WTO flags poor use of India’s preferential scheme for LDCs

Source: The post is based on the article “WTO flags poor use of India’s preferential scheme for LDCs” published in the Business Standard on 03rd June 2023

What is the News?

According to a recent report, about 85% of about 11,000 products offered at zero tariff by India to least developed countries (LDCs) under the duty-free quota-free (DFQF) scheme of the World Trade Organisation (WTO) remains unutilised. This report was done by the LDC Group at the multilateral trade body.

About the duty-free quota-free (DFQF) scheme for LDCs and India

The decision to provide duty-free quota-free (DFQF) access for LDCs was first taken at the WTO Hong Kong Ministerial Meeting in 2005.

The decision requires all developed and developing country members declaring themselves in a position to do so, to provide preferential market access for all products originating from all LDCs.

India became the first developing country to extend this facility to LDCs in 2008, providing market access on 85% of India’s total tariff lines to better integrate LDCs into the global trading system and improve their trading opportunities.

The scheme was expanded in 2014 providing preferential market access on about 98.2% of India’s tariff lines to LDCs. India offers 11,506 preferential tariff lines to LDCs of which 10, 991 are duty-free.

What are the report findings regarding the performance of the DFQF scheme in India?

According to WTO data for 2020 presented in the report, 85% of India’s tariff lines show a zero utilisation rate compared to 64% by China. Among the remaining, only 8% demonstrate a utilisation rate of above 95% against 17% by China.

Noteworthy amounts of LDC exports are entering under non-preferential (most favoured nation) tariff route into India even though they are covered by the Indian preference scheme.

There is a significant variation between the beneficiary LDCs, and the two countries (Guinea and Bangladesh) showing the highest amount of eligible imports simultaneously have very low utilisation rates.

Benin reports a utilisation rate of 98%, the highest of all beneficiary countries.