At WTO, India under increasing trade fire
The
Indian Express
November 17, 2018
Australia’s move Friday to refer India to the World Trade
Organization (WTO) over subsidies paid to sugarcane farmers is the latest in a
series of challenges and reverses in recent months. The action comes on the
back of a November 12 filing by the US at the Geneva-based global trade
regulator alleging that India has paid out far more in cotton subsidies than
the WTO rules permit.
Days earlier,
on November 7, India lost a key trade dispute at the WTO after a settlement
panel largely upheld Japan’s complaint on the imposition of safeguard duty on
imports of hot-rolled steel flat products during September 2015 and March 2018.
Earlier, in 2016, the dispute settlement panel had ruled in favour of a US
complaint against the requirement that power producers under the Jawaharlal Nehru National
Solar Mission compulsorily procure a part of solar panels and modules for their
projects from domestic producers.
Trade analysts
point to the trend being a cause for concern, especially the increasing
intensity of action by countries and the leeway that this offers for other
nations to cite the penal action as a justification in their submissions.
Incidentally, the mounting list of trade disputes coincides with a phase when
India has resorted to well over a dozen hikes in customs duties covering over
400 items during the last 24-30 months, marking a “calibrated departure” from
the underlying policy of reducing import duty that was consistently followed by
successive governments over the last two decades. Prior to the large-scale
hikes, India’s peak customs duty — the highest of the normal rates — on
non-agriculture products had come down steeply from 150 per cent in 1991-92 to
40 per cent in 1997-98 and subsequently, to 20 per cent in 2004-05 and 10 per
cent in 2007-08.
“We’ll continue
to support the right of our sugar industry to compete on equal terms & will
utilise the established global trading rules to defend the interests of our
farmers,” Australia’s Trade Minister Simon Birmingham said in a tweet after
announcing the move. This, Australia claims, has created a global surplus that
is affecting its own farmers. Australia has submitted a ‘counter-notification’
to the WTO that is expected to be discussed by the Committee on Agriculture on
November 26 in Geneva. The next step would be a formal dispute action.
On September
27, the NDA government had approved a fresh Rs 5,538-crore package for the
sugar industry. A query on the issue sent to the Commerce Minister’s office on
the latest action initiated by Australia and series of actions earlier by other
countries did not elicit a response. India’s stated position on the issue is
that the country’s sugar exports comply with WTO rules as it does not extend a
subsidy to its farmers for exports, but instead gives a production subsidy.
“This (WTO
action) is a cause of concern, especially the increasing intensity of action by
countries,” Biswajit Dhar, professor, Centre for Economic Studies and Planning,
School of Social Sciences, Jawaharlal Nehru University, said.
The US’
contention in its November 12 WTO filing was that India has paid out far more
in cotton subsidies than the rules permit. “It appears that India provides MPS
(market price support) for cotton vastly in excess of what it has reported to
the WTO,” the US filing said. India has previously dismissed these allegations
and has demanded that MPS should be calculated by using the recent reference
period instead of 1986/88 prices, which was factored in at the time of the
creation of the WTO.
Besides cotton,
in an earlier consultations request by the US in the WTO during the second week
of March 2018, it listed 27 examples of Indian laws and regulations that it
claimed are WTO-prohibited export subsidies. In May 2018, the US submitted a
communication under provisions of the WTO Agreement on Agriculture (AoA) on
certain measures of India providing MPS to wheat and rice for the years 2010-11
to 2013-14. In this communication, Washington stated that India has
“under-reported” its domestic support provided for wheat and rice and
“breached” its commitments under the WTO AoA.
“The
calculations done by them, to support this claim is based, as per them, on
information available in the public domain and news reports. The US has,
however, clarified that the purpose of the counter notification is to
facilitate conversation and improve transparency. India has refuted the
calculations done in the US counter notifications as being flawed on technical
grounds and asserted that the methodology used by India in its domestic support
notifications is in accordance with the rules under the AoA,” a Commerce
Ministry official involved in the exercise said.
On November 7,
a three-member panel ruled that the safeguard duties imposed by India at
different periods during 2015 and 2018 are “inconsistent” with core provisions
of the WTO’s Safeguards Agreement. While WTO members are entitled to slap
safeguard duties to curb unforeseen surges in imports that cause material
injury to their domestic industries, there is a need to demonstrate that it is
a “sudden” and “sustained” spike in imports causing injury to its domestic
industry. Japan launched the dispute settlement proceedings against India last
year challenging the “definitive” safeguard duties imposed on imports of
hot-rolled steel flat products by the revenue department of the Indian finance
ministry during September 2015 and March 2018.
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