Consensus on industrial tariffs sought

India in favour of adopting formula based approach

India is seeking to build consensus on industrial tariffs among other developing countries at the World Trade Organisation. It is proposing certain modifications in the Girard formula for tariff reduction on industrial goods.

Senior government officials told Business Standard that India was in favour of adopting a formula based approach over a sectoral approach on tariff reduction for industrial goods, as was being proposed by certain countries. The government was veering towards the view that compliance with sectoral initiatives should be voluntary.

The Girard formula, also called the Swiss formula, had not gained widespread support from countries with low tariffs as it required them to make greater cuts than countries with high average tariffs.

India was trying to work out a compromise, with countries in the Asean and Latin American regions which have lower average tariffs, officials said.

The formula, mooted by the Swiss Chairman for NAMA negotiations, Pierre-Louis Girard, sought to bring down lower tariffs relatively sharply and include all the unbound tariff lines in the list of tariffs to be reduced.

The formula also proposed that developing countries be allowed to keep 5 per cent of the tariff lines as unbound and convert specific duties into their ad-valorem equivalents.

India was proposing a more gradual reduction of tariffs for countries where the level was already low.

For instance, if a country had an average tariff level of less than 10 per cent, their final tariff level should be dependent on a coefficient of 3, while a country with average tariff level of between 10-20 per cent, could use a coefficient of 2. For products with unbound tariffs, India was proposing that the rate be bound at the average of all developing country tariffs, which worked out to around 27.5 per cent. The Girard formula proposed that the rate be bound at twice the applied Most Favoured Nation (MFN) rates.

On special and differential treatment, India was willing to negotiate on certain aspects, said officials. For instance, developing countries, while not being exempt from binding tariffs, should be allowed to make less than formula cuts on some sensitive products.

The Girard formula had recommended that developing and least developed countries would have additional provisions like longer implementation periods for tariff reduction and upto 5 per cent tariff lines to remain unbound, provided they did not exceed 5 per cent of the total value of the country's imports.