Indian Express

Unresolved issues aplenty before India-Japan FTA

By Jayant Singh

6 August 2008

Despite India’s hope of concluding the Indo-Japan free trade agreement (FTA) in the next round of talks in New Delhi in September this year, there still remains a whole gamut of unresolved issues concerning market access for Indian exports to Japan.

According to sources in the Ministry of Commerce and Industry, there are several tariff as well as non-tariff barriers on export items of India’s interest - primarily agricultural items and services - which make it difficult for these items to penetrate the Japanese market.

Though India’s trade with Japan has more than doubled over the past four years from about $4 billion in 2003-04 to almost $10 billion in the last fiscal, Japan’s tariffs for a lot of agricultural commodities have remained high. The average applied MFN (most favoured nation) tariff for agricultural products stands at 18.8 per cent as compared to the overall average tariff of 6.5 per cent.

Many sub-sectors such as oilseeds, dairy products, sugar and sugar products face are subject to tariff peaks, that is, tariffs three times as high as the average.

Also, Japan’s tariff rate quotas - specified zero-tariff quotas for different commodities - for Indian goods cover only 1.7 per cent of the entire trade basket. While tariff barriers may be a cause for worry, the greater problem, perhaps, is the innumerable non-tariff barriers that pose a real threat to unobstructed trade with Japan. In terms of standards and technical regulations, Indian goods often find it difficult to meet the requirements of the technologically slick Japanese certification authorities, which are fast aligning with international standards.

Japan has refused to import sesame seeds from India since it had allegedly detected DDT residue in some lots in the early 1990s. A lot Japan’s sanitary and phytosanitary requirements go beyond even international standards. Imported agricultural products, for instance, have to undergo a dual inspection and quarantine system, first under the Japanese Ministry of Agriculture, Forestry and Fisheries and then under the health ministry.

Since a number of different ministries are involved in administration of the food safety regime, during the talks, the Japanese trade ministry avoids discussing these matters since they don’t fall in their jurisdiction. Similar problems exist in industrial imports as well. Chemical imports too have to meet strict approval requirements while textile ad leather products face problems if they have been treated with certain kinds of chemicals.

Being a comprehensive trade agreement in goods, services and investment, the FTA provides good opportunities for India in terms of service exports.

In this, computer-related and IT services are of particular interest to India. However, a 15 per cent withholding tax levied by Japanese authorities is a major hurdle discouraging Indian professionals from working in Japan.

Also, Indians can get only a three-year multiple-entry visa at most, that too if they are invited by their Japanese counterpart.