ANDREW FARRAN. India riding roughshod in commodities trade.

India’s decision on 21 December to slap overnight a 30% tariff increase on Australian imports of lentils and chick peas is just not what a stable, orderly trade system needs. But even so, do we need another discriminatory bilateral so-called ‘free trade’ agreement with yet another country (India) when all these taken together are a recipe for future trade wars as occurred in the 1930s. 

India is a major offender in cases such as this. The damage it does to Australian commodity producers is considerable. It is reported that some 200,000 tonnes of pulses are currently in shipment and at risk. Not long before India imposed a 50% tariff on field peas and wheat, another surprise for Australian exporters.

Not long ago India suffered a severe drought which significantly decreased its own production of these commodities causing much suffering to affected farmers and threatened starvation from rising prices among its poorer sections. At that time India was dependent on available supplies from overseas, particularly from Australia.  By intervening in this fashion India threatens the viability of overseas producers on whom it will again at some time be dependent.

Apart from this short sightedness at the government level, India’s actions breach fundamental principles and rules of the multilateral trading system which requires, under Article 28 of the GATT, that proper notice, with reasons, of unilateral changes to tariffs, duties and quotas be given in such a way as to avoid disruption to existing contractual arrangements.

Similarly the recently concluded Trade Facilitation Agreement now in force, and which binds India, requires similar notice and safeguards in making such changes which are not to be used as disguised measures of trade protection.

Trade relations in agriculture between Australia and India have long been problematical, even intractable, as evidenced by the difficulties being encountered currently in negotiations for a so-called bilateral ‘free trade’ (read preferential) agreement, put off yet again just before the summer break. [Did our negotiators know then that the above tariff increases were afoot?]

Even so, do we need another discriminatory bilateral so-called ‘free trade’ agreement with yet another country when all these taken together are a recipe for future trade wars as occurred in the 1930s.

A ‘free trade’ agreement may be discriminatory if it includes substantially all the trade between the parties (with few exceptions) and, if multilateral, should embrace a recognised region. Apart from the EU none of these do in satisfaction of Article 24 of the GATT.

It would be best if the parties to these arrangements were to trade consistently with the GATT/WTO trade rules or at least give an undertaking to abide by those rules and avoid breaching them other than in exceptional circumstances. Meanwhile for the sake of its credibility the Australian government should be firm in dealing with such unilateral and cavalier actions on the part of India in this case (and others in other cases), and be prepared to take retaliatory action where appropriate, as allowed under WTO rules, to safeguard Australian farmers and traders.

But while dog eat dog practices prevail in world trade, this may be a pious hope.

Andrew Farran is a former diplomat, trade adviser, and academic in international and public law.

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