US criticizes India at WTO over increasing restrictions on trade

In the first instance of US President Joe Biden’s administration expressing its views on India’s trade policy, Washington criticized New Delhi at the World Trade Organization (WTO) over its growing protectionist measures including tariff hikes, domestic testing requirements on imports, restrictive rules in e-commerce and cross-border data flows.

The US comments come at a time when India is seeking to make a fresh beginning with the US on the trade front after four acrimonious years under the administration of then President Donald Trump. India’s trade minister Piyush Goyal has hinted that both sides may work to put together a new trade package, junking the one under negotiation with the previous administration.

During India’s 7th latest Trade Policy Review (TPR) at the WTO, the US side said it is disappointing to see India’s restrictive trade measures, urging it to significantly reduce tariffs and remove non-tariff barriers on imports. “For example, since India’s last TPR, India’s simple average MFN applied tariff rate has increased from 13.5% in 2015 to 17.6% in 2019, according to the WTO tariff profiles. This will not facilitate India’s integration into global supply chains,” the US said. India’s TPR was released in January, but the minutes of the discussions were released last week.

Brajendra Navnit, India’s ambassador to the WTO countered the US view, holding that it has been undertaking regular tariff liberalization like other WTO members and its tariffs are within its WTO commitments. “India’s average bound MFN rate for all products is about 50%, while the applied rates are much lower. I wish to assure the membership that extensive deliberations and well laid out policy modalities and contours ensure that India’s tariff changes are transparent and rational, and thereby provide a stable policy environment,” he said.

The US said it has also seen a recent increase in measures that could create technical barriers to trade in other sectors, including in information and communication technology products, medical devices, and chemicals. “India continues to expand the list of products required to undergo conformity assessment only in India. Such testing requirements and mandatory quality control orders that are not in line with international standards continue to limit India’s ability to attract investment,” it said.

Navnit clarified that most of India’s technical regulations rely on international standards and are implemented in close consultation with all stakeholders. “None of these measures are discriminatory or create any unwarranted obligations that could be termed as trade barriers. They are also equally applicable to both domestic and foreign manufacturers,” he said.

The US complained that while India has benefited from access to WTO members’ services markets around the world, India prohibits or significantly limits foreign participation in sectors such as retail, e-commerce, and insurance. “The digital economy is also a powerful force for domestic and global economic growth, but India has implemented digital trade barriers that likely will undermine that growth. The US encourages India to refrain from introducing barriers to digital trade, including restrictions on cross-border data flows and data localization requirements,” it said.

India said member countries should not be forced to pre-maturely bind themselves to international e-commerce rules at this stage, when most related issues are not fully understood. “Developing countries and LDCs need to focus on improving their domestic physical and digital infrastructure to bridge the digital divide and enable benefits of digitalization to be equitably shared,” Navnit said.