FLAG: Trade with Japan

HEAD = Under Rules of Origin, trade

with Japan set to move to higher level
Japan and India started negotiating a comprehensive
Economic Partnership Agreement in January 2007, and
their Governments concluded the deal in 2011. India has
signed various trade agreements with different countries
where tariff concessions are offered for greater market
access. One such agreement, India has signed is the
Comprehensive Economic Partnership Agreement (CEPA)
with Japan, which is an important trading partner. Indias
exports to Japan grew by 24% in 2011-12 to reach $6.3
billion. In fact, Japan occupies a 2% share of Indias global
exports. Japan and India signed an economic agreement
on February 2011 that will abolish tariffs on 94% of trade
over 10 years as each country expands its investment in
Asia.
Keeping in view the importance of Rules of Origin for
exports to various countries, FIEO organized an
interactive session on Rules of Origin for Exports to
Japan on November 22, 2012 at New Delhi. The
programme was attended by Mr Rajiv Raizada, Additional
Director, Export Inspection Council of India, (Ministry of
Commerce & Industry, Government of India), and Mr Sunil
Agnihotri, Jt Dy.Director General, FIEO.
In his presentation, Mr Raizada briefed about the Rules of
Origin for exports to various countries, specifically Japan.
Rules of Origin are an important factor in determining the
tariffs to be imposed on specific goods and whether
quantitative and other trade restrictive measures may be
applied to imported goods. Consequently, the manner in
which these rules are formulated and applied may have
an enormous impact on the flow of trade and investment.
A country's manipulation of origin rules can substantially
affect direct investment, parts procurement and other
business activities of companies seeking to establish
origin in that country. In addition, a change in the rules of
origin of a particular country may force globalized
producers to add certain manufacturing processes in that
country, with substantial resulting costs.
Establishing a fair and common international rule in this
area, India has asked Japan to remove all non-tax barriers
to help the domestic industry take advantage of the
comprehensive free-trade agreement and increase share
in the Japanese market.
Though it is too early to arrive at definite conclusions, the
trend signals that Tokyo is successfully using tariff cuts to
penetrate deeper into the Indian market for goods. At a
time when India and the EU are struggling to negotiate
duty cuts on automobiles, New Delhi will drastically
reduce tariffs on diesel engines and gear boxes from
Japan under their free trade pact. A free trade agreement
between Japan and India may help prevent some Japan
companies from moving overseas through an increase in
exports.
It is expected that the CEPA will promote liberalisation
and facilitation of trade and investment between the two
nations and will further strengthen their economic ties in
wide-ranging fields. This CEPA is significant in terms of
the sizeable GDP of India and Japan. For India, this pact
will provide access to the $5 trillion-GDP Japanese
market, and is also the first CEPA with a developed
country. For Japanese companies, it is expected to
provide more business opportunities in India, which is one
of the growth engines in the world. About 94% of the
tariffs between Japan and India will be eliminated within
10 years (about 97% by Japan and about 90% by India)
on a trade value basis. Japan agreed to eliminate almost
all tariffs on industrial products at the entering into force
of this agreement and also made commitments on
agricultural products. The number of Japanese companies
operating in India has doubled in the last three years
from 362 in February 2007 to 725 in October 2010.
There was useful interaction of the representatives of the
participating companies with Mr Raizada during the open
house discussions on a number of issues with regard to
trade and services for exports to Japan. The participants
were able to get clarifications from the speaker regarding
trade issues between the two countries.
Mr Agnihotri of FIEO, while proposing the vote of thanks
observed that Japan offers excellent business
opportunities for Indian businessmen and there was a
need for frequent interactions to further augment Indias
trade with this region.