Showing posts from 2019

WTO moratorium on E-Transmissions and OECD Pillars for digital economy

Moratorium on Cross Border E-Transmissions If one imports a book into India, one will pay applicable customs duty (currently 10% basic customs duty, and all applicable cess/welfare charges). However, if one downloads the same book over Amazon Kindle, one gets it duty free. Kindle books are almost always cheaper than their paper counterparts and the zero import duty is one of the factors keeping it that way, other factors being savings on printing/paper, transportation etc. This is an example of how the moratorium on international cross border taxation on Electronic Transmissions (ET), adopted by WTO in 1998  affect the prices.  Share of Digitalised Products in Global Imports - as represented in UNCTAD study Also, there is the question of direct taxation, in terms of corporate taxes or taxes on profits from the earnings made in India for companies who are highly digitalised in terms of delivery/users/markets (Amazon cloud services, Facebook, Google), and where it is n

Bonded Manufacturing Scheme - The potential game changer for manufacturing sector

Government has tweaked the existing scheme of manufacturing under bond at bonded warehouses (Section 58 to 65 of Customs Act) and has come up with a 'Bonded Manufacturing Scheme' which might revolutionise the way manufacturing units are organised among domestic tariff areas, Free Trade and Warehousing Zones, Export oriented units (EOUs) and Special Economic Zones (SEZs). The relevant customs notification (69/2019) on Manufacture and other operations at Warehouse Regulations 2019 is at this link . Invest India (an arm of government that encourages investments in India through realtime assistance to entities to set up business) maintains a dedicated website for information dissemination on this topic at this link  and the FAQs are hosted  here . Relevant Customs Circular (34/2019) that outlines the regulatory procedural details is at this link . Bonded manufacturing scheme overview - [from Invest India's Bonded manufacturing website] The salient part of this scheme

The interest in free trade and related matters - a silent story from google trends

Google web-search is a rough indicator of the hotness/popularity of the topic. Here's what you get for some of the words that this blog cares about, if you see the popularity trend in Google web searches across the world over last 15 years. 1. Free Trade 2. WTO 3. Free trade agreements 4. Tariff Barrier 5. Non Tariff Barrier 6. Trade war 7. International Trade 8. E Commerce 

MSMEs in cross border E Commerce – Challenges, Opportunities and Trade Facilitation Measures

MSME's and E Commerce MSMEs currently contribute to around 40% of exports of India. E-Commerce is an area that has shown tremendous potential for growth, especially for MSMEs. It is so because MSMEs suffer from certain handicaps in traditional trade models, with regard to access and scale, that are ameliorated in an E-Commerce model. This post shall elaborate some of the challenges and opportunities that pertain specifically to MSMEs when it comes to E-Commerce trade across border before deliberating on the facilitation measures specific to MSMEs. Data from Statista show that retail E commerce trade will grow to around 4.8 Trillion USD by 2021 – around two years from now. Around 30% of this is expected to be cross border trade through E-Commerce route. Data also shows that 82% of enterprises involved in such cross border trade are micro and small scale in size (definition of SMEs vary across countries/organisations).   Opportunities for MSMEs in Ecomme

Understanding beef-ban, prohibition and prostitution in India through repugnant market theory

Bans are not always effective as we know. Gujarat's prohibition has given rise to a thriving black market for liquor, whereas the ban on prostitution has held up relatively well in India with only a small steady state black market that has not grown bigger. Selling and consumption of beef on the other hand, where banned, has been effective to a large extent - to the detriment of the health of cattle and leather industry - as was witnessed during recent ban on cow slaughter in Uttar Pradesh. Bans are blunt instruments. It is necessary for a policymaker to study the effects from the prism of effectiveness of achieving policy objectives of a ban, over the negative externalities, and also lack of effectiveness arising due to administration issues. It is not that a stiffer punishment would automatically lead to desired outcome. To cite an extreme example, rape in India attracts imprisonment of 7 to 10 years. Murder attracts life term or hanging. If the punishment of rape is inc

GVCs and the tariffs - a simple fact the free traders miss

A common argument of free trade supporters runs this way: Tariffs create barriers to movement of goods - India has high tariffs on various goods  Global Value Chains(GVCs) operate better with low barriers for movement of goods Therefore high tariffs are responsible for India's lack of integration into various GVCs In principle the argument is correct.  For a graduate student who has completed a course on International Economics, the above argument is obvious. This belief carries over to the practising economists, and journalists who consult the economists. That's why we read a lot of criticism of the government when tariffs are raised - as they lead to breaking away from GVCs, or rather in India's case, not getting integrated into them. A simple case where a duty of 10% is levied every time a component crosses the border in the journey through the value chain, where a value addition of 30% takes place at each step, leads to a situation where the prices build up