How we cooked our goose at WTO

India lost two high-profile trade disputes at the World Trade Organisation recently — both to the US. These could be good case studies on how not to handle such matters.

In both the poultry dispute and the fight over domestic sourcing clause in the country’s solar power programme, it was a case of too many cooks spoiling the broth.

The bigger of the two botch-ups is, without doubt, the handling of the solar dispute. Two years ago in September, India gave up the opportunity of imposing anti-dumping duties on cheap solar panels imported from the US and China, despite the Directorate General of Anti-Dumping (DGAD) recommending such duties.

The finance ministry refused to notify the duties as the ministries of new and renewable energy (MNRE) and road transport and highways rallied against the move, arguing there wasn’t enough domestic manufacturing capability.

One might have imagined the US would, in turn, drop its case at the WTO against India’s domestic content norms in its national solar power generation programme (that it lodged in 2013 and again the next year) — but that did not happen.

Now, it would be quite naïve to paint the US as the villain of the story in the ruthless world of global trade. What is difficult to understand is: why did India not use the proposed anti-dumping duties to strike a deal with the US on domestic sourcing?

Levying anti-dumping duties following processes laid down by the WTO and after duly establishing dumping and injury to domestic industry is considered legitimate by the multilateral trade body. Therefore, deciding not to impose the anti-dumping duties without making the US give anything in return seems to defy common sense.

Possibly to ease its conscience, the MNRE, under Minister of State Piyush Goyal, decided to make things right for the domestic industry by stepping in to handle the WTO dispute with the US. With almost no experience in dealing with a powerful negotiator such as the US, the MNRE could make no headway. Officials in the commerce and industry ministry stepped back and watched quietly as MNRE failed to make any dent in the US resolve to make India withdraw its compulsory sourcing norms.

Arguments that the mandatory local sourcing of components was limited in scope, was part of government procurement and a small move to encourage the nascent domestic solar industry fell flat both with the US and the WTO.

Commerce ministry officials would tell journalists off-the-record how they distanced themselves from the negotiations as they did not want to be blamed for MNRE’s failure.

Such was the chasm that once commerce and industry minister Nirmala Sitharaman officially told reporters that they should direct all questions on the solar dispute to her colleague Piyush Goyal, as his ministry was handling the negotiations.

When the WTO announced its judgement early this year against India, Goyal saw red, launched a verbal tirade against America’s hypocrisy in media interviews.

He quoted from a commerce ministry study outlining the large number of programmes run by various US States such as California, Texas and Michigan which insisted on domestic sourcing.

India, however, realised that quoting such instances at the appeal filed by it against the WTO verdict on domestic sourcing would not really help in reversing the judgement (as two wrongs don’t make a right). It instead, decided to file a number of cases against the US’ domestic sourcing policy, and Sitharaman said as much in a Parliament reply.

While retaliatory cases would have certainly helped in sending the US the message that it should not play dirty with India, unfortunately, New Delhi is again dragging its feet. It is yet to make its move.

It is quite obvious, though, that India will not be able to continue with its domestic sourcing clause in the present form in the third phase of the ambitious Jawaharlal Nehru National Solar Mission (which seeks to generate 100 gigawatts of electricity annually from solar power by 2022).

The WTO’s verdict on India’s appeal is unlikely to be favourable in the absence of any fresh arguments. New Delhi has none but itself to blame for its predicament.

The second case that India lost recently at the WTO — the one related to the ban on import of US poultry — could also have been handled better, had the ministries worked in tandem.

The WTO ruled last year that India’s ban based on the risk of low-pathogenic (low intensity) avian influenza was unscientific and went against global norms. It was obvious to the commerce ministry that more genuine and convincing reasons would have to be found to continue with the ban.

New Delhi had one year to come up with newer justifications, as the WTO gave it a year’s time to weed out the older restrictions considered as unscientific.

Since the Department of Animal Husbandry officially notifies import restrictions on animal products, it became the nodal ministry to examine the validity of alternative reasons to stop imports, such as use of genetically modified feed by US farmers or the practice of deep freezing meat for months.

The commerce ministry remained involved in the exercise and held meetings with the poultry industry for a few months but lost interest (after another ministry was officially entrusted with the matter).

Unable to come up with anything new, the Animal Husbandry Department decided to lie low and continue with the ban even after the WTO deadline had lapsed.

The US, however, was not sleeping, and threatened India with economic sanctions after waiting for a few weeks. Just a day later, New Delhi, came up with a new notification removing the older restrictions, and not surprisingly it was not ready with any new barriers.

The lesson to be learnt from these two experiences is this: trade disputes have to be taken ownership of and handled jointly as a team by the responsible Ministries and departments and not as individual entities.

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