The Hindu Business Line : Tariff reduction formula only on bound rates, says Kamal Nath

INDIA on Tuesday made it clear that any tariff reduction formula negotiated under the aegis of the WTO would have to be based only on bound rates and not on applied rates.

Addressing the Unctad stakeholder consultation workshop on `Non-Agricultural Market Access' (NAMA), the Commerce and Industry Minister, Mr Kamal Nath, said that India was determined to counter any attempt to use applied rates as the base for application of a tariff reduction formula.

Applied rates are the rates of import duty that are actually applied and are generally lower than the bound rates.

"This is something that we shall not accept under any circumstances, as it would mean rewriting the July framework. We have put all those insisting on this on notice. This is a fundamental position of ours and non-negotiable," Mr Kamal Nath said.

He added that the July framework clearly specified that the formula - on agriculture or NAMA - would only be on the basis of bound rates.

These remarks of the Minister came in the wake of a call given by some developed countries that there should be "real market access" - by which they mean reduction below current applied rates, irrespective of what the bound rates are.

In the run-up to the Hong Kong WTO Ministerial in December this year, the Government has intensified consultations with various stakeholders including industry on WTO-related issues, especially NAMA.

On NAMA, Argentina, Brazil, and India have proposed a modified Swiss-type formula (based on average tariffs of members) that satisfies the requirements of the July framework and at the same time takes care of the concerns of the developing countries.

The developed countries including the EU and the US have proposed the Swiss formula for industrial tariff reduction.

A Swiss formula is one that results in deeper cuts in higher tariffs and that harmonises the tariff lines around the chosen co-efficient. The bigger the co-efficient the less steep the cut. Thus, the whole negotiation boils down to a choice of co-efficient.

The ABI proposal sponsored by India has mooted that each country should use as a co-efficient the average of its tariff.

"Such a solution would have the advantage of achieving the July framework mandate of deeper cuts in higher tariffs and reducing tariff peaks and tariff escalations, while at the same time permitting developing countries the `policy space' they require," Mr Nath said.

Mr G.K. Pillai, Additional Secretary, Ministry of Commerce and Industry, later told newspersons that about 70 per cent of India's industrial products are bound and that average industrial tariffs stood at about 34 per cent.

Ruling out the acceptance of the Swiss formula in NAMA, Mr Kamal Nath also made it clear at the workshop that there is no mandate for harmonisation of tariffs of different countries.

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