March 2013 News 1: INDIA OPTS OUT OF WTO TALKS IN THREE SECTORS

INDIA OPTS OUT OF WTO TALKS IN THREE SECTORS

[Says proposals on services, IT and environmental goods against its interests]

India has decided to opt out of negotiations for agreements between select WTO (World Trade Organisation) member countries for liberalising foreign direct investment and visa regimes in service sectors and for lowering import duty on 357 information technology products and 54 environmental goods, saying the talks were against its interests.

Senior government officials said that the so-called early harvest scheme, meant to thrash out a deal on a select set of sectors, would impact the ability of developing countries such as India to strike a bargain with trade in farm goods, where the developed countries boost exports through heavy doses of subsidies and industrial products.

"What the US and European Union are trying to do is

cherry-picking without addressing the core concerns of

developing countries, which is at the heart of Doha Round

which is a development round," said a top-ranking official.

Early harvest was pushed by developed countries as they were unwilling to open up farm trade, a domestic hot potato, even as countries such as India were not very keen on the plan. The officials said that the developed countries were insisting on including at least 50 products such as washing machines, refrigerators and window AC among the 357 'IT products' on which customs duty will be removed. Similarly there are 136 dual-use goods in which a zero duty regime is being suggested. There are another 50 items in which there are local sensitivities. The plurilateral agreement, involving a few WTO members, is in any case seen to be helping countries such as China and Taiwan snatch and further lead as hardware Manufacturing hubs.

The current IT Agreement, which covers over 280 products is seen to have helped the two countries corner a bulk of the manufacturing with China's share rising from around 11% in 2000 to 36% now.

Although India is no longer part of the negotiating group, it retains its 'observer status' to keep the option of rejoining talks later.

In case of the talks on environmental goods, officials said that trading bloc Asia-Pacific Economic Cooperation (APEC) has identified 54 products on which it is pushing for a tariff cut to 5%. India's view is that the issue needs to be discussed at the WTO 'and instead of following a product-specific list approach, a better strategy would be to have project-driven agenda that will benefit the developing countries.

But the biggest setback is seen to be in services, an area which India was hoping to reap major gains from during the Doha Round. But the early harvest model being pushed by developed countries has suggested a 'standstill' approach, which will force countries to commit to the existing regime. So, if the government allows 74% FDI in telecom, it will be bound not to reduce it later.

Similarly,  the  advanced economies are seeking a 'ratcheting' model, which will again mandate that any voluntary opening up-which may mean increasing the FDI cap for multi-brand retail to 100%-cannot be reviewed later. "How can you commit to this kind of a regime ? It takes away any policy flexibility," an official said, and added that even Brazil, South Africa and China have opted out.

But withdrawal from service negotiations also means

that India will not push for easier visa rules for its

professionals, something that was being seen as a major

gain from the Doha Round. Officials said that apart from

IT local regulations were not such that local players

would benefit.

WHAT INDIA DOESN’T WANT AND WHY?

Agreement on Services Between Select WTO Members : '

Opposed to suggestions from developed countries to bind

themselves to allowing at least the current level of FDI, visas,

films etc., saying it reduces policy flexibility. Also fears local

players not capable of dealing with liberalised rules.

Implication : By not committing to higher FDI or allowing

entry of foreign lawyers and auditors, India is giving up its

demand for more visas for Indian professionals overseas.

IT Agreement : New Delhi says list of 357 items includes products like washing machine, fridges and window airconditioners, which are not IT goods.

Implication : Import duty on tablets and iPods to remain.
          Environmental Goods : India is against committing to 5% import duty on 54 items identified by APEC as it is for a

project-driven approach instead of a product-based strategy. { Wants WTO, not APEC, to drive agenda.

Implication : No custom duty cut on environmental

goods.