WTO Current Affairs

US challenges India’s export subsidy programmes at WTO

The US Trade Representative (USTR) has challenged Indian export subsidy schemes at World Trade Organisation (WTO), saying these programmes harm its manufacturing sector and workers by creating an uneven playing field.

Key Facts

According to USTR, at least half a dozen Indian programmes provide financial benefits to Indian exporters, which allow them to sell their goods more cheaply to detriment of US workers and manufacturers. These programs are Merchandise Exports from India Scheme (MEIS), Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme, Special Economic Zones (SEZs), Export Promotion Capital Goods Scheme (EPCGS) and Duty Free Imports for Exporters Programme.

It has alleged that through these programmes, India has given exemption from certain duties, taxes, and fees which benefits numerous  exporters, including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel.

It also has alleged that earlier India was under limited exception rule under WTO specified for developing countries. It allowed specified countries to continue to provide export subsidies temporarily until they reach defined economic benchmark. But now it has surpassed benchmark in 2015. India’s exemption has expired, but India has not withdrawn its export subsidies and in fact it has increased size and scope of these programs.

Background

The US administration under President Donald Trump has taken various protectionist measures in an attempt to bring down its trade deficit from around $800 billion annually. For this, it is holding its trading partners accountable by vigorously enforcing US rights under various trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO. Earlier in March 2018, the Trump administration had announced tariffs of 25% and 10% on all steel and aluminum imports citing national security issue.

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WTO to set up compliance panel in solar dispute case between India, US

The dispute settlement body (DSB) of World Trade Organization (WTO) has decided to set up panel to examine whether India has complied with its 2016 ruling in case against US regarding domestic content requirements (DCR) rules for solar cells and modules.

Background

In 2016, the multilateral body had ruled against India for favouring local manufacturers in its solar power programme, on petition filed by US. But after ruling, US had alleged that India continues to apply WTO-inconsistent measures and had approached WTO demanding action against India for non-compliance of WTO ruling in December 2017. India, however, has maintained that it has complied with WTO’s ruling and had requested WTO to set up a panel to determine its compliance with rulings of dispute.

What is the issue?

In 2013, US had filed complaint before WTO, arguing that domestic content requirement imposed under India’s ambitious Jawaharlal Nehru National Solar Mission (NSM) violates global trading rules by unfavourably discriminating against imported solar cells and modules. In February 2016, WTO panel had ruled that India had violated its national treatment obligation, by imposing the domestic content requirement. US had claimed that its solar exports to India have fallen by more than 90% since India had brought in the DCR rules.

Dispute Settlement Body (DSB)

WTO is an intergovernmental organization that regulates international trade. General Council of WTO convenes as DSB to deal with disputes between WTO members. Such disputes may arise with respect to any agreement contained in Final Act of Uruguay Round that is subject to Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).

The DSB has authority to establish dispute settlement panels, refer matters to arbitration, adopt panel, Appellate Body and arbitration reports, and maintain surveillance over implementation of recommendations and rulings. It can also authorize suspension of concessions in event of non-compliance with those recommendations and rulings.

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