US threatens to drag India to WTO dispute settlement panel on export incentives

United States has stepped up its attack on India's export friendly policies by alleging that the key programmes and incentives that India offers are creating an uneven playing field for US companies and workers.

This is despite the fact that Indian exports to United States consists of just 2.1 percent of the overall goods imports of that country.

In a statement, U.S. Trade Representative (USTR) Robert Lighthizer said that all key export promotion programmes of India, 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 programme are all  providing financial benefits to Indian exporters that allow them to sell their goods more cheaply to the detriment of American workers and manufacturers.

USTR requested dispute settlement consultations with the Government of India at the World Trade Organization (WTO) challenging these programmes. "USTR will continue to hold our trading partners accountable by vigorously enforcing U.S. rights under our trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO," Lighthizer said.

USTR data indicates that U.S. goods imports from India totaled $46.0 billion in 2016, up 2.7 percent ($1.2 billion) from 2015. U.S. imports of services from India were an estimated $26.8 billion in 2016, 8.6 percent ($2.1 billion) more than 2015.  The top import categories in 2016 were precious metal and stone (diamonds) ($11 billion), pharmaceuticals ($7.4 billion), mineral fuels ($2.4 billion), miscellaneous textile articles ($2.3 billion), and machinery ($2.1 billion). Leading services imports from India to the U.S., in 2015, were in the telecommunications, computer, and information services, travel, and research and development sectors.

India's export friendly programmes that have been challenged by the US have been supporting the exporters of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel.

USTR said that India is no longer eligible for the exception provided in WTO to specified developing countries to offer such export subsidies as it has crossed the economic benchmark limits.  "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", the statement said.  

It also alleged that India has increased the size and scope of these programmes. "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 also points out that India's 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.  Similarly, 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.       

Consultations are the first step in the WTO dispute settlement process. If the United States and India are not able to reach a mutually agreed solution through consultations, the United States may request the establishment of a WTO dispute settlement panel to review the matter.