India is contemplating to move the World Trade Organisation (WTO) against a US health and compensation Act,which levies a two per cent tax on all goods and services procured by the US from countries not party to an international procurement agreement with it.
The James Zadroga 9/11 Health and Compensation Act of 2010,signed by US president Barack Obama on January 2,2011,is seen to violate the very premise of the WTO which calls for Most Favoured Nation (MFN) and national treatment obligation to countries which are a part of the world trade body.
The 2 per cent levy on goods and services is going to hurt India because we are a marginal player in the US procurement. Hardly one per cent of Indias total export (as per the latest figures available) forms part of the US procurement and the new levy will lead to loss of opportunities for India vis-à-vis countries which are in the WTO government procurement agreement (GPA) with the US, the sources said.
The exact financial impact of these provisions on Indian firms is yet to be known. According to the act,an additional tax of 2 per cent is imposed on any foreign person that receives federal procurement payments.
However,countries with which the US has a GPA or bilateral agreement will not be impacted by the act. Thus developed countries which have a GPA with the US will be cushioned against the new levy.
However,developing nations like India would be at a disadvantage.
Countries which are member of WTO have to give MFN treatment to other member nations as per the General Agreement on Tariffs and Trade (GAAT),which says that any advantage,favour,privilege or immunity granted by any WTO member to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other WTO members.
However,the James Zadroga Act violates the MFN provision by discriminately applying it to foreign countries like India which are not in a GPA with the US. The national treatment obligation as provided by GAAT is violated by the present act.
Earlier,industry bodies including CII have already slammed the protectionist measures by the US to raise funds for compensating victims of 9/11 terrorist attacks,along with slew of other measures by the US.
The US steeply hiked visa fee on Indian software professionals under the Border Security Bill moved in August 2010 to fund border protection between the US and Mexico.
Ohio States ban on off-shoring projects,foreign manufacturers legal liability and accountability are other few protectionist measures taken by the country to boost and protect domestic industry.