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India has proposed to renegotiate the upper tariff limits on certain items, reportedly information technology products, at the World Trade Organization (WTO) beginning 1 January. The move comes at a time when the Centre has been encouraging domestic manufacturing in select sectors through a production-linked incentive scheme under the Atmanirbhar Bharat Abhiyan.

“India hereby reserves the right under Article XXVIII:5 of the GATT 1994 to modify its Schedule XII, during the next three-year period beginning on 1 January 2021," India’s one-line notification to WTO members said.

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WTO rules allow countries to renegotiate bound rates, or upper tariff limits, for products with substantial interest in exports if the country’s applied or current tariff is about to breach the bound rate. The country has to compensate to raise its bound rate to the exporting country through negotiations.

In 1988-99, after India lost the case for quantitative restriction on rice and maize, it had to renegotiate tariffs of such items under Article 28 with Brazil, Argentina, the US, the EU and Australia, which had substantial trading interest in the products. As a result of the renegotiations, India got to impose tariff quotas on milk, cream powder, maize and mustard oil. It also got to raise tariffs on rice and millet to 80% and 70%, respectively, from 0%. But in return, India had to substantially reduce tariffs on a host of items, including butter, oranges and grapefruit, to compensate the other countries.

Trade experts said India could be opening another front of renegotiation with member countries on IT products, including smartphones on which it has hiked duties, believed by many countries to be in violation of the IT Agreement it had signed in 1996 under which tariffs on such products need to be kept at zero. “However, others may not agree to India’s renegotiation offer, though the issue can be dragged on for a few more years," one trade expert said under condition of anonymity.

A message sent to the commerce ministry spokesperson seeking a comment did not elicit a response.

Under the programme to promote indigenous manufacturing of mobile handsets, starting from the FY16 budget, India has hiked customs duties in a phased manner on mobile phones and components including chargers, batteries, microphones, receivers, keypads, USB cables, printed circuit board assembly and camera modules. Starting 1 October this year, the government has also imposed a 10% customs duty on the display assembly and touch panel of handsets.

The moves prompted the US, the EU and China to drag India to the dispute settlement mechanism of the WTO.

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