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India and WTO

Introduction

WTO provides with a rules based system and a level playing field where every country has an equal voice. WTO provides a sense of predictability in the trade regime and gives a sense of security to small economies.

India was a founding member of GATT and due to its high stakes, it has been one of the most active members of the WTO since its creation in 1995. More so after 1991 when the Indian economy underwent a reform, from being an inward looking economy to liberalization, privatization and globalization. India interacts with the World Trade Organisation as a developing country and also as one of the world’s large economy which is consistently growing. So, India’s relation with WTO can be understood by keeping these two roles in mind. Its stand reflected its domestic philosophy and it has always been vocal for the needs of developing countries.

India and WTO

India has been drawn in many trade disputes at the WTO. Indian export subsidy schemes like MEIS has been challenged by the US. Many other countries have criticized India’s subsidies for sugar, fisheries and solar panels and import duties for sectors like electronics, iron and steel.

Japan, in 2019, questioned India on the tariff treatment that India allegedly provides to some ICT goods. It accuses India of charging excess duties to benefit the domestic manufacturers. According to Japan, the excess charges go against the IT Agreement, 1996 under which India committed to charge that at 0%. India has defended itself by pointing out that the products on which the charges were removed have changed since the agreement was signed.

Countries like Guatemala, Brazil and Australia have raised concerns regarding India’s domestic support schemes and export subsidies. India’s reasoned that it provided subsidies in the form of production subsidies which the WTO permits. India also added that the export of Indian sugarcane are too small in quantity to cause any disruptions. As no mutually agreeable position could be reached with Australia, Brazil and Guatemala, dispute settlement panels will be set up to look into India’s sugar subsidies.

US has also requested for dispute consultations with India related to issues like subsidies and countervailing measures. These allegations of US have been supported by countries like Japan, Brazil, Canada, China, EU, Thailand, etc.  Another dispute between US and India regarding latter’s export promotion subsidies was won by the US.

In 2013, the US had also raised objection against the domestic content requirement of India’s Jawaharlal Nehru national Solar Mission for solar cells and solar modules, on the basis of being inconsistent with GATT. In 2016, the dispute was ruled in favour of the US but India has responded by asking for a compliance panel to review that its rules are now compliant with the rules.

On the other hand, India won a case against US on domestic content requirements and subsidies provided in the solar sector by the eight US states.

India too has filed many objections against several economies. India had alleged that some measures taken up by the US are against the provisions of Agreement on Safeguards and GATT. India was joined by several countries like China, Russia, Hong Kong, EU, Mexico, Thailand. India has also condemned the high import duties imposed by the US on aluminum and steel items which has impacted Indian businesses.

India defeated the US in the case regarding domestic content requirements applied in America and subsidies provided by some states in the renewable energy sector. The issue was raised in 2016 and the panel accepted that measures implemented by the US in the renewable energy sector are incompatible with GATT.

In December 2021, a dispute settlement panel declared that India was violating its commitment under agreement on Agriculture by providing price support to its sugarcane farmers and export subsidies to sugar. The reality is that developed countries continue to give their farmers subsidies which also increase consistently.

The 12th Ministerial Conference

WTO failed to consider and discuss the topics concerning the developing countries. Instead, they brought in new issues like e-commerce small and medium enterprises, and investment facilitation.

Most of these issues will have immense impact for Indian agriculture. For instance, after investment facilitation countries will have to give market access in the form of multilateral agreement on investment. This might end up in land grabbing and can impact environmental conservation processes. Introduction of e-commerce policy will also have impact on developing countries. Big companies which already have control over data will start control the agriculture and its stakeholders like the government and the farmers themselves.

The significant issue that was discussed was on fisheries, and an Agreement was adopted on the same to check on the harmful subsidies and the TRIPS waiver. It should be mentioned that India took the role of global leadership during the discussions. From early on, India had been on the forefront to make sure that the current and future need of developing countries are sustained. India demanded an effective implementation of the special and differential treatment as provided by the Marrakesh Agreement. Developed countries argue that large quantity of fisheries subsidy is the reason for overfishing and depletion of fishes. On the other hand, for the developing countries it is a matter of the livelihood of numerous resource-less fishermen. Moreover, India wants to ensure that the countries which are actually responsible for the degradation of the water bodies should pay.

The introduction of non-trade issues like labour laws and environment protection laws in the WTO negotiations are seen to be increasing the disadvantage faced by countries like India. the disadvantage comes from the poor infrastructure that comes inherently with the developing countries due to lack of technologies and capital. These countries are in the process of developing their infrastructure and it would be unfair to put restraints on them at this moment. India’s stand is that there are already various bodies concerning these issues, hence they should not be linked to trade.

The 12th ministerial conference also discussed the joint proposal of India and South Africa to waive Intellectual Property Rights on several diagnostic, therapeutic medicines and vaccines. Although India is one of the leading countries in the pharmaceuticals industry but most of the developing nations are unable to access the medicines which are patented and sold at high rates. The proposal adopted by the WTO only provides a minor tweak in the rule and unrealistically presumes that the developing countries will first have the capacity and the handholding which is required for making even the compulsory license to be issued and the vaccines to be manufactured. This provision is seen to be only on paper by most developing countries.

India has pointed out the failure of the WTO in addressing the issues of hunger and food security in the developing countries and it also proposed a food stockpiling program. This problem has been hanging since the Bali Ministerial Conference. Unfortunately, countries with interest in agricultural trade have been stalling the process of coming to a permanent solution. India, at the moment, has only managed to bring in the ‘Peace Clause’ which says that no developing country can be challenged in the dispute settlement mechanism for providing subsidies to its farmers exceeding the 10%. This was arrived at the Bali ministerial conference and will continue until a permanent solution is derived. The peace clause comes with lot of conditionality which are stringent. India at this moment does not have a major issue with them but many developing countries which want food security for its people by introducing a PDS like program cannot introduce a new one nor can they introduce a subsidy for a new crop. Hence, these countries are adding power to India’s voice demanding global equality.

India and the Dispute Settlement Mechanism

Today, the WTO is facing multiple unprecedented challenges. The war of trade and tariff is crossing over the established rules of trade. These wars are getting fierce day by day due to multiple reasons such as the economic rivalry between the US and China, rise in protectionist tendencies, and the inability of the developing and the developed countries to come to terms on the outline of the future of trade negotiations.

India is a developing state and its economy is ever branching and growing. In this situation, India has to tackle many conflicts as seen above, hence India has always sought to improve the dispute settlement mechanisms. The dispute settlement mechanism which has been called the crowing jewel of WTO has been threatened by US taking an uncompromising stand. This has left WTO hanging with its legitimacy under question.

The dispute settlement mechanism exists to resolve trade disputes between the members. The US has been blocking the appointment of new members to the Appellate body, which is a seven-member organ which adjudicates appeals within the dispute settlement mechanism. This has made the organ virtually dysfunctional. And this would lead to countries indulging in unilateralism, threatening the global trade and cooperation.

India needs to ensure that the mechanism survives which is directly linked to the interests of many poor and developing countries.

Conclusion

India has been a strong votary of multilateralism. WTO which has been called a rich man’s club get legitimacy due to India’s active participation. India’s interest converges with developing countries so it is seen as the symbol of the rights of the developing countries. When it fights for itself, when it negotiates hard for itself it simultaneously fights for the poor.

Although, developed countries criticize the special and differential treatment but in reality there is a reverse S&DT going in the favour of the developed countries. According to a study by Indian Institute of Foreign Trade, the gap between the developed and the developing countries have in fact increased since the establishment of WTO. It should also be asked whether affecting same law on a big economy and a poorer economy is fair in anyway.

The world is anyway, moving away from multilateralism. If these questions are not answered, the developing countries will start having lesser and lesser stake in the WTO and this will eventually harm the power and leading traders of the world.

Posted in PSIR CURRENT AFFAIRS 2022 - IR

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