Chief Ministers of States across the country need to emulate Kerala, which plans to participate in foreign economic policy formulation that impacts peninsular India. Kerala’s Agriculture Minister VS Sunil Kumar recently reached out to Karnataka, Tamil Nadu, Puducherry, Andhra Pradesh and Telengana to lobby with New Delhi for a greater say in tariff negotiations in international relations.
Kerala has conveyed its serious concerns to New Delhi over the Regional Comprehensive Economic Partnership, a proposed free trade agreement (FTA) between India and the 10 member ASEAN states which has a bearing on the southern economies.
The crops common to some of these southern States are coconut, cashew, cardamom, coffee, ginger, turmeric, pepper and rubber, which are vulnerable to imports through the FTA.
Today the import of pepper, which is grown across Karnataka, Kerala and Tamil Nadu, has hit domestic prices drastically.
Karnataka is the country’s largest pepper producer after Kerala and Tamil Nadu. Following the Indo-Sri Lanka Free Trade Agreement (ISLFTA) signed in 2016-17, there was phenomenal increase in the import of spices, especially black pepper and nutmeg from Sri Lanka into India.
Cheaper pepper from Vietnam, the world’s largest pepper producer, illegally entered India through Sri Lanka, Nepal, Myanmar and Bangladesh at eight per cent duty under SAARC agreement as against 70 per cent for other countries. This lowered Indian black pepper prices by 40 per cent during the last fiscal year.
An estimated 40,000 tonnes of pepper was dumped into the country in 2017 which compelled the Directorate General of Foreign Trade to shift import of this commodity and its derivatives from “free” to “prohibited” if the import price is ₹500 or less per kg. Earlier, importers exploited a loophole in the notification of December 6, 2016, where pepper was defined as “free”, and cleared their consignments with payment of a small fine on invoiced value.
As a founder WTO member, India is committed to implementing its various agreements and provisions, which include those on market access, domestic support and export subsidies, agreements on sanitary and phyto-sanitary measures, TRIPS and TBT.
As a result of the agreements, all the quantitative restrictions had to be abolished and non-tariff measures replaced by tariff measures during the implementation period from January 1, 1995, to December 31, 2004.
However, there are certain protection provisions in the form of ‘safety trigger’, customs duties, anti-dumping clauses and 189 countervailing duty rights available to India as to other members of the WTO family.
While ISLFTA has increased Indo-Sri Lankan general trade, there is no scope for increased export of Indian spices to Sri Lanka, as India is a bigger market and Sri Lanka is a smaller one for spices. However, the ISLFTA has helped the spice oils and oleoresin industry of Kerala to get cheap spices, especially light berries of black pepper and nutmeg, through the duty free import of spices from Sri Lanka.
In this backdrop, Kerala’s initiative to act collectively to protect its agricultural economy and lobby with the Centre is an impressive initiative.
Today, New Delhi holds executive power in all matters related to foreign policy as stipulated in Article 246a, 7th Schedule of the Constitution.
However, Prime Minister Narendra Modi has sought participation from State governments in foreign policy, especially to strengthen trade ties and seek foreign direct investment.
In October 2014, the External Affairs Ministry created a new ‘States Division’ “to coordinate facilitation of efforts . . . between . . . Mission/Post(s) and State/Union Territories Governments as well as foreign diplomatic and trade missions in India.” This will enable the States to contribute to foreign policy formulation.
In its 2014 election manifesto, the Bharatiya Janata Party referred to the importance of creating a new spirit of cooperation and collaboration between New Delhi and the States.
Modi stated: “Team India shall not be limited to the Prime Minister-led team sitting in Delhi, but will also include Chief Ministers and other functionaries as equal partners.”
Often, unilateral decisions taken by the Centre create dissatisfaction in the States. For instance, the Centre ceded the Islet of Kachchativu to Sri Lanka in 1974 without any consultation with the Tamil Nadu government. To that extent, the States have historically been distanced from engagement with the Centre over national security and foreign policy issues.
For the first four decades of nationhood, the dominance of the Indian National Congress with not many regional parties, except in Tamil Nadu, explains such a situation. However, with the era of coalition politics since 1991, States have influenced foreign policy decisions.
During the late 1980s, Tamil Nadu’s political leaders lobbied with the Centre to withdraw the Indian Peace Keeping Force and stop further conduct of counter-insurgency operations in Sri Lanka.
The country’s true strength is the sum total of the prosperity of its States which are key drivers of economic growth. While agriculture contributes 18 per cent to GDP, it is noteworthy that 49 per cent of the population is engaged in farming, which merits state support through trade protectionism to the extent possible.
To develop India-Sri Lanka trade, at the cost of poor farmers, for geo-political considerations or counter the rise of China is pathetic policy. For the Ministry of External Affairs to be in tune with the citizenry across the country, it cannot afford to be New Delhi-centric but must have representative offices (apart from regional passport offices) across all State capitals.
Clearly, the Centre and States need to be on the same page to formulate foreign economic policy that does not adversely impact sections of society.
The writer teaches International Relations and Strategic Studies at the CHRIST Deemed to be University, Bengaluru.