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USA drags India to the WTO

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The U.S. launched a challenge at the World Trade Organization against India’s export subsidies, arguing the programs give Indian companies an unfair advantage. A week after it threatened India with reciprocal taxes, the US has challenged practically almost entire India’s export programs. It has filed a complaint at the WTO about India’s export subsidy programs claiming them to harm American workers.

The challenge covers Indian programs including the Merchandise Exports from India Scheme, the Export Oriented Units Scheme, and the Electronics Hardware Technology Parks Scheme, U.S. Trade Representative Robert Lighthizer said Wednesday in a statement. 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.

Trump has openly criticized India for imposing high import duty on the iconic Harley-Davidson motorcycles and threatened to increase the import tariff on “thousands and thousands” of Indian motorcycles to the US.

“These export subsidy programs harm American workers by creating an uneven playing field on which they must compete,” said United States Trade Representative Robert Lighthizer, pegging these subsidies at $7 billion. As per the US administration, 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.”

 “These export subsidy programs harm American workers by creating an uneven playing field on which they must compete,” Lighthizer said in a statement. The US has sought consultations on the matter in the WTO. Consultations are the first step in the WTO dispute settlement process. If the two are not able to reach a mutually agreed solution through consultations, the US may request the establishment of a WTO dispute settlement panel to review the matter.

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The USTR alleged that despite the expiry of India’s exemption under the WTO’s special and differential provisions for developing countries in 2015, New Delhi has increased the size and scope of these programs.

The dispute is noteworthy given the Trump administration’s frequent criticism of the Geneva-based WTO, which was created in 1995 and hears disputes between countries over trade. The U.S. has blocked new appointments to the WTO’s appellate body, and President Donald Trump’s tariffs on steel and aluminum have caused hand-wringing in capitals around the world.

The complaint against India shows that, at least for the time being, the USTR sees the WTO dispute-settlement body as a viable forum for ensuring fair trade for U.S. producers.

It said 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.

Exports from SEZs increased over 6,000% from 2000 to 2017, and in 2016, exports from these zones accounted for over $82 billion in exports, or 30% 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% from 2000 to 2016, according to Washington.

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India has increased its allocation for international trade disputes four-fold to Rs1.2 crore in its budget presented by finance minister Arun Jaitley last month. India has so far launched 23 trade disputes at the WTO against other countries, while it is a respondent in 24 such cases. While India and the US have been strategic partners, both countries are fighting out on several issues at the WTO dispute settlement mechanism.

The USTR alleged that despite the expiry of India’s exemption under the WTO’s special and differential provisions for developing countries in 2015, New Delhi has increased the size and scope of these programs.

After consecutively losing two cases to the US at the WTO on its ban on the US poultry imports claiming bird flu fears and subsidy program for domestic solar panel manufacturers in 2015 and 2016, respectively, India took the US over Washington’s allegedly trade-restrictive measures by hiking professional visa fees and over domestic content requirements by several of its states in the energy sector.

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The Trump administration has time and again insisted that India is resorting to discriminatory trade practices, which have led to a large trade deficit for the US. However, India has been insisting that it conducts its trade policy in a non-discriminatory and transparent manner. Trump has openly criticized India for imposing high import duty on the iconic Harley-Davidson motorcycles and threatened to increase the import tariff on “thousands and thousands” of Indian motorcycles to the US.

The complaint against India shows that, at least for the time being, the USTR sees the WTO dispute-settlement body as a viable forum for ensuring fair trade for U.S. producers.


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