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Source Name: Assocham

India-US WTO Deal: Balancing Trade and Food Security

Nov 21, 2014   14:45 IST 
India

In a major breakthrough, India and the US have reached an agreement to resolve their differences over food subsidy, indicating an end to the WTO impasse and paving the way for implementation of the Trade Facilitation Agreement.

ASSOCHAM applauds the efforts of the Government to secure the agreement with an indefinite ‘peace clause’, until a permanent agreement is reached. This will ensure that the country’s food security programme, which acts as a safety net for approximately 2/3rd of India's population will remain immune to WTO rules. ASSOCHAM believes that the agreement, once implemented, will provide remarkable benefits to India and the global economy.

  • The Trade Facilitation Agreement could add USD 1 tn to the world economy and boost global economic growth, reduce costs, and increase trade both on exports and imports side. In our view, the Trade Facilitation Agreement could help to increase India’s share in global trade much higher from the current 2%

  • A developing country like India stands to gain most from efficient procedures as it would enjoy higher revenue collections from increased trade volumes and improve efficiency of its customs administration. As per OECD, the cumulative impact of trade facilitation improvement will be greater than a simple sum of individual measures and the reduction in trade cost is estimated to be highest for lower middle income countries (like India) to the tune of 15.5% as compared to 14.5% reduction of total trade costs for low income countries and 13.2% for upper middle income countries

  • In particular, the trade facilitation agreement, coupled with the ‘peace clause’ will not only expand trade but will also help in achieving development goals of reducing hunger, creating more jobs and income opportunities in developing countries; leading to the realization of overarching goal of ‘economic security’.

ASSOCHAM feels that the trade facilitation measure will substantially reduce transaction cost for Indian exporters which range from 19-22% (as compared to 2-3% for exporters in the developed world). In order to fully actualize the benefits from trade facilitation, ASSOCHAM believes that efforts must focus on creating a ‘fostering environment’ for MSMEs, given that they contribute nearly 40% to India’s exports and account for 45% of manufacturing output. 

Sincerely,

Rana Kapoor

President, ASSOCHAM


 
 
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