Protectionism is anachronous to the modern world, where free trade and free movement of people set the norm for economic growth, says an ANZ Bank study.
Citing India as an example, the study said that protectionism, with its attendant factors of high tariffs and non-tariff barriers have been impediments for greater trade until the advent of ‘Modern India’ with market reforms.
Sunil Kaushal (Head of India Relations), Mark Smith (Senior Economist) and Con Williams (Rural Economist) are the authors of a Report titled, ‘A Closer Look at India,’ a part of which was analysed in our April 15, 2013 issue.
Significant moves
Mr Kaushal said that barriers including quarantine restrictions had blocked access to the Indian market until about 18 years ago.
“Since joining the World Trade Organisation (WTO) in 1995, India’s average applied tariff rate has reduced in line with its tariff policy and WTO commitments. This has seen India’s competitiveness improve, with the country currently ranked 63rd in terms of 2012 global competitiveness rankings compiled by the World Economic Forum. New Zealand and China occupied respectively 27th and 33rd position,” he said.
Although the Report acknowledged the economic reforms introduced by the Indian Government over the years, especially since 2008, it was doubtful of the industries and training providers reaching the national target of training 500 million people by 2022. However, India is encouraging foreign involvement under the General Agreement on Trade in Services (GATS), it said.
“There have been multilateral negotiations to lower barriers on services. Generally, tariffs on services are lower than goods in India,” the Report said.
Free Trade Pact
According to reliable sources in Delhi, although a Free Trade Agreement (FTA) between New Zealand and India remains elusive, a number of other agreements signed between the two countries over the past 15 years have yielded some benefits.
Mr Kaushal said that New Zealand and India signed an agreement in 2007 to jointly examine the benefits of FTA, while another study in 2009 found considerable potential to substantially develop the trade and economic relationship.
ANZ placed India’s average tariff rate at 10% for trade with WTO members (higher tariffs for non-members). Tariffs differ markedly across sectors, with higher tariffs for agricultural products, where the average tariff rate averages around 30%
“FTA negotiations with India are at an early stage, but there will be considerable emphasis by New Zealand negotiators on reducing tariff rates for trade in agricultural goods. By contrast, the maximum tariff rate on coal is only 7.4% with low tariff rates for machinery,” Mr Kaushal said.
Welcome initiatives
Stating that developing relationship with India was a priority for New Zealand, Mr Kaushal said that initiatives such as ‘NZ Inc India Strategy,’ aimed at lifting relations with India to the status of core trade, economic and political partnership by 2015.
“The goals of FTA with India include (a) increasing merchandise export to $2 billion by 2015 (b) raising annual trade by 20% (c) improving bilateral investment framework and facilitating growth in the investment relationship and (d) attract and retaining skilled migrants from India who are able to make an effective contribution.”
The Study cited the absence of direct air services between the two countries, (despite a bilateral Air Services Agreement signed many years ago) as a lacuna.
Mr Kaushal said that medium to long-term outlook was promising, but the Indian export market is highly price sensitive.
“With the high New Zealand Dollar, upward shifts to global export commodity prices and regulatory changes, including those to work and eligibility criteria to student visas, there is a short-term headwind to lifting export incomes. One-off events, including the 2015 Cricket World Cup tournament, which will be co-hosted by Australia and New Zealand, may help temporarily avert the current situation,” he said.
Two reports relating to ANZ Bank’s Read ‘A Closer look at India’ appeared in our April 15, 2013 issue.
ANZ is the Title Sponsor (jointly with Radio Tarana) of the Indian Newslink Sir Anand Satyanand Lecture, scheduled to be held at Stamford Plaza Hotel, Auckland from 630 pm on Monday, July 29, 2013. Vino Ramayah, Executive Chairman of Medtech Global Limited will be the Guest Speaker, with ‘Transparency: Myth or Reality’ as the theme of his address. For more details write to editor@indiannewslink.co.nz
Photo: Sunil Kaushal
