Executive Summary

Market Access for the non-agriculture products in one of the principal agenda of the WTO negotiations. In this study, an attempt has been made to analyse India’s current bindings in terms of domestic sensitivity to import and to identify tariff lines (or commodities). Effort has also been made to suggest the possible level of binding rates in the present Uruguay Round. An analysis has been carried out for 9,467 tariff lines (of the industrial sector), which are defined by the 8-digit level of Harmonised System.

The analysis conducted in this study can be classified into two broad steps: Step1 involves an identification of items/commodities which are sensitive with respect to imports, and their possible degree of sensitivity, e.g. insensitive, moderately sensitive, sensitive or highly sensitive. These items have been divided into different categories as per India’s import policies during the last few years, and the Non-BoP list of the WTO.

Based on the degree of sensitivity, the level of binding rates of different industrial items/commodities for next round trade negotiations have been suggested as a part of the analysis in Step 2.

The study suggests:

• India’s current binding, for most lines/commodities, does not reveal a domestic sensitivity from imports.

• The applied rates for a large number of lines are lower than their corresponding binding rates, but the differences between the applied and corresponding binding rates are not significant. The mean and average rate of a large number of unbound items is not significantly different from those of bound rates.

• There exists a large scope for a widespread binding of Indian industrial lines/items. There are very few lines/commodities, which are highly import sensitive. India can still keep such industrial lines in the unbound category or undertake to bind these at a high level, in the present negotiations. The study suggests that the number of industrial lines, subject to binding rates, can be increased from the 70 per cent at the Uruguay Round, to around 99 per cent in the forthcoming round.

• India can offer tariff cuts on a large number of tariff lines. Our analysis of 9467 tariff lines show that India can offer significant tariff cuts on 8643 lines (including 2582 unbound lines). Out of the remaining 167 unbound tariff lines, India can think of binding 166 lines at relatively higher tariff rates. There are 365 lines (excluding 262 lines which have a zero bound rate) where the present level of the bound rate is considered adequate.

• India can easily bring down the average (simple) tariffs from a binding rate of 34.1 per cent to 20.8 per cent, or even 15 per cent on the basis of the Liberal Scenario

• Similarly, its peak tariffs can be brought down to 20 per cent for most of the tariff lines of the industrial sector.

• The average MFN tariff rates, during 2001-02 for raw-material, for semi-manufactured and for finished goods were 23.6 per cent, 32.4 per cent, and 31.4 per cent, respectively. It is very difficult to believe that India’s MFN average tariff rate of finished goods is lower than that of semi-manufactured goods. This is in contrast to the tariff structure of a large number of other countries.

India and Developing countries should insist that the process of negotiations should start from the bound rates (or given rates for unbound items), and not from the applied rates. Further, it is possible to achieve reduction in tariff peaks and tariff escalation if the proper formula is used in the negotiation process. With respect to the modalities for the forthcoming negotiation process we have found out that India should follow a mixed approach.