India needs to give a tougher response to China’s non-tariff trade barriers

Sunilchandra Dal
Saturday, 9 September 2017

In spite of the border dispute, the spat over OBOR (One Belt One Road) and China’s support for Pakistan, India’s largest trading partner today is China. Moreover, China’s exports to India in 2016-17 were worth $61.3 billion as against India’s exports to China of $10.2 billion. India’s goods trade deficit with China widened from $1.1 billion in 2003-04 to $51.1 billion in 2016-17. The trade deficit was $52.7 billion in 2015-16.

In spite of the border dispute, the spat over OBOR (One Belt One Road) and China’s support for Pakistan, India’s largest trading partner today is China. Moreover, China’s exports to India in 2016-17 were worth $61.3 billion as against India’s exports to China of $10.2 billion. India’s goods trade deficit with China widened from $1.1 billion in 2003-04 to $51.1 billion in 2016-17. The trade deficit was $52.7 billion in 2015-16.

One reason for this trade imbalance is that China has set up barriers that ensure that Indian goods do not enter the Chinese market easily. This is not done openly by imposing tariffs, but with the help of non-tariff barriers (NTBs). For example, China lays down mandatory procedures for Indian exporters to follow. These procedures are costly, complicated and take a lot of time.

Experts say that many of the Chinese standards such as the China Compulsory Certification (CCC) require certification by the Chinese authorities before a product can be put on the Chinese market. Even after the Indian exporters spend a lot of money and time, the certification may never arrive.

Some products require the manufacturer’s factory to undergo inspection by Chinese officials, for which the Indian exporter has to pay. This could cost as much as Rs 10 lakh. The exporter may later be told that another inspection is necessary.

Ultimately, after paying lakhs of rupees and waiting for months, the goods may not be cleared. There is no appeal from the officials’ decision. Sometimes certificates are given with only three months’ validity. Media reports say that some manufacturers get frustrated and opt out half-way. This means the Chinese NTB has succeeded.

The sanitary and phytosanitary certification requirements for items such as seeds, seafood products and fruit and vegetables exceed international standards and hurt Indian exports. Indian pharmaceutical products are approved by American, European and Japanese regulators, but still find it difficult to get entry to Chinese markets. Certain oilseed exports require 11 certificates stating the items are pest-free, though most of the pests are present in China.

Experts point out that China implements NTBs selectively: It is easy for Chinese officials to permit or reject goods without assigning reasons. China is one of the largest buyers of non-Basmati rice from Pakistan, but it doesn’t allow such imports from India. 

China also uses import quotas and licences to restrict imports of goods, including watches, cars, some textile products and also certain kind of foods.

India has objected to China about the non-tariff barriers created by that country to hinder imports from India. According to media reports, Beijing will send a team headed by its commerce minister to New Delhi to discuss the issue by December.

However, beyond holding talks, China may not take any steps in the matter. India cannot apply the same NBTs against China as there is a vast difference between Indian and Chinese exports.

At present, India exports mostly raw material to China and imports mostly finished goods from that country. 

However, one could use quotas or licences and set up NTBs against the goods exported by China to India. It is necessary to examine how Chinese products can be hampered through NBTs on a case to case basis. These NTBs can permit imports from other countries and be applied selectively for Chinese goods.

Just the mere announcement that India is mulling setting up NTBs will give India an edge in the trade negotiations and force China to reconsider its anti-Indian export stance. 

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