The US Trade Representative (USTR) challenged Indian export subsidy schemes at the World Trade Organisation (WTO) by claiming that these programmes will harm American workers through creating an "uneven" playing field.
The USTR consulted the WTO in this matter. These consultations are the first step in the WTO dispute settlement process. If they do not reach to a jointly agreed solution through discussion, the US may left with only option to request the WTO dispute settlement panel to review the matter.
What’s the matter?
As per the USTR, financial benefits given to Indian exporters through at least half a dozen Indian programmes allow them to trade their goods more cheaply to the detriment of American workers and manufacturers.
They pegged these subsidies benefits at $7 Billion.
The USTR said that India has provided exemption from certain duties, taxes, and fees which benefits numerous Indian exporters, including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel through these programmes.
The programmes under which these benefits are provided 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 Duty Free Imports for Exporters Programme.
The USTR also said that India’s exemption under the WTO’s special and differential provisions for developing countries in 2015, New Delhi has expired but still it continued to do so and even raised the size and scope.
WTO’s special and differential provisions
The WTO Agreements contain special provisions which give developing countries special rights and which give developed countries the possibility to treat developing countries more favourably than other WTO Members until they reach a defined economic benchmark.
However, there are limited exception given to specified developing countries that may continue to provide export subsidies temporarily until they reach to a defined economic benchmark.
As per USTR, India was initially within this group, but it surpassed the benchmark in 2015. And hence India's exemption has expired, but India has not withdrawn its export subsidies.
According to US, 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 Special Economic Zones increased over 6,000 per cent from 2000 to 2017, and in 2016, exports from Special Economic Zones accounted for over USD 82 billion in exports, or 30 per cent of India's export volume.
The USTR said export subsidies provide an unfair competitive advantage to recipients.