WTO panel’s ruling against US duties on Chinese items encouraging for India, say experts

Amiti Sen New Delhi | Updated on September 16, 2020 Published on September 16, 2020

Washington had increased import duties by 25 per cent on several items from China.   -  istock/Zerbor

US investigations against India’s digital tax, criticism of IP regime may not hold at WTO

The World Trade Organization dispute panel’s decision, notified on Tuesday, against unilateral import duties imposed by the US on certain Chinese goods based on the findings of the US 301 report, is encouraging for India which has faced threats of similar action by Washington for its digital taxes and IP rules, say experts.

The decision of the WTO panel is a shot in the arm for India which has been receiving criticism and warnings from the US for deciding to impose digital taxes and not removing certain provisions from its intellectual property regulations, pointed out Abhijit Das from the Centre for WTO Studies.

“We need to hold on to our ground firmly on our decision on imposition of digital tax. The entire proceedings initiated by the US under its Section 301 (Trade Act 1974), and any action taken pursuant to it, will totally be in violation of WTO rules,” said Das.

In a decision notified on Tuesday, a dispute panel at the WTO ruled that the US broke international rules when it imposed tariffs on Chinese goods in 2018. Washington had increased import duties by 25 per cent on several items from China.

The tariffs were authorised under Section 301 of the Trade Act of 1974 (of the US), which empowers the President to levy tariffs and other import restrictions whenever a foreign country imposes unfair trade practices that affect US commerce. Washington had claimed that the tariffs were necessary to confront China’s widespread violations of intellectual property rights and forced technology transfer policies.

In its report, the panel said the US had not met its burden of demonstrating that the measures are provisionally justified.

“The panel’s report leaves little scope for unilateral action against any country, including India, by the US or any other member. A panel will certainly examine if there is a nexus between public morale and the action take,” pointed out K M Gopakumar from the Third World Network. He added that if it cannot be proved, like in the case of the US and China, it would be judged inconsistent with WTO rules.

In June this year, the US Trade Representative’s office had announced that it will start Section 301 investigations against India and nine others for imposing or considering digital services taxes that may affect American companies. India was targeted for announcing a two per cent tax on all non resident e-commerce companies that sell more than ₹2 crore ($267,000) of in-scope goods or services to Indian customers in the Union Budget for 2020-21, according to the order.

‘Priority watch list’

Moreover, in its Special 301 report, India has been continuously identified by the US as a ‘priority watch list’ country and as one of the world’s most challenging major economies with respect to protection and enforcement of IP. The US wants India to change its IP laws, especially those denying patents on items that have undergone only small changes over their previous versions (described as ever-greening of patents).

“The US is sure to challenge the panel ruling and the matter may stay suspended due to the dysfunctional Appellate Body of the WTO, yet it could help India in arguing its case better when it discussed issues with the US bilaterally,” another Delhi-based expert pointed out.

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Published on September 16, 2020
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