WTO Current Affairs - 2019
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Imports from Pakistan to India have declined by 92% amounting to USD 2.84 Million in March 2019 after imposition of 200% customs duties on all products. The strong economic action against Pakistan was taken following Pulwama terror attack.
- Background: On February 2019, in aftermath of Pulwama terror attack for which Pakistan based JeM terror group claimed responsibility, India revoked the MFN (Most Favoured Nation) status given to Pakistan. This further led to strong economic action against Pakistan such as India raised customs duty to 200% on all goods imported from Pakistan.
- During 2018-19 fiscal year for January-March period, the imports from Pakistan declined by 47%, about USD 53.65 Million.
- India’s Export: In March 2019, India’s exports to Pakistan also dipped by about 32% amounting to over USD171 million. However, Indian exports grew by 7.4% (over USD 2 billion) during 2018-19.
- Commodities Imported: India raised 200% custom duty on goods imported from neighbouring country, including cotton, fresh fruits, cement, petroleum products and mineral. But the main commodities imported during month of March 2019 from Pakistan includes knitted fabrics, wool, articles of apparel and clothing, preparation of vegetables spices, chemicals, man-made filaments, and plastics.
- Exception: As per some experts, keeping in mind that importing goods at 200% customs duties would not be viable for anyone, thus government has allowed few domestic manufacturing exporters to avail Nil(0%) import duty benefit under Advance Authorisation Scheme to import products, especially raw materials from Pakistan.
About Most Favoured Nation Status
- Under the MFN pact, a World Trade Organisation (WTO) member country is obliged to treat other trading nation (to whom it has granted MFN status) in a non-discriminatory manner, especially with regard to customs duty and other levies.
- The MFN status was granted by India to Pakistan in 1996, but India was not granted the same from Pakistan.
India has found problems with the current methodology adopted by the Organisation for Economic Cooperation and Development (OECD) under its Services Trade Restrictiveness Index (STRI) to rank countries.
- About: A study commissioned by Indian Ministry of Commerce found that OECD index, the STRI has a several problems associated with it, which also includes some significant design issues that render the index impractical for use.
- Issues: As per India the outcomes of STRI are biased and counter-intuitive.
- The initial work suggests that there are both empirical and theoretical inconsistencies in STRI’s methodology.
- The data generated by OECD’s methodology seems to have been through arbitrary procedures and reflects being bias towards developed country.
- It shows Indian services sector as highly restrictive in areas such as FDI.
- Impractical: For instance, STRI seems to show the services sector in India as one of the most restrictive in world, particularly in policy areas like foreign entry, FDI etc. This is astonishing as since 1991, following the LPG reforms the one area that has seen maximum liberalisation in India is Foreign Direct Investment (FDI).
- India’s Approach: India is trying to build a consensus around adopting a new method of measuring trade restrictiveness in services sector. For this India approached several developing countries during recently-concluded WTO Ministerial talks held in New Delhi. It has also approached South Africa, Indonesia, China, Turkey and Brazil.
- India’s Argument: Unlike manufacturing trade which has a well-documented system of classification of commodities, the problem in services, is that for a long time there was not any way to find that whether a country’s service trade policies were restrictive.
- Also, even if it was ascertain as restrictive it was not known that what to do about it since services trade is usually regulated by domestic regulations and not border tariffs.
- It was launched in 2014, by The Organisation for Economic Cooperation and Development (OECD).
- It purpose is to rank countries based on their services trade policies.
- STRI (computed by OECD) is now available for year 2018. It includes a total of 45 economies (with 36 OECD and the rest non-OECD) and 22 sectors. These countries and sectors undertaken represent more than 80% of global trade in services.
Tags: FDI • Foreign Direct Investment • Liberalisation • LPG Reforms • Ministry of Commerce • OECD • Organisation for Economic Cooperation and Development • Services Trade Restrictiveness Index • STRI • World Trade Organisation (WTO) • WTO • WTO Ministerial Meet • WTO Ministerial Meeting