A deal on further easing of global trade through tariff cuts and liberalisation of services trade may be off the WTO agenda because of the global economic crisis and the resultant protectionist tendencies in the West and elsewhere, but the new director-general of the multilateral trade body has got a shot in the arm as New Delhi on Monday said it was "in favour" of a trade facilitation agreement (TFA).
After a meeting with visiting WTO director-general Roberto Azevedo, commerce and industry minister Anand Sharma said on Monday: “There should not be any confusion on trade facilitation because we are in favour (of that) and that’s why we are engaged to have an understanding and an agreement.”
On his part, Azevedo, however, said that India's food security law, under threat of WTO censure, was not “mature” on technical side.
The DG, who took office on September 1, is trying to garner support for on onward push to at least some elements of the WTO Doha Development Agenda, ahead of the Bali ministerial in December.
A TFA will include binding commitments by member countries to harmonise the documentation as well as customs clearance standards and procedures among member countries in what could ease cross-border trade and reduce costs by 5-15%.
India has so far been sceptical of TFA due to the high cost of putting in place foreign trade management infrastructure at its ports and making that available for multilateral scrutiny.
The importance of TFA can be gauged from the fact that while average world tariffs are 5% ad valorem, trade (customs) costs are 10%. The current worlld cross-border trade is $18 trillion.
According to a recent study, a multilateral deal on TFA could give a one-time boost to global GDP of $960 billion. Defending the food security law, Sharma said the legitimacy of that has been appreciated by all WTO members and the negotiators will find an acceptable solution to that.
At the Bali ministerial, apart from TFA, one of the “Singapore issues”, other issues to be be discussed include Least Developed Countries' (LDC) proposal on Rules of Origin and duty-free quota-free (DFQF). Other items to be discussed include food safety and cotton subsidy.
Till now, New Delhi has refused agreeing to the TFA because it made 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.
This was done as developed countries wanted India’s proposal on Customs Cooperation to be accepted on a ‘best endeavour’ basis, while their proposals are to be accepted by developing countries on a binding and justiciable basis.
On customs cooperation, the main proposal had initially been put forward by India, Brazil, South Africa and Sri Lanka, which asked for mandatory exchange of information between customs administrations (on request) so as to prevent under-invoicing, overvaluation, tax evasion and illicit capital flows.
While the US had also joined India in making an initial submission, in recent times, it has shown its disinterest in the matter.
India’s proposal is being strongly opposed by Canada and Singapore on grounds of breach of confidentiality and silently opposed by the rest of the Colorado Group members like the US and the EU.