Not A Zero-Sum Affair

Context: India has suffered once by adopting protectionism. It must learn from past mistakes.

Rising trade protectionism in India

• Rising tariffs: Simple average of India’s tariffs that stood at 8.9 per cent in 2010-11 has increased by almost 25 per cent to 11.1 per cent in 2020-21.
  • The proportion of tariff lines with rates above 15 per cent in 2020-21 stood at 25.4 per cent, up from 13.6 per cent in 2014-15.
• Reversal in political consensus on tariff liberalisation that India followed since 1991. Eg. 2018 budget admitted India’s “calibrated departure” from the policy of cutting tariff rates.
• India is the highest initiator of anti-dumping measures aimed at shielding domestic industry from import competition.
  • According to the WTO, from 2015 to 2019, India initiated 233 anti-dumping investigations, which is a sharp increase from 82 initiations between 2011 and 2014 (June).
  • Anti-dumping initiations by India from 1995 till 2020 stand at 1,071.
  • This is higher than the anti-dumping initiations by US (817), EU (533), and China (292), despite India’s share in global merchandise exports being far less than these countries.
• Anti-market policies: India recently amended Section 11(2)(f) of Customs Act of 1962, giving government power to ban import or export of any good.
  • This is inconsistent with India’s WTO obligations, as WTO allows such provisions only based on certain conditions such as in case of serious injury to domestic industry or balance of payment difficulties or for national security purposes.
• Strengthening non-tariff barriers: Recent amendments to rules of origin requirement under Customs Act, imposed onerous burdens on importers to ensure compliance with the rules of origin requirement.
  • The intent appears to be to dissuade importers from importing goods from India’s FTA partners.
• Aatmanirbhar Bharat and protectionism: Clarion call given by Prime Minister to be “vocal for local” (giving preference to domestically made goods) is creating an ecosystem where imports are looked at with disdain, upsetting competitive opportunities and trading partners.

Conclusion: International trade is not a zero-sum game. India can’t maximise its interests at the expense of others. India should learn from disastrous experience of trade protectionism in the decades before 1991 and recalibrate its policies and preferences.