{"id":39834,"date":"2024-02-27T03:40:43","date_gmt":"2024-02-26T22:10:43","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=39834"},"modified":"2025-04-24T19:58:51","modified_gmt":"2025-04-24T14:28:51","slug":"high-duties-curb","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/high-duties-curb\/","title":{"rendered":"Impact of High Duties to Curb Imports from China"},"content":{"rendered":"<h2>What\u2019s in Today\u2019s Article?<\/h2>\n<ul>\n<li>Why in News?<\/li>\n<li>India\u2019s Import from China and Blockade Targeting Chinese Imports<\/li>\n<li>Comparing India\u2019s Tariffs with Other Countries and Adverse Impact of High Tariffs<\/li>\n<li>Indian Government\u2019s Response to Allegations of High Tariffs<\/li>\n<li>Need to Gradually Reduce Duties on Imports from China<\/li>\n<\/ul>\n<h2>Why in News?<\/h2>\n<ul>\n<li>Multiple wings of the government have begun to criticise the Centre&#8217;s moves to gradually raise customs tariffs, particularly the more recent targeting imports of Chinese components and inputs.<\/li>\n<\/ul>\n<h2>India\u2019s Import from China and Blockade Targeting Chinese Imports<\/h2>\n<p><img decoding=\"async\" src=\"https:\/\/vajiramandravi.s3.us-east-1.amazonaws.com\/media\/editor_images\/2024\/2\/27\/12\/40\/10\/65dd8ad2dad39805a68fcb31_OI.PNG\" alt=\"\" \/><\/p>\n<ul>\n<li>India accounts for negligible share in China\u2019s total trade (India is home to barely 3% of Chinese exports), but still accounts for 14% of India\u2019s imports with &#8211;\n<ul>\n<li>Not just inputs for the domestic industry in sectors ranging from electronics to pharmaceuticals and textiles to leather,<\/li>\n<li>But also, capital goods, being sourced from China.<\/li>\n<\/ul>\n<\/li>\n<li>The blockade targeting Chinese imports had gained traction across Central ministries and departments in the aftermath of the Galwan border clash in 2020.<\/li>\n<li>There is an increase in the average tariffs to 18.1% in 2022 from 13% in 2014.\n<ul>\n<li>Moreover, to check cheap quality imports from China, India imposed Quality Control Orders (QCOs) that restrict MSMEs from getting necessary input material.<\/li>\n<\/ul>\n<\/li>\n<li>Tariff hikes have been undertaken multiple times covering well over 500 major item categories since 2016.\n<ul>\n<li>Analysts caution that in some cases where customs duty hikes have been proposed, duties are close to or have effectively crossed the WTO-mandated \u201cbound rates\u201d.<\/li>\n<li>These are the customs duty rates that a country commits to all other members under the most favoured nation (MFN) principle.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Comparing India\u2019s Tariffs with Other Countries and Adverse Impact of High Tariffs<\/h2>\n<p><img decoding=\"async\" src=\"https:\/\/vajiramandravi.s3.us-east-1.amazonaws.com\/media\/editor_images\/2024\/2\/27\/12\/40\/11\/65dd8ad3dad39805a68fcb32_OI.PNG\" alt=\"\" \/><\/p>\n<ul>\n<li>Globally there is no country where tariffs are so high (as in India). India\u2019s tariffs are higher than countries in South East Asia and even Africa.<\/li>\n<li>India is currently negotiating FTAs with developed countries which have maximum tariffs at 60% that too on products such as tobacco. India\u2019s highest tariffs go up to 150%.<\/li>\n<li>These restrictions are now seen to be impacting sectors such as electronics and pharmaceuticals leading to either a loss of\n<ul>\n<li>Domestic output or<\/li>\n<li>Competitive advantage (high production cost rendering India\u2019s exports uncompetitive) for Indian manufacturing.<\/li>\n<\/ul>\n<\/li>\n<li>Industries have warned of the detrimental impact of higher tariffs being used as a protectionism tool.\n<ul>\n<li>India\u2019s high tariffs pose a disincentive to de-risking supply chains beyond China.<\/li>\n<li>As a result, countries such as Vietnam, Thailand and Mexico are offering lower tariffs on components to grab the space vacated by China.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Indian Government\u2019s Response to Allegations of High Tariffs<\/h2>\n<ul>\n<li>The Ministry of Commerce denies these duty increases as \u201cprotectionist\u201d in nature.<\/li>\n<li>India\u2019s stance on hiking tariffs mirrored the broader trend globally, and that New Delhi had shown a renewed interest in signing bilateral FTAs over the last 24 months.<\/li>\n<li>India has chosen to stay out of important mega regional trading arrangements, including the Regional Comprehensive Economic Partnership (RCEP).<\/li>\n<\/ul>\n<h2>Need to Gradually Reduce Duties on Imports from China<\/h2>\n<ul>\n<li>From the perspective of development economics, it makes sense to gradually decrease duties and integrate better with global markets and then negotiate Free Trade Agreements (FTAs).<\/li>\n<li>Protectionism is not nationalism. It only brings inefficiency (at the cost of hurting consumers).<\/li>\n<li>Nearly 8 years of protectionism have not increased India&#8217;s manufacturing share of GDP (~15%), despite several sops, including extraordinary tax advantages.<\/li>\n<li>Therefore, an advanced strategy to use tariffs as a diplomatic tool is the need of the hour; otherwise, the achievements of India&#8217;s manufacturing-focused thrust (including from schemes like PLI) may be in danger.<\/li>\n<li>The MeitY had pushed for a lowering of duties of about 20% on parts including circuit boards, chargers and fully assembled phones, by at least 5% points.\n<ul>\n<li>This was partly agreed to and the government reduced duty on several IT goods ahead of the Interim Budget 2024.<\/li>\n<\/ul>\n<\/li>\n<li>These calibrated changes in duty rates will &#8211;\n<ul>\n<li>Help the domestic industry in capacity creation,<\/li>\n<li>Provide a level playing field,<\/li>\n<li>Easing the raw material supply side constraints and<\/li>\n<li>Enhance ease of doing business.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3>Q1) What is the most favored nation (MFN) principle?<\/h3>\n<p>MFN treatment requires Members to give all other Members the most favorable tariff and regulatory treatment given to any one Member&#8217;s product when importing or exporting &#8220;like products&#8221;.<\/p>\n<h3>Q2) What is the Regional Comprehensive Economic Partnership (RCEP)?<\/h3>\n<p>RCEP is a comprehensive free trade agreement being negotiated between the 10 ASEAN Member States and ASEAN&#8217;s free trade agreement (FTA) partners viz. Australia, China, India, Japan, Korea and New Zealand.<\/p>\n<hr \/>\n<p><strong>Source:<\/strong> <a href=\"https:\/\/indianexpress.com\/article\/business\/trade-diplomacy-govt-depts-red-flag-high-duties-to-curb-china-imports-seek-nuance-in-strategy-9182690\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>Trade diplomacy: Govt depts red-flag high duties to curb China imports, seek nuance in strategy<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The blockade targeting Chinese imports had gained traction in the aftermath of the Galwan border clash in 2020 resulting in a loss of competitive advantage for Indian manufacturing<\/p>\n","protected":false},"author":5,"featured_media":39835,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-39834","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/39834","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=39834"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/39834\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/39835"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=39834"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=39834"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=39834"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}