1. China’s secret weapons in trade battle with India are NTBs

China’s secret weapons in trade battle with India are NTBs

A small-time exporter from Mumbai wanted to ship out engineering goods to China. He was told that a Chinese team was required to visit his factory and he would have to pay for it.

By: | New Delhi | Updated: November 4, 2016 5:41 PM
After MEA's dig at Chin In a recent meeting with the Chinese ambassador-designate to India, commerce and industry minister Nirmala Sitharaman gave “examples after examples” on how non-tariff barriers are hurting India’s exports to that country.

A small-time exporter from Mumbai wanted to ship out engineering goods to China. He was told that a Chinese team was required to visit his factory and he would have to pay for it. He agreed, and spent some R10 lakh on the team’s visit. After six months he was told that another team would land up at his factory again before getting to the next stage of obtaining the permit. Assuming that this was going to be a long, arduous and expensive process, he decided to dump the idea and looked for another destination.

The list of such non-tariff barriers (NTBs) by China goes on and on. This reflected in trade between the two sides. While India’s goods exports to China stood at just $9 billion in 2015-16, imports from that country touched $61.7 billion, leaving an unprecedented trade deficit of $52.7 billion. So many here were nonplussed when, reacting to the call for boycott of Chinese goods by some private individuals for its “continued support” to Pakistan, the Chinese embassy in Delhi last week issued a statement stressing any such move would negatively impact India-bound investments from its enterprises and that the biggest losers will be Indian traders and consumers. For its part, the Indian government has made it clear that it hasn’t changed its policy towards China.

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In a recent meeting with the Chinese ambassador-designate to India, commerce and industry minister Nirmala Sitharaman gave “examples after examples” on how non-tariff barriers are hurting India’s exports to that country. The ambassador is learnt to have said he would convey New Delhi’s concern to Beijing. A Chinese delegation that had come to see Indian labs for phytosanitary clearances hasn’t yet responded. Sitharaman is learnt to have told the ambassador that “China cannot consume so much time for these things”.

China’s exports to India were 1.8 times India’s outbound shipments to that country in 2000-01, showed official data. In 2015-16, what China exported to India was close to six times what India shipped out to China. “Non-tariff barriers imposed by China are a major concern. While India has been using the tariff route to discourage imports in certain areas (especially agriculture), China has been very effectively using non-tariff barriers to curb imports that it wants to avoid,” said Biswajit Dhar, professor at the Centre for Economic Studies in Jawaharlal Nehru University. So while India’s average tariff rate of 13.5% (it is the highest among Regional Comprehensive Economic Partnership nations of which China is a part) is criticised by some global analysts as a deterrent to greater trade flows, China’s restrictions on imports by stealth, through the application of NTBs, often remain invisible.

Already, analysts attribute the NTBs to China’s frosty political ties with India and acute self-centred trade policies. For instance, China is one of the largest buyers of non-Basmati rice from Pakistan, but it doesn’t allow such supplies from India. Certain oilseed exports require as many as 11 certificates stating the items are pest-free. Interestingly, 10 of the 11 pests are already present in China. The neighbour has also put restrictions on supplies of Indian buffalo meat, India’s second-largest farm export item, citing foot and mouth disease among cattle in this country. However, China has been the biggest buyer of Indian cotton and yarn for years now, as it needs the raw materials to keep its massive textile and garment industries running.

While half of India’s top 10 segments of items for exports to China in recent years are low-value primary goods, all the top 10 product categories that China ships to India are manufactured goods. In fact, a study by research body RIS punctured the conventional wisdom that China is flooding the Indian market because its products are cheaper. It said India imported “uncompetitive products that can easily be supplied by other competitors of China at cheaper prices to India” to the tune of $9.7 billion, or 19.5% of its total imports from the neighbour, in 2012.

“Many of the Chinese standards such as the CCC standard require certification by the Chinese authorities before a product can be put on the Chinese market,” said Engineering Export Promotion Council chairman TS Bhasin. He said the factory has often to be inspected at the expense of the exporter, which is a lengthy and costly procedure. “Many exporters, in particular SMEs, are discouraged to export in such a difficult environment,” he added.

The sanitary and phytosanitary certification requirements for items such as seeds, seafood products and fruit and vegetables exceed international standards. Worse, the international system of arbitration for trade disputes is not recognised there.

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