The U.S. has launched a trade challenge against almost all of India’s export subsidy programs at the World Trade Organisation in its latest protectionist move, coming soon after President Donald Trump threatened retaliatory duties on countries that export more to the U.S. than they import from it.
"These export subsidy programs harm American workers by creating an uneven playing field on which they must compete," U.S. Trade Representative Robert Lighthizer said in a media statement on the USTR website.
"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 added.
The programs listed in the statement are:
- Merchandise Exports from India Scheme
- Export Oriented Units Scheme and sector specific schemes
- Electronics Hardware Technology Parks Scheme
- Special Economic Zones
- Export Promotion Capital Goods Scheme
- Duty free imports for exporters program
Through the mentioned programs, India provides exemptions from certain duties, taxes and fees; reduces import liability and benefits numerous Indian exporters including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel, the statement said.
The USTR has computed the benefit to Indian exporters at over $7 billion every year from these programs, the statement added citing documents from the Indian government.
Earlier this month, Trump potentially triggered a global trade war after he imposed tariffs on imported steel and aluminium. The announcement was met with stern reactions from across the world, including the European Union, which has threatened to slap a retaliatory tariff on everything from American jeans to whiskey and even the iconic Harley Davidson bikes. China, which Trump branded as a “strategic competitor” has also warned of a “justified and necessary response”.
The metal tariffs have little impact on India as it is only a minor exporter of the two metals to U.S.
But this offensive against several export incentives is likely to elicit a strong reaction from the Indian government.
The WTO allows certain developing countries, like India, to offer export subsidies till they reach a defined economic benchmark, said the USTR statement. The WTO's provisions say that export incentives can be provided by countries where gross national income per capita is less than $1,000 per annum at the 1990 exchange rate, according to information on its website. The incentives can only be given to a sector that has a share of less than 3.25 percent in global exports.
The USTR claims that India surpassed the benchmark in 2015 and its exemption has expired. Yet the country has not withdrawn its export subsidies, it alleges.
As the USTR statement details, if the U.S. and India are not able to arrive at a settlement on these via consultations, “the United States may request the establishment of a WTO dispute settlement panel to review the matter”.
The WTO is the arbiter of international trade disputes for member countries such as India and the U.S. Currently India has been or is involved in over 170 WTO disputes, according to data on the trade organisation’s website - in 23 as the complainant, in 24 as the respondent and in over 125 India has had third party involvement. Sixteen of these involve the U.S., next only to the 20 disputes with the European region.
Watch this discussion with Jayant Dasgupta, former Indian ambassador to the WTO.