After Solar Power Dispute, US Challenges India's Export Subsidies at WTO

The Trump administration has claimed that the subsidies that the Modi government provides to Indian exporters negatively impact American workers and manufacturers.

New Delhi: Notwithstanding its growing strategic partnership with India, the US is not ready to show forbearance over the latter’s trading practices when it comes to protecting interests of its own industry.

After successfully challenging India’s domestic content requirement for equipment under the National Solar Mission, the US has again dragged India to the World Trade Organisation (WTO) dispute settlement body over alleged malpractices in its export regime.

Specifically, the US has sought WTO consultations with India over the latter’s export subsidy programmes – Export Oriented Units (EoUs) Scheme and sector-specific schemes including the Electronics Hardware Technology Parks Scheme, Special Economic Zones (SEZs), Export Promotion Capital Goods Scheme and a Duty Free Imports for Exporters Programme.

Consultations are the first step in the resolution of disputes at the WTO. If the US is not satisfied with India’s response, the WTO will set up a panel to hear the case.

The US has claimed that these apparent export subsidies provide financial benefits to Indian exporters that allow them to sell their goods more cheaply to the detriment of American workers and manufacturers.   

India provides exemptions from certain duties, taxes and fees that benefit numerous Indian exporters, including producers of steel products, chemicals, pharmaceuticals, textiles and information technology products, said Robert Lighthizer, the US trade representative (USTR).

“These export subsidy programmes harm American workers by creating an uneven playing field on which they must compete,” Lighthizer stated.

“USTR will continue to hold our trading partners accountable by vigorously enforcing US rights under our trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO,” Lighthizer added.

The office of the USTR said export subsidies provide an unfair competitive advantage to the companies that receive them and are prohibited under WTO rules.

A limited exception to the rule is provided for developing countries until they reach a specific economic benchmark, the USTR office said. It said India was initially within the group of developing countries but surpassed the economic benchmark in 2015.

The USTR said India has, in fact, increased the size and scope of these programmes. For example, it noted that India introduced the ‘Merchandise Exports from India Scheme’ in 2015, which has rapidly expanded to include more than 8,000 eligible products, nearly double the number of products covered at its inception.

Exports from SEZs increased over 6,000% from 2000 to 2017, and in 2016, exports from SEZs accounted for over $82 billion in exports or 30% of India’s export volume. Exports from the EOUs scheme and sector-specific schemes, including Electronics Hardware Technology Parks Scheme, increased by over 160% from 2000 to 2016, pointed the USTR.      

The US has complained to the WTO that India is in violation of Appellate Tribunal recommendations in solar case. Consequently, the multilateral trading body has agreed to set up a panel to examine whether India has complied with the tribunal’s ruling.

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