Spoils of Victory: India's Duty Slapping Frenzy

The Nehru-Gandhi dynasty lives on with the resounding victory of the Congress Party in the recently held nationwide elections in India. The financial section of India Times, the Economic Times, heralds this victory as a potentially important occasion for Indian trade and industry. For, the number of seats won by the Congress Party means it can avoid currying favor with coalition partners possessing quirky (read: anti-business) agendas like its erstwhile Communist allies. Indeed, many commentators are now banking on this victory to secure forward momentum in the long-running soap opera that is the Doha Round of trade negotiations.

Or is this really so? In recent months, India has stealthily applied import restrictions--without much explanation, I should add-- to toys coming from China [1, 2, 3] and steel coming from South Korea. Hot on the heels of the Congress Party's victory comes word of India informing the WTO that it will invoke safeguard clauses to protect segments it says are being threatened by an inundation of exports. Again from the Economic Times:

Playing by the book, India has notified its decision to initiate investigations on the need to impose special import duties on hot-rolled steel, certain automobile parts, acrylic fibre and coated paper at the World Trade Organisation (WTO).

WTO allows imposition of special duties (called safeguard duty) on imports, provided the affected country carries out a comprehensive investigation on the need to impose the duties by holding discussions with all affected parties.

We cannot carry out investigations on safeguards without keeping the WTO in the loop. This is to ensure that countries do not impose safeguards without firmly establishing that there has been an import surge which has led to disruption of the domestic market," a government official, who did not wish to be named, said.

Interestingly, an attempt was being made by the DG [India's Directorate General of Foreign Trade] safeguards office to impose interim duties on the four products without consulting the user industry was rejected by the board on safeguards (a body of secretaries headed by the commerce secretary) on the ground that there was not enough evidence to show that the domestic industry was hurt due to increased imports. It gave the DG office two months to consult all parties, including the user industry, and come up with its report.

The Koreans are not likely to be happy about this turn of events. In any case, the question to ask is this: If the more protectionist/isolationist elements of the alliance have been neutered after the elections, then is it really the purportedly pro-business Manmohan Singh behind these trade-negative moves? Also remember that India is the world leader in initiating anti-dumping cases. Somehow, I do not think the rest of the world--both developed and developing nations--is deliberately ganging up on India.

UPDATE: Also see Reuters on the steel issue.