India's Trade Overview



India is involved in a number of trade disputes at the WTO. US has challenged India’s export subsidy schemes like MEIS, citing that the country has crossed the US$ 1,000 GNI threshold for the third successive year and can no longer provide such subsidies. India’s subsidies for sectors like sugar, fisheries and solar panels as well as import duties for sectors like electronics, iron and steel have been challenged by other countries at the forum. The US has also challenged India’s retaliatory tariffs on 28 products. Some of the major disputes involving India at the WTO are as follows.

a. Disputes against India

(i) Tariff treatment on certain goods (India v/s Japan, EU)

On May 10, 2019, Japan has requested consultations with India regarding the tariff treatment that India allegedly accords to certain ICT goods. Tokyo accuses New Delhi of charging excess duties to give impetus to its local manufacturing. These tariffs, Japan has argued, counter India’s commitment of charging them at 0% (in consonance with the IT Agreement, 1996). India, however, has defended its move by arguing that the identified IT and telecom products on which import duties have been imposed did not exist in the present form when the agreement was signed. Therefore, they fall outside its jurisdiction. Other members like the USA and EU have also requested the WTO to join these negotiations and to side with Japan.

According to official sources, in February’20, India decided to block the European Union’s request for a dispute settlement panel at the World Trade Organization (WTO).

India had levied 10% customs duty on mobile phones and some other ICT products for the first time in July 2017 and subsequently increased it to 15% and eventually 20%. EU initiated dispute proceedings last year. It has alleged that New Delhi is levied excess tariffs than what it had committed to in its tariff schedule at the WTO. India, on its part, has insisted that most of the items identified by the EU and others were not covered under the Information Technology Agreement as these did not exist in 1996 and the tariff lines were not included in the agreement.

(ii) Measures concerning sugar & sugarcane (India v/s Guatemala, Brazil, Australia)

India’s domestic support (CVM) schemes and alleged export subsidies have led to a string of countries like Guatemala, Brazil and Australia to request WTO dispute consultations with India. While arguing its case, India asserted that the subsidies it provides are in the form of production subsidies, which are permitted under the WTO. The export subsidies, too, are given for production and marketing purposes, which are also permissible under the WTO rules. Furthermore, India opined that its exports of sugarcane are not significant enough to cause a surplus in the global market, as is being alleged by other WTO members.

After failing to reach a mutually agreeable position in its discussions with Australia, Brazil and Guatemala at WTO, it has been decided to set up dispute settlement panels to look into India’s sugar subsidies. However, India has rejected requests from the three countries for a single panel to oversee their complaints jointly on grounds that each case was distinct.

The three countries have argued that India’s sugar subsidies (like soft loans and subsidies, to maintain stocks of sugar, and tax rebates) are causing a global glut, depressing prices and are in breach of trade rules.

Plausibly, there would be one panel that would separately hold the proceedings to address the claims raised by each member country.

(iii) Export Related Measures (India v/s US)

On 14th March, US filed a request for dispute consultations with India in the WTO. The issue revolved around subsidies & CVMs. Various countries like Japan, Brazil, Canada, China, EU, Thailand, etc. supported the allegations of US. Since the parties failed to reach a consensus, the WTO has established a panel to resolve the dispute. What is particularly worrying for India is the large number of third parties that resonate with the US.

The squabble between US & India over the latter’s export promotion subsidies has been won by the US. WTO’s dispute settlement panel has ruled that these schemes violated several provisions of the WTO’s subsidies and countervailing measures agreement. The three-member dispute settlement panel comprising Jose Antonio S. Buencamino, Leora Blumberg, and Serge Pannatier stated that India must withdraw all the schemes within a time period of 90-120 days, after it is adopted by the WTO’s dispute settlement panel within a month (as required under the dispute settlement understanding). It also said “in cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment of benefits.”

However, Commerce and Industry Minister Shri Piyush Goyal said in a written reply to the Lok Sabha that India is not obliged to implement recommendations the World Trade Organization’s dispute panel has made about its export promotion schemes. The panel, in its October 31, 2019 report ruled that India’s export-related schemes (including for special economic zones or SEZ) are in the nature of prohibited subsidies under the Agreement on Subsidies and Countervailing Measures and are inconsistent with WTO norms. The country had appealed at the WTO’s appellate body after it was given 180 days to withdraw the SEZ scheme.

“Due to non-functioning of appellate body (of the WTO’s dispute settle mechanism), the appeal has been kept in suspension. Till the appeal is disposed of, India is under no obligation to implement the recommendations of panel,” the minister stated.

(iv) Measures related to solar cells & solar modules (India v/s US)

In this case, too, the US was supported by other countries like Brazil, Canada, China, EU, Japan, Norway, Ecuador, etc. The dispute dates back to 2013, when US alleged that the domestic content requirement of India’s Jawaharlal Nehru National Solar Mission for solar cells & solar modules are inconsistent with GATT. In 2016, the Dispute Settlement Body ruled in the favour of US. However, according to the latest developments, India has countered the WTO’s moves by seeking the establishment of a compliance panel to resolve the issue. India is trying to convince the panel that its rules are now compliant with the WTO ruling.

India won a case in June this year against the US on domestic content requirements and subsidies provided by 8 US states in the solar sector. However, India has challenged the ruling given by the WTO dispute settlement panel, according to a release by the trade body. While most of the verdict is in India’s favour, it has challenged some points in its communication, which reads, “India hereby notifies the dispute settlement body (DSB) of its decision to appeal to the appellate body certain issues of law and legal interpretation covered in the panel report entitled US – Certain Measures Relating to the Renewable Energy Sector which was circulated on 27 June 2019.” It adds, “The panel erred in holding that India did not make a prima facie case that the Minnesota solar thermal rebate under measure 10 had ongoing effects, and therefore, constituted a matter before the panel that required examination in order to provide a positive solution to the dispute.” 

(v) Measures on Imports of Iron and Steel Products (India v/s Japan)

On 20 December 2016, Japan requested consultations with India relating to certain measures imposed by India on imports of iron and steel products into India. Since bilateral talks didn’t prove fruitful, Japan requested the establishment of a panel to look into the issue in March’17. Meanwhile, a group of countries like Australia, US, Ukraine, China, EU, Indonesia, etc. became third parties to the row. The Novemeber’18 ruling upheld Japan’s view regarding the safeguard duty imposed by India on steel imports.

b. Disputes filed by India

(i) Measures on Steel and Aluminium Products (India v/s US)

India alleged that some of the measures practised by the US flout the provisions of the Agreement on Safeguards & GATT. China, Russia, Hong Kong, EU, Mexico, Thailand, etc. joined the consultations. India also claims that the imposition of high import duties on aluminium & steel items by the US has impacted exports of these products by Indian businesses. India has alleged that the US move is also not in compliance with global trade norms.

(ii) Measures Relating to the Renewable Energy Sector

On September 9, 2016, India requested consultations with the United States regarding certain measures of the latter relating to domestic content requirements and subsidies instituted in the energy sector. It argued that these subsidies contravene the provisions of TRIMS, GATT & SCM. In a massive development, India defeated the US at WTO in a case concerning America’s domestic content requirements and subsidies provided by eight states in the renewable energy sector. The panel concluded that 10 measures implemented by the U.S. pertaining to renewable energy sector are incompatible with its obligations under GATT 1994.