Rebuff WTO advice but mull it over for strategy Apextalk

It isn’t too difficult for India to shrug off Monday’s advice by a dispute-resolving panel of the World Trade Organization (WTO) that held Indian tariffs on mobile phones (and some other electronic items) to be in violation of a trade agreement. In response to objections raised in 2019 by the EU, Japan and Taiwan, the panel asked New Delhi to align its policy—axe import duties, i.e.—with its obligations under the General Agreement on Tariffs and Trade, 1994. We have potent motives not to comply. Our exports of electronic items have been rising smartly, with smartphones worth over $10 billion exported in 2022-23, as estimated. This is a sizzling global market. It hosts the world’s most valuable business of all time, Apple Inc, as well as our biggest success so far of an industrial policy designed to prop local production behind a hardy shield of double-digit import duty. In pursuit of self-reliance, Atmanirbhar Bharat has been sending up friendly flares to attract supply-chain rejigs by global megacorps looking to diversify away from China. And since the WTO’s appellate body hangs in limbo, our government could simply appeal the latest ruling to render it likewise. This would be expedient, no doubt. But whether it’s also advisable at a strategic rather than tactical level is not so clear.

India’s case at the WTO rested on the fact that products like smartphones did not exist when the relevant infotech pact was signed, back in 1996. Hence, we argued, we are not obliged by it to eliminate tariffs on these. What may be fine in letter, though, needn’t be so in spirit. The panel found us unable to show that assuming such exceptions was essential to the country’s consent and said we had been notified of the deal’s possibly enlarged scope. The reason this is unlikely to disrupt our game goes well with the tactical approach we have taken to world trade. The WTO’s apex device to settle disputes is dysfunctional because of US neglect, apiece with America’s own retreat from ideals of free trade. US-China ties were already fraying when covid choked supplies and gave Western megacorps another reason to explore ‘China-plus’ options. As geopolitical trends and business rethinks converge to offer India a splendid chance to play the next global factory, even if only as a buffer, the Centre has been wooing investment by turning policy knobs to that end. Today, the handsets we buy may cost more than what we’d pay in duty-free countries, but tens of thousands of local jobs have been created at home as Apple and Samsung vie to export the world’s favourite gizmo in bulk. We have a good buzz going. Why disturb it by slashing tariffs?

So long as it takes money from public coffers plus a consumer sacrifice in terms of inflated retail prices, India’s self-reliant springboard will not reflect a strategic crack at broad export success. That would require our manufacturers to be globally competitive without props and barriers, which is a far steeper challenge. It so happens that America’s anxiety over China’s rise has made space for us to attract favour and investment (think ‘friendshoring’) by way of specific alliances across the world; and for global business deals to be grabbed, flexible policy tactics have had to be deployed, as seen in the case of Apple’s flashy presence. Yet, the only export edge that we can sustain and sharpen by ourselves over the long haul of India’s emergence is cost efficiency that could survive to thrive in a world of barrier-free trade. Towards that endgame, by strategy, we should set a slow clock ticking on props and barriers.

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