions.

Japan, along with the EU, Canada, Australia, Korea and Taipei (Taiwan), described India’s decision to launch safeguard investigations on hot-rolled flat sheets and plates on 10 December 2015 as an adverse development.

India and other developing countries are alarmed at the manner in which the US and other industrialized countries are increasingly questioning the use of legitimate trade instruments in the policy space at the WTO, said a trade official familiar with the CTG meeting.

“Poor and rich countries alike need to carve out greater space for pursuing their respective objectives," argued Dani Rodrik, a trade academic at Princeton University, in his article on A Progressive Logic of Trade published in Mint on 15 April.

Developing countries, added Rodrik, “need to restructure their economies and promote new industries".

“The best way to bring about such institutional re-engineering would be to re-write multilateral rules," he maintained.

Rodrik underscored the need for broadening the “safeguard" clause of the WTO to allow for the imposition of trade restrictions in instances where imports demonstrably conflict with domestic social norms.

“Similarly, trade agreements could incorporate a ‘development box’ to provide poor countries with the autonomy they need to pursue economic diversification," Rodrik said in his article.

The Indian budgetary measures that resulted in increasing tariffs as well as the exemptions in duties are consistent with the binding tariff commitments that India took for these products, according to trade officials familiar with the subject.

Further, by raising these issues at the CTG instead of the appropriate WTO forums such as the committee on market access or the committee on safeguards, an impression is being created by major industrialized countries that India and other developing countries are increasingly resorting to trade-restrictive measures, according to an African trade official who asked not to be named.

As regards the 10% duty hike on information technology products in July 2014, the three advanced countries asked India why it had done so when it had certified these items under zero duty in its WTO Schedule of Concessions.

A trade official familiar with the US’ queries said it was puzzling that the US, EU and Japan had only now raised an issue that dates back to July 2014.

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