The GATT 1947 mentions that no prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.
The main reason for this prohibition is that quantitative restrictions (QR) can be more trade restrictive than tariff measures. Tariffs per se do not prevent entry of products, and those goods that are competitively priced always have a chance to jump over high tariff walls.
On the other hand, QRs in the form of quotas and licensing requirements that allow only a few players or entities to import (“canalising”), effectively put a limit or ceiling on imports, even if there is a domestic market for these products for reasons apart from price such as technology, features, convenience, etc.
At one point of time, India had the “distinction” of being grouped with Tunisia, Nigeria, Pakistan, Bangladesh and Sri Lanka as the only countries that continued to persist with the import quota system.
However, the GATT provides exceptions to this fundamental principle. Members are allowed to impose QR in a non-discriminatory manner for any of the following reasons:
1. Imports
· To safeguard the balance of payments position
· As a safeguard measure when there is serious injury to domestic producers
· Restrictions on any agricultural or fisheries product, when there is a temporary domestic surplus of the product or when there is over-dependence on an imported product
· Protection of public morals
· To protect domestic industry at a developing stage (“infant industry protection”)
· Security, arms and ammunition, nuclear material
· Health of human, animal and plant life
· Gold and silver trade
· Monopolies enforcement
· Protection of patents, trademarks and copyrights
· For the application of standards or regulations for the classification, grading or marketing of commodities in international trade
· Products made by prison labour
· Protection of national treasures
· Conservation of exhaustible natural resources
· Approved inter-governmental commodity agreements
2. Exports
· To prevent or relieve critical domestic shortages of foodstuffs
· For the application of standards or regulations for the classification, grading or marketing of commodities in international trade.
Quantitative restrictions can also be imposed subject to the authorisation of the other members as a retaliatory measure when the recommendations and rulings of a dispute settlement panel are not implemented within the given reasonable period of time.
The GATT requires that application of the QR be made public with information about the total quantity or value of the product permitted to be imported during a specified future period and of any change in such quantity or value. Moreover, any such restriction should not result in a change in the relative value of imports to the total of domestic production. That is, the QR should continue to maintain the ratio of imports to domestic production of the product concerned, as it existed during a previous representative period. The representative period being a normal period that did not warrant imposition of an import quota.
India began the process of removing import controls ever since the 1980’s when a fresh list of items was allowed to be imported under the Open General Licence (OGL) every year. This process that gathered momentum during the period 1991-96 witnessed QR being lifted on as many as 6161 tariff lines by March 31, 1996. Since then, 1999-2000 saw 1905 tariff lines being removed from the QR regime while another phase of dismantling of QRs on 714 tariff lines was announced on March 31, 2000. The central government’s notification of March 31, 2003, further removed QRs on import of an additional 69 items.
