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.