US drags India to WTO over six export subsidy schemes

The Trump administration has mounted a fresh offensive against India by dragging it to the World Trade Organisation (WTO) for providing what it termed as export subsidies through half-a-dozen schemes, including SEZs and the Merchandise Exports from India Scheme.

HIGHLIGHTS:
1. The US argues that the subsidies violate WTO agreements
2. That's because India is no longer below the economic benchmark of $1,000 per capita gross national income
3. India argues that like with other countries previously, it should be allowed a transition period of eight years

In its request to hold consultations with India, the first step before legal action, the US has argued that the incentives violate WTO agreements as India is no longer below the economic benchmark of $1,000 per capita gross national income

“These export subsidy programmes harm American workers by creating an uneven playing field on which they must compete. 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,” US trade representative Robert Lighthizer said. The US has estimated the quantum of incentives offered by India at $7 billion.

While Indian authorities said they would respond to the US request for consultations within the specified 60 days, they argued that like other countries in the past, India should be allowed a transition period of eight years.

When the WTO was set up, developing countries that had a GNI of over $1,000 per capita were allowed eight years to wind up their export promotion schemes.

Our presumption is that India also has a similar period of eight years to graduate out of the subsidy regime and this is what we will be placing before the US. We are hopeful that they will recognise this time frame and during this time frame we will commit ourselves and meet our obligations,” commerce secretary Rita Teaotia told reporters, adding that India was not offering subsidies but many of the “incentives” were meant to neutralise the impact of taxes.

Besides, some other countries which achieved the benchmark later, such as Egypt and Sri Lanka, have been allowed the transition period, Indian officials said and accused the Trump administration of targeting India as part of a strategy focused on pleasing its domestic constituency.

US authorities have launched a multi-pronged strategy to address domestic concerns over job losses due to off-shoring of services and imports from countries such as China and India.

In recent months, visa rules for technology professionals have been tightened and import duties on several products have been increased, steel and aluminium being the most recent instances.

On the latest move, Indian officials pointed to the anomaly in the WTO treaties and said a country which had $950 per capita GNI may not be allowed a transition period, while a country above the threshold at the time the agreement came into force got eight years to wind up incentives.

Teaotia said that India had flagged the issue in 2011 itself. While the WTO had pointed out that India breached the benchmark in 2015, officials said, the eight-year transition period should be calculated from 2017, when the multilateral trade body pointed it out.

The US accused India of not just continuing with the incentives, which were allowed till the limit was exceeded in 2015, but said the government expanded the scope of the programme.(Source: The Times of India)