Download - China and International Trade
China and International Trade: Implications for Indian Business
Ritesh Kumar Singh
Contents
India-China Bilateral Trade
China as an Opportunity
China as a Threat
Factors favoring Chinese exports
Case Studies
China & Imports
India: Determinants of Export Competiveness
Export Incentives & India
India’s Options
India-China Bilateral Trade
Value
Composition
China as an Opportunity
China as a cheap source for procuring importantinputs such as power equipments, auto-components,electronics & computer hardware, pharmaceuticalingredients and coking coal
China as an important market for India’s exports
China as a Threat
Indian businesses feel threatened because of cheap import ofmanufactured goods from China in domestic as well as India’s exportmarkets - traditional as well as non-traditional Latin America & Africa
Proposed policy changes/realities that will cause serious threats toIndian industry from China
– Sectoral negotiation under NAMA in WTO Doha Round which aims atdeeper tariff cuts in 14 sectors (including chemicals and allied sectors,electrical/electronics, industrial machineries, textiles & clothing)
– Inevitable market economy status to China by 2015 which will make itdifficult to use WTO trade remedial measures (e.g. anti-dumping) againstcheap Chinese imports
– Proposed free trade pact with China
Factors favoring Chinese Exports
Low real wages & near absence of industrial disputes and lockouts in China
Cross-subsidization of productive/corporate sector by Chinese households through Government controlled financial institutions
Deliberately undervalued exchange rate makes Chinese exports cheaper and imports costlier
Domestic availability of cheaper raw materials through use of export restricting measures like export quotas, export duties, export licensing & minimum export price requirements
Subsidy inherent in the availability of government-acquired land, cheap power and looser environmental standards
Case Studies
China’s export duty and its impact on Indian Fluorine Chemical Industry
Chinese export duties on coking coal and its impact on Iron & Steel Industry
China and Imports
China uses several non-tariff trade barriers to restrict access to its domestic market:
– Application of unique Chinese national standards despite the existence of well established international standards,
– Violation of national treatment principles on standards applied to imported & domestic products
– Use of taxation system to discriminate against imports
India: Determinants of Export Competitiveness
Enabling Policy Environment– Export import formalities
– Restrictive FDI regulations
Infrastructural Deficiencies– Overall poor infrastructural facilities: World
Competitiveness Report by World Bank
– Poor trade infrastructure in particular ports, inland connectivity, customs procedures
Export Incentives and India
To comply with India’s commitment at WTO, export incentives will have to be phased out once India achieves the GNP per capita of USD 1000 at 1990 prices, a likely scenario by 2012-13
India’s Options
Ways & means to tap – Fast-growing China, as an export market and/or – A supplier of cheap inputs to improve cost competitiveness of Indian industry
Resisting WTO incompatible Chinese trade measures through bilateral negotiation or WTO Dispute Settlement Mechanism
Diversification of Export markets into relatively unexplored territories of Latin America and Africa
Remodeling the role of Indian Government from that of an ‘Incentive-giver‘ to a ‘Trade-facilitator’
Effective cooperation between India’s trade negotiators and Indian businesses so that their trade objectives are taken into account for formulating/finalizing agenda for bilateral and multilateral trade negotiations
• Thank You!
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