What are Non-Debt Capital Receipts? (TH)

Context: Terms used in editorials.

Analysis

  • Non-debt capital receipts (NDCR) of the union government include:
  1. Recoveries of loans and advances given to state governments, Union territories and foreign governments
  2. Disinvestment proceeds
  3. Money accrued to the Union government from listing of central government companies and issue of bonus shares

After months of tortuous negotiation over Hungary and Poland’s objections, member States of EU finally agreed on a long-term budget and a COVID-19 recovery package of $2 trillion.

  • The two countries had opposed anti-COVID-19 support being linked to good governance, in particular, accusations of suppression of human rights and lack of independence in the judiciary.
  • There is relief that the U.S. may now be more predictable, Europe will resist taking sides in any U.S.-China tug of war. This is underlined by the EU-China Comprehensive Agreement on Investment concluded after minimal consultation with Washington.

15 July 20: The Hindu

  • Seven years after talks on a free trade agreement were suspended, India and the European Union (EU) are set to agree on a “high-level dialogue on trade and investment” to restart negotiations.
  • The trade and investment dialogue is expected to give a boost to negotiations on the Bilateral Trade and Investment Agreement (BTIA) as the EU-India FTA is known.
  • An EU official, who specialises in trade issues, admitted that there was “no timeline” for the BTIA talks yet and that negotiators are still “quite far apart” due to what Europe perceives as India’s “protectionist stance”.
  • The Make in India programme was accelerated by the COVID-19 crisis and recent pronouncements that India wants to go “self reliant”, didn’t help the situation,” the official said, referring to Mr. Modi’s launch of “Atmanirbhar India”.
  • The official said trade with India formed under 3% of the EU’s global trade, which is “far below” what was expected of the relationship.
  • Conversely, the EU is India’s largest trading partner and investor, and accounts for 11% of India’s global trade.
  • The official also said the EU has reservations about the model “Bilateral Investment Treaty” (BIT) that New Delhi has proposed, especially on dispute mechanisms in Indian courts.

European Union-India Free Trade Agreement (FTA)

  • India is the only major power lacking an FTA with any of its top trade partners, including the EU, the U.S., China and Gulf economies.
  • India, in the meantime, is hanging on to its Most Favoured Nation (MFN) status.
  • Its status under the EU’s Generalised Scheme of Preferences (GSP) will face rising competition from Pakistan or Sri Lanka, who enjoy GSP+ benefits (China, India, Colombia, Indonesia, Thailand and Vietnam are not eligible for GSP Plus).
  • The good news here is that India’s talks with the EU have been advancing slowly but steadily.
  1. From agriculture to intellectual property, the EU and India have quietly been exchanging and aligning views.
  2. New areas like e-commerce have registered significant convergence because India’s position on data privacy is not that different from the EU’s.
  • As with the EU-Japan deal, India may wish to proceed at two speeds: it could delay discussions about free flow of data for a few years and freeze differences on the tax moratorium issue or data localisation, even while committing to liberalise in other areas.
  • EU negotiators are now more willing to make concessions on labour or environmental regulationswhich used to be insurmountable obstacles.
  • The collapse of the Transatlantic Trade and Investment Partnership and concerns about excessive economic reliance on China have propelled the EU to become a little more pragmatic.
  • Increasing economic integration:
  • Free Trade Area-> Custom Union-> Common Market-> Economic Union

Generalized System of Preferences

  • Generalized System of Preferences (GSP) is a preferential tariff system extended by developed countries (donor countries) to developing countries (beneficiary countries).
  • It involves reduced Most Favoured Nation Tariffs or duty-free entry of eligible products exported by beneficiary countries to the markets of donor countries.
  • The Generalized System of Preferences (GSP) was instituted in 1971 under the aegis of United Nations Conference on Trade and Development (UNCTAD).
  • The objective of UNCTAD’s support on GSP and other preferential arrangements is to help developing countries – particularly LDCs – to increase utilization of GSP and other trade preferences and in turn promote productive capacity development and increased trade.
  • The primary objective of the Generalized System of Preference, commonly called GSP is to contribute to the reduction of poverty and the promotion of sustainable development and good governance.
  • Tariff preferences in the developed markets enable Developing Countries toparticipate more fully in international trade and generate additional export revenue to supportimplementation of their own sustainable development and poverty reduction policy strategies.
  • GSP is presently extended by about 28 developed countries (Recently, U.S. has ended this status for India).
  • Only such products of a beneficiary country (like India) that fulfil the requirements of the rules of origin (a set of requirements laid down by the importing country) laid down by the importing country, are considered eligible for preferential tariff treatment on import into the markets of donor countries.
  • The rules of origin are aimed at reserving, as far as possible, the benefit of the preferential system to the country for which it is intended, and to prevent third countries’ goods from unduly exploiting the system.

What is the EU GSP Plus Scheme and how does it differ from ‘normal’ GSP?

The European Union’s GSP covers three separate regimes;

  1. The standard GSP, which provides preferences to 90 (previously 177) Developing Countries and Territories on over 6300 tariff lines;
  2. The special incentive arrangement for Sustainable Development and Good Governance, known as GSP+, which offers additional duty-free exports to support vulnerable developing countries (previously 16 now 25 countries – Including Pakistan) in their ratification and implementation of relevant international conventions in these fields, and;
  3. The Everything But Arms (EBA) arrangement, which provides Duty-Free, Quota-Free access for the 50 Least-Developed Countries (LDCs).

Least developed countries (LDCs)

  • Least developed countries (LDCs) are low-income countries confronting severe structural impediments to sustainable development.
  • They are highly vulnerable to economic and environmental shocks and have low levels of human assets.
  • There are currently 47 countries on the list of LDCs which is reviewed every three years by the Committee for Development (CDP).
  • LDCs have exclusive access to certain international support measures in particular in the areas of development assistance and trade.

Most Favoured Nation (MFN)

  • While the term Most Favoured Nation (MFN) suggests special preference for the country given MFN status, it actually means it would be treated equally as all others.
  • According to the World Trade Organisation rules, countries cannot normally discriminate between their trading partners.
  • If one country is granted a trade concession such as, for example, lower import duties, then all WTO members must be extended the same concessions. This principle is known as the Most Favoured Nation treatment.

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