11:55 AM Jul 1, 1997
NO CONSENSUS AT INDIA BOP CONSULTATIONS
Geneva, 1 July (Chakravarthi Raghavan) -- The WTO Committee on Balance of Payments ended its consultations with India Tuesday, with no agreement, and with developed countries planning to take up the issue to a dispute process. While the disagreement between India on the one side and the US, EC, Japan and other industrial nations on the other appeared to revolve around whether India would remove its restrictions in 5 years as the latter wanted or in seven years as India had proposed, there were probably some underlying efforts to make a systemic example of India, and force it to disinvoke the BOP rights, and use it against other developing countries in future. The BOP committee will now record the views of either side and report to the General Council without any recommendations. The major industrial nations have indicated they would raise disputes which probably will go against India ultimately, but is bound to have some political and economic fall-outs within the country. and in India's relations with some of its major trading partners. India presented Monday, at the resumed consultations on balance-of-payments a revised plan for the phase-out over seven years of its quantitative restrictions maintained for balance-of-payments under Art. XVIII:B, but was pressed to remove them over a shorter period, front-loading imports in products of interest to the majors. The consultations had been recessed on 17 June to give all sides "a period for reflexion" -- after India had presented a plan for removal of QRs over nine years, spread over 3 three-year phases, and the major industrial nations had demanded a faster phase-out, holding out the threat otherwise of taking issue to the Dispute Settlement processes. The industrial nations - the US, EU, Switzerland, Australia and Norway, all of whom maintain extensive restrictions on imports of agricultural products as well as textiles and clothing products, the latter to be phased out only in 2005 -- demanded that India should liberalise imports on these as well as luxury import items like automobiles, liquor etc. Prior to Monday's meeting of the Balance-of-Payments Committee resumption of the consultations, India had held here and in Delhi bilateral talks with its trading partners -- several of whom, armed with some of the writings in the Indian press, have been arguing that the 'consumer' in India did not favour these restrictions. At the BOP committee, the Indian ambassador, Mr. S. Narayanan said that under the modified schedule, the QRs would be eliminated in two phases, each of three years, and the duration of the third phase will be reduced to one year - with a small number of items of 'high sensitivity' and those bound at zero tariff or very low rates will be retained for elimination in the final year. The US, EC, Australia, New Zealand, Switzerland and Norway asked for a faster phase-out, with the EC saying that it could live with a five-year phase-out, provided the QRs on some of the items of interest to it were removed earlier. The US reportedly did not say much about the plan itself, but repeated that it would reserve its rights. In private conversations, the US, has reportedly been arguing that India should forthwith remove the QRs and disinvoke GATT rights under BOP provisions or face the prospects of US invoking dispute settlement panels. There were also some arguments about the effect of the plan -- if accepted and recommended by the BOP Committee and adopted by the WTO General Council. Under the BOP provisions -- in terms of paragraph 13 of the understanding on BOP reached during the Uruguay Round. This stipulates that, in any disputes that may be raised, the rights and obligations of the country's whose phase-out plan has been approved, would be judged in that light. A number of developing countries, in their comments stressed the need to adopt a careful approach and to support India in its efforts to liberalise. Earlier, the Indian ambassador, Narayanan suggested that for developing countries whose BOP face inbuilt pressures arising out of development needs, advance liberalisation schedules and "standard" time-frames for removal of QRs may be meaningless. Inflows of imported goods, unless calibrated, may also adversely impact on domestic production capacity due to instability in terms of trade and inability of Indian producers to compete with capital-intensive large scale overseas production. Narayanan also referred to what he said were suggestions by some Members that India could stabilise BOP through macro-economic instruments and price-based measures, and that protective tariffs could be used on highly-sensitive products. [However, Art.XVIII:B, para 11, while calling for actions by a contracting party maintaining BOP to have domestic policies that would restore equilibrium and progressively relax restrictions, also stipulates "Provided that no contracting party shall be required to withdraw or modify restrictions on the ground that a change in its development policy would render unnecessary the restrictions which it is applying under this Section.] But price based measures can have a delayed impact and inflationary effects and may not permit efficient allocation of scarce resources in a country like India where income distribution is skewed, Narayanan told the BOP committee. As for suggestions that other defence mechanisms could be used by India (such as safeguards actions, anti-dumping measures etc), Narayanan said that India's law would need to be amended, and institutions created, to put these into effect -- implying that this too needed time. Narayanan said that even now there were a number of barriers in existence in the industrial countries denying access to products of developing countries. This seemed to be a reference to the industrialized nations maintaining quotas and other barriers against imports of textile and clothing products, and high tariffs and tariff-quotas on agricultural products, The formal meetings of the BOP committee was recessed to enable further informal consultations to be held. The consultations are due to resume Tuesday afternoon.