Economic Survey 2016: India’s stand at WTO flawed

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New Delhi | February 27, 2016 12:50 AM

Concerns over country’s misplaced focus on SSM and permanent solution to public stockholding issue at multilateral body

The Economic Survey on Friday unequivocally questioned India’s long-time stance of insisting on a special safeguard mechanism (SSM) and a permanent solution to its public stockholding issue at the World Trade Organization (WTO), arguing that the country’s strategy should instead evolve around the need to shift away from tariff armours for producers to domestic support, and that too at an appropriate level and form.

The Survey pointed out that the policies being defended are those that “India intends to move out of in any case” due to well-documented impacts, including a decline in water tables and the over-use of electricity and fertilisers. FE was the first to question India’s stance at the WTO on these issues on January 17.

Given that the real need for an extra protection in the form of the SSM arises only in the case of a very tiny segment and applied tariffs on most farm items are far below the bound rates, India should discuss SSMs not as “a generic issue of principle but as a pragmatic negotiating objective covering a small part of agricultural tariffs”.

“Perhaps, in this instance, lofty theologising about freedom and sovereignty needs to cede to mundane haggling over hides and hibiscuses,” the Survey said. India’s applied rate is less than 5% of the bound rate for about 4% of tariff lines, and less than 20% for about 16% of its tariff lines.

It also expressed reservations as to whether pressing for a permanent solution to the stockholding issue is vitally necessary, especially when the country has managed to get a “peace clause” in Bali which was reiterated at the Nairobi ministerial in December last year.

Prescribing a way forward, the Survey said what India should consider offering a cut in its very high tariff bindings and in return seek more freedom to provide higher levels of domestic support, especially for pulses. It must also desist from policy volatility on trade.

The survey also asks India, China and other similar nations “to offer to open up their markets and undertake greater commitments in the context of future WTO negotiations” in return for similar actions by its trading partners (say, more mobility for Indian labour) if the multilateral body is not to be consigned to irrelevance.

The Survey cautioned against resorting to more protectionist measures to deal with the current global stress, especially in the case of items that could undermine the competitiveness of downstream industries. Instead, the rupee should be allowed to have a fair value without strengthening.

India should strengthen procedures that allow WTO-consistent actions against dumping, subsidisation and surges in imports to be taken expeditiously and effectively, it said. It should remove any negative protection for domestic manufacturing, which can be achieved by the GST implementation. And if it’s delayed, a similar result could be achieved by eliminating the countervailing duty exemptions.

Different opinion
* The Survey argues that the country’s strategy should evolve around the need to shift away from tariff armours for producers to domestic support, and that too at an appropriate level and form
* It pointed out that the policies being defended are those that ‘India intends to move out of in any case’ due to well-documented impacts
* It also expressed reservations as to whether pressing for a permanent solution to the stockholding issue is vitally necessary, especially when India has managed to get a ‘peace clause’ in Bali

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