Background

The Office of the U.S. Trade Representative reports that a World Trade Organization dispute panel has agreed that India provides prohibited export subsidies worth more than $7 billion annually to Indian producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel. The panel gave India between three and six months to withdraw these prohibited subsidies, but its decision can be appealed. If that occurs, a final resolution of the case and any resultant U.S. trade sanctions against India could be delayed indefinitely because the Appellate Body is expected to cease operations in December due to an insufficient number of confirmed judges.

According to USTR, the Indian programs found in violation of WTO rules are the merchandise exports from India scheme; the export-oriented units scheme and sector-specific schemes, including the electronics hardware technology parks scheme; special economic zones; the export promotion capital goods scheme; and a duty-free imports for exporters program. USTR states that India has increased the size and scope of these programs; e.g., the MEIS covers nearly double the number of products now as when it was introduced in 2015, exports under the SEZ increased more than 6,000 percent from 2000 to 2017, and exports under the EOU increased by more than 160 percent from 2000 to 2016.     

USTR notes that while there is a limited exception to WTO rules prohibiting export subsidies for specified developing countries that do not exceed a defined economic benchmark, India surpassed that benchmark in 2015 and did not withdraw its export subsidies. According to USTR, the WTO panel report rejected India’s assertion that it is entitled to additional time to provide export subsidies.

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