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Alternative scenario for tariff negotiations

Abstract

The paper seeks to provide certain key inputs into the ongoing tariff reforms both in the domestic context and in the context of the ongoing WTO discussions. It looks at the average tariff structure in India during 1991-92 to 1999-2000. An alternative tariff structure is suggested taking into account (a) the dispersion seen in terms of peak to average tariff ratio, and (b) the elasticities of import to GDP ratio with respect to tariff. The impact of streamlining and simplification of tariff structure on imports and revenue is also looked into. Further, the study compares the tariff structure prevailing in India with some selected developed countries where the peak tariff rates are generally very high, especially in the agriculture sector. The analysis suggests that while negotiating for reduction of average tariff rate, developing countries should bargain for a reduction in peak rates and dispersion around the average tariff by developed countries.

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Dr. Archana S. Mathur and Arvinder S. Sachdeva are from Indian Economic Service and are currently working as Deputy Advisers in the Perspective Planning Division of Planning Commission. The views expressed are those of the authors and not necessarily those of the Government of India.

The authors are thankful to Dr. Pronab Sen, Adviser (Perspective Planning Division), Planning Commission for his guidance and very helpful suggestions at the draft stage. The authors would also like to thank Mr. M.R. Verma, Senior Research Officer for assistance in data analysis. Assistance from Ms. Shyamla is also acknowledged. Mr. R.S. Shukla typed the manuscript.