Transcript Slide 1

Business Implications of India’s
Trade Agreements
Tamanna Chaturvedi
Consultant
Indian Institute of Foreign Trade
WTO Objectives
WTO came into existence on 1st Jan 1995 for the purpose of :
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Transparent, free and rule-based trading system
Provide common institutional framework for conduct of
trade relations among members
Facilitate the implementation, administration and
operation of Multilateral Trade Agreements
Rules and Procedures Governing Dispute Settlement
Trade Policy Review Mechanism
Concern for LDCs and NFIDCs
Concern on Non-trade issues such as Food Security,
environment, health, etc.
BASIC PRINCIPLES
1.
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NON-DISCRIMINATION
MFN (Most Favored Nation)
Members are bound to grant to the products of other
members treatment not less favorable than that accorded
to the products of any other country.
National Treatment
Once goods have cleared customs, imported goods must be
treated no less favorably than the equivalent domestically
produced goods.
2. PREDICTABLE AND GROWING ACCESS TO THE MARKETS
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Prohibition of Quantitative Restrictions
Binding of Tariffs
Bound Tariffs cannot be increased
Progressive reduction in the protection.
Exceptions: Safeguards, BOP.
3. FAIR COMPETITION
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TRANSPARENCY
ENCOURAGE DEVELOPMENT
Then why entering into trade agreements?
Tariff and Non Tariff barriers For Herbal exports
MFN
range
Switzerland
0-0
Japan
0-10
USA
0-6
NTM%
NTM Description
50% Labelling requirement
Product ch.requirement to protect
8% human health (cert req)
60% Testing and sampling
Tariffs and NTMs on Indian Exports
(i)
Tariffs and NTMs together imposed on
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(ii)
Oilseeds in Taiwan
Cane Sugar in Bangladesh
Bovine meat in Egypt
Crustaceans in Thailand
Malt extract in USA Bangladesh
Only NTMs
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Pepper in Canada
Rice in Nigeria
Oilseeds in USA, Taiwan
Cane sugar in Malaysia, Indonesia
Fish products in USA
Tea in USA
Major Export Markets for Herbal Products
Italy
USA
Germany
Japan
UK
Switzerland
France
Existence of Preferential Trade Arrangements
Germany (23.16%)
UK(7.37%)
India
(0.28%)
Switzerland
France (36.03%)
Preference for EU Countries
Stages of an Regional Trading Arrangement
Common currency
Macroeconomic
policy
coordination
Free
movement of
factors of
production
CET
(BTIA)
GSTP Global System of Trade preferences
What all can possibly be added in an FTA?
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Economic Co-operation in identified sectors
Institutional framework to enable environment for greater flow of investments
SPS-TBT considerations
 MRA on standards, mutual recognition, assessment procedures, equivalence
 MOU on harmonization on Ayurvedic/traditional medicines
 Custom clearance agreement
Consumer Protection and legal meteorology
Trade defense measures
Double taxation Avoidance Convention (DTAC)
Bilateral Investment Promotion & Protection Agreement (BIPA)
Treatment of “Shell Companies”
Air services agreement & open skies for charter flights
Health care, education, media, tourism
Unauthorized trade
Govn procurement, IPRs & GIs
Dispute Settlement process
Which Arrangement to choose from?
CEPA: Tariff Elimination on goods
E-0
Tariff will be entirely eliminated on the date the agreement enters into force
(January 01, 2010)
E-5
Tariff will be removed in 5 equal annual stages beginning on the date the
agreement enters into force, effective January 1 of the year* four
E-8
Tariff will be removed in 8 equal annual stages beginning on the date the
agreement enters into force, effective January 1 of the year* seven
RED
Tariff will be reduced to 1 – 5 % from the base rate (2006) in 8 equal annual
stages beginning on the date the agreement enters into force, effective January
1 of the year seven
SEN
Tariff will be reduced by 50% of the base rate (2006) in 8 equal annual stages
for India and 10 annual stages for Korea on the date the agreement enters into
force, effective January 1 of the year seven (for Korea) and year nine (for India)
EXC
Tariff is exempted from the obligation of tariff reduction or elimination
Let’s check the implications
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out of a total of 5227 tariff lines, 14.7%
of the tariff lines have been placed
under the Exception list, which
accounts for 14.5% of the import value.
71.5% of the tariff lines are subjected to
tariff elimination, most of this (over
90%) is accounted by E8.
However, in terms of import value, E0
accounts for 38.4% while E8 accounts
for 22.1%.
Compared to this, the combined
import significance of RED and SEN is
low at 11%.
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Out of a total of 11261 tariff lines,
about 89% is subjected to tariff
elimination, whose share in import
value is 84.5% Unlike India, about for
61% of the total imports.
The relative importance of E5 in much
higher for Korea as compared to India.
The Exception list account for only 7%
of the imports.
India's Export to Korea
HS 2 Digit
HS 6 Digit
Tariff rates in
Korea
Korea's Schedule of
tariff concessions
1
27 (Mineral Fuel, Oil, etc)
271011 (Light Oil, Preps (Not Crude))
5
RED
2
29 (Organic Chemicals)
290124 (Buta-1,3-Diene and Isoprene)
0
E-0
3
26 (Ores, Slag, Ash)
262030 (Mainly Containing Cooper)
2
E-0
4
52 (Cotton + Yarn, Fabric)
520523 (Single Yarn, Combed, 43-52Nm)
8
EXC
5
72 (Iron & Steel)
720241 (Chromium >4% Carbon)
3
E-0
6
71 (Precious Stones, Metals)
711299 (Waste And Scrap of Precious metals)
2
E-0
7
84 (Machinery)
840999 (Spark-ignition Parts)
5
E-0
8
23 (Food Waste; Animal Feed)
230649 (Rape/Colza Seed Oilcake)
0
E-0
9
76 (Aluminum)
760110 (Not Alloy)
3
E-0
10
79 (Zinc + Articles Thereof)
790111 (N Al=>99.99% Zinc Weight)
5
E-0
11
32 (Tanning, Dye, Paint, Putty)
320417 (Pigments & Preparations)
8
E-5
12
85 (Electrical Electrodes)
854511 (Furnace Carbon Electrode)
5
E-0
13
24 (Tobacco)
240120 (Stemmed/Stripped)
20
EXC
14
12 (Misc Grain, Seed, Fruit)
120740 (Sesame Seed)
630% or
6660/kg
EXC
15
38 (Misc Chemical Products)
380891 (Insecticides, In Forms)
6.5
E-0
16
78 (Lead)
780199 (Other Non Refined)
5
E-0
17
41 (Hides & Skins)
411410 (CHAMOIS Leather Prep Tan/Crust )
5
E-5
18
87 (Vehicles, Not Railway)
870899 (Other 8708)
8
E-0
19
73 (Iron/Steel Products)
730490 (Other 7304)
0
E-0
20
03 (Fish & Seafood)
030379 (Other 0303)
10 to 63
E-8 & EXC at 8th HS
level
Major Goods Benefiting from CEPA
Staging Category
E-0
Exports to Korea
Naphtha, benzene, polycarbonates
E-5
Lubricating oil, u-sonic scanning
applications, glass beads
E-8
Antibiotics, other residues, nonindustrial / unworked diamonds
Cashew nuts, turmeric (curcuma),
gasoline
Corn for animal feed, mango, single
cotton yarn
Meat of bovine animals, meat of swine,
pure cotton yarn
RED
SEN
EXC
Analyzing Indo ASEAN agreement
Export opp. in ind ASEAN countries
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Thailand: Electrical machinery,
Nucler reactors, Vehicles, Mineral
Fuels, Pearls
Malaysia: Cereals, Copper,
Organic Chemicals
Idonesia: Electrical Machinery,
Vehicles, Cotton, Iron, Iron &
Steel, Ships & boats
Electrical Machinery, Vehicles,
Cotton, Iron, Iron & Steel, Ships &
boats
Philippines: Meat, Food residues,
Pharmaceutical, Rubber, Electrical
machinery, Vehicles
Vietnam: Meat, Electrical
machinery, Ships & boats
Import Duty concessions. structure
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Thailand:Vehicles (87)
Malaysia: Electrical machinery
(85)
Indonesia: Edible Fruits & nuts
(08), Electrical machinery (85),
paper board (48)
Philippines:Vehicles (87), Optical
photo (90), Paper Board (48)
Vietnam: Coffee, Tea, Spices
(09), Electrical machinery (85)
Duty Concessions for Sri Lankan Exports to India
Tariff
Reduct
ion
Tariff Lines
Remarks
1998
2005
100%
1351
4150
50%
2799
0
50%Tea
5
5
50%Garme
nts
25%Textile
s
233
528
233
528
The Rules of Origin (RoO) criteria have
To be made duty free
alsofrom
been2004
defined under ISLFTA. The
duties
will of
be tea
applicable
50% fixed tariff preferential
concession for
imports
from Sri Lanka
if of
the
value-addition is at a
(Annual maximumonly
quota
15domestic
million Kilograms)
minimum
of 35 percent
or while
25 percent
Garments covering
Chapters
61 & 62
remaining
when Indian inputs comprise 10 percent.
in the negative list, will be given 50 percent tariff
concessions on a fixed basis, subject to an annual
restriction of eight million pieces, of which six million
shall be extended the concession only if made of
Indian fabric. On utilization of the unrestricted quota,
an additional quota of 2 million pieces out of 8 million
pieces is permitted. The quota level per category is
increased from 1.5 million to 2 million pieces per
category per year.
Concessions of Textile items restricted to 25 percent on Chapters 5156, 58-60, & 63. Four Chapters under the Textile sector retained in
the negative list (Chapters 50, 57, 61, and 62)
Total Tariff
Lines at 6
digit
Duty Free
Tariff
Line
Concessional
Tariff Lines
Negative
List Tariff
Lines
(01) Live Animals
28
0
23(100.0)
0
(02) Meat & Edible Meat
70
38
21(36.0)
0
(03) Fish & Crustaceans
95
0
94(100.0)
0
(04) Dairy Products
28
0
27(100.0)
0
(05) Products of Animal Origin
17
0
17(100.0)
0
(06) Live Trees & Other Plants
14
5
7(58.0)
0
(07) Edible Vegetables
64
43
13(23.0)
0
(09) Coffee, Tea, Mate & Spices
34
0
28(100.0)
0
(10) Cereals
16
0
16(100.0)
0
11 Products of Milling Industry
35
0
29(100.0)
0
(18) Cocoa & Cocoa
11
0
11(100.0)
0
(19) Preparation of Cereal
20
0
19(100.0)
0
(20) Preparation of Vegetables,
Fruits
57
0
50(100.0)
0
(21) Miscellaneous Edible
Products
17
0
15(100.0)
0
(40) Rubber & Articles thereof
101
0
54(63.0)
32(37.0)
Commodity description/code
Regional 0rientation Index (Rj)
Where:
• Xrj represent the value of exports of j (Commodity )in RTA’s intra trade
•Xtr reflect the total value of member countries’ exports within RTA
•Xoj represent the value of exports of j in trade with third countries
•Xto reflect the total value of member countries’ exports outside RTA
Value of
> 1 indicates greater tendency to export to regional markets
Let’s Analyse this…..
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Indian shrimp exporter has two choices say USA and Australia
where India does not have RTA with either of these countries.
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Your competing supplier of shrimps in these markets is
Vietnam who in turn has an RTA with both these countries.
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ROI of Vietnam-USA is 3.5 and ROI of Vietnam-Australia is 4.2.
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In this condition, if you were to choose between USA and
Australia, which market will you choose and why?
Parameters to analyze an RTA
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Nature of RTA
Status of the partner countries in an RTA
Strength of an RTA: RO index
Negative List
Sensitive List
Concessional list
Duty Free list
Rules of Origin
Time periods of the Concessions
Ready reference for Indian Exporters
Tea,
medicines
plastics
rubber
refined sugar
pharma
white cement
dyes and resins
leather
Vanaspati(one lakh mt), copper products (10,000mt), acrylic(10,000mt),
organic chemicals,
pharma,
essential oils,
plastics,
rubber,
textiles
Zinc oxide(2,500mt)
electric machinery
Ready reference for Indian Exporters
ROO :30%
Tea,
medicines
refined sugar
white cement
ROO :10-100%
plastics
rubber
pharma
dyes and resins
leather
Vanaspati(one lakh mt), copper products (10,000mt), acrylic(10,000mt),
textiles
Zinc oxide(2,500mt)
ROO :10-20100%
organic chemicals,
pharma,
essential oils,
plastics,
rubber,
electric machinery
Ready reference for Indian Importers
raisins, dry fruits, fresh fruits, spices
meat, fish, rock salt, iodine, copper ore, chemicals, leather, newsprint, paper, wood/plywood
all products of nepalese interest
Meat products, chemicals, dyes and pigments, raw hides and skins, leather, glass, wool, articles of iron
and steel, electrical machinery