Context: As per recent reports, about 85 per cent of 11,000 products offered at zero tariffs by India to least developed countries (LDCs) under the duty-free quota-free (DFQF) scheme of the World Trade Organisation (WTO) remains unutilised.
About the duty-free quota-free (DFQF) scheme:-
IMAGE SOURCE: BUSINESS STANDARD
- Background: The decision to provide duty-free quota-free (DFQF) access for least developed countries (LDCs) was first taken at the WTO Hong Kong Ministerial Meeting in 2005.
- Least developed countries (LDCs): The WTO recognizes as least-developed countries (LDCs) those countries, which have been designated as such by the United Nations.
- There are at present 48 LDCs on the UN list.
- 31 of these are members of the WTO.
- It requires all developed and developing country members to provide preferential market access for all products originating from all LDCs.
- India became the first developing country to extend this facility to LDCs in 2008.
- It provided market access to 85% of India’s total tariff lines.
- It aimed to integrate LDCs into the global trading system and improve their trading opportunities.
- The scheme was expanded in 2014 providing preferential market access on about 2% of India’s tariff lines to LDCs.
- India offers 11,506 preferential tariff lines to LDCs of which 10, 991 are duty-free.
- Of the duty-free tariff lines, 1,129 are agricultural goods and the remaining 9,862 are non-agricultural goods.
Key findings of WTO data for 2020:-
- 85% of India’s tariff lines show a zero utilisation rate compared to 64% by China.
- Among the remaining, only 8% demonstrate a utilisation rate of above 95% against 17% by China.
- Noteworthy amounts of LDC exports are entering under non-preferential (most favoured nation) tariff routes into India even though they are covered by the Indian preference scheme.
- There is a significant variation between the beneficiary LDCs.
- Guinea and Bangladesh: show the highest amount of eligible imports
- Benin: reports a utilisation rate of 98%, the highest of all beneficiary countries.
- Afghanistan: Fruits and nuts worth $325 million exported were entered under the most-favoured-nation (MFN) despite the preference margin of 28 percentage points being offered under the Indian preference scheme.
- Most-favoured-nation (MFN): treating other people equally.
- Under the WTO agreements, countries cannot normally discriminate between their trading partners.
- If a country grants someone a special favour (such as a lower customs duty rate for one of their products), they have to do the same for all other WTO members.
- This principle is known as most-favoured-nation (MFN) treatment.
- Chad: exports of mineral fuels, oils and products, etc, of a value of $48 million are entering India under MFN.
The World Trade Organization (WTO):-
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- The WTO is the international organization whose primary purpose is to open trade for the benefit of all.
- Objective: to help producers of goods and services, exporters, and importers conduct their business.
- WTO agreements are negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments.
- Ministerial Conference: the topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. (UPSCE CSE:12th WTO Ministerial Conference)
- The General Agreement on Tariffs and Trade (GATT) traces its origins to the 1944 Bretton Woods Conference, which established two key institutions, the International Monetary Fund (IMF) and the World Bank.
- An agreement as the GATT signed by 23 countries in Geneva in 1947 came into force on Jan 1, 1948, with the following purposes:
- To phase out the use of import quotas.
- to reduce tariffs on merchandise trade.
- Uruguay Round (1987-1994): culminated in the Marrakesh Agreement, which established the World Trade Organization (WTO).
- The WTO incorporates the principles of the GATT and provides a more enduring institutional framework for implementing and extending them.
- The GATT 1994 is an international treaty binding upon all WTO Members.
- It is only concerned with trade in goods.
- Members: it has had 164 members since 2016.
- WTO is not an UN-specialized agency.
- It is the only global international organization dealing with the rules of trade between nations.
- It is a forum for governments to negotiate trade agreements.
- It is a place for them to settle trade disputes.
- It is a place where member governments try to sort out the trade problems they face with each other.
MUST READ: Reviving WTO
SOURCE: BUSINESS STANDARD
PREVIOUS YEAR QUESTIONS
Q.1) “Rapid Financing Instrument” and “Rapid Credit Facility” are related to the provisions of lending by which of the following: (2022)
- Asian Development Bank
- International Monetary Fund
- United Nations Environment Programme Finance Initiative
- World Bank
Q.2) With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? (2020)
- Quantitative restrictions on imports by foreign investors are prohibited.
- They apply to investment measures related to trade in both goods and services.
- They are not concerned with the regulation of foreign investment.
Select the correct answer using the code given below:
- 1 and 2 only
- 2 only
- 1 and 3 only
- 1, 2 and 3