Made in China? No Clue!
Heere's how India plans to deal with China in the midst of this pandemic. Read on.
India is tightening the noose on unjust trade practices deployed by China. China has been accused of exploiting India-ASEAN Free Trade Agreements (FTAs) by routing their products through 11 ASEAN countries into India.
FTA is a pact entered into by nations to allow free movement of goods and services, without trade barriers like import/export tariffs and has relaxed norms.
ASEAN is an association of 11 south-east Asian countries that have agreed upon free-trade practices and joined forces to improve their competitiveness against larger economies in Asia, like India and China.
So, how is China cheating?
Assume that India has agreements with ASEAN countries for duty-free import of electronics. However, the same goods, if imported from China, have a tariff of 10%.
Now, China enters into a duty-free electronics export agreement with ASEAN countries. Chinese companies set up their offices in, say Vietnam, ship the products to these offices which then re-ships the goods to India, effectively avoiding 10% duty.
This way, Chinese imports essentially become cheaper, and our domestic companies lose their competitiveness. Not fair.
The Chinese companies are able to do so because of the lenient 'country of origin' disclosure norms for ASEAN countries. We essentially don’t really know where our products are coming from.
Note: While importing goods from other countries, there are some mandatory documents required to be filled. One such disclosure is ‘country of origin’ or the country in which the product being imported was manufactured. This helps in deciding what duty rate will apply to which product (we have different duty rates for different countries) and assess how much we are importing from which country.
Indian imports from ASEAN rose by 26% in FY19 (imports from Vietnam were up by 43.3%). Experts suspect that this increase is mostly due to China’s re-routing gimmicks.
This has now caught the government’s attention. Amidst cries against everything Chinese, and the self-reliant movement taking a nationalist turn (with China as the prime villain), all eyes are on the Government to do something to stop the Red Dragon.
Changing old FTAs and enforcing stringent ‘country of origin’ norms would bode well to stop such malpractices by our second-favourite neighbour.
Will the policy-makers focus on scoring quick wins? Or will they take strategic steps that genuinely help us in becoming a self-reliant economy? Only time will tell.
Till then, take care, and ReadOn.
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