Geneva: India is set to lose a major trade dispute with the US at the World Trade Organization (WTO).

A WTO dispute settlement panel has upheld a US complaint that export subsidy programmes provided by the Indian government violated provisions of the trade body’s subsidies and countervailing measures (SCM) pact, several people familiar with the final ruling said on condition of anonymity.

The ruling, which has been shared with the two parties in the dispute, will be released to all the WTO members around 10 October.

The three-member dispute settlement panel comprising Jose Antonio S. Buencamino, Leora Blumberg and Serge Pannatier has struck down Indian export promotion schemes on the grounds that India is not entitled to provide such subsidies because its per capita gross national product (GNP) has crossed $1,000 per annum, said one of the people cited above.

Once the panel’s final report is made public, India will have a month to challenge the ruling before an appellate body, the highest court for global trade disputes. If the appellate body upholds the panel’s ruling, India will be required to discontinue the existing export promotion schemes.

The programmes that could be affected are export-oriented units scheme, electronics hardware technology parks scheme, bio-technology parks scheme, merchandise exports from India scheme, export promotion capital goods scheme, special economic zones and duty-free imports for exporters.

(Photo: Bloomberg)
(Photo: Bloomberg)

In 2018, the US complained that India’s export-related programmes violated Article 3.1(a) of WTO’s SCM agreement. Under Article 3.1, developing countries with gross per capita of $1,000 per annum are not entitled to provide export subsidies that are contingent upon export performance.

India has maintained that in 2015 it had announced it would discontinue export subsidies soon. Subsequently, the government made another announcement in 2017 that it would end the export subsidies. Despite these pronouncements, the government has continued with export subsidies.

The ruling comes at an opportune time for Washington, which is piling pressure on New Delhi to open the Indian market for medical products, particularly heart stents and knee implants, dairy items and other products, as part of an interim trade deal, according to a legal analyst, who asked not to be identified.

With WTO’s appellate body set to become dysfunctional from 11 December because of a US decision to block the selection process for filling six vacancies at the appellate body, it remains to be seen how India’s challenge against the panel ruling will be adjudicated, said another legal analyst who asked not to be named.

“We are now entering a dark phase of adjudication of trade disputes at WTO in the absence of the appellate body," the legal analyst said.

Though the US has scored a significant victory against India, Washington has not implemented the appellate body’s ruling in favour of India against the US’s countervailing measures for carbon steel products until now.

A compliance panel is expected to issue its report whether the US fully implemented the findings of the appellate body in the case.

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