Report of the Joint Study Group on the Feasibility of India-Indonesia ...

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19 Agriculture NO.27/permentan/OT. 140/3/2007 dated 1 March 2007. Up to <strong>the</strong> present, Indonesia still does not allow Indian meat to enter <strong>the</strong> Indonesian market. Indonesia has imposed an anti-dumping duty <strong>of</strong> 11.40% on <strong>the</strong> sourcing <strong>of</strong> wheat flour from India over and above 5% duty on <strong>the</strong> product from India. This additional tariff <strong>of</strong> 11.40% will be operative till <strong>the</strong> end <strong>of</strong> 2010 which has practically dried up sourcing <strong>of</strong> Indian wheat flour in Indonesian market. An anti-dumping duty <strong>of</strong> 6.19% to 40.13% has been imposed on uncoated writing and printing paper from November 2004 till November 2009. However, India is importing large quantities <strong>of</strong> waste paper, pulp and paper & paper board from Indonesia. There is also an anti-dumping duty <strong>of</strong> 11% on import <strong>of</strong> Carbon Black from India. Non-tariff barriers on <strong>the</strong> following Indonesian products have been imposed by India: • Palm oil – The Indian government forbids <strong>the</strong> importation <strong>of</strong> all palm oil products through all ports in Kerala. The Government <strong>of</strong> India has released notification No. 63(RE-2007)/2004-2009 on 24 December 2007 which prohibits <strong>the</strong> importation <strong>of</strong> palm oil products through all ports in Kerala. The reason for this import prohibition is to protect <strong>the</strong> marginal farmers and agricultural labourers dependent on coconut plantations in Kerala. II.7. Trade Facilitation Measures Trade linkages between <strong>the</strong> two countries could be intensified not only through tariff liberalisation but also by adopting various trade facilitation measures. These measures could, inter alia, include entering into mutual recognition agreements (MRAs), to deal with issues <strong>of</strong> technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS); Customs cooperation; harmonisation <strong>of</strong> standards and conformity assessment; and enhancing business to business dialogue. It is also necessary to put in place various trade remedial measures, and rules <strong>of</strong> origin, as mutually acceptable, designed in such a way as to facilitate trade creation between <strong>the</strong> two countries.
20 II.7.1. Rules <strong>of</strong> Origin Rules <strong>of</strong> origin (ROO) are a central component <strong>of</strong> preferential trading arrangements in determining <strong>the</strong> origin <strong>of</strong> goods for tariff preferences. It is obvious that a country would like to allow goods from a partner country on a preferential duty basis under a trade agreement provided <strong>the</strong> goods have originated in <strong>the</strong> partner country. However, <strong>the</strong>re is always a possibility that third-country goods enter a country’s markets through <strong>the</strong> partner country and that too, on a preferential basis. This phenomenon is well known as ‘trade deflection,’ which has <strong>the</strong> potential to undermine a country’s MFN-customs regime. Thus, one <strong>of</strong> <strong>the</strong> prime objectives <strong>of</strong> ROO is to check trade deflection. It is also important to bear in mind that ROO are not to safeguard against imports per se instead <strong>the</strong>y are to check deflected imports from third countries. There are various ways <strong>of</strong> determining this. First, <strong>the</strong>re is a change in tariff-heading test, implying that <strong>the</strong> tariff-heading <strong>of</strong> <strong>the</strong> final product is different from <strong>the</strong> tariff-headings <strong>of</strong> its inputs. Second, a percentage test is applied, according to which a minimum percentage <strong>of</strong> total value addition should be achieved with <strong>the</strong> help <strong>of</strong> domestic inputs. Finally, specified process tests require a product to undergo certain stipulated processes. However, consensus on applications <strong>of</strong> <strong>the</strong>se rules is <strong>of</strong>ten difficult to achieve. For example, <strong>the</strong> extent <strong>of</strong> ‘substantial transformation’ for different products depends on <strong>the</strong> level <strong>of</strong> disaggregation, at HS 4- or 6- digit level, on which tariff-shift is technically possible. In addition, percentages <strong>of</strong> minimum value addition also vary from product to product, depending on <strong>the</strong> prevailing exchange rates, labour costs and <strong>the</strong> product-specific import dependence <strong>of</strong> <strong>the</strong> country in terms <strong>of</strong> raw materials and intermediates. The ROO have both trade and developmental effects. These rules should be designed in a manner that is not trade restrictive. They should not become trade barriers due to <strong>the</strong>ir complex methods <strong>of</strong> implementation. These issues and specifically <strong>the</strong> developmental role <strong>of</strong> ROO need to be given adequate importance under <strong>the</strong> CECA. Therefore, it is necessary to have close cooperation in <strong>the</strong> matter <strong>of</strong> verification <strong>of</strong> <strong>the</strong> certificates <strong>of</strong> origin, which is required to check trade deflection and circumvention <strong>of</strong> ROO. It may be highlighted that it is not true that rules <strong>of</strong> origin would be redundant once a country, which is a member <strong>of</strong> different trade agreements, reduces its MFN-tariffs considerably to very low levels. In fact, <strong>the</strong>re is evidence to suggest that stringent rules <strong>of</strong>
Page 1 and 2: 0 Report o
Page 3 and 4: 2 Letter of Transm
Page 5 and 6: 4 4. These estimates were complemen
Page 7 and 8: 6 I. Overview The bilateral relatio
Page 9 and 10: 8 II. Trade in Goods II. 1. Introdu
Page 11 and 12: 10 Box 2 : Indonesia’s Trade Poli
Page 13 and 14: 12 Indonesia has stressed that <str
Page 15 and 16: 14 II.2.2. Volatility This fluctuat
Page 17 and 18: 16 Table 4. Relative Importance <st
Page 19: 18 Nevertheless, d
Page 23 and 24: 22 II. 7. 3. TBT, Sanitary and Phyt
Page 25 and 26: 24 II.8.2. CGE Simulations To compl
Page 27 and 28: 26 Objectives The national steel in
Page 29 and 30: 28 Table 9. Trade Complementarities
Page 31 and 32: 30 Intra industy trade has been bei
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Page 35 and 36: 34 the Government
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Page 39 and 40: 38 public health safety and securit
Page 41 and 42: 40 Table 11 Portfolio investment fl
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Page 47 and 48: 46 From August 1991 to December 200
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Page 51 and 52: 50 III.4.2. Indonesia Indonesia ran
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70 Under the propo
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72 3. To improve the</stron
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74 IV.4.9.2. India Given India's un
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76 is limited up to 49 per cent. On
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78 • Have substantial sectoral co
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80 • Availability of</str
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82 V. 5.3. Forestry Indonesia has a
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84 V.6. Cooperation in Transportati
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86 countries/ agencies, after signi
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88 For enhancing training and educa
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90 In a partial-equilibrium framewo
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92 VI.4 Trade in Services In respec
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1 Terms of Referen
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3 Table A.I.1 Composition o
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5 Table A.I.2 Composition o
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7 Annexure 2 Table A.II.I Sectors w
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9 Table A.II.I Sectors with Dynamic
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11 Table A.II.2 Sectors with Dynami
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13 Annexure 3 Table A.III.1 Indones
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15 Table A.III.2 Indonesia as an Im
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17 Annexure 4 Table A.IV.1 Potentia
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19 Table A.IV.1 Potential for India
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45 Table A.IV.3 Potential for <stro
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59 Table A.V.1 Items Amenable for I
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75 Annexure 6 HS 6-digit Code Table
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77 HS 6-digit Code Table A.VI.1 Ind
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85 Annexure 7 Table: Macro Economic
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87 Forecasting India’s exports to
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89 POLICY ON FOREIGN DIRECT INVESTM
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91 (iii) Other ser
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93 vii) viii) ix) x) xi) xii) xiii)
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95 30. Satellites - Establishment a
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97 Investment Incentives Annexure C
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99 India's share in Asia**) 2.46 4.
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101 Fig 6: Comparative Trend in RCA
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