GENEVA — India, the world’s second-largest emerging economy behind China, has been urged by its major trading partners — the U.S., China and the European Union — to remove barriers to its markets and to scrap market distorting export incentives in competitive sectors like textiles and apparel.
“It is unfortunate that India has chosen to push exports in the past year through a series of new trade-distorting export incentives,” said Michael Punke, deputy U.S. Trade Representative. “This type of response tends to promote one member’s economic gains at the expense of another.
“The United States considers these measures particularly troubling when afforded to the textile and apparel sector, given India’s obligation to gradually phase out export subsidies in that sector starting no later than 2007,” Punke told a two-day review of India’s trade regime hosted by the World Trade Organization that ended on Friday.
Punke also flagged U.S. concerns about the “lack of transparency” in many aspects of India’s trade policy.
“This contributes greatly to the difficulties of firms, particularly small and medium-sized enterprises trying to invest and trade with India,” he s aid.
On the plus side, the U.S. official observed, “The total value of trade in goods between our two countries has increased over threefold since 2001.”
The WTO report shows that in 2009-10, India’s exports totaled $178.8 billion, with the main destinations the EU (20.5 percent share), the United Arab Emirates (13.4 percent), the U.S. (11 percent) and China (6.5 percent). Combined, textiles and apparel accounted for 12.1 percent of total export shipments, it said.
In February, India’s government released a strategy that aims to increase exports during the next three years to $450 billion in 2013-14 from around $225 billion in 2010-11.
India’s commerce secretary, Rahul Khullar, said in his WTO presentation that the robust export growth reflects the country’s policy of market diversification. But Khullar also emphasized that it is important for India and other developing nations “to be able to protect the interests of their nascent and vulnerable industries.”
“The development interests of such industries cannot be sacrificed at the altar of mercantilist demands,” he said.
Yi Xiaozhun, China’s WTO ambassador, said it was necessary for India to improve the business environment “by eliminating over-regulation.”
The envoy also said China’s exporters “have shown strong concerns over the increased frequency of use of antidumping measures by India.”
Similarly, the EU called on India to abandon its practices of restricting exports in certain important raw materials, like cotton and iron ore products, and to liberalize sectors that remain restricted for foreign direct investment such as retail distribution.
The EU also said while India’s average tariffs have come down in recent years, further cuts are warranted, in particular in areas where tariffs are at peak levels. The WTO report reveals that India’s tariffs for industrial goods in 2010-11 averaged 8.9 percent, down from 12 percent in 2006-07.
For textiles and apparel in 2010-11, tariffs averaged 9.6 percent and 10 percent, respectively, but additional duties increased the rates to 16.2 percent and 25.7 percent accordingly.