India and APEC An Appraisal
RIS ASEAN-India Research and Information System for Developing Countries Centre at RIS
India and APEC: An Appraisal
India and APEC: An Appraisal
by
V. S. Seshadri
ASEAN-India Centre at RIS ASEAN-India Centre at RIS ISBN: 81-71299-108-4
Copyright © AIC, 2015
Published in 2015 by:
ASEAN-India Centre at RIS ASEAN-India Centre at RIS
Core IV-B, Fourth Floor, India Habitat Centre Lodhi Road, New Delhi-110 003, India Ph.: +91-11-24682177-80, Fax: +91-11-24682173-74
: E-mail: [email protected] Website www.ris.org.in, http://aic.ris.org.in Contents
Foreword by Ambassador Shyam Saran...... vii Acknowledgments...... ix List of Abbreviations...... xi
Exe ...... 1
cutive Summary ...... 9 ...... 9 India and APEC: An Appraisal ...... 10 1. Introduction ...... 11 2. Evolution of APEC ...... 12 3. APEC at 25 ...... 13 4. Institutional and Organisational Structure of APEC ...... 14 5. APEC’s Successes ...... 14 6. APEC’s Perceived Shortcomings ...... 7. How Relevant is APEC in the Changing International Context? ...... 28 8. Should India Join APEC? 15 ...... 29 9. Will India be Accepted? Annexures 10. Conclusion and Way Forward ...... 33
Annexure 1 : Structure of APEC ...... Annexure 2 : APEC Sectoral Ministerial Meetings ...... 3735 Annexure 3 : APEC Best Practices/Guidelines Sectoral...... Best Practices 39 Annexure 4 : APEC Initiatives/Action...... Plans in Vogue 41 Annexure 5 : Key APEC Targets ...... 43 Annexure 6 : Various APEC Centers ...... Annexure 7 : APEC ‘Pathfinder’ Initiatives 45 ...... 47 Annexure 8 : Bogor Goals and Osaka Action Agenda: A Comparative Study of Laws and Practices in India and Select...... APEC Economies 79 Annexure 9 : APEC and Indian Customs ...... 101 Annexure 10 : APEC and Liberalisation of Trade on Environmental Goods: A Brief Note ...... Annexure 11 : APEC and ITA-2 ...... 105111 Annexure 12 : India’s...... Trade and Investment with APEC Economies 117 Endnotes...... List of Tables and Figures
Tables ...... 49 ...... Comparison of the MFN Applied Tariffs for India and APEC Members ...... Average MFN Applied Tariffs of Selected APEC Members and India 50 ...... Trade Deficit as Percentage of Exports 51 ...... Profile of Specific Trade Concerns on SPS/TBT Issues 53 ...... GP Regimes, Recent Improvements and Planned Changes 55 ...... 60 Number of Sub-sectors within Each Sector Committed under GATS and RO 59 ...... STRI for Selected Countries ...... 68 Investment Regimes in India and APEC Countries 65 ...... 71 FDI Regime in Selected Sectors in China, India, Indonesia and Malaysia ...... 73 Ranking of Countries on investment-Related Indicators ...... 74 Implementation of International IPR Treaties ...... Patent Applications by IP Office ...... 81 Patent Granted by IP Office 75 ...... 86 SCFAP: The Chokepoints ...... 89 Overview of Increase in ICEGATE Usage ...... 91 Logistic Performance Index of Selected APEC Members and India ...... 94 Cost per Container and Number of Documents Requirement for Exports and Imports ...... 103 APEC Electronic Individual Action Plan on Trade Facilitation of Select Countries ...... 108 India’s Trade in Environmental Goods ...... 108 India’s Trade in ITA-1 Products ...... 111 India’s Applied Tariffs on ITA-2 Products ...... 112 APEC’s Global Trade and FDI Profile ...... 113 India’s Exports and Imports from APEC ...... 114 India’s Trade with Sub-regions within APEC ...... 114 India’s Services Exports to APEC ...... India’s Services Imports from APEC ...... 116 India’s FDI Inflows from APEC 115 India’s OFDI to APEC List of Figures ...... 60 ...... 90 STRI for Selected Countries Ranking of Selected APEC Countries and India: 2014 Foreword
Ambassador Shyam Saran Chairman, RIS
India is a member of several regional and sub-regional forums covering East and South East Asia as also of the larger East Asia Summit. It is, however, not part of the Asia Pacific Economic Cooperation (APEC) forum that was established twenty five years ago. This is even as India remains a gateway to the Asia-Pacific and has been a leading emerging economy in this region.
As India continues to take strides in fostering accelerated economic development, India’s continued absence in APEC seems a void. India’s participation in APEC could help to further consolidate India’s quest to speed up growth and to also integrate closer with its neighbouring Asia-Pacific economies. It can also help India to become familiar and more involved with the sweeping changes taking place in the region towards reducing transaction costs, improved connectivity, greater supply chain linkages and shared production networks. Furthermore, it can have a catalytic impact on several recent initiatives by the government such as the ‘Make in India’ campaign or the move to improve India’s ranking in the ‘Ease of Doing Business’ Index.
The ASEAN-India Center at RIS had been tasked by the Ministry of External Affairs (MEA) to undertake studies with a view to explore how India’s ties with East and South East Asia can be further strengthened. This Study on ‘India and APEC: An Appraisal’ is the first in this exercise with Dr. V. S. Seshadri as the principal investigator. It examines the desirability of India joining APEC. It also looks at how India may be able to cope with and contribute towards the work programme and aspirational goals of APEC. The study goes on to indicate elements of a possible approach by which India’s membership could be further pursued with APEC members, many of whom are also India’s strategic partners. India and APEC: An Appraisal
APEC’s activities cover a wide variety of disciplines. It is also unique in the sense of involving the business community in a consultative manner in its activities. It is, therefore, important that the recommendations made in the study are examined by all stakeholders including trade and industry circles.
A suitable strategy needs to be devised if it is decided to pursue membership. It is hoped that this study can be of some assistance in this regard. Shyam Saran
viii Acknowledgements
This study was undertaken under the overall guidance of Ambassador Shyam Saran, Chairman, RIS. The lead investigator was Dr. V. S. Seshadri, Vice-Chairman, RIS who also authored the main report. Annexure 8 of the Report, which has done a comparative study of laws and practices in India and select APEC economies, was contributed by a team from the Center for WTO Studies, IIFT, led by its Head, Shri Abhijit Das. Annexure 9 of the Report on ‘APEC and Indian Customs’ was contributed by Shri Shashank Priya, Commissioner (GST Cell), New Delhi in his personal capacity. Ms. Aditi Gupta, Consultant, RIS assisted in the preparation of Annexure 10 on trade in environmental goods and Annexure 11 on ITA-2. Technical assistance in compiling the report was provided by Mr. N. N. Krishnan. The publication of the report was undertaken by the Publications Unit, RIS consisting of Shri Tish Malhotra, Mr. Sachin Singhal and Ms. Ruchi Verma.
This study under the aegis of ASEAN-India Centre at RIS was supported by a grant from the Ministry of External Affairs (MEA) which is gratefully acknowledged. The author is also thankful to Ambassador Anil Wadhwa, Secretary (East), Ministry of External Affairs (MEA) and Ms. Pooja Kapur, Joint Secretary (ASEAN Multilateral), Ministry of External Affairs (MEA) for their support and encouragement.
The author also received active support from Prof. Sachin Chaturvedi, Director General of RIS, Dr. Prabir De, Coordinator of ASEAN-India Centre at RIS and other faculty members of RIS during the course of the study. The High Commission of India, Singapore facilitated the author’s several interactions in Singapore. Usual disclaimers apply.
List of Abbreviations
ABAC : APEC Business Advisory Council ABTC : APEC Business Travel Card ACP : Accredited Clients Programme ACTA : Anti-Counterfeiting Trade Agreement AEO : Authorised Economic Operator ANSSR : APEC New Strategy for Structural Reforms APEC : Asia-Pacific Economic Cooperation APMEN : Asia Pacific Model E-Port Network ARTS : Automated Recording and Targeting System ASEAN : Association of South East Asian Nations ASPIRE : APEC Science Prize for Innovation, Research and Education BIS : Bureau of Indian Standards BITs : Bilateral Investment Treaties CBEC : Central Board of Excise and Customs CBNI : Capacity Building Needs Initiative CBPR : Cross Border Privacy Rules CCEA : Cabinet Committee on Economic Affairs CCS : Cabinet Committee on Security CESTAT : Customs, Central Excise and Service Tax Appellate Tribunal CFS : Container Freight Stations CL : Compulsory Licensing CTE : Committee on Trade and Environment CVC : Central Vigilance Commission DGCIS : Directorate General of Commercial Intelligence and Statistics DGFT : Directorate General of Foreign Trade EAS : East Asia Summit ECOTECH : Economic and Technical Cooperation EDI : Electronic Data Interchange EEMRA : Electrical and Electronic Mutual Recognition Arrangements EGA : Environmental Goods Agreement EGS : Environmental Goods and Services FDI : Foreign Direct Investment FII : Foreign Institutional Investor FIPB : Foreign Investment Promotion Boards FTA : Free Trade Agreement FTAPP : Free Trade Area of the Asia-Pacific GATS : General Agreement on Trade in Services GATT : General Agreement on Tariffs and Trade GDP : Gross Domestic Product GIS : Geographic Information System India and APEC: An Appraisal
GoS : Group on Services GP : Government Procurement GPA : Government Procurement Agreement GPEG : Government Procurement Experts’ Group GVC : Global Value Chain IAPs : Individual Action Plans ICD : Inland Container Depots ICEGATE : Indian Customs EDI Gateway ICES : Indian Customs EDI System IIFT : Indian Institute of Foreign Trade ICT : Information and Communication Technology IEC : International Electro-technical Commission IEG : Investment Experts’ Group IFAP : Investment Facilitation Action Plan IIA : International Investment Agreement IMF : International Monetary Fund IPEG : Intellectual Property Expert Group IPPs : Independent Power Producers IPRs : Intellectual Property Rights ISO : International Organisation for Standardisation ISPs : Internet Service Providers ITA : Information Technology Agreement JNCH : Jawaharlal Nehru Custom House JNPT : Jawaharlal Nehru Port Trust LLP : Limited Liability Partnership LPI : Logistics Performance Index LSIF : Life Science Innovation Forum MFN : Most Favoured Nation MIDA : Malaysian Investment Development Authority MIS : Management Information System MNEs : Multi National Enterprises MRA : Mutual Recognition Agreement MRI : Magnetic Resonance Imaging MSE : Micro and Small Enterprises MSMED : Micro, Small and Medium Enterprises Development NAMA : Non-Agricultural Market Access NSWNBPs : NationalNon-Binding Single Principles Window NIC : National Informatics Centre
NTBs : Non-Tariff Barriers NTMs : Non-Tariff Measures OAA : Osaka Action Agenda OECDxii : Organisation for Economic Cooperation and Development List of Abbreviations
OSPCA : On Site Post Clearance Audit PCA : Post Clearance Audit PECC : Pacific Economic Cooperation Council PSU : Policy Support Unit RCEP : Regional Comprehensive Economic Partnership REI : Regional Economic Integration RES : Remote EDI System RMS : Risk Management System RTA : Regional Trade Agreement SAP : Sevices Action Plan SCCP : Sub-Committee on Customs Procedures SCFAP : Supply Chain Connectivity Framework Action Plan SCSC : Sub-Committee on Standards and Conformance SEZ : Special Economic Zone SIAM : Society of Indian Automobile Manufacturers SOM : Senior Officials’ Meeting SMEs : Small and Medium Sized Enterprises SPS : Sanitary and Phytosanitary SSC : Secure and Smart Container STAR : Services Trade Access Requirements STRI : Services Trade Restrictiveness Index TBT : Technical Barriers to Trade TDRs : Transferable Development Rights TFAP : Trade Facilitation Action Plan TISA : Trade in Services Agreement TPP : Trans-Pacific Partnership TRIPS : Trade-Related Aspects of Intellectual Property Rights TRS : Time Release Survey WIPO : World Intellectual Property Organisation WTO : World Trade Organisation WCO : World Customs Organisation
xiii
Executive Summary
1.
The Asia-Pacific Economic Cooperation advancing the Asia-Pacific partnership. (APEC) forum is a premier regional Key among them was its endorsement institution promoting trade, investment of a roadmap for achieving a Free Trade and other linkages among economies of Area of the Asia-Pacific (FTAPP). The the Asia-Pacific region. India is not a Summit also launched a blueprint for member of APEC but has close political, the next ten year period 2015-25 on economic and strategic ties with many enhancing physical, institutional and of its economies. This Study examines people-to-people connectivity to reach the desirability of India joining APEC. It a seamlessly and comprehensively also probes the question whether India connected and integrated Asia-Pacific. 2. will be accepted if it shows interest. A third major outcome was the adoption th of a blueprint on global value chain APEC celebrated its 25 anniversary 3. development. last year. At the meeting held in Beijing from 10 to 11 November 2014 the The Philippines, Chair of APEC for 2015, Leaders declared that in the quarter has already announced the priorities for century APEC not only made significant APEC during the year. President Aquino contributions to the region’s economic has proposed establishing a more development, social progress and inclusive economic environment across improvement of people’s livelihoods, Asia-Pacific as the main focus. APEC’s but also epitomised the great changes work is to be taken forward under four and rising strategic position of the main themes, viz. enhancing regional Asia-Pacific. The Summit meeting held economic integration, fostering SMEs under China’s Chairmanship also took participating in the regional and global several initiatives towards further economy, strengthening human capital1 India and APEC: An Appraisal
development, and building sustainable through a voluntary process on an ‘open and inclusive communities including liberalism’ model and the roadmap enhancing disaster preparedness. for achieving these goals2 was laid out in 1995 in the Osaka Action Agenda 4. APEC has come a long way since (OAA) in fifteen areas covering trade its first ministerial meeting held in and investment liberalisation and Canberra in November 1989, but facilitation. These efforts were to be continues to be an informal forum supported by economic and technical deciding on the basis of consensus cooperation among member economies. and its action plans and targets are aspirational in nature. Working through 7. APEC has progressively moved from voluntary cooperation it plans and looking at not only measures at the implements its programmes through border but also those inside the border networking, capacity building, sharing (domestic measures affecting trade and of and developing best practices and investment) and across the border. conducting peer reviews to encourage 8. APEC has also come to address a conformity and compliance. It has been range of issues in reaction to evolving an incubator of ideas working closely international developments. Structural with the private sector, mainly through reforms, secure trade, climate change, the APEC Business Advisory Council dealing with pandemics and disaster (ABAC), thereby forming an integral preparedness are some of them. All these part of its consultative mechanism. have resulted in creation of sectoral APEC’s major annual event, that has and functional networks, greater largely been behind its prominence information exchange, identification and effectiveness, has been the Leaders’ of best practices/policy principles, Meeting that has been held every year mutual recognition arrangements, since the Seattle Summit in 1993 with centres of excellence or other facilities, consistent highest level attendance. all of which seek to promote policy 5. APEC’s membership,1 which was 12 development in the respective areas economies to begin with, steadily and foster closer regional economic expanded to 21 , but after 1998 there integration. has been no further expansion. However, 9. APEC is credited with many successes. the relative economic weight of APEC The APEC Business Travel Card that economies has grown, accounting enables accredited business persons now for over 43 per cent of world (the number of APEC card holders population, 57 per cent of world GDP 6. exceed 166,000) to enter all APEC and 47 per cent of world trade. economies virtually visa free has become APEC began with its focus largely very popular. The implementation of on liberalising trade and investment APEC Trade Facilitation Action Plan that continues till date. The Bogor (TFAP-I) from 2002-2006 resulted Goals (announced in 1994) of freeing in reducing transaction costs by at trade and investment by 2010 by least 5 per cent that was followed developed APEC member economies by TFAP-II from 2007-2010 with and by 2020 on the part of developing another similar 5 per cent reduction. APEC members were to be achieved APEC is building on this further by 2 Executive Summary
12.
targeting a 10 per cent improvement These are questions that may be difficult in supply chain performance by 2015. to answer at this stage in a definitive Likewise is the action programme manner. APEC, however, still enjoys launched for bringing about a 25 being a unique informal discussion per cent improvement in the Ease of forum, as a process for promoting Doing Business by 2015. APEC has greater regional integration and as a progressively transformed itself into laboratory of ideas that also allows a process by which a steady stream ideas to be taken forward in whichever of realistic but ambitious targets are way possible. Beyond the objective of sought to be achieved. economic cooperation, an unspoken security element underpinned APEC, 10. Apart from the inherently unattainable which united both sides of the Pacific Bogor Goals on an open liberalism basis, in an unique and effective manner. APEC’s critics have drawn attention to Also unlike EAS, which is one afternoon APEC’s virtual inaction during the Asian with Leaders reading from prepared financial crisis and its general failure texts, APEC was a very different forum to tackle financial issues. Yet, another that allowed Leaders to informally weakness cited is APEC’s voluntary discuss amongst themselves. What is and non-binding nature. Some have, also relevant to note is that all slots however, regarded this as APEC’s for hosting the annual APEC Leaders’ strength. Another criticism voiced Meeting are filled,3 and, therefore, the has been that the development gaps chair for those years, have already been among APEC members had widened 13. taken till 2022. over the years. The 2014 Leaders’ declaration has claimed that APEC Turning to whether India should join has been ‘working to narrow the APEC, this Study has examined three development gap’. It is to be seen if interrelated aspects: (i) How does India during the Philippines Chairmanship, fare on reform and liberalisation in the APEC will be providing new thrust in areas identified by the Osaka Action 11. this direction. Agenda (OAA) and will APEC help it move further?; (ii) Will joining APEC Questions do arise also about the benefit India?; and (iii) What could be continued relevance and importance any possible downside and how do they of APEC. Forums like East Asia Summit all add up? (EAS) and the G-20 Summit bring together Leaders many of whom 14. On several of the reform areas identified also attend the APEC Summit. Will in OAA, India’s progress is comparable APEC continue to attract highest level to that of APEC developing economies attendance particularly after conclusion but in certain others more time may of a binding Trans-Pacific Partnership be necessary. But, the move towards (TPP) that also carries many ‘behind reformCustoms and greater Procedures openness is: clear. the border’ commitments? Already a) India twelve of APEC members participate has launched several initiatives in TPP negotiations. There is also for simplification of customs distinct possibility that more could join procedures and their transparency including China. more or less on the lines of several 3 India and APEC: An Appraisal
APEC developing economies. and mutual recognition are the India is, however, still several key elements of the APEC agenda ranks behind in terms of Logistics in these areas. India also has Performance Index or in respect several institutions established of cost per container to export for formulating and administering or import. India could benefit standards and other non-tariff from best practices and reforms measures in accordance with WTO developed by APEC including on disciplines. But, India needs to implementing Single Window strengthen its standards setting scheme, harmonious blending and implementation capacities. of customs clearance with the Participation by the Bureau of logistics and supply chain network, Indian Standards and sectoral establishment of common industry groups in APEC’s activities standards and mutual recognition including in industry dialogues can of procedures apart from capacity make a significant contribution buildingTariffs: programmes. here.Services : b) India’s average applied d) In respect of existing tariffs of 10.2 per cent for non- GATT commitments, or the revised agricultural products and 33.5 offers under the Doha Round, per cent for agricultural products India’s position appears further are considerably higher than ahead in many sectors than some those for APEC economies. of the APEC developing economies. While India has made significant The Services Trade Restrictive progress on tariff reduction since Index indicates, however, that 2000, making further progress in sectors like accounting, towards tariff reduction will not architecture, legal, air transport be easy. Already, its merchandise and insurance, India is more trade deficit is 38 per cent of its restrictive than others. India, exports, much larger than any however, fares better in relation other developing APEC economy. to engineering, motion pictures, Infrastructure constraints further sound recording, telecom, maritime require a certain minimum level of transport, road freight transport, protection to offer a level playing computer and construction field to domestic industry. Ease services. India’s current services of pressure on these fronts will sector liberalisation initiatives, be necessary before further tariff particularly in the insurance, air reductions can be effected. An and rail transport and construction earlier policy of moving towards services, should also further ASEAN tariff levels could perhaps improve its position. India would be revived when economic gain through participation in conditionsNon-Tariff will Measuresallow. and discussions on guidelines and Standards and Conformance: competency standards in various c) sectors. APEC forums can also facilitate conclusion of MRAs Adherence to WTO rules, between sectoral regulatory harmonisation, standardisation
4 Executive Summary
services in India and in the APEC steadily strengthened. Regimes of economies.Government Procurement: APEC developing economies have similar legal provisions, but some e) have provided more protection India’s procurement regime than the minimum standard in appears quite comparable and the WTO TRIPS Agreement. A new forward looking including in terms IP policy is under formulation in of transparency. It may be further India with the objective of boosting improved if the public procurement creativity and innovation that can bill that was pending before the be expected to further streamline last Parliament is reviewed and India’s IPR regime. It is unlikely, adoptedInvestment . : though, considering intense f) India has a fairly domestic political sensitivities, open investment regime barring that there will be any dilution limited equity caps in certain away from protecting public health sectors like retail, insurance, real concerns or meeting consumer estate development, media, etc. welfare needs. India can, however, APEC economies generally are benefit a great deal from APEC’s more open although they too work on IPRs, particularly in have some restrictions to cover respect of capacity building. domestic sensitivities. However, h) There are a few other areas under India’s rank of 142 on ‘Ease of the OAA including Competition, Doing Business’ is much higher Regulatory Reform, Transparency, than the corresponding scores of Electronic Commerce, RTAs APEC economies. The new Indian and Dispute Mediation. On government is actively engaged most of them, India has well in speedily ratcheting up its rank established mechanisms such as and make India a manufacturing on Competition or Regulation. hub with its ‘Make in India’ and Transparency is also a horizontal ‘Digital India’ campaigns. India theme that is steadily gaining can significantly benefit from currency in governance. This study APEC’s activities on investment does not anticipate any problem facilitation including its ongoing for India being able to report on initiative to make it 25 per cent progress on these issues. easier to do business, particularly in the four areas of: starting a 15. There are several benefits that can business, getting credit, trading flow from India becoming part of the across borders and enforcing APEC process and integrating more contracts, which are of priority to with the dynamic Asia-Pacific region. IndiaIntellectual as well. Property Rights Driving the ‘Make in India’ campaign (IPRs): and sustaining it to success to make g) India an attractive business destination India’s IPR regime is warrants support from every quarter. WTO-compliant and it also has India needs to get more involved in elaborate mechanisms for IPR regional production and supply chain administration that is being networks. Even as India’s trade and
5 India and APEC: An Appraisal
economic links with the Asia-Pacific 18. Joining APEC will, however, invite peer region presently are substantial with review and perhaps peer pressure as APEC economies accounting for 35 well even as APEC is non-binding. APEC per cent of India’s merchandise trade, speaks the language of liberalisation, 27 per cent of FDI inflows and 40 per reform and business facilitation that cent of FDI outflows, these are still not permeate its various activities. India’s commensurate with APEC’s overall reform programme could come under trade or investment profile and India’s greater scrutiny, which, on the one 16. proximity to this region. hand, could be viewed as an unwelcome oversight and a downside. Or it could From a trade policy angle as well it will be seen as an occasional useful nudge be strategically good for India to be by fellow members of the Asia-Pacific part of APEC. India is a participant in region, something that the Government RCEP negotiations, but is not involved can handle in its stride just as periodic in TPP. Should APEC members move reviews by WTO or IMF. to establish FTAAP, it cannot be ruled out that this initiative too could see 19. From the comparative study of OAA India not being part of that process. areas, it becomes evident that in India becoming part of APEC that has certain areas like services, government been the incubator of several regional procurement and competition, India’s initiatives will enhance India’s options progress is quite comparable to those of APEC developing economies. In relation and will also strengthen India’s capacity to areas such as Trade Facilitation for exercising those options as and and Customs Procedures, Standards when decisions may be taken. and Conformance and Ease of Doing 17. APEC has been a premier forum for Business there is clearly a need to regional cooperation in the Asia-Pacific step up. But, these are also areas and India’s non-inclusion has remained where there is already a very keen a void. India is a key maritime nation interest to significantly scale up India’s that in some ways forms the western performance in a short period and gateway to this region. It has from time improve ranking. APEC could provide to time contributed to efforts aimed synergies to India’s efforts on these at maintaining regional maritime fronts. On the other hand, for bringing security and provided assistance when down tariffs more time will be needed disasters have struck. India’s ‘Act East’ as already indicated. Again, for IPRs, policy is also increasingly attending to while the enunciation of a new policy infrastructure and connectivity needs could further streamline India’s efforts in the neighbourhood. While India’s to protect, administer and enforce its participation in the region’s political IPRs regime, no major changes can and security architecture has come possibly be expected that are seen more easily, this has not been the case to dilute public health interests or on the economic front. The Indian consumer welfare. Clearly, India joining Prime Minister joining other economic APEC will have to be explored within Leaders of the region will be a plus for these contours. both India and APEC in terms of the 20. It must be mentioned that not all value that India can bring to the table. 6 developing APEC economies are part Executive Summary
of every APEC activity. Nor does APEC India’s keen interest to work towards act as a caucus in WTO with unified promoting Asia-Pacific integration. The positions. India should be able to find a overall progress made by India and suitable groove for itself even as it can the various business facilitation and exude a keen interest and be supportive reform measures being introduced by of keeping up the momentum of Asia- the new government to significantly 21. Pacific regional integration. improve ease of doing business in India form a good basis for this purpose. Will India be admitted into APEC? Secondly, it would be necessary to The membership strength of APEC get some influential APEC members has remained at 21 since 1997, when to push India’s case. It is noteworthy a moratorium on further expansion that during the recent visit of President was put in place for a ten year period. Obama to India, the US-India Joint While the APEC Leaders’ Meeting Strategic Vision for the Asia-Pacific discussed the question of possible inter alia and Indian Ocean Region that was expansion in 2007 and 2010, they have announced, , mentioned that kept the matter in abeyance, wanting the United States welcomed India’s to ensure that any expansion will interest in joining APEC. Even as India contribute to enhancing the momentum seeks to co-opt US further in this effort, towards regional integration and Australia and Japan, both of which open economies. It is possible that a are regarded as ‘parents of APEC’ perceived need for accommodating and with both of which India is also long pending demands of various sub- developing good bilateral relations, regions of Asia-Pacific, considerations may also be good candidates for of balance, but lack of readiness of some promoting India’s effort. Engaging with of them may also have been factors. China, another influential member In any event, if India has to become of APEC, and members from ASEAN a member of APEC, there will be an countries will also be important. expectation to see that its economic Thirdly, since the chair country has reform and liberalisation process will substantial leverage in setting the contribute towards the APEC process agenda in APEC, some additional of regional integration. Way Forward engagement will also be required with 22. the Philippines, Peru and Vietnam, which are the chair countries for 2015, There are many potential gains that 2016 and 2017, respectively. India can accrue from India’s membership could target to receive a favourable of APEC even as managing some of the decision soon, perhaps latest by ensuing expectations and pressures 2017, when Vietnam will be the chair. will need deft handling. If it is Meanwhile, India should, to convey decided to move ahead with gaining its keen interest, begin participation membership of APEC, a well crafted as a ‘Guest Country’ in some of the effort will be necessary that also Working Groups on trade facilitation articulates well the limitations posed and strengthening of supply chains. by domestic compulsions and the If the Indian economy also gets on to flexibilities needed. A persuasive case a higher growth trajectory soon, APEC can, however, still be made regarding will perhaps find it compelling enough.
7
India andV. APEC:S. Seshadri An Appraisal
1. Introduction Chairmanship in 2015. The institutional and organisational structure of APEC is explained in The Asia-Pacific Economic Cooperation Section 4. Assessment of APEC’s successes and (APEC) forum, a premier regional institution perceived shortcomings are given in Sections promoting trade, investment and other 5 and 6, respectively. Section 7 then examines linkages among economies of the Asia-Pacific how relevant is APEC in the current context of region, has just celebrated twenty five years certain mega FTAs and sectoral plurilaterals of its establishment. India is not a member of under negotiations and the emergence of APEC, but has close political, economic and more regional and international forums with strategic ties with many of its economies. somewhat overlapping mandates. The key This Study surveys the progress that issue of whether India should join APEC is APEC has made towards promoting regional dealt with in Section 8 that looks at three economic cooperation and integration. It inter-related aspects. Firstly, will India be examines the desirability of India joining APEC able to move along with the aspirational goals and looks at possible benefits and downsides. of APEC economies on trade and investment It also probes the question whether India will liberalisation and contribute to greater be accepted if it shows interest. regional integration? This is then followed by Section 2 of the Study dwells on how APEC a discussion of the potential benefits to India has evolved over the years. Section 3 gives an if it joins APEC. Lastly, will there also be a idea about APEC’s present preoccupations downside and possible pressures that it may by drawing attention to the key outcomes have to face. Section 9 analyses whether India, of the recently held APEC Leaders’ Meeting if it decides to join, will be accepted by APEC in Beijing, as also the themes highlighted by economies. Conclusion and way forward are the Philippines that will form the focus of its presented in Section 10.
9 India and APEC: An Appraisal
2. Evolution of APEC developed APEC economies and by 2020 on APEC has come a long way since its first the part of developing APEC members were ministerial meeting held in Canberra in to be achieved through a voluntary process November 1989. On the one hand, while on an ‘open liberalism’ model that meant the certain aspects have remained the same, it benefits of liberalisation will extend to all and continues to be an informal forum deciding not just to APEC economies. The roadmap for6 on the basis of consensus with no legal achieving these goals was laid out in 1995 in standing or treaty binding the members. Its the Osaka Action Agenda (OAA) in 15 areas agreements, action plans and targets are covering trade and investment liberalisation aspirational in nature and not mandatory. and facilitation. Individual Action Plans (IAPs) Working through voluntary cooperation it had to be submitted by each member economy plans and implements its programmes through on an annual basis reporting the progress networking, capacity building, sharing of and made. developing best practices and conducting While aggregate MFN tariffs have generally peer reviews to encourage conformity and come down within the APEC region7 from over8 compliance. It has been an incubator of ideas 17 per cent in 1989 to 5.2 per cent in 2012 , working closely with the private sector, mainly the Bogor Goals of free and open trade were through the APEC Business Advisory Council not reached by developed APEC members (ABAC), thereby forming an integral part of by 2010 and they continue to maintain high its consultative mechanism. APEC’s major tariffs in certain labour intensive sectors like annual event, that has largely been behind its garments and agriculture products. It is also prominence and effectiveness, has been the unlikely that the Bogor Goals will be reached Leaders’ Meeting that has been held every by developed APEC economies even by 2020 year since the Seattle Summit in 1993 with let alone by developing ones. This was in fact consistent highest level attendance. evident in 1997 itself when the proposal for an Early Voluntary Sectoral Liberalisation 214APEC’s, membership, which was 12 economies to begin with, steadily expanded to programme in 15 sectors received a tepid but after 1998, there has been no further response from several member economies. expansion. However, the relative economic Countries are generally more willing weight of APEC economies has grown, to liberalise through an FTA in which they accounting for over 43 per cent of world received reciprocal concessions from partners population, 57 per cent of world GDP5 and 47 or through the Doha round, but not voluntarily per cent of world trade in 2012. With the on MFN basis. Recognition in this regard led members not too keen on institutionalisation, to APEC focussing more on trade facilitation it has only been in recent years that the (that has subsequently been broadened to APEC Secretariat has acquired a longer term business facilitation) and economic and Executive Director. Still, however, manyad hoc of technical cooperation that along with trade its middle level officials are seconded from and investment liberalisation constitute the member governments on a somewhat three pillars of APEC’s work. Under these three basis. broad pillars, APEC has moved from looking APEC began with its focus largely on at not only measures at the border but also liberalising trade and investment that continues those inside the border (domestic measures till date. The Bogor Goals (announced in 1994) affecting trade and investment) and across of freeing trade and investment by 2010 by the border (connectivity, logistics, supply chains, etc.).
10 India and APEC: An Appraisal
Additionally, international developments leadership for its realisation, which will during this period have also had an impact. initially include a strategic study that is to Thus emerged APEC Principles to Enhance be submitted by the end of 2016. The second Competition and Regulation in 1999 to address priority the Summit addressed was to follow the structural and regulatory weaknesses up the initiative begun by the previous Chair that were perceived as having contributed Indonesia on strengthening comprehensive to the Asian financial crisis. After 9/11, the connectivity and infrastructure development. Shanghai Summit in 2001 issued a statement The Summit launched a blueprint for the on counter terrorism that also saw APEC next ten year period 2015-25 on enhancing commencing work on secure trade. Following physical, institutional and people-to-people the global economic crisis, more attention connectivity to reach a seamlessly and was given to structural reforms and behind comprehensively connected and integrated the border measures with APEC endorsing Asia-Pacific. The third priority the Summit a New Strategy for Structural Reform and promoted was adoption of a blueprint on formulating an APEC Strategy for investment global value chain development. The blueprint at the Yokohama Leaders’ Meeting in 2010. sought to build on APEC’s work in the area The Singapore Summit in 2009 also launched of connectivity and in strengthening supply work on facilitating supply chains apart from chains. Finally, the Summit also conveyed adopting an ‘Ease of Doing Business’ Action support for exploring new and promising Plan. Comprehensive connectivity has become economic growth areas such as the Green another area of work beginning from the Bali Economy, the Blue Economy, and the Internet Summit in 2013 that is supported by a multi- Economy. year infrastructure plan and investment. The Philippines, Chair of APEC for 2015, Climate change, dealing with pandemics and has already announced the priorities for APEC disaster preparedness, are some of the other during the current year. President Aquino issues that have been addressed by APEC from has proposed establishing a more inclusive time to time. 3. APEC at 25 economic environment across the Asia-Pacific as the main focus. APEC’s work is9 to be taken th forward• Enhancing under four main Regional themes Economic: APEC celebrated its 25 anniversary in 2014. Integration: At the meeting held in Beijing from 10-11 November 2014, the Leaders declared that This will include in the quarter century, APEC not only made establishment of a task force for the significant contributions to the region’s two year strategic study on FTAAP economic development, social progress and also take forward cooperation and improvement of people’s livelihoods, to reduce customs bottlenecks and but also epitomised the great changes and enhance supply chain performance rising strategic position of the Asia-Pacific. to meet APEC’s declared goals in • theseFostering areas; SMEs Participating in the The Summit meeting held under China’s Regional and Global Economy: This Chairmanship also took several initiatives towards further advancing the Asia-Pacific partnership. Key among them was its will include helping SMEs to meet and endorsement of a roadmap for achieving a benefit from APEC’s goal of making Free Trade Area of the Asia-Pacific (FTAPP). it 25 per cent easier to do business APEC will be the incubator and will provide by 2015; 11 India and APEC: An Appraisal
• Strengthening Human Capital Development: APEC’s ministerial meetings are held on This will also involve a wide range of subjects including energy, launch of further steps to reach the tourism, health, education and HRD, women, goal of 1 million intra-APEC student environment, forestry, food security, mining, • exchangeBuilding annuallySustainable by 2020; and Inclusive telecom, transportation and ocean related Communities: matters. While these have been held depending on the need and/or on the basis of keen This will cover interest shown by a host country (Annexure implementation of APEC’s connectivity 2 gives the full listing of ministerial meetings), and infrastructure development more regular have been the annual ministerial agenda, initiatives in the area of meetings on trade, economy and finance, and environment and green economy and small and medium enterprises apart from the enhanced preparedness to meet the key APEC ministerial meeting of trade and growing onslaught of disasters. 4. Institutional and Organisational foreign ministers just prior to the Leaders’ Structure of APEC Meeting. All these have resulted in creation of sectoral and functional networks, greater information exchange, identification of best Decision making in APEC on policy issues takes practices/policy principles, mutual recognition place at the level of Leaders, the Ministerial arrangements, centres of excellence or other Meetings and the Senior Officials’ Meeting. facilities all of which seek to promote policy Their task is supported at the working level development in the respective areas and to by four Committees dealing with: (a) Trade foster closer regional economic integration. and Investment; (b) Economic Issues; (c) A listing of APEC’s Best Practices and Economic and Technical Cooperation;and (d) APEC’s Action Plans/Initiatives developed Budgetary Issues. . over the years may be seen at Annexures 3 and Reflecting APEC’s main focus, the Committee 4 A list of the key APEC targets may be seen at on Trade and Investment deliberates on most Annexure 5 that also features the aspirational of the substantive issues and is also assisted by goal most recently endorsed, at the Beijing two Sub-Committees (dealing with Customs Summit, of doubling by 2030 the share of Procedures and Standards and Conformance) renewables in the APEC energy mix, including and separate expert groups devoted to Market in power generation, from 2010 levels. Access, Services, Investment, Intellectual Seen at one level, APEC’s Secretariat with Property Rights, Rules of Origin and Electronic only around 60 professional staff could look Commerce. The Economic Committee focusses lean and its annual budget of US$ 4 million on structural reforms and has one subsidiary or so contributed by member governments, working group on Competition Policy and a part of which also goes towards technical Law. The Economic and Technical Cooperation assistance programmes, may appear quite Committee also plays a very important role in small. On the other hand, each year the dispensing technical assistance and capacity chair economy, which hosts around hundred building with inputs flowing from a variety of meetings including the annual Leaders’ expert groups from agriculture to transport Meeting, presumably spends at least US$ 40 and from counter terrorism to tourism. An million. For the US Chairmanship in 2011, the organisational structure of APEC as available in US Congress appears to have provided 10in all an the APEC website may be seen at Annexure 1. appropriation of about US$ 45 million. Other 12 India and APEC: An Appraisal
5. APEC’s Successes members also bear host country expenses to hold meetings numbering another hundred or APEC is credited with many successes. Some more held in various APEC venues. have pointed to the formation of APEC itself For several of APEC’s technical assistance as a key factor that goaded the European programmes, Japan and Australia and also Community to be more forthcoming that certain other members have been providing enabled the Uruguay Round negotiations additional voluntary contributions. APEC to be brought to a close. The Information provides funding for around 100 projects each Technology Agreement (ITA-I) had its origins year. According to the APEC website, more than in APEC even as subsequently it was signed US$ 11 million was available for APEC projects under the aegis of WTO with India also in 2014. To assist the APEC Secretariat and the becoming a party. Some of the APEC members membership, a Policy Support Unit (PSU) that have now similarly floated a proposal to has a separate Director and a board governing freeing trade in environmental goods and it, has also been recently established. Voluntary services that is being more widely discussed contributions are separately taken for funding after the list of goods received approval within PSU, whose task is to provide policy research APEC for bringing down tariffs on them to less and analytical and evaluation capacity and than 5 per cent by 2015. to help in coordinating related technical and economic cooperation activities. No less significant, however, has been its contribution on the business facilitation side. There are also several APEC centres doing The APEC Business Travel Card that enables specialised work in different areas and located accredited businesspersons (the active card at venues spread throughout the region. While holders now number more than 166,000) to these are endorsed by APEC, they seem to be enter all APEC economies virtually visa free funded and run largely by host governments through a special counter has become very perhaps with some support from other APEC popular. The implementation of APEC Trade economies. A list of these APEC centres may Facilitation Action Plan (TFAP-I) from 2002- be seen at Annexure 6. 2006 resulted in reducing transaction costs Further contributing to APEC’s work is by at least 5 per cent that was followed by the APEC Business Advisory Council (ABAC) TFAP-II from 2007-2010 with another similar that has three senior business people from 5 per cent reduction. APEC has sought to build each member economy and a Secretariat on this further by aiming for a 10 per cent based in Manila. ABAC meets four times a improvement in supply chain performance year, participates in Senior Officials’ Meetings in terms11 of time, cost and uncertainty by (SOMs), ministerial meetings and various 2015 by dealing with eight identified choke other expert level meetings and presents points. Likewise is the action programme recommendations to APEC Leaders at the launched for bringing about a 25 per cent annual business dialogue held on the margins improvement in the Ease of Doing Business of the Summit. by 2015 in the five priority areas of starting Closely monitoring these developments at a business, getting credit, trading across a think tank level are 50 APEC Study Centres borders, enforcing contracts and dealing with in the APEC member economies which also permits. APEC has progressively transformed undertake research, disseminate information itself into a process by which a steady stream and facilitate discussions on APEC related of realistic but ambitious targets are sought issues, initiatives and processes. to be achieved. 13 India and APEC: An Appraisal
6. APEC’s Perceived Shortcomings Another criticism voiced has been that the Critics have also pointed to certain development12 gaps among APEC members shortcomings of APEC. Apart from the have widened over the years. Two Chinese inherently unattainable Bogor Goals on an academics , Zhang Yunling and Shen Minghui, open liberalism basis, which have already whileth reviewing APECs achievements on been referred to, many have drawn attention its 20 anniversary, pointed out that not all to APEC’s virtual inaction during the Asian APEC members benefitted equally from the financial crisis and its general failure to tackle APEC process even as they acknowledged that financial issues. Finance ministries including China itself had benefitted from APEC in the the US Treasury have generally been reluctant reform of its domestic laws and regulations, to fully engage in a regional process that has integration with international trade practices, been largely led by the trade and foreign etc. They surmised that the role of seminars, ministries of member countries. Even as discussions and training had not been very ministers of finance of APEC countries do get effective in the strengthening of the capacities together annually, they have refrained from of some of the developing economies and taking up core monetary or finance issues in proposed that APEC should strengthen its role their meetings, relying instead on Fund/Bank in social programmes. It needs pointing out mechanisms or more lately G-20 summits. here that the 2014 APEC Leaders’ declaration has claimed that APEC has been ‘working Yet another weakness cited is APEC’s to narrow the development gap’. It is to be voluntary and non-binding nature. Some have, seen if during the Philippines Chairmanship, however, regarded this as APEC’s strength. under one of its chosen themes to promote an These were apparently insisted upon as a inclusive economic environment and to build fundamental requirement for their joining sustainable and inclusive communities, APEC APEC by then ASEAN member countries. will7. How be providing Relevant new thrust is APEC in this direction. in the President Hu Jintao also said at the Singapore Leaders’ Meeting in 2009: “We should maintain Changing International Context? the nature of APEC as a forum for economic cooperation and its approach of conducting Despite all its achievements, questions do cooperation on a non-binding basis as this arise about the continued relevance and best suits the diversity prevailing in the Asia- importance of APEC at a time when more Pacific.” Even then, it must be stated that it regional and international forums have was the Shanghai declaration in 2001, which come into play and the mega Trans-Pacific introduced the ‘Pathfinder Approach’ by which Partnership (TPP) negotiations involving APEC can launch an initiative even if it initially twelve APEC members are also in progress. does not have the backing of all members. Forums like East Asia Summit (EAS) and the The expectation is that other members may G-20 Summit bring together Leaders, many find acceptance in due course. There are of whom also attend the APEC Summit. In several such pathfinder initiatives currently a span of one month last year in November underway, although it is difficult to see if all of 2014, for example, many of these Leaders them will find full consensus eventually (see were in Beijing for APEC Economic Leaders Annexure 7 for a listing of current Pathfinder Meeting (10-11 November), in Nay Pyi Taw initiatives). Likewise, it is not uncommon to for EAS (13-14 November), and in Brisbane for come across APEC programmes that do not G-20 (15-16 November). Will APEC Summits enjoy all round participation because of lack continue to attract highest level attendance? of interest or perhaps capacity among some.
14 India and APEC: An Appraisal
Will APEC, that is regarded as the primary to follow the goals and work programme forum for economic cooperation among Asia- of APEC and whether conformance with Pacific countries, retain that importance when possible expectations from APEC economies the ‘high standard‘ and legally binding TPP, be challenging? This is in turn depends on how that also carries many ‘behind the border’ India is currently faring in its autonomous commitments, gets concluded with the distinct trade and investment liberalisation effort in possibility that it could attract a few more comparison to some of the developing APEC entrants including China? economies. Secondly, what will be the benefits to India if it joins APEC? Lastly, will there also These are questions that may be difficult be a downside and how does it all add up? to answer at this stage in a definitive manner These questions are now examined. but most of the interlocutors we met at 8.1 How Does India Currently Singapore felt that APEC will be relevant Fare on the Trade and Investment as a unique informal discussion forum, as Liberalisation Front in Relation to a process for promoting greater regional APEC? integration and as a laboratory of ideas that also allows ideas to be taken forward in whichever way possible. While it will no APEC economies regularly submit a progress doubt become difficult for each new chair report on trade and investment liberalisation every year to find new themes and initiatives, through the now bi-annual Individual Action many felt this should not be too difficult a Plans (IAPs) that cover 15 areas of the Osaka challenge in an ever changing world. A veteran Action Agenda, which are then peer reviewed. Singaporean diplomat and trade negotiator, It becomes relevant to examine how India for example, felt confident that APEC will would fare particularly in relation to some continue to be relevant and host countries of the APEC economies at comparable levels and Leaders will continue to find ways and of development. In this regard, this study has ideas to keep APEC alive. Furthermore, he examined the current status on following added that beyond the objective of economic topics: (i) Customs Procedures; (ii) Tariffs; cooperation, an unspoken security element (iii) Non-Tariff Measures and Standards and underpinned APEC, which united both sides of Conformance; (iv) Services; (v) Government the Pacific in an unique and effective manner. Procurement: (vi) Investment; and (vii) Another interlocutor noted that EAS, which Intellectual Property Rights (IPRs). is one afternoon with Leaders reading from Inputs for this exercise were received from prepared texts, is a very different forum from comparative study papers contributed by APEC that allowed Leaders to informally (a) A team from the Centre for WTO Studies, discuss amongst themselves. What is also New Delhi led by Professor Abhijit Das; (b) relevant to note is that all slots for hosting Shri Shashank Priya, Commissioner (GST the annual APEC Leaders’ Meetings13 are filled, Cell), CBEC, Delhi, who submitted a paper and therefore, the chair for those years, have on Customs Procedures in his individual already8. Should been Indiataken till Join 2022. APEC? capacity; and (c) Ms. Aditi Gupta, Consultant at RIS, who worked on initiatives by APEC on environmental goods and Information Technology Agreement. Based on these Turning to the question whether India should inputs which can be seen at Annexures 8 to join APEC, it can perhaps be examined from 11, and basede. on information available at the three inter-related perspectives. Firstly, the APEC website, an assessment is given below question arises, will India find it comfortable topic-wis
15 India and APEC: An Appraisal
8.1.1 Customs Procedures Progress by APEC import. Likewise, APEC economies are reporting efforts to implement or improve risk management techniques. As will be seen from Comparative Study Many customs administrations with (Annexure 9) on Customs Procedures, APEC well-established AEO programmes are has been active in the area of Customs starting to sign Mutual Recognition Procedures with a separate sub-committee Agreements (MRAs) with counterparts to promoting adoption of transparency expand the coverage. Other cooperation standards, simplification and harmonisation initiatives involve exchange of information of procedures and efforts to ensure that and joint efforts to combat illicit activities.” goods move efficiently, effectively and safely. In recent years, time to export/import Among many initiatives that have been a container has been faster in APEC. In taken, the launch of Trade Facilitation Action 2013, it was more than 0.5 days faster in Plan I (2002-2006) and Trade Facilitation comparison to14 2011 and more than 1.5 faster Action Plan II (2007-2010) have brought than in 2008. However, cost to trade has down trade transaction costs by 5 per increased, which can be partially explained cent each. Including trade logistics as part by the additional investments in ports to meet of the trade facilitation agenda, a supply security requirements, which has transferred chain connectivity Framework/Action Plan part of the cost to traders, and increasing cost was also adopted in 2009, which was to of transportation from economic centers to the reduce trading time, cost and uncertainty ports,Initiatives due to Taken higher by fuel India prices. by 10 per cent each by 2015. Several other initiatives have also been taken such as developing a Single Window to streamline India has also taken several initiatives towards export-import processes, IPR enforcement customs reform in the last two decades that Strategies and development of an Authorised have been very well brought out in Annexure Economic Operator (AEO) programme. Other 9. This includes a transparency mechanism efforts underway include the work of the through the website of the Central Board of Electronic Commerce Subgroup of APEC that Excise and Customs (CBEC) that publishes is undertaking projects on paperless trading all laws, regulations and departmental for cross-border trade, integrating paperless instructions, establishment of paperless trading in commercial processes, enhancing trading through the use of Electronic Data reliable and speedy supply chains by e-B/L Interchange (EDI), messaging through Indian exchange and e-Manifest in APEC region. Customs EDI Gateway (ICEGATE) in 2002, The 2014 APEC Progress Report on Bogor introduction of a Risk Management System Goals had the following to say on Customs (RMS) in 2005, implementation of ‘On Site Procedures: Post Clearance Audit’ System from 2011 “All APEC economies have reported for customs accredited clients, rolling out progress in facilitating trade through the an Authorised Economic Operator (AEO) simplification of customs procedures. Programme from November 2012, and The implementation and expansion of preparations currently being undertaken in Single Window, Authorised Economic the form of pilot programmes for an early Operator (AEO) programs and non-intrusive launch of a Single Window clearance system. inspection systems through modern Details about all these programmes have scanners are reducing the time to export/ been provided in Annexure 9. It may, however, 16 India and APEC: An Appraisal
be mentioned here that the aim of the AEO of other government agencies, automated programme is to enable businesses involved in routing of declarations for the clearance of the international trade to reap several benefits other government agencies, integrated risk such as: (i) securing supply chain from point assessment, and online release. Payment of export to import; (ii) ability to demonstrate of applicable charges will also be received compliance with security standards when in the e-Payment mode. To help the trader contracting to supply overseas importers/ prepare with the right kind of documentation exporters; (iii) enhanced border clearance and to provide the correct clearance related privileges in MRA partner countries; (iv) procedural information, a web portal is also minimal disruption to flow of cargo after a being developed. For the trader to proactively security related disruption; (vi) reduction in receive updates on the cargo and clearance dwell time and related costs; and (vi) customs events, an Event Notification platform is advice/assistance if trade faces unexpected proposed. For physical events that require issues with Customs of countries with which timely and coordinated action by or presence India has MRA. of officers, an Appointment Management SystemThe Comparative is envisaged. Picture India’s AEO programme is expected to result in Mutual Recognition Agreements (MRAs) with other Customs administrations Compared with some of the APEC members, that implement similar programmes. MRAs like Indonesia, Vietnam, China and Peru, would ensure that Indian export goods get India is felt not to be lagging behind in terms due Customs facilitation at the point of entry of simplification of customs procedures and in the foreign country. Apart from securing instruments or in respect of transparency. supply chain, the benefits include reduction in But India’s rank is relatively low when making dwell time and consequent reduction in cost comparisons with the Logistics Performance of doing business. Indian Customs have signed Index (LPI) of the World Bank. India also an MRA with Hong Kong Customs to recognise figures high in respect of cost per container to respective AEO Programmes to enable trade export or import. These need to be addressed. to get benefits on reciprocal basis. Indian Customs is now engaged in finalising MRAs Clearly, as is also seen from the study at with other important trading partners. Annexure 9, benefits to India through closer association with APEC can be several: The facility for ‘Single Window’ customs clearance will provide for the submission of • Gaining from the discussions on best clearance-related information and documents practices and reforms undertaken at a single entry point without the trader by the developed and more dynamic having to submit the physical copies at emerging economies of APEC; different government offices. The facility will • Benefitting in particular from also provide for payment of fees and charges experiences in dealing with at a common portal. The scheme for Single establishment of Single Window Window Customs Clearance was one of the Scheme, where APEC has been ahead announcements made by India’s Finance of India by 5 years or so. It can also Minister in the Budget for 2014-15. cut time delay in implementing other The features of the proposed Single reforms; Window include the development of an • Helping in addressing wider horizons ‘integrated Customs declaration’ for import of trade facilitation, where smooth and export, including data requirements
17 India and APEC: An Appraisal
and efficient customs clearance has for non-agricultural items was 37.10 per cent to blend harmoniously with logistics and 82.65 per cent for agricultural goods. and supply chain network. India can However, as for bringing about further tariff gain from participation in programmes liberalisation towards the Bogor Goals, this relating to removal of supply chain will not be easy. The various infrastructure choke points as identified by APEC (the constraints that stand against an enabling eight choke points have been dwelt level playing field for domestic industry as with in detail in Annexure 9); also the wide trade deficit that India has on merchandise trade account, which at 38 per • Promoting establishment of common cent in relation to exports is much larger than standards that also lends itself to for any APEC economy, would mean that India’s mutual recognition of procedures; and progress towards further trade liberalisation • Capacity building activities of will be dependent on improvement of these APEC could help officials as well aspects. That said, however, it needs also to be as institutional betterment (testing noted that the actual applied tariffs imposed laboratories, training institutions, for products of several APEC economies by etc.). It could also address aspects like India even at present are much lower on reduction in the number of documents, account of India’s FTAs/RTAs with them. More better container handling practices and APEC economies will come within this ambit 8.1.2 efficientTariffs port logistics. once the Regional Comprehensive Economic Progress Made by APEC Developing Partnership (RCEP) agreement is concluded. Economies In any case, it is surmised that even in respect of tariffs imposed by APEC economies, while their average tariffs may go down a bit further APEC economies have been seeking to as they move towards 2020, they are unlikely progressively bring down their tariff levels to be eliminated both by developed and in consonance with Bogor Goals of free and developingEnvironmental APEC Goods economies. Initiative open trade. As will be seen from Section 1 of the comparative study of Annexure 8, while the average applied tariff of India in 2013 APEC is also implementing an initiative to for non-agricultural products was 10.2 per reduce tariffs to less than 5 per cent by 2015 cent, those of APEC developing economies on 24 identified environmental goods. India’s were relatively lower ranging from 6 per cent tariffs on these products currently range for Chile, 6.7 per cent for Indonesia, 8.3 per from 0 per cent to 10 per cent with an overall cent for Vietnam to 9 per cent for China. For average of 6 per cent. A separate note on this agricultural products, the gaps were larger initiative along with India’s position on the with India’s average applied tariff at 33.5 per environmental goods agenda at WTO may cent and the corresponding figure for China, be seen at Annexure 10. India’s imports of the highest among APEC economies, at 15.6 these items at US$ 8.1 billion in 2013-14 are perAverage cent. Tariffs of India already far more than its exports amounting to US$ 2.8 billion. There are also other concerns about an inverted duty structure India has no doubt made considerable that implementation will bring. India will progress in reducing tariffs, if they are looked have to treat any suggestion to immediately at from 2000 levels when the average tariff implement this initiative with caution. Some of
18 India and APEC: An Appraisal
the APEC economies themselves are reported The Bogor Goals Progress Report (2014) as exercising some flexibility in implementing has mentioned the following on this topic for On NTMs thisITA-II initiative. APEC as a whole:
“APEC economies reported progress APEC has also been supportive of expansion concerning the elimination of some NTMs . of the Information Technology Agreement However, new NTMs have been imposed in (called ITA-II) to include an additional set of recent years and the accumulation of NTMs products numbering around 200 at 6-digit Oncontinues Alignment restricting of Standards trade.” tariff lines for duty elimination. While India is a member of ITA-I since 1997, it has refrained “Efforts to align to international standards, from participation in ITA-II discussions after active participation in international a not so positive experience from ITA-I that organisations in charge of standardisation resulted in stunting the growth of the domestic matters and specific trade concerns have electronics and IT manufacturing industry. increased over the last few years.” It may, however, be mentioned that even Non-Tariff Measures (NTMs) are dealt with among APEC economies, that are members of by many bodies in APEC under the Committee ITA-I, Indonesia, Russia and Vietnam are not on Trade and Investment. Chief among them participating in ITA-II discussions, and Brunei, are the Working Group on Market Access Chile, Mexico and Papua New Guinea are not that is mandated to oversee both tariffs and even members of ITA-I. A separate note that NTMs and the Sub-Committee on Standards captures the position in more detail can be and Conformance that addresses negative seen at Annexure 11. 8.1.3 Non-Tariff Measures and effects of differing standards and conformance Standards and Conformance mechanisms on trade and investment. The Progress Made by APEC latter has also done extensive work in encouraging greater alignment of national standards with international standards. Unlike tariffs, there are no set targets for APEC A specific initiative launched was the APEC economies on Non-Tariff Measures (NTMs) Electric and Electronic Mutual Recognition although Common Action Plans are developed Arrangement, but this has not been very for voluntary alignment with international effective. APEC members, other than Australia, standards or regulatory best practices. New Zealand, Malaysia and Singapore, have Harmonisation, standardisation and mutual not agreed to accept test reports by one recognition have been key elements of APEC’s another. Malaysia, among these four countries, Trade Facilitation Action Plans. has also not agreed to accept certification by APEC economies are required in their others. But, most APEC economies have agreed IAPs to report changes regarding NTMs and on information exchange. the regulatory framework as also about the A Mutual Recognition Arrangement for work they are undertaking about standards conformity assessment for telecom equipment and conformance. These are examined by the was also taken in 1999 that has been further Peer Review mechanism that may be looking followed up by conclusion of an MRA for at their conformity mainly vis-à-vis the WTO equivalence of technical requirements in 2010. rules or the APEC’s roadmap for standards Information is not readily available on how and conformance. many among APEC economies have actually become signatories to the arrangement.
19 India and APEC: An Appraisal
An APEC Food Sectoral MRA was also standardisation activities particularly in the developed as an umbrella arrangement with work of the International Organisation for guidelines for further development of specific Standardisation (ISO) and the International sectoral arrangements. It is not clear, however, Electro-technical Commission (IEC). A to what extent further progress has been made sizeable number of standards have also and whether a good number of signatories been harmonised with ISO/IEC standards. In have joined these arrangements. respect of MRAs, however, India has not made much progress. Aspects relating to harmonisation of policies and regulation of standards are also Networking among concerned standard addressed sectorally by other forums such as setting or conformance assessment bodies the Automotive Dialogue, which addresses can be of great help in devising ways to reduce this issue in the automotive sector. The barriers and such activities can also facilitate Chemicals Dialogue, which has evolved a Code in reaching MRAs. Participation in discussions of Best Practices on Chemicals Regulation that lead to harmonisation arrangements and (2000), has a working group on Regulatory assistance that can be derived in capacity Cooperation and has also been discussing how 8.1.4building Services should all be welcomed. the harmonised system of chemicals labelling Progress Made by APEC agreed to at the UN can be implemented. The Life Sciences Innovation forum that deals with health and biological sciences has a Regulatory With international disciplining of trade in Harmonisation Steering Committee, that services commencing only in 1995, APEC’s for example, held a series of seminars for work on services was also somewhat delayed government regulation on medical devices. with a Group on Services (GoS) established There is also an APEC Harmonisation Centre only in 1997. GoS has since been working to under this forum, based in Seoul, Korea, liberalise trade in services looking at policy that has held several workshops on subjects and regulatory issues, both horizontally and ranging from multi-regional clinical trials to sectorally, and also working on technical combinationComparative products. Picture and Benefit from Cooperation aspects like gathering services trade statistics and developing a database on Services Trade Access Requirements (STAR) for APEC The activities mentioned in the foregoing are economies. specialised and tailored to each sector and will More recently, APEC formulatedinter a set alia of, need careful evaluation. In general, however, Non-Binding Principles on Cross-Border initiatives in these areas, appear to be pursued Trade in Services in 2008 that, by interested APEC economies, depending called for MFN and National Treatment to on their sectors of interest. These should be service suppliers of other APEC economies. of great value for a country like India that They urged that APEC economies, to the has wide ranging interests both from a trade extent possible, should not require service perspective as well as in developing domestic suppliers of other APEC economies to have industry that is in sync with countries in the a local presence as a condition of supplying region and internationally . a service. Nor should limitation be placed on In India, the Bureau of India Standards the number of suppliers of any service that is (BIS) has been participating in international permitted. While it was acknowledged that
20 India and APEC: An Appraisal
Comparative Picture not all economies will be able to adhere to all of the principles with respect to all sectors, IAP has separate sections on Trade in Services progressive liberalisation was suggested and for Business Mobility on which member with an endeavour also not to roll back any economies have to report on liberalisation liberalisation already in force. There were measures undertaken during the review also principles included on regulatory aspects, period. From the comparative study on transparency, and for facilitating services that Services that is given in Section 5 of Annexure required movement of business persons. 8, which has looked at the Services Trade Restrictiveness Index (STRI) of Chile, China APEC Leaders further adopted an umbrella and Indonesia, along with India, it would Services Action Plan in 2009 to provide overall appear that while there are certain services like coordination and focus to services related accounting, architecture, legal, air transport work, to identify priorities and capacity and insurance, where India is more restrictive building needs and to boost services trade. than others, there are also several others Services trade issues are also discussed in like engineering, motion pictures, sound separate APEC sectoral groups on energy, recording, telecom, maritime transport, road telecom, transportation and tourism. Sectoral freight transport, computer and construction Initiatives have also been launched by GoS on dervices, where India is ahead of at least two Legal Services (2010) and Accounting Services other countries. The comparative study has (2011) to enhance transparency requirements also looked at the WTO GATS commitments of licensing and qualifications and guidelines of several APEC developing countries as also for regulation. Environmental Services and their Revised Offers for liberalisation under expansion of APEC’s database on Services the Doha Round and points out that the Trade Access Requirements (STAR) are other corresponding Revised Offers of India are far areas presently receiving GoS attention. more ambitious in many cases, which indicates GoS has also adopted an APEC strategy India’s readiness to move forward if others on Movement of Business Persons (2010) are. The study further points to some of the regarding actions that could contribute to liberalisation moves even currently underway facilitation of entry and temporary stay. This in India in the insurance, rail and air transport and construction services sectors, which, not only relates to the APEC Business Travel when fully ushered in, should make India’s Card (ABTC) that has been a very successful services framework more attractive. initiative of APEC, but also covers temporary visits of natural persons for providing services; As for the benefits from possible an aspect that could be of particular interest membership of APEC, it is evident that to India. Interestingly, the strategy also participation in the work of GOS and the focuses a need for further development of various sectoral groups, which also cooperate APEC initiatives for Professional Services and closely with trade and industry could bring Engineering Services. The implementation considerable gains. Of particular interest of the strategy would also come under the could also be cooperative activities that could review of the Business Mobility Group of promote mutual recognition arrangements APEC consisting of immigration and consular (MRAs). If this is also accompanied by officials that regularly meet every year and economic and technical cooperation activities also undertake close consultation with APEC that could assist in capacity building, these should be very welcome. Business Advisory Council. 21 India and APEC: An Appraisal
8.1.5 Government Procurement
While more details about APEC activities While this is one of the 15 areas under the in this area may be seen in the Section 6 on Osaka Action Agenda, there is no separate Investment in Annexure 8, the APEC Progress standing APEC group on the topic. However, Report (2014) on Bogor Goals has presented following the work of an earlier APEC Expert the following overall picture in this area: group a set of Non-Binding Principles on “APEC economies recognise the Government Procurement was adopted importance of attracting and promoting in 1999. That notwithstanding, as is seen investments, including from foreign sources, from the analysis in Section 4 of Annexure to contribute to economic growth. In general, 8, including the comparative Table 7, most APEC economies have been implementing policies to improve investment conditions. APEC developing economies (as also certain Many economies have relaxed conditions developed members) favour domestic for foreign ownership in particular sectors companies for government procurement and offer investors no restrictions in terms and many also orient at least a part of such of repatriation of capital, profits or royalties. procurement for achieving certain social It is also common to find policies offering objectives. India’s procurement regime lower taxes or agreements for double appears quite comparable to them. This may taxation avoidance to attract investors. be further improved if the pending Public In order to provide legal stability, it has Procurement Bill is adopted by the Parliament. been common practice to sign bilateral India should also be open for any further investment treaties (BITs). Furthermore, streamlining of the procurement system, as there has been efforts to attract foreign long as it does not require any market access direct investment (FDI) by simplifying 8.1.6commitments. Investment Theadministrative Comparative procedures.” Picture Progress Made by APEC Annexure 8 also carries a tabular comparison of the investment regimes of India and certain Investment liberalisation has remained a developing APEC economies. Generally, it will key focus of APEC from the beginning with be seen that India has a fairly open regime the APEC Investment Expert Group coming in most areas, barring limited equity caps out with Non-Binding Investment Principles in certain sectors like multi-brand retail, that were adopted in 1994. In more recent insurance, real estate development, media, etc. years, particularly following the global APEC economies have been relatively more economic downturn, APEC has also adopted open in these sectors, although they too have an Investment Facilitation Action Plan and an some restrictions, or the other. APEC Strategy for Investment. An updated set Of greater concern than relative openness of Non-Binding Investment Principles has also of the investment regime is India’s ranking been adopted in 2011 to reflect the changing in terms of ‘Ease of Doing Business’, where conditions of business environment. The India does not score highly on many counts Investment Expert Group has also expanded including on ‘Ease of starting a Business’. This its activities to stimulate investment on is an area where the new Indian government social and environmental responsibility. A has indicated determination to register guidebook that will compile information on a significant improvement within a short Public-Private-Partnership frameworks in the period. If this happens, it could lead to a region is one of the projects being undertaken. further increase in interest including among 22 India and APEC: An Appraisal
APEC members, towards investing in India. anti-counterfeiting initiatives. IPEG is also Of particular relevance here is that in India’s discussing with the APEC Sub-Committee total FDI stock, APEC economies as a group on Customs Procedures on IPR Border already have a rising share that is around enforcement. In 2005, the APEC ministers of 27.54 per cent from April 2000 to March 2014. Trade had also launched an initiative on anti- This is even more the case in respect of India’s counterfeiting and Piracy. outward FDI in which, in percentage terms, APEC’s progress report (2014) on Bogor APEC economies accounted for 40 per cent Goals stated the following in respect of IPRs share upto 2011-12. for APEC as a whole. India can benefit significantly from APEC, “In order to strengthen the IPR system, through exchange of experiences, participation APEC economies proceeded by creating or in Investment Experts’ Group (IEG) and amending laws and regulations, signing various other programmes and capacity international IP treaties and improving the building activities. APEC is itself implementing collaboration with authorities to investigate an Ease of Doing Business Initiatives, which cases on alleged violations of IPR. The started in 2009, of making it 25 per cent easier advancement of new technologies and the to do business by 2015, particularly in the emergence of new digital tools and platforms priority areas of starting a business, getting have motivated many APEC economies to amend their laws and regulations (such as credit, trading across borders, enforcing copyright, patent, trade mark and industrial contracts and dealing with construction design acts) in order to adapt them to the 8.1.7permits. Intellectual These are of priorityProperty to India Rights as well. recent developments and be more effective Progress Made by APEC in fighting and preventing IP related crimes. These changes also include increasing penalties for those infringing the law. Effective protection and enforcement of Many APEC members have reported Intellectual Property Rights (IPRs) have signing, ratifying or putting in force formed an important part of APEC’s agenda. international IP treaties such as the Madrid Each APEC economy is required to comply Protocol (on registration of trade marks), with the TRIPS Agreement of WTO and ensure the Hague Agreement (on industrial designs), the Marrakesh Treaty (on access to adequate and effective protection through published work to blind or visually impaired legislative, administrative and enforcement persons), the WIPO Copyright Treaty, the mechanisms. Beijing Treaty (on audiovisual performance) APEC’s Expert Group on IPRs has been and the Singapore Treaty (on the Law of working to deepen the dialogue on IPR, TheTrade Comparative Marks), among Picture others.” survey and exchange information in IPR protection and administrative systems, study measures for effective enforcement viz.The comparative study in Section 7 of and facilitate technical cooperation. The last Annexure 8 has examined one area of IPRs, meeting of Intellectual Property Expert Group patents, and looked at the patent regimes (IPEG), held in China in 2014, for example, in India and in some of the developing APEC discussed initiatives on a wide range of economies. India’s patent administration topics such as raising public awareness on regime has also been explained, which shows a IPRs, international cooperation and patent steady increase in the patents granted. India’s acquisition procedures, capacity building and legislation is WTO-compliant, and there is an 23 India and APEC: An Appraisal
8.1.8 Other Areas under the Osaka Action Agenda elaborate mechanism for IPR administration and enforcement that is being steadily strengthened. Patent laws of some of the APEC There are a few other areas under the Osaka developing economies have similar provisions Action Agenda on which APEC members but a few have provided more protection than have to regularly report in their IAP. These the minimum standards prescribed in the include: competition, regulatory reform, WTO TRIPS agreement. In respect of accession transparency, electronic commerce, RTAs to more recent IPR treaties/conventions, India and dispute mediation. On most of them, is party to two of the six treaties and others India has well established mechanisms are under consideration. such as on Competition, where the country now has a national competition law, with a India has come under some pressure, Competition Commission responsible for its particularly from the United States, in implementation. In recent years, it has also recent years, with US also seeking to take come to establish jurisprudence and take unilateral action under its domestic Special an active role on enforcement. Similarly, on 301 provisions. Some of the APEC economies regulation, again, there are now a whole have also been named in recent years under range of regulatory bodies dealing with the ‘Priority Watch List’ or ‘Watch List’. While telecom, electricity, civil aviation, stock these will need to be bilaterally resolved, exchanges and Foreign Institutional Investor what is of interest here is the initiative by the (FII) inflows, to mention only a few, that have government to enunciate a new IP Policy for been set up. These are acquiring experience which the think-tank set up by the government, and establishing principles and practices has already brought out a first draft for public towards promoting a stable and predictable comments. It is expected, on the one hand, to environment. This study does not anticipate promote creativity and innovation, while, on any problem for India being able to report the other, protecting the national interest and progress on these issues. balancing the rights of IP owners with public More importantly, APEC has, over the welfare. It is also expected to harmoniously years, expanded significantly beyond the align the IPR regime with government initial 15 areas of OAA that now span from initiatives like ‘Make in India’ that is aimed innovation and energy to infrastructure and at transforming India into a manufacturing issues relating to secure trade and disaster hub and ‘Digital India’ that is seeking to preparedness. These should be welcome areas strengthen the country’s digital infrastructure 8.2of cooperation. Possible Benefits and take India fully into the digital age. The new IP Policy could be expected to further 8.2.1 A Significant Improvement in streamline India’s IPR regime. India can also India’s Trade and Investment benefit a great deal from APEC’s work in this Profile and Attractiveness area including capacity building activities. It is unlikely though, considering intense domestic political sensitivities on the subject, that there The APEC process could be particularly useful could be any change in the IPR regime that is for India in bringing about greater trade seen as a dilution away from securing public and investment facilitation and in reducingnd health concerns or critical consumer interest. transaction costs. India presently ranks 142 in the World Bank’s Ease of Doing Business
24 India and APEC: An Appraisal
ranking. India’s ranking is even lower in Becoming part of the APEC process will the list in respect of opening a business, inevitably, as India becomes an easier place getting construction permits, enforcing to do business, draw in far more investments contracts,paying taxes, etc. The APEC process, from the Asia-Pacific region. This in turn can particularly the segment dealing with business offer incentives, not just for India but also for facilitation, has begun focussing on many of India’s Asia-Pacific trade partners, for bringing these areas identifying best practices and about greater harmonisation or mutual useful policy principles. The APEC process recognition of standards and professional also has several economic and technical qualifications and other soft infrastructure. cooperation programmes aimed at promoting All this should help India get involved more skills and capacity building. All these along in regional production and supply chain with peer pressure will encourage forward networks thus enabling it to become part movement. of the dynamic Asia-Pacific Community. Enhanced connectivity, that also involves These could be particularly beneficial at a more institutional and people to people time when India is launching a ‘Make in India’ connectivity, could also see India plugging campaign and some of the state governments into more regional frameworks not only in are also pitching in with reforms at the state trade and investment but also in various other level. While external influence can perhaps be areas including15 tourism and human resources only limited in dealing with some entrenched development. These cannot but be welcome. interests and practices, sustaining the ‘Make 8.2.3 Enabling to be a Participant in in India’ campaign to success and India’s Shaping and Developing Ideas on long-term interest in continuing to remain Economic Policy Development an attractive business destination warrant for the Region for which APEC 8.2.2support Propelling from every quarter. India Further in has become known Becoming Part of the Dynamic Asia-Pacific Community that could Enhance Economic India is a participant in RCEP negotiations but Engagement and Connectivity is not involved in TPP. Should APEC members with the Region move to establish FTAAP it cannot be ruled out that this new initiative too could see India not being part of that process. While the desirability of joining FTAAP and TPP India’s trade and economic links with the will need to be evaluated in each case and a whole region are substantial with APEC decision taken at the right time, India being economies accounting for 35 per cent of part of APEC that has been the incubator of India’s merchandise trade, 27 per cent of FDI several regional initiatives, enhances India’s inflows and 40 per cent of FDI outflows. They options. Also, once India becomes a member of also figure significantly in India’s services APEC it will itself be able to participate in the trade and as sources for FII inflows. Still, development and shaping of APEC initiatives. however, when seen in percentage terms these It may be relevant to mention here that APEC are not commensurate with APEC’s overall has been a forerunner in dealing with some of trade or investment profile. (See Annexure the so called ‘21st century issues’ which have 12 for a brief review, of India’s trade and subsequently been taken up for framing rules investment ties with APEC economies where in some of the recent high standard FTAs. countrywise trade and investment figures have also been given).
25 India and APEC: An Appraisal
8.2.4 Closer Engagement Also Helps Enhancing Familiarity with Newer Policy Issues for India’s neighborhood. Furthermore, India has always Economic and Other Ministries risen to the occasion in terms of providing assistance and support following many disasters and accidents that have taken place A distinguishing feature of APEC, which has in this region. Under India’s ‘Look East’ or ‘Act membership of both advanced and developing East’ policy, India is, moreover, attending to economies, is the role played by its expert certain infrastructure and connectivity needs in the neighbourhood. groups, working groups, committees, task 17 forces, and industry dialogues,16 that have over India has also become a ‘strategic’ partner 200 meetings in all every year somewhat of several member economies of APEC and on the lines of OECD. They bring together becoming a part of this forum will help to concerned officials, experts and also business further strengthen these partnerships. While representatives, who exchange ideas, policy India’s participation in the region’s political options and come up with action plans and best and security architecture have come more practices which generate greater familiarity easily, this has not been in the case on the with emerging issues. In a way it also sparks economic front. The geographical issue of greater internal coordination within each not being a rim country appeared somewhat economy, since effectively dealing with APEC’s settled with the inclusion of India in the agenda requires close cooperation among East Asia Summit. Joining APEC will make it all the stakeholders including the business decisive in line with the growing usage of the segment, within each member. It should be term ‘Indo-Pacific’. The Indian Prime minister very welcome for India to become part of joining other economic Leaders of the region such a process. Needless to add, however, will be a plus for both India and APEC in terms that benefits of APEC membership will accrue of the value India can bring to the table not fully only if all the concerned ministries and only towards ushering in greater prosperity other stakeholders, and not just ministries to the region but also in ensuring trade and of external affairs and commerce, take part economic security, issues relating to which actively in all its programmes and activities 8.3are frequently Possible discussedDownsides in APEC. and How do and set aside required human and financial They All Add Up? 8.2.5resources. The Political Factor
While APEC is generally non-binding in nature, APEC has been an important forum for and naming and shaming is also not part of promoting economic cooperation in the Asia- APEC culture, India, once admitted, could Pacific region and India’s non-inclusion has face pressure on the trade and investment remained a void. This is despite India’s size liberalisation front. and role including as a key maritime nation APEC speaks the language of liberalisation, that in some ways forms the western gateway reform and business facilitation that permeate to this region. Some have earlier questioned its various activities. India’s reform programme India’s membership on the ground that its could come under greater scrutiny, which, geographical boundaries did not touch the on the one hand, could be viewed by the Pacific Rim. But this ignores the contribution government as an unwelcome oversight it is making towards keeping commercial sea and a downside. Or, it could be seen as an lanes of vital interest to the region open let occasional useful nudge by fellow members alone its growing economic linkages with this 26 of the Asia-Pacific region, something that the India and APEC: An Appraisal
Government can handle in its stride just as India will, however, find it difficult to accept periodic reviews by WTO or IMF. From the greater liberalisation unless it breaks out of its foregoing study of OAA areas, it becomes current limited export profile that is already evident that in certain of them like Services, unable to finance its imports resulting in Government Procurement and Competition, huge trade deficits. A key to expanding India’s India’s progress is quite comparable to those export profile will require actions both on the of APEC developing economies. In relation to supply front and on ensuring that our market areas such as Trade Facilitation and Customs access overseas gets further expanded. This is Procedures, Standards and Conformance and even as there appears a looming prospect that Ease of Doing Business, there is clearly a need market access may get further constrained to step up. But, these are areas, where there with some mega FTAs in the making like is already a very keen interest to significantly TPP or plurilateral agreement like Trade in scale up India’s performance in a short period Services Agreement (TISA) in which India is and improve ranking. APEC could in fact bring not a participant. synergies to India’s efforts on these fronts. On Action on the supply front requires the other hand, in respect of bringing down improving competitiveness that internal tariffs more time will be needed as already reforms and business facilitation can bring explained. Again, as for IPRs, the enunciation about. On the former, the government has of a new policy could further streamline recently taken some measures including on India’s efforts to protect, administer and labour reforms. Some states are also now enforce its IPR regime but no major change pitching in with reforms that is being already away from seeking to protect public health commented and welcomed as a case of interests or welfare can be expected. ‘Competitive Federalism’. More actions will Of immediate relevance as for expectations doubtless need to be taken. As for business could be compliance with the APEC initiative facilitation, the APEC process could certainly to bring down tariffs on 54 identified be of some help as has been stated earlier. environmental goods to a maximum of 5 Working on market access would also need per cent by 2015 that has already been dealt clearing away a widely held (mis) perception with in Section 8.1.2.3 on Environmental about India taking an overly negative stance Goods Initiative as well as in a more detailed on international trade issues. This needs manner in Annexure 10. It will be important clearer articulation and reasoning of India’s to know more about the flexibilities that APEC position and bringing out its legitimate developing economies themselves are availing concerns through some timely and skillful on implementation of this initiative. economic diplomacy. Enhancing market access There could also be renewed pressure to would also require not only foraying into new join ITA-II that is still under negotiation with markets but also looking carefully at beneficial China holding out on inclusion of several exchange of further concessions in some of the products. India has several reservations on FTAs India has already signed or in the fresh ITA II including on product coverage. FTAs under negotiations (many of the partner countries in both sets of these FTAs are APEC India could also face pressure for easing members). On this front, again, being a part of its stance on some of the WTO related issues APEC process and its action plans on business particularly relating to the Doha round. APEC facilitation, etc., will provide Indian trade and meetings have from time to time issued other concerned officials with greater insights declarations calling for an ambitious and about what to seek. Indeed, India is the only balanced outcome.
27 India and APEC: An Appraisal
non-ASEAN country in RCEP, which is not a in 2011 but since then the issue has apparently member of APEC. It raises a question whether not been taken up in any APEC meeting. that may not be proving a handicap to India’s While there is no confirmation if India’s RCEP negotiators. possible entry was discussed at any time, and APEC itself is also not unified, when it if indeed India had also formally submitted comes to trade liberalisation or WTO issues. It any application, media reports and inputs rarely acts as a caucus on WTO matters except from some regional interlocutors point to in a very broad way just as its declarations on discussions having taken place in APEC on a WTO which are generally couched. There are few specific prospective members including several developing countries (and developed) India. ASEAN members of APEC could well among its membership, which are also have proposed the inclusion of Cambodia, protective towards their agriculture sector Laos and Myanmar. Mongolia from East Asia and certain sensitive industrial sectors. They and Colombia and one or two more countries also have in place many non-tariff barriers from South America could have been others. that have been constraining India’s exports to An indication received was that the closest them. It would be very important to carefully India was towards getting admitted was in study them and the Individual Action Plans 2007 but the timing was probably not right submitted annually by APEC members. Such with divisions in WTO being at a height then. inputs should be put to effective use by India’s A perceived need for accommodating long economic diplomacy apparatus even as we pending demands of other sub-regions of exude a keen interest to move towards further Asia-Pacific, considerations of balance but lack reform and liberalisation as and when our of readiness of some of them may also have 9.economic Will India conditions be willAccepted? allow. been factors. The 2007 and 2010 declarations convey that a decision was postponed because of a concern that inclusion of new members The membership strength of APEC has should not impair the momentum towards remained at 21 since the decision taken to regional integration and the efficiency to get include Peru, Russia and Vietnam in 1997 results and that APEC would wait till it can be when a moratorium on further expansion certain that new entrants will work to enhance was also put in place for a ten year period. regional integration. The APEC Leaders’ Meeting in 2007 discussed Discussions by the author in Singapore this question and decided to postpone generally brought out a perception that India consideration after agreeing that ‘it was could receive a good measure of support important to manage the possible entry of from many countries and that India could new members in a manner that ensures that become a member as soon as APEC decided the momentum APEC has developed towards to take in new members. All round support, regional integration and open economies is however, cannot be taken for granted and enhanced’. The Leaders again took up this some countries will need to be persuaded. It is question in 2010 and this time noted ‘Keeping noteworthy that in the ‘US-India Joint Strategic in mind the benefits of APEC membership Vision for the Asia-Pacific and the Indian as well as the need for efficiency to achieve Ocean Region’, that was announced during the results we will continue to review the question recent visit of President Obama to India, the of APEC new membership going forward’. A United States has welcomed India’s interest to more or less identical formulation figured in join APEC. With India now being part of EAS the Statement of the APEC ministerial meeting and RCEP and with India developing closer
28 India and APEC: An Appraisal
ties with East and South East Asia, India’s e) A few also proposed that India should prospects appeared better. But, India will also participate in some of the Working need to work for it and prepare the ground. Groups of APEC that can also reflect There were several suggestions and comments India’s keen interest. It was recalled that in this regard that were made: India had participated in one or two working groups of APEC some years ago. a) An effort has to be made by India to (There is some mention in the literature engage closer with the Asia-Pacific region about India’s participation in the 1990s and its keen interest for becoming part of in APEC Working groups on Energy and APEC has to be effectively conveyed. A key Science and Technology although this factor that could be suitably highlighted author could not obtain confirmation is that by 2020 or so India will emerge in this regard). New procedures for as the third largest economy and it made participation in working groups as a sense for APEC to see India within it. ‘guest’, however, does not leave it only to b) Despite India’s ‘Look East’ policy, its the discretion of the host country but also ramping up engagement with the region requires submission of an application/ was not so compelling. There was worry invitation to the APEC Secretariat that in the street about the gap between what has to be approved by consensus by all India talks and what it does and that its 10. participants Conclusion in the and working Way group. Forward actions were not commensurate with its power. c) How serious India is about the enterprise There are many potential gains that can accrue of liberalisation will become an important from India’s membership of APEC even as factor. India will need to work carefully on managing some of the ensuing expectations its positions in WTO and RCEP. That India and pressures will need deft handling. Author was not seen as forthcoming in RCEP considers that it will be beneficial for India negotiations was mentioned by several to join APEC but a well crafted effort will be necessary to prepare the ground. A decision interlocutors. One interlocutor felt India’s needs to be taken quickly by the government. positions need to be explained with a If it is decided to move ahead, necessary few well argued papers. Some seminars preparations have to start right away even and conferences organised by good think as a favourable decision on India’s admission tanks can help. into APEC may take two to three years to d) Some, particularly in the think-tank materialise. Firstly, a persuasive case will need community, suggested that India should to be made regarding India’s keen interest to become a member of the Pacific Economic work towards further promoting Asia-Pacific Cooperation Council (PECC) as a first Integration. The overall progress made by step. All existing members of APEC are India and the various business facilitation members of PECC and many regard the and reform measures being introduced by the seeds for APEC were sown by discussions government to significantly improve Ease of in PECC that predated APEC by ten years. Doing Business in India provides a good basis There was, however, one key interlocutor for this purpose, even as the limitations posed who felt that PECC’s importance had by domestic compulsions and the flexibilities greatly declined now and there was not needed may have to be well articulated. It much point in going for a ‘small prize’. would be necessary to get some influential
29 India and APEC: An Appraisal
APEC members to push India’s case. One will soon, but latest by 2017 when Vietnam will be to co-opt the United States in this effort, be the chair country. Meanwhile, however, particularly considering the welcome it has it may be a good idea for India to try and accorded to India’s interest to join APEC. It participate as a ‘Guest Country’ in some of may also be advisable to get Australia and the Working Groups on trade facilitation and Japan, both of which are regarded as ‘parents strengthening of supply chains. This will, on of APEC’ and with both of which India is also the one hand, convey India’s keen interest developing good bilateral relations, to give a while our concerned officials will also have supportive push. China, another influential an opportunity to see if they can burnish member and the ASEAN members of APEC, up India’s own national campaigns on trade will also need to be engaged. Secondly, since facilitation and on making manufacturing the chair country has substantial leverage in attractive from lessons learnt. If the Indian setting the agenda in APEC, some added efforts economy gets on to a higher growth trajectory will also be required with the Phillipines, Peru soon, this will be an additional favourable and Vietnam, which are the chair countries factor. It is interesting that18 in recent months for 2015, 2016 and 2017, respectively. India three different scholars have argued how could target to receive a favourable decision getting India into APEC would benefit both India and APEC members.
30 Annexures
Annexure 1 Structure of APEC
Source
: APEC website (www.apec.org).
33
Annexure 2 APEC Sectoral Ministerial* Meetings
1. 12.
Meeting of APEC Ministers Responsible APEC Science Ministers Meeting (4)– 2. for Trade (21)** – 2014*** 13. 2004 APEC Finance Ministers’ Meeting (21) APEC Health and Economy Ministerial 3. – 2014 Meeting (4) – 2014 APEC Small and Medium Enterprises 14. APEC Meeting of Ministers Responsible Ministerial Meeting (21) – 2014 for Environment (3) – 2012 4. APEC Energy Ministerial Meeting (11) 15. APEC Ministerial Meeting on Food – 2014 16. Security (3) – 2014 5. APEC Transportation Ministerial APEC Avian Influenza and Pandemics 6. Meeting (8) – 2013 Ministerial Meeting (3) – 2006 APEC Tourism Ministerial Meeting – (8) 17. APEC Meeting of Ministers Responsible 2014 Source for Forestry (2) – 2013 7. APEC Human Resources Development : Information given in Annexures 2 to 7 have been collatedNote: from APEC Website (www.apec.org). Ministerial meeting (6) – 2014 * An annual APEC Ministerial Meeting is also held just 8. APEC Telecom and Information prior to the Annual Leaders’ meeting. Normally each member is represented in such a ministerial meeting by their Foreign Ministerial Meeting (6) – 2012 and /or Trade ministers. 9. APEC Education Ministerial Meeting ** Figure in parenthesis indicates number of meetings held so far. (5) – 2012 *** Year against each entry refers to last year when meeting 10. Meeing of APEC Ministers Responsible was held. 11. for Mining (5) – 2014 APEC Ocean-related Ministerial Meeting (4) – 2014
35
Annexure 3 APEC Best Practices/ Guidelines
Trade and Investment Related 11. 1. APEC’s Good Practice on Regulatory 12. APEC Best Practices for RTAs/FTAs and Reform 2. APEC Model Chapters for RTAs/FTAs 13. APEC Leaders Transparency Standards 3. APEC Best Practices in Secure Trade APEC Non-binding Principles on APEC Customs ‘Best Practices’ Hand Government Procurement Book 14. APEC Good Practice Guide on Public 4. APEC Customs 3M Strategic Framework Sector Governance. 15. APEC Principles for Cross Border Trade 5. APEC Best Practices to Create Jobs and 16. 6. Increase Competitiveness (2013) in Services. APEC Information Notes on Good APEC Guidelines for Advance Rulings Practice for Technical Regulations 17. APEC AEO (Authorised Economic 7. APEC Innovation Principles Operator) Action Plan and APEC AEO Best Practices 8. APEC Privacy Framework and Cross- border Privacy Rules (CBPR) 18. APEC Principles to Enhance Competition Sectoraland R Bestegulatory Practices Reform 9. Model Code of Conduct for Business, a Model Code of Principles for Public 1. Aapproval and Complementary Anti- APEC Chemical Dialogue – Principles for Corruption Principles for the Private 2. Best Practice Chemical regulation and Public Sectors Manual of Best practice Principles for 10. APEC Principles on the Prevention 3. Independent Power Producers (IPPs) of Bribery and Enforcement of Anti- Bribery Laws Building Energy Codes – Best Practices Report for APEC Economies
37 India and APEC: An Appraisal
4. APEC Report of Best Practices in practices for people linking with HIV/ Accessible Tourism AIDS 5. APEC Smart Buildings – Development of 14. APEC Best Practice Principles as Best Practices for Low Energy Buildings 6. Network a) Accelerating Investment in Natural Gas supplies Best Practices in Agricultural Statistics in APEC Members b) Natural Gas Trade 7. APEC Common Principles to Shipping c) Infrastructure and Trading Policy Networks in the region. 8. APEC Best Practices for SMEs Innovation d) Facilitating the development of LNG Trade 9. APEC Functioning Economies in times of Pandemics Guidelines e) Independent Power Producers (IPP) 10. Models for Supporting Women’s Micro Enterprise Development: Best Practices f) Energy Education 11. and Guidelines g) Financing Energy Infrastructure APEC Principles for Voluntary Codes Projects of Business Ethics. (KL principles for h) Establishment and Management of medical devices sector, Mexico city Strategic Oil Stocks principles for bio-pharmaceutical 15. APEC IPR Guidelines in Capacity sector and the Hanoi principles for the 16. Building 12. construction sector). 10 APEC Mining Policy Principles APEC’s Voluntary Food Defence 13. Principles (2007) 17. APEC Guidelines on Appropriate Source Donations in Times of Disaster APEC Guidelines for creating an enabling environment for employers : APEC website (www.apec.org). to implement effective workplace
38 Annexure 4 APEC Initiatives/ Action Plans in Vogue Trade and Investment Related 1. governance, public sector governance Strategic Framework on Measurement and strengthening economic and legal 12. 2. of APEC TiVA under GVCs. infrastructure) 13. APEC Investment Facilitation Action APEC Services Initiative (2010) 3. Plan (IFAP) (2008-2010) APEC Strategy for Investment: Advanced APEC New Strategy for Structural Principles and Practices, Facilitation Reforms (ANSSR) endorsed in 2010. and Promotion - Building on Non- binding Investment Principles and the 4. APEC Connectivity Blueprint for 2015- Investment Transparency Standards 2025 (2014) 14. APEC consolidated Counter Terrorism 5. APEC Strategic Plan on Capacity and Secure Trade Strategy. Building to Promote Trade and 16. 6. Investment (2010-2025) 15. APEC Single Window Initiative 2007 APEC Ease of Doing Business Action Secure Trade in the APEC Region Plan (STAR) Initiative 2002. 7. APEC Regulatory Cooperation Plan 17. APEC Business Travel Card Scheme (2011) 18. Beijing Roadmap for APEC’s 8. APEC Anti-counterfeiting Facility and contribution to the Realisation of Piracy Initiative FTAAP (2014) 9. APEC Regional Movement Alert System 19. APEC Cross-border E-Commerce Innovation and Development Initiative 10. APEC Trade Recovery Programme (2014) 11. (Pilot service 2009) 20. APEC Strategic Blueprint for Promoting Leaders’ Agenda to Implement Global Value Chain Development and Structural Reform (Regulatory Cooperation (2014) reform, competition policy, corporate
39 India and APEC: An Appraisal
21.
APEC Initiative of Cooperation to 9. APEC Blue Print for Action on Electronic Promote the Internet Economy (2014). Trading (2008) Sectoral 10. APEC Multi Year Plan on Infrastructure 11. 1. Development and Investment. APEC Action Plan Framework on APEC Food Security Roadmap Towards Regional Economic Integration (REI) 2. 2020. Capacity Building Needs Initiative APEC Advertising Regulatory Capacity 12. (CBNI) 3. Building Monitoring Program APEC Food Security Business Plan APEC Strategy for Disaster Risk 13. (2014-2020) Reduction and Emergency Preparedness APEC Action Plan for Promoting Quality and Response Employment and Streghening People 4. APEC Science Prize for Innovation, to People Connectivity through Human Research and Education (ASPIRE) Resources (2015-2018) 5. APEC Electrical and Electronic Mutual 14. APEC Food Security Roadmap toward 6. Recognition Arrangements (EEMRA) 2020 (2014 version) APEC Food Sectoral MRA 15. APEC Cooperation Initiative for 7. APEC TEL MRA. jointly establishing an Asia-Pacific Source Urbanisation Partnership 8. APEC Standards Education Initiatives : APEC website (www.apec.org).
40 Annexure 5
Key APEC
1. Targets Bogor Goals of achieving Free and 8. Achieving convergence on regulatory open Trade and Investment by 2010 approval procedures for medical for developed members and by 2020 products by 2020 (2011) 2. for developing members of APEC (1994) 9. Aspirational goal of increasing forest 10 per cent improvement in supply cover in the region by at least 20 million chain performance by 2015 in terms hectares of all types of forests by 2020 of time, cost and uncertainty (of APEC (2007) supply chain framework) using 2009 10. Conserve at least 10 per cent of coastal 3. as a base (2009) and marine areas, including through Aspirational goal of a 25 per cent effectively managed marine protected improvement on ‘Ease of Doing areas (MPAs) and other area-based business’ by 2015, taking 2009 as a 11. conservation measures, by 2020 base in five priority areas: Starting a 1 Million intra APEC University students business, getting credit, trading across 12. by 2020 (2013) borders, enforcing contracts and dealing in permits (2009) 800 million APEC tourist arrivals by 2025 (2014) 4. Reduction of tariffs on APEC List of Already Achieved Environmental Goods to 5 per cent or less by the end of 2015 (2012) 1. reduction in trade transaction costs 5. Aspirational goal of doubling the share by 5 per cent across the APEC region of renewables in the APEC energy mix, between 2002 & 2006 - APEC’s First including in power generation, from Trade Facilitation Action Plan (TFAP - I) 6. 2010 levels by 2030 (2014) 2. Further reduction in trade transaction Reduction of aggregate energy intensity costs by 5 per cent in the period 2007- by 45 per cent by 2035 using 2005 as a 10 - APEC’s Second Trade Facilitation base year (2012) Source Action Plan (TFAP-II) Year in parenthesis indicates the year in which the target Note: : APEC website (www.apec.org). 7. Achieving universal broad band access was set. in APEC region by 2015 (2009)
41
Annexure 6
Various APEC Centers 1.
Biomedical Regulatory Science Center 10.11. APEC Digital Opportunity Center of Excellence and Training Center APEC Experts Advisory Panel and a for Commercialisation of Biomedical pilot Public Private Partnership center 2. Products 12. in Indonesia (2013) APEC Life Science Innovation Forum APEC Marine Environmental Training 3. (LSIF) Harmonisation Centre, Seoul 13. and Education Centre in Korea APEC Research and Training Center for APEC Ocean and Fisheries Information Marine Biodiversity Conservation and Center in Indonesia Ecosystem Management in China 14. APEC Marine Sustainable Development 4. APEC Innovation Center of Excellence Centre in China for the evaluation of multi-regional clinical trials 15. APEC sustainable Development Centre 16. in China 5. APEC Center on SMEs in Republic of 6. Korea APEC Higher Education Research Centre APEC SME Crisis Management Centre in Taipei 17. Asia-Pacific Model E-Port Network (APMEN) operational centers in the 7. APEC Climate Center Shanghai Model E-port 8. US-APEC Technical Assistance and 18. Pilot Center of APEC Cooperation Training facility in Singapore Network on Green Supply Chain, 9. Asia-Pacific Finance and Development Tianjin, China Center that is now to be upgraded to Source
Asia-Pacific Finance and Development : APEC website (www.apec.org). Institute
43
Annexure 7 APEC ‘Pathfinder’ Initiatives 1. 2. Trade and the Digital Economy (2002) 9. APEC Pathfinder on Technology Choice 3. Corporate Governance (2002) (2006) Electronic Certificates of Origin (2002) 10. APEC Data Privacy Pathfinder Initiative 11. (2007) 4. Electronic SPS Certificates (2002) APEC Self Certification of Origin Path 5. Adoption of Unilateral Advance 12. Finder (2009) 6. Passenger Information System (2002) APEC Pathfinder to Enhance Supply Adoption of Revised Kyoto Chain Connectivity by Establishing a de Convention on the Simplification and 13. minimis value (2011) Harmonisation of Customs Procedures (2002) APEC Pathfinder Initiative on Facilitating Trade in Remanufactured 7. APEC Pathfinder Initiative on APEC Goods (2011) Electrical and Electronic Equipment Mutual Recognition Arrangement 14. APEC Pathfinders on Mutual Recognition (APEC EE MRA) Parts II and III (2002) of AEO (Authorised Economic Source Operators) Programme (2011) 8. APEC Sectoral Food Mutual Recognition Note: : APEC website (www.apec.org). Arrangement (2003) Year against each entry indicated the year in which the initiative was endorsed.
45
Annexure 8 Bogor Goals and Osaka Action Agenda: A Comparative Study of Laws and Practices in India and Select* APEC Economies 1. Introduction business more efficiently, thus reducing costs of production and leading to increased Pursuant to the Bogor Goals and Osaka Action trade, cheaper goods and services and more Agenda, APEC members are seeking to pursue employment opportunities due to an expanded the triple objectives of trade and investment economy. APEC has set an aspirational goal of liberalisation, business facilitation and a 25 per cent improvement on ‘Ease of Doing economic and technical cooperation. Trade business’ by 2015, taking 2009 as a base in and investment liberalisation aims to reduce five priority areas: starting a business, getting and eventually eliminate tariff and non-tariff credit, trading across borders, enforcing barriers to trade and investment. Bogor Goals contracts and dealing in permits. sought to achieve free and open trade and investment by 2010 for developed members APEC’s ECOTECH is dedicated to providing and by 2020 for developing members of training and cooperation to build capacities APEC. Further, APEC members have also in all APEC economies to take advantage of committed to reducing tariffs on APEC List global trade. This area builds capacity at the of Environmental Goods to 5 per cent or less institutional and personal level to assist APEC by the end of 2015. economies and its people gain the necessary skills to meet their economic potential. As a part Business facilitation focuses on reducing of their commitment to meet the stated goals the costs of business transactions, improving for free and open trade and investment, APEC access to trade information and aligning members regularly submit their IAPs. This is policy and business strategies to facilitate a record of actions taken to meet its stated growth, and free and open trade. Essentially, goals. APEC members set their own timelines business facilitation helps importers and and goals, and undertake these actions on a exporters in Asia-Pacific to meet and conduct voluntary and non-binding basis.
* A team comprising Prof. Abhijit Das (Head CWS, IIFT), Dr. Murali Kallummal (Associate Professor and Consultant, IIFT), Dr. Pralok Gupta (Assistant Professor and Consultant, IIFT), Ms. Shraddha Kulhari (Research Fellow Legal, IIFT) and Dilfy Ann Philip (Research Associate, IIFT) worked on this report. The report has benefitted significantly from the suggestions of Dr. V. S. Seshadri, Vice-Chairman, RIS.
47 India and APEC: An Appraisal
2. Tariffs As specified in the Osaka Action Agenda, reporting of IAPs is based on the following The stated objective of APEC countries is to areas: (i) tariffs; (ii) non-tariff measures; (iii) eliminate tariffs. Bogor Goals sought to achieve services; (iv) investment; (v) standards and free and open trade by 2010 for developed conformance; (vi) customs procedures; (vii) members and by 2020 for developing intellectual property rights; (viii) competition members of APEC. This section19 analyses tariffs policy; (ix) government procurement; (x) in select APEC members in order to make deregulation/regulatory review; (xi) WTO an assessment of India’s standing relative to obligations (including rules of origin); (xii) these countries. The analysis is undertaken dispute mediation; (xiii) mobility of business separately for all products, as well as at the people; (xiv) information gathering and 2.1sectoral Analysis level. of Applied MFN Tariff analysis; (xv) transparency; (xvi) Regional Trade Agreements/Free Trade Agreements Rates (RTAs/FTAs). Each year, several APEC member economies volunteer to have their IAPs reviewed. Known as Peer Reviews, this Table 1 provides details of MFN applied tariffs process involves a formal review team for India and six selected APEC countries. considering each volunteer economy’s IAP. Based on the table, it is clear that compared Experts conduct independent research and to the other APEC countries, India has higher analysis and the independent private sector average total MFN applied tariffs. Further, body and the APEC Business Advisory Council India’s applied tariffs are higher for both (ABAC) are also part of the process. agricultural and non-agricultural products. While the gap between India’s average tariffs The objective of this report is three-fold. and those of APEC countries is not particularly First, it seeks to describe the APEC’s goals/ wide for non-agricultural products, in respect aspirational targets in respect of tariffs, of agricultural products India’s tariffs are two customs procedures, government procurement, times higher than that of Vietnam (the APEC services, investment, protection of intellectual country with highest agricultural tariffs). property rights and competition. Second, in Reduction of tariffs, particularly in respect of respect of each of these areas, it endeavours to agricultural products, is likely to be one of the compare India with select APEC members at key areas in IAP in which India could come similar stages of development. APEC members under pressure from APEC countries. Table 1 selected for this purpose include China, Chile, also suggests that the developing members of Indonesia, Malaysia, Peru, the Philippines APEC are not likely to eliminate tariffs by 2020, and Vietnam. The third objective is to assess particularly in respect of non-agricultural how APEC’s mechanisms/best practices/ 2.2products. Sector-Wise Applied MFN Tariffs expert groups can help India to improve its development objectives in each area. While this report is not a comprehensive analysis The disparity between tariff levels in India of all issues included in the Action Agenda of and in the developing APEC economies under APEC, it has focused attention on certain key consideration are further illustrated when aspects including tariffs, non-tariff barriers, sector level average tariffs are considered customs procedures, government procurement, viz. (Table 2). On the one hand, in certain labour services, investment and intellectual property intensive or primary sectors, clothing, rights. Even in selected areas, it does not cotton, leather and footwear, manufacturing purport to comprehensively examine all issues. n.e.s, minerals and metals, non-electrical
48 Bogor Goals and Osaka Action Agenda
2.4 Progress Towards Bogor Goals machinery, petroleum and wood, paper etc., tariffs are relatively high both in India Marginal reduction has been seen in the APEC as well as in some of the developing APEC average MFN tariff after 2010. While MFN economies. In respect of the other sectors, tariffs in non-agricultural products declined, India’s tariffs are significantly higher than the agricultural products faced increasing MFN rest, particularly in agriculture related sectors average tariffs. As stated earlier, the developing such as tea and coffee, dairy products, fish and members of APEC are not likely to eliminate fish products, fruits and vegetables, oilseeds tariffs by 2020, particularly in respect of non- fat and oil and sugars and confectionery. In 2.5agricultural Tariffs: products. Overall Assessment of general, however, India’s higher tariff levels have to be also understood in the context of its India’s APEC Membership need to keep its trade deficit in check. As will be seen from Table 3, India’s trade deficit as a percentage of its total exports of merchandise Given its relatively higher tariffs, India is likely goods is already significantly higher than the to come under pressure to reduce/ eliminate developing APEC economies. tariffs, at least in certain sectors, such as IT 2.3 ITA 2 and Environmental Goods products and environmental goods. However, it may be noted that there is some divergence within the APEC members on tariff related APEC has been at the forefront of seeking issues. To illustrate, while Malaysia and reduction/elimination of tariffs on IT goods, Thailand have shown aggressive interests in as well on the so-called environmental goods. NAMA negotiations at the WTO, Indonesia China, Malaysia and the Philippines are among and the Philippines are members of NAMA the 28 WTO members, which are seeking -11 and have more defensive concerns. India an expansion of ITA 1. This perhaps reflects could also argue that it needs tariff protection the active participation of these countries in to neutralise the cost disadvantage suffered global value chains of electronic products. As by its producers on account of infrastructural far as the environmental goods are concerned, deficiencies, quite apart from the large trade in 2012, APEC identified 54 products for deficit that it currently has on merchandise reduction ofTable tariffs 1: toComparison 5 per cent or of lower. the MFN Applied Tariffs for India and APEC Members (2000 - 2013)
(%)
Country Agriculture Non-Agriculture 2000 2005 2010 2013 2000 2005 2010 2013
Chile 9.00 6.01 6.00 6.00 8.96 5.98 5.98 6.00 China 14.10 13.81 15.60 8.09 8.17 9.00 India 82.65 36.04 23.49 33.50 37.10 15.56 9.09 10.20 3.36 Indonesia 6.57 6.93 7.08 7.50 5.67 5.70 5.87 6.70 Malaysia 2.56 2.49 2.57 8.90 4.49 3.82 5.50
Peru 12.75 10.31 4.44 4.00 17.00 9.34 5.53 3.30 Vietnam 13.91 9.97 16.20 12.37 6.90 8.30 US 4.10 5.40 3.40 5.30 3.60 3.20 3.10 3.10 Source Japan 3.80 3.90 4.20 19.00 3.60 3.40 3.20 2.60 : Compiled based on WITS data and WTO tariff profile 2013.
49 India and APEC: An Appraisal
Table 2: Average MFN Applied Tariffs of Selected APEC Members and India
(%) Tariff Above by Above Peru (2011) Peru Chile (2012) India (2012) China (2011) Avg. MFN App. Avg. APEC Members Avg. of Selected of Selected Avg. V ietnam (2012) India's Average Average India's Malaysia (2012) Malaysia Indonesia (2012) Philippines (2012) Avg. MFN incl. India Avg.
31.1 12.6 21.1 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l=d-k)) 22.3 6.2 32.2 Animal products 6.0 14.8 4.7 3.8 5.4 21.0 14.2 10.0 Beverages & tobacco 6.0 31.369.1 48 124.6 8.2 43.2 41.0 36.9 21.2 Cereals & 6.0 24.36.6 5.3 4.5 2.7 10.9 17.23.1 12.8 preparations 10.1 13 12.3 2.1 Chemicals 6.0 7.8 5.5 2.8 2.0 3.8 4.7 4.3 3.5 6.3 Clothing 6.0 16.0 14.1 14.4 0.2 14.8 19.8 12.0 2.6 Coffee, tea 6.0 14.7 56.3 6.7 5.7 15.7 26.7 17.3 11.7 44.6 2.3 Cotton 6.0 14.9 6.0 4.0 0.0 6.o 6.0 5.7 5.6 0.4 2.1 Dairy products 6.0 12.0 33.5 5.5 0.0 3.9 9.7 9.1 5.6 27.9 Electrical machinery 6.0 8.3 7.3 5.8 4.3 4.0 8.1 5.7 5.5 23.21.8 Fish & fish 6.0 10.8 29.9 5.3 1.0 0.5 8.0 15.6 9.6 6.7 products Fruit, vegetables, 6.0 14.8 31.0 5.5 3.0 5.1 9.8 20.0 11.9 21.8 plants 13.1 6.6 9.2 1.3 Leather, footwear, 6.0 10.2 8.6 10.5 4.7 12.8 9.1 8.9 etc. 6.3 6.2 1.6 Manufactures, n.e.s. 6.0 11.9 8.8 6.8 4.5 3.7 4.8 9.8 7.0 6.8 2.0 Minerals & metals 6.0 7.4 7.6 8.1 1.5 2.24.6 3.27.8 6.0 3.2 Non-electrical 6.0 8.0 7.3 5.3 3.5 0.62.3 4.5 4.1 machinery Oilseeds, fats & oils 6.0 10.811.3 37.4 4.1 1.8 3.1 5.6 7.96.6 9.5 5.5 31.9 Other agricultural 6.0 22.5 4.0 0.6 1.23.4 3.27.2 17.5 products 5.0 Petroleum 6.0 4.4 4.9 0.36.2 0.7 0.0 16 8.2 13.1 3.0 1.9 Sugars and 6.0 27.4 35.9 2.5 0.8 10.1 9.9 26.0 confectionery Textiles 6.0 9.5 21.213.5 9.2 9.0 9.6 9.1 9.6 9.4 8.9 4.6 Transport 5.4 11.5 9.4 11.4 1.0 8.8 18.2 10.9 6.69.4 11.8 equipment 13.1 Wood, paper, etc. 6.0 4.4 9.0 4.5 10.0 4.4 6.5 10.5 6.9 2.4 Source Average 6.0 12.7 22.5 8.0 9.8 3.7 7.8 10.4 8.7 13.8 : Compiled based on WTO tariff profile 2013.
50 Bogor Goals and Osaka Action Agenda
Table 3: Trade Deficit as Percentage of Exports
(%) 16.62 Country 2000 2005 2010 2013 Chile 8.76 21.56 -2.91 -2.23 China 9.67 13.39 11.52 11.73 Indonesia 46.05 32.64 14.02 India -24.98 -40.37 -58.81 -38.45 Malaysia 17.25 19.30 17.21 9.74 Peru -8.00 26.95 14.70 -3.55 Philippines 2.81 -19.96 -13.54 -20.60 Source Vietnam -7.97 -13.30 -17.45 0.00 Note: : Compiled based on data from WITS online database. A negative percentage indicates deficit and a positive figure surplus.
3.goods. NTMs, Standards and of likely gains for India in the area of Standards, Conformance if3.1 it were Profile to join of SpecificAPEC. Trade Concerns on SPS/TBT Issues
Given the increasing role of non-tariff barriers in impeding trade, it is surprising that APEC There is no universally accepted measure of has not yet embarked on a comprehensive and non-tariff barriers (NTB) imposed by various ambitious plan to address this issue. However, countries. One possible method of assessing some efforts are being made through the Sub- the extent to which SPS/TBT measures have Committee on Standards and Conformance caused concerns among different countries is (SCSC), which was established in 1994, to by analysing the Specific Trade Concerns on help reduce the negative effects that differing SPS and TBT issues raised by WTO members standards and conformance arrangements against APEC countries and India. The number have on trade and investment flows. These of these unresolved concerns can be a useful efforts have resulted in Mutual Recognition and relevant indicator of NTBs imposed by Agreements on Electrical and Electronic APEC countries and India. As shown in Table Equipment; and Telecommunications and 4, while China is at the receiving end of the Telecommunications-related Equipment. highest number of Specific Trade Concerns Further, APEC members seek to align domestic (16), India and Indonesia (8) each are not far standards to international standards as far 3.2behind. MRAs on Electrical and Electronic as possible. APEC economies have reported Equipment; and Telecommunications progress concerning the elimination of some and Telecommunications-Related non-tariff measures (NTMs). However, new Equipment NTMs have been imposed in recent years and the accumulation of NTMs continues to restrict trade. This section looks at the profile of specific The Electrical and Electronic Equipment trade-related concerns on SPS/TBT issues; Mutual Recognition Arrangement (EEMRA) briefly discusses the MRAs on the two broad is intended to apply to all instances where product categories, and provides an assessment
51 India and APEC: An Appraisal
test reports or certification are used as the MRA initiatives have been mooted in basis for regulatory compliance with respect several other areas, and it does not appear to electrical and electronic equipment. It to have progressed beyond information comprises three elements: information exchange.3.3 Likely Implications for India in interchange; acceptance of test reports; Respect of Standards if It Joins APEC and acceptance of certification. The EEMRA ensures that comprehensive information relating to member economies’ regulatory India could gain from the MRAs on regimes are available to manufacturers, Electrical and Electronic Equipment; and thereby improving compliance with Telecommunications and Telecommunications- regulatory requirements. By having mutual related Equipment. However, this is contingent recognition of test reports and certification upon the manufacturers meeting the testing/ by designated testing and certification certification and conformity assessment bodies, respectively, duplicate testing and requirements in accordance with the relevant certification can be avoided when products ISO/IEC Standards and Guide. Further, are being exported to numerous markets. questions could be raised on India’s capacity The testing/certification requirements have to exports these products at competitive prices been specified in accordance with the relevant to the APEC countries, some of whom are ISO/IEC Standards and Guide. It may be noted perhaps the most cost-effective producers in that out of the 21 APEC economies 18 have the world. In addition, these products do not agreed to participate in information exchange. constitute a significant share in India’s global However, participation in acceptance of test export basket. reports (5 APEC economies) and acceptance of certification (4 APEC economies) is low. With APEC is implementing the Automotive the larger economies – the US, Japan, Korea Dialogue, which allows the public and and Canada - not participating in acceptance private sectors to work together to improve of certification or acceptance of test reports, policy development, to identify barriers to the utility of the MRAs in facilitating exports growth and to develop effective cooperation would be reduced. mechanisms for APEC economies to address and reduce impediments. In the past, as part of The APEC-TEL Mutual RecognitionThe the dialogue, the Society of Indian Automobile Arrangement is a multilateral arrangement Manufacturers (SIAM), has been invited to between economies in the APEC region. make presentations. Membership of APEC APEC TEL MRA for Conformity Assessment could deepen the cooperation between SIAM of Telecommunications Equipment, which and similar other bodies in the APEC region came into effect on 1 July 1999, facilitates for reducing trade barriers in this sector. the recognition of each other’s conformity assessment results. The MRA for Equivalence of The large number of Specific Trade Technical Requirements, which was endorsed Concerns raised at the WTO against India by the APEC Telecommunications Ministers could be reflective of insufficient domestic on 31 October 2010, builds upon the MRA capacity in India to design and implement for Conformity Assessment by facilitating standards. In this context, the second benefit to the recognition of equivalent standards or India could arise from institutional and human technical requirements and provides for a resource capacity building by participation further reduction in the costs of conformity in discussions at APEC on issues related to assessment. standards and MRAs. The significance of this
52 Bogor Goals and Osaka Action Agenda
Table 4: Profile of Specific Trade Concerns on SPS/TBT Issues
No. of No. of unresolved unresolved Illustrations of recent TBT SPS related Illustrations of recent TBT related Country SPS related Specific related Specific Specific Trade Concerns Trade Concerns Specific Trade Trade Concerns Concerns 1 Proposed amendment to the Food Zero-tolerance for Health Regulations; Safety for Chile salmonella in imported 4 Printers and Energy Efficiency for poultry products Printers Import conditions related to phthalates; Free Sales Certificate for Imported 16 Import restrictions in Cosmetics; Safety Requirement for response to the Japanese Lithium Ion Cells and Batteries; China nuclear power plant 48 Regulations for the Supervision accident; Import policy and Administration of Medical on swallow nests; Import Devices restrictions on beef due to BSE Import restrictions on apples, pears Requirements for compulsory and citrus; Import registration of Electronics and conditions for pork and Information Technology Goods; India 8 20 pork products; India's Amendment to 2008 Hazardous import requirements Waste Law; Labelling Regulations for blueberries and for Canola Oil avocados Health Regulation on the inclusion of sugar, salt and fat content information, and health messages on the label of Permits on horticultural Indonesia 8 18 processed foods; regulation on products halal food; Mandatory Indonesia National Standard (SNI) for Glazed Ceramic; Affixed Mandatory Label in Indonesian Language for Goods 3 3 Conformity Assessment Import restrictions on Procedures for Steel Products; Malaysia pork and pork products Draft Protocol for Halal Meat and Poultry Production 6 Regulations for Moratorium on Planting Genetically Engineered Peru Crops; Act to Promote Healthy Eating Among Children and Adolescents 1 Regulations relating to liquor production and trading; Vietnam Ban on offals 4 Implementation of Some Articles Source of Food Safety Law : Compiled from WTO website (www.wto.org).
53 India and APEC: An Appraisal
4.1 Existing GP Regimes, Recent aspect cannot be under-estimated, given the Improvements and Proposed importance being attached by the government Changes to strengthen the domestic capacity in setting 4.standard. Government Procurement Neither India nor any of the APEC developing economies under examination are signatories Government Procurement (GP) generally to the Government Procurement Agreement constitutes a significant share of the total GDP (GPA) at the WTO. However, in their FTAs with in many countries. In many countries, the GP US, Chile and Peru have taken market access market is protected and the procurement commitments for government procurement. It regimes permit the countries to discriminate is also understood that China is at an advanced against foreign suppliers. GP is further stage of its accession to the GPA. APEC characterised by lack of transparency economies have been working on initiatives to in procedures. APEC has been seeking improve government procurement practices to to enhance openness in procedures and help ensure value for money, open and effective attempting to remove barriers that prevent competition, fair dealing, accountability and foreign entities to secure GP contracts in transparency. A common reported feature has other countries. been the implementation of electronic public procurement systems to streamline processes The APEC Government Procurement and make them more transparent. Experts’ Group (GPEG) was established in 1995 to consider ways to achieve increased Table 5 provides the basic information on transparency and enhanced liberalisation government procurement markets in India of government procurement markets in and selected APEC countries. From this table accordance with the Bogor Declaration. it would be clear that India’s procurement GPEG has developed a set of APEC Non- system may be comparable, if not better, than Binding Principles (NBPs) on Government those of the APEC countries. In the light of Procurement, which were endorsed by APEC CVC guidelines on procurement, it is also likely Leaders at their meeting in 1999 in Auckland, that in certain aspects – transparency – its New Zealand. The NBPs have contributed to procedure may be better than those prevailing the successful promotion of transparency and in4.2 the Likely APEC countries. Impact on India of APEC the liberalisation of government procurement Membership markets across member economies. The NBPs on government procurement are in respect of the following elements: value The work on GP at APEC has considerable for money; open and effective competition; flexibility and is not intended to be mandatory accountability and due process; fair dealing; or prescriptive. Some APEC members, non-discrimination; and transparency. particularly Malaysia, seem to have improved their procurement procedures and regime, This section compares the existing pursuant to work at the APEC. In the area of GP, procurement regimes in India and in select the most important gain to India from APEC APEC countries; recent developments in GP membership is likely to be improvements in and proposed improvements; and makes an procurement procedures. Adherence to some assessment of gains and costs to India that of the NBPs on government procurement could might arise from APEC membership. help streamline the procurement systems in
54 Bogor Goals and Osaka Action Agenda
Table 5: GP Regimes , Recent Improvements and Planned Changes
Country, Status wrt Domestic Regime on Government Procurement and Planned Improvements GPA, Size of GP Recent Improvements Separate law on procurement of goods and services implemented. Chile Has provided non-discriminatory market access under (Observer) the Chile - US FTA. Chile also negotiated an economic Size - $11.720 billion integration initiative with Pacific Alliance Members (2011) (Colombia, Peru and Mexico), which includes a Government Procurement chapter. 23 Government Procurement Law in effect since 1 January China (Observer, 2003. negotiating Procurement from domestic sources mandatory, Simplifying and accession) subject to certain exceptions including unavailability standardising Size - RMB 1,397.8 of goods or services on reasonable commercial terms GP procedures; billion in 2012,21 up domestically. Possibility of foreign suppliers to strengthening from RMB 842.2 participate in GP exists if other laws and administrative evaluation management billion in 2010. regulations so permit. of procurement results; Government Recent improvements include standardising bid further standardising GP procurement evaluation procedures; requiring use of competitive procedures; and actively accounted for about procurement methods; establishing complaint participating in GPA 2.2 per22 cent of GDP settlement mechanism; streamlining procedures accession negotiations. (2.1 per cent in for application and approval; and treating products 2010). produced by foreign invested enterprises in China at par with those produced by Chinese enterprises.
No specific GP law. At the central level GP is undertaken in accordance with General Financial Rules Public Procurement 2005; Delegation of Financial Powers Rules; manual Bill was introduced on policies and procedures for purchase of goods; in Parliament in May guidelines issued by the Central Vigilance Commission 2012, but could not etc. Railways, Telecommunications, PSUs etc. have be approved. Under their own procurement systems. In respect of high the proposed bill the value tenders competitive global biding is resorted to. procuring entities However the threshold for this is not defined. Price shall generally not preferences of up to 15 per cent is provided to MSMEs discriminate amongst over the quotations provided by large scale industries. bidders but in limited Central PSUs are allowed preferences on a case by case India (Observer) circumstances domestic basis. A list of medicines is reserved for purchase from Size 24- 20 per cent of purchase preference Pharma PSUs. GDP may be permitted. A project on E-Government procurement is being Other important implemented at the Central Government level. In provisions of the bill addition, procuring entities at the Central Government include a two stage level provide detailed information on their respective grievance redressal websites regarding each procurement. mechanism and integrity pact providing With the exception of a few States like Andhra Pradesh, directives on what Karnataka and Tamil Nadu, rules of GP are generally conducts are not obsolete and have not been updated over the past acceptable. many decades.
Table 5 continued...
55 India and APEC: An Appraisal
Table 5 continued...
Country, Status wrt Domestic Regime on Government Procurement and Planned Improvements GPA, Size of GP Recent Improvements No exclusive procurement26 law; the main source of procurement rules is Presidential Regulation No. Indonesia 54/2010 (PR54). (Observer) E-Procurement made mandatory as of 2012. Size - 3025 per cent of Procurement announcements and tender budget. documentation are available online but in Indonesian only. SMEs given priority for procurement below IDR 2.5 billion. No exclusive legislation on government procurement; the Financial Procedure Act 1957 is the main28 legal instrument for government procurement. Sales to GP require a local agent or a joint venture partner, usually a Bumiputera. Open tendering NextGeneP, an advanced mandatory for procurement above RM 500,000. e-procurement Malaysia International tenders invited when domestic goods system, will go live (Observer) and services unavailable. Bumiputera suppliers in 2015. This will Size- $ 28.127 billion receive margin of preference between 2.5 - 10 per cent; enhance transparency (2010). Bumiputera manufacturers receive MoP between 3 - 10 in procurement and per cent. Comprehensive offset policy exists covering make the process more defense and non-defense procurements – mainly in interactive. Aerospace, Rail, Automotive and Energy Sectors. As part of procurement reform results of recent tenders made electronically available. E-Procurement being gradually encouraged. Government Procurement Law-2009 and its All entities must publish Peru (Neither implementing regulations30 (Supreme Decree No. tendering information signatory nor 184-2008-EF). Pursuant to its FTAs with EU, Peru electronically. Steps Observer) is implementing comprehensive obligations related being taken to Size - S33.829 billion to transparency in GP. In addition Government publish procurement (2012). Procurement Tribunal established for settling GP information in English. related disputes. Government Procurement Reform Act (R.A. No. 32 Studying the 9184 of 10 January 2003) replaced over 100 laws, Philippines (Neither establishment of rules, and regulations, with a single unified regime. signatory nor independent bid Foreign participation in GP remains restricted, as Observer) 31 challenge procedure. strong preference provided to procure domestically. Size - around 3 per Plans to implement Upgrading online monitoring and evaluation system cent of GDP professionalisation for implementing agency procurement performance programme for indicators. Approved guidelines on e-bidding on a pilot improving GP. basis. Decrees providing Government procurement regulated in accordance guidelines Law Vietnam33 (Observer) with the Law on Tendering No. 61/2005/QH11 of 29 on Procurements Size - $ 21.9 billion November 2005; Law No. 38/2009/QH12, Decree No. (amended) on selecting (2011). 85/2009/ND-CP, Decree No.34 68/2012/ND-CP, and bidders and investors in other guiding documents. pipeline. Source
: Complied by author from various sources.
56 Bogor Goals and Osaka Action Agenda
India. India may also benefit from adopting access and national treatment conditions some of the practices that can give effect to through the negotiation of FTA/RTAs including the elements of the NPBs. This would become deeper commitments than those agreed under particularly relevant if the Public Procurement the General Agreement on Trade in Services Bill is approved by the Parliament and rules (GATS). Regulatory frameworks have been need to be formulated for implementing the modified in certain sectors to reduce market procurement law. The overall balance tilts risk. Some restrictions still remain. For on the side of gains for India, provided the example, the local content requirements can work programme does not require member be frequently found in broadcasting sector. countries to make any commitments for In addition, restrictions in terms of market non-discriminatory market access to foreign access, national treatment and commercial suppliers. presence to provide a service are common in35 5. Services some sectors (e.g domestic transportation). Section 5.1 proceeds with discussing services commitments (GATS as well as Revised Offers In their 2008 Statement, APEC Leaders called pursuant to the GATS negotiations under the for accelerated implementation of APEC’s Doha Round), Services Trade Restrictiveness regional economic integration agenda, and: Index (STRI) and investment regime in “instructed officials to undertake initiatives selected APEC members and India. The APEC designed to promote greater convergence developing members chosen for comparisons in key areas of APEC’s trade and investment include Chile, China, Indonesia, Malaysia, Peru, portfolio, including cross-border services”. In the Philippines and Vietnam. This provides response to Leaders’ instructions, a Services an overview of how India compares with Action Plan (SAP) has been developed to APEC countries in services liberalisation. provide an overarching level of coordination Sub-section 5.2 dwells upon various initiatives and focus to the services-related work on services at APEC. In sub-section 5.3 an conducted across all of APEC’s various sub- assessment of the likely impact on India of committees and working groups. 5.1APEC Services membership Commitments is undertaken. under APEC members have reported an increase GATS at the WTO in the participation of foreign companies in a number of services sectors. Governments are unilaterally increasing competition by All the selected APEC members and India improving market access requirements for had made partial scheduling of sectors foreign firms or by extending licenses to under the GATS with the only exception of additional players, including to foreigners. Vietnam, which had scheduled all 11 services Telecommunications is the sector where sectors under the GATS on its accession to competition seems to have benefitted the the WTO in 2008. China and Malaysia had most from these more open market conditions. Among other services sectors, some APEC scheduled 9 sectors each followed by Peru economies reported better terms for foreign (7 sectors), Indonesia (6 sectors) and Chile participation in the financial services (in and the Philippines (5 sectors each). India particular, in the securities industry), had scheduled six services sectors. All these broadcasting, energy, energy-related services, countries had made improvements in the legal services, health-related services, postal services sectors scheduled in their Revised and courier. APEC economies have also Offers (RO) that form part of the ongoing Doha been encouraging more trade in services by Round Negotiations. Table 6 provides number providing more certainty regarding market of sub-sectors within each sector committed
57 India and APEC: An Appraisal
by these countries under the GATS and RO. these four countries in broadcasting, road The sub-sectors are classified as per the WTO freight and courier services. Service Sectoral Classification List (MTN/ The sectors with the highest STRI scores for GNS/W/120). It may be noted that the ROs India are rail freight transport, legal services were made in 2005/2006. and air transport. Rail freight transport is All the selected countries had GATS on the list of prohibited sectors. It is not commitments in business services, open to private investment, let alone foreign communication services, financial services and investment. For legal services, foreign services tourism and travel related services. transport suppliers have very limited access to the services had also been committed by these legal services market. Only Indian citizens countries except India under the GATS. Except can become fully licensed lawyers. Due to China, Peru and Vietnam, these countries have restrictions on any engagement that would not made any commitments under the GATS imply sharing remuneration with non- in distribution services, education services advocates, creation of corporations does not and environmental services. However, these seem to be feasible. Foreign lawyers may countries have proposed liberalisation in only enter on a fly-in fly-out basis, practicing education services in the RO, except the international and home country law. Foreign Philippines which has not committed in investment in air transport (commercial Education but has committed in Distribution establishment only) is allowed up to 49 and Environmental Services. per cent through the government route, for which prior approval is needed. The board The OECD has developed the Services Trade of directors and the manager (CEO) must Restrictiveness Index (STRI) for various be citizens of India, and the main carrier is services to identify policy measures that state-owned. The STRI score for India on restricts trade. The STRI indices take the value insurance would change now that the equity from 0 to 1, where 0 is completely open and share permitted for foreign companies has 1 is completely closed. They are calculated on been raised. the basis of information in the STRI database 5.2 Developments in APEC which reports regulation currentlyviz. in force. The STRI is calculated for the OECD members and selected non-members, Brazil, China, Work at the APEC on services issues can India, Indonesia, Russian Federation and be divided into the following three broad South Africa. Therefore, the STRI is available categories: policy issues (i.e. cross-cutting only for Chile, China, Indonesia and India out work relating to services trade, such as services of the selected countries for this study. principles, regulatory issues, economic impact of services trade); technical issues (i.e. work As can be seen from Table 7 and Figure 1, of a statistical or analytical nature, such as Chile is generally the most open market in measuring services trade volumes, classifying most of the services sectors considered for services); and sector-specific work (i.e. work calculating the STRI. India and Indonesia are relating to trade in specific services sectors, among the most restrictive markets except for such as professional services, energy services, engineering, motion pictures, sound recording, education services, environmental services road freight, computer and construction tourism services etc). services for India and broadcasting, road freight and courier services for Indonesia. Work in the area of policy issues include China is the most restrictive market among the following: assessing the impact of services
58 Bogor Goals and Osaka Action Agenda x 5 2 1 2 1 3 2 30 14 18 10 R O India x x x x x x 9 1 1 2 10 18 GATS ------R O evised Offer. evised x 5 4 4 3 2 2 2 20 19 19 12 O: R GATS V ietnam*** x x x 3 1 1 1 2 1 IO 12 23 14 evised Offer; R Offer; evised x x x x x x x 2 9 2 19 11 GATS Philippines* ------R O x x x x x 7 9 2 2 2 8 Peru** 19 GATS x x 1 2 3 5 1 1 2 45 10 23 R O x x x 2 3 5 1 1 2 Malaysia 27 10 19 GATS x x x 4 6 4 1 1 3 IO 14 20 21 x x x x x x 2 6 4 3 12 13 Indonesia* GATS x x 5 5 5 4 1 2 29 14 16 14 R O China x x x 5 4 5 4 2 21 11 12 12 GATS x x x x x x x 5 3 26 12 12 evised Offer not available publicly; *** Not submitted Initial Offer and R Initial Offer *** Not submitted publicly; not available Offer evised R O Chile x x x x x x x 8 8 1 3 10 GATS 5 5 4 4 5 1 5 4 48 24 23 35 Total No. of Total Sub-sectors Table 6: Number of Sub-sectors within Each Sector Committed under GATS and RO under GATS Committed within Each Sector 6: Number of Sub-sectors Table elated elated elated R R
elated elated And Social R Services/Countries ecreational, ecreational, Cultural And Business Services Communication Services Construction And Distribution Services Services Educational Services Environmental Financial Services Health Those Than (Other Services U nder 1.A.H-J.) Listed Travel And Tourism R Sporting Services Services) Than Audiovisual (Other Services Transport Included not Services Other Elsewhere Engineering Services Services : Compiled by author from various sources. various author from : Compiled by Source these countries; ** R by submitted were Initial Offers * Only Note:
59 India and APEC: An Appraisal
Table 7: STRI for Selected Countries
Countries/ Services Chile China Indonesia India Accounting 0.135 0.415 0.432 0.552 Architecture 0.125 0.26 0.308 0.362 Engineering 0.144 0.287 0.325 0.196 Legal 0.187 0.524 0.716 0.731 Motion pictures 0.152 0.447 0.716 0.268 Broadcasting 0.308 0.784 0.472 0.506 Sound recording 0.165 0.308 0.367 0.25 Telecom 0.281 0.529 0.607 0.474 Air transport 0.324 0.591 0.647 0.654 Maritime transport 0.386 0.387 0.443 0.321 Road freight transport 0.092 0.377 0.366 0.144 Rail freight transport 0.245 0.415 0.403 1.000 Courier 0.472 0.868 0.444 0.535 Distribution 0.109 0.359 0.4 0.352 Commercial banking 0.196 0.492 0.551 0.511 Insurance 0.138 0.496 0.523 0.635 Computer 0.132 0.293 0.321 0.289 Source Construction 0.135 0.294 0.313 0.24 : Compiled from OECD database.
Figure 1: STRI for Selected Countries
Source
: Compiled from OECD Database.
60 Bogor Goals and Osaka Action Agenda
5.3 Recent Developments in India and Overall Assessment trade; and enhancing the understanding of regulatory issues. Work on technical issues has concentrated on: boosting the capacity The Indian government has made, or is in the of APEC countries to measure trade in process of making, significant changes in the services; and addressing classification issues investment regime by relaxing investment in environmental services. Sector-specific norms for various services sectors. These are work seek to achieve the following objectives: discussed(a) Air Transport as below. Services facilitate trade in engineering services, architectural services, legal services and accounting services across the APEC region; At present, a domestic airline in India needs exchanging insights on “best” practices and to be in operation for minimum five years standards on education services regulations; and have a fleet of at least 20 aircraft to be information exchange on qualifications eligible to fly on international routes. The frameworks (QFs) and recognition agencies Civil Aviation Ministry in India is examining a for education services; develop a common proposal to either completely scrap this rule competency standard of nursing skills to or change it to one year of domestic flying underpin a Mutual Recognition Agreement for and having a five-plane fleet. A change in this the APEC region; deepen understanding of the 5/20 rule would have an immediate impact factors facilitating or inhibiting health services on carriers like AirAsia India, Air Costa or trade; development of a set of guidelines to the proposed Tata-Singapore Airlines joint assist developing economies in implementing venture Vistara. However, national career, Air WTO compliant domestic regulations in the India, and existing domestic36 careers, such as ICT sector. Indigo are opposing relaxing the 5/20 rule for flying(b) Rail international Transport routes.Services APEC is also implementing the APEC Legal Services Initiative, which seeks to enhance transparency of requirements and procedures Government of India opened up railways to for professional legal service providers to foreign investment by allowing 100 per cent practice foreign law across APEC economies. FDI in areas such as high-speed train systems, It also seeks to develop best practices for the suburban corridors and dedicated freight regulation of foreign lawyers. With a view line projects besides allowing FDI in some to increase accessibility to information for projects like construction of new lines, gauge regulators, an inventory of relevant regulatory conversion, doubling of lines and maintenance frameworks is being created. Along similar projects under the public-private partnership lines, the APEC Accounting Services Initiative model. For joint venture in the area of projects, is also being pursued. up to 74 per cent FDI will be allowed. These FDI proposals will be allowed under the APEC has also recognised certain non- automatic route, so these will not require FIPB binding principles for Cross-Border Trade approval. It is worth noting that the Railways in Services. These include principles for Policy of 2012 had also allowed foreign players the promotion of open services markets, in rail projects, but this could not become a regulatory principles, principles to enhance reality as the Industries Act, 1951, and the transparency and predictability, principles consolidated FDI policy of 2013 did not have for services delivered electronically and enabling provisions. This anomaly has been principles to facilitate delivery of services removed by the above mentioned opening through Mode IV. up of railways through an executive decision.61 India and APEC: An Appraisal
The Ministry of Railways had listed 17 the date of approval of the building/layout areas for private and foreign investment. plan by the authority. Subsequent tranches These included suburban corridor projects, can be brought in till 10 years from the high-speed train projects, freight lines, commencement of the project or before the rolling stock manufacture, electrification, completion of the project, whichever is earlier. signalling, freight terminals and logistics It is worth noting that since 2005, 100 per cent parks, passenger terminals, training institutes, FDI through the automatic route is allowed testing facilities, branch lines and hill railways, in this sector, which includes townships, non-conventional energy, mechanised laundry,37 housing, commercial premises, hotels, resorts rolling stock procurement, bio-toilets, level and hospitals. However, the government has (c) Insurance Services crossings solutions and safety solutions. clarified that such investment isn’t allowed in an entity engaged in, or proposing to engage in, real estate, construction of farm houses and39 The Cabinet Committee on Economic Affairs trading(e) Services: in transferable Overall Assessmentdevelopment ofrights. India (CCEA) in India had approved in July 2014 a Joining APEC proposal to ease FDI limit in the insurance sector to 49 per cent from 26 per cent. Overseas investment proposals beyond 26 per cent will Based on the commitments under GATS and have to be approved by the Foreign Investment OECD’s STRI, it would appear that some of Promotion Board, the nodal agency that vets the APEC countries under examination have FDI applications. The increased FDI limit is undertaken significant higher liberalisation subject to the condition that management of their services sectors than India. However, control of these companies will remain with India’s Revised Offers under the Doha Round Indian promoters. The higher FDI ceiling will are more ambitious than the APEC countries, come into force after Parliament passes the with the exception of Malaysia in two sectors Insurance Laws (Amendment) Bill that has - Business Services and Financial Services. been pending38 since 2008 for lack of political The recent developments relating to raising consensus. Recently, through an ordinance, the FDI caps in certain service sectors the government has raised the limit of equity (d) Construction Services could be a pointer to the willingness of the participation by foreign companies. government to usher in reforms. Overall, were the need to arise, India may find it relatively less difficult to implement a structured plan The government has relaxed the norms for of services liberalisation under the APEC allowing FDI in the construction development sector. The minimum built-up area required framework. On the other hand, India could to attract FDI was reduced from 50,000 sq m gain from participation in discussions on, to 20,000 sq m, while the capital requirement and implementing, guidelines and common was decreased from $10 million to $5 million. competency standards in various services Also, an investor will now be allowed to exit on sectors. As most of the APEC guidelines are completion of the project or after three years implemented by countries on a voluntary basis, from the date of final investment, whichever India could be selective in implementing the is earlier. guidelines keeping its domestic sensitivities in view. In addition, implementation of MRAs According to the norms, at least $5 million in some sectors could boost India’s exports to in FDI will have to be brought in within six the APEC economies. months of the commencement of a project- 62 Bogor Goals and Osaka Action Agenda
6. Investment of property and protection of investments; Investment liberalisation is an important (iii) enhance predictability and consistency pillar in overall integration in the APEC region. in investment-related policies; (iv) improve Many economies have relaxed conditions for efficiency and effectiveness of investment foreign ownership in particular sectors and procedures; (v) build constructive stakeholder offer investors no restrictions in terms of relationships; (vi) utilise new technologies repatriation of capital, profits or royalties. to improve investment environment; (vii) Furthermore, there have been efforts to attract establish monitoring mechanisms for foreign direct investment (FDI) by simplifying investment policies; and (viii) enhance administrative procedures. Sub-section 6.1 international cooperation. In respect of starts with a description of APEC’s initiatives each principle, a menu of actions has been in the area of investment. Sub-section 6.2 developed that an economy can implement. It attempts a comparison of the investment is expected that implementation of the eight regimes in India and in select countries in principles would facilitate achievement of APEC. Finally, sub-section 6.3 seeks to assess a conducive environment for achieving the Bogor Goals. 6.1the overall APEC impact Initiatives of India on joining Investment APEC. Member economies have been taking various “promotional activities” to create Considering APEC’s past aims and activities, investment opportunities and solicit investors. it has identified the following categories as These include the following: information the pillars of its work strategy: Advanced sharing on investment opportunity; capacity Principles and Practices, Facilitation and building for investment promotion agencies Promotion. APEC economies have made through introduction of good practices substantial progress in developing principles and indicators provided by international on investment. These formally adopted texts organisations; development of PPP methods provide a common basis for the entire APEC in the APEC region; understanding the values region’s international commitments, since of enhanced investment in innovation as a they cover the key elements for International key enabler of sustainable and innovative Investment Agreements (IIAs), such as economic growth; and exchange of good MFN, National Treatment, Prohibition of practices on how to create business linkages Performance Requirements, Removal of between6.2 Investment SMEs and RegimesMNEs. in India and Barriers to Capital Exports, Expropriation and APEC Economies Compensation, Repatriation and Convertibility, Settlement of Disputes, and Transparency. APEC has conducted a variety of substantive Table 8a compares the overall investment works, and based on these works, formulated regimes in India and those in APEC countries. Investment Facilitation Action Plan (IFAP). Table 8b compares in detail the investment In IFAP, member economies have established regimes in a few key sectors, including a working framework of the following insurance, retail, real estate, railways and eight principles for investment facilitation, highways. It would be seen that based on government’s role, and business impact: (i) a comparison of FDI caps and restrictions, promote accessibility and transparency in the India’s FDI regime is perhaps more restrictive formulation and administration; (ii) enhance than some of the APEC countries, particularly stability of investment environments, security Malaysia and Indonesia in sectors such as 63 India and APEC: An Appraisal
insurance. However, it is also evident that in In Malaysia all proposals for manufacturing certain sectors, such as real estate, railways, and related projects, both foreign and domestic, and roadways and highways, India has a are screened to determine the extent to which more liberal investment regime compared to they contribute to the government’s goals and Malaysia and Indonesia. Further, on the basis objectives. Project approval depends on many of higher number of BITs signed by India other factors as well. Malaysian Investment than other countries except China, it can be Development Authority (MIDA) may consider concluded that India is prepared to implement the size of an investment, the share of a more liberal investment regime for investors production exported, the type of financing from specific countries. required (both local and offshore), the capital/ labour ratio, the potential for technology As far as the manufacturing sector is transfer into the local economy, the ability of concerned, India’s FDI regime is significantly existing and planned infrastructure to support liberal. FDI in manufacturing of cigars, the effort, and the existence of a local or foreign cheroots, cigarillos and cigarettes, of tobacco market for the output. If both local and foreign or of tobacco substitutes is prohibited. FDI firms propose similar projects, the local firm in Defence Industry (subject to Industrial will be given preference. However, all requests license under the Industries (Development & are handled on a case-by-case basis. Desirous Regulation) Act, 1951) is through Government of increasing local participation in this activity, route up to 26 per cent and above 26 per the government encourages joint-ventures cent to be decided by Cabinet Committee on between Malaysian and foreign investors. Security (CCS) on case to case basis, wherever 6.3 Investment: Overall Assessment it is likely to result in access to modern and of India Joining APEC ‘state-of-art’ technology in the country. FDI in MSEs (as defined under Micro, Small and Medium Enterprises Development Act, Based on the FDI caps and other restrictions 2006 (MSMED, Act 2006)) is subject to the on investment, it would appear that in some sectoral caps, entry routes and other relevant sectors India has perhaps a more liberal sectoral regulations. In other manufacturing investment regime than that in other APEC activities FDI is permitted up to 100 per countries. This is particularly true for the cent through the automatic route, subject manufacturing sector. It is, therefore, not to applicable laws/regulations; security and surprising to find that India ranks significantly other conditionalities. higher than most of the APEC countries (with the exception of Malaysia and Peru) in respect In Indonesia, certain industries including of ease of protecting investment (Table 9). This chemicals and alcoholic beverages are closed may perhaps make it less difficult for India to FDI. Certain industries have partnership to implement liberalisation in investment conditions for FDI. These include processed protection under the aegis of APEC framework. food; essential oils; rattan and wooden goods; However, it is also important to note that India component and spare parts to start up motor has a low rank in ease of starting a business industry, pump and compressor industry; and enforcing contracts. Both these are crucial components and accessories for two and three areas requiring attention of the government, if wheels vehicles; jewelry; agriculture machinery it seeks to attract foreign investment. etc. Entry conditions are imposed in some industries including valuable paper and paper By being a part of APEC, India could pulp, sugar, lead smelting, defence etc. also benefit from information sharing on investment opportunity and capacity building
64 Bogor Goals and Osaka Action Agenda
Table 8 a : Investment Regimes in India and APEC Countries
Total Total Other Name Bilateral International of the Investment Regime and Recent Developments Investment Investment Country Treaties Agreements (BITs) Generally open investment regime allowing foreign investors to hold upto 100 per cent of the equity. Generally grants national treatment. Exceptions to national treatment and market excess include costal shipping, air transport, fisheries and communications certain activities reserved for the State – exploration and exploitation of 51 (38 in 27 (23 in Chile lithium, oil or gas. force) force) Foreign investors can benefit from a clause establishing invariability of value added tax and customs duties on imported capital goods. Foreign investors can opt for fixed income tax at the rate of 42 per cent for up to 10 years. Foreign investment allowed in several forms including joint ventures, wholly foreign owned enterprises, partnerships or mergers and acquisitions of domestic enterprises. FDI restricted in projects deemed to employ outdated technologies, over-exploit scarce natural resources or harm the environment. FDI prohibited in projects polluting the environment, destroying natural resources or damaging public interest. FDI may enjoy customs duty and VAT exemptions on imported 130 (106 in 17 (16 in China capital goods. force) force) Threshold of foreign projects requiring Central Government approval raised to US$ 300 Million. In most services sectors, except financial and telecomm sector, approval of foreign investment delegated to local level. The Shanghai Pilot Free Trade Zone launched in 2013 is being implemented on a negative list approached and provides national treatment on a trial basis.
FDI is allowed in Indian companies (including micro and small enterprises), partnership firms, venture capital funds, and in limited liability partnerships (LLPs) firms. FDI in LLPs has been allowed since May 2011, with FIPB approval, in sectors where 100 per cent FDI is allowed through the automatic route and where FDI is not linked to any performance conditions. 84 (69 in India 13 (9in force) FDI in India is prohibited in: (a) Lottery Business (b) Gambling force) and Betting including casinos etc. (c) Chit funds (d) Nidhi company (e) Trading in Transferable Development Rights (TDRs) (f) Real Estate Business (g) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes (h) Activities/sectors not open to private sector investment. Table 8a continued...
65 India and APEC: An Appraisal
Table 8a continued...
Total Total Other Name Bilateral International of the Investment Regime and Recent Developments Investment Investment Country Treaties Agreements (BITs)
In sectors where FDI is allowed up to 100 per cent, FDI enters under the automatic route, subject to sectoral regulations and other conditions. No approval is required from the Reserve Bank of India or the Government. In sectors where FDI is capped, prior approval from the FIPB is required. FIPB recommendations must be cleared by the Ministry of Finance for FDI proposals below or equivalent to Rs. 12 Billion, and by the Cabinet Committee of Economic Affairs for FDI proposals of Rs. 12 Billion or more. Sectors not listed in the Policy are 100 per cent open to FDI under the automatic route subject to applicable laws, rules, and security conditions. However, even where FDI is allowed up to 100 per cent and under the automatic route, specific conditions or permits apply, which could in some cases be more restrictive than an explicit investment cap. FDI may be freely repatriated. Enacted a new investment law in 2007. Foreign investors can use either foreign capital entirely or joint capital with domestic capital. Foreign investment may only take the form of a limited liability company. In general all business fields open to foreign investment, but restrictions apply for health, safety and environmental reasons. Restrictions include 100 per cent domestic capital requirement, specific permits, maximum foreign ownership, location requirements, partnership requirements, permit requirements etc. National treatment granted to foreign investors. Foreign investors have the right to repatriate funds using foreign 64 (46 in 15 (13 in Indonesia currency. force) force) No nationalisation, except through law and providing market price compensation. Foreign investment in SEZs receives fiscal incentives. Investment application procedures simplified by eliminating the registration step. Government reviewing the negative list and planning to reduce restrictions in 9 sectors including management and operation of ports, airports land terminals and dry docks; pharmaceuticals; and eco-tourism.
Foreign investment generally open, but restriction in some sectors such as fisheries, energy, telecommunications, air and maritime transport. Foreign investors not allowed to acquire properties 69 (50 in 22 (19 in Malaysia below RM 1 Billion. force) force) Policy restrictions exist in respect of FDI affecting Bumiputeras. Malaysia ranked high for strong investment protection. Table 8a continued...
66 Bogor Goals and Osaka Action Agenda
Table 8a continued...
Total Total Other Name Bilateral International of the Investment Regime and Recent Developments Investment Investment Country Treaties Agreements (BITs)
The Foreign Investment Law automatically authorises foreign investments in the country, and once undertaken, it must be registered. No screening mechanisms, nor performance requirements applied. Certain limitation so foreign investments in broadcasting, air and water transport, ownership of real estate and some resources within 50 km of Peru’s international borders applied. 32 (31 in 25 (19 in Peru Generally national treatment accorded to all investments. force) force) Foreign investors guaranteed the right to transfer all their capital, dividends or profits derived from their investments out of the country in freely convertible currencies. Made progress in implementing APEC Non-Binding Investment Principles concerning business facilitation, international investment agreements and double taxation treaties.
Vietnam's investment regime is based on the Enterprise Law and the Investment Law. The Enterprise Law provides for enterprises to be established in the form of limited liability companies, shareholding companies, partnerships, or sole proprietorships. The Investment Law also prohibits investments considered detrimental to national defence and security, historical and cultural ethics, Vietnamese traditions and fine customs, and the environment. Investment is conditional in (i) sectors having an impact on national defence and security, social order and safety, and public health; (ii) banking and finance; (iii) recreational services; (iv) education and training; (v) real estate, (vi) culture, information, press, and publication; and (vii) surveying, prospecting, exploration and mining of natural 60 (45 in 19 (15 in Vietnam resources. In financial services and legal services, investment is also regulated under specific laws, i.e. the Law on Credit Institutions, force) force) the Law on Insurance Business, the Law on Securities, and the Law ₫ on Lawyers. For investment projects valued at less than 15 billion and not in a conditional investment sector, no further formalities are necessary. ₫ All investment projects (domestic and foreign) worth more than 300 billion as well as all projects in the conditional sectors are subject to an "investment evaluation". An enterprise with up to 49 per cent foreign ownership is subject to the same conditions as a Vietnamese-owned company, whereas the foreign investment rules apply to enterprises with more than Source 49 per cent foreign ownership.
: Compiled by author from various sources.
67 India and APEC: An Appraisal Table 8b continued... Table etail Trading. In R India through automatic route in # Insurance Insurance Company, Insurance Third Party Administrators, Surveyors and Brokers, Loss Assessors 100 per cent in through Cash automatic route Wholesale & Trading Carry from (including Wholesale MSEs). sourcing Wholesale Trading/ trading resale, includes processing and bulk thereafter imports sale, warehouse with business e-Commerce. ex-port/ex-bonded sales and 100 per cent B2B (Automatic up to 49 per cent, Government route beyond 49 per cent) in Single Brand Product respect of proposals involving FDI beyond 51 per cent, sourcing of 30 per cent of the from done be to is purchased goods of value India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. 26 per cent Malaysia einsurance einsurance companies R 100 per cent in Department speciality stores stores. department and must reserve at least 30 per cent of their shelf space for goods made by SMEs. bumiputera-owned In 2009, foreign ownership limits were raised from 49 70 per per cent for cent branches of foreign to insurance companies. foreign equity above 70 However, per is cent considered on basis a for insurance case-by-case the companies investment if is facilitate determined to the rationalisation consolidation of and industry. the insurance are required to do more per cent than of reinsurance in Malaysia 50 and have 5 per As part local of Malaysia’s retention. cent cession and response to the 1997-1998 financial Asian crises, foreign all insurance companies branches were locally. incorporate to required of Indonesia e-insurance e-insurance Company, einsurance Broker 95 per cent selling in direct marketing developed by business network partners. through 80 per cent in General Insurance Life Insurance Company, Company, R General Adjuster Insurance Insurance Company, Company, Broker Insurance company R Agent and company China* Table 8 b : FDI Regime in Selected Sectors in China, India, Indonesia and Malaysia Sectors in Selected 8 b : FDI Regime Table estricted estricted in Commercial estricted in Wholesale, retail estricted estricted in Insurance R companies of commodity direct selling, mail Internet order selling, commissioned selling, franchising, management commercial operation, R and logistic grain, distribution cotton, sugar, of vegetable medicines, automobiles, oil, capital tobaccos, goods crude for production agricultural (Chinese hold the majority oil, of should shares the of multiple shops which have more than 30 branch stores and sale different kinds and brands of commodities suppliers) from multi- R companies (the share insurance of life- companies than 50 per cent) and is Insurance less companies brokerage Sector etail R Insurance
68 Bogor Goals and Osaka Action Agenda Table 8b continued... Table S $ 100 million. At least At million. 100 $ U S etail Trading. Minimum R 51 per cent in through Multi government Brand route amount to be brought is investor in foreign as FDI by the 30 per cent of the value of of procurement manufactured/ purchased shall processed be sourced products small and medium industries. micro, from Indian 100 per cent through automatic infrastructure built-up route housing, Townships, in and construction-development would (which projects include, but not be restricted to, housing, commercial premises, hospitals, hotels, recreational resorts, facilities, educational city The infrastructure. minimum level built-up and regional area required institutions, to attract FDI was reduced the while m, sq 20,000 to m sq 50,000 from capital requirement was decreased from $10 million to $5 million. Also, an investor will now be allowed to exit on completion of the project or after the date three of final years investment, whichever from is earlier. in route automatic 100 per cent through systems, train such as high-speed areas freight corridors and dedicated suburban FDI in some besides allowing line projects construction of new lines, like projects doubling of lines and conversion, gauge under the public- projects maintenance joint partnership model. For private 74 up to of projects, in the area venture per cent FDI will be allowed. Information Information not available that inferred be for may it Hence, sector. this in this sector. FDI is not allowed this for not available Information be inferred Hence, it may sector. in this that FDI is not allowed sector. R p 67 Construction per (construction service cent implementation service) in using advanced technology and/or high risk and/or the work value is more than 1,000,000,000.00 67 per cent in for Construction work railway ailway freight freight ailway passenger ailway estricted estricted in development of estricted in construction and estricted in real estate in R estricted in R estricted R pieces of land (limited to equity joint ventures or joint ventures) contractual R hotels, high-ranking of operation villas, high-class office buildings and international centres exhibition R transaction in market second-grade companies and brokerage medium and R companies transportation R companies, transportation Chinese partner shall hold the majority of shares in Construction and Encouraged and city management of metro (Chinese partner shall rail light hold the majority of shares) ailways eal Estate eal R R Table 8b continued... Table
69 India and APEC: An Appraisal 100 per cent through automatic route. automatic 100 per cent through o Investment And Business Fields Open, With Conditions, To And Business Fields Open, With Conditions, To o Investment
http://english.mofcom.gov.cn/article/policyrelease/aaa/201203/20120308027837. Information not available for this for not available Information be inferred Hence, it may sector. in this that FDI is not allowed sector. oad
egulation%2039%20year%202014.pdf 95 per cent in Toll R 95 per cent in Toll Business 67 per cent in for Construction work bridge, flyover, highway, tunnel, and underpass http://dipp.gov.in/English/Policies/FDI_Circular_2014.pdf epublic Of Indonesia Number 39 2014 On List Business Fields Closed T egulation of The R Encouraged in Construction and Encouraged access- management of urban roads controlled /www.state.gov/documents/organization/228504.pdf Statement - Malaysia’; http://www.state.gov/e/eb/rls/othr/ics/2013/204686.htm - Malaysia’; Statement Climate Investment http:/ ‘2013 * Chinese Catalogue for the Guidance of Foreign Investment Industries (Amended in 2011) delineates sectors of the economy where foreign investment is “encouraged,” “restricted,” “restricted,” is “encouraged,” investment foreign where of the economy sectors Industries (Amended in 2011) delineates Investment the Guidance of Foreign * Chinese Catalogue for oad and R Highways Table 8b continued... Table China: ‘Catalogue for the Guidance of Foreign Investment Industries (Amended in 2011)’; Investment the Guidance of Foreign China: ‘Catalogue for Source: shtml and R Indonesia: ‘Presidential R http://www.bkpm.go.id/img/Presidential%20 Investment’; http://www.mida.gov.my/home/administrator/system_files/modules/photo/uploads/20140215090230_01%20GeneralPolicies. in The Services Sector’; Investment ‘Malaysia: Malaysia: pdf and India: ‘Consolidated FDI Circular of April 2014’; FDI Circular India: ‘Consolidated Note: foreign it will benefit from it believes where in sectors investment China “encourages” permitted. in the Catalogue is considered not listed in sectors Investment and “prohibited.” or that do not meet the goals of China’s on national security, that touch that China deems sensitive, in sectors and “prohibited” is “restricted” Investment assistance or technology. of India. of Government an Ordinance 49 per cent on 24 December 2014 by to plans. # This limit has been increased economic development
70 Bogor Goals and Osaka Action Agenda
for investment promotion agencies through rapid growth and developments of the New introduction of good practices and indicators Economy (e.g. establishing an appropriate provided by international organisations. The balance among all stakeholders, including latter is particularly important as India lacks content providers and ISPs in terms of the a structured institutional mechanism for liabilities for infringing intellectual property attracting investments. Furthermore, with online), etc. almost 25 per cent of its Outward FDI directed Each APEC economy is also required towards AECP economies, membership in to ensure that intellectual property rights APEC could provide an opportunity to India are granted through expeditious, simple, to raise, and seek to address, concerns of its and cost-effective procedures; ensure that 7.investors Intellectual in these economies. Property Rights adequate and effective civil and administrative procedures and remedies are available against infringement of intellectual property rights; According to the Osaka Action Agenda, APEC and provide and expand bilateral technical economies will align with WTO Agreements cooperation in relation to areas such as patent and in particular protect intellectual property search and examination, computerisation and rights by adopting or abiding by the principles human resources development in order to of the Agreement on Trade-Related Aspects ensure adequate intellectual property right of Intellectual Property Rights (TRIPS protection in compliance with the TRIPS Agreement), with regard to border control Agreement. while encouraging further acceleration, Collectively, APEC economies are required if possible, through technical assistance. to take the following actions: deepening the The objectives include the following: foster dialogue on Intellectual Property Policy; harmonisation of intellectual property rights support for easy and prompt acquisition of systems in the APEC region; ensure adequate rights; establish electronic processing of IPR- and effective protection, including legislation, related procedures; appropriate protection administration and enforcement of intellectual of IPR in new fields (e.g., biotechnology property rights; address the challenges for and computer-related inventions, GIS, e- intellectual property rights arising from the Table 9: Ranking of Countries on Investment-Relatedcommerce); establishing Indicators effective systems for
Rank in Enforcing Ease of starting Ease of Protecting Contracts for 189 a Business-2014 Investors- 2014 Membership of Country economies in 2014 (Rank in 143 (Rank in 143 ICSID countries) countries) (Ease of doing 32 Business Index) 122 Chile 53 64 Yes 32 China 81 35 Yes India 129 186 No Indonesia 117 42 172 Yes 63 16 Malaysia 15 4 29 Yes Peru 100 Yes Philippines 125 105 124 Yes Source Vietnam 104 125 47 No : Doing Business (www.doingbusiness.org) Database.
71 India and APEC: An Appraisal
IPR enforcement; facilitation of technology treaties. Therefore, it would be incorrect to transfer through ensuring IP protection, etc. consider India as a country that is not active in negotiating and signing new IPR treaties. Sub-section 7.1 discusses the status 7.2 Comparison of Patent Regimes of India and APEC countries regarding Patent Term: implementing IPR related agreements that go beyond the TRIPS Agreement. This is Under the TRIPS Agreement, relevant as some of the APEC economies have the minimum period of patent protection been active participants in negotiating these term is 20 years. While India provides this agreements, which is also a part of the Osaka period of patent protection, some of the Action Agenda. Thereafter, in sub-section 8.2 APEC economies provide a longer period of a brief comparison of patent regimes in these protection. Indonesia40 has a possibility of two countries is undertaken to identify some of year extension. In Chile the patent term is the TRIPS plus provisions being undertaken normally 20 years, unless there has been an by APEC economies, as well as to ascertain unjustified delay on the part of the authority in processing the granting41 of the patent or by the approach of these economies to certain Data Exclusivity: crucial issues, including compulsory licensing. the sanitary authority. As India’s patent regime has come under The TRIPS Agreement considerable criticism, particularly from the does not mandate countries to provide for perspective of enforcement, sub-section 8.3 data exclusivity. India does not provide for compares the number of patent applications data exclusivity. Malaysia provides for data and patents granted in India, as well as in exclusivity of upto five years for new drug APEC economies. Sub-section 8.4 provides the product containing new chemical entity and 7.1conclusions Implementation on IPRs. of International upto three years for a second indication of a IPR Treaties registered drug product. Vietnam provides data exclusivity for five years for finished drug products containing new active ingredients. Table 10 provides details of the status of China has six years of data exclusivity from India and APEC economies in respect of date of marketing approval. Chile and Peru implementing six international IPR treaties: provide data exclusivity for five years. Peru Protocol Relating to the Madrid Agreement has additional protection of 10 years of data Concerning the International Registration protection for crop protection products. of Marks; Hague Agreement Concerning the However, Indonesia and the Philippines, like International Deposit of Industrial Designs; India, do not have any provision for data Compulsory Licensing (CL): Marrakesh Treaty to Facilitate Access to exclusivity in their law. Published Works for Persons Who Are While India Blind, Visually Impaired or Otherwise Print has granted one CL, APEC economies have Disabled; WIPO Copyright Treaty; Beijing not refrained from using this instrument. Treaty on Audiovisual Performances; and Indonesia on two occasions and Malaysia for Singapore Treaty on the Law of Trademarks. four anti-retroviral HIV/AIDS formulations While India is not a signatory to four out of have granted CL. Thus, India cannot be six of these treaties, Malaysia and Vietnam consideredPatentability to be an Criteria: outlier in resorting to CL. are not signatory to five of the treaties. On the other hand, countries like Chile, China Section 3(d) of and Indonesia are signatory to most of these India’s Patent Act does not treat the following as an invention: new form of a known
72 Bogor Goals and Osaka Action Agenda V ietnam : April Accession 11, 2006 11, July In Force: 2006 Not a Signatory Not a Signatory Not a Signatory Not a Signatory Not a Signatory Philippines : Accession April 25, 2012 In Force: 25, July 2012 Not a Signatory Not a Signatory : Accession 4, 2002 July In Force: 4, October 2002 Not a Signatory Not a Signatory Peru Not a Signatory Not a Signatory : Signature June 28, 2013 : Accession 30, July 2001 In Force: 6, March 2002 : Signature June 26, 2012 Not a Signatory Malaysia Not a Signatory Not a Signatory Not a Signatory : Accession September 27, 2012 In Force: December 27, 2012 Not a Signatory Not a Signatory :
China : Accession 1, September 1995 In Force: December 1, 1995 Not a Signatory : Signature June 28, 2013 : Accession 9, 2007 March June In Force: 9, 2007 : Signature June 26, 2012 Ratification 9, 2014 July : Signature January 29, 2007 : Chile Not a Signatory Not a Signatory : Signature June 28, 2013 : Signature December 20, 1996 Ratification April 11, 2001 In Force: 6, March 2002 : Signature June 26, 2012 Not a Signatory : Indonesia Not a Signatory Not a Signatory : Signature September 24, 2013 : Signature 20, December 1996 Ratification June 5, 1997 In Force: 6, March 2002 : Signature 18, December 2012 Not a Signatory : Table 10: Implementation of International IPR Treaties 10: Implementation of International Table India : Accession April 8, 2013 : July In force 8, 2013 Not a Signatory : Signature April 30, 2014 Ratification June 24, 2014 Not a Signatory Not a Signatory Not a Signatory elating to elating to Treaties Treaties Countries egistration of Marks egistration the Madrid Agreement the Madrid Agreement Concerning the International R Protocol R Protocol Hague Agreement Hague Agreement Concerning the International Deposit of Industrial Designs Marrakesh Treaty to to Treaty Marrakesh to Access Facilitate Persons for Published Works Blind, V isually Who Are or Otherwise Print Impaired Disabled WIPO Copyright Treaty WIPO Copyright Beijing Treaty on Beijing Treaty Performances Audiovisual Singapore Treaty on the Law on the Law Treaty Singapore of Trademarks Compiled by author from various sources. various author from Compiled by Source:
73 India and APEC: An Appraisal
7.4 IPRs: Overall Conclusions of India Joining APEC substance – not resulting in the enhancement of the known efficacy of that substance; the mere discovery of any new property/use for India’s IPR regime is WTO-compliant and has a known substance/process unless it results sought to strike a balance between various in a new product or employs at least one new interests and in many respect it can be said reactant; a substance/process for producing to be comparable to that of developing APEC such substance – admixture resulting only economies. Some of these APEC economies in the aggregation of the properties of the have, however, been more proactive than India components. The Philippines has almost in signing new IPR treaties and accepting TRIPS an identical provision in its law. However, plus provisions in their domestic law. One other APEC economies do not have any such of the important areas in which India could provision in their law. 7.3 Patent Applications Filed and come under considerable pressure to change Patents Granted its domestic regime, if it joins APEC, is patents. In particular, India may be requested to amend Section 3 (d) of the Patent’s Act and also provide It is relevant to compare the number of patent data exclusivity. These are extremely sensitive applications and patents granted by India and issues and it would be difficult to agree to other APEC countries. As seen from Tables 11 comply with these requests. This aspect needs and 12, India is ahead of all APEC countries, to be borne in mind while taking a decision on except China, in receiving patent applications India joining APEC. from non-residents and also granting patents Concerns have been articulated on to non-residents. This perhaps demonstrates India’s enforcement of its IP laws. Customs that India’s patent laws are not discriminatory administrations within the APEC region and that it is not unduly difficult to secure undertake a key role in enforcing IPR at patents in India. Accordingth to WIPO, India . the border. In fact, APEC work seems to is globally ranked 15 in terms of patents increasingly focus on this aspect. It is also not granted to non-residents unlikely that at some point APEC economies Table 11: Patent Applications by IP Office
International Applications By Country Patents Applications By Ip Office (2012) Origin Via Pct (2012) 13 India 43,955 = 9,553 (R) + 34,402 (NR) 1,314 Indonesia 5,830 = 533 (R) + 5297 (NR)** Malaysia 6,940 = 1,114 (R) + 5,826 (NR) 289 China 6,52,777 = 535,313 (R) + 117,464 (NR) 18,617 11 Chile 3,019 = 336 (R) + 2683 (NR) 118 13 Peru 1,190 = 54 (R) + 1,136 (NR) Vietnam 3,805 = 382 (R) + 3,423 (NR) Source Philippines 2,994 = 162 (R) + 2,832 (NR) 18 Note: : WIPO Statistics Database, May 2014. ** Data for Indonesia is available for 2011. R: Residents; NR: Non-Residents.
74 Bogor Goals and Osaka Action Agenda
Table 12: Patent Granted by IP Office
Patents Granted By Origin Country Patents Granted By Ip Office (2012) (2012)* India 4,328 = 722 (R) + 3,606 (NR) 3,588 Indonesia 1811 = 70 (R) + 1741 (NR)** 19 Malaysia 2,460 = 295 (R) + 2,165 (NR) 660 236 China 217,105 = 143,808 (R) + 73,297 (NR) 152,102 16 Chile 770 = 113 (R) + 657 (NR) Peru 431 = 11 (R) + 420 (NR) 63 Vietnam 1,068 = 52 (R) + 1,016 (NR) 56 Source: Philippines 1,111 = 11 (R) + 1,100 (NR) Note: WIPO Statistics Database, October 2013 *Equivalent grants by origin data are incomplete, as some offices do not report detailed statistics containing the origin of applications for which patents were granted. ** Data for Indonesia is available for 2008. R: Residents; NR: Non-Residents could consider adopting ACTA-type measures enforce his rights. India might be confronted for IP enforcement. This may create difficulties with these issues, if it were to join APEC. for India. The Department of Industrial Policy and India had raised serious concerns on Promotion has constituted an IPR Think Tank ACTA, particularly in respect of provisions to draft the National Intellectual Property that placing greater discretion in the hands Rights Policy and to advise it on IPR issues. The of customs authorities to act on their own first draft of the National IPR Policy submitted initiative against “suspect goods”, without by the IPR Think Tank on 19 December 2014, defining the basis for exsuspicion. officio’ This would provides the vision, mission and objectives of imply using Customs authorities as “IP the policy. India’s membership of the APEC police”. The powers of ‘ enforcement could facilitate in implementation of initiatives sought to be granted to Customs officials for pursuing some of the objectives (e.g. significantly shifts the focus of enforcement commercialisation8. Conclusions of IP). away from Courts and the judicial process to a more administrative domain. Thus, unlike the established principle in the enforcement Gains to India of APEC membershipper can se; arise of IPRs, which are private rights, that the from two distinct channels. First, gains that rightholder is the first mover in the course may accrue by APEC membership and of enforcement of his rights, the onus under second, benefits that could be garnered from ACTA seems to have shifted to the public liberalisation and domestic reforms that India authorities to enforce the IPRs effective. This might undertake in pursuance of APEC action is unlike TRIPS which allowed such shifting agenda. The indirect benefits arise mainly only against counterfeit trademark goods and from the reform process that each member pirated copyright goods. This would mean that is expected to undertake. This can result in the element of balance between rights of the gains from domestic reforms as well as gains IP owners and those of the users may now tilt that may arise from reforms of other APEC in favour of the former since the accuser does members. However, for India to gain from not have to be as vigilant or as persuasive to domestic reforms that may be required on
75 India and APEC: An Appraisal
account of APEC membership, it would need a perception has perhaps arisen from the fact to undertake reforms progressively under all that firms in many of the APEC economies are areas of work of APEC. This would require active players in GVCs. It has been suggested India to formulate annual Individual Action by some experts and policymakers that India Plans whose implementation would be subject should reduce tariffs on parts and components to peer review by APEC members. and get integrated into GVCs in APEC region. No doubt low/zero tariffs on parts and Further, benefits from APEC membership components has facilitated integration of have to be viewed not only from the prism manufacturing firms in APEC economies of export gains, but also seen from the from integrating into GVCs. However, low/ perspective of improvements in domestic zero tariffs are neither necessary nor systems as well as institutional and human sufficient condition for GVC integration. In resource capacity building. APEC Business the Indian context even if tariffs on parts Visa and access to information about emerging and components are reduced to zero, Indian business practices in the region are likely to firms may not be cost competitive to become provide direct benefits of APEC membership. attractive for GVC lead firms to consider In other areas of APEC work, the gains are outsourcing manufacturing into India. In case likely to be indirect. the infrastructural deficiencies are reduced, Given the significant gap between the if not totally overcome, cost competitiveness trade openness, regulatory requirements and of Indian producers might improve, making business procedures between India on the GVC integration more probable. Premature one hand and many of the APEC members reduction in tariffs on part and components on the other, it may not be easy for India to would not only have adverse impact on the meet the expectations of other members in domestic industry of these products, but may respect of various APEC initiatives. Given the Standardsnot result in and integrating NTBs Indian firms in GVCs. slow pace of voluntary reforms in India, this is an important aspect that might need careful consideration by the government while taking Main gains for India would arise from a decision on India’s APEC membership. It institutional and human resource capacity may also be relevant to bear in mind that building in the area of standard setting. India has strongly opposed ITA expansion and There is no denying the fact that India tariff concessions on environmental goods - lags behind developed countries and even initiativesTariffs that emerged from APEC. some developing countries, e.g. Brazil, on standard setting. Active participation in various APEC initiatives in this area could In the area of tariffs India is likely to be under significantly strengthen India’s capacity to considerable pressure for liberalisation, as usher a standard-driven manufacture within its tariffs are considerably higher than those the country. This could have long term effects in APEC economies. There appears little by facilitating compliance with standards possibility for India to benefit in the area of in main foreign markets and making India’s tariffs. exports more price competitive. In addition, In this context, it is also important to Indian exporters could also benefit from briefly assess the growing perception that access to standard-related information in APEC membership will facilitate India to get APEC economies. The existing MRAs in the integrated into global value chains (GVC). Such APEC region may be of little benefit to India’s
76 Bogor Goals and Osaka Action Agenda
exports, as electronic and telecommunication work programme does not require member products have a low share in its export basket. countries to provide non-discriminatory In the automobile and auto components marketServices access to foreign suppliers. sector, active participation in the Automotive Dialogue could provide an opportunity to Indian exporters to address market access Overall, India’s approach to services impedimentsCustoms Procedures in this sector. liberalisation can be considered to be almost comparable to that of many of the APEC economies. Were the need to arise, India may Given India’s low and steadily declining find it relatively less difficult to implement ranking on various measures, including the a structured plan of services liberalisation LPI and Trading Across Borders, India has under the APEC framework. On the other considerable catching up to do, compared to hand, India could gain from participation in many of the APEC economies. This is likely to discussions on and implementing, guidelines bring India under some pressure at the APEC. and common competency standards in However, some of the recent initiatives taken various services sectors. As most of the APEC by India as a part of its autonomous efforts guidelines are implemented by countries on to improve Customs procedures and steps a voluntary basis, India could be selective leading to paperless trading could provide it in implementing the guidelines keeping its some comfort. domestic sensitivities in view. In addition, implementation of MRAs in some sectors Main gains from India would come from could boost India’s exports to the APEC two channels; first, institutional and human memberInvestment economies. resource capacity building through exposure to best practices and guidelines for improving customs infrastructure. Second, benefits By being a part of APEC, India could also would arise from implementing improvements benefit from information sharing on in domestic institutional mechanisms and investment opportunity and capacity building procedures.Government Procurement for investment promotion agencies through introduction of good practices and indicators provided by international organisations. In the area of government procurement, the The latter is particularly important as India most important gain to India from APEC lacks a structured institutional mechanism membership is likely to be improvements in for attracting investments. However, India procurement procedures. Adherence to some could experience considerable difficulties if of the Non-Binding Principles on government the APEC work proceeds towards mandatory procurement could help streamline the binding commitments on certain elements procurement systems in India. India may also in International Investment Treaties. benefit from adopting some of the practices These elements could include definition of that can give effect to the elements of the investment, expropriation, pre-establishment Non-Binding Principles. This would become commitments, national treatment, etc. particularly relevant if the Public Procurement Furthermore, India would need to ensure that Bill is approved by the Parliament and rules its participation in APEC work programme need to be formulated for implementing the does not pose a constraint in revising some procurement law. The overall balance tilts of its existing bilateral investment treaties. on the side of gains for India, provided the
77 India and APEC: An Appraisal
IPRs
the border. In fact, APEC work seems to In many respects India’s IPR regime cannot increasingly focus on this aspect. This is be considered to be inferior to that of APEC another area where India could be requested economies. However, it is also true that to make improvements, particularly for many of these countries have been more using Customs authorities to be granted a proactive than India in signing new IPR greater role in IP enforcement. India might be confronted with these issues, if it were to treaties and accepting TRIPS plus provisions Recommendations in their domestic law. Further, fostering join APEC. harmonisation of intellectual property rights systems in the APEC region is an important APEC member economies set their own objective of the Osaka Action Agenda. This timelines and goals, and undertake actions could have implications for India in terms of on a voluntary and non-binding basis. This being required to provide higher standards should provide considerable flexibility to of IP protection, if the APEC work proceeds India in adopting and implementing the non- in this direction. binding principles and guidelines in different One of the important areas in which India areas of work of APEC. India could stand could come under considerable pressure to to benefit from access to information and change its domestic regime, if it joins APEC, is institutional and human resource capacity patents. In particular, India may be requested building from various APEC initiatives. But, to amend Section 3 (d) of the Patent’s Act it should consider joining APEC only if it is and also provide data exclusivity. These are confident of making progressive reforms, on extremely sensitive issues and it would be a voluntary basis, in different areas of APEC difficult to agree to comply with these requests. initiatives. In the absence of this capacity, This aspect needs to be borne in mind while India could be forced to stall the various APEC taking a decision on India joining APEC. initiatives, once it becomes an APEC member. Concerns have been articulated on This eventuality may not be viewed favourably India’s enforcement of its IP laws. Customs by the international business community and administrations within the APEC region India could be labelled as a country that yet undertake a key role in enforcing IPR at again blocks reforms.
78 Annexure 9 APEC and Indian * Customs
This paper looks at the work undertaken by recognition agreements. To this end, APEC APEC in the area of customs procedures and adopted Trade Facilitation Action Plan I (TFAP facilitation. It also examines how far India I) in 2001 with the aim to cut trade transaction has progressed in these areas before going cost by 5 per cent by 2006 and later Trade on to make comparisons between India and Facilitation Action Plan II (TFAP II) in 2007 certain APEC developing economies in key with an aim to cut trade transaction cost by areas of customs reform. India’s performance a further 5 per cent. Some of the important as reflected in some of the relevant global elements of Trade Facilitation Action Plan are indicators is then examined. Finally those discussed below. aspects where India could benefit from closer On 27 October 2002, in Los Cabos, Mexico, engagement with APEC are indicated. 1. APEC Customs Programme APEC Leaders adopted the Statement to Implement APEC Transparency Standards (“Leaders’ Statement”), and directed that these The APEC Sub-Committee on Customs standards be implemented as soon as possible, Procedures (SCCP) was established in 1994. Its and in no case later than January 2005. main objectives are to simplify and harmonise regional customs procedures to ensure that In paragraph 8 of the Leaders’ Statement, goods and services move efficiently, effectively APEC Leaders instructed that “APEC sub-fora and safely through the region, and to reconcile that have not developed specific transparency and facilitate border control. provisions should do so,” and further instructed that such new transparency provisions should APEC’s agenda on trade facilitation be presented to Leaders upon completion for has focussed on customs facilitation and incorporation into the Leaders’ Statement. adoption of harmonised standards and mutual The Sub-Committee on Customs Procedures
* This paper has been contributed by Shri Shashank Priya, Commissioner, (GST cell), Delhi who has written this in his personal capacity. Inputs for Section 3 of this paper were contributed by the team from Centre for WTO Studies, IIFT, New Delhi.
79 India and APEC: An Appraisal
developed the following set of transparency 4. Subject to domestic confidentiality standards on customs and provided specific requirements, each Economy will make guidance for implementation within the such advance rulings publicly available Transparencycustoms context. Standards on Customs for purposes of ensuring application of Procedures for APEC Members the rulings to other goods where the facts and circumstances are the same 1. as those under which the rulings are In furtherance of paragraph 1 of the issued. Leaders’ Statement each Economy will 5. In furtherance of paragraph 5 of the promptly publish and make available Leaders’ Statement each Economy will on the Internet, information on its maintain procedural transparency and customs laws, regulations, procedures fairness in customs procedures by: (i) and administrative rulings of general providing for the prompt review and, application in such a manner as to where warranted, correction of customs enable interested persons to become administrative actions; (ii) ensuring 2. acquainted with them. that importers are provided with the In furtherance of paragraph 2 of the right to a level of administrative review Leaders’ Statement, each Economy independent of the employee or office will, to the extent possible, publish in issuing the determination subject advance any regulations of general to review; and (iii) maintaining the availability of judicial review of customs application governing customs 6. procedures proposed for adoption, administrative determinations. and provide a reasonable opportunity Each Economy will maintain one 3. for comments from interested parties. or several contact points to which In furtherance of paragraph 4 of interested parties can address questions the Leaders’ Statement, and taking concerning customs matters, and into account Economies’ individual shall make available on the Internet circumstances, upon request from information concerning the procedures an interested person in its territory, for making such inquires. each Economy will provide for the Economies are to report their Individual issuance of advance rulings based Action Plan against the actual language in on specific facts and circumstances the APEC Leaders’ Transparency Standards provided by such requester prior to the on Customs Procedure. Economies are to importation of a good into its territory, use 1996 as the base year for previously for areas such as: (i) tariff classification; raised IAP transparency issues, but to use (ii) the application of the provisions 2003 as the base year for reporting on new set forth in the WTO Agreement on transparency commitments per the APEC Customs Valuation; (iii) the application Leaders’Customs Transparency Procedures Standards. and Supply of duty drawback; (iv) country of Chain Facilitation origin marking requirements; (v) the application of rules of origin under free trade agreements and other preferential In order to further advance the trade facilitation tariff regimes; and (vi) admissibility agenda, APEC also started to look at the issue requirements. of logistics to facilitate the actual movement
80 APEC and Indian Customs
of goods across the borders. It realised that in The SCFAP was developed to address eight the new economic environment, businesses critical supply chain ‘chokepoints’. The overall seek short transit times and reliable delivery objective is to reduce trading time, cost and schedules. In 2009, it included trade logistics uncertainty by 10 per cent in 2015. The eight in the trade facilitation agenda and went on to chokepoints and initiatives to address them adopt a Supply Chain Connectivity Framework are discussed in Table 1. Action Plan in 2009 (SCFAP;Table 2010-15). 1: SCFAP: The Chokepoints
Chokepoints (CP) Examples of Initiatives CP1: Lack of transparency/awareness of full scope Advance ruling of regulatory issues affecting logistics: Lack of Compendium of Best Practices of national Logistics awareness and coordination among government Associations agencies on policies affecting logistics sector Survey among industry to better understand the various services involved in the logistics industry CP2: Inefficient or inadequate transport Assess best practice in PPP markets and prioritise infrastructure; lack of cross border physical reform measures linkages (e.g. roads, bridges) Examine individual transportation/trade policies that use a gateway or trade corridor approach CP3: Lack of capacity of local/regional logistics sub- Review constraints affecting engagement of Small providers and Medium Enterprises Help raise the quality of APEC economies’ logistics services and management CP4: Inefficient clearance of goods at the border; Implementation of Single Window system Lack of coordination among border agencies, Conduct Time Release Survey (TRS) to measure the especially relating to clearance of regulated goods effect of simplifying and facilitating cargo clearance ‘at the border’ at border CP5: Burdensome procedures for customs Self-Certification of Origin Capacity Building documentation and other procedures (including for Porgram preferential trade) Simplification and harmonisation of customs procedures on the basis of revised Kyoto Convention Explore the possibility of adopting electronic certificates related to customs procedures CP6: Underdeveloped multi-modal transport Introduce the Secure and Smart Container (SSC) capabilities; inefficient air, land, and multimodal concept of intermodal transport connectivity enhancing “supply chain visibility” to determine the feasibility of constructing an information network to share cargo status information in the mulit- modal logistics CP7: Variations in cross-border standards and Improving Submarine Cable Protection regulations for movements of goods, services and Reducing International Mobile Roaming charges business travellers Improving ‘Road Safety Measures for Heavy Vehicles in the Transport Supply Chain Sector in APEC’ CP8: Lack of regional cross-border customs-transit Examine and identify issues relating to transport arrangements and customs-transit Identify specific issues and impediments relating to cross-border customs transit arrangements for Source logistics companies : From the Paper titled ‘APEC and ASEAN Connectivity: Areas of Mutual Interest and Prospects of Cooperation’ by Sanchita Basu Das, Pham Thi Phuong Thao and Catherine Rose James.
81 India and APEC: An Appraisal
Having adopted “Facilitation, Accountability, in supply chain performance amongst APEC Consistency, Transparency and Simplification” economies. The SCCP has also undertaken the as itsTrade basic Facilitationguiding principles, Action Plansthe SCCP has responsibilities of addressing choke-points made concerted Supplyeffort in Chain implementing Connectivity the or bottlenecks relevant to Customs. These twoFramework (2002- efforts will contribute to the development Yokohama2010) and Vision the of a fair, transparent and dynamic economic (2010-2015) as42 well as the and trading environment in the Asia-Pacific Overall Progress (since Achieved 2010). region. A review of the Individual Action Plans of the APEC membersviz. shows that they have made considerable progress in a set of trade Over the past 20 years, the SCCP has carried facilitation goals, greater availability of out a series of initiatives and achieved fruitful trade related information, paperless trading, outcomes including: allowing temporary importation facilities, providing clear appeal provisions, aligning • The Single Window Strategic Customs Valuation and non-preferential Plan developed to streamline the rules of origin provisions with their WTO export-import process using an online commitments, adoption of WCO’s revised system linking all government agencies Kyoto Convention, Harmonised System responsible for permits, certificates Convention and Guidelines on Express and fees. Consignment Clearance, implementation • The Intellectual Property Rights (IPRs) of advance ruling system, adoption of risk Enforcement Strategies and APEC management system, conducting time release Guidelines for Customs Border survey andviz. addressing customs integrity Enforcement, Counterfeiting and issues. The progress made by selected Piracy endorsed to strengthen the IPR countries, China, Indonesia, Vietnam and enforcement at borders. Peru is listed out in Table 5 given at the end • The Action Plan on the Development of2. this Indian annexure. Customs and Trade of Authorised Economic Operator Facilitation (AEO) Programmes and the AEO Compendium for all APEC Economies help members to India is a signatory of the international establish AEO programmes and conventions of the World Customs mutual recognition. Operators can Organisation like the Harmonised System, be accredited by Customs as an AEO Revised Kyoto Convention, ATA Convention, when they prove to have high quality Nairobi Convention and Johannesburg internal processes that will prevent Convention. It is an active member of43 the WTO goods in international transport to and implements all its Agreements. India has be tampered with. This helps speed carried out substantial autonomous reform customs inspections for low risk to facilitate trade across the borders during operators. the last decade and the important landmarks achieved are discussed below. India’s efforts SCCP’s efforts over the past two decades at trade facilitation in customs has focused have contributed greatly to the two-time 5 on reduction in dwell time, transaction costs, per cent reductions of APEC trade transaction procedural requirements and documentation costs. It is also playing a key role in the associated with the movement and clearance targeted 10 per cent improvement by 2015
82 APEC and Indian Customs
of goods from international borders. This IT service management and quicker rollout relates to cargo handled at sea ports, airports, to new locations has been some of the basic Inland Container Depots (ICD)/Container policy guidelines under which the automation Freight Stations (CFS), land customs stations programme has been carried out. The details and other warehousing locations. However, of ICT initiatives in Indian Customs are as it also needs recognition that Customs alone below.2.1 Automated Processing cannot facilitate trade in an isolated manner as it functions in tandem with many stakeholders such as port authorities, carriers, clearing Prior to the pilot rollout of ICES 1.0 at Delhi agents, Directorate General of Foreign Trade Air Cargo in 1995, CBEC carried out a major (DGFT), Banks and various other Government process re-engineering in order to ensure departments (e.g., phytosanitary, environment, that the new system did not simply mirror the health authorities, etc.) in the movement and existing manual regime. The following features clearance of goods. Therefore, Customs has to were built into ICES that eventually proved to necessarily work in an integrated manner with be major trade facilitation measures: all the stake holders to achieve meaningful and • EDI-based automated workflow system effective trade facilitation. for clearance of import and export Recognising the importance of information consignments. The ICES application and communication technology (ICT) as one enables Customs officers to appraise of the major enablers of trade facilitation, shipments, give ‘out of charge’ for the Central Board of Excise and Customs import consignments and ‘let export (CBEC) under the Ministry of Finance of the order’ for export consignments in sea Government of India introduced an automated ports, airports, land customs stations Customs workflow system, called the Indian and ICDs/CFS locations. Customs EDI System (ICES) in 1995. The • Drastic reduction in the number of main objectives of the system were to: (i) stages in the manual import or export Reduce time taken in clearance of cargo and clearance process. ability to handle larger volumes of clearances; (ii) Reduce interface between Trade and • The entire process was carried out in Customs; (iii) Ensure simple and uniform the electronic system and final copies Customs processes; (iv) Promote accuracy, of goods declaration for import and transparency, accountability; (v) Ensure better export (Bills of Entry and Shipping Bills monitoring and control; and (vi) Improve respectively) were generated only at quality of data collection. the last stage of the process for legal purposes. This initiative was implemented at 40 locations by 2006 and greatly facilitated • The ICES application automatically clearance of export and import consignments. calculated the duty based on each This also formed the basis of further strategic import declaration and generated initiatives for trade facilitation including a bank ‘challan’ for the payment of implementation of Electronic Data Interchange duty. This freed the importers and (EDI) messaging through Indian Customs EDI Custom House Agents from the burden Gateway (ICEGATE) in 2002 and introduction of manually computing the duty. In of a Risk Management System (RMS) in addition, it eliminated arithmetic 2005. Addressing issues of technology errors that used to be noticed at audit obsolescence, security needs, professional stage. This also released Customs
83 India and APEC: An Appraisal
personnel for deployment in more the priority of a shipment in case of gainful activities. life saving drugs, etc. Senior officers were also able to get a complete online • ICES also introduced the concept of view into the functioning of the Custom selective appraisement and examination House through extensive MIS reports, that were eventually institutionalised hitherto not possible in a manual in the Risk Management System. Self- environment. assessment was allowed for certain categories of commodities and trusted • On the exports side, the ICES importers along with green channel at automatically calculated the drawback the examination stage. amount in the drawback shipping bills and generated a scroll which • Electronic interfaces were established was transmitted to the banks for with trade community partners through drawback payments. There was no the National Informatics Centre (NIC) need for the exporter to file a separate network infrastructure. This allowed claim for drawback. The exporter filing of Bills of Entry and Shipping was free to maintain his account in Bills from the office of importers, any bank in the country and his dues exporters and Custom House Agents were directly credited. It is gathered with electronic acknowledgements and that India is among the first Customs query interaction with Custom Officers. administrations to have introduced this A free software package, Remote trade facilitation measure. EDI System (RES), was provided for members of the trade who wished to • ICES also enabled the online avail of this facility. With the setting maintenance of bonds and licenses. up of ICEGATE, e-filing infrastructure By creating electronic files for was set up within Customs to enable transmission to DGFT, the system Internet based filing. allowed for easy availment of export benefits. • CBEC also facilitated the entry of Bills of Entry and Shipping Bills by • IGM/EGM details are submitted by trained data entry operators in service Airlines electronically through service centers run by third party professional providers. service providers. These centers were • The system also enabled compilation of located in the Custom Houses and trade statistics and Daily Trade Returns provided a convenient interface for were provided to the Directorate trade. Trade could track the status of General of Commercial Intelligence and each consignment through the service Statistics (DGCIS) online. centers as well as through touch screen kiosks. • Daily lists of trade statistics were also made available to the trade at all these • ICES ensured that no transaction was locations. ever lost or modified and brought in transparency and accountability in the ICES 1.0 was a major success with a Customs Department. All documents coverage of 40 locations, with over 95 per were processed on a first-come, first- cent of the Bills of Entry being processed served basis, with only senior officers electronically at these locations, involving being allowed the option of changing duty collection of over Rs. 75000 crore
84 APEC and Indian Customs
(Rs. 750 billion) in 2009. With the availability services at ICEGATE are free of charge of a centralised computing infrastructure and contribute significantly towards the and extensive network coverage by 2009, it transaction cost reduction in export and was possible to redesign and upgrade ICES import2.3 Helpdesk, trade. Document Tracking to work in a more robust and secure manner. and Information on Website The migration to a new application ICES 1.5 was carried out between 2009 and 2011. It works on the latest technology stack and ICEGATE provides information to the provides a single uniform application to all stakeholders such as importers, exporters, the Customs locations in the country. This has shipping lines, shipping agents, Airlines and also facilitated use of new applications like Custodians about the status of their import/ Enterprise Data Warehouse and centralised export goods during the journey through bond management. As on 31.12.2014 the Customs. ICEGATE and ICES 1.5 are serving ICES 1.5 application has been launched in about 1 million (9, 30,889) importers/ 124 Customs locations in the country. The exporters and handling nearly 98 per cent document load being handled by ICES 1.5 is of India’s International trade in terms of around2.2 Trade 50,000 Facilitation per day. through EDI import and export consignments. At present, Message Exchange there are about 28000 registered users at the ICEGATE who act as intermediaries between the Customs and about 1 million (9, 30, 889) Indian Customs EDI Gateway (ICEGATE) portal Import Export Code holders who actually is the gateway that connects all the external import/export goods. Currently, more than stakeholders with the ICES application. It brings 90 per cent of the Shipping Bills and Bills of about 15 different categories of stakeholders on Entries are filed through ICEGATE. a common electronic platform and their data A round the clock Helpdesk has been Integration with Customs through message implemented at ICEGATE to assist the trade. exchanges. This includes banks, port authorities, In 2013-14, 185750 calls and 143247 e-mails custodian and Directorate General of Foreign were handled by the ICEGATE Helpdesk. Trade (DGFT). It hosts a number of services for the EDI partners and makes the Customs ICEGATE provides complete real time clearance process of import/export goods tracking of the documents not only at both transparent and efficient. The ICEGATE ICEGATE/ICES end but their status vis-a-vis application handles the filing of Bills of Entry, message exchange with trade partner. The Shipping Bills, Import and Export general exponential increase in use of ICEGATE is manifests, amendments, queries, replies, 2.4captured Risk in ManagementTable 2. System and messages with custodians, trans-shipment Post Clearance Audit and transit procedures, information related to arrival and departure of vessels, goods registration intimation through internet for Indian Customs had implemented the Risk enabling examination/inspections, document Management System (RMS) in the year 2005 tracking to ascertain the status of clearance, etc. along with an Assured Customs Clearance ICEGATE provides facilities for e-filing of Procedure for special clients having good documents from anywhere at any time(24/7) track record and those who meet specified and for making amendments thereto along criteria identified by the Customs. The with electronic acknowledgements. The implementation of the RMS was one of the
85 India and APEC: An Appraisal
most significant steps in the ongoing Business department is required to enforce, and Process Re-engineering and e-Governance registered with the Risk Management Division initiatives of CBEC. It covers about 85 per cent under the Accredited Clients Programme of India’s international trade. (ACP) get assured facilitation. Except for a small percentage of consignments selected Under the RMS, Bills of Entry filed by on a random basis by the RMS, or cases importers are processed for risk and a where specific intelligence is available or large number of consignments are allowed where a specifically observed pattern of clearance without examination but based non-compliance is required to be addressed, on the importers’ self-assessment. Other the ACP importers are allowed clearance consignments go for assessment or on the basis of self-assessment. There are examination or both, depending on the 271 such ACP importers, as on 1.07.2013. evaluation of risk by the RMS. Implementation of RMS has drastically cut Upon introduction of RMS, the erstwhile down the dwell time of cargo. Concurrent Audit was replaced with Post Automated Recording and Targeting Clearance Audit (PCA). Post Clearance Audit System (ARTS) for protection of Intellectual is carried out only on Bills of Entry selected Property Rights (IPRs) has been developed and by the Risk Management System. implemented as part of the Risk Management All the qualified importers, who have System. A module for IGM based selection of demonstrated capacity and willingness containers for scanning on arrival at JNPT to comply with the Tablelaws, 2:which Overview Customs of Increase or Nhava in ICEGATE Sheva has Usage been developed by the
2007-08 2010-11 2013-14 18.34 Mn Number of Import/ Export Goods declarations 5.39 Mn (Approx. 12.55 Mn (Approx. (Approx. related transactions per year 15800 per day) 40000 per day) 50,000 per day) ICEGATE e-Filing vis-à-vis digitised document 60 per cent 83 per cent 83 per cent filing through service centre Documents filed at ICEGATE beyond business Hardly any 10 per cent hrs. at Night Trade Partners – Customs Brokers (CHA) 6500 9000 26,000 Others 10 Approx. 80 Number of Customs Duty payment Bank Not handled by 1,80,000 per 1,85,000 challans transmitted per day ICEGATE day Not handled by Customs Duty Collection- through messages- Rs. 12,000 Bn Rs. 2185.14 ICEGATE Hardly through e-payment Rs. 270 Bn Bn any Export Declaration Transmissions to Licensing 17885 4500 7000+ Authority (DGFT) per day (Approx) Website No of Hits per day 0.13 Mn 7.49 Mn 52,03,347 Website No. of unique visitors per month 0.03 Mn 0.25 Mn 4,52,000 Helpdesk support - No. of e-mails per year - 1,11,417 1,85,750 Source Data not available Number of calls per year 91,620 1,43,247 : Compiled from ICEGATE website (www.icegate.gov.in).
86 APEC and Indian Customs
Risk management Division and successfully • Ability to demonstrate compliance with implemented. The Risk Management System security standards when contracting to for courier clearances and exports has also supply overseas importers/exporters; been developed. 2.5 Self-Assessment • Enhanced border clearance privileges in MRA (Mutual Recognition Agreement) partner countries; Self-Assessment of Customs duty by importers or exporters was introduced in 2011. This was • Minimal disruption to flow of cargo aparadigm shift in the system of assessment after a security related disruption; of duties- fromthat by Departmental officers • Reduction in dwell time and related to the importers signifying the high level of costs; and trust now being reposed on the importers. The • Customs advice/assistance if trade objective of this initiative is to expedite release faces unexpected issues with Customs of imported/export goods. The interest of countries with which India has MRA. of revenue in terms of ensuring correct declarations and duty payment is ensured by The AEO Programme was rolled out on the2.6 R Onisk Management Site Post SystemClearance (RMS). Audit 16.11.2012 after successful completion of pilots. AEO programmes have been implemented (OSPCA) Scheme by other Customs administrations that give AEO status holders preferential Customs treatment in terms of reduced examination, ‘On Site Post Clearance Audit’ (OSPCA) has faster clearances and other benefits. Thus, been implemented from1.10.2011 in case of India’s AEO programme is expected to result the importers registered under the Customs in Mutual Recognition Agreements (MRA) Accredited Client Programme (ACP). This with these Customs administrations. MRAs scheme is aimed at facilitating Customs would ensure that Indian export goods get clearance of goods and reducing dwell time. due Customs facilitation at the point of entry At the same time interest of revenue is to be in the foreign country. Apart from securing safeguarded by a comprehensive verification supply chain, the benefits include reduction of records and documents at the premises of in dwell time and consequent cost of doing the importer/exporter on annual basis. business. Indian Customs has signed Mutual OSPCA is a shift from transaction based Recognition Arrangement (MRA) with Hong audit undertaken in Customs Houses (other Kong Customs to recognise respective AEO than the ACP importers) to comprehensive Programmes to enable trade to get benefits scrutiny of records at the premises of the on2.8 reciprocal 24x7 basis. Customs Clearance 2.7importers Authorised and exporters. Economic Operator Operations (AEO) Programme viz. This facility begun with effect from 1.9.2012 at An Authorised Economic Operator (AEO) identified Air Cargo Complexes, Bangalore, programme has been developed to enable Chennai, Delhi and Mumbai and Seaports, businesses involved in the international trade namely Chennai, Mumbai, Kandla and Kolkata. to reap the following benefits: The Indian Finance Minister in the Budget • Secure supply chain from point of 2014 has announced extension of 24x7 export to import; Customs Clearance at more number of ports.
87 India and APEC: An Appraisal
2.12 Future Work Programme As a result, till 31.12.2014, the 24x7 facility for specified export and import goods is available With ICES 1.5 operating in a stable manner, at 17 airports and 18 sea ports. 2.9 Single Window in Customs efforts are on to introduce new functionalities and additional features which would significantly contribute to the trade facilitation In 2014, it has been announced that an Indian by Customs. The ICEGATE would be focusing Customs Single Window Project will be rolled on electronic integration of the remaining out. Customs is the lead agency to implement Export Promotion Schemes of the Department Single Window Scheme. It provides a common of Commerce, integration of Gateway IGM/ platform to trade to meet requirements EGM with ICD container arrival report/ of all regulatory agencies (such as Animal EGM respectively, tracking services through Quarantine, Plant Quarantine, Drug Controller, SMS, international data exchange, reverse FSSAI, Textile Committee, etc.) involved scroll messages from banks, messaging with in foreign trade through seamless access Special Economic Zone (SEZ) online, and to regulatory services delivered through 3.downloadable Overview daily of trade Indian lists. Customs 2.10electronic ‘Time means. Release Study’ (TRS) and Logistics Performance as per International Indices CBEC has decided to undertake Time Release Study (TRS) as per WCO Guidelines.WCO Time Release Study (TRS) is a unique tool and The Section above on ‘Indian Customs and method for measuring the actual performance Trade Facilitation’ gives an overview of an of Customs. The underlying objectives of Time impressive array of trade facilitation initiatives Release study are: undertaken by India. However, India still does not compare favourably with many • Identifying bottlenecks in the APEC countries with respect to Customs international supply chain/or procedures when making comparison using constraints affecting Customs release. certain indicators developed by the World • Establishing baseline trade facilitation Bank. These include Logistics Performance performance measurement Index (LPI) indicators, including Ease of Doing Business, trading across border variables It is gathered that Pilot on TRS has been and indicators. A number of indicators and completed at two Customs locations, viz. variables are used for analysing the complexity Jawaharlal Nehru Custom House (JNCH) and of customs procedures of individual countries. Mumbai air cargo (imports). After completion The indicators and variables are: cost of of pilot, TRS will be conducted at major exports and imports expressed in US dollars Customs2.11 Interactive Locations at an Website interval of six months. per container; number of documents required for exports and imports; lead time to export and import both in median case of days; and CBEC has developed an interactive website trading across border. which enables the importer/ exporter to Comparison of the APEC members ascertain effective rate of Customs duty as well and India’s “logistic performance index” as compulsory compliance requirements in provides an understanding of the efficiency respect of a particular product. The website is of customs clearance process. The Logistics user friendly and is a guide for trade in making Performance Index surveys are conducted correct assessment of Customs duty. by the World Bank in partnership with
88 APEC and Indian Customs
academic and international institutions and As seen in Table 3 India is marginally private companies and individuals engaged better than Indonesia, Peru and Vietnam in in international logistics. The round of 2009 LPI. However, comparing the scores of various was based on the survey covering more than APEC countries against the benchmark country 5,000 country assessments by nearly 1,000 Singapore, provides useful information on the international freight forwarders. The markets relative improvement in LPI over time. With were chosen based on the most important the exceptionvis-a-vis of China, other APEC countries export and import markets of the respondent’s and India have seen deterioration in their country, random selection, and, for landlocked LPI scores Singapore. However, as countries, neighbouring countries that compared to India, Indonesia and Vietnam connect them with international markets. have slipped further behind Singapore. These individual respondents evaluated Apart from LPI, other indicators used efficiency of customs clearance processes for assessing simplification of customs (i.e. speed, simplicity and predictability of procedures in India and APEC countries formalities), on a rating ranging from 1 (very include World Bank ranking of countries on low) to 5 (very high). Scores are averaged Trading Across Borders, cost per container, across all respondents of the survey. Table 3: Logistic Performance Index ofdocuments Selected APEC required Members for andtrade India and time
Countries 2007 2010 2012 Difference of Comments based on 2012 upon the Column 5 1 2 3 2007 6 3.3 3.1 4 5 Chile 3.22.9 3.3 -0.2 ImprovementMarginal Deterioration China 3.0 0.3 Improvement India 2.7 2.7 2.8 0.1 3.1 3.3 Indonesia 2.7 2.4 2.5 -0.2 Marginal Deterioration Malaysia 3.4 -0.1 Marginal Deterioration Peru 2.7 2.5 2.7 0.0 No Change Thailand 3.0 3.0 3.0 -0.1 Marginal Deterioration Vietnam 2.9 2.7 2.7 -0.2 ImprovementMarginal Deterioration Singapore Distance3.9 from Singapore4.0 (in4.1 Scales of Indices)0.2
Chile -0.58 -1.09 -0.99 0.1-0.4 Deterioration China -0.91-1.21 -0.86-1.32 -0.85-1.33 Improvement India -0.1 Marginal Deterioration Indonesia -1.17 -1.59 -1.57 -0.4 Deterioration -1.22 Malaysia -0.54 -0.91 -0.82 -0.3 Deterioration Peru -1.52 -1.42 -0.2 Marginal Deterioration Thailand -0.87 -1.00 -1.14 -0.3 Deterioration Source: Vietnam -1.01 -1.34 -1.45 -0.4 Deterioration http://data.worldbank.org/indicator last accessed on 26 October 2014.
89 India and APEC: An Appraisal
taken for import and export. As shown in to export and import as compared to most of Figure 1, India ranks significantly lower at the APEC countries. 126 compared to other APEC countries on However, it is important to sound a note the criteria of Trading Across Borders. While of caution that the ranking mentioned in the China’s ranking is also relatively low at 98, Table 4 should be taken as indicative. It is nevertheless, it is significantly higher than also important to underline that it is based that of India. on a survey of extremely limited sample (T Turning to the cost per container and the which cannot be considered to be statistically number of documents required for trade significant.4. Assessment of India’s Gains in able 4) it is clear that compared to most of the APEC countries, India can be considered Trade Facilitation from Joining to be less “import friendly”. It is a matter APEC of concern that the cost per container for India’s export is indicated to be almost 50 per cent higher than that of China, which has As the APEC members include a large number the highest cost per container for exports of developed economies and also advanced amongst the APEC countries. Further, India’s developing countries with a high degree of cost per container is 150 per cent higher than trade openness, its customs reform agenda that of Malaysia which has the lowest per has been very forward looking. It is very container cost. It is interesting to note that clear that their trade facilitation agenda also the cost to import in India is higher than that found a strong reflection in the proposals of all the APEC countries with the exception during the Trade Facilitation negotiation of Vietnam and Malaysia. Inefficiencies and in the WTO. Therefore, it can be safely complexities in India’s exim procedures are concluded that APEC is one of the forum further revealed from the fact that the number for futuristic trade facilitation reform. India of documents required for import and export has carried out a very commendable set of is higher in India than the APEC countries. trade facilitation reforms autonomously and, India also suffersFigure from 1: relatively Ranking higherof Selected time APECtherefore, Countries it can and also India: be a strong2014 voice in the
Malaysia 11
Chile 40
Peru
Indonesia 62
Philippines 65
Vietnam 75
China 98
India 126
Source:
http://data.worldbank.org/indicator last accessed on 26 October 2014.
90 APEC and Indian Customs
future trade facilitation agenda, which can system through the use of EDI and ICEGATE potentially include cross-border paperless which is now being taken to the next level trade, including online exchange of certificates by commencing the development of Single of origin, phytosanitary certificates, etc. Window;a good risk management system When compared to trade facilitation which is now complemented by the schemes programme of some of the similarly situated of Onsite Post Clearance Audit (OSPCA) and economies like Indonesia, Vietnam, People’s the Authorised Economic Operator (AEO); a Republic of China and Peru, it can be seen that well-established appeal procedure through India is not lagging behind at all. Based on the mechanism of Commissioner (Appeal), information obtained from Individual Action Customs, Central Excise and Service Tax Appellate Tribunal (CESTAT) and the High Plans (IAPs), that are regularly submittedvis-à- by Courts and the Supreme Court; an Advance APECvis countries, an assessment of the trade facilitation reforms of these countries Ruling System presently available only to the India has been carried out which is given Joint Ventures and Public sector and resident in Table 5. public limited companies and all advance rulings are published on the website44 of the From a description of the trade facilitation Advance Ruling Authority of India ; and well reforms in India captured in the preceding laid out border enforcement procedures for section, it is clear that India has followed IPR infringing goods. There is a system of a very proactive reform agenda and has seeking comments of the stakeholders for largely in place all the trade facilitation important changes in law, however, this is not instruments that the four surveyed APEC done in every case and particularly where the members have in place. These include: a matter is urgent or of confidential nature like strong transparency mechanism through an the annual Budget announcements. There active website of the Central Board of Excise are also no well-defined contact points for and Customs (CBEC) which publishes all laws, traders to seek information on customs related regulations, and Departmental instructions matters. However, some of these missing concerning customs, central excise and elements can be expected to be implemented serviceTable 4: tax; Costs established per Container paperless and Number trading of Documents Requirement for Exports and Imports, 2014
Cost to Cost to Documents Time to Documents Time to export import Country Rank to export export to import import (US$ per (US$ per (number) (days) (number) (days) container) 12 container) 21 Chile 40 5 15 910 5 860 126 21.1 China 98 8 823 5 24 800 62 26 India 7 17.1 1,332 10 1,462 11 11 Indonesia 4 17 571 8 646 12 Malaysia 4 525 4 8 560 6 Peru 55 5 890 7 17 1,010 21 21 Philippines 65 15 755 7 15 915 Source: Vietnam 75 5 610 8 600 Compiled based on the Doing Business Database, World Bank.
91 India and APEC: An Appraisal
shortly as part of the WTO’s Trade Facilitation big country and it may not be possible for it to Agreement. match the speed of reforms in more developed In the area of logistics too, India’s but smaller economies like Singapore, Hong performance compares favourably to many Kong China, etc., but India’s active engagement APEC countries. However, it still has a low at a forum like APEC can cut the time lag in position in the Ease of Doing Business undertaking reforms in line with the global Ranking and the cost per container for import best practices. and export and the number of documents Another benefit will be that Indian customs required for import and export are reported officials will get a chance to interact closely to be comparatively high. While there can be with customs officers of US, Japan, Australia, some questions raised regarding the method China, etc., which can potentially be a beneficial of sampling and the size of sampling of the means of a two-way flow of information on World Bank reports, but it can be said that the trade facilitation issues. It is recognised that same deficiency will possibly apply to other India is also actively associated with the countries surveyed. Therefore, improving the negotiations in WCO and WTO but APEC being indicators for Ease of Doing Business should less rigidly rule bound, the scope of work here be one of the focus areas of further trade can be more expansive than in a multilateral facilitation reform in India. rule making body. A question can arise as to whether any Another benefit relates to addressing benefit can be expected to accrue in the area the wider horizons of trade facilitation in a of Customs trade facilitation through APEC. In concerted manner. Improvement of logistics author’s view, there can be several benefits. environment for faster and more efficient At a macro level, one benefit can be movement of goods across the borders is well that India can gain from the discussion recognised. APEC’s attention to the logistics on best practices and cutting edge reform chokepoints will improve the international being carried out by the more developed logistics environment and India can gain by and outward economies. This is important participating in this programme. as India is also becoming an increasingly Simplification and harmonisation of behind open economy and is looking at integrating the border procedures are also important aims with Global Value Chains. Reform efforts in of APEC. Development of common standards, tandem with the more developed economies establishment of mutual recognition will improve India’s attractiveness for FDI agreements in areas like authorised economic and thus improve its chances of becoming a operator and product safety standards will go manufacturing hub of the world. a long way in implementing trade facilitation Another benefit is somewhat interconnected on a firmer footing. India can also benefit by with the first one. It can be seen that APEC collaborating on issues like risk management members were involved in undertaking some methodologies, Single Window procedures far reaching reform like establishing Single and aviation and multimodal transport. Window right from 2009 whereas Indian Another area of mutual benefit for India initiative has begun in 2014 and going by and APEC members can be capacity building the general experience of countries that have activities for officials as well as trade. established Single Window, it will take at least Institutional partnerships for test laboratories, 3 to 4 years to have a stable Single Window training institutions, benchmarking of best system in India. It is recognised that India is a practices can be useful in improving the
92 APEC and Indian Customs
capacity of trade and officers in embracing and of APEC. However, still India can come under moving towards international best practices. pressure to undertake opening up or to put This can also address issues like reduction in place procedures and processes that may in number of documents, better container not be compatible with its more conservative, handling practices and efficient port logistics. cautious and gradualist trade policy reform It is also useful to ask ourselves what can agenda. It will also put pressure on its be the potential cost of India joining APEC. bureaucracy to put its energy and effort in A distinctive feature of APEC is that it is an engaging with another international agency intergovernmental voluntary economic and when its current engagements are themselves trade forum. It looks at ways and means of quite demanding. eliminating trade barriers and increasing In conclusion, it can be said that in the field investments without insisting that members of trade facilitation, India potentially stands take up legally binding commitments. This to gain from engagement with APEC but it informal approach can give comfort to India will also entail some cost. However, given the as its agenda of trade openness may not be as direction of India’s trade policy, the price may ambitious as some of the leading members not be as high as the benefits likely to accrue.
93 India and APEC: An Appraisal
Table 5: APEC Electronic Individual Action Plan on Trade Facilitation of Select Countries (2006, 2007, 2008, 2009)
Sl. Customs People’s Indonesia Vietnam Peru India’s Status No. Procedure Republic of (2008,2009) (2007, 2008) (2006, 2007, China 2008 1. (2008, 2009)
Greater Public China Customs Online Upgrade of The website Information Availability of reconstructed the registration Vietnam customs www.sunat. on customs Information official customs for importers website. gob.pe has been tariff and website, by which through Publish improved with: procedures local customs Indonesian information 1. A “user’s available on websites could Customs and provide orientation” the website be connected. website. e-customs section with of the Central More practical Preparing services; a simple Board of and effective English version To publish and language that Excise and approaches to of Indonesian translate legal allows a better Customs achieve greater Customs documents knowledge (CBEC). public availability website. on customs on customs of customs activities into processes. information have English. been explored Dissemination 2. A consultation and put into use. of information section by on customs e-mail. 2. procedures. Paperless China Customs In addition Pilot on SUNAT is EDIFACT and Trading developed to the pilot electronic working to ICEGATE and applied programme, Customs establish a systems the Clearance 4 other ports Procedures to Foreign Trade have enabled Management (Semarang, be expanded; Single Window. paperless System (H2000) Surabaya, collaborate with During 2008, a filing of across all Batam, Medan) the functional joint payment declaration. customs districts have installed Ministry, platform pilot Supporting in China. National Industry in the has been documents Single Window planning and developed like invoice, E-Port System of (NSW) for their implementation between SUNAT packing list Chinese Customs services. of the one door and the Service are still filed is an integrated mechanism of Agrarian in paper clearance Expansion of based on IT. Health SENASA. format. information data NSW to cover Establish legal A joint physical form enabling more ports and basis and examination data exchange participation issue direction pilot is also between G-G and more other circulars being developed G-B. agencies. and invest in by a computer Electronic infrastructure system support pre-arrival and human and warehouse declaration of resources for the terminal and Manifest made implementation Customs agent effective from 1 of electronic assistance. January 2009. C/O and other Customs issues/contents Declarations will relating to be digitalised electronic as well as transactions. the clearance Carry out supporting the one door documentation. mechanism in 2012. Table 5 continued...
94 APEC and Indian Customs
Table 5 continued...
Sl. Customs People’s Indonesia Vietnam Peru India’s Status No. Procedure Republic of (2008,2009) (2007, 2008) (2006, 2007, China 2008 3. (2008, 2009) No information available. Provision of Implementing Clear regulations The importation India is a Temporary the ATA carnet to facilitate period have been signatory Importation towards the 2008 the categories extended to 18 of ATA and Facilities Olympics related of temporary months. Carnet cargoes and imports into system. materials Vietnam. To extend the Complete application of necessary the ATA carnet procedures to in connection sign bilateral with temporary agreements with admission. ATA.some countries/ territories on
Organise training courses and workshops.
4. Implementation Applying a Revised Procedures In the case of India has of Clear Appeals complete system regulation gives to deal with claims, they well laid Provisions on supervision more sufficient administrative are filed at the out appeal of customs time for the cases are port where the provision enforcement. appellants specifically goods entered both at the To establish in preparing stipulated in and liquidated administrative and improve a their appeal the Ordinance or where the and judicial system governing (current: 60 dealing with administrative level, namely guidelines days, before: 30 administrative act was Commissioner on customs days). cases in 1996 generated. The (Appeal), administrative Preparing and further party has twenty Customs, actions. electronic revised and (20) working Excise and database based supplemented in days counting Service Tax on tax court 1998 and 2006. from the next Appellate decision. working day Tribunal Disseminate of notice to (CESTAT), legislative file the claim. High Courts documents If the claim is and the on fining and denied by the Supreme appellate. administration, Court. the party has fifteen (15) working days from the next working day of notice to appeal. The appeal is decided by the Tax Court within a period of six (06) months. Table 5 continued...
95 India and APEC: An Appraisal
Table 5 continued...
Sl. Customs People’s Indonesia Vietnam Peru India’s Status No. Procedure Republic of (2008,2009) (2007, 2008) (2006, 2007, China 2008 (2008, 2009) No information available. 5. Alignment with Fully However, as Calculate A different India’s WTO Valuation implementing the Indonesia is customs value in system of law to Customs Agreement Agreement. a member compliance with determine the Valuation law More activities of WTO, it is principles and value for imports is fully aligned to be organised implementing methodologies of the goods to the WTO towards better the WTO as regulated considered in Agreement implementation Valuation in WTO’s Sections XI and on Customs of the Agreement. Agreement. Agreement XII, and the used Valuation. on Customs goods of Chapter Valuation. 87 of the Tariff Build mechanism Code. to coordinate A new regulation within customs for valuation authorities of used cars to effectively imported investigate and through special control price centers called frauds. CETICOS. 6.
Adoption Fully Adopting Vietnam joined Peru is a Member India is a of Kyoto implementing the best practices the revised Kyoto of the Andean signatory to Convention General Annex recommended Convention on 8 Community the General and the specific by The April 2008. which issued Annex of the annex joined by Revised Kyoto Most of a Decision Revised Kyoto China. Convention. regulations laying down Convention To prepare for Acceding the and practices the progressive accession to more Revised Kyoto of Vietnam’s incorporation of Annexes. convention Customs are General Annex compliant to and reference standard of the of Specific revised Kyoto Annexes of the Convention. revised Kyoto Convention.
Implementation 2007 HS version Updating From 1 January In 1998, India is a 7. of Harmonised has been amended 2008, Vietnam Peru became signatory and System translated into Harmonised officially applied a signatory implements Convention Chinese and was System. HS 2007 of the country of its revisions implemented Amending WCO and ASEAN International regularly as of 1 January Harmonised Harmonised Convention of 2007. System in 2012 Tariff the Harmonised To further perfect Nomenclature Commodity HS database. (AHTN) 2007. Description and Coding System To introduce risk (HS). management Peruvian Tariff approach in Nomenclature is classification organised at the operations. 10-digit level.
Table 5 continued...
96 APEC and Indian Customs
Table 5 continued...
Sl. Customs People’s Indonesia Vietnam Peru India’s Status No. Procedure Republic of (2008,2009) (2007, 2008) (2006, 2007, China 2008 (2008, 2009)
8. Implementation Applying Customs Categorisation Peruvian India has of An Advance the ACRS in Laboratories of goods before Customs Law an advance Classification the Customs with export – import provides for ruling Ruling System operation system. international (before customs an advance system for More training will standard clearance) has clearance classification, be conducted for providing goods been adopted system, valuation and customs officers identification by Vietnam’s which allows application of to improve the service for Customs, conducting the notification. current system. classification importers and clearance of It is only purpose. exporters. merchandise available for Research on before, during or Joint Venture Creating and the possibility after its arrival. and public developing of applying limited electronic regulations companies. database of on pre- classification.No information categorisation.No information No information available. available. available. 9. Implementation Fully However, as However, as However, as Peru India is a of WTO implementing the Indonesia is Vietnam is a is a Member signatory Obligations and WTO Obligations a Member Member of WTO, of WTO, it of all WTO Rules of Origin and Rules of of WTO, it it implements the implements the Agreements. Origin. implements the Agreement on Agreement on More trainings Agreement on Rules of Origin. Rules of Origin. and studies will Rules of Origin. be organised. No information available. 10. Implementation Fully However, as It is expected Peruvian Indian of the TRIPs implementing the Indonesia is that in 2008 and Customs signed Customs law Agreement TRIPs Agreement. a Member 2009 Vietnam’s an Agreement has provisions More effective of WTO, it Customs will with INDECOPI for border measures were implements the apply risk in the application interdiction taken to interdict Agreement on management of preventive of the IPR infringing goods Rules of Origin. system for IPR measures for infringing at borders. related import the protection goods. IPR homepage set – export goods. of intellectual up on customs At the same property rights. website to time, the General Also, the publicise laws Department National and regulations. of Customs is Enforcement completing the Agency has database on undertaken IPR based on several seizure requirements operations in and documents cases where supplied by IP goods have holders. been suspected of violating Intellectual Property Rights. Table 5 continued...
97 India and APEC: An Appraisal
Table 5 continued...
Sl. Customs People’s Indonesia Vietnam Peru India’s Status No. Procedure Republic of (2008,2009) (2007, 2008) (2006, 2007, China 2008 11. (2008, 2009)
Adoption of Applying risk Setting up Build the plan on Enhancement India has Systematic Risk management 4 different implementing of profile a well- Management in the whole channels for risk management functioning Techniques Customs released goods management module, risk operation system. on the basis techniques implemented in assessment To further of degree of on Vietnam the importation system for develop the risks. Those are Customs for consumption imports as current system. green channel, formalities. regime. It is well as for red channel, considering exports. yellow channel, to extend its priority channel application to other customs regimes.
12.
Implementation The target Reviewing WCO guides on The Express India has of WCO objectives related Express customs Consignments an Express Guidelines of Express regulation clearance by air have a special Consignment on Express consignment and by road have and preference Clearance Consignment clearance been applied. treatment, with System Clearance contained in Research, the "Regulation the SCCP CAP implement of postal ITEM have been for other consignments achieved. transportation or parcel". The To enhance means. goods that have the security this special measures treatment are: of Express • Letter, consignment. postal items, newspapers and books. • Goods not valued over US$ 100 (total 13. value). Integrity The integrity Establishing Providing Peru India has a action plan Internal solutions to Government Departmental has been Control Unit prevent and issued the Law Vigilance implemented and on the level of stop the habit No. 27815, set up and is risk assessment Headquarter, of troublesome, “Ley del Código also subject was introduced to prime service disturbance de Ética de la to external improve Customs office and and negative funciónpública”, oversight integrity. regional office. activities of (Law of Ethics, through To fully Customs officers Code for public external implement the to timely meet all function) dated agencies principles and the difficulties 12 August 2002.
Table 5 continued...
98 APEC and Indian Customs
Table 5 continued...
Sl. Customs People’s Indonesia Vietnam Peru India’s Status No. Procedure Republic of (2008,2009) (2007, 2008) (2006, 2007, China 2008 (2008, 2009)
measures set in Exploring of business; It means that the like Central the blueprint possibility speeding up legal framework Bureau of of the customs in providing the internal for integrity in Investigation integrity plan online inspection, all government and Central 2004-2010. complaint organising agencies has Vigilance To continue service regular been established. Commission. the efforts Conducting meetings and to introduce regular talks between On the other international best complaint Customs and hand, their practices. survey business. internal Undertake regulation of training work contains activities for some issues customs officers of the Arusha to be more Declaration. professional and No information polite.No information No information available. available. available. 14. Time Release China Customs It is done Survey started its TRS occasionally project in 9 at major ports of entry in ports like 2007. A common NhavaSheva, understanding but not on a of work plan regular basis. for further implementation of TRS has been formulated. No information No information No information available. available. available. 15. Implementation On 1 April 2008, India has of APEC the Measures implemented Framework of Classified AEO System. based on Management the WCO to Enterprises Framework became effective, of Standards which shows that to Secure and China Customs Facilitate Global implemented the Trade AEO system in accord with the Framework. Table 5 continued...
99 India and APEC: An Appraisal
Table 5 continued...
Sl. Customs People’s Indonesia Vietnam Peru India’s Status No. Procedure Republic of (2008,2009) (2007, 2008) (2006, 2007, China 2008 16. (2008, 2009) No information available. Other Issues China Customs is Simplified Most of Peruvian Other issues (This includes working hard to Export and procedures facilitating other Customs push forward the Import activities, are adapted to trade includes activities customs e-port goods and quality system introduction facilitating initiatives in vehicles transit. ISO 9002. of self- trade which is order to pursue Applied risk assessment not part of the trade facilitation management for customs SCCP CAP) and customs measures, clearance modernisation after customs (2001 IAP). clearance China Customs measures, is also E-Customs modernising its formalities.To administration. expand E-Customs Source: formalities.
Complied by author from various sources.
100 Annexure 10 APEC and Liberalisation of Trade on Environmental * Goods: A Brief Note
After discussion for several years, APEC Mandate there have been numerous attempts economies agreed, at the Vladivostok APEC to identify the list of environmental goods Economic Leaders’ Meeting in September with a number of member countries making 2012, to voluntarily liberalise tariffs on 54 their submissions to the Committee on Trade environmental goods to 5 per cent or less by and Environment (CTE) of WTO. However, no the end of 2015. The deal represented the consensus has so far been able to be reach on first international agreement to liberalise the final list of environmental goods. trade on a set of goods that are considered “environmental”, even as a commitment to Another initiative to pursue a pluritaleral launch negotiations on lowering tariffs and Environmental Goods Agreement was NTBs in environmental goods and services signalled during the World Economic Forum’s (EGS) trade was included in the Doha Round annual meet in Davos, Switzerland in January, negotiating mandate at WTO, launched in 2014. Subsequently, 14 WTO members launched plurilateral negotiations for an 2001. Paragraph 31(iii) of the 2001 Dohathe Environmental Goods Agreement (EGA) on 8 reductionMinisterial or, Declaration as appropriate, (DMD) elimination mandates of July 2014 at the WTO. The EGA talks are aimed tariffMember and non-tariffcountries barriers to negotiate to environmental on “ at promoting green growth and sustainable goods and services with a view to enhancing development while providing impetus for the the mutual supportiveness of trade and conclusion of the Doha Round. It is significant environment that for arriving at an EGA, it was agreed to use .” Following the Ministerial the list of 54 environmental goods drawn up
* This note has been prepared by Ms. Aditi Gupta, Consultant, RIS under the guidance of Dr. V. S. Seshadri, Vice Chairman, RIS.
101 India and APEC: An Appraisal
by APEC as a starting point. The total global countries such as Chile, Peru, Mexico, Brunei, trade in environmental goods is estimated Russia, Indonesia, Malaysia, the Philippines, at US$ 1 trillion. With some WTO member Thailand, Papua New Guinea and Vietnam are countries applying tariffs as high as 35 per notImplementation taking part in the talks. of the APEC cent on environmental goods, the participating Environmental Good Initiative countries, which account for about 86 per cent of global trade in these items, hope that an EGA will45 substantially boost trade in these Applied tariff rates on most of the goods products. covered under APEC’s list are below 5 per The members of the EGA would at the cent for almost all the member countries, first stage, aim to eliminate tariffs or customs with simple average of the tariffs for all of duties on a broad list of green goods that help APEC being 2.6 per cent. However, in the case clean the air and water, help manage waste, of wind-powered generators, several APEC are energy efficient, control air pollution, and economies (Brunei, China, Chinese Taipei, help generate renewable energy like solar, Chile, Indonesia, South Korea, Mexico, and wind, or hydroelectric. At the second stage, Thailand) have tariffs greater than 5 per cent the negotiations could also address non-tariff - in the case of Brunei (20), Chinese Taipei barriers and environmental services. The (10), and Indonesia (10) tariffs are 10 per talks are open to any WTO member and the cent or higher. Also, China imposes tariffs of results will be applied in accordance with about 14 per cent on auxiliary plants for use the most-favoured nation (MFN) principle. with boilers (HS 840420), and Indonesia, Like other sectoral agreements, the EGA South Korea, the Philippines, and the US also will require a critical mass threshold for its have tariffs of over 5 per cent for all national operationalisation, which needs to be agreed tariff lines under this position. Some APEC to by all its members. A critical mass may economies apply relatively high tariffs to non- be said to exist when a sufficient number electric water heaters, including solar water of parties that do not represent the entire membership agree upon a common course heaters. For example, applied rates in China of cooperative action to be taken under the are 35 per cent and rates for Mexico, Thailand auspices of the WTO. These agreements are and Vietnam are all set at 10 per cent. Another applied on a MFN basis implying that the example includes alternators and electric benefits accruing from them apply on a non- generating sets/rotary convertors where46 discriminatory basis to signatories and non- applied rates for Brunei are 20 per cent. signatories alike. Negotiators are meeting Some experts have also commented regularly to discuss product coverage and on the way in which APEC members have Participationother details. in EGA of APEC implemented voluntary cuts and the goods Members that were subject to such cuts. It has, for example, been reported that APEC leaves it to member economies to decide whether or not It may be noted that several of the APEC to cut tariffs at the Harmonised System (HS) members such as Australia, Canada, China, 6-digit level or pick and choose more specific Chinese Taipei, Hong Kong China, Japan, New products from within these categories. This Zealand, Singapore, the Republic of Korea approach has created a degree of uncertainty and the United States are also involved in the about the full47 implementation of the APEC new EGA initiative. On the other hand, APEC, agreement.
102 APEC and Liberalisation of Trade
India’s Position with regard to EGA
developing and least-developed countries India’s trade in the 54 environmental goods where the industrial sector is dominated by under the APEC list is presented in Table 1. small and medium enterprises (SMEs) that do There has been a consistent increase in India’s not have the necessary resources to invest in trade in these products with exports rising research on environment related technologies faster than imports. Despite this India has a and will hence be rendered unviable. Under the “Environmental Project Approach (EPA)” large negative trade balance in these goods. proposed by India, a Designated National Whereas there are some products where Authority (DNA) in each country would decide the applied tariff is zero or less than five per if goods and services interincluded alia in a project cent, but for a majority of the 54 environmental will qualify for specified concessions. Such goods the applied tariff rate in India ranges items would include, , equipment, between 7.5-10 per cent and the simple parts and components, consumables, and average tariff on these goods is a little over 6 services. The commitments that Members per cent. While India is not taking part in the agree to undertake may include (a) reduction EGA negotiations, India had earlier circulated or elimination of tariffs on import of all project its proposal on this issue in June 2005 as part related goods; (b) reduction, elimination or of the Doha Round negotiations48 Para 31 (iii) appropriate treatment of standards, licensing of the Doha Declaration. Taking note of the restrictions, non-tariff barriers and other widespread divergence in opinion on the related issues; and (c) specific commitments categorisation of environmental goods, India required in all modes of service delivery. put forward a project based approach than a This approach, it was felt, would address “List approach”. It said that many of the items diversity in environmental standards with proposed to be included in the list had dual use. common but differentiated responsibilities This meant that even though these products and would bring in trade liberalisation to meet could be utilised for environmental purposes, the environmental as well as development they still had other industrial uses some of goals of both the Doha Development Agenda which may not even be environment friendly. and Agenda 21. The broad criteria for Examples include electricity meters, liquid “environmental projects” could be agreed upon flow meters, heat exchangers, conveyers and among WTO members with due consideration centrifugal drums. Similarly, inclusion of items to the policy space of national governments. such as ovens, energy efficient refrigerators, The projects may, among others, include: etc., in the list was problematic since zero or Air Pollution Control; Water and Waste marginal tariffs on these goods would have Management; Solid Waste Management; detrimental effects onTable industrial 1: India’s sectors Trade in in REnvironmentalemediation and Clean-up;Goods Noise and Vibration
(US$ million) Year Exports Imports Total Trade Trade Balance 1997-98 147.24 1045.75 1192.99 -898.51 2004-05 717.15 2252.04 2969.19 -1534.89 Source 2013-14 2866.58 8133.7 11000.28 -5267.12 Note: : Directorate General of Commercial Intelligence and Statistics (DGCIS), Ministry of Commerce and Industry, Government of India. Trade figures are calculated for 54 tariff sub-headings at 6-digit level.
103 India and APEC: An Appraisal
Abatement; Environmental Monitoring and proposed approach would have as widespread Analysis; Process Optimisation; Energy Saving effects as envisaged under the Paragraph Management; Renewable Energy Facilities; 31(iii) mandate on EGS, given that it would and Environmentally Preferable Products. be applied on a case-by-case, temporary basis. Further, the extent to which it would EPA as proposed by India offered greater assist small and medium sized enterprises benefits than the “List approach”. It would (SMEs) is questionable since the benefits from address the changing needs of Members the approach might accrue to multinational50 and there would be an incentive to employ corporations operating on a larger scale. the latest technology and products. This Many developing countries welcomed the new, approach was also dynamic as it would alternative approach as a basis for further take into account the evolving nature of discussion, but also raised questions about environmental technology and equipment and practicalities. The US and Hong Kong repeated reduce or eliminate tariffs on a contemporary that they were opposed to the approach, list of goods and services. Further, since tariff contending that it was overly51 bureaucratic and concessions would be available for goods used difficult to implement. in the project for a finite period of time (even if Meeting the APEC Target by India extended), the concerns expressed regarding dualObjections use were tomitigated. India’s Proposal India faces a sizeable trade deficit in environmental goods, coupled with experiencing an inverted duty structure. Thus, Despite getting a favourable response from in case India joins APEC, it seems necessary countries such as Argentina, Cuba, South Africa that it will require some additional time to and Côte d’Ivoire, India’s project approach has meet the APEC targets. This effort will become been criticised by many developed countries less difficult if it is granted flexibility to choose on the basis that it would fail to provide only certain products from within each 6-digit binding and predictable market access on a tariff sub-headings, as is apparently the case in permanent basis for environmental goods49 the implementation of the initiative by certain and for being inconsistent with WTO rules. APEC developing economies. Several Members, questioned whether the
104 Annexure 11
* APEC and ITA-2
The Information Technology Agreement production and trade in information (ITA) was designed to achieve lowering of technology products. It was assumed that the all taxes and tariffs to zero, on the identified agreement will make positive contributions information technology products by to global economic growth, through reduction signatories applicable on an MFN basis. The in costs of inputs into information and proposal for the expansion of world trade in communications technology (ICT) services, information technology products was adopted integration of more countries into the export vide the “Ministerial Declaration on Trade markets of IT products, and global diffusion of in Information Technology Products” dated technology. As of 20 October 2014, the ITA had 13 December 1996 at Singapore Ministerial 52 participants (covering 80 members and Conference of WTO. The implementation of States or separate customs territories in the the Declaration was subject to the prerequisite process of acceding to the WTO) representing that participants representing approximately approximately 96 per cent of world trade in 90 per cent of world trade in information information technology products. In recent technology products should notify their52 years, there has been a much higher level of acceptance. The original 29 signatories participation by developing countries in the did not reach the 90 per cent trade coverage ITA, many of which are recently acceded WTO criteria. In the ensuing months up53 to 1 April Members. However, for developing countries, 1997, a number of other countries expressed who were the initial signatories of ITA-1, an interest in becoming participants in the tariff elimination schedule was specified differently under the S&D principles: Costa ITA and notified their acceptance. Thus, the ITA entered into force with the first staged54 Rica, Indonesia, India, Korea, Malaysia, Chinese reduction in tariffs occurring on 1 July 1997. Taipei, and Thailand were granted flexibility in cutting their tariffs on a few products to The stated objectives of the ITA included zero after the year 2000 but not beyond 2005. raising standards of living and expanding
* This note has been prepared by Ms. Aditi Gupta, Consultant, RIS under the guidance of Dr. V. S. Seshadri, Vice Chairman, RIS.
105 India and APEC: An Appraisal
However, these periods did not necessarily among the ITA member countries, and later allow the time needed by developing countries expanded to 27 countries. The technical for building55 or advancing the domestic IT working group56 currently consists of 27 ITA sector. India on its part eliminated tariffs for participants, representing more than 90 all the ITA products by 2005. per cent of international trade in information technology. In particular, the negotiations to The product coverage of ITA-1 is roughly review the ITA focus on three broad areas: about 200 tariff lines at the 6-digit level, expanding the product coverage, expanding covering six major product groups: computers, the membership of ITA and developing non- telecom equipment, semiconductors, binding principles on NTBs. The discussions semiconductor manufacturing and do not include a consideration of special testing equipment, software and scientific and differential treatment for developing instruments. It must be added, however, that countries. on several of these 6-digit tariff lines not all Expansionproducts were of covered. ITA An expanded ITA is expected to include 200 additional tariff lines, including medical equipment, GPS devices, video game consoles, Consultations to review the product coverage printer ink cartridges, video cameras, static of ITA had started in 1997 itself, that is converters and inductors, loudspeakers, the same time when it was implemented. software media (e.g., solid state drives), next Countries differed in their views on issues generation semiconductors, point-of-sale such as what should be considered an IT cards to download software and games, and product. While Hong Kong (China), Malaysia various information and communications and Singapore considered that consumer technology testing instruments. The average electronic products should be included in applied MFN tariffs maintained by the WTO the expanded ITA, European Union with the members participating in the ITA expansion support of certain East European countries negotiations range from 0 per cent to 7.1 and India, opposed this idea. By the end of per cent for the products being negotiated. March 1998, the negotiations had virtually However, the import duties for certain stalled. products in key markets are as high as 35 per Currentcent. Status More recently, concerns were raised regarding the product coverage of ITA-1. It was recognised that due to rapid technological Failure to reach a consensus on the products changes, whole new categories of IT products to be covered under the expanded ITA has had been developed, including a number of stalled the formalisation of an agreement at products which do not fall within the scope of the WTO. Several countries including China the existing ITA. Hence several of ITA members had raised concerns over many items in the decided to embark on expanding the product proposed list, which they consider as ‘sensitive coverage. products’. At the APEC Summit held in Beijing The discussions on expansion of the ITA in November 2014, the US and China reached towards ITA-2 have been taking place in a a consensus regarding the proposed ITA technical committee which does not include expansion. It was believed that China and all countries party to ITA-1. The committee the US had agreed on maximum phaseout commenced its work with 18 countries from periods for the products covered under their
106 APEC and ITA-2
“understanding” which included items such 1 members such as Indonesia, Russia and as advanced semiconductors known as MCOs, Vietnam are also not participating in ITA-2 magnetic resonance imaging (MRI) machines negotiations. It is believed that Vietnam is and high-tech testing equipment. Further, the reluctant to participate in the talks primarily US had also agreed to back several of China’s because of its preoccupation with Trans- offensive interests in the ITA, which include Pacific Partnership talks while officials in the car stereos, watt-hour meters and switching Ministry of Information and Communications equipment. believe that the expansion of imported tariff- free products could hurt some Vietnamese Hopes of finalising the much anticipated companies. In Indonesia, officials argue ITA expansion at Geneva in December 2014 against joining the expanded ITA because the hit a deadlock, however, over the issue of benefits of the original58 agreement have not inclusion of flat panel displays or LCDs which been very obvious. Another APEC member, were not covered under China’s understanding Russia, has only recently (September 2013) with the US. China, which is looking to build joined ITA-1. However, a majority of APEC its own domestic manufacturing of LCDs, is members such as Australia, Canada, China, insisting on the exclusion of flat-panel displays Hong Kong, the US, Japan, Peru, Singapore, while Korea, Taiwan and Japan are insisting Malaysia, Thailand, New Zealand, Taiwan, the on including them under the expanded ITA. Philippines and Korea are in favour of ITA Korea is, however, ready to exclude flat panel expansion. displays in ITA-2 in exchange for including certain other items such as organic light- APEC’s average tariff for the products emitting diodes, rechargeable batteries and proposed under the ITA expansion is already certain kinds of monitors. These discussions low at about 3.57 per cent. Further, for a APEChave pushed and theITA-2 formalisation of ITA-2 further. majority of APEC countries, the average tariff on ITA-2 products is lower than 5 per cent. This includes countries such as US APEC as a whole has been supportive of (1.9), Australia (2.3), Taiwan (3.0), Mexico ITA-2 negotiations. The Declaration released (3.0), Philippines (3.5), Peru (1.8), Malaysia by APEC Economic Leaders’ Meeting in (4.3) and New Zealand (2.5). For some APEC November 2014 spoke about APEC’s role in the countries such as Hong Kong, Singapore, negotiations to expand the product coverage Canada, Japan and Papua New Guinea, the of the Information Technology Agreement average tariffs were close to or equal to zero. (ITA) and stated that the final ITA expansion China (8.2) and Brunei (10.0) have the highest outcome should be commercially significant, average applied tariffs on the proposed items. China has an applied tariff rate of 60 per cent credible, pragmatic, balanced, and reflective for television cameras, digital cameras and of the dynamic technological developments video camera recorders. Furthermore, for a in the information technology sector over the range of electrical appliances for household last 17 years, and contribute to the multilateral uses such as refrigerators and windows AC, trading system. The Declaration also called China’s applied tariff rate ranges between for swift resumption and conclusion57 of 15 to 30 per cent. The tariff for many of the plurilateral negotiations in Geneva. articles falling under China’s sensitive list such However, four APEC countries, Brunei, as monitors (applied rate more than 20 per Chile, Mexico and Papua New Guinea are not cent) and cathode ray picture tubes (applied even members of ITA-1. Furthermore, ITA- rate more than 10 per cent) is higher than 5
107 India and APEC: An Appraisal
per cent. Brunei has high applied tariffs of over such as call centres and software development 20 per cent for many of the products covered contributing to the59 boom in the Indian IT Indiaunder ITA and expansion. ITA-2 Services industry. However, there has not been a commensurate growth in the domestic manufacturing of electronic products which is India’s experience of ITA-1 has on the whole facing stiff competition from60 low cost imports not been very positive. India joined ITA- from countries like China. 1 in 1997 hoping to promote the growth India has repeatedly expressed concerns of its IT services industry through ICT about ITA implementation arising from imports and inward FDI. A WTO report has classification problems in respect of certain pointed out that Indian firms strived to products with multiple uses, inverted duty improve their competitiveness in electronic structure in certain cases and absence of products, which helped in improving their progress on the issue of non-tariff barriers. comparative advantage inTable IT-related 1: India’s services Trade At in theITA-1 ITA Products Symposium to mark the 15th
(US$ million)
Year Exports Imports Total Trade Trade Balance (Exports-Imports)/Exports 1997-98 755.91 2475.6 3231.51 -2.27 2004-05 1674.15 10375.29 12049.44 -5.20 Source 2013-14 4343.48 17480.63 21824.11 -3.02 Note: : DGCIS, Ministry of Commerce and Industry, GOI It must be noted that there are inherent problems with any attempt to quantify trade in ITA-1 products. In addition to the 148 items listed in Attachment A (with specific 6-Digit HS Codes), the ITA Schedule also lists 13 items listed “in” Attachment B, and 42 items in Section 2 of Attachment A which were labelled “for” Attachment B for which no specific HS Codes are assigned. Individual countries assign different codes to these 55 items and there is no unanimity on the HS codes to be used for these items. Hence, it becomes difficult to ascertain the products covered under Attachment B. Further, the product coverage in ITA was based on HS 1996; however there have been a number of modifications in HS in 2002, 2007 and 2012. The WTO report stated that while HS 2002 affected only a few HS 1996 sub-heading pertaining to ITA, changes to HS 2007 affected 96 of 163 HS 2002 sub-headings. Another problem with getting reliable estimates of trade in ITA products results from the fact that out of the total 190 items defined in terms of HS, around 95 are defined beyond the HS sub-heading, i.e. 6-digit level. However, for the purpose of the analysis in this note, only 6-digit tariff sub-headings based on HS 1996 are used. This would mean that the figures presented here slightly overstate the actual ITA-1 trade figures. Table 2: India’s Applied Tariffs on ITA-2 Products
No. of Tariff Average applied Minimum Applied Category Maximum Lines Tariff (%) Tariff (%) Applied Tariff (%) Consumer Electronics 40 8.42 0 10 223 ICT 94 7.16 0 10 Non ICT 8.17 0 10 Source Total 357 7.93 0 10 Note: : Tariff figures from WTO IDB. . (1) OECD Classification for ICT Sector has been used to classify products under the 3 categories. (2) 357 sub-headings at 6-digit level
108 APEC and ITA-2
anniversary of the ITA in 2012, the Indian Domestic industry has expressed serious delegate contested the view that India had61 sensitivities regarding many of the items. benefitted from the ITA in terms of increasing Further, India along with several countries, employment, IT spending and investment. including Egypt, El Salvador, Guatemala, India’s trade balance for ITA-1 products has Honduras and the Dominican Republic, have consistently been negative (Table 1). called for greater transparency, inclusiveness Ever since India joined the ITA in 1997, there and the granting of flexibilities to developing has been a steady increase in India’s imports countries.India’s Current Level of Tariffs on of IT products. Even though India’s exports ITA-2 Products too have increased, the growth in imports has been higher leading to a growing trade account deficit. India’s trade balance in ITA products India’s average tariff on the proposed ICT has been rising since 1997-98 and has been items to be covered under ITA-2 is around particularly high in the early 2000. Even though 8 per cent. The tariffs on individual items the trade deficit showed a moderate decline in ranging between 7.5-10 per cent, with tariffs the late 2000s it still is at a precariously high being greater than 5 per cent for almost all the level. For the year 2013-14, India’s exports of products. In particular for non-IT products ITA-1 products stood at about US$ 4 billion covered under the proposed ITA expansion while its imports were 4 times higher at about such as washing machines, refrigerators, US$ 17 million. Even for the items proposed window ACs and microwave ovens, the under the ITA expansion, India’s imports have average tariff applied by India is 10 per been higher than its exports, resulting in an cent. Tariff applied on consumer electronic adverse balance of trade. items such as microphones, sound and video Concerns have also been raised with regard recording apparatus, lamps and light fittings to the products being covered under ITA-2. and thermionic and cathode is around 8 per Out of the 357 products under the proposed cent. Table 2 gives an idea of the applied tariffs ITA expansion, 50 items belong to non-IT by India on the different categories of goods category like washing machines, refrigerators Conclusioncovered under ITA-2. and window AC. Similarly, 136 were dual use products. At the meeting of Committee of Participants on the Expansion of Trade in The success or failure of ITA-1 depended Information Technology Products in March on the status and objectives of the member 2013, the Indian delegate pointed out that countries as well as the level of development India’s IT manufacturing had dipped quite of their IT sectors. As noted by Joseph (2006), profusely due to ITA-1. Further, he also ITA-1, which was solely a tariff cutting noted that during stakeholder consultations mechanism without provisions for capacity regarding ITA-2, concerns were raised building, offered limited benefits to the regarding the relevance of many of the development of a competitive IT sector. Many proposed ITA-2 products, the multiple-use of of the developing countries, who joined the many products and the difficulty in monitoring agreement prematurely did not have enough products with multiple use at the customs capacity to take part in the export market level. It was also pointed out that the proposed62 creating serious impact on the value addition items to be covered under ITA-2 could also as well as employment creation in the sector. create an inversion in the duty structure. This happened in the case of India’s hardware
109 India and APEC: An Appraisal
63 industry. Considering the experience rising emergence of a balance of advantage. In any from implementation of ITA-1, India may find case, not all members of APEC are participants it difficult to join ITA-2 at least for several in ITA-2 discussions, and a few are not even years until its domestic electronics and part of ITA-1. IT industry develop to a point that allows
110 Annexure 12 India’s Trade and Investment with APEC Economies
The 21 economies of APEC account for total exports declined from 46.2 per cent in approximately 49 per cent of world imports 2000-01 to only 32.7 per cent in 2013-14. and around 47 per cent of global outward On the other hand, India’s imports from FDI stock indicative of their economic weight APEC economies showed a reverse trend (Table 1). On the other hand, India’s exports to by increasing from a 29.2 per cent share in APEC economies accounted for only 32.7 per 2000-01 to 36.2 per cent in 2013-14. Seen cent of India’s worldwide exports in 2013-14. together, however, APEC’s share of India’s In respect of FDI inflows into India, again only external trade (exports + imports) has more 27.54 per cent of cumulative inflows from April or less hovered at around 35 per cent. The 2000 to March 2014 were from APEC economy external trade share of APEC, however, climbs registered companies. India has clearly not to almost 50 per cent if trade in petroleum benefitted in a commensurate manner with products were not taken into account. the economic strength displayed by APEC At the sub-regional level, however, the Indiaeconomies. and APEC Merchandise Trade shares have varied in a different manner as will be seen from Table 3. India’s external trade with North East Asia, Latin America-3 Examining further, it is seen from Table 2 that and ASEAN-7 of APEC has grown rapidly the share of APEC economiesTable 1: among APEC’s India’s Global Tradeover the and years. FDI OnProfile the other hand, with North
(in %)
APEC's Share of Total APEC's Share of Total Global APEC's Share of Total Global Year World Imports OFDI flows OFDI Stock
2000 50.14 25.98 49.84 2005 47.54 17.83 46.29 2010 48.01 49.80 44.72 Source 2013 49.77 66.28 47.38 : UNCTAD Statistics. 111 India and APEC: An Appraisal
Table 2: India’s Exports and Imports from APEC
(US$ million)
2000-01 2013-14 India's India's Total India's India's Countries Total Trade Exports Imports Trade Exports Imports 3.22 Australia 405.63 456.81 862.44 2297.39 4532.93 6830.32 Brunei 0.15 3.37 32.28 763.60 795.88 Canada 656.27 395.61 1051.88 2036.43 2932.61 4969.04 Chile 108.34 57.09 165.43 662.93 2440.93 3103.86 China 830.26 1238.51 2068.77 14780.62 50207.8 64988.42 Hong Kong 2640.69 851.87 3492.56 12730.83 7321.85 20052.68 Indonesia 399.45 824.66 1224.11 4827.47 7866.75 12694.22 Japan 1794.09 1819.74 3613.83 6780.49 9245.89 16026.38 Korea (Rep.) 450.67 893.47 1344.14 4142.54 12435.91 16578.45 Malaysia 607.72 1169.77 1777.49 4185.19 9206.67 13391.86 Mexico 208.31 53.83 262.14 2227.38 3672.26 5899.64 New Zealand 63.01 73.23 136.24 276.32 436.60 712.92 Papua New Guinea 4.40 0.31 4.71 43.78 178.28 222.06 Peru 26.25 9.11 35.36 620.3 524.17 1144.47 Philippines 201.67 63.00 264.67 1415.72 391.43 1807.15 Russia 888.93 510.81 1399.74 2120.75 3748.87 5869.62 Singapore 876.89 1459.55 2336.44 12378.47 6718.77 19097.24 Taiwan 391.19 507.65 898.84 1973.63 4040.02 6013.65 Thailand 529.97 337.67 867.64 3701.59 5321.49 9023.08 12.36 US 9303.26 2991.25 12294.51 39098.35 21187.83 60286.18 Vietnam 225.87 238.23 5420.18 2581.37 8001.55 Total Trade with APEC 20616.09 13726.45 34342.54 121752.64 155756.03 277508.67 India's Trade with 44560.30 50536.40 95016.4 314405.30 450197.60 764594.20 World %Share of Trade with 46.27 27.16 36.14 38.72 34.60 36.29 APEC vis-a-vis World India's Trade with World (minus 44499.13 48845.90 93345.03 312576.01 432072.23 744648.24 Petroleum) %Share of Trade with APEC vis-a-vis 46.33 28.10 36.79 38.95 36.05 37.27 World (Excluding Source Petroleum) : DGCIS, Ministry of Commerce and Industry, Government of India.
112 India’s Trade and Investment
Table 3: India’s Trade with Sub-regions within APEC
(US$ million)
Total % Growth Total Trade Total Total Trade in Trade in within the Countries Region Trade in Trade in within the 2013-14 region in 2001-02 2013-14 region in compared to 2001-02 2013-14 2001-02 Australia 1468.63 12122.8 13236.26 New Zealand Oceania 142.62 1616.07 222.26891.2 719.04 Papua New Guinea 4.82 Brunei 3.46 796.05 Indonesia 1309.99 19598.5 Malaysia 1784.95 13427.81 Philippines ASEAN-7 265.65 6811.40 1810.59 71985.64 956.84 Singapore 2341.02 19273.03 Thailand 868.04 9043.47 Vietnam 238.29 8036.19 China 2333.5 65858.98 Hong Kong 3492.97 20053.94 North Japan 3636.67 11708.04 16294.82 124917.76 966.94 East Asia Korea (Rep.) 1344.54 16679.29 Taiwan 900.36 6030.73 Mexico 262.34 5899.87 North Canada 1053.54 13373.66 5185.26 66832.44 399.73 America US 12320.12 61647.18 Chile 165.59 3171.81 Latin Peru 35.45 463.38 1144.75 10216.43 2104.76 America-3 Mexico 262.34 5899.87 Russian Russia 1406.67 1406.67 6015.66 6015.66 327.65 Federation Total Trade with APEC 35641.56 299104.06 739.20 SourceIndia's Total Trade with World 95016.43 764594.22 704.70 : DGCIS, Ministry of Commerce and Industry, Government of India. India-APEC Services Trade
America as also with Russian Federation, India’s trade grew at a much slower pace. It is not easy to get services trade figures at China has also overtaken US as India’s largest disaggregated level for each import/export external trade partner in recent years. destination particularly for recent years. 113 India and APEC: An Appraisal
Table 4: India’s Services Exports to APEC
Country India's Services Exports (in 2010) US$ million United States 13661.00 Hong Kong 802.00 Korea 817.00 Australia 630.18 Canada 563.02 Russia 225.87 New Zealand 126.00 Singapore 2866.70 India's Services Exports to APEC in 2010 19691.77 India's Total Services Exports in 2010 116945.64 SourceAPEC's Share in Total Services Exports from India (%) 16.84 : WTO, OECD Stats and UNCTAD.
Table 5: India’s Services Imports from APEC
Country India's Services Imports (2010) US$ million United States 10319.00 Hong Kong 1 050.04 Korea 1649.00 Australia 2 689.51 Canada 429.06 Russia 892.66 New Zealand 336.00 Singapore 4449.30 India's Services Imports from APEC in 2010 18075.02 India's Total Services Imports in 2010 114455.47 Source:APEC's Share in Total Services Imports to India (%) 15.79 WTO, OECD Stats and UNCTAD.
114 India’s Trade and Investment
Table 6: India’s FDI Inflows from APEC
(US$ million)
Cumulative FDI Inflow from Cumulative FDI Inflow from S.No Country 1 April 2000 upto March 2011 April 2000 upto March 2014 2 Australia 442.69 593.16 3 Canada 343.85 436.99 Chile 104.59 143.97 4 China 53.77 402.31 6 5 Hong Kong 693.88 1215.38 Indonesia 605.31 611.44 7 Japan 5276.23 16268.05 8 Malaysia 293.36 637.73 9 Mexico 10.66 74.36 11 10 New Zealand 29.15 41.74 12 Peru 0.04 0.14 13 Philippines 1.4 32.65 Russia 467 483.74 14 Singapore 11895.19 25445.46 16 15 South Korea 762.76 1405.4 Taiwan 42.72 66.46 17 Thailand 84.9 172.05 18 U.S.A 9448.61 11927.46 19 Vietnam 0.13 0.24 Total FDI Inflows into India 30556.24 59958.73 from APEC Total FDI Inflows into India 129836.56 217702.63 % Share of FDI Inflow from vis- Source 23.53 27.54 a-vis the World : Compiled from various DIPP Factsheet.
Figures obtained from WTO/OECD sources from 25.3 per cent in March 2011 to about for 2010 may be seen at Tables 4 and5 which 27.54 per cent in March 2014. Noteworthy indicate that the share of APEC economies is here is the growth seen from Singapore, Japan, only around 16 per cent with US and Singapore Hong Kong, South Korea, Malaysia and China as the principal trading partners. Considering (See Table 6). It is of course possible that the that services trade figures are often difficult actual percentages may be somewhat higher to capture, these can at best be taken as since some of the foreign companies are known indicative, but it does reflect here again, with to use the Mauritius route or other tax havens APEC’s share of world services imports being for routing their investments into India. around 40 per cent, India’s exports to these India’s outward FDI has targeted APEC economies have not been to the same level. FDI Inflows and Outflows economies even more. Around 40 per cent of India’s total FDI outflow between 2001-02 and 2011-12 amounting to US$ 48.8 billion went to In respect of India’s FDI stock, APEC economies APEC destinations with Singapore, US, Russia, as a group have steadily accreted their share
115 India and APEC: An Appraisal
Table 7: India’s OFDI to APEC
(US$ million)
Cumulative outflows Cumulative outflows between S. No Country between 2001-02 upto 2001-02 upto 2011-12 1 2006-07 2 Singapore 1879.67 27681.3 3 Australia 275.9 3140.2 US 1965.99 7655 231.6 4 Malaysia 57.97 679.2 6 5 Hong-Kong 1175.7 Canada 427.56 858.4 7 Russia 2959.92 4417.9 8 Indonesia 49.06 499.2 9 Philippines 10.45 169.6 11 10 China 248.84 1157.4 12 Thailand 124.95 351.8 13 Japan 2.9 87.6 Mexico 63.14 109.6 2.1 14 Vietnam 114.91 275.2 16 15 New-Zealand 12.9 3.2 Chile 0 19.4 17 Peru 0.49 18 Brunei 0 0.9 2.1 19 South-Korea 53.76 516.4 20 Taiwan 0.47 Total OFDI to APEC (Excluding 8469.68 48813 Papua New Guinea)
Total OFDI to World 27474.91 121779.7 %Share of OFDI with APEC 30.83 40.08 Source vis-a-vis the World : Outward Direct Investment from India: Trends, Objectives and Policy Perspectives, May 2014, Exim Bank Occasional Paper Series.
Australia and China figuring among the top term investments by Foreign Institutional (see Table 7). Investors (FIIs), many of them having APEC origins. It can perhaps be surmised that It is clear from these figures that even as should India’s “Make in India” and other India did not benefit from APEC’s steadily economic reforms proposed move forward to growing economic clout in a commensurate create a more conducive environment, India’s way, these economies have acquired enormous trade and investment relations with APEC importance in our trade and investment economies could receive further impetus. portfolio and these do not include short 116 Endnotes
1. Russian Federation, Singapore and US apart from ASEAN as a whole. 18. Australia, Brunei Darussalam, Canada, Chile, China, These may be found in the following news items/ Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, reports. 1) ‘Bringing India inside the Asian Trade Tent’ New Zealand, Papua New guinea, Peru, Philippines, by Alyssa Ayres, Senior Fellow, Council for Foreign Russia, Singapore, Chinese Taipei, Thailand, United 2. Relations, New York posted in June 2014. 2) ‘India States, Vietnam. into APEC: Three APEC reasons why’ by Malcolm Cook, The fifteen areas are: tariffs, non-tariff measures, Senior Fellow, Institute of South East Asian Studies services, investment, standards and conformance, Singapore; posted in July 2014. 3) ‘India and APEC: customs procedures, Intellectual Property rights, Not yet there but getting closer’ by Amitendu Palit, competition policy, Government procurement, Head (Partnerships and Programmes) and Senior deregulation/regulatory review, WTO obligations Research Fellow, The Institute for South Asian Studies, Singapore posted in July 2014. (including rules of origin), dispute mediation, mobility 19. of business people, information gathering and Selected APEC members are: Chile, China, Indonesia, analysis, transparency, Regional Trade Agreements/ Malaysia, Peru, Philippines and Vietnam. 3. 20. Free Trade Agreements (RTAs/FTAs). OECD (2011), “Government at a Glance 2011.” Available Countries which will be hosting future APEC Summits at: http://statlinks.oecdcode.org/422011011P1G093. 21. are: Philippines (2015); Peru (2016); Vietnam XLS. (2017); Papua New Guinea (2018); Chile (2019); WTO (2014), Table 3.18 in “Trade Policy Review, Malaysia (2020); New Zealand (2021); and Thailand Report by the Secretariat: China”, WTO document (2022). 22. 4. WT/TPR/S/300. Ibid 1. 5. WTO (2014), Para 3.178 in “Trade Policy Review, ‘Achievements and Benefits’ from APEC website Report by the Secretariat: China”, WTO document 6. 23. (www.apec.org). WT/TPR/S/300. Ibid 2. WTO (2014), Para 3.177 in “Trade Policy Review, 7. Some could argue that these reductions may have Report by the Secretariat: China”, WTO documentThe WTO WT/TPR/S/300. come about due to Uruguay Round commitments, 24. Regime on Government Procurement: Challenges and ITA-1 and other factors and not necessarily due to Reforms.S. Arrowsmith and R. Anderson (2011), deliberate moves solely to reach Bogor Goals. 8. Ibid 5. New York, US: Cambridge Press. 9. 25. Press Release issued by APEC Informal Senior Officials 26. Transparency International and the Center for meeting on 10 December 2014. International Private Enterprise (2011). 10. Congressional Research Service Report on Asia- WTO (2013), Para 3.105 in “Trade Policy Review, Pacific Economic Cooperation (APEC) Meetings in Report by the Secretariat: Indonesia”, WTO document Vladivostok, Russia: A Preview by Michael E. Martin, WT/TPR/S/278. 11. 27. August 2012. WTO (2010), “Trade Policy Review, Report by The eight chokepoints are elaborated in Table 1 of the Secretariat: Malaysia”, WTO document WT/ 12. TPR/S/225, p. 42. Annexure 9. 28. Yunling Zhang andAPEC Mingui at Shea20: Recall, (2009) Reflect ‘“APEC: Remake. Taking WTO (2014), Para 3.62 in “Trade Policy Review, Report Stock and Looking Ahead” in K. Kesavapany and by the Secretariat: Malaysia”, WTO document WT/ Hank Lim (eds) TPR/S/292. 13. 29. Singapore: Institute for South East Asia Studies. WTO (2013), Chart 3.3 in “Trade Policy Review, Countries which will be hosting future APEC Summits Report by the Secretariat: Peru”, WTO document WT/ TPR/S/289. are: Philippines (2015); Peru (2016); Vietnam (2017); 30. Papua New Guinea (2018); Chile (2019); Malaysia WTO (2013), Table 2.2, Para 2.12 in “Trade Policy (2020); New Zealand (2021); and Thailand (2022). Review, Report by the Secretariat: Peru”, WTO 14. 31. APEC’s Bogor Goals Progress Report, August 2014. document WT/TPR/S/289. 15. An Indian businessman when queried about the 32. WTO, “Trade Policies and Practices by Measure”, WTO benefits from APEC replied immediately that for him document WT/TPR/S/261, p. 46. getting an APEC Business Travel Card will greatly 16. 33. WTO , “Trade Policies and Practices by Measure”, WTO facilitate business travel to the region. document WT/TPR/S/261, at 46. OECD is, however, a much larger organisation, with Dang Chien Thang (2011), “APEC Procurement a staff of 2500 professionals and a budget of about Transparency Standards in Vietnam,” Transparency US$ 500 million. It is also composed of like minded International-US and Center for International Private countries committed not only to market economies Enterprise, p. 13. Available at: http://www.cipe.org/ but also pluralistic democracy. publications/papers/pdf/TI-Report-Vietnam.pdf. 17. 34. India has ‘strategic’ partner relations with Australia, WTO (2013), Para 3.127, in “Trade Policy Review, China, Indonesia, Japan, Republic of Korea, Malaysia, Report by the Secretariat: Vietnam”, WTO document WT/TPR/S/287
117 India and APEC: An Appraisal
49. 36.35. http://www.undp.org/content/dam/india/docs/ APEC (2014), APEC’s Bogor Goals Progress Report. pub-povertyreduction/EGS-Paper.pdf 50. Based on http://articles.economictimes.indiatimes. http://www.ictsd.org/bridges-news/biores/ com/2014-09-10/news/53770533_1_tata-singapore- news/indias-project-approach-causes-stir-at- airlines-eligibility-norms-vistara and http://www. environmental-goods-talks wcarn.com/news/38/38956.html . 51. 37. http://www.ictsd.org/bridges-news/biores/news/ Based on http://www.business-standard. cte-looks-at-approaches-to-environmental-goods- com/article/economy-policy/modi-cabinet- liberalisation may-liberalise-fdi-regime-for-defence-railway- 52. projects-114080600341_1.html and http://www. Australia, Austria, Belgium, Canada, Denmark, Finland, livemint.com/Politics/1li6TeBNhtBuHWe5EMuB4M/ France, Germany, Greece, Hong Kong, Iceland, Ireland, Govt-outlines-areas-open-for-FDI-in-railways.html Italy, Japan, South Korea, Liechtenstein, Luxembourg, 38. Netherlands, Norway, Indonesia, Portugal, Singapore, Based on http://www.livemint.com/ Spain, Sweden, Switzerland, Chinese Taipei, United Politics/5PcpHfKqOYGq1D8PKFxtFJ/Cabinet- Kingdom, United States, Turkey and Indonesia approves-49-FDI-in-insurance-sector.html 53. 39. Czech Republic, Costa Rica, Estonia, India, Israel, Based on http://www.business-standard.com/ Macau China, Malaysia, New Zealand, Romania, Slovak article/economy-policy/centre-relaxes-norms-for- Republic and Thailand fdi-in-construction-114103000029_1.html 54. 40. Kallummal M. (2012), Process of Trade Liberalisation WTO (2013), Table A3.3 in “Trade Policy Review, under the Information and Technology Agreement Report by the Secretariat: Indonesia”, WTO document (ITA): The Indian Experience, Working Paper, CWS, WT/TPR/S/278. 41. IIFT 55. WTO, Table III.6 in “Trade policiesinter and practicesalia by http://www.southcentre.int/wp-content/ measure”, WTO document WT/TPR/S/220. 42. uploads/2013/10/AN_ITA1_-ITA-Consideration- APEC Leaders’ declaration which aims to from-a-Devt-perspective_EN.pdf 56. establish a stronger and deeper regional economic (counting the European Union as one), including: integration by furthering their work to liberalise Albania; Australia; Canada; China; Colombia; Costa and facilitate trade and investment with the ultimate Rica; Dominican Republic; El Salvador; the European objective of achieving free and open trade and Union; Guatemala; Hong Kong; Iceland; Israel; investment for all APEC economies by the year 2020 Japan; Korea; Malaysia; Mauritius; Montenegro; New as envisaged by the Bogor Goals. 43. Zealand; Norway; the Philippines; Chinese Taipei; It was one of the pioneers amongst the developing Singapore; Switzerland; Thailand; Turkey; and the countries to implement the Agreement on Customs United States. 57. Valuation since 1988 after the conclusion of the http://www.apec.org/Meeting-Papers/Leaders- Tokyo Round negotiation in 1979 and much before Declarations/2014/2014_aelm.aspx the WTO’s principle of Single Undertaking made all 58. developing and Least developed countries to join this http://csis.org/publication/indonesia-and- Agreement after the creation of WTO in 1995 vietnam-would-get-boost-if-they-joined-expanded- 44. information-technology-agr Advance rulings from 16.03.2004 to 27.05.2013 could 59. be seen on the website www.cbec.go.in/aar when last http://www.ecipe.org/app/uploads/2014/12/trade- accessed on 05.01.2015. in-information-technology-goods-adapting-the-itata- 45. to-21st-century-technological-change.pdf http://www.lexology.com/library/detail. 60. aspx?g=7a519c1c-485a-4483-ab4e-2006f7ff5d8f E15initiative.org, (2015). [online] Available at: http:// 46. e15initiative.org/wp content/uploads/2014/11/ http://www.ictsd.org/bridges-news/biores/news/ E15_Innovation_Ernst_FINAL.pdf [Accessed 9 Jan. 61. apecs-environmental-goods-initiative-how-climate- 2015]. friendly-is-it 62. 47. G/IT/M/55 http://www.ictsd.org/bridges-news/biores/ 63. news/%E2%80%9Cgreen-goods%E2%80%9D- G/IT/M/56 trade-talks-kick-off-in-geneva http://www.unescap.org/sites/default/files/SSWA_ 48. TN/TE/W/51 dated 3rd June 2005 Development_Papers_1303_March2013_2.pdf
118
A Think-Tank RIS of Developing Countries
Research and Information System for Developing Countries (RIS) is a New Delhi–based autonomous policy research institute that specialises in issues related to international economic development, trade, investment and technology. RIS is envisioned as a forum for fostering effective policy dialogue and capacity-building among developing countries on global and regional economic issues.
The focus of the work programme of RIS is to promote South-South Cooperation and collaborate with developing countries in multilateral negotiations in various forums. RIS is engaged across inter-governmental processes of several regional economic cooperation initiatives. Through its intensive network of think tanks, RIS seeks to strengthen policy coherence on international economic issues and the development partnership canvas.
For more information about RIS and its work programme, please visit its website: www.ris.org.in
Policy research to shape the international development agenda
RIS ASEAN-India Research and Information System Centre at RIS for Developing Countries
Core IV-B, Fourth Floor, India Habitat Centre Lodhi Road, New Delhi-110 003, India Tel.: +91-11-2468 2177-80, Fax: +91-11-2468 2173-74 E-mail: [email protected]; [email protected] Website: www.ris.org.in; http://aic.ris.org.in