security: Protectionism 2023? Not quite so PC

Licensing of computer imports on grounds of security does not constitute a breach of WTO rules, unless contested. Security restrictions are commonplace for countries to impose non-tariff trade barriers. India’s notification this week requires importers of IT hardware to obtain a permit from the Directorate General of Foreign Trade (DGFT), which promises to issue these expeditiously. Whiffs of protectionist-era India when ‘if you couldn’t beat or join them, block them’? Not quite. No additional tariffs are being imposed on laptops, tablets and PCs in step with GoI’s efforts to secure personal and enterprise data from hardware breaches. The intent is to ensure IT hardware is entering the country from trusted partners. Most big PC-makers like Dell, HP and Lenovo have a manufacturing presence here and will require additional clearance to import products manufactured abroad.

Coincidentally, all the big PC-makers apart from Apple are participating in the government’s PLI plan directly or through contract manufacturers. Since over half the import shipments by value originate in China, PC-makers would be nudged by India’s import licensing to speed up their supply chain diversification. India has made progress in the export of mobile handsets after raising import tariffs and pushing local manufacturing. The argument was that cellphones were not part of the list of electronic items India had signed up to eliminate tariffs. A WTO resolution panel has found India in breach on that score, but China was not a party to the dispute.

Instead, Apple had to involve its Chinese vendors to help build its manufacturing base in India. PC-makers have had time to build their supply chains in India and may not need hand-holding by their Chinese suppliers. IT hardware imports constitute a small part of India’s trade with China, which will have little reason to object to heightened protection. India is also trying to sway the argument within the window that PC-makers have to finalise their China-plus-one strategy.