Tariff cuts: India says China needs to prune import barriers

Both nations agree that market access for Indian goods in China remains low owing to non-tariff barriers

A day after China announced it would slash import tariffs on various products from countries, including India, the government remained cautious on India's prospects of exporting more. 

On Thursday, the Chinese finance ministry announced that import duties would be slashed on over 8,000 products from India, Bangladesh, Laos, South Korea, and Sri Lanka. Beijing announced the move as an adjustment in tariff rates as part of a tariff concession arrangement reached under the Asia-Pacific Trade Agreement (APTA).

“China will reduce or cancel tariffs on imports of 8,549 types of goods from India, South Korea, Bangladesh, Laos and Sri Lanka. The goods include chemicals, agricultural and medical products, soybean, clothing, and steel and aluminum products,” Chinese ambassador to India Luo Zhaohui tweeted.

While Beijing has not released a list of products, commerce ministry officials said no official communication had reached New Delhi till Thursday evening. “We will be watching the developments but the final list will be important. The Chinese will have to dismantle technical barriers that are present in sectors where bilateral trade takes place,” an official said.

Barriers to trade remain high, especially those that are non-tariff in nature. This has been true for the pharmaceutical sector, considered to be one of the most ambitious by New Delhi and shortlisted by Beijing for reducing import duties.

In March, Chinese Commerce Minister Zhong Shan had visited New Delhi and recognised pharma as one of the areas where the trade disparity could be reduced. He had assured that over 240 applications of Indian pharmaceutical exporters, pending with China, would be processed soon.

But regulatory backlogs with the China Food and Drug Administration continue to remain high, especially with regard to Indian applications, the report pointed out. The recent changes in review policy mean that innovative medicines manufactured in China are granted priority.

“China is a state enterprise-driven economy and most imports continue to be ordered by state companies. Issues of market access, primarily in agricultural commodities and pharma products, remain.  These have to be addressed,” Ajay Sahai, director-general of the Federation of Indian Export Organisations, said.

“The APTA has been working for many decades but the items covered under it have been small. China's decision to expand it will help exports from other nations. But, this is a consequence of China's trade partners pressurising them to import more. This will reduce trade deficit.” Sahai added.

India signed the APTA, the oldest preferential trade agreement among countries in the Asia-Pacific region, in 1975. There has not been much movement in expanding the agreement since then. The latest tariff reduction owes its origin to discussions in January 2017.

“There has not been much negotiation on the APTA as preferential tariffs have become less important,” Biswajit Dhar, trade expert and professor at Jawaharlal Nehru University, said. 

He added this was because of more comprehensive trade deals, such as the Regional Comprehensive Economic Partnership (RCEP). With import tariff rates dropping, the margin of preference does not matter much when nations are discussing free trade deals such as the RCEP. With different norms and rules of origin, trade will become complicated for exporters, added Dhar. 

In March, India and China had agreed to reduce India's trade deficit of $62.903 billion with its northern neighbour. It was decided that non-tariff barriers would be identified in specific sectors and removed.