Diversification of regional pacts can take us ahead

Tags: Interview, News
It has been more than a decade since the launch of Doha Round of negotiations in 2001. With no major breakthrough in sight, countries, including India, are now resorting to bilateral trade agreements. Surajit Mitra, director of the Indian Institute of Foreign Trade, spoke to Yogima Seth Sharma on the role of WTO in pushing India’s merchandise exports over the past two decades and what lies ahead for India. Excerpts:

How has WTO helped in pushing India’s merchandise exports?

The inception of WTO, after the conclusion of the lengthy Uruguay Round (1986-94), was greeted with lots of hope by developing countries and least developed countries. It was expected that the tariff lines of WTO members were bound, and the applied tariffs were to be reformed across the globe, leading to better trade opportunities. Secondly, negotiations on the agricultural front were considered favourable for India’s exports interest. Thirdly, we hoped that phasing out of quotas on textiles and garment products, through a multi-fibre arrangement, would create prospects to India’s merchandise exports. Fourthly, it was felt that the introduction of a product patent regime would benefit exports of pharmaceutical products from the country, while negotiations on trade in services will give the required push to India’s services sector growth. Since the initial phase of WTO’s tenure coincided with the post-reform phase of the Indian economy, our merchandise exports in­creased from $26.3 billion in 1994-05 to $35 billion in 1997-98.

What happened after that?

Disappointment started sinking in since the late ’90s with exports decelerating, primarily because of depreciation of currencies of several Southeast Asian countries in the aftermath of the economic crisis and the limitations of WTO in responding to several key concerns. Though tariff barriers came down, there was a whole new range of standard-related non-tariff barriers that were introduced in several developed and developing countries, which had a dampening impact on India’s exports like chemicals. Secondly, the imposition of anti-dumping duties on several key Indian export items, like textile products, significantly curbed access to initiating markets.

At that time multilateral negotiations were considered the best way to settle discords and India played a major role in all these multilateral forums with the hope that a speedy conclusion of the round would offer some respite to their legitimate concerns noted earlier. However, with the subsequent limited success of the Cancun (2003) and Hong Kong (2005) ministerial meetings and the slow progress ever since have put a question mark on the possible date of conclusion of the Doha round.

What was the role of the WTO during the global recession from 2008 onwards?

A protectionist wave has been seen across countries since the global recession in 2009. A number of countries have increased their applied tariffs and also introduced a number of regulatory measures with adverse trade implications. Moreover, almost all countries in the world are now party to one regional trade agreement (RTA) or the other, and that preferential trade is largely eroding the “most favoured nation” treatment of WTO. India has been conscious of this trend and has joined a number of countries through preferential trade arrangements, including the Indo-Asean free trade agreement and the India-Singapore comprehensive economic cooperation agreement, from 2003 onwards.

Despite this, India’s exports have taken a hit. Can you list some of the recent issues that have curbed India’s export growth opportunities?

Indian exports are still subject to stiff non-tariff barriers in several trade partner countries, notably the developed ones. Secondly, so far around four per cent of the total anti-dumping cases initiated since 1995 have been done against India, which has considerably lowered export potential in several labour-intensive product categories. Thirdly, around 19 per cent of total countervailing duties-related cases have been initiated against Indian exports, which have often hurt India’s export interests. Finally, Indian generic drugs exports to Latin America have witnessed repeated seizures in EU countries during transit on patent infringement grounds as per provisions of anti-counterfeiting trade agreement.

How important is diversification into new markets to prevent free fall of exports?

India has taken major strides in diversifying its export markets in the recent years. There has been a shift in the share from traditional markets in advanced countries to new markets in the emerging economies. The share of India’s exports to Europe and North America has declined from 25.26 per cent to 21.82 per cent and from 18.7 per cent to 12.47 per cent, respectively, during 2005-2010. On the other hand, the share of India’s exports to Africa, Asia-Pacific and Latin America and the Caribbean have registered moderate to high increase during the same period. The major changes in the direction of trade is the entry of Indonesia, Korea, Iran and Nigeria among the top 15 trading partners of India, replacing Italy, France, Australia and Malaysia.

What is the way out to revive growth in India’s merchandise exports?

In the backdrop of the slow progress in Doha Round negotiations of WTO and the rapid growth in RTAs across the globe, the recent Indian initiatives in terms of preferential trade agreements would play a significant role in the diversification and expansion of its export markets. The India-Malaysia comprehensive economic cooperation ag­reement and the India-Japan comprehensive economic partnership agreement became operational during the first half of 2011-12. At present, India is engaged in similar negotiations with the EU, Canada, New Zealand and Australia as these are expected to further str­engthen India’s position in international trade.

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