foreign trade policy
The Government of India has made a major change in its foreign trade policy. Now there will be a ban on importing any such foreign goods into the country, in the making of which ‘forced labour’ has been used partially or completely. This decision of the government has come at a time when America is strictly investigating the supply chain of 60 countries including India.
With this decision, India has made it clear in the international trade market that it is in no mood to give any relaxation regarding its supply chain and import rules. Let us understand in detail why the government took this decision.
Why was this decision taken?
The real reason for this new rule is the pressure coming from America. Actually, the US Trade Representative (USTR) is investigating 60 economies including India under ‘Section 301’. America alleges that these countries are failing to stop the import of goods made with forced labour.
For this reason, on June 3, America had proposed to impose a huge additional tariff (import duty) of 12.5% on goods coming from 54 countries including India. At the same time, only 10% duty was said to be imposed on 6 countries like Canada, European Union (EU), Mexico, Ecuador, Indonesia and Pakistan, because these countries had already implemented domestic laws to prevent such imports. Sensing this danger and to strengthen the ongoing Bilateral Trade Agreement (BTA) negotiations with the US, India has also amended its trade rules.
Will foreign goods disappear from the market?
If you are thinking that this decision of the government will stop the import of foreign goods with immediate effect, then it is not so. In the gazette notification issued by the Directorate General of Foreign Trade (DGFT) on July 13, it has been made clear that at present the import of any country or product is not being banned overnight.
The rules of this notification will come into effect after 30 days. The government has only prepared a legal framework. In future, if DGFT’s investigation proves that forced labor has been used in making a particular item, then the government will be able to ban it. The entire process of its investigation will be decided in the ‘Handbook of Procedures, 2023’. Additionally, a new definition of ‘forced labour’ has been added to Chapter 11 of the Foreign Trade Policy, which is based on the 1930 Convention (No. 29) of the International Labor Organization (ILO). That is, making a person work without his consent due to fear of fine or punishment.
Will China be tightened?
Trade policy experts believe that this step of India is a masterstroke. According to Ajay Srivastava, founder of think tank GTRI, the real success of this rule will depend on how the government conducts the investigation and how evidence is collected. He told that the Xinjiang region of China remains most on America’s radar, where cotton clothes, solar panels, seafood, metals and electronics are made using forced labour. However, despite this, America and European countries buy these goods from China, which shows how difficult it is to implement these rules.
At the same time, Agneswara Sen, Trade Policy Leader of EY India, says that by adopting the ILO definition as it is, India has equaled America’s international benchmark. In Sen’s words, “India is not just defending America’s allegations, but is proving that it itself is fully capable of monitoring goods made from prison or bonded labour.”
