India - trade policy consultation Mechanisms
Background
After independence in 1947 and until the beginning of the
1990s, India's trade policy was heavily influenced by the
"Swadeshi" (self sufficiency) mentality and the "licence raj"
system of restrictions on production and imports.
A first generation of reforms (1991-1996) - aimed at, among other
things, liberalising trade - led to a reduction of import tariffs,
elimination of quantitative restrictions, exchange rate reforms and
deregulation of industry resulting in yearly growth rates of around
7% (compared with 3% before the reforms).1
Central Government
The main responsibilities at the federal level in India are:
the Ministry of Commerce and Industry (MOCI); the Ministry of
Agriculture (MOA); the Ministry of Finance and the Ministry of
External Affairs (MEA).
The MOCI is mandated with the primary responsibility for all WTO
related issues. The Government of India orders regarding the
allocation of business state that it is the MOCI that would handle
all issues related to "International trade and commercial policy,
including tariff and non-tariff barriers". Within the MOCI, the
Trade Policy Division (TPD) is responsible for the work relating to
WTO. It is headed by a Special Secretary, who is assisted by two
senior Joint Secretaries and a team of nearly 20 middle management
level officers.
The MOA is the key Ministry for all issues relating to
agriculture, including the work relating to the Food and
Agriculture Organization of the United Nations (FAO) although, in
practice, the responsibility for WTO negotiations is shared between
the two Ministries.
State Governments
The State Governments of India are allocated responsibilities
under the constitution for many aspects of economic administration,
including for example, agriculture. During the Uruguay Round the
State governments were left 'out of the loop' by the central
government agencies. They objected, sometimes strongly, to the
provisions of the Agreements when they were presented to them after
the Marakesh Ministerial meeting and several filed suit in India's
Supreme Court in an attempt to invalidate the proposed
implementation of the Agreement on Agriculture on the grounds that
the Government of India had no power to make agreements on a matter
reserved to the States.
In an attempt to remedy this lack of coordination, the MOCI
created an Inter-State Trade Council in June, 2005:
"… in order to ensure a continuous dialogue with State Governments
and Union Territories. The Inter-State Trade Council would
inter-alia advise the Government on measures for providing an
international trade enabling environment in the States and to
create a framework for making States partners in India's
international trade and export effort to achieve the objective of
boosting India's exports".
Under the Chairmanship of the Minister of Commerce and Industry,
the State Council will be a purely advisory body but at a high
level of government, with a mandate (among other things): "To
identify issues relating to State Governments in regard to WTO
capacity building, infrastructure development and creating an
overall supportive policy and fiscal environment for international
trade."
Industry
Until 2005 most of the extensive, but informal, consultation
on Indian trade policy at the Federal level involved one of the two
main industry associations: The Confederation of Indian Industry
(CII) and the Federation of Indian Chambers of Commerce &
Industry (FICCI).
The CII has been playing an increasingly active role in putting
industry views and concerns to the Government. Reportedly, its
membership extends to over 4800 companies from the private as well
as public sectors. According to its Director General, the CII,
"provides a platform for sectoral consensus building and
networking"2 based on consultation among its own members
and subsequent contact with government. The FICCI, according to its
Project Leader (WTO), has been at the forefront of "analyzing the
impact of events through a multi-disciplinary approach involving
representatives of business, academia, policy makers and foreign
experts, and evolving problem solving responses".3
In spite of having broadly similar organizational objectives, the
two associations do not necessarily coordinate their approach or
advocacy efforts on trade and in some ways view each other as
competitors for broadly the same business constituency. Although
both FCCI and CII claimed to represent all sectors of merchandise
production there has always been some doubt about the degree to
which they represented the interests of the farming (as opposed to
agribusiness) industries.4
Neither of these organizations was consulted during the Uruguay
Round negotiations, but the by the end of the 1990s both the
pressure of Parliamentary concern about trade agreements and the
impact of the progressive liberalization of India's commercial
regulations (especially internal commerce) brought about dramatic
changes. These associations are now not only consulted regularly,
but also provide critical inputs to Government on trade issues.
According to FCCI, "the turning point of this relationship was the
Seattle Ministerial Conference, where for the first time
representatives from industry were formally a part of the Indian
delegation".5
In April 2005 the Ministry of Commerce issued a decision to
'reconstitute' the Board of Trade with a broad mandate and
representation from a wide range of peak business and industry
groups (including the FCCI and the CII).
Academic institutions and "Think tanks"
Like the business groups, academic institutions and think
tanks had no consultative role in the Uruguay Round but have since
become more closely involved to the extent that they have the
resources to devote to meaningful analysis. The most prominent
include the National Council for Applied Economic Research (NCAER),
the Indian Institute of Foreign Trade (IIFT), the Indian Council
for Research on International Economic Relations (ICRIER) and the
RIS.
Parliament
The Parliament of India occasionally plays a prominent role
in the examination of aspects of trade policy, as in the 1998
Commerce Committee reports on the Uruguay Round agreements. The
Commerce Committee is organized in the Raja Sabha (the 'States'
house of the Parliament) as a Committee reporting to the Ministry
of Commerce. A review of its activities (
http://rajyasabha.nic.in/book2/reports/commerce/comreplist.html)
suggests that the majority of its reports concern support and
promotion activities organized on a sectoral basis rather than
analysis of policy or legislative initiatives.
Evaluation
Experience during the Uruguay round suggests that the
Commerce ministry guarded its turf zealously, with considerable
help from the Cabinet secretary, the Prime Minister's Office and
the Finance ministry. Inter-Ministerial consultations, and some
interaction with State Governments and industry groups, took place
but were the exception rather than the rule.
But political pressure, especially from the Parliament, for a more
accountable and transparent process, combined with the complex
requirements of coalition politics in India meant that a broader
system of consultation had to be set up. This meant, essentially,
four types of consultation: with state governments, with trade and
industry groups, with other ministries, and with political parties,
trade unions and NGOs.6
The evidence from negotiations leading up to the Doha ministerial
meeting, for example on the crucial issues of agriculture, show a
much more extensive, albeit still 'tops down' and somewhat 'ad
hoc', system of consultations.7
This progressive extensions and formalization of the trade
consultation system has now resulted in the establishment
of:
A Board of Trade with a mandate to provide wide-ranging
and detailed industry advice that includes a broad selection from
peak national industry organizations and commercial advisors with
specific expertise.An explicit mechanism for consultation among Ministries
and with the State Governments that ensures 'whole of government'
approaches to trade and commercial policies.
1Narayan, S. Trade Policy Making in India.
London School of Economics (mimeo). May 2005.
2Shishir Priyadarshi. The decision making processes in India in
the context of the agriculture negotiations, in Managing the
Challenges of WTO Participation. Cambridge University Press
(forthcoming).
3, 4, 5,ibid.
6Sen, Julius. Lessons Not Learned: India's Trade Policy Making
from Uruguay to Doha, London School of Economics. May 2003.
7Priyadarshi, op.cit.
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