Turning the heat further on India on trade issues, the United States has challenged India’s export subsidy programmes at the World Trade Organisation (WTO). The move comes close on the heels of a string of statements accusing India of “unfair” trade practices, by President Donald Trump. U.S. Trade Representative (USTR) Robert Lighthizer said Washington has requested dispute settlement consultations with the Government of India at the WTO on the issue. Mr. Trump had threatened to raise duties on products from India.
Unlike the many trade disputes between India and America that are sector specific or product specific, the new move by Mr. Lighthizer — a trade hawk closely in alignment with Mr. Trump’s nationalist economic policies — is broad and sweeping, in targeting the whole range of Indian export subsidy programmes.
A statement from the USTR listed 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 programme as distorting trade in a way that allows Indian exporters “to sell their goods more cheaply to the detriment of American workers and manufacturers.”
“These export subsidy programmes harm American workers by creating an uneven playing field on which they must compete,” said Mr. Lighthizer. “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.”
Mukesh Aghi, president of the United States-India Strategic Partnership Forum (USISPF), said the case would not alter the long-term trajectory of bilateral trade partnership. “As the relationship deepens, and volumes increase, disputes are natural. This is a normal dispute redressal mechanism that will run its course. Trade and defence ties between the countries will not be affected by this,” Mr. Aghi said.
“The U.S. has been imposing countervailing duties in response to all these Indian programmes already. The decision to take this to the WTO is a political move and qualitatively different from countervailing duties… Here the U.S. is trying to get a WTO order that will force India to discontinue these programmes rather than responding to them through counter measures,” said Moushami P. Joshi, trade lawyer at Washington law firm Pillsbury, where she advises sovereign governments on WTO disputes. Ms. Joshi believes the move could be a response to the recent tariff increases in the union budget. “Though India is still below bound duties mostly, the increases have considerably impacted U.S. exports to India. This is has created a lot of consternation here,” she said.
Richard M. Rossow, Senior Adviser and Wadhwani Chair in U.S.-India Policy Studies at the Centre for Strategic & International Studies agrees. “Trade ties have historically been testy, and are getting worse, at least from a government-to-government standpoint. Beyond anti-trade rhetoric from the Trump Administration, the government of India dramatically increased customs duties in nearly 50 product categories in its 2018-19 Fiscal Budget, which will certainly be another point of contention in future trade discussions,” he said.
Mr. Rossow also thinks the latest move is different from other disputes. “The U.S. and India regularly use the World Trade Organization as a platform to resolve trade disputes. Per the WTO website, there appears to be 16 active cases, with the U.S. being the complainant in 6, and the respondent in 10. However, most of these disputes are for a product or group of products, and less about India’s larger policy programmes. That has changed with the current dispute initiated by the United States, which raises concerns about multiple wider trade programs issued by the Indian government,” he said.
