AUGUST 08, 2014

By Sumit Dutt Majumder

THE media, including the Indian media has been generally critical of the stand taken by India at the World Trade Organization (WTO) with respect to inking of the Trade facilitation Agreement (TFA). As someone who had been associated with the internal committee of the Central Board of Excise & Customs (CBEC) on Trade Facilitation during 2005 to 2009, and who had the privilege of attending the WTO meeting on Trade facilitation at Geneva in 2005, I have a different take on the matter.

India in general, and the Indian Customs in particular have always been serious about trade facilitation. This would be evident from various steps on automation and other measures taken by the Indian customs, even without a TFA in place. Off the cuff, I remember the introduction of EDI, RMS (Risk Management System), NIDB (National Import Data Base for dealing with the valuation issues), ACP (Accredited Client Programme), AEO (Authorized Economic Operator – under process), self Assessment and PCA (Post Clearance Audit, under process).

The aim of these Customs initiatives has been to cut down the delay in clearance of goods, which is also the main objective of the TFA. It may be recalled that the Jayanta Ray Committee, set up in the early years of the last decade by the Commerce Ministry to find out the lime taken by each concerned agency in clearing the goods finally out of the Docks, observed in its Report that the time taken by the Customs was only around 14% of the total time taken by all the agencies. Efforts are continuing relentlessly for further reduction of the clearance time which would bring down the transaction cost even more. India has also been pursuing the efforts on Globally Networked Customs (GNC) which would ultimately facilitate the exchange of Customs information among the WTO members on real time basis. This is a World Customs Organization (WCO) initiative coming out of its vision document titled ‘Customs in the 21st century’.

An impression has been created in certain sections of the media that India is averse to Trade Facilitation. The facts stated herein above would dispel that misconception.

Now the question would be why did then India block the TFA. One must accept the reality that national interest plays significant role in international relations as well. India, along with certain other developing countries has been calling for concluding the whole ‘Bali Package’, formulated at Bali in December, 2013. The ‘Bali Package’ included food security and certain other LDC (Least Developed Countries) development issues apart from the TFA. India soon realized that the Developed Countries were mainly interested in pushing the TFA, stand alone, which would no doubt help the supplying countries (read the developed countries) more. India therefore proposed for continuation of the interim relief, also called the ‘Peace Clause’ on the food security front. At present, there is a cap of 10 percent on the ‘food subsidy' which is not to be breached. By virtue of the said ‘peace clause', a country was entitled not to follow the said 10 per cent cap on food subsidy till the 11th WTO Ministerial scheduled in 2017. In effect, the 'Peace Clause' insured that the developing countries including India could continue with its public stock holding programme without being challenged through the WTO dispute settlement mechanism, even if they breached the 10 per cent cap;  but only up to 2017.

As of now, India does not need the 'peace clause' since its food subsidy is quite below the present 10 percent cap. But, India is close to the cap, particularly in respect of rice and wheat, and she is likely to beach it by 2017, when the 'Peace clause’ would expire. Naturally, therefore, India would like the 'peace clause’ to continue beyond 2017 untill a permanent solution with respect to food subsidy is found.

That’s the new proposal offered by India on the early morning of the 30th of July, close to the deadline. India wanted a General Council (GC) decision on the ‘Peace clause’. India also urged that there should be enhanced process in the WTO so as to find a permanent solution to subsidy and stock piling of food grains, and also to the LDC development issues by the 31st of December, 2014. The member Countries received India's proposal with mixed feelings as they raised issues over India’s demand for a ‘General Council’ statement on the ‘Peace Clause’. Thus consensus eluded the Indian proposal and the TFA missed the timeline for the time being.

In this context, one must realize that in spite of tremendous development made by the country in the last two decades, India does also have a big percentage of poor people, and that the difference between the poor and the upper middle class (one may call it ‘rich’ if one likes) has been increasing continuously. This has called for more efforts towards 'inclusive growth'. Given this position, India has done well in making her position clear. Reportedly, Prime Minister Narendra Modi has voiced similar concern when he said that the developed countries should also understand the challenges of poverty in developing nations and their governments' responsibilities to address them.

Right after the Doha Declaration the developed countries have been pushing hard for the TFA which is aimed at reducing the transaction costs through simplified Customs norms. No harm in that, inasmuch as the suppliers would naturally like to make the Customs Norms more simplified. But it has to be realized that the markets must also be enabled to purchase the goods and services from the suppliers. And, going by the population, the major markets are in the developing countries. If they starve, the demand for goods and services would also come down, much to the detriment of the supplying (developed) countries.

Hence is the need for a balanced view, and India has done well in this respect. She has also kept the window open with her latest proposals discussed above. I for one believe, - ‘Come September’, and all the WTO countries will have reasons to rejoice, dancing with that old charming number!

(The author is Former Chairman, Central Board of Excise & Customs)