Diplomatist Magazine Diplomatist April 2018 - Page 13

COVER STORY Goods imported under the FTA route attract reduced import duty including zero duty whereas the goods sold by Export Oriented Units (EOUs) in the Domestic Tariff Area (DTA) are levied duties at par with non-FTA route. Bangladesh and Ethiopia have zero percent duty access to the US and the EU considerably. This affects India’s exports to its major markets. Moreover, EU is India’s major market for cotton fabrics that levies 8 percent import duty whereas India’s main competitor Pakistan’s cotton fabrics get duty-free access into the EU market. A majority of chemicals exported from ASEAN to China are given duty-free access under ASEAN-China FTA whereas Indian products face 7 percent import duty, considerably hitting our competitiveness in the Chinese market. China, the world’s biggest consumer of Polyolefi n, imposes 2 percent import duty on its imports from India while it imports duty-fee from ASEAN countries including Singapore and Thailand due to ASEAN-China FTA, thus making our products less competitive. Similarly, LABSA (Linear Alkyl Benzene Sulphonic Acid) is imposed 5 percent duty in Vietnam whereas Korean products are levied no duty under ASEAN-India FTA. Such anomalies put Indian products at a disadvantageous place and need to be negotiated and addressed. There are many such instances where Indian products suffer price competitiveness in international markets due to import duty anomalies. Issues related to India’s Participation in FTAs Exports Facilitation through e-Commerce: Although exports through e-commerce are rapidly rising and likely to touch $5 billion by the next three years, there remains several issues in streamlining e-commerce transactions. Moreover, there are only a few export benefi ts like Merchandise Exports from India Scheme (MEIS), which are available in select sectors whereas other incentives such as duty drawback are just not available. This requires a comprehensive review and remedial measures in view of its rapid growth. Difficulties in Getting Preferential Certificates of Origin for Exports to FTAs: In India, the issuing authority for Preferential Certifi cates of Origin (PCoO) is Export Inspection Council (EIC) but its presence in several export manufacturing clusters is missing. As a result, exporters need to spend considerable time and money in obtaining PCoO. To make effective penetration of India’s products into the markets and derive optimum benefi t out of India’s FTA engagement, India needs to broaden its institutional framework for issuing PCoO. FTA make DTA Sales of EOUs Uncompetitive: Goods imported under the FTA route attract reduced import duty including zero duty whereas the goods sold by Export Oriented Units (EOUs) in the Domestic Tariff Area (DTA) are levied duties at par with non-FTA route. Although EOUs are allowed to sell 50 percent of its production in the DTA, it becomes uncompetitive and duty free imported products under FTA route become more competitive in the domestic market. This issue needs to be addressed so as to promote indigenously produced goods in the domestic market. Anomalies in Product Classifi cation: Under several comprehensive agreements such as India Japan CEPA, India South Korea CECA and India-ASEAN FTA, there are several anomalies in product classifi cation, especially after the six- digit level. Moreover, there are also discrepancies in the product description that too varies from country to country. For instance, in India the HS code for medicaments containing chlorepeniramine is 30049093 whereas it is 30049093 under Indonesian classifi cation. The classifi cation discrepancies after six digit need to be resolved early as tariff preferences are based on national tariff lines. Need for Comprehensive Evaluation of India’s Engagement with FTAs India needs to make a comprehensive effort to examine issues emanating out of all the FTAs signed by it and its competing countries and assess their impact on India’s export competitiveness. This will help the country to evolve an effective strategy to engage into further bilateral and multilateral negotiations so as to keep import tariffs for its products in its major markets, at least at par with its major competitors, if not at a advantageous position. * Dr. Rakesh Mohan Joshi is Professor & Chairperson, Research, Indian Institute of Foreign Trade… Chandrika Joshi is an MBA student specialising in Marketing at Centre for Management Studies, Jamia Milia Islamia, New Delhi. Besides marketing, she has keen interest in issues related to International Trade. Extraordinary and Plenipotentiary Diplomatist • Vol 6 • Issue 4 • April 2018, Noida • 11