Tariff Rate Quotas can act as a basic economic tool for deal making in trade discussions at global levels by balancing the interests of domestic producers and consumers. Examine (200 Words)
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IAS Parliament 6 years
KEY POINTS
· A Tariff Rate Quotas is a mechanism that allows a set quantity of specific products to be imported at a low or zero rate of duty. TRQs are established under trade agreements between countries.
· TRQ is a limit on the quantity eligible for lower or zero duty.
Reason for TRQ
· TRQs protect domestic producers from having to face competition from large quantities of imports. They also allow consumers and producers in the importing country to get enjoy a benefit, a limited one, of lower priced products.
· TRQs have now become a way of reaching a consensus with trading partners.
· Tariff quotas are used on a wide range of products. Most are in the agriculture sector: cereals, meat, fruit and vegetables, and dairy products are the most common. Sugar is protected in most producing countries with tariff quotas.
Criticism of TRQ
· TRQ unviable in the context of long term economic policy.
· It acts in opposition to the goals of Make In India.
· It partially restricts investments, especially FDI.
For better trade at global level
· The TRQ administration system must not ‘impair or nullify the market access commitments negotiated’.
· It should be transparent, minimising transactional costs for traders.
· Tariff arbitrage is an effective tool for inducing local manufacture or at least domestic value addition in the country.
· It has been a basic tool in the country’s Phased Manufacturing Programme policy.
