India firm over sectoral tariffs

India’s trade envoys to the World Trade Organization (WTO) are comfortable with the proposed norms on concentration of tariff cuts, but are firm that the sectoral proposals at the Doha Round will have an adverse impact on the country’s economy.

According to the anti-concentration principle, sensitive industrial tariff lines, which would not be subjected to full formula-based tariff cuts, cannot be concentrated in one particular sector or sub-sector.

The current proposal on the table says that a developing country will have to reduce import duties for at least 20 per cent of the tariff lines or for products that account for 9 per cent of the total value of imports in that sector.

“For countries like India, the more important factor is that the full formula cuts will have to be taken in products that account for 9 per cent of imports in a sector. In many sectors, a few products account for large imports. Hence, the industry needs to be protected against those items for which large imports are seen. The proposal on subjecting 20 per cent tariff lines to full formula cuts is less significant for us. In effect, negotiators are comfortable with the anti-concentration proposal,” said a government source in the know.

The anti-concentration proposal was mooted by the European Union, which wanted that developing countries should undertake formula-based tariff cuts in at least 50 per cent of tariff lines in a sector.

The Indian government’s assessment is that the key sectors which are likely to be impacted by anti-concentration include automobile components, aircraft, chemicals and silk.

“Developing countries may get some relaxation regarding exemption of sectors having less than 50 tariff lines from anti-concentration clause. This would take care of sectors like silk industry in India where lot of artisan weavers are dependent on,” officials added.

Trade experts point out that the Indian industry, which are dead against anti-concentration and sectoral principles, do not have an in-depth assessment of the impact of these two proposals.

An analysis by the International Trade Union Confederation pointed out that adverse impacts of anti-concentration could include restricted development of value chain in a sector and loss of competitiveness as overhead costs of firms will remain fixed while only some portion of the products would see protection against cheap imports. Moreover, even protected goods would lose out as consumers would opt for cheaper imported goods of the same category.

However, officials maintained that there could be no compromise on having sectoral talks for undertaking full duty cuts in certain sectors. According to this principle, certain countries will negotiate to reduce tariffs of certain identified sectors to zero.

“Any Indian sector that is subjected to sectoral talks would adversely impact the entire sector. In fact, this is one of the real issues that is yet to be sorted in Doha Round talks and there is no comfort zone on it,” officials added.

The strategy of developing countries, including India, is to first get their concerns on protection of their agriculture sectors addressed, after which they will be willing to move forward on comfort zones like anti-concentration on industrial goods as a part of the negotiations on non-agricultural market access (Nama).