India may have slightly higher tariffs, but advanced nations keep much higher NTBs

Major developed and developing countries, such as the US, China, South Korea, Japan and those in the EU, have erected huge non-tariff barriers (NTBs) to mask the ferocity of their trade protectionism and discourage “undesirable imports”, even though they claim to maintain a low-tariff regime.

The US has put in place as many as 8,453 NTBs, followed by the EU (3,119), China (2,971), South Korea (1,929) and Japan (181), shows a commerce ministry analysis, based on the WTO data (See chart). In contrast, India has imposed only 504 NTBs.

Although India’s trade-weighted average tariff of 10.3% in 2018 was higher than these countries, it was still well below a third of its bound tariff, or the level it’s permitted by the WTO to impose, government officials argue.

Analysts say most of the non-tariff measures are typically in the form of either technical barriers to trade (TBT) or sanitary and phytosanitary (SPS) measures.

While non-tariff measures are not always aimed at curbing imports (for instance, safety, quality and environmental standards are put in place by all countries for imported products), what have often worried analysts is that they can be abused for trade protectionism, especially in times of frosty political ties between trading partners.

Last December, in an inter-ministerial meeting chaired by commerce and industry minister Piyush Goyal, it was revealed that while most of India’s key partners had built in elevated levels of NTBs, only about 10% of New Delhi’s imported products were subject to various standards; the rest remain unregulated even from basic safety and environment parametres.

Concerned with a surge in inflows of sub-standard products, Goyal had then asked the Bureau Of Indian Standards (BIS) to develop standards for over 4,500 products (HS lines) at the earliest, taking the total number of imported items where quality and other parameters would be in place to 5,000. These items include steel, consumer electronics, heavy machinery, telecom goods, chemicals, pharmaceuticals, paper, rubber articles, glass, industrial machinery, some metal articles, furniture, fertiliser, food and textiles.

This move marked a policy shift in New Delhi from an avowedly pro-liberalisation approach to external trade to a more discretionary one, where barriers could be erected, if required, to ‘non-essential’ and sub-standard imports that could harm the economy, rather than benefit it. New Delhi’s earlier approach was to curb non-essential imports through just a hike in tariffs (it has raised duties on a number of electronic and other products since 2018). Analysts say India seems to have taken a cue now from key markets like the US, the EU, China and South Korea that have effectively employed various non-tariff measures to imports they deem undesirable.

Indian exporters have already pointed out that some of the common NTBs that they are subjected to are stringent rules on product certification, labelling standards and import approval requirements. Customs clearances face delays and often (especially in case of China) factory has to be inspected at the exporter’s expense. Customs value of the same item may vary for duty calculation depending on ports and rules are frequently changed and details are not easily available in English.

India pulled out of the 16-nation Regional Comprehensive Economic Partnership (RCEP) agreement in November last year, as its proposals on safeguard measures to deal with any “irrational spike” in imports, among others, weren’t adequately addressed by potential partners, including China.