The World Trade Organization (WTO) has upheld a US complaint against India for wrongfully using more than US$7bn-worth of export subsidies to boost Indian exporters.
The case was filed in March 2018 by the US due to it expressing concern over Indian “export subsidy measures”.
The Office of the US Trade Representative (USTR) says the WTO panel which reviewed the matter has agreed that India is providing prohibited subsidies to Indian exporters worth billions annually, including to producers of steel products, pharmaceuticals, chemicals, IT products and textiles.
At present, WTO rules bar export subsidies that directly link to export volumes through, for example, low-cost loans or tax relief for domestic firms; however, it makes allowances for developing countries until they reach a certain economic benchmark. The USTR adds: “India was initially within this group, but it surpassed the benchmark in 2015. India’s exemption has expired, but India has not withdrawn its export subsidies.”
“This is a resounding victory for the United States,” says US trade representative Robert Lighthizer. He adds that the US is using “every available tool”, including WTO enforcement actions, to ensure American workers are able to compete on a “level playing field”.
Schemes that will be impacted by the WTO’s ruling include the Merchandise Exports from India Scheme (MEIS), the Export Oriented Units (EOU) initiative and sector-specific schemes, the Export Promotion Capital Goods (EPCG) programme and Duty-Free Imports for Exporters Scheme (DFIS).
The WTO panel has asked India to withdraw the concerned schemes within a period of 90 to 180 days – depending on the particular scheme. India can challenge the decision; New Delhi has a month to appeal against the order.
Tensions between the US and India have been rising, particularly as the Trump administration ended India’s preferential access to the US market under a scheme for developing countries earlier this year. The two countries have now been involved in stilted discussions to resolve these matters; but this latest event is sure to make a dent in any solid negotiations made.