Recent Policies on Trade
Export-Import Policy, 1992-97
            The Government of India announced a new five year export-import policy effective from April 1, 1992 which gave further push to liberalization of imports and intended to give significant boost to exports. Under this policy, the international trade was made free subject to a negative list of imports and exports. But as far as farm products and related goods are concerned, most of them remained a part of the negative list, as per the following details:
Negative List of Exports
(i) Permitted Subject to Licensing -
            Coconut, copra, seeds and planting materials, cotton seed, vegetable oils, groundnut cakes, rice bran, milk, cattle, camels, chemical fertilizers.
(ii) Permitted through Canalising Agency -
            Onion (NAFED), Niger Seed (NAFED/TRIFED), Powdered Milk (NDDB), Ghee (NDDB).
(iii) Permitted without a licence but subject to terms and conditions -
            Basmati rice, non-basmati rice, wheat, barlet, maize, bajra, jowar, ragi, HPS groundnut, raw cotton (Bengal desi, Assam comilla, staple cotton, yellow picking), sesame seed, sugar, gram and gram flour, wheat flour, deoiled groundnut cake, deoiled rice bran, VFC tobacco, soyabean extractions, cotton yarn, black pepper etc.
Negative List of Imports
(i) Canalised Items -
            All fertilizers (MMTC), edible oils (STC, HVOC), seeds of oilseed crops (STC, HVOC), Cereals (FCI).
(ii) Restricted Items -
            Livestock, plants, seeds and other materials (licence from the department of Agriculture).
            The import of pulses, raw cashewnut, seeds of vegetables and flowers, plants, tubers and bulbs of flowers etc., were placed in the negative list.
            The philosophy underlying these massive trade policy reforms include the following:
            (i) Trade – both exports and imports can flourish in a free regime.
            (ii) Trade policy should go far beyond balancing of imports and exports and should lead to better technology, greater investment and more efficient production                  at home.
            (iii) Liberalization and removal of licensing, quantitative restrictions and other discretionary controls on matters relating to exports and imports are essential to                     trade policy reforms. This meant fewer governmental restrictions, greater freedom to trade and lesser administrative controls.
            The process of pruning the negative list and decanalization has continued in recent years.
Main Features of Export-Import (EXIM) Policy, 2002-07

• Removal of all quantitative restrictions and decanalization of exports (except a few sensitive items) of farm products.
• Scheme of Special Economic Zones (SEZ) strengthened.
• Major thrust to promote agricultural exports by setting up of Agri Export Zones and by removing export restrictions on designated items (agro and agro-based products).
• Transport subsidy provided for export of fruits, vegetables, floriculture, poultry and dairy products.
• Simplification of procedures to further reduce transaction costs.
• Widening of the scope of Market Access Initiative Scheme to include setting up of Business Centres in Indian Missions abroad for focused market promotion of exports.
• Dereservation from small scale industry provisions of over 50 items including agricultural implements.

Agri-Export Zones
            The Government announced the proposal to set-up Agri-Export Zones in the EXIM Policy 2001-02 for the purpose of developing and sourcing raw materials and their processing/packing leading to final exports. The concept essentially embodies a cluster approach of identifying the potential products and the geographical regions in which such products are grown and adoption of end-to-end approach of integration of the entire process. Under the scheme, the state government would identify products with export potential which have comparative advantage in the local area. APEDA is the nodal agency of the Central Government to promote setting up of Agri-Export Zones.
           Till December, 2002, the Central Government has sanctioned and notified 41 Agri-Export Zones (AEZs) which are being set up in 16 states-West Bengal, Uttaranchal, Karnataka, Punjab, Uttar Pradesh, Tamil Nadu, Maharashtra, Andhra Pradesh, Tripura, Jammu & Kashmir, Madhya Pradesh, Bihar, Gujarat, Sikkim, Himachal Pradesh, Orissa and Jharkhand. Agricultural products covered under these AEZs are Litchi, pineapple, potatoes, onion, garlic, mangoes (Kesar, Chausa, Dusshari, Alphonso), grapes, flowers, apples, vegetables, walnuts, gherkins, wheat, ginger, turmeric, basmati rice and seed spices. A projected export of more than Rs.3000 crore during the next 5 years and a substantial amount of direct and indirect employment is likely to be generated as a consequence of setting up of these zones. These 41 AEZs will entail an estimated investment of Rs.1142.5 crores, out of which Rs.333.68 crores will flow from various Central Government agencies like APEDA, NHB, Ministry of Food Processing Industry and Ministry of Agriculture; Rs.168.61 crores from state governments and Rs.640.24 crores from the private sector.
International Trade Agreements
GATT (The General Agreement on Trade and Tariffs)
            The General Agreement on Trade and Tariff (GATT) was a multinational treaty to liberalize world trade. It took effect on 1st January, 1948 and ended when 117 member states signed the Uruguay Round of negotiations in Marrakesh, Morocco on 15th April, 1994. GATT's administrative structure in Geneva was succeeded by the World Trade Organization (WTO) under the Uruguay Round agreement.
           GATT established a code of conduct for international trade, based on the principle that the trade should be conducted without discrimination, tariffs should be reduced through multilateral negotiations, and member, countries, should consult each other to overcome trade problems. GATT centre operated jointly with the United Nations Conference on Trade and Development to assist developing nations in promoting their exports.
           Under GATT, a total of eight round of talks of trade negotiations brought about phased reductions in tariffs and other trade barriers. The prolonged eighth round of talks began in September, 1986 at part del Este, Uruguay. In this, the participants agreed to expand the negotiations to include banking investment, intellectual properties and telecommunications. The talks were concluded in December, 1993 and resulted in the far reaching trade liberalization in the history. Trade in the agricultural commodities was included in the agreement for the first time.
           The Uruguay Round launched over 1986-94 was the most ambitious so far. This round also established the World Trade Organisation (WTO). The successor to the General Agreement on Trade and Tariff (GATT). It brought international trade rules to areas previously excluded or subjected to weak rules (agriculture, textiles and clothing), services, Trade Related Investment Measures, and Trade Related Intellectual Property Rights (TRIPS) and strengthened the dispute settlement mechanism. Despite these achievements, the global trading system faces major challenges. Against these challenges, the ministerial conference in Doha in November, 2001 adopted the Development Agenda, which calls for a more coherent approach to trade and development and puts the needs and interests of the developing countries at the heart of the WTO's work program.
World Trade Organisation (WTO)
            WTO is an international body to supervise and encourage international trade. The Uruguay Round of trade talks concluded in 1994 resulted in setting up of the World Trade Organisation (WTO) to take over the functioning of GATT for encouraging multilateral trade in goods and services. The WTO began functioning on 1st January, 1995. The Agreement on Agriculture (AoA) under WTO requires clear understanding.
Agreement on Agriculture (AoA) under WTO
            The provisions under AoA can be understood to consist of five broad groups:

• Market Access Commitment
• Reduction  Commitment for Aggregate Measure of Support (AMS)
• Reduction Commitment for Export Subsidy
• Sanitary and Phyto-Sanitary Measures (SPS)
• Trade Related intellectual Property Rights (TRIPS)

(i) Market Access
The provisions under market access commitment include the following:

• Tariffication of all non-tariff barriers (like converting quantitative restrictions to import duty)
• Reduction of all tariffs in a time bound framework as follows:

1. If imports of foreign goods to the domestic market is less than three per cent in the base period (1986-88), it must be brought to three per cent and to further raise it to five per cent in the implementation period.
2. If dumping is proved, the countries will have the freedom to increase the import duty.

(ii) Aggregate Measures of Support (AMS)
The aggregate measures of support for a country's agriculture is the sum of product specific and non-product specific subsidies. If AMS in the base period (1986-88) is more than the permissible limit, it should be reduced by the following amount during the implementation period:

(iii) Export Subsidies
           The reduction commitment for export subsidies require that (a) the developed countries would reduce it by 36 per cent in six year; and (b) the developing countries would reduce it by 24 per cent in 10 years.
(iv) Sanitary and Phyto-Sanitary Measures (SPS)
           The SPS provisions of AoA require all exporters to employ international standards relating to sanitary and phyto-sanitary conditions. In the case of default, the importing countries are allowed to prohibit imports from defaulting countries.
(v) TRIPS
           Trade related intellectual property rights include copyrights, trade-marks, geographic indications, industrial designs, and patents. According to AoA, all the countries are required to provide for arrangements for protection of plant varieties. The developing countries were given a period of five years to evolve such arrangements.
The main features of the WTO Agreement on Agriculture (AoA), which are of concern to India, are:
(i) India has been maintaining quantitative restrictions (QRs) on import of 825 agricultural products as on 1st April, 1997. Under the provisions of the Agreement, such QRs were to be eliminated. India had sought to remove them in three phrases within an overall time frame of six years i.e. upto 31st March, 2001. These QRs have since been replaced with appropriate tariffs.
(ii) The Agreement also imposed constraints on the level of domestic support provided to the agricultural sector. In India's case, it may have, in future, some implications on minimum support prices given to farmers and on the subsidies given on agricultural inputs. However, the Agreement allows us to provide domestic support to the extent of 10% of the total value of agricultural produce. Our support to the Indian farmers continues to be less than permissible limit.
(iii) Disciplines on export subsidy do not affect us as India is not providing any export subsidy on agricultural products.
(iv) The Agreement allows unlimited support to activities such as:

1. Research, pests & diseases control, training, extension and advisory services;
2. Public stock holding for food security purposes;
3. Domestic food aid; and
4. Income insurance and food needs, relief from natural disasters and payments under the environmental assistance programmes.

Model Quiz

1. Globalisation of a country’s economy would increase its
   a. Export       b. Import  c. Both a and b   d. Foreign exchange Reserve
   Ans: c
2. Globalisation of Indian economy was initiated in the year
   a. 1981          b. 1985                        c. 1991                        d. 1995
   Ans: c
3. Trade liberalisation in India resulted in
   a. Increased share of agricultural and allied products in total export earnings.
   b. Increase in absolute value of total exports.
   c. Both a and b
   d. None of these 
   Ans: b
4. Pick the odd man out
   a. MPEDA     b. APEDA       c. NAFED       d. DMI 
   Ans: d
5.   Tariffication of all non tariff barriers is related to
   a. Market access commitment    b. Aggregate measure of support   c. Export subsidy        d. TRIPS
   Ans: a
6. AOA allows unlimited support to activities such as
   a. Pest and disease control   b. Public stock holding for food security  purpose. c.domestic food aid    d. All of these
   Ans: d
   

TRUE or FALSE

1. In the absence of any public intervention in the domestic market, the producers gain by  exporting  and lose by importing. (True)
2. Capacity of a country to import depends on its ability to export.   (True)
3. Devaluation of the country’s currency would benefit the exporters. (True)
4. Processed fruits and juice are the traditional export products of India that show good prospects. (False)
5.  Rice is an important non traditional good exported from India. (True)
6. Code of conduct established by GATT does not permit the member countries to consult each other to overcome trade problems. (False)
7. GATT was a bilateral treaty to liberalise the world trade. (False)
8. As per WTO provisions, countries will have the freedom to increase the import duty if dumping is proved. (True)
9. Reduction commitment is more for developed countries than for developing countries in the case of AMS. (True)
10. Reduction commitment is less  for developed countries  than for developing countries in the case of export subsidies. (False)

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