INDIAJAPAN EPACEPA NEGOTIATIONS: IDENTIFYING PRODUCTS OF INTEREST AND CONCERN TO INDIA CONSULTATION

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INDIA-JAPAN EPA/CEPA NEGOTIATIONSIDENTIFYING
PRODUCTS OF INTEREST AND CONCERN TO
INDIACONSULTATION WITH STAKEHOLDERS ON
SENSITIVE LISTNon-Agricultural products
United Nations Conference on Trade and
Development -UNCTAD

• UNCTAD INDIA PROGRAMME
• 20TH February 2008
• Marigold Conference Hall, Chennai

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Structure of the Presentation

• Context
• Methodology for deriving Sensitive List
• Details of Sensitive List in Non-Agricultural
  Products
• Discussions with Stakeholders on Non-Agricultural
  Products

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Context

• In January 2007, India and Japan launched
  negotiations aimed at concluding a Comprehensive
  Economic Partnership Agreement (CEPA).
• Progress towards an FTA started in April 2005
  when a joint study group was launched to explore
  the possibility of a bilateral agreement. The
  study group concluded its work in 2006 with a
  recommendation to start negotiations. Till
  January 2008, five rounds of negotiations have
  been held.
• India is expected to commit to a zero duty
  customs regime on substantially all imports from
  Japan, and similarly Japan is expected to commit
  to zero customs duty regime on substantially all
  imports from India.
• As in other similar trade agreements, both India
  and Japan would have the flexibility to exclude
  certain products from the schedule of tariff
  elimination.

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Existing Trade Pattern between India and Japan

• Indias total trade increased from US 3.7
  billion in 2002-03 to US 7.4 billion in 2006-07.
  
• While exports increased from US 1.8 to US 2.8
  billion,
• imports from Japan witnessed a higher increase,
  i.e., from US 1.8 billion to 4.5 billion.
• Japans share in Indias global imports is now
  around 2.3 (average of 2004-07) while its share
  in Indias global export is 2.6 (average of
  2004-07).

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Methodology for the Sensitive List

• To arrive at a list of products where no
  preferential tariffs would be offered in the
  India-Japan EPA/CEPA, i.e., the sensitive list,
  both economic analysis and stakeholder
  consultations are required.
• An economic analysis was undertaken based on 6
  Digit HS 2002.
• The Sensitive list arrived at is further
  disaggregated into HS 8 Digit Level.

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Sensitive List Methodology

• The methodology is based on two different
  approaches
• (a) Standard Revealed Comparative Advantage
  Analysis (RCA) and
• (b) Unit Value analysis.

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Revealed Comparative Advantage Analysis

• RCA INDIA-Japan Indias export to the world in
  ith sector /total export of India to world /
  Japan export to the world in the ith sector /
  total Japan export to the world.
• A country is comparatively less competitive in
  producing a product as compared to other country
  if RCA lt 1

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STEP 1 RCA Analysis

• Using the six-digit level HS codes, RCA for India
  with respect to the Japan is estimated for all
  tariff lines, i.e., 5233 tariff lines.
• The database used for trade data is the World
  Trade Integrated Solutions.
• For 2232 tariff lines RCA for India was found to
  be less than 1.
• For 2757 tariff lines where RCAgt1, were removed
  from further consideration.
• For 244 lines no RCA available.

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STEP II. Unit Value Analysis

• Is undertaken to identify those products where
  the import prices from Japan to India are lower
  than the prevailing domestic prices in India.
• The import price for India from Japan is arrived
  at by computing the export unit values of Japan
  to India.
• Domestic prices in India are arrived at by using
  the proxy of export unit values of India to the
  world.
• Since the latter will be lower than the domestic
  prices, a factor of 13 is added to the export
  unit values vis-à-vis the world to arrive at the
  domestic prices (Ferranti 2002).

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Unit Value Analysis
Where
stands for
and
Unit Value of Indias Export to World
Unit Value of Indias Imports from Japan
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Unit Value Ratio

• UV ratio is computed for 2389 tariff lines for
  which exports from the Japan to India is
  available.
• UV lt 1 implies that import price of the product
  from Japan is lower than the domestic price and
  therefore needs consideration.
• Out of 2389 tariff lines, for which the data is
  available, UV is greater than zero but less than
  one (0ltUVlt 1) for 805 tariff lines.

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STEP III Overlap between RCA and UV Analyses

• After undertaking the standard RCA and Unit value
  analysis, the tariff lines covering the products
  where India is more competitive than Japan and
  have lower domestic prices as compared to import
  price from Japan are excluded from the total
  list.
• The overlap of the two analyses shows that in 521
  tariff lines India is less competitive vis-à-vis
  Japan both in terms of RCA and unit value
  analysis.
• For 223 tariff lines neither RCA nor UV were
  available-Feedback is required. Annex II

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SENSITIVE LIST

• This list of 476 tariff lines comprises the Final
  Sensitive List vis-à-vis the Japan on the basis
  of our analysis (ANNEX 1).
• In addition to these 223 tariff lines, RCA or UV
  is not available. This comprises ANNEX II and
  feedback is required.
• Feedback Required is required in a format given
  in ANNEX III

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Description of Sensitive List.
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FEEDBACK REQUIRED

• Identify the tariff lines that you think could be
  removed from this sensitive list. Some of the
  reasons could include the following
• domestic production of the product concerned
  inadequate to meet domestic demand, hence
  industry highly import dependent
• no significant domestic industry of the product
  concerned exists
• only 1-2 main producers of the product concerned,
  leading to possibility of price fixing or absence
  of competition in the domestic market
• the product concerned is an important raw
  material for downstream industry and
• downstream user industry of the product concerned
  is fragmented, with many small producers

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FEEDBACK REQUIRED

• Are there any items on the sensitive list which
  you think can be effectively substituted by other
  items? YES/NO If yes, could you identify these
  items?
• Are there additional items which should be
  included in the sensitive list? Some of the
  reasons could include the following
• Japan is more cost competitive in the product
  concerned
• Significant spare capacity in Japan in the
  product concerned
• Greenfield investments made in the recent years
  in India in the product concerned
• Output from SSIs constitute more than 20 of the
  total domestic output and
• Significant imports of the product concerned into
  Japan from its preferential trading partners
  might result in trans-shipment into India.
• High Japanese investments in India in the product
  concerned.

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Chapter 28 Organic or Inorganic Compounds of
Precious Metals, Rare earth Metals, of Radio
active Elements of Isotopes
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Chapter 29 Organic Chemicals
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Chapter 29 Organic Chemicals
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Chapter 29 Organic Chemicals
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Chapter 29 Organic Chemicals
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Chapter 29 Organic Chemicals
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Chapter 29 Organic Chemicals
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Chapter 38 Miscellaneous Chemical Products
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Chapter 39 Plastics and articles thereof
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Chapter 50 and 51 Silk and Cotton
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Chapter 50 and 51 Silk and Cotton
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Chapter 54 Manmade Filament
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Chapter 55 Man made Staple Fibres
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Chapter 56 and 58 Wadding, felt and
non-woven-Special woven fabrics
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Chapter 6063 Knitted or Crocheted Fabrics
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Chapter 6063 Knitted or Crocheted Fabrics
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Chapter 72 Iron and Steel
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Chapter 72 Iron and Steel
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Chapter 72 Iron and Steel
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Chapter 72 Iron and Steel
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Chapter 73 Articles of Iron and Steel
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 84 Machinery and Mechanical Appliances
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Chapter 85 Electrical Machinery and Equipment
and Parts thereof
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Chapter 87 Vehicles
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Chapter 87 Vehicles