Daily Current Affairs : 5-June-2024

The Duty-Free Quota-Free (DFQF) scheme is an important initiative that aims to offer Least Developed Countries (LDCs) better access to global markets. Under this scheme, countries like India provide preferential market access to LDCs by eliminating tariffs on a large number of products. However, despite these efforts, the scheme has faced challenges, particularly in terms of low utilization rates.

What is the DFQF Scheme?

The DFQF scheme allows LDCs to export goods to developed and developing countries without paying import duties or facing import quotas. This preferential treatment is meant to promote the integration of LDCs into the global trading system. Key facts about the scheme include:

  • Origin: The concept for DFQF access was first introduced at the World Trade Organization (WTO) Hong Kong Ministerial Meeting in 2005.
  • India’s Role: India became the first developing country to implement this scheme in 2008, offering LDCs duty-free access to 85% of India’s tariff lines.
  • Expansion: By 2014, India expanded the scheme to cover more than 98% of its tariff lines, offering over 11,000 tariff lines to LDCs, of which 10,991 are duty-free.

Low Utilization of the Scheme

Despite the significant benefits of DFQF, a report by the LDC Group at the WTO reveals that approximately 85% of the products offered under this scheme remain unutilized. This is a worrying trend for both India and LDCs, as it highlights missed opportunities for trade and economic growth.

Reasons for Low Utilization:

Several factors contribute to this low utilization:

  • Lack of Awareness: Many exporters in LDCs are not aware of the scheme and its potential benefits. This lack of knowledge prevents them from taking advantage of the preferential access to Indian markets.
  • Inaccurate Data: There is incomplete or inaccurate data on the actual utilization rates of the scheme. This makes it difficult to assess how effectively the scheme is being used.
  • Non-Preferential Routes: A large portion of LDC exports to India still enters the country through the Most Favored Nation (MFN) tariff route, rather than utilizing the DFQF benefits, even though they are eligible for tariff-free access.

Important Points:

DFQF Scheme Overview:

  • Aims to provide Least Developed Countries (LDCs) with duty-free and quota-free access to markets of developed and developing countries.
  • India became the first developing country to offer this access in 2008, initially covering 85% of its tariff lines.

Key Milestones:

  • 2005: The DFQF access was introduced at the WTO Hong Kong Ministerial Meeting.
  • 2008: India began implementing the scheme, covering 85% of its tariff lines.
  • 2014: The scheme was expanded to cover 98% of India’s tariff lines, offering over 11,000 tariff lines, with 10,991 being duty-free.

Low Utilization:

  • 85% of the products offered under DFQF by India remain unutilized by LDCs.
  • Despite the scheme’s potential, there are missed opportunities for trade and economic growth.

Reasons for Low Utilization:

  • Lack of Awareness: Many LDC exporters are unaware of the scheme and its benefits.
  • Inaccurate Data: Incomplete or faulty data makes it difficult to assess the scheme’s effectiveness.
  • Non-Preferential Routes: A significant portion of LDC exports to India enter through the Most Favored Nation (MFN) tariff route, rather than utilizing DFQF access.

Why In News

According to a report by the LDC Group at the World Trade Organization (WTO), approximately 85% of the 11,000 products offered at zero tariffs by India to Least Developed Countries (LDCs) under the Duty-Free Quota-Free (DFQF) scheme remain unutilized, highlighting a significant gap between the potential benefits of the scheme and its actual impact on trade between India and LDCs. This underutilization points to the need for more effective outreach and support to ensure that these preferential trade opportunities are fully leveraged.

MCQs about The Duty-Free Quota-Free (DFQF) Scheme

  1. What is the main goal of the Duty-Free Quota-Free (DFQF) scheme?
    A. To impose tariffs on LDC exports to developing countries
    B. To provide Least Developed Countries (LDCs) with tariff-free access to global markets
    C. To restrict exports from LDCs to developed countries
    D. To eliminate trade restrictions for all countries, not just LDCs
    Correct Answer: B. To provide Least Developed Countries (LDCs) with tariff-free access to global markets
    Explanation: The DFQF scheme aims to give LDCs preferential market access by removing tariffs and quotas on their exports to developed and developing countries, helping them integrate more effectively into the global trading system.
  2. When did India first implement the DFQF scheme for LDCs?
    A. 2000
    B. 2005
    C. 2008
    D. 2014
    Correct Answer: C. 2008
    Explanation: India became the first developing country to offer duty-free access to LDCs in 2008, providing them with preferential access to 85% of its tariff lines.
  3. What is the main reason for the low utilization of the DFQF scheme, according to the essay?
    A. The scheme is too complicated for exporters to use.
    B. LDC exporters are not aware of the scheme and its benefits.
    C. The tariff-free products are too expensive for LDCs to produce.
    D. Developed countries are not participating in the scheme.
    Correct Answer: B. LDC exporters are not aware of the scheme and its benefits.
    Explanation: The essay highlights that a major reason for the low utilization of the DFQF scheme is the lack of awareness among exporters in LDCs about the preferential access they have to India’s markets.

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