The Hindu Business Line : Trade in the right spirit

The need of the hour is for the rich countries to make a "development concession" for the world’s weak economies which is as yet still not forthcoming.

The WTO appellate body’s report on the India-US dispute on wine and spirit import duties, released last month, faults the panel judgement of June that favoured India. The importance of the October ruling is two-fold: first, New Delhi does not have to roll back its current import duty structure and, second, the report makes a symbolic point regarding imposition of import duties at a time when the world economy is in the grip of a developing recession.

Indeed, this is a time to encourage international trade by rolling back import duties of all kinds so that export-led employment in some economies can be encouraged while in some others, critical imports for infrastructure development can be enabled at a reasonable price. But WTO rules governing world trade are of a more permanent nature and in normal circumstances, there is a clear need to protect the interests of domestic players from being swamped by cheap imports. Seen in this perspective, the wind is taken out of the symbolic value of the appellate body’s ruling. This apart, the US Trade Representative, Susan Schwab, has said that the ruling has "reaffirmed a fundamental WTO rule that members cannot impose duties on imports that exceed their tariff commitments". This clearly shows the mechanistic approach of countries such as the US to international trade issues which is wholly at odds with the Doha Development Round approach. Indeed, this is a fundamental reason why the Doha Round negotiations have got stuck in interminable wrangling. The need of the hour is for the rich countries to make a "development concession" for the world’s weak economies, which is as yet still not forthcoming. It remains to be seen whether the incoming Obama Administration will initiate any meaningful change in this attitude.

As far as the specific import duty structure on alcoholic beverages is concerned, the appellate body has not recommended any changes. This can be interpreted as recognition of the fact that the structure, as it now stands, is WTO-compatible, something that New Delhi has rightly touted as vindication of its stand. After all, it is not the basic Customs duty on such beverages that is at issue here but the high internal taxes imposed on comparable domestic products by some States. The additional import duties have been imposed to provide a level playing field for the domestic players, which is basically what has been challenged by Washington (and other exporters). Equally important is the fact that, over time, New Delhi has lowered the import duties following pressure from exporters, which probably has also been noted by the WTO dispute-resolution authorities.

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