Lifting of import restriction on US items ends longstanding dispute

Lifting of import restriction on US items ends longstanding dispute
Chidanand Rajghatta

WASHINGTON, JANUARY 12: America Online will not be the only US enterprise making its presence felt in India. While the world was partying towards the end of the millennium last fortnight, Washington and New Delhi quietly concluded an agreement under which India will lift what is called quantitative restrictions on imports of 1400 American products into the country.

That means American agriculture products, textiles, and more consumer goods in Indian markets. Under the agreement, signed on December 28 but disclosed only on Monday by the US Trade Representative's office, India has committed to lift half of the restrictions within three months; the remaining half of the restrictions will be lifted by April 1, 2001.

The deal brings to a closure a longstanding dispute between the two sides that had bedeviled trade ties and resulted in a prolonged spat before the WTO tribunal. The agreement was struck apparently by the Deputy USTR Susan Esserman during her visit to New Delhi in November last year. Although a similar Indian deal with European Union and Japan lifts the QRs by 2003, the US has extracted a better deal advancing the deadline by two years."Eliminating these restrictions will provide -- for the first time in fifty years for some products -- market access opportunities for U.S. producers in key sectors such as textiles, agriculture, consumer goods and a wide variety of manufactured products, and at the same time will stimulate investment, competition, and economic activity in India," US Trade Representative Charlene Barshevsky crowed in a statement.

The agreement still leaves more than 1600 items in the restricted list. India was forced into the deal after the WTO Appellate Body last August rejected New Delhi's plea that its balance-of-payments situation justified import restrictions. The US argued India's BOP had improved and the restrictions were not warranted anymore. It also prompted the IMF to testify before the WTO that India no longer had a balance-of-payments problem that justified these restrictions.

India countered that it would lift QR only after its BOP position improved on a "sound and lasting" basis and began its international trade battle by initially offering to remove QRs in nine years and later reduced it to seven years. But the US did not bite even that offer.

Although some Indian experts feel the lifting of QRs would endanger India's economic security, Barshevsky maintained that "with respect to India's domestic economic situation, the elimination of this regime of import restrictions will permit the growth and competition that will raise economic welfare levels and stimulate entrepreneurial activity in the Indian private sector that began with the reforms earlier this decade."

While the lifting of QRs may be a body blow to the swadeshi lobby in India, it signals the way of international trade in the new era. India has also won disputes before the WTO tribunal -- and against the United States at that. New Delhi has successfully contested US restriction on import of shrimps, textiles, and garments.