Opening up: Envoy sees the benefit for India as China gives tax relief for drugs

By: | Published: May 4, 2018 4:39 AM

Amid a looming trade war with the US, China has exempted 28 drugs — including all cancer medicines — from import tariffs from May 1 and decided to further open up to foreign businesses.

India, china, tax, tax relief, drugs, medicinesFE had earlier reported that China had also pledged to look into the sticky issue of greater market access to Indian farm products and agreed to resolve any issue that hurts the prospect of Indian pharmaceutical exports to that country.

Amid a looming trade war with the US, China has exempted 28 drugs — including all cancer medicines — from import tariffs from May 1 and decided to further open up to foreign businesses. The move is a “good news for India’s pharmaceutical industry and medicine export to China”, Luo Zhaohui, the Chinese ambassador in New Delhi, said in a tweet on Thursday. “I believe this will help reduce trade imbalance between China and India in future,” he tweeted.

However, pharmaceutical industry executives are sceptical about any meaningful gains to India, saying the choice of mainly cancer products for the exemption suggests the decision is aimed primarily to placate the US. More than tariffs, non-tariff barriers are the real issue for Indian pharma companies seeking to export to China, they say. India’s exports of pharma products to China were negligible — $37.44 million in the first 11 months of 2017-18.

The move comes at a time when China is facing criticism over inadequate action to trim its massive trade surplus with both the US and India, and also follows Prime Minister Narendra Modi’s recent visit to China. Luo also said an executive meeting of the State Council on Wednesday, chaired by Chinese Prime Minister Premier Li Keqiang, decided to further improve business environment by halving time required to open a business. “China’s door to the outside world will open wider. Indian businesses are welcome!,” he tweeted.

While the US under President Donald Trump has already announced its intention to target China through a raft of measures–including plans to impose tariffs on goods worth $50 billion, over and above duties on steel and aluminium supplies—India has asked the neighbour to offer greater market access in farm products, pharmaceuticals and IT.

Although China, too, declared its plan to impose tariffs on US goods, in a conciliatory approach, Chinese President Xi Jinping last month promised to open the country’s economy further and lower import tariffs on a range of products, including cars. Xi had also announced that China would also enhance the limit of foreign ownership in its automobile sector, which is of crucial interest to the US, and push for opening up the financial sector.

A senior government official termed the latest Chinese move “positive” but cautioned against excessive optimism as yet, saying specific benefits to the country can be gauged once details of the items to be exempted are available. “If only cancer drugs are exempted, we may not gain much. We need market access in more products,” he said. “However, a new beginning seems to have been made, and it’s a good thing,” he added.

DG Shah, secretary general at Indian Pharmaceutical Alliance, said: “The Chinese decision is aimed at satisfying the US, as the US is a big player in the cancer drugs segment.” For Indian exporters, non-tariff barriers in product registration are a big issue, which China needs to address urgently, he said. In a meeting between commerce minister Suresh Prabhu with his Chinese counterpart Zhong Shan in March, both the sides had agreed to work on a road map to reduce trade imbalance, apart from re-negotiating a bilateral investment agreement.

FE had earlier reported that China had also pledged to look into the sticky issue of greater market access to Indian farm products and agreed to resolve any issue that hurts the prospect of Indian pharmaceutical exports to that country.

India’s goods trade deficit with China steadily worsened over the years–from just $0.7 billion in 2000-01 to a massive $53 billion in the first ten months of 2017-18. Official data show China’s exports to India were 1.8 times of India’s outbound shipments to that country in 2000-01. But at $63.2 billion, what China exported to India in the first ten months of the current fiscal was more than six times of what India shipped out to China.

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