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``Tariff formula must be on `bound' rates"

Special Correspondent

This is a fundamental position of ours and it is non-negotiable, says Kamal Nath

  • No mandate for harmonisation of tariffs
  • Acceptance of the Swiss formula ruled out
  • Modified Swiss type formula proposed

    NEW DELHI: : India has said that any import duty reduction formula in agriculture and industry will have to be on the basis of "bound" rather than the actual applied rates in the World Trade Organisation (WTO) talks. "This is a fundamental position of ours and is non-negotiable," Commerce and Industry Minister Kamal Nath said on Tuesday while referring to a demand on these lines by developed countries.

    "Bound" rates are the ceiling for import duties while the "applied" rates are those actually being used which are generally lower than the bound ones.

    Mr. Kamal Nath noted that some developed countries were calling for what they described as "real" market access, by which they meant reduction below the current applied rates of import duty.

    Addressing a workshop on Non-Agricultural Market Access (NAMA), he said: "India is determined to counter any attempt to use applied rates as the base for application of a tariff reduction formula." He said that it would mean rewriting of the WTO's July 2004 framework which laid down that bound rates would be the basis for negotiations both in NAMA and agriculture.


    He said the July framework also provided flexibility for developing countries either by not undertaking formula cuts on certain tariff lines or keeping "unbound" a certain number of tariff lines.

    Keeping some tariff lines unbound provided the flexibility of raising import duty in this area. India would fully utilise these flexibilities for those sections of industry where there were domestic sensitivities.

    There was no mandate for harmonisation of tariffs of different countries. "We shall therefore resist any attempt to impose an artificial over-arching harmonisation for which there is no mandate", he said at the workshop which was jointly organised by the Commerce and Industry Ministry and UNCTAD.

    Mr. Kamal Nath ruled out acceptance of the Swiss formula put forward by some developed countries which stipulate steep tariff cuts by countries which have higher tariffs.

    As most developing countries, including India, have higher tariffs the Swiss formula would affect them adversely. In this context, he referred to the modified Swiss type formula, proposed by India along with Argentina and Brazil, which would satisfy the requirements of the July Framework and address the concerns of developing countries.

    Contrary to the Swiss formula which harmonised the tariff lines around the co-efficient chosen resulting in steep cuts for higher tariffs, the ABI formula recognised that developing countries could not have the same co-efficient as there were wide differences in their tariff structures.

    Best solution

    The best solution would be for each country to use as a co-efficient the average of that country's tariff.

    This would have the advantage of achieving the July Framework mandate of deeper cuts in higher tariffs and cutting tariff peaks and tariff escalations, while permitting developing countries the policy space they needed, he felt.

    Besides tariffs, he noted that concerns regarding use of non-tariff barriers by developed countries would also have to be addressed before WTO negotiations move forward.

    India's offensive interest in NAMA was in gaining market access to developed countries.

    This would be possible not through tariff reduction — which were relatively low in developed countries — but through elimination of non-tariff barriers, he said.

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