Measures in India's Finance Bill 2012, the temporary ban imposed on cotton exports earlier this year, and elements of the National Manufacturing Policy 2011 have all come under fire in a European Commission report on global protectionism published on Wednesday.
India is among the countries most cited in the report examining moves made by the EU's 31 main trading partners, covering the period from September last year to the start of May, during which it notes a total of 123 potentially trade restrictive measures.
This worrying trend ran “counter to the necessity of keeping trade flows open in order to promote global recovery”, the report warned, citing the “temptation of protectionism” as one of the “biggest dangers the global economy is facing”.
“The pace of the introduction of new measures seems to be accelerating with notable recourse to an increased number of border measures and wider economic stimulus measures.”
The EU Trade Commissioner, Mr Karel De Gucht, called on G20 members to renew their commitment to fight against protectionism at the forthcoming summit at Los Cabos on June 18 and 19.
“Let us remind ourselves that the G20 pledged to end such practices and that protectionism benefits no one. It sends the wrong signal to global trading partners, it sends the wrong signal to investors and it sends the wrong signal to the business community which relies on a predictable business climate.”
Since the start of the global financial crisis in October 2008, India had introduced a total of 24 potentially trade restrictive measures and removed five, the report noted.
Argentina has introduced the most: a total of 119, followed by Russia (86), Indonesia (59), Brazil (38), and China (30).
However, in the most recent 8-month period the report said, “Argentina, Brazil India and Russia have resorted to the highest number of new potentially restrictive measures”.
On the tax provisions in the Finance Bill, the European Commission expressed “serious concerns” about its retroactive effect.
“The Finance Bill also seems to reverse judgements issued in favour of foreign investors by Indian courts or to impact on many currently on-going cases and audits in relevant matters.”
Turning to the export ban on raw cotton introduced and revoked in March, it said the move had created “considerable market disruption” and which the EU would continue to monitor to ensure sustainable cotton exports.
“In addition, India, for a substantial number of products, including steel bicycles, and motor vehicles, increased its customs duty as well as export duties on iron and chromium ores and concentrates.”
In its section on potentially trade distortive economic stimulus packages introduced by a number of nations globally, it highlighted the National Manufacturing Policy 2011, including the provision of an umbrella for the draft National Telecom Policy of 2011, which confirmed the intended use of government procurement to support domestic demand as well as February's decision over a new policy to give preference to domestically manufactured electronic goods in public procurement procedures.
Finally, in its section on ‘Behind the border' restrictions, it noted that India had introduced a requirement for certification of seven new steel products to conform to national standards.