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The European Union has raised concerns against the proposed telecom manufacturing policy on grounds that it may flout WTO norms.
In a letter to the Secretary, Department of Telecom, the EU said that though India has the right to define a domestic manufacturing policy, it should respect the obligations under international law.
The Ministry of Communication and IT had floated a proposal to reserve 30 per cent of all electronic equipment procurement to items manufactured in India. This includes telecom gear and IT peripherals. When the policy is announced, telecom companies, both private and public sector, will have to buy 30 per cent of their hardware from those that have manufacturing base in the country or face penalty. The policy also gives fiscal benefits to local products in terms lower taxes.
If implemented, it will have major impact on European manufacturers, including Nokia Siemens, Ericsson and Alcatel-Lucent.
“The proposed preferential access measures favouring Indian manufactured products appear to run counter to Article III:4 of the GATT 1994, as such measures would result in imported products facing a less favourable treatment than that given to domestic like products,” the EU letter said.
The letter signed by the Ambassadors of Italy, Finland, Denmark, France, Germany and Sweden has also been sent to the Commerce Ministry.
US seeks clarification
The US Government had also raised similar concerns over this issue earlier as the proposed policy will also impact American manufacturers such as Cisco, HP, Motorola and Dell. The US has specifically objected to bringing procurement by private companies within the ambit of the new policy.
The US has asked, “Could India please clarify how the preference regimes for domestic purchases carried out by private sector enterprises that are licensed by the Government qualify as ‘products purchased for Governmental purposes' so as to constitute government procurement under the terms of the GATT Article III-8a?”
The US has asked this as part of the fifth Trade Policy Review of WTO. Under international trading protocols, WTO members are not allowed to give protection to local products except when procured by governmental agencies.
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