Global trade war: India's export promotion schemes challenged by US at WTO

Possibly the first warning shots of a much talked about global trade war by the United States against India was visible on Wednesday when the Trump administration decided to challenge a plethora of India's export promotion schemes at the World Trade Organisation. Early on Thursday morning, US Trade Representative (USTR) Robert Lighthizer's office announced that the United States has requested dispute settlement consultations with India at the World Trade Organisation (WTO) challenging Indian export subsidy programs. These programs are the Merchandise Exports from India Scheme; Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme; Special Economic Zones; Export Promotion Capital Goods Scheme; and a duty free imports for exporters program. 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, the USTR says. “These export subsidy programs 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,” Lighthizer said. The US says that through these programs, India provides exemptions from certain duties, taxes, and fees; reduces import duty liability; and benefits numerous Indian exporters, including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel. It also refers to official figures by India saying that "thousands of Indian companies are receiving benefits totaling over $7 billion annually from these programs". A senior Commerce Department official said it is reviewing the petition and will respond accordingly soon. The crux of the matter Developed nations including the US has long argued that export subsidies provide an unfair competitive advantage to recipients, pointing out that WTO rules expressly prohibit them.

However, a limited exception to this rule is for specified developing countries that may continue to provide export subsidies temporarily until they reach a defined economic benchmark. India was initially within this group, but it surpassed the benchmark in 2015. The US now points to the fact that India’s exemption has expired, but the country has not withdrawn its export subsidies. In fact, India has increased the size and scope of these programs, it says, backing up its argument with data. "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." It further adds that exports from Special Economic Zones increased over 6,000 percent from 2000 to 2017, and in 2016, exports from Special Economic Zones accounted for over $82 billion in exports, or 30 percent of India’s export volume. Exports from the Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme, increased by over 160 percent from 2000 to 2016. Far larger game? However, experts caution that the US has its sights on a much larger target. “The US is playing a far larger game whereby it is on one hand petitioning the Dispute Settlement Body while also single-handedly and consistently blocking the appointment of judges to the seven-member panel. Currently, three members have retired and a fourth is set to retire soon,” senior trade expert and Jawaharlal Nehru University professor Biswajit Dhar said. India had repeatedly raised this issue during the last ministerial conference of the WTO at Buenos Aires in Argentina, with Commerce and Industry Minister Suresh Prabhu urging swift action to resolve the impasse. “This is part of a larger plan to destabilise the WTO structure and force India and other nations to come into a bilateral agreement with the United States,” Abhijit Das, head of the Centre for WTO Studies, said.