The dispute was filed by the US, which has challenged five such initiatives namely Merchandise Export from India Scheme (MEIS), Export Oriented Units (EOU), Electronics Hardware Technology Parks (EHTP), Special Economic Zone (SEZ) and Export Promotion Capital Goods (EPCG).
India has appealed against a ruling of the WTO’s dispute settlement panel, which held that certain provisions of the domestic export incentive initiatives are inconsistent with global trade norms, an official said. The dispute was filed by the US, which has challenged five such initiatives namely Merchandise Export from India Scheme (MEIS), Export Oriented Units (EOU), Electronics Hardware Technology Parks (EHTP), Special Economic Zone (SEZ) and Export Promotion Capital Goods (EPCG). The US asserted that these initiatives harm its companies by creating an uneven playing field. A report by the dispute settlement panel found that these schemes were in violation of the WTO agreements for providing prohibited export subsidies. “India has filed an appeal against the panel’s report, which was released on October 31,” the official said.
The plea was made in the appellate body of the World Trade Organisation’s (WTO) dispute settlement mechanism. The US has dragged India to the WTO under Article 27 of the organisation’s Agreement on Subsidies and Countervailing Measures (SCM), which also provides for special and differential treatment to developing countries like India. At the time when the agreement came into force, developing countries with over USD 1,000 per capita gross national income (GNI) were provided a period of eight years to bring down their export subsidies.
India said the WTO informed the country only in 2017 that it has crossed this threshold and hence should get the eight-year period from 2017 to cut its export subsidies. India has contested that it should be given an eight-year phase-out period as was available to other developing countries. The official said India has requested the appellate body to look at the negotiation history of the SCM agreement, wherein it was decided that countries like India will get a phase-out period for the alleged export subsidies when their GNP reaches the pre-determined threshold.
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India has also challenged the panel’s ruling with respect to each of the five schemes challenged by the US. “The country argues that the panel erred in its ruling to find these schemes as export subsidies. India has stated that the EOU scheme ensures all imported goods are consumed in the production of exported products, and therefore, cannot be deemed as a subsidy,” the official added. It has also emphasised that capital goods imported under the EPCG scheme are also used for the manufacture of exported products, and therefore, consumed in the production of exported product.
On SEZ, it has appealed that the scheme does not mandate export performance, and therefore, cannot be found against the the SCM agreement. “India is hopeful that the appellate body will reverse the errors made by the panel in their ruling,” the official said. According to trade experts, the ruling if implemented would impact India’s exports and the government will have to immediately work on alternatives. “We need to immediately work on new schemes, which are WTO compatible,” Rafeeq Ahmed, Chairman of Farida Group, said.