Uncompetitive imports call for relook at India's China trade policy

KOLKATA: Is India enriching China and allowing it to occupy our land?

A study shows India pays more for goods from China that it could buy from elsewhere at a lower price since the era of cheap Chinese goods appears to be coming to an end. The land of dragons has struggled to keep its cost competitiveness going because of rising wages, land prices and taxes. The ascent of the renminbi or yuan has also made the world's largest manufacturer more expensive. The Sino-Indian bilateral trade took off during the last decade to nearly $70 billion (about 4.2 lakh crore) at the end of 2012 and is expected to touch $100 billion (about 6 lakh crore) in 2015. It certainly looks impressive, but the magnitude of uncompetitive imports calls for a relook at the bilateral trade policy, argues Prof SK Mohanty, who did a study on Sino-India trade relationship on behalf of the Reserve Bank of India

The volume of uncompetitive imports from China rose from $4.49 billion in 2007 to $7.15 billion in 2008, but declined to $6.6 billion in 2009. The relative size of this to total imports was very high, ranging from 18.6% in 2007 to 25.4% in 2008. In fact, nearly one-third of 3,876 items imported by India in 2009 proved costlier.

"It is a matter of concern as the share of uncompetitive products in total is increasing over a period of time. They are both in terms of the number of products imported and also in value terms," says Prof Mohanty of Research and Information System for Developing Countries in the study titled 'India China Bilateral Trade Relationship'.

Uncompetitive imports are concentrated in four sectors -- chemicals, textiles, base metals and machinery with about 75-80% share of total uncompetitive imports during 2007-09. Imports of minerals, plastics, gems & jewelleries, and automobile parts from China have also turned out to be uncompetitive. The combined share of these eight sectors exceeded 93% of total uncompetitive imports during 2007-09.

Many believe the rising labour cost in China is to be blamed primarily. In fact, China is gradually withdrawing from the lower end of the textile sector, and if the trend continues, the production base of textiles and clothing will slowly shift to other countries, as has been the case with the textile industries of a number of East Asian countries in the past.

This could prove a blessing for India which has a large textile sector. Prof Mohanty suggests India should start preparing itself by getting into partnership with foreign firms to establish production centres on its shore for mass production of garments. "The Chinese phase-out from the garment industry may be an opportunity for India to replace it in the global market in a phased manner."

The automobile industry both in India and China has expanded rapidly during the last two decades and India enjoys a competitive edge in auto components, small-cars and two-wheeler segments. However, the study showed that India's imports from China in these product segments are turning out to be uncompetitive, and imports of these products can be managed efficiently from other competitive suppliers. India is also emerging as competitive player in the niche area of auto designing, which is related to the IT sector.

These trends indicate Indian firms can venture into the Chinese market in certain segments though they are likely to face strong competition from various domestic firms and also from other foreign competitors. The distribution of uncompetitive imports was skewed across various technology intensive sectors. While uncompetitive import growth was 43% per annum for medium-tech, similar estimates for the high-tech sector was 102.2% during 2007-09. India's imports in these two sectors are likely to grow in future in view of the current emphasis on industrialisation as discussed in the country's new manufacturing policy.

As an emerging country, India's import of intermediate products has been important for fostering industrialisation, meeting domestic demand and addressing its export needs. India is likely to gain from its engagement with China, but a realignment of the product basket may be needed to preserve India's long-term interests. This requires restructuring of India's domestic and external policies in the first place.

Source: economictimes.indiatimes.com

India, China influencing pattern & scope of international trade: WTO

MELBOURNE: Emerging economies like India, China and Brazil are no longer "policy takers" but are significantly influencing the pattern and scope of international trade, according to WTO Director General Pascal Lamy.

"These emerging powers -- China, India, Brazil, Mexico, Indonesia, Malaysia, South Africa-- and many others are no longer policy takers. "These countries now increasingly influence the pattern and scope of international trade, creating new supply and demand pulls and flexing their influence in international organisations," he said recently at the Richard Snape Lecture here.

Lamy said, "This is no longer the world of the twentieth century dominated by the US pillar on one side and the European pillar on the other. We are in a twenty-first century multi-polar world".
The WTO chief said emergence of some developing countries as key players and as "real contributors" to global dialogue on trade and economics is a fundamental feature of this new geo-political reality. He said the global network of imports and exports is no longer just the North-South paradigm of the past century.

"Increasingly we are seeing developing countries as producers and as markets for each other and this is one of the growing patterns of the new landscape of trade," he added.
The WTO chief said that the in the past 20 years, merchandise trade between developing countries has expanded much faster than the North-South trade.

A recent report by UNCTAD notes that in 2010 South-South exports made up 23 per cent of world trade compared to just 13 per cent in 2000.

"Developing countries are now the largest market for other developing countries. While this is encouraging, the contribution of developing regions to South-South trade is highly skewed," he said.
Asian countries make up more than 80 per cent of South-South trade, with the shares of Africa and Latin America being just 6 per cent and 10 per cent respectively in 2010.

Lamy said that economic ties between Africa and China and Africa and India are growing considerably. "Trade between China and Africa will likely hit upwards of $ 200 billion in 2012, up 25 per cent year on year. If this trend continues, reports are that Africa could surpass the EU and the US to become China's largest trade partner in three to five years," he added.

Nov 28, 2012 |The Economic Times|

Canada - India trade agreement

The Honourable Ed Fast, Minister of International Trade and Minister for the Asia-Pacific Gateway, today announced the conclusion of the seventh round of negotiations toward a Canada-India comprehensive economic partnership agreement. Negotiations took place in New Delhi on February 5 and 6, 2013. “Our government is committed to building on our already-strong ties with India to create a partnership that will lead to jobs, growth and long-term prosperity for workers in both our countries,” said Minister Fast. “More than a million Canadians of Indian origin is clear proof of how both business and people-to-people ties are helping us deepen the Canada-India relationship.”

Negotiations this week were productive and focused mostly on market access and related areas.
A Canada-India joint study concluded that a trade agreement between the two countries could boost Canada’s economy by at least $6 billion. That translates to almost 40,000 new jobs across the country, or a $500 boost to the average Canadian family’s annual income.

Canada has identified core economic opportunities in India in the energy, agriculture, infrastructure and education sectors.

In less than six years, Canada has concluded free trade agreements with nine countries: Colombia, Honduras, Jordan, Panama, Peru and the European Free Trade Association member states of Iceland, Liechtenstein, Norway and Switzerland. In addition to India, Canada is engaged in negotiations with large, dynamic and fast-growing markets, such as the European Union, Japan and the countries that comprise the Trans-Pacific Partnership.

February 6, 2013  |Foreign Affairs and International Trade Canada|

Indian IT exports to grow by up to 14%

 
Nasscom have said that India's information technology and IT-enabled services sectors are expected to grow 12-14% and clock export revenues of $84-87 billion in the next fiscal year.

“Increase in global technology spending and opportunities created through adoption of disruptive technologies are expected to propel growth," the National Association of Software and Services Companies (Nasscom) said in a statement.

“Nasscom expects the industry to clock export revenues of $84-87 billion maintaining a growth rate of 12-14 per cent.

“The Indian IT-BPM industry has demonstrated resilience and agility in the past year. Technology has today become an integral enabler for growth across all sectors and the industry is continuously evolving and innovating to emerge as a strategic partner to its customers.”

Exports from the industry, which counts the US and Europe as its biggest markets, were estimated to have grown 10.2% to $75.8 billion.

Given the economic uncertainty, Nasscom had predicted growth in the sector to be between 11-14% and later said only the lower end of the target would be met.

12/02/2013 By Daniel Hunter |internationaltrade.co.uk|