Trade and Energy Security: Legal Assessment of the Linkages and Implications for India

Abstract

Energy is an issue that is strategically important for all countries—whether they are inherently energy-surplus or energy-deficit countries. Most countries worldwide typically use export or import restrictions as well as pricing regulations in order to regulate energy production, consumption, and trade. The WTO framework does not address all the issues that arise in the context of trade in energy. Energy-related discussions are however likely to gain prominence under the WTO with the increasing presence of oil-producing countries becoming WTO members in the past decade. The Doha Ministerial Declaration also highlights the need for deeper discussions on several aspects impacting trade in energy. The North American Free Trade Agreement (NAFTA) and the Energy Charter Treaty (ECT) are two examples of legally binding instruments at the multilateral level that address the trade-energy linkage. Both the NAFTA and the ECT emerged in distinct and very specific economic contexts, and hence cannot be transposed into the WTO framework or that of a separate agreement on energy. Nevertheless, provisions of these instruments are instructive of the type of provisions that are likely to be negotiated in the event of any multilateral negotiations on energy. The domestic regulatory framework governing energy in India is largely liberalized. There has been a gradual dismantling of regulatory controls over the past decade, and an ongoing liberalization process which has significantly enhanced private participation in sectors such as electricity, petroleum, and natural gas. Disinvestment in public-sector enterprises is also another core area where significant progress has been made. Nevertheless, as will be discussed in this chapter, there are gaps between the Indian regulatory framework and the mandate specified under the NAFTA and the ECT. Any engagement in the trade and energy debate would need to be assessed from a strategic perspective of India as an energy-deficit country, whose enterprises are gaining significant interests in export of petroleum products, and in investment in oil and gas assets worldwide.

Views expressed are personal. The authors are grateful to Ishupal Singh Kang for his valuable research assistance. The findings of this chapter were presented at a workshop organized by the Centre for WTO Studies on 31 January 2013. The authors are grateful for the detailed discussions at the workshop and valuable comments from Abhijit Das, Atul Kaushik, Sajal Mathur, and James Nedumpara, which were instrumental in fine-tuning and refining this chapter.

Annex

Table 4.1 lists India’s tariff schedule commitments in the WTO for the energy products which are covered in the NAFTA and ECT. All the energy products have been listed according to their HS Code and the relevant data on bound tariff, applied tariff and preferential applied tariff has been provided in the corresponding columns. It is also important to note that the coverage of energy goods and products in NAFTA and ECT is predominantly similar. However, some minor differences may be observed. For instance, petroleum jelly; paraffin wax, micro-crystalline petroleum wax, slack wax, ozokerite, lignite wax, peat wax, other mineral waxes, and similar products obtained by synthesis or by other processes, have been mentioned in NAFTA but are not covered in the ECT. Similarly, products like fuel wood, in logs, in billets, etc., and charcoal are mentioned in the ECT but not in NAFTA. But since the analysis is based on both NAFTA and ECT, all the energy products covered by these two have been included in the table.

Table 4.1 India’s tariffs on energy-related products