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India prepares for possible trade war
By Arun Bhattacharjee
NEW
DELHI - In January, Indian consumers are going to pay 8
to 12 percent more on products coming from the United
States and European countries, be it parmesan cheese
from Italy, apples from Washington State in the US or
Scotch whisky from Britain, fallouts from the failure of
the World Trade Organization (WTO) talks in Cancun to
resolve the subsidy issue.
India’s commerce
minister, Arun Jaitley, has already requested various
government departments work out the levels of subsidies
on agricultural and other products that India imports
from the US and European countries.
Import-export industry figures are jittery and
importers are doing their best to import as much as they
can before the government imposes duty on the European
and US products. That has driven up first-quarter fiscal
year imports by US$3.8 billion over last year’s first
quarter.
The Europeans have fired the first
salvo. It hurts. India’s textile industry is in a tizzy
as new duties on bed linens and other textile products
will hurt textile majors with considerable clout. Eight
Indian cotton textile exporters were told that their
products would face an 8.4 percent duty in the European
and the US market under the anti-dumping law. The
textile industry is not optimistic of a favorable
outcome at the October 30-31 meeting they sought with
the European Union and the US representatives.
India has taken serious note of the European
decision to impose 8.4 percent duty on Indian textile
products as, with a European Union custom tariff of 9.6
percent, the duty on Indian products rise to 18 percent.
Among the eight Indian companies affected are textile
majors Bombay Dyeing, Prakash Cotton, Vigneswara Mills,
Brijmohan Tex, Divya Textiles and Purushotam Das.
The Indian government sent a note to the EU
conveying objection to the EU and US decisions after
they lost their case in April this year before the WTO
appellate body. A senior bureaucrat in the Commerce
Ministry says, “We are deeply concerned over this
unwarranted EU move as this will affect India’s textile
exports which constitute 35 percent of India’s exports
and earned $ 4 billion in 2002-03 financial year.”
Industry sources point out that current bed
linen exports worth $98.68 million (Rs4.5 billion) would
probably increase by 200 percent as India is able to
forestall the 18 percent duty under the anti-dumping
clause. Siddhartha Rajpal, executive director of the
Cotton Textile Promotion Council, says that the EU’s
allegation of a 100 percent subsidy to the cotton
textile industry is unfounded as the cotton textile
industry does not receive any subsidy except those
legitimate benefits provided to any industry under
export promotion incentives.
India’s two apex
industry associations, the Federation of Indian Chambers
of Commerce and Industry (FICCI) and the Confederation
of Indian Industry, predict that a trade war is almost
inevitable unless the US and EU take some intermediate
steps to avoid it. In their defense, they point out the
EU and the US together offer nearly $300 billion in
subsidies to their farmers. “It may take two decades for
India to match that kind of subsidy to its industry and
farmers,” says a senior economist at FICCI.
A
senior government official says that India is most
likely to impose import duties on a number of products
starting from soybeans and cotton, to dairy products and
vegetables and fruits in absence of an agreement. He
explains that the WTO permits imposition of tariffs on
imported products to match the subsidies provided by the
governments on their agricultural products as well as
others. According to him the “peace clause” in the WTO
agreement is valid until December 31, after which
countries can impose tariffs on agriculture products.
“We are bothered by decision to impose this duty
on Indian textile products when it is known that the
quota system will disappear after January 2005,” says
Shiddhartha Rajpal. He explains that retaliatory Indian
steps may not be necessary if the EU and the US agree to
waive the new tariff after the two meetings they have
agreed on to be held October 30-31 with the
representatives of India’s textile industry.
The
Economic Times comments on the EU and US decision of
imposing tariffs on Indian textiles: “The US and EU
fired the first salvo by seeking new decision-making
methods in the WTO and declaring that they would focus
on preferential trade agreements."
Government
sources say India has already informed China, Brazil,
Egypt and Argentina about the EU and US decision to
impose duty on Indian textiles. These sources also say
Jaitley, the commerce minister, raised the issue with
China during India’s trade and cultural festival in
Beijing. India will discuss the issue with visiting
South African President Mbeki next month.
(Copyright 2003 Asia Times Online Co, Ltd. All
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