India Got Away With $7 Billion in Illegal Export Subsidies. WTO’s Putting an End to That.
Date: Monday, November 4, 2019
Source: Sourcing Journal
The dispute panel said India gives prohibited subsidies to producers of textiles, apparel, steel, pharmaceuticals, chemicals and information to the detriment of American workers and manufacturers.
“This is a resounding victory for the United States,” U.S. Trade Representative (USTR) Robert Lighthizer said. “The United States is using every available tool, including WTO enforcement actions, to ensure American workers are able to compete on a level playing field.”
USTR noted that according to the Indian government, thousands of Indian companies are receiving subsidies from these programs, which have increased in size and scope. For example, India has rapidly expanded the Merchandise Exports from India Scheme (MEIS) to include more than 8,000 eligible products, nearly double the number of items covered since its introduction in 2015.
Exports under the Special Economic Zones (SEZ) have increased more than 6,000 percent from 2000 to 2017 and in 2016 accounted for more than $82 billion in exports, or 30 percent of India’s export volume, according to USTR. Exports from the Export Oriented Units Scheme (EOU) increased 160 percent from 2000 to 2016.
WTO rules expressly prohibit export subsidies because they give an unfair competitive advantage to recipients. A limited exception to this rule exists 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. However, even though India’s exemption expired, the country did not withdraw its export subsidies.
In March 2018, the U.S. initially requested consultations with India concerning certain alleged export subsidy measures. A dispute panel was subsequently set up.
India argued before the panel that the special and differential treatment provisions still exclude it from the application of the prohibition on export subsidies. However, India did not dispute that it had graduated from the special and differential treatment provision that it originally fell under and the panel found that no further transition period is available to India, according to the WTO ruling.
The Indian programs found in violation of WTO rules were the MEIS, EOU and related sector-specific schemes, SEZ, Export Promotion Capital Goods Scheme and a duty-free imports for exporters program. The panel gave India six months to withdraw these prohibited subsidies.
“The withdrawal of these prohibited subsidies will result in American workers and manufacturers competing on a fairer basis with their Indian competitors,” USTR said.