Geneva: The US and China, among others, are expected to object at the World Trade Organization (WTO) to New Delhi’s customs duties on information and communications technology (ICT) products, particularly mobile phones and other gadgets, on the grounds that India is not adhering to its bound tariff commitments.
Pressure mounts on India over tariffs on ICT items
In a 2 November announcement, the US, European Union (EU), China, Japan, Canada, and Norway indicated their intention to raise concern about India’s “customs duties on ICT (information and communications technology) products” at the WTO.
The six countries are expected to challenge India to clarify on 12 November whether it is adhering to its bound/scheduled tariff commitments on ICT products, according to the agenda reviewed by Mint.
The increase in customs duties up to 20% from 15% on high-end mobile phones and other items, including smart watches which will attract duties up to 20% from 10% last year, and subsequent restrictive measures imposed on ICT products following the sudden spike in trade and current account deficits are said to be inconsistent with India’s scheduled commitments in the Information Technology Agreement (ITA) that came into force on 1 July 1997, said a trade diplomat from a major IT exporting country, who asked not to be named.
India, which is a signatory to the ITA in 1996, is required to eliminate tariffs on a range of products, including mobile phones. But the imposition of tariffs on IT products, including mobile telephones, during the recent Union budget has come under intense scrutiny at WTO’s committee on trade in goods and the committee on ITA.
Significantly, the US and China, which are fighting a trade war on alleged theft of intellectual property by Chinese semiconductor companies and imposition of forced transfer of technologies on American patent holders—closed ranks on India’s customs duties on ICT products, said an analyst, who asked not to be named.
It remains to be seen whether the sponsors will raise a trade dispute following the Council for Trade in Goods (CTG) meeting.
India had already come under pressure at the previous WTO goods council meetings over the customs duties on smartphones, base stations, printer ink cartridges and other ICT products. The customs duties on IT products, they said, are inconsistent with the commitments India undertook to eliminate tariffs in the ITA.
In the past, the EU had said that India is bound by a zero percent duty in its GATT (General Agreement on Tariffs and Trade) commitments. The EU had alleged that India’s tariff on two additional ICT products—digital still video cameras, and other electronic integrated circuits (EICs)— were not in conformity with its scheduled commitments for zero percent tariff.
The US had also pointed out apparent inconsistencies in India’s tariff structure on IT products. Washington sought to know how India can increase import duties on mobile phones against its scheduled binding trade commitments. Japan had questioned India’s justification that the purported items were not covered in the ITA saying India’s measures were inconsistent with tariff classification.
In response, India had explained that the IT goods in question do not fall under ITA. It had all along maintained that IT and telecom technologies have evolved with new applications and equipment which were neither existent nor even conceived at the time of signing the ITA-I in December 1996, at the WTO’s first trade ministerial meeting in Singapore.
Therefore, India argued, the new IT products including the latest Apple phones and other IT products do not strictly fall under the scope of ITA-I agreement. India maintained it is not undertaking any fresh commitments under ITA-2 agreement that came into force more than two years ago.
Meanwhile, India is also coming under pressure on its sugar subsidies. Australia and the EU have raised the issue to be discussed at the same CTG meeting on 12 November.