India likely to join multi-lateral talks on industrial tariff cutting

At a recent meeting in the ministry, some senior officials maintained that it was not in India’s interest to engage in these talks because India would have to offer far more than it got. Its average bound (ceiling) tariff rate in the WTO is about 32 per cent.

They said that if India cut these by half, that would be a decrease in the ceiling rate of 16 per cent, whereas the above countries (the so-called Quad group) would only have to offer a 1.9 per cent cut to halve their tariffceilings of 3.8 per cent.

However, the other view is that India engaging in these talks is advantageous. The argument is that the low 3.8 per cent bound (ceiling) tariff average of the Quad group concealed tariff ceilings as high as 15 per cent on textiles: the area far and away of greatest export interest to India.

As many as 70-80 per cent of low-value-added imports into these countries are in fact duty-free: A clear indication of how high other tariffs must be to still yield an average tariff ceiling of 3.8 per cent.

WTO affairs special secretary N.N. Khanna has publicly said how Indian manufactured exports face high tariffs by these countries precisely in high-value-added, finished products, where exports can be most profitable for India.

The case for India agreeing to industrial tariffs talks is strengthened by two other factors. The Auckland meeting of the 18-country APEC (Asia-Pacific Economic Cooperation forum) last week endorsed new talks on industrial tariffs alongside the so-called in-builttrade agenda at the upcoming WTO ministerial meeting at Seattle in November-December.

Since the APEC countries together account for over 50 per cent of world trade, it is hard to see how a country with half a per cent of world trade share can prevent such talks. Second, a review of the WTO agreement on agriculture is already mandated under the Uruguay Round agreement and will start from next year. Since India has committed extremely high tariff ceilings on agricultural imports, it can leverage cuts here in return for industrial tariff cuts by the developed countries.

Tariff ceilings or bindings in the WTO mean a commitment that tariffs will never be raised beyond the committed figure.