GREATER MARKET ACCESS FOR INDIA’S INDUSTRIAL PRODUCTS AS A RESULT OF HONG KONG – FARMERS INTERESTS FULLY PROTECTED SURGE IN INDIA’S EXPORTS CONTINUES SEZs TAKE OFF WITH PASSAGE OF BILL SAFTA IMPLEMENTATION CLEARED YEAR END REVIEW – DEPARTMENT OF COMMERCE
Date : 01 Jan 2006
Location : New Delhi
Industrial products from developing countries like India will get greater market access as a result of the Ministerial Declaration adopted at the Sixth Ministerial Conference of the World Trade Organisation (WTO) held in Hong Kong, as it provides for reduction and elimination of tariff peaks and tariff escalations, in particular on industrial products of export interest to developing countries. Shri Kamal Nath, Minister of Commerce and Industry, led the Indian delegation to the Hong Kong Ministerial Conference which was held from 13-18 December, 2005. As indicated by Dr. Amit Mitra, Secretary General, Federation of Indian Chambers of Commerce & Industry (FICCI) “perhaps the biggest gains from Hong Kong came from reduction and elimination of tariff peaks and tariff escalations, prevailing in developed countries, against our industrial products. Though the average import duty in developed countries is supposedly 3%, the peak duty on specific items such as ready-made garments is to the tune of 30%. Similarly, tariff escalations duty on value-added leather bags as against raw leather reach levels of 20% in the US. Another gain was in the realm of flexibility which would let the Indian business have selected items exempt from import duty reduction altogether”.
In agriculture, interests of farmers have been fully protected as the Declaration clearly provides that developing countries will be able to self-designate an appropriate number of tariff lines as Special Products (which are subject to nil or marginal tariff reductions) based on the criteria of food security, livelihood security and rural development. Further, to safeguard farmers against surge in imports or fall in international prices, developing countries will be able to use a Special Safeguard Mechanism with both import quantity and price triggers. Domestic support given to farmers in countries like India having a preponderance of small farmers has also been fully preserved. Besides, the complete elimination of export subsidies in all agricultural products by developed countries will not only help in protecting farmers in developing countries from unfair competition in the domestic market, but will also open up new opportunities for export of developing countries.
Meanwhile, India’s merchandise exports grew at an accelerated pace during 2005, with exports continuing to record double-digit growth during April-November 2005-06. During 2004-05, India’s merchandise exports at US $ 80 billion far exceeded the target. It is anticipated that the export target of US $ 92 billion for 2005-06 will also be exceeded. To improve competitiveness of India’s agri exports, almost Rs.100 crore worth of cess presently levied on export of several agricultural products under different enactments is proposed to be abolished and a Bill to this effect has been introduced in the Parliament.
In a major new initiative, the Annual Supplement to the Foreign Trade Policy announced in April 2005 provided for the setting up of an Inter State Trade Council to actively engage State Governments in promoting India’s international trade, besides containing a series of other measures to simplify procedures, reduce transaction costs and enhance competitiveness of Indian exports, especially in the manufacturing sector.
The Special Economic Zone (SEZ) Scheme finally took off in the year 2005 with the passage of the SEZ Bill by the Parliament in May 2005. This new law is aimed at giving stability to domestic and foreign investors in SEZs, thereby creating world-class infrastructure and boosting exports and employment in the country. The setting up of as many as 71 SEZs has been approved. Of these new SEZs, several have already become operational – namely, Indore multi-product SEZ (Madhya Pradesh); and the following sector-specific SEZs: Manikanchan (West Bengal) – gems & jewellery; Jaipur (Rajasthan) – gems & jewellery; Mahindra City, Chennai (Tamil Nadu) – IT, hardware bio-informatics, apparel and fashion accessories; Salt Lake Electronic City (Kolkata) – software development and IT enabled services; and Jodhpur (Rajasthan) – handicrafts. The Chandigarh SEZ (electronic and IT enabled services) has already been notified and is ready for operation.
In a landmark decision, the year also witnessed the Union Cabinet giving clearance to implementation of the South Asia Free Trade Area (SAFTA) which comes into effect from 1<st January, 2006. SAFTA is aimed at reducing existing tariffs to less than 5% within a stipulated time frame to boost trade among the SAARC member countries. At the same time, sensitive products covering agricultural items, textiles, pharmaceuticals, small-scale industries etc., will be exempt from the trade liberalisation programme.
Among the other important regional trade initiatives was the signing of a Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore in June 2005 covering trade in goods & services, as well as investments. The Agreement came into effect from 1st August, 2005. Negotiations for the establishment of an FTA are going on with a number of countries which include (i) Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation (BIMSTEC) comprising Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand; (ii) ASEAN and (iii) Thailand, under the respective Framework Agreements.