The Hindu Business Line : Allow duty-free border trade in Nathu La: Study

New Delhi April 1 Even as India is wrestling with duty-free goods under free trade area from different countries with which it has forged free trade agreement (FTA), an official study makes a case for locally produced goods in Sikkim and Tibet Autonomous Region (TAR) duty-free border trade, in a bid to realise the potentials of growing India-China trade.

The volume of trade between India and China would reach $40 billion by 2010 even as large proportion of bilateral trade takes place through sea routes.

There has been some interest in opening up trade at the border points with special attention to Nathu La pass, according to a latest study on the potential of Indo-China Border Trade through Nathu La.

On the initiative of the Union Minister of State for Commerce, Mr Jairam Ramesh, the National Council of Applied Economic Research (NCAER) conducted a study whichargues that the advantage of Nathu La over other extant Lipulekh and Shipkila passes is the presence of motorable roads on both sides of the border.

Safety valve

The study said the list of commodities permitted for duty-free bilateral trade (import and export) needs to be re-defined keeping in view the current production structures of Sikkim and TAR regions. The increased demand from across the border would diversify the subsistence economic activities into commercial-oriented ones.

Indo-China trade through Nathu La will substantially improve economic welfare of local people in Sikkim and other neighbouring areas by affecting the implicit real wage rate.

Arguing that open trade would act as a safety valve to minimise informal Chinese imports entering into India through certain other routes, including one through Nepal, the study suggests sequencing of trade expansion plan through Nathu La.

In 2007-08, it suggests new list of commodities should be prepared through bilateral discussion and circulated to all concerned for conduct of border trade.

MFN status

In the period 2007-09, a modern customs check-post with all required facilities should be set up near Nathu La, the study pointed out. Even as the proposed expansion of roads and development of other support services should be concurrently carried out at a faster clip. In 2009-10, MFN (most favoured nation) trade might be allowed, duty-free border trade is to proceed simultaneously.

The study said an open trade regime based on MFN basis has certain advantages. Unlike in duty-free border trade in which there is physical movement of the traders from both sides into other country's border, the MFN trade is based on movement of goods and not people. This would have a positives defence edge over the traditional duty-free border trade.

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