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Saturday, September 21, 2013

India demands changes in WTO trade facilitation agreement 09-22

India demands changes in WTO trade facilitation agreement 

But industry prefers present form as it will reduce its cost burden
Even as the government is collating inputs from industry to chalk out its negotiating strategy in a trade ministers’ meet during December 3-6 in Bali, Indonesia, it has demanded some immediate changes to the Trade Facilitation Agreement (TFA) being discussed at the World Trade Organization (WTO).

India has clearly stated that it will not agree to TFA’s conclusion without the changes it suggested. The commerce and industry ministry has the authority to negotiate on behalf of the country. The ministry wants to make it compulsory for customs authorities globally to allow exporters to take back portions of the rejected consignments at the borders before nullifying the entire shipment, officials in the commerce department told Business Standard.

“The draft trade facilitation proposal has substantial cost implications for developing countries. Countries will have to amend their laws. Apart from cost implications, the onerous compliance implications are also a matter of concern,” said a senior commerce department official on condition of anonymity.

However, Indian industry is strongly batting for the deal to go through in its present form for it will reduce industry’s cost burden. A comprehensive deal on trade facilitation will reduce transaction costs by 10 per cent in advanced economies and by 13-15.5 per cent in developing countries, says a study by Organisation for Economic Co-operation and Development (OECD).

The TFA, which aims to reduce bureaucracy at borders, has the potential to provide a $1-trillion boost to global economy, according to WTO chief Roberto Azevêdo who wants work on the deal to speed up before trade ministers from all 159 member countries meet in Bali.  India has also proposed that the customs procedures be made transparent and non-discriminatory to avoid any non-tariff barriers and encourage greater flow of goods from one country to another.

“The benefits of a trade facilitation agreement will accrue largely to the developed countries and those developing countries which are strong manufacturer-exporters. Such an agreement based on the current proposals would aggravate the adverse balance of trade of many developing countries,” the official, who is involved in the talks, said.

In FY13, India witnessed an unprecedented level of trade deficit at $191 billion with exports falling by 1.76 per cent to $300.60 billion, while imports stood at $491.6 billion.

The official added that if TFA is accepted in the present form, the “burden of policy change required to implement the deal will lie only on developing countries”. The main objective of the deal is to reduce bottlenecks of shipments at borders by smoothening customs procedures through customs streamlining, easing transaction costs and red tape at international borders.

According to a recent World Bank study, most of the gains in trade facilitation will come from improving infrastructure such as ports and roads, which calls for a considerable amount of expenditure and investment.

Developing countries such as India, China, the Philippines and Brazil have also urged agreement on food security along with the TFA as a successful outcome of the Bali meet. TFA is only a minor component of the entire global trade deal, which started in Doha in 2001. However, a major consensus on this is expected to pep up the deadlocked talks for a global trade deal as countries are increasingly diverting their attention to regional trading arrangements.

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