VITC

3. Are QRs being phased out under pressure from the US? Couldn’t the Government have negotiated a better bilateral agreement with the US than agreeing to an accelerated phase-out of QRs by 2001?

There is no question of yielding to anybody on the removal of the remaining QRs on imports. In fact, India had been autonomously removing import controls ever since the 1980's when there used to be a fresh list of items allowed to be imported under OGL (Open General Licence) every year. This process gathered momentum during the period 1991-96. QRs on as many as 6161 tariff lines (or items) were already removed as on 31st March, 1996. And since then, 1905 tariff lines for imports had been made free till the beginning of the year 1999-2000. Dismantling of QRs on 714 tariff lines announced on 31st March, 2000 was part of this ongoing import liberalisation process.

In this connection, we may recall the words of Dr. Manmohan Singh in his budget speech in 1994-95: "Fears of being swamped by imports as a consequence of liberalisation have proved to be grossly exaggerated."

In fact, the import growth in subsequent years have also proved his assertion. The growth rates of imports since 1994-95 are as follows:

Year	% Growth rate of Imports
1994-95	22.9
1995-96	28.0
1996-97	6.7
1997-98	6.0
1998-99	2.2

During the premiership of Mr. Deve Gowda, the government took the following view as far back as March 1997:

"Our foreign exchange reserves and BOP position in any case do not warrant the continuation of such restrictions…… Insistence on a continuing need for Quantitative Restrictions in the WTO context is counterproductive……"

The Finance Ministry had consistently maintained that in view of the remarkable and sustained recovery in BOP position from the crisis year of 1991-92, continuance of QRs was not justified.

As regards the dispute with the US, it needs to be mentioned that while India successfully concluded bilateral agreements with other trading partners for phasing out of QRs over a 6-year period from 1st April, 1997 to 31st March, 2003, the US was not agreeable to a similar 6 - year phase-out, in spite of the best efforts made by India.

Further, during bilateral discussions, the US insisted on a number of other onerous conditions being simultaneously fulfilled by India such as the condition of seeking an annual waiver from the WTO for maintaining QRs, substantial reductions in tariff bindings, front-loading of several items of interest to USA etc., which were clearly not acceptable from our point of view, leaving India with no option but to go through with the dispute settlement process in the WTO.

The Dispute Settlement Body of the WTO upheld that India’s QRs on imports were not justified on BOP grounds. Subsequently, an agreement was reached with the US in December 1999 on a reasonable period of time for implementing the ruling for phase-out of QRs. Incidentally, the reasonable period of time agreed is longer than the maximum time frame of 15 months normally allowed under the WTO dispute settlement mechanism.