Govt needs to be transparent, must avoid selective protectionism

The government has started the new year with another dose of selective protectionism. This trend, which started a couple of years back, is likely to continue and gain momentum.

One of the major pillars or principles of the General Agreement on Trade and Tariffs (GATT) under the auspices of the World Trade Organisation (WTO) was the abolition of quantitative restrictions. Essentially, it meant doing away with tools such as import licensing that would make it difficult for the foreign goods to enter the domestic markets. India did so in 2001 and incorporated internationally accepted nine principles of restriction in the Foreign Trade Policy in 2004.

In 2021, the government added eight more principles of restriction that included preventing sudden increases in imports from causing serious injury to domestic producers or to relieve producers who have suffered such injury. Since then, the quantitative restrictions by way of minimum import prices, registration of foreign suppliers, import licensing, import monitoring system etc. have grown.

Last week, the government prohibited the import of screws, ie threaded articles, unless their CIF import price is Rs 129 or above per kg. On the first day of this calendar year, the government allowed removal of used information technology (IT) assets from Special Economic Zones (SEZ) to domestic tariff area, subject to the conditions that they have been used for at least 2 years in the SEZ, are not older than 5 years from the date of manufacturing and are not exempted from any other regulatory requirements and said that the used IT assets that do not meet   these conditions will be subject to import licensing.  

The finance ministry, on its part, imposed anti-dumping duty on gypsum board/tiles with lamination on at least one side, industrial laser machines, in fully assembled, semi knocked down or fully knocked down form, used for cutting, marking, or welding operations and wheel loaders i.e. self-propelled wheel-mounted equipment with an articulation joint, having front end loading mechanism, of certain specifications.

The GATT envisaged that the WTO members would regulate their imports mainly through the instrument of tariffs and that the members can vary their customs duty rates only below a certain bound rate. India had broadly simplified the customs tariff by imposing uniform rate for all items within a chapter and mostly, for non-agriculture items, imposing 5 per cent duty on basic commodities, 7.5 per cent on capital goods, chemicals etc. and 10 per cent on other goods. However, in recent years, duty rates have been raised on quite a few items.   The government had started phasing out certain exemptions from customs duties but has now slowed down  that process.

The WTO allows imposition of anti-dumping duties, safeguard duties, and anti-subsidy countervailing duties after due process of investigation. By and large, the government used to accept the recommendations made by the Director General of Trade Remedies (DGTR) after due investigations but since the last couple of years the government has been selective in acting on the recommendations. The process of accepting only some DGTR recommendations is rather opaque just as the process of imposing quantitative restrictions on only some items is non-transparent.

Such selective protectionism smacks of selective favouritism and raises suspicions that effective lobbying works. In some ways, it is worse than pre-liberalisation days. The government must strive to avoid selective protectionism and be transparent to the extent possible. 

Email : tncrajagopalan@gmail.com