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India to retain trade barriers with China

India wants to prevent China from flooding its market with cheap goods. So the approach is to give minimum tariff concessions to Chinese goods and delay concessions by several years and at the same time allow imports from other member countries of the 16-country trade bloc at lower duties. India is looking to treat Chinese products differently due to the burgeoning trade deficit it has with Beijing. In 2015-16, India’s exports to China were $9 billion while imports were a staggering $61.7 billion leaving a trade deficit of $52.7 billion.

This extended phasing out of tariff concessions and differential treatment is called deviations. Since India for some reason had to do away with a three-tier structure of differential duty cuts, deviations are the last ray of hope to contain the trade deficit with China. In the earlier tiered structure, India had proposed to remove duties on 42.5 per cent of the items traded with China, something that China had termed as low.

However, keeping tariff barriers high will raise transaction costs. India’s problem with China seems to be a lack of trade access. And to better manage the trade deficit with China, India needs to call for better trade access rather than opt to keep tariff barriers high.