Use Trade Policy Review to Boost Domestic Economic Reforms: CUTS

September 15, 2011, Jaipur
“India has once again demonstrated its commitment to trade openness even at the peak of the global economic crisis in the recent past when countries were turning to protectionist sentiments and creating trade barriers. The Trade Policy Review of India by the World Trade Organisation would not have come at a better time and will help boost India to undertake further steps towards reforming its economy”, said Pradeep Mehta, Secretary General, CUTS International.

He was speaking about the importance of periodic assessment of a country’s trade policy as an important part of the WTO’s work as an institution fostering a more open and rules-based multilateral trading system. The review of India’s trade policy, which is an exercise happened every four years and conducted by the WTO Secretariat, started yesterday and will continue till 16th September.

The WTO Secretariat’s Report applauded India’s growth story and said its annual real GDP growth averaged over 8.4 percent between 2006-07 and 2010-11, driven primarily by robust domestic demand. However, the Report cautioned and argued that “sustained non-inflationary growth” would call for “addressing bottlenecks and investing in infrastructure and education. It will also need the simplification of the business environment by eliminating over-regulation and defining more transparent trade and investment regime.”

The Report states that decrease in agricultural and industrial tariffs is due to India’s gradual shift toward a more open trade regime. It reports that the simple average tariff rate in India declined to 12 percent in 2010-11 from 15.1 percent 2006-07. However, complexity in tariff structure still remains and calls for further reforms.

On the issue of regional trade agreements and India, the Report described India as a strong advocate of the multilateral trading system with some regional arrangements in the past, and observed that “regionalism has increasingly become an element of its overall trade policy objective of enhanced market access for exports”.
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Reflecting on the growth of India’s merchandise trade as a percentage of its gross domestic product, which continued to increase to 40.3 percent in 2009-10 from 30.1 percent in 2005-06, the Report stated that India’s goal to double its share of global merchandise trade within the next five years can be achieved by its proposed policy measures including tax incentives, export promotion and credit facilitation schemes to ‘neutralise’ the cost of imported inputs used in exports. At the same time, it cautioned India that “such schemes may contribute to the complexity of India’s trade regime”.

CUTS welcomes the latest Trade Policy Review of India and urges the Government of India to evaluate its trade and other macro-economic policies in light of this Report. “Such evaluation should be done periodically and independently and by engaging non-state actors and they should focus on economic, social and environmental impact assessment of India’s trade policy, not just from the point of view of producers’ and traders’ welfare but looking at consumer welfare as well,” Mehta added.

During this Review, WTO Members can make comments and seek clarifications on specific aspects of India’s trade policy. While the US has commented about “lack of transparency in many aspects of India’s trade policy”, several other WTO Members including the European Union, China, Brazil, Mexico, Pakistan and Turkey have praised India for pursuing valiant trade and development friendly steps notwithstanding serious economic and social challenges.
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