India files appeal against WTO panel report on export subsidies

India has filed an appeal against the World Trade Organisation (WTO) panel report which recently ruled that many of the country’s popular export promotion incentives were not in sync with multilateral trade rules and needed to be withdrawn. The case was initiated by the United States (US).

"India filed an appeal on November 19 concerning the WTO panel report in the case brought by the United States in “India — Export Related Measures”. The panel report was circulated to WTO members on October 31 2019," according to an official release.

In its ruling, the WTO panel had backed several claims filed by the US against export promotion measures adopted by India including the Merchandise Export from India Scheme (MEIS) and the Export Promotion Capital Goods (EPCG) scheme.

The US had claimed that since India's per capita Gross National Income (GNI) has increased beyond $1000 per annum, which is the threshold beyond which export subsidies are not allowed, many of its export promotion schemes flouted rules.

Washington alleged that government figures showed that thousands of Indian companies were receiving benefits totaling over $ 7 billion annually for its main export subsidy programmes was was providing an unfair competitive advantage to recipients.

As per the WTO panel recommendations, India needed to withdraw the "prohibited subsidies" under the MEIS, EPCG, Export Oriented Units Scheme/Electronics Hardware Technology Parks Scheme/Bio Technology Park Schemes, within 120 days from adoption of the report. For sops under the Special Economic Zones (SEZ) scheme, India has been given a period of 180 days.

New Delhi’s contention that it was exempted from the prohibition on export subsidies under the special and differential treatment provisions of the WTO Agreement on Subsidies and Countervailing Measures (SCM) was rejected by the panel.

"While India has plans to replace some schemes such as the MEIS with ones that are allowed under the WTO, it does not want to do so under duress. There are some other schemes which should be allowed to continue. India is going to fight its case on strong legal grounds," an official said.

The Appellate Body of the WTO, however, is likely to become dysfunctional from December 11 if the US continues to block the appointment of new judges, and a judgement on the case may get delayed. It usually takes around three months for a judgement to be delivered.

In case, the Appellate Body becomes dysfunctional and there is no alternative mechanism to resolve disputes, India is unlikely to be under the obligation of implementing the ruling of the WTO panel, an official said.