1.

INTRODUCTION
International trade increases the number of goods that domestic consumers can choose
from, decreases the cost of those goods through increased competition, and allows
domestic industries to ship their products abroad. While all of these seem beneficial, free
trade isn't widely accepted as completely beneficial to all parties. This article will
examine why this is the case, and look at how countries react to the variety of factors that
attempt to influence trade.
1.1 TARIFF
In simplest terms, a tariff is a tax. It adds to the cost of imported goods and is one of
several trade policies that a country can enact.
Tariffs barries represent taxes on imports of commodities into a country/region and
are among the oldest form of government intervention in the economic activity.
1.2 NON-TARIFF BARRIERS TO TRADE
on!Tariff "arriers #T"s$ refer to restrictions that result from prohibitions, conditions,
or specific market re%uirements that make importation or exportation of products difficult
and/or costly. T"s also include un&ustified and/or improper application of on!Tariff
'easures #T's$ such as sanitary and phytosanitary #()($ measures and other technical
barriers to Trade #T"T$.
T"s arise from different measures taken by governments and authorities in the form of
government laws, regulations, policies, conditions, restrictions or specific re%uirements,
and private sector business practices, or prohibitions that protect the domestic industries
from foreign competition.
Examples of Non-Tariff Barriers
on!Tariff "arriers to trade can arise from*
o Import bans
o +eneral or product!specific %uotas
o ,omplex/discriminatory -ules of .rigin
o /uality conditions imposed by the importing country on the exporting countries
o 0n&ustified (anitary and )hyto!sanitary conditions
1
o 0nreasonable/un&ustified packaging, labelling, product standards
o ,omplex regulatory environment
o 2etermination of eligibility of an exporting country by the importing country
o 2etermination of eligibility of an exporting establishment #firm, company$ by the
importing country.
o 3dditional trade documents like ,ertificate of .rigin, ,ertificate of 3uthenticity etc
o .ccupational safety and health regulation
o 4mployment law
o Import licenses
o (tate subsidies, procurement, trading, state ownership
o 4xport subsidies
o 5ixation of a minimum import price
o )roduct classification
o /uota shares
o 'ultiplicity and ,ontrols of 5oreign exchange market
o Inade%uate infrastructure
o 6"uy national6 policy
o .ver!valued currency
o -estrictive licenses
o (easonal import regimes
o ,orrupt and/or lengthy customs procedures
1.3 REASONS FOR USIN TARIFFS AND TRADE BARRIERS
Tariffs are often created to protect infant industries and developing economies, but are
also used by more advanced economies with developed industries. 7ere are five of the
top reasons tariffs are used*
1. Protecting Domestic Employment
The levying of tariffs is often highly politici8ed. The possibility of increased
competition from imported goods can threaten domestic industries. These domestic
companies may fire workers or shift production abroad to cut costs, which means
higherunemployment and a less happy electorate. The unemployment argument often
shifts to domestic industries complaining about cheap foreign labor, and how poor
9
working conditions and lack of regulation allow foreign companies to produce goods
more cheaply. In economics, however, countries will continue to produce goods until
they no longer have a comparative advantage #not to be confused with an absolute
advantage$.
9. Protecting Consumers
3 government may levy a tariff on products that it feels could endanger its
population. 5or example, (outh :orea may place a tariff on imported beef from
the0nited (tates if it thinks that the goods could be tainted with disease.
;. Infant Industries
The use of tariffs to protect infant industries can be seen by the Import (ubstitution
Industriali8ation #I(I$ strategy employed by many developing nations. The
government of a developing economy will levy tariffs on imported goods in industries
in which it wants to foster growth. This increases the prices of imported goods and
creates a domestic market for domestically produced goods, while protecting those
industries from being forced out by more competitive pricing. It decreases
unemployment and allows developing countries to shift from agricultural products to
finished goods.
,riticisms of this sort of protectionist strategy revolve around the cost
of subsidi8ingthe development of infant industries. If an industry develops without
competition, it could wind up producing lower %uality goods, and the subsidies
re%uired to keep the state!backed industry afloat could sap economic growth.
<. National Security
"arriers are also employed by developed countries to protect certain industries that
are deemed strategically important, such as those supporting national security.
2efense industries are often viewed as vital to state interests, and often en&oy
significant levels of protection. 5or example, while both Western 4urope and
the0nited (tates are industriali8ed, both are very protective of defense!oriented
companies.
;
=. Retaliation
,ountries may also set tariffs as a retaliation techni%ue if they think that a trading
partner has not played by the rules. 5or example, if 5rance believes that the 0nited
(tates has allowed its wine producers to call its domestically produced sparkling
wines 6,hampagne6 #a name specific to the ,hampagne region of 5rance$ for too
long, it may levy a tariff on imported meat from the 0nited (tates. If the 0.(. agrees
to crack down on the improper labeling, 5rance is likely to stop its retaliation.
-etaliation can also be employed if a trading partner goes against the government's
foreign policy ob&ectives.
1.! T"#ES OF TARIFFS AND TRADE BARRIERS
There are several types of tariffs and barriers that a government can employ*
(pecific tariffs
3d valorem tariffs
>icenses
Import %uotas
?oluntary export restraints
>ocal content re%uirements
Specific Tariffs
3 fixed fee levied on one unit of an imported good is referred to as a specific tariff. This
tariff can vary according to the type of good imported. 5or example, a country could levy
a @1= tariff on each pair of shoes imported, but levy a @;AA tariff on each computer
imported.
Ad Valorem Tariffs
The phrase ad valorem is >atin for 6according to value6, and this type of tariff is levied
on a good based on a percentage of that good's value. 3n example of an ad valorem tariff
would be a 1=B tariff levied by Capan on 0.(. automobiles. The 1=B is a price increase
on the value of the automobile, so a @1A,AAA vehicle now costs @11,=AA to Capanese
consumers. This price increase protects domestic producers from being undercut, but also
keeps prices artificially high for Capanese car shoppers.
<
Non-$ariff %arriers $o $ra&e in'l(&e)
Licenses
3 license is granted to a business by the government, and allows the business to import a
certain type of good into the country. 5or example, there could be a restriction on
imported cheese, and licenses would be granted to certain companies allowing them to
act as importers. This creates a restriction on competition, and increases prices faced by
consumers.
Import uotas
3n import %uota is a restriction placed on the amount of a particular good that can be
imported. This sort of barrier is often associated with the issuance of licenses. 5or
example, a country may place a %uota on the volume of imported citrus fruit that is
allowed.
Voluntary E!port Restraints "VER#
This type of trade barrier is 6voluntary6 in that it is created by the exporting country
rather than the importing one. 3 voluntary export restraint is usually levied at the behest
of the importing country, and could be accompanied by a reciprocal ?4-. 5or example,
"ra8il could place a ?4- on the exportation of sugar to ,anada, based on a re%uest by
,anada. ,anada could then place a ?4- on the exportation of coal to "ra8il. This
increases the price of both coal and sugar, but protects the domestic industries.
Local Content Re$uirement
Instead of placing a %uota on the number of goods that can be imported, the government
can re%uire that a certain percentage of a good be made domestically. The restriction can
be a percentage of the good itself, or a percentage of the value of the good. 5or example,
a restriction on the import of computers might say that 9=B of the pieces used to make
the computer are made domestically, or can say that 1=B of the value of the good must
come from domestically produced components.
In the final section we'll examine who benefits from tariffs and how they affect the price
of goods.
=
1.* TARIFF BENEFITS
The benefits of tariffs are uneven. "ecause a tariff is a tax, the government will see
increased revenue as imports enter the domestic market. 2omestic industries also benefit
from a reduction in competition, since import prices are artificially inflated.
0nfortunately for consumers ! both individual consumers and businesses ! higher import
prices mean higher prices for goods. If the price of steel is inflated due to tariffs,
individual consumers pay more for products using steel, and businesses pay more for
steel that they use to make goods. In short, tariffs and trade barriers tend to be pro!
producer and anti!consumer.
The effect of tariffs and trade barriers on businesses, consumers and the government
shifts over time. In the short run, higher prices for goods can reduce consumption by
individual consumers and by businesses. 2uring this time period, businesses will profit
and the government will see an increase in revenue from duties. In the long term,
businesses may see a decline in efficiency due to a lack of competition, and may also see
a reduction in profits due to the emergence of substitutes for their products. 5or the
government, the long!term effect of subsidies is an increase in the demand for public
services, since increased prices, especially in foodstuffs, leave less disposable income.
1.+ TARIFFS AFFECT #RICES
Tariffs increase the prices of imported goods. "ecause of this, domestic producers are not
forced to reduce their prices from increased competition, and domestic consumers are left
paying higher prices as a result. Tariffs also reduce efficiencies by allowing companies
that would not exist in a more competitive market to remain open.
5igure 1 illustrates the effects of world trade without the presence of a tariff. In the graph,
2( means domestic supply and 22 means domestic demand. The price of goods at home
is found at price ), while the world price is found at )D. 3t a lower price, domestic
consumers will consume /w worth of goods, but because the home country can only
produce up to /d, it must import /w!/d worth of goods.
E
5igure 1. )rice without the influence of a tariff
When a tariff or other price!increasing policy is put in place, the effect is to increase
prices and limit the volume of imports. In 5igure 9, price increases from the non!tariff )D
to )'. "ecause price has increased, more domestic companies are willing to produce the
good, so /d moves right. This also shifts /w left. The overall effect is a reduction in
imports, increased domestic production and higher consumer prices.
5igure 9. )rice under the effects of a tariff
F
1., TARIFFS AND -ODERN TRADE
The role tariffs play in international trade has declined in modern times. .ne of the
primary reasons for the decline is the introduction of international organi8ations designed
to improve free trade, such as the World Trade .rgani8ation #WT.$. (uch organi8ations
make it more difficult for a country to levy tariffs and taxes on imported goods, and can
reduce the likelihood of retaliatory taxes. "ecause of this, countries have shifted to non!
tariff barriers, such as %uotas and export restraints. .rgani8ations like the WT. attempt
to reduce production and consumption distortions created by tariffs. These distortions are
the result of domestic producers making goods due to inflated prices, and consumers
purchasing fewer goods because prices have increased.
(ince the 1G;As, many developed countries have reduced tariffs and trade barriers, which
has improved global integration and brought about globali8ation. 'ultilateral agreements
between governments increase the likelihood of tariff reduction, while enforcement on
binding agreements reduces uncertainty.
5ree trade benefits consumers through increased choice and reduced prices, but because
the global economy brings with it uncertainty, many governments impose tariffs and
other trade barriers to protect industry. There is a delicate balance between the pursuit of
efficiencies and the government's need to ensure low unemployment.
1.. E/A-#0ES
Example of $ariff %arriers ! (ay India imposes some tax on import of chinese plastic
goods which raises its final price in India. (ince now it becomes more expensive
than price of plastic made in India, it will be difficult to sell 'ade in ,hina plastic
goods in India and hence its import will stop. This is called tariff barrier because
govt imposes tax or tariff on it.
Example of non-$ariff %arrier ! (ay India does not impose any tariff barrier on
,hinese plastic goods, but makes it mandatory that any imported plastic should be of
such and such %uality, which say the chinese plastic does not meet, and conse%uently
such plastic goods cannot be sold in India. (uch barrier by govt of India would come
under non!tariff barriers.
H
2. FRAMEWORK CONDITIONS AND INDIAN TARIFF
BARRIERS
Trade in India is often conditioned by bureaucratic delays, inade%uate infrastructure, and
corruption. 'oreover, cultural differences are often perceived as a challenge by foreign
operators ! although 4nglish is one of the official languages in India, local assistance is
recommended for negotiation situations. It is important to keep in mind that the trade
conditions may vary significantly between states. >ikewise, the barriers for 52I #foreign
direct investment$ depend on the sector. 5or specific information on 52I policy, please
read more on The 2epartment of Industrial )olicy I )romotion.
Tariffs1 Taxes 2 D($ies
Tariff barriers moreover constitute an significant trade barrier. Tariffs in India vary from
sector to sector and between product groups. )lease find sector specific information
on 40Js 'arket 3ccess 2atabase, which also includes information on non!tariff barriers
to trade. 'oreover, the Trade ,ouncil can help finding the current custom duty for
specific industries and products.
Tariff ra$es have been reduced over the past years, but are still %uite high compared to
other countries. 3dditional duty is generally applied to the import tariff, which means the
total import duty often adds up to ;A pct. or more. )lease contact theTrade ,ouncil for
information on specific import duties.
Corpora$e $ax for foreign companies is approx. ;A pct. )lease read more on IndiaJs
taxation laws on 2epartment of Industrial )olicy I )romotion #2I))$.
Impor$ &($ies, which were previously prohibitively high at levels of 1HAB or more, have
been rationalised to conform to international levels, albeit in the high end. 2uties have
been used as means for anti!dumping at several occasions in previous years.
,ompanies operating within a range of sectors can benefit from IndiaJs arrangement
with Spe'ial E'onomi' 3ones #(4K$. The purpose of (4K is to boost Indian exports by
G
establishing favourable framework conditions for business activities and thus attract
foreign investments. (4K units en&oy comprehensive benefits including tax relief and the
possibility of evade duties on goods bought for development, operation and maintenance
of (4K units. These (4Ks have given the level of foreign investment a substantial boost,
but are considered less efficient to ,hina among other countries. -ead more on (pecial
4conomic Kones India.
India has a number of Inland ,ontainer 2epots #I,2s$ which handle exported as well as
imported shipments. )lease find more information on these depots as well as on shipment
and transport between the federal states on IndiaJs 2epartment of ,ommerce.
Te'4ni'al Barriers $o Tra&e
The liberali8ation of the Indian economy since the 1GGAs has had a very palpable impact
on IndiaJs trade policy vis!L!vis foreign trade. Import regulations have been progressively
eased ! both in terms of %uantitative restrictions and import duties and almost all items
are now allowed to be imported into India. 7owever, some import restrictions still remain
for certain goods.
There are import prohibitions and restrictions on some goods for sanitary reasons and for
other goods testing and 'er$ifi'a$ion is re%uired. "ureau for Indian (tandards #"I($
demands that certain products fulfil the Indian "I(!%uality standards which have
gradually come closer to I(.!standards. In particular import of foodstuff is sub&ect to
various restrictions and import conditions are generally intransparent. It is therefore
recommended to read more on "ureau for Indian (tandards and/or to contact the Trade
,ouncil for specific information.
Imported goods are sub&ect to various labelling re%uirements including the maximum
retail price before they leave their place of origin. 3 limited number of products are still
not allowed to be imported, or they have to be imported through an official authority or
on the foundation of specific licenses. )lease contact the Trade ,ouncilfor specific
information.
1A
In$elle'$(al #roper$5 Ri64$s
IndiaJs Trademark 3ct from 1GGG is in compliance with international norms and
standards, including the )aris ,onvention for )rotection of Industrial )roperty.
In 9AA= India changed its legislation to comply with the WT. agreement on Trade!
-elated 3spects of Intellectual )roperty -ights #T-I)($. 7owever, the reinforcement of
the legislations remains weak. With regard to &oint ventures, 2anish companies should
hand in a patent application before the Indian partner can make use of the patent in order
to maintain its right to the patent.
11
3. NON TARIFF -EASURES
on Tariff 'easures #T's$ are all measures other than normal tariffs namely trade
related procedures, regulations, standards, licencing systems and even trade defense
measures such as anti!dumping duties etc which have the effect of restricting trade
between nations. (ome of these measures could be &ustified under the provisions or the
exceptions provided under the various multilateral agreements governing international
trade. .n the other hand, certain non tariff measures which cannot be &ustified under any
of these legal provisions are normally termed as non tariff barriers #T"s$.
With the lowering of tariffs across the globe, T's have come into prominence with
'embers using these measures to erect entry barriers for goods and services. It is
therefore, not surprising that the developed countries with relatively lower tariffs are the
more prolific users of T's / T"s especially to keep out developing country exports.
The details of some of the ma&or T's that are maintained against Indian exports are as
under*
Co(n$r5 I$em De$ails of NT-
0nited (tates 'arine products Increased inspections under the "io!
Terrorism 3ct, ,ustoms "ond
re%uirement, 'andatory labeling
discriminating Mfarm raisedN and MwildN
with punitive fines and non!recognition
of 4I, certification.
0nited (tates )aper products on scientific %uarantine restrictions,
customs surcharges, eco labeling
stipulations and food safety/ health
standards exist on paper products
exports.
0nited (tates Tobacco 3 T-/ regime restricts imports.
0nited (tates 5ood products 2etailed labeling re%uirements are
stipulated with extensive product and
content description.
3rgentina )rocessed 'arine )roducts, 'atches,
Insecticides, 5ungicides, )lastics,
-ubber, >eather, Wood I )aper
3 new regulation #=F I=H/9AAF dated
9<.AH.9AAF$ wherein minimum import
price has been established for specified
19
)roducts, Textiles I ,lothing,
7eadgear, 5ootwear, 3rticles .f Iron
I (teel, 'echanical I 4lectrical
'achinery, two wheelers, optical
instruments, furniture, toys,
miscellaneous manufactured articles
product imports from India and some
other countries. 0nder this the
3rgentine ,ustoms authorities can ask
for validation of Indian customs
invoice with a full set of original
documents if they suspect that the
invoiced value is less than the minimum
import price established.
3rgentina )harmaceuticals There is delay in registration leading to
non!viability of exports.
3ustralia 'angoes 3ustralia maintains ban on the pretext
of the presence of fruit flies and stone
weevils.
3rmenia 3gro chemicals and pharmaceuticals 3rmenia stipulates registration
re%uirements and mandates permission
for imports and exports
"angladesh )oultry products "angladesh continues to ban imports
despite India gaining the avian
influen8a free status.
"ra8il )harmaceuticals )rocedural delays occur in the
clearances, inspections and registration
by the "ra8ilian 7ealth (urveillance
3gency #3?I(3$
,anada )aper products on scientific %uarantine restrictions,
customs surcharges, eco labeling
stipulations and food safety/ health
standards exist on paper product
exports.
,hile Wheat, wheat flour and sugar 3 complex price band system wherein a
minimum import price #well above the
international price and domestic prices$
is stipulated. .n account of a WT.
dispute decision, this band would be
lowered by 9B every year from 9AAH to
1;
9A1< after which a )residential review
would be undertaken.
,hina 3gricultural products .pacity of (anitary and )hytosanitary
#()($ measures and delays in giving
clearances
,olombia )harmaceuticals The registration by ,olombian 2rugs
,ontrol and ,ertification takes 11 to 19
months, inspections are undertaken for
environmental compliance and a 1AB
price preference is granted for 5rench
pharmaceutical companies under a
bilateral agreement.
4uropean
,ommunities
"ovine meat (tandards are more stringent than .I4
#World .rgani8ation for 3nimal 7ealth$
Terrestrial 3nimal 7ealth ,ode, a ban
is maintained on account of 5oot and
'outh 2isease #5'2$ and prolonged
delay in upgradation of IndiaJs status to
+"-1 #o risk of "(4$
4uropean
,ommunities
'arine products -e&ection and subse%uent destruction of
consignments with chloramphenicol /
nitrofuran residues, re&ections in Italy
and 5rance due to presence of ?ibrio
)arahaemolyticus without &udging the
virulence factors, re&ection due to
alleged presence of bacterial inhibitors/
anti!biotic residues without any
confirmatory tests.
4uropean
,ommunities
,hemicals The -egistration, 4valuation and
3uthorisation of ,hemicals #-43,7$
legislation increases cost of compliance
by O H=,AAA to O ;9=,AAA per chemical.
4uropean
,ommunities
4ngineering and 4lectronics The stipulation of ,4 #originally known
by the 5rench term ,onformitP
1<
4uropPenne$ marking to indicate
conformity with the essential health and
safety re%uirements increases cost for
small and medium enterprises.
Capan 5ootwear The tariff rate %uota #T-/$ restricts
imports to the %uantum of the %uota.
:orea ,hemicals, pharmaceuticals,
computer and medical e%uipment
,ertification re%uirements #including
prior approval$ add on to the cost of
exports.
ew Kealand )aper products on scientific %uarantine restrictions,
customs surcharges, eco labeling
stipulations and food safety/ health
standards exist on paper products
exports.
orway 'arine products The pathogen analysis is carried out by
the ':> method which is not
accepted internationally.
-ussia 'eat products (tandards for bovine meat are more
stringent than the .I4 Terrestrial
3nimal 7ealth ,ode, 4I, ,onformity
certificates are not recogni8ed and
,ertification with respect to swine fever
and 5'2 are insisted upon for poultry
exports which are not relevant..
0kraine "ovine meat, coffee, tea, spices,
pharmaceuticals, cosmetics, plastics,
leather products, textiles I clothing
3 compulsory certification with the
option of either #a$ certificate of
acceptance of foreign certification by
2er8h (tandard or #b$ ,onformance
certificate by 0krainian 3gency.
Though I(. GAAA (tandards are
adopted by 2er8h (tandard, foreign
certification recognition exists only to
the extent of international treaty
obligations of 0kraine.
1=
08bekistan 3ll products ,umbersome procedure for registration
and certification, a custom processing
fee Q A.FB of value and lengthy
procedure for conversion of hard
currency as well as profit repatriation.

With a view to strengthening its information base on T's/ T"s, the 2epartment of
,ommerce has attempted to put in place a database of T's/ T"s imposed by trading
partners on its exports.
We would welcome inputs from the trade and industry, apex chambers of commerce,
export promotion councils, trade analysts, researchers etc on specific T's/ T"s
imposed against Indian exports with a view to expanding this database.
Da$a%ase of NT-s7 NTBs
i. ,ountry wise
ii. )roduct wise

In&ia spe'ifi' NTB Da$a%ase %ase& on s$(&5 %5 ICRIER
i. 4lectric I 4lectronic products
ii. )harmaceuticals products
iii. )roduct (pecific re%uirements in the 0(
iv. )roduct specific re%uirements in the 4,
v. (tate (pecific re%uirements in the 0(
vi. (tate specific re%uirements in the 4,
vii. T"s in the +ulf ,AAperation ,ouncil #+,,$
1E
!. TARIFF AND NON-TARIFF BARRIERS BENEFIT DE8E0O#IN
COUNTRIES - NE9 STUD"
There is considerable evidence for the hypothesis that under certain conditions,
restrictions on trade can promote growth, especially of developing countries, according to
a study published in the Cournal of 2evelopment 4conomics.
The study by 7alit Ranikkaya, an academic at the ,ollege of "usiness and 3dministrative
(ervices, ,elal "ayar 0niversity #Turkey$, has examined the growth effects on 1AH
economies of a large number of measures of trade openness, using the same yardsticks or
measures of openness and over the same periods, and applying econometric models and
regressions. The study has used two broad categories* measures of trade volumes and
measures of trade restrictions and measures their effects on growth in the 1AH economies.
The study and the results of the data analysed challenges what the author calls Mthe
unconditional optimism in favour of trade openness among the economic profession and
policy circles.N
It finds that on the basis of trade volumes, there is a positive and significant association
between trade openness and growth.
3ccording to the conventional view and studies on the growth and trade restrictions, trade
restrictions have an Madverse association between trade barriers and growth.N
The study finds a contrary evidence and says* Mour estimation results from most
specifications #of tariff and trade barriers$ show a positive and significant relationship
between trade barriers and growthN.
M4%ually important,N the study adds, Mthese results are essentially driven by developing
countries, and thus consistent with the predictions of the theoretical growth literature that
certain conditions, developing countries can actually benefit from trade restrictions.N
(everal empirical studies of the SHAs and SGAs provided an affirmative answer for the
view that Mopen economiesN grew faster than closed ones, and that Moutward!orientedN
1F
economies have consistently higher growth rates than Minward!orientedN ones. These led
to a strong bias in favour of trade liberalisation and under!pinned the World "ank/I'5
policy conditionalities and advice to developing countries and the Washington ,onsensus
of the 1GGAs.
Ranikkaya says that this strong bias in favour of trade liberali8ation was partly due to the
tragic failures of the import substitution strategies especially in the 1GHAs, and the
overstated expectations from trade liberali8ation. The World "ank! sponsored studies, by
2ollar and others, said they had found positive correlations between open economies and
faster growth across countries.
The first ma&or challenge from academia came from 2ani -odrik, and followed by a
cross!country empirical analysis, using the same measures of SopennessJ across a range of
countries, which brought out that these studies had reached the conclusion of open
economies growing faster because they used different yardsticks for countries and over
different time!periods* "ut when the same yardsticks were used and over the same time!
periods, the results showed that fast growth had taken place in some of the countries with
higher trade restrictions #India and ,hina$, but which had adopted a measured approach
to trade liberali8ation #after creating capacity domestically, and calibrating liberali8ation
measures$.
(ince then a number of studies have come out challenging the view that liberali8ation of
trade and investments is always a plus and there is growth in the long!run. These studies
have brought out that openness to external trade and trade liberali8ation are two different
concepts, and that the latter promoted growth #and brought in foreign direct investment
and associated technology$ only under certain conditions, and when the host!country
(tate played an active role.
The Ranikkaya study notes that while there is a near consensus about the positive
correlation between trade flows and growth, the theoretical growth literature #which
studied growth effects of trade restrictions$ came to the view that the effects were very
complicated in the most general case, and mixed in how trade policies play a special role
in economic growth.
1H
This, the author attributes to the way SopennessJ is described very differently in various
studies, making classification of countries on basis of SopennessJ a formidable task.
7ence, using different measures of openness produces differing results.
The Ranikkaya study looks at the growth effects on a large number of measures of trade
openness. Two broad measures of trade openness are used and studied* one is on effect of
various measures on trade volumes, which indicate a positive and significant association
between openness and growth, and is in line with conclusions of empirical and theoretical
growth literature.
7owever, the estimation results for various measures for trade barriers, contradicts the
conventional view on the growth effects of restrictions, and suggests Man adverse
association between trade barriers and growth. The estimation results from most
measures of trade restrictions show a positive relationship between trade barriers and
growth, a result driven by developing countries.
These results are consistent with the predictions of theoretical growth literature, namely,
that under certain conditions, developing countries can actually benefit from trade
restrictions.
In a survey of the literature, the study finds that international trade theory #based on static
trade gains$ provides little guidance to the effects of international trade on growth and
technical progress, the new trade theory argues that gains from trade can arise from
several fundamental sources differences in comparative advantage and economy!wide
increasing returns.
While there are many studies about the effects of trade policies on growth ! during the
failed import substitution strategies of the 1GHAs and the export!promotion policies ! there
is a lack of clear definition of Strade liberali8ationJ or SopennessJ.
The most difficult has been measuring SopennessJ. 3n ideal one would be an index that
includes all trade barriers distorting international trade, such as average tariff rates and
indices of non!trade barriers. (uch an index, incorporating effects of both tariff and non!
tariff measures has been developed by C.4.3nderson and C.).eary. "ut it is not available
1G
for a large number of economies. .ther studies, like those by 2ollar and, (achs and
Warner used available data.
If the growth engine is driven by innovation and introduction of new products, then
developing countries should benefit more by trading with developed countries than with
other developing countries. 7owever, the Ranikkaya study results do not support this,
both providing growth regressions positively and significantly.
The study finds that a developing country benefits through technology diffusion by
trading with a developed country, and since the 0( is the leader in technology,
developing countries benefit through this bilateral trade. 3lso, countries with higher
population densities tend to grow faster than those with lower densities.
In using measures of trade restrictions ! several of whom it acknowledges are not free
from measurement errors ! the study reaches some very different conclusions than
conventional trade theory suggests. Thus, it finds that trade barriers in the form of tariffs
can actually be beneficial for economic growth.
In the current context #of the 2oha -ound and the drive of 4urope and the 0( to tear
down and harmonise developing country tariffs$, this is a significant and telling result,
providing support for the viewpoint of developing countries in these talks. The
framework for modalities for tariff liberalisation in industrial products in the 3'3
negotiations put forward by the chairman #and WT. secretariat$ is misguided and needs
to be opposed and &ettisoned. When export taxes and total taxes on international trade are
used as a measure of trade restrictions, the study finds that save for fixed effect estimates,
there is a Msignificant and positive associationN between trade barriers and growth. This is
similar to the results for average tariffs.
.n non!tariff barriers, there are difficulties of estimation because of data limitationsT
hence these are excluded in most empirical studies. "ut studies by C.4dwards #cited in the
Ranikkaya study$ found such restrictions having an insignificant relationship with
growth, and came to the view that T"s are poor indicators of trade orientation, since a
broad coverage of T"s did not necessarily mean a higher distortion level.
9A
0sing several new measures of trade openness and restrictions now available, and
applying them on a framework model explained in details #but needs econometric
knowledge for the lay trade person to test and see$, the Ranikkaya study, says that there is
Mconsiderable evidence for the hypothesis that trade restrictions can promote growth,
especially in developing countries, under certain conditions.N The study makes clear that
it has no intention of establishing a simple and straightforward positive association
between trade barriers and growth, but rather to show that Mthere is no such relationship
between trade restrictions and growth.N (uch a relationship depends mostly on the
characteristics of a country. -estrictions can benefit a country depending on whether it is
developed or developing #a developed one seems to lose$, whether it is a big or small
country, and whether it has comparative advantage in sectors receiving protection
91
*. CASE STUDY
*.1 DIS-ANT0IN TRADE BARRIERS IN INDIA
The 4uropean ,ommission's Trade and Investments "arriers -eport, published in 'arch
9A19, points out that some progress has been made to dismantle trade barriers in India*
Two trade barriers were fully removed in 9A19* export restrictions on cotton
and security re%uirements for telecommunication e%uipment.
)rogress has also been achieved with regard to sanitary and phyto!sanitary
rules.
o positive movement has been seen in the area of e%uity caps.
India's industrial policies contain trade!restrictive elements.
The report also identified India's national manufacturing policy as a key
priority for reform.
The 40 and India hope to increase their trade in both goods and services and investment
through the 5ree Trade 3greement negotiations launched in 9AAF.
5ollowing the 40!India (ummit in 5ebruary 9A19 negotiations entered an intense phase.
Important issues include market access for goods, the overall ambition of the services
package and achieving a meaningful chapter on government procurement.
EU-India trade negotiations
The negotiations cover*
access to each other's markets, for goods, services and to public procurement
contracts,
the framework for investment
the rules that frame trade, such as intellectual property and competition
sustainable development, growth in trade is in tandem with the environment,
social and labour rights.
99
Tra&e pi'$(re
India is an important trade partner for the 40 and an emerging global economic
power. The country combines a si8able and growing market of more than 1 billion
people.
The value of 40!India trade grew from O9H.E billion in 9AA; to OFG.G billion in
9A11.
40 investment in India more than tripled between 9AA; and 9A1A* going from
OF=Gmillion in 9AA; to O; billion in 9A1A.
Trade in commercial services tripled during the same time period, going from
O=.9billion in 9AA9 to O1F.G billion in 9A1A.
9;
EU an& In&ia
India has embarked on a process of economic reform and progressive integration with the
global economy that aims to put it on a path of rapid and sustained growth. 7owever,
India's trade regime and regulatory environment remains comparatively restrictive #for
example see the World "ank's 4ase of 2oing "usiness Index $. India still maintains
substantial tariff and non!tariff barriers that hinder trade with the 40. In addition to tariff
barriers to imports, India also imposes a number of non!tariff barriers in the form of
%uantitative restrictions, import licensing, mandatory testing and certification for a large
number of products, as well as complicated and lengthy customs procedures.
With its combination of rapid growth, complementary trade baskets and relatively high
market protection, India is an obvious partner for a free trade agreement #5T3$ for the
40.
The parameters for an ambitious 5T3 were set out in the report of the 40!India 7igh
>evel Trade +roup in .ctober 9AAE, which was tasked with assessing the viability of
an 5T3 between the 40 and India. .ther studies have reinforced the economic potential
of an5T3 between the 40 and India, notably asustainability impact assessment was
carried out by the 40.
egotiations for a comprehensive 5T3 were started in Cune 9AAF and are ongoing. This
would be one of the most significant trade agreements, touching the lives of 1.F billion
people.
9<
India en&oys trade preferences with the 40 under the +eneralised (cheme of )references.
To assist India in its efforts to better integrate into the world economy U with a view to
further enhancing bilateral trade and investment ties U the 40 is providing trade related
technical assistance to India.
*.2 DES#ITE TRADE RO9T:1 INDIA #OSES BARRIERS) US RE#ORT
(ubstantial growth in India!0( bilateral trade and recent economic reforms unleashed by
ew 2elhi notwithstanding, 0( companies face a series of trade and tariff barriers, an
official report said here.
In its latest report S9A1; ational Trade 4stimate* 5oreign Trade "arriersJ the 0( Trade
-epresentative #0(T-$ has listed out a whole range of difficulties 0( companies face in
India, which according to officials prevent them from realising the full potential of India!
0( economic relationship.
MWhile the 0nited (tates has actively sought bilateral and multilateral opportunities to
open IndiaJs market, 0( exporters continue to encounter tariff and non!tariff barriers that
impede imports of 0( products, despite the +overnment of IndiaJs ongoing economic
reform efforts,N the report said.
3ccording to the report released yesterday, the 0( goods trade deficit with India was @
1H.9 billion in 9A19, up @ ;.= billion from 9A11.
0( goods exports in 9A19 were @ 99.; billion, up ;.G per cent from the previous year.
,orresponding 0( imports from India were @ <A.= billion, up 19.1 per cent.
India is currently the 1Hth largest export market for 0( goods, the 0(T- report said.
0( exports of private commercial services #i.e. , excluding military and +overnment$ to
India stood at @ 11.A billion in 9A11 #according to latest data available$, and 0( imports
were @ 1E.G billion.
9=
(ales of services in India by ma&ority 0(!owned affiliates were @ 1<.9 billion in 9A1A
#latest data available$, while sales of services in the 0( by ma&ority India!owned firms
were @ F.; billion.
MThe stock of 0( foreign direct investment #52I$ in India was @ 9<.F billion in 9A11
#latest data available$, down from @ 9<.H billion in 9A1A.
0( 52I in India is largely in the professional, scientific, and technical services,
finance/insurance services, and the information services sectors,N it said.
0(T- said the structure of IndiaJs customs tariff and fees system is complex and
characterised by a lack of transparency in determining net effective rates of customs
tariffs, excise duties, and other duties and charges.
0( exporters have alleged that IndiaJs customs valuation methodologies do not reflect
actual transaction values and raise the cost of exporting to India beyond applied tariff
rates.
0( companies have also faced extensive investigations related to their use of certain
valuation methodologies when importing computer e%uipment. ,ompanies have reported
being sub&ected to excessive searches and sei8ures, it alleged.
The 0(T- held that India Mlacks an overarching +overnment procurement policyN, and
as a result, its +overnment procurement practices and procedures vary at the state and
central levels and by ministry.
M5oreign firms are disadvantaged when competing for Indian +overnment contracts due
to the preference afforded to Indian state!owned enterprises and the prevalence of such
enterprises,N it said.
The report also refers to IndiaJs export subsidy programmes, including exemptions from
taxes for certain export!oriented enterprises and exporters in (pecial 4conomic Kones
and duty drawback programmes that Mappear to allow for drawback in excess of duties
levied on imported inputsM.
9E
0(T- said the Indian +overnment had a strong ownership presence in ma&or services
industries such as banking and insurance, while private firms play a preponderant to
exclusive role in some of the fastest growing areas of the services sector, such as
information technology and business consulting.
It also referred to the MIndian policy that foreign satellite capacity must in practice be
provided through the Indian (pace -esearch .rganisation #I(-.$, effectively re%uiring
foreign operators to sell capacity to a direct competitor.N
The report said the 0( companies have noted that this re%uirement creates additional
costs, allows I(-. to negotiate contract terms with the goal of moving the service to one
of its satellites once capacity is available, and puts I(-. in a position of being able to
determine the market growth rate.
The 0(T- report has also expressed its displeasure over the conditions imposed by India
on entry of 52I in multi!brand retailing.
MThe (eptember 9A19 retail policy announcements also explicitly prohibit 52I in single!
brand and multi!brand retail by means of electronic commerce,N it said.
5oreign providers of higher education services interested in establishing a presence in
India face a number of barriers, it said.
This included a re%uirement that representatives of Indian states sit on university
governing boards, %uotas limiting enrolment, caps on tuition and fees, policies that create
the potential for double!taxation, and difficulties repatriating salaries and income from
research, it said.
5.3 NON-TARIFF BARRIERS AFFECTING INDIAS EXPORTS
on!Tariff 'easures #T'$ is one mechanism countries use to restrict imports. T'
include %uantitative restrictions, tariff %uotas, voluntary export restraints, orderly
marketing arrangements, export subsidy, export credit subsidy, government procurement,
import licensing, antidumping/countervailing duties, and technical barriers to trade.
9F
The ascend of T's holds special significance to developing countries like India as they
have been encountering difficulties in accessing developed country markets. Therefore,
this paper seeks to*
identify and trace the type structure of T's affecting IndiaJs exports
examine these commodity!wise/category!wise with the main focus on developed
country markets
suggest or recommend policy options.
The case starts by highlighting that Indian exports do face non!tariff barriers in ma&or
export markets especially the 0(, 40, Capan and other developed countries, which
significantly hinder IndiaJs exports to these markets.
Trade barriers #tariff and non!tariff$ in destination countries have a significant impact on
IndiaJs exports because these measures impose additional costs on such exports.
7owever, the author could not estimate the impact of non!tariff measures on IndiaJs
exports, since there is no reliable estimate of these extra costs or 6tax e%uivalence6 due to
these measures and there is no systematic information available on T's faced by
IndiaJs exports.
The picture that emerges from this analysis is that Indian businesses continue to be
hunted by a variety of restrictions in the form of standards and compliance costs. The
author makes some policy recommendations to help Indian policy makers respond to
these challenges*
a multilateral trade forum that includes moving T's on top of the WT.
agenda, plugging loopholes in the multilateral rules to make the system less
restrictive as well as improving the empirical database
putting in place bilateral and/or regional 5T3s
internal measures need to be taken to deal with issues such as import restrictions,
the lack of coordination between the different departments and the lack of ade%uate
processing facility and the basic infrastructure like storage and transportation.
*.! NON-TARIFF BARRIERS STU-# #:AR-A E/#ORTS TO C:INA) FICCI
IndiaJs exports of pharmaceuticals could make a significant dent in the ,hinese market
and help meet overall trade expectations of 0(@ ;A billion by 9A1<, provided on Tariff
9H
"arriers in the shape of procedural, legal and cultural barriers that hinder market access
are removed, according to 5I,,I.
"ased on feedback received from pharma exporting companies, 5I,,I has called for
urgent steps to streamline customs procedures as well as efficient and effective use of
technology for electronic data interface in customs administration and information
exchange. 3 bilateral pre!shipment inspection agreement would also benefit both
countries.
5I,,I has suggested that recognition agreements on standards should be arrived at and
full details of standards should be made easily available. It has recommended that the
various non!tariff barriers be identified and addressed and both countries act to remove
them in a time bound framework. 4asier trade financing and greater cooperation between
the 4VI' banks of the two countries would also work to the benefit trade between the
two countries.
In this context, it is important to note that Indian exports of drug, pharmaceuticals and
fine chemicals to markets such as the 0(, 4urope, 3frica and (outh 3merica have grown
by 1GB year!on!year in the last three years while the world average growth rate for this
sector is about EB. In contrast, in the last three years IndiaJs exports to ,hina have grown
at &ust ;B. 5rom 0(@ G< million in 9AA9!A;, ,hinese imports from India have grown to
0(@ 1AE million in 9AA;!A< to 0(@ 1AG million in 9AA<!A=. This accounts for barely 9B!
;B of Indian exports of drugs and pharmaceuticals to the world. This indicates that the
high!performing Indian pharma sector has not found the environment conducive for
achieving similar growth with ,hina.
The on!Tariff "arriers identified by 5I,,I in pushing pharma exports to ,hina include*
)rocedures for product and company registration and for procuring Import 2rug
>icense are expensive and time consuming. .ver and above the official cost of
0( FAAA per product, they can cost anywhere between 0(@ 9A,AAA to @<A,AAA per
product. "esides, it may take 1H months to three years to procure an Import 2rug
>icence. These licences and registration are essential for beginning to export or
9G
ship goods even to factories owned by the companies that are situated in ,hina.
This is a considerable deterrent for Indian entrepreneurs to initiate exports to
,hina.
>ong customs procedures, re!inspections and discriminatory packaging I
labelling regulations that even specify the colour used for packaging, result in
delays and higher costs and most of all consume energy and patience.
The banking procedures for foreign players, particularly for remittance of foreign
exchange, are tough and tedious. 4ven the sight payments are remitted after a
minimum of ;A to <= days due to the foreign exchange declaration system of
,hinese banks.
.nce in the ,hinese market, the drug distribution is mostly through hospitals. In
practice, locally produced drugs are preferred and this manifests in the form of red
tape for Indian pharma products.
Intellectual )roperty -ights acts as another restrictive non!tariff trade barrier.
,hina surpassed the 0( as the worldJs most litigious country for I) disputes in
9AA=, with 1;,<9< cases filed with ,hinese courts compared to 1A,GA= cases filed
in the 0( during the same period. International companies were involved in only
9EH of the I) cases filed in ,hina last year, which represents an increase of FEB
over the number in 9AA<. This overly cautious approach in seeking I)
enforcement by international companies in ,hina is partly due to their
unfamiliarity with ,hinese civil litigation.
>ack of transparency in information about local markets and trade statistics add to
the low awareness of foreign businesses in ,hina. This lack of transparency
clouds insight into the ,hinese market and hampers marketing strategies of Indian
pharma companies in ,hina.
In all of the above, language is a ma&or barrier to trade. There are very few
,hinese!speaking people in India that can be resourced as interpreters. 3lthough
the number of ,hinese who are learning 4nglish is growing, communication
remains a ma&or impediment to trade.
While ,hina has consistently complained about anti!dumping cases in India. India has
responded by delivering on its words and this is no longer a bone of contention between
;A
the two nations. It is for the ,hinese now to set the ground rules right and ensure that all
non!tariff barriers are removed. 3t the same time, ,hina needs to ensure that the %uality
standards are maintained in pharmaceutical products. India has the largest number of
0(523 approved plants outside the 0(. There more than F= plants which are also W7.
+') #+ood 'anufacturing )ractices$ certified and could easily cater to the demand for
high %uality pharma products.
*.* A#T-A URES INDIA TO RE-O8E NON-TARIFF BARRIERS
The 3ll )akistan Textile 'ills 3ssociation #3)T'3$ has said that the Indian
+overnment should withdraw non!tariff barriers #T"s$ imposed on )akistan to improve
the bilateral trade between the two 3sian neighbours.

Welcoming a 1=!member team of Indian &ournalists, led by 'umbai )ress ,lub president
+urbir (ingh, 3)T'3 chairman Rasin (iddik said )akistanJs business community
supports giving most!favoured nation #'5$ status to India, but the T"s imposed by
the Indian side would hamper the smooth flow of trade between the two nations.

7e suggested that India should remove T"s to make the '5 status a success.

7e said in spite of India giving '5 status to )akistan in 1GGE, )akistanJs exports to
India are much lower, which is a clear proof that India has not opened up its market to
)akistani goods.

In 9AAG!1A, the bilateral trade between India and )akistan stood at 0(@ 1.< billion, of
which, Indian exports to )akistan accounted for 0(@ 1.9 billion, while )akistanJs exports
to India were a meager 0(@ 9EH million, according to 'r. (iddik.

7e suggested that India should open up its market to )akistani goods in order to enhance
bilateral trade and capitali8e on the potential for &oint business strategies, especially in the
textile industry.

;1
7e said the granting of '5 status by )akistan to India must be reciprocal to the lifting
of T"s by the Indian +overnment, and hence, the policymakers should take up this
issue with their Indian counterparts.

7e further suggested that both )akistan and India must harmoni8e their customs
procedures for assessing compliance with safety and %uarantine standards, for which
special laboratories should be set up at border crossings.
*.+ #:AR-AS DE-AND RE-O8A0 OF NON-TARIFF E/#ORT BARRIERS
)harmaceutical entrepreneurs have urged the government to remove non!tariff barriers to
exporting their products to India.
They said that additional duty and lengthy paperwork had been slowing exports of
allopathic medicines and herbal products to the southern neighbour.
epalJs general medicinal products are of high %uality and are competitively priced, but
the trade barriers have hindered exports and even harmed growth of the local industry,
they added.
They claimed that pharmaceutical factories were operating at ;A!<A percent of capacity,
and they could get a shot in the arm if exports could be boosted.
3ccording to the 3ssociation of )harmaceuti!cal )roducers of epal #3)).$, exporters
have to pay additional duty besides going through lengthy procedures to register their
products and get them certified by Indian authorities. 3)). +eneral (ecretary 2eepak
)rasad 2ahal said countervailing duty was levied on allopathic and ayurvedic medicines
exported to India.
M3fter registering the pharmaceutical products with the Indian authorities, traders have to
wait for at least another seven months to get them certified by labs in India,N he added.
3ccording to 2ahal, ayurvedic medicines too have to be put through the tedious process
before they can be shipped to India. M7owever, herbs in raw and unprocessed form can be
exported to India easily,N he added.
4ntrepreneurs have also complained that Indian products are granted trouble!free entry
into India while epali products do not en&oy the same privilege.
,riticising the government policy, 3)).Js )resident 0mesh >al (hrestha said that
Indian products which are banned in India were being registered without any hindrance in
;9
epal. 7e also demanded that the government restrict imports of general medicines that
are being produced in epal.
3s per an 3)). study, epal is self!reliant in FF types of general medicines.
M7owever, the government is providing licences to sell products that could face
duplication in the domestic market.N
(hrestha also urged the government to facilitate sales of epali products when supplying
subsidised medicines in rural areas. MThe government buys -s ; billion worth of
medicines annually for distribution to the poor, and most of the procurement contracts go
to foreign!based companies,N he added.
3ccording to (hrestha, the bidding process for epali pharmaceuticals is too complicated
compared to the conditions applied to foreign!based companies.
'eanwhile, the 2epart!ment of 2rug 3dministration said it had started work to restrict
sales of foreign allopathic medicines which are being manufactured locally in a bid to
protect domestic industry. arayan )rasad 2hakal, drug administrator at the 223, said
they had started discussions with stakeholders. MWe have been discussing whether to put
these general medicines in the negative list or impose similar technical barriers in order to
reduce their imports,N he added.
3ccording to 3))., local products account for << percent of epalJs pharmaceutical
market which is worth -s 1F billion annually.
*., SAARC NATIONS TO 9OR; TOET:ER TO RE-O8E NON-TARIFF
BARRIERS
India has said it is working to resolve all matters related to non!tariff barriers #T"s$ to
boost trade among (outh 3sian countries and has said there is a need for greater
awareness on such measures.
M>ack of awareness about T"s is creating lot of problems. (takeholders like business
associations should organise seminars to make traders aware of the procedures followed
by each countries. The move would help in increasing trade,N said Indira 'urthy,
2irector, ,ommerce 'inistry.
T"s are measures other than tariffs that restrict trade like technical standards, %uality
specifications and lack of ade%uate infrastructure.
;;
'urthy said India was making all efforts to sort out T" related issues amongst
members of the (outh 3sian 3ssociation for -egional ,ooperation #(33-,$ to boost
trade. (he was addressing a seminar on T"s affecting regional trade in the (33-,
region organised by ,0T(.
MThere is a subWgroup that is looking at the issues related with land custom stations.
egotiations are on to remove the T"s,N she said.
(he added that the +overnments are engaged to remove barriers related with
infrastructure and facilitates at customs stations like testing laboratories.
(tressing on the importance of ade%uate infrastructure for removal of T"s,
:hairu88aman 'o8umder, 2eputy (ecretary, 'inistry of ,ommerce, "angladesh, said
that it was heartening to note that most (33-, countries were ready to work in the area.
MThere has to be cooperation between +overnments in the region to improve
infrastructure and they have to come up with the resources. While India would get the
funds on its own, the 32" is to provide grants and loans to countries like "hutan,
"angladesh and India. 3ll have to upgrade together for the exercise to be meaningful,N he
said.
)akistani ,ustoms and Trade )olicy official -obina 3ther said it was necessary to
identify, evaluate and eliminate T"s for trade to grow in the region. MWe need to focus
on priority T"s so that they can be sorted out fast,N she said.
3ccording to the proposed "usiness )lan for improving regional trade drafted by ,0T(,
(outh 3sian countries should identify products of high importance to regional trade,
measured by supply capacity and matching import demand within the region.
,0T( has conducted an assessment and identified products for each (outh 3sian country
which meets their export interests and import demand respectively.
*.. US E/#ORTERS FACE TRADE BARRIERS FRO- INDIA
2espite India's ongoing economic reform efforts, 0( exporters continue to encounter
tariff and non!tariff barriers that impede imports of 3mericans products to India, an
official report has said.
In its report 9A19 ational Trade 4stimate -eport on 5oreign Trade "arriers, the 0(
Trade -epresentatives #0(T-$ said the 0( has actively sought bilateral and multilateral
opportunities to open India's market.
;<
6The structure of India's customs tariff and fees system is complex and characterised by a
lack of transparency in determining net effective rates of customs tariff, excise duty and
other duties and charges on imports into India,6 said the India section of the report.
0( goods trade deficit with India was @ 1<.= billion in 9A11, up @ <.; billion from 9A1A,
it said.
0( goods exports in 9A11 were @ 91.E billion, up 19.< per cent from the previous year.
,orresponding 0( imports from India were @ ;E.9 billion, up 99.= per cent.
oting that India is currently the 1Fth largest export market for 0( goods, the report
said 0( exports of private commercial services #excluding military and government$ to
India were @ 1A.; billion in 9A1A #latest data available$, and 0( imports were @ 1;.F
billion.
(ales of services in India by ma&ority 0(!owned affiliates were @ 1;.1 billion in 9AAG
#latest data available$, while sales of services in the 0( by ma&ority India!owned firms
were @ F.9 billion.
The stock of 0( foreign direct investment #52I$ in India was @ 9F.1 billion in 9A1A, up
from @ 9A.G billion in 9AAG, it said adding, that 0( 52I in India is led by the information,
professional, scientific, and technical services, and manufacturing sectors.
In its report, 0(T- said India' procurement practices and procedures are often not
transparent.
5oreign firms also rarely win Indian government contracts due to the preference afforded
to Indian state!owned enterprises and the prevalence of such enterprises.
0(T- said India's tax exemption for profits from export earnings has been completely
phased out, but tax holidays continue for certain export!oriented enterprises and exporters
in (pecial 4conomic Kones.
6In addition to these programmes, India continues to maintain several other export
subsidy programmes, including duty drawback programmes that appear to allow for
drawback in excess of duties levied on imported inputs,6 it said, adding that India also
provides pre!shipment and post!shipment financing to exporters at a preferential rate.
*.< C:INA NEED NOT FEAR TARIFF BARRIERS IN INDIA
,hinese solar module makers should not fear India tariff or trade barriers that could
restrict or affect exports to the fast!growing market.
;=
,hinese manufacturers slowed marketing efforts in India due to the growing wave of
module import opposition in the 0.(., fearing that the Indian government would also
impose import duties.
IndiaJs 'inistry of ew and -enewable 4nergy #'-4$ has gone on record to say that it
has no plans to impose tariff barriers against ,hinese products. '-4 seems to be &ust
about happy with one clause in its national solar mission policy, which stipulates that
pro&ects adopting crystalline module technology will have to import these modules from
the local markets. The '-4 mission policy made an exception for solar thermal
technologies and e%uipment earlier. 3nd, now, it has made an exception for thin!film
modules as well.
4lsewhere within India, various state governments, including the key western states of
+u&arat and -a&asthan, have allowed pro&ect developers to import technologies and
e%uipment at almost 8ero percent duties.
There are various reasons why the Indian government would not impose barriers*
India generally refrains from imposing anti!dumping duties on products being
imported from any particular country. It is only in case of food!grains that the Indian
government generally takes such steps.
The government would rather have prices go down considerably, rather than
extend its commitments in subsidi8ing solar power pro&ects. The recent bids for on!grid
solar pro&ects have substantially reduced the subsidy burden.
The Indian government is %uite keen to promote solar power generation and
reduce its dependence on fossil fuels, particularly if it must enable the industry to become
more productive. )ower shortage is a ma&or bane for the manufacturing sector, which
either shuts down or uses other expensive and polluting fossil fuels. This is a large
captive market that will soon open.
)ower shortage is a much bigger issue for the government, rather than supporting
IndiaJs module manufacturerJs business.
The federal #central$ as well as the key states of India have already demonstrated that
they are serious about promoting and expanding the solar market. Tariff barriers will only
prove to be counter!productive.
If the 0.(. imposes trade barriers, ,hina can focus on the Indian market where the hunger
for power is huge and continuously growing.
;E
CONC0USION
Indian exports do face non!tariff barriers in ma&or export markets especially the 0(, 40,
Capan and other developed countries, which significantly hinder IndiaJs exports to these
markets.
Trade barriers #tariff and non!tariff$ in destination countries have a significant impact on
IndiaJs exports because these measures impose additional costs on such exports.
2eveloping countries like India need to focus urgently on the removal of non!tariff
barriers if they are to promote trade and growth.
on!tariff barriers need to be brought to the forefront of the global trade debate and made
a priority by trade negotiators. 2eveloping countries need to remove their hugely
bureaucratic non!tariff barriers to trade. ,urrently, for example, exporters from India
have to go through 19 separate bureaucratic processes involving 1A separate agencies.
'ore reliable data on non!tariff barriers need to be collected in order to %uantify their
coverage and the problems caused by them.
2eveloping countries also need to remove tariff barriers which are still prevalent in some
industries. India, for example, has a tariff barrier of GG per cent on roasted coffee and
'exico F1 per cent.
India pointed that it is working to resolve all matters related to non!tariff barriers #T"s$
to boost trade among (outh 3sian countries and has said there is a need for greater
awareness on such measures.
;F
BIB0IORA#:"
BOO;S AND =OURNA0S
Carbaugh, Robert J. International Economics, South-Western, 199.
Cross, !ran" #. $%arado&ical %erils o' the %recautionar( %rinci)le,* Revision +1,
Washington and ,ee -ome %age, .olume /0/, 1991.
$2e3 %rinci)le to %rotect -uman -ealth and the Environment,* -ealth 4lert, Earth
5uardian, C6S, 1999.
78Riordan, 9im and James Cameron. $Inter)reting the %recautionar( %rinci)le,*
Earthscan %ublications, ,td., Island %ress, 199:.
James ,. #ut"ie3ic; < -alit =ani""a(a, >?11. @Institutions and the im)act o'
government s)ending on gro3th,@ Journal o' 4))lied Economics, Universidad del
CEA4, vol. ?, )ages /19-/:1, 2ovember.
INTERNET 9EBSITES
Non-Tariff Barriers $o Tra&e
http*//www.tradebarriers.org/ntb/nonXtariffXbarriers
Tariffs an& -o&ern Tra&e
http*//www.investopedia.com/articles/economics/AH/tariff!trade!barrier!basics.asp
Frame>or? Con&i$ions an& In&ian Tariff Barriers
http*//indien.um.dk/en/the!trade!council/india!as!a!market/framework!conditions!
and!barriers/
Disman$lin6 Tra&e Barriers in In&ia
http*//ec.europa.eu/trade/policy/countries!and!regions/countries/india/
Despi$e Tra&e ro>$41 In&ia #oses Barriers) US Repor$
http*//www.thehindubusinessline.com/news/international/despite!trade!growth!india!
poses!barriers!us!report/article<=F9H=H.ece
Non-Tariff Barriers affe'$in6 In&ia@s Expor$s
http*//www.eldis.org/go/homeIidY1G19HItypeY2ocumentZ.0uinEd:Ebbg
;H