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To prevent flooding of Chinese goods -- India wants rules of origin clause in treaty with Nepal

Our Bureau

CHENNAI, Sep. 2

THE Commerce Ministry is trying to include a clause in the Indo-Nepal treaty to strengthen the rules of origin regime. This is to prevent indiscriminate movement of Chinese goods through Nepal into India, according to Mr R. Gopalan, Joint Secretary, Comm erce Ministry.

He said China would be spending huge sums of money on improving infrastructure in the provinces, especially those in the proximity of the country's border with India. A lot of Chinese goods were moving into India through Nepal. And, once the railway line was completed, the goods could be moved in larger numbers through containers to Nepal from where they would be sent across the border to India. It was to prevent such a flood of Chinese goods coming into India that the Ministry intended to strengthen th e rules of origin regime.

Addressing a seminar on `China means business' organised by the Confederation of Indian Industry here on Saturday, Mr Gopalan dealt at length on how China was making its industry more competitive and facilitating exports.

China, for instance, had a power tariff of around Rs 1.95 per unit against Rs 3.70 in India. China had improved its electricity sector with less transmission and distribution losses, which were around 6.8 per cent compared to about 23 per cent in India, and higher plant load factor.

As far as labour was concerned, China had a system of re-training the workers through a nation-wide network of 2,700 re-training centres. Workers who lost their jobs because a sick unit was shut down, were re-trained with skills not necessarily in the sa me area as they were employed in before. The workers could then take up jobs in different industry segments. If not, they would be on Government dole for two years after which they would have to fend for themselves.

Mr Gopalan said 2.7 million workers had been re-trained in China and the target was to re-train five million workers by the end of this year. India did not have such a facility. Also, there was great decentralisation of powers in China, with the result t he provinces could take decisions on their own.

He said with its imminent entry into the World Trade Organisation (WTO), China was expected to shift to light manufactures, with a possible loss of market-share in agricultural and textile products. India had to work out how it could develop its competit iveness. China had built up such large capacities in its manufacturing sector. For instance, as far as bicycles were concerned, a major portion of the production was exported, but the capacity utilisation was just about 55 per cent. The huge capacities w as something that would affect India in the short and medium term.

It was these capacities as well as the higher labour productivity and the higher value-addition to raw materials that helped keep prices of Chinese products low. For example, the Indian market price of an electric fan was about $20, while the Chinese f.o .b. value was about $5. Likewise, in the case of colour television sets, the market price in India was $255, while the Chinese f.o.b. value was $65. This price differential existed even in the case of some of the major export items of India and China. Th e Indian f.o.b. value of travel goods of leather was $16 while it was $3.7 for China; the Indian f.o.b. for leather ladies handbags was $8.8 while that for China $4.2.

What are the lessons India had to learn from China? Mr Gopalan listed them as enhancing productivity of raw materials, PSU reforms including disinvestments, improving labour market flexibility, developing small and medium enterprises, freeing agri market , decentralising regulations, ensuring stability of decision-making, developing infrastructure, and investing in education.