Macro Economy

Commerce Ministry to replace exportsubsidy schemes banned at WTO

Amiti Sen New Delhi | Updated on July 27, 2018

Trade hurdle Under WTO rules, a country can no longer offer export sops if its per capita GNI has crossed $1,000 for three years in a row   -  joxxxxjo

Legal team helping in re-designing schemes to ensure compatibility

The Commerce Ministry will soon be ready with a road map to replace export subsidy schemes incompatible with World Trade Organisation norms with ones that cannot be legally challenged at the multilateral organisation, a senior government official has said.

“Schemes that are being targeted by countries, including the US, at the WTO will be re-designed so that they do not lead to disputes being lodged against India. A competent team of trade lawyers is advising the group of officials, industry representatives and trade experts working on the new schemes,” a government official told BusinessLine.

While some re-designed schemes could be announced in a review of the Foreign Trade Policy in 2018-19, some may be replaced even before, the official said.

This is a difficult exercise as incentives can no longer be targeted at exporters alone and giving sops to all enterprises, whether domestic or export-oriented, could put a huge burden on the exchequer.

The Centre is in a hurry to put its house in order as the WTO’s Dispute Settlement Body (DSB) has already agreed to constitute a panel to rule on a US complaint on certain programmes in India, including the popular Merchandise Export from India Scheme, the Export Promotion Capital Goods scheme such as the Electronics Hardware Technology Parks Scheme and some Special Economic Zones incentives. Washington says the schemes don’t comply with existing rules.

Under existing WTO rules, a country can no longer offer export subsidies if its per capita GNI has crossed $1,000 for three years in a row. In 2017, the WTO notified that India’s GNI had crossed $1,000 in 2013, 2014 and 2015.

Phase-out time

While India refuted the US allegation by arguing that it should be entitled to a eight-year phase-out period, chances of the argument working in the dispute is weak as this demand has been ignored at the WTO since 2011.

“The team re-working the schemes is going through all WTO disputes on export incentives in details with the legal team to see what has been successfully challenged and which schemes have stood up to legal scrutiny,” the official said.

The Commerce Ministry will also hold discussions with the Finance Ministry once it has a plan in place as the alternative schemes would need ample funds.

“We do not want the level of compensation and incentives that exporters are getting at present to be reduced. While schemes will be re-designed, the support is likely to remain unchanged,” the official added.

According to the US complaint filed at the WTO, the targeted measures provide producers of steel products, pharmaceuticals, chemicals, information technology products, textiles and apparel with benefits to the tune of around $7 billion per year.

Published on July 27, 2018

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