Centre to seek India Inc views on duty cuts at WTO

The Centre will soon hold talks with India Inc to get their response on the proposed inclusion of market-opening provisions called ?sectorals?, aimed at mandatory reduction or elimination of dutiesin some infant and vulnerable sectors?in the final agreement at the Doha Round talks of the World Trade Organisation (WTO).

The move comes in the backdrop of mounting pressure from the US on emerging economies like India to make commitments at the WTO regarding liberalising markets for industrial products.

The US has stressed that it would not agree to a global trade deal that does not have clauses on ?sectorals?. The WTO talks, aimed at clinching a global trade deal, had collapsed late last month mainly due to differences between India and the US over safeguards to protect poor farmers in developing countries from import surges of agricultural products.

However, taking note of WTO director-general Pascal Lamy?s request for resumption of the talks, India had indicated its willingness to return to the negotiating table and restart the seven-year-old Doha Round talks if the US too gives positive signals.

The US is keen on getting more markets access in three sectors – chemicals, electrical electronics and industrial machinery. The US wants India to negotiate on these and agree to eliminate or drastically cut duties in these three sectors.

India had initially vehemently opposed entering into any sort of discussions on ?sectorals? and had informed the WTO during the recent ministerial talks that it ?cannot have a situation where sectorals are made mandatory.? India stressed that the talks on sectorals should only be voluntary. Countries like Argentina too has opposed the proposals put forward by Lamy on industrial goods saying it was against the interests of developing countries.

India said clauses like ?sectorals? would harm its core interest of protecting infant and vulnerable industries as well as employment- intensive sectors from cheap imports.

But now the Centre has decided to hold talks on ?sectorals? with India Inc between late-August and mid-September in Delhi, Mumbai, Kolkata and Chennai as well as in industry hubs like Ahmedabad and Hyderabad, before the resumption of talks in WTO later in September.

In chemicals, India?s average bound tariff (or tariffs that it had committed to in the Uruguay Round talks of the WTO) is 43%, while its average applied tariff (or those prescribed by the finance ministry) is 8.3%. In electrical electronics, the average bound tariff is 30%, while the average applied tariff is 7% and in industrial machinery the average bound and applied duties are 29% and 7% respectively.

Official sources said the aim of the talks is to make the industry aware of the consequences of accepting the inclusion of ?sectorals? in the final deal and thereby agreeing to commit to drastically reducing the average bound rates in these sectors or even bringing the bound rates to zero giving countries like the US total market access.

But since developed countries would also be eliminating duties in these sectors, India Inc would have some offensive interests in gaining access to those markets, they said, adding that the government was trying to find out both offensive and defensive interests in these sectors as well as the conditions that it should keep in mind during future negotiations.

Industry bodies like FICCI had made it clear that sectoral tariff negotiations should remain non-mandatory. They also said there should not be any provision to establish linkages between ?sectorals? and ?flexibilities?, which means giving incentives to developing countries participating in ?sectorals? negotiations by allowing them to commit to lesser tariff cuts.

The CII, the Automotive Component Manufacturers Association of India and the Society of Indian Automobile Manufacturers had earlier written to Lamy saying they have the support of Union Industrial Argentina and Business Unity South Africa in their opposition to proposals on sectorals.

Claiming that sectors like automobiles, auto components, textiles, marine products and chemicals in India are likely to be severely hurt if ?sectorals? are included in the final agreement, they said these sectors are already experiencing high levels of import penetration in all three countries?India, South Africa and Argentina. The high level of import penetration is indicative of the already existing open trade regime and is also reflected by the lack of non-tariff barriers (NTBs) in all these three countries, they said.

Recently Member of Parliament and Bajaj Auto chairman Rahul Bajaj had hit out at commerce and industry minister Kamal Nath for allegedly offering to make concessions to developed nations at the WTO regarding market access to their industrial goods in India without getting any concrete commitments in return. Bajaj said, ?no deal is better than a bad deal? that does not protect the interests of Indian industry.

At the WTO talks last month, India had indicated its willingness to accept a proposal that would limit the highest tariffs of developing countries at 20% and that of developed countries at 8%. According to this proposal developing countries would be able to protect from duty cuts 6.5% of the total industrial tariff lines 7.5% of the total volume of trade.

The initial demand of India Inc was to ensure that the highest bound tariff of developing countries like India is 34% and that of developed countries at 9%. India Inc also faces a lot of non-tariff barriers in developed countries .