FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) supported the latest report of the Thought Arbitrage Research Institute (TARI) titled “REGULATORY INTERVENTIONS AND ILLICIT TRADE ACROSS BORDER: Impact on Six Key Industries” that examines the impact of Tariff and Non-Tariff measures (NTMs) on illicit trade in six key industries – Alcoholic Beverages, Consumer Electronics, FMCG-Packaged Foods, FMCG-Household and Personal Goods, Mobile Phones and Tobacco Products.
As per the report, the total illicit trade across the borders in the six industries is estimated at Rs. 54, 070 crores in the 2019-20 period. Among the six key industries, Consumer Electronics has the major share with 52%, followed by Tobacco Products at 21% and Mobiles Phones at 11%.
The 2023 FICCI CASCADE first-of-a-kind report provides an understanding of NTMs in the six key industries through in-depth analysis in terms of Frequency, Coverage Ratio, and Prevalence Score over a period of time (2015 to 2020). The present study develops the empirical model to provide the impact of applicable NTMs in these industries on the illicit trade and finds that In comparison, Tariff and Price Quantity Measures have a much greater impact on illicit trade. The Report highlights:
The Frequency Ratio is the percentage of products affected by one or more NTMs while the Coverage Ratio is the trade value share of the products subject to NTMs. All six key industries have a 100 percent frequency and coverage ratio. All six key industries are highly regulated with each import tariff line (product within the industry) being subject to some type of NTM. The prevalence score shows the applicable NTMs on a given product and points out that regulatory interventions have increased during the 2015-20 period for all six key industries. Packaged foods meant for human consumption have the highest prevalence score (38) while consumer electronics and FMCG-household and personal goods having a large number of product categories have a significant variation in prevalence score among the products.
The study used the prevalence score of three different types of NTMs to understand their impact on the illicit trade. First are the Technical NTMs including Sanitary and Phytosanitary (SPS), Technical Barriers to Trade (TBT) and pre-shipment requirements (C) to ensure food safety for human consumption, prohibit and regulate trade on hazardous substances, chemicals etc meant for human use. These NTMs have more than 75 percent contribution towards the prevalence score for FMCG products packaged foods, household and personal goods and alcoholic beverages. For other industries including tobacco products, mobile phones and consumer electronics, technical NTMs have over 50 percent contributions.
The other two types are non-technical measures including Price and Quantity Control Measures (PQCM) and Competition Measures. PQCM NTMs are alternate tariff measures and include various policy measures like quotas, licences, price controls, para-tariff measures and contingent trade protective measures such as anti-dumping duties. Competition NTMs are certain behind border measures that aim to provide preferential treatment to domestic products and reduce their competition with imported products.
Based on the empirical findings of the research models and the overall analysis of non-tariff measures, the report has made some recommendations for policy considerations to counter the menace of illicit trade. These include – Reducing Import Dependency, Rationalisation of Tariffs, Nodal Agency for NTMs Data Collection, Cost-Benefit Analysis of Regulatory Interventions, Harmonising Food NTMs with International Standards, Enforcement and Rule of Law and Capacity Building and Better Risk Management. Additionally, the report calls for International Coordination and Cooperation as it has now become a global phenomenon affecting nearly all countries in the world.
The link to access the reportis : https://ficcicascade.in/wp-content/uploads/2023/02/Final-ILLICIT%20TRADE%20ACROSS%20BORDER%20report.pdf
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