Step Out of a One Stop Shop

Context: Policy of National self-sufficiency must also consider short and long term consumer/manufacturer welfare.

Policy of National Self Sufficiency/Protectionism Strategy/Country of Origin Rules (COR)

• Customs officers to check and verify ‘certificates of origin’: granted under various trade agreements

• Legal Metrology Rules, 2011: requires disclosure of country of origin or assembly or manufacture.
• Draft Consumer Protection E-Commerce Rules, 2020: mandates that sellers on e-commerce sites disclose the ‘country of origin’ of the goods.

Objectives

• Check abuse of FTAs and PTAs.
• Counter unfair trade measures in particular countries by imposing anti-dumping duties.
• Correct attribution of nationality assists in consumer choice. 

Challenges 

• Absence of rules for determining the country of origin:  for purposes of Indian law, other than for the FTAs. 
• Small and medium-sized sellers and importers will likely find verification of the veracity of declarations made by foreign parties to be expensive and difficult.
• COR will lead to an increase in prices entailed by increased compliance and paperwork. 
• Unviability, or inability, of Indian sellers to implement COR regulations: will also lead to product unavailability.

How important is it for India to import whatever it is importing from China?  

• India has a substitute /alternative source: countries of items where China has more than 50% import share.
• Most modern mass-production processes can be performed in most countries and climates with almost equal efficiency.
• Import dependency on China may not always be in India’s long-term economic interests, or short-term and long-term non-economic interests.
• Chinese exports are priced artificially low: due to their implicit subsidies
• Chinese output and input prices are distorted and they don’t conform to market norms.
• Case for diversification away from China: if the price differential between a Chinese import and import from some other country (or sourced domestically) is less than 15%.
• Once China conforms to all WTO principles price differential will disappear.

Conclusion: Policy of national self-sufficiency must make a balance between overregulation, protectionism and import dependency.