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  March 20th, 2018 | Written by

US Challenges Indian Export Subsidy Programs at WTO

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  • USTR: Indian steel, pharmaceuticals, chemicals, tech, textiles, and apparel exporters benefit from subsidies.
  • USTR: Thousands of Indian companies receive $7 billion annually from subsidy programs.
  • USTR: “Export subsidies provide an unfair competitive advantage, and WTO rules expressly prohibit them.”

United States Trade Representative Robert Lighthizer has announced that the US has requested dispute settlement consultations with the Government of India at the World Trade Organization (WTO),  challenging Indian export subsidy programs.

The US alleges that through these programs, India provides exemptions from certain duties, taxes, and fees; reduces import duty liability; and benefits numerous Indian exporters, including producers of steel, pharmaceuticals, chemicals, technology products, textiles, and apparel.  According to Indian government documents, the USTR, says, thousands of Indian companies are receiving benefits totaling $7 billion annually from these programs.

The programs in question include the Merchandise Exports from India Scheme; Export Oriented Units Scheme and sector specific schemes; Special Economic Zones; Export Promotion Capital Goods Scheme; and a duty-free imports for exporters program. These apparent export subsidies, as the USTR calls them, “provide financial benefits to Indian exporters that allow them to sell their goods more cheaply to the detriment of American workers and manufacturers,” according to a USTR statement.

“Export subsidies provide an unfair competitive advantage to recipients, and WTO rules expressly prohibit them,” the statement went on to say. “A limited exception to this rule is 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.”

Instead of withdrawing its export subsidies, the US alleges that India has increased the size and scope of these programs.  India’s Merchandise Exports from India Scheme was introduced in 2015, and has expanded to include more than 8,000 eligible products, nearly double the number of products covered at its inception, according to the USTR.

Exports from Special Economic Zones increased over 6,000 percent from 2000 to 2017, and in 2016, exports from Special Economic Zones accounted for over $82 billion in exports, or 30 percent of India’s export volume, the USTR statement said. Exports from the Export Oriented Units Scheme and sector specific schemes increased by over 160 percent between 2000 to 2016.

Consultations are the first step in the WTO dispute settlement process.  If the US and India are unable to reach an agreed solution through consultations, the US may request the establishment of a WTO dispute settlement panel to review the matter.