India seeks 50% cut in bound rates on industrial goods

NEW DELHI: India has come up with a proposal that both developed and developing countries of the WTO at least halve their existing bound tariffs on industrial goods, a plan that is likely to surprise developed members like the EU and the US. This would require developed countries to lower their tariffs to about 2.9% while India will have to reduce average bound rates to 18-20%.

India has, however, maintained that developing countries deciding on a 50% cut or more — which translates into a reduction coefficient of 30 or less — should be allowed to shield 10-15% of their tariff lines from reduction commitments. The percentage of sensitive tariff lines should be directly proportional to the developing country’s reduction commitment. The proposals were made in a WTO discussion paper on non-agriculture market access (Nama) circulated by India recently.

Though India would not face much difficulty in reducing its bound rates — presently at about 40% — by half or more as its average peak tariff is about 10.5%, it will lose the flexibility to increase it beyond the agreed level thereafter. Even if India agrees to a coefficient of 24 — wherein, as per the proposal, it is to be allowed to keep 15% of tariff lines sensitive — it will have to cut bound tariffs to about 14.5%.

Official sources told ET that loss of flexibility to raise tariffs would not be a major problem if India could protect its sensitive items like automobiles and auto parts by keeping them out of reduction commitments.

Some policy watchers have, however, criticised India’s move on the ground that it had made a unilateral gesture without getting anything in return. They argue that India should have linked its offer to a good bargain in return during the services and agriculture talks.

But officials said it was just a proposal by India to push the stalled talks forward. “We have not committed anything. We just put some ideas on the table to be taken forward by all members. Negotiations and give-and-take have not started yet,” a source said.

The Doha round of multilateral trade talks, which began in November 2001, has been in a limbo for the past two years. Negotiators are trying to break the deadlock in the agriculture and Nama talks, stuck over the issue of reduction commitments by developed and developing nations. Many fear that there may be no progress till next year’s US presidential elections.