New Delhi to Seek 8 years to Phase Out Export Subsidies at WTO

India will make a case for an eight-year transition period to phase out its export subsidies at the consultations sought by the US at the World Trade Organisation questioning the validity of the country’s export promotion schemes.

“We are clear that an eight-year transition is needed for developing countries to change their export subsidy regime,” Commerce Secretary Rita Teaotia said at a press conference indicating India’s response to the US move.

Washington dragged India to the WTO on Wednesday stating that a number of export subsidy schemes in India seemed to be in violation of the Agreement on Subsidies and Countervailing Measures as its gross national income (GNI) per capita had reached $1,000 per annum and it no longer qualified for exemptions which allowed it to extend such subsidies.

The schemes that the US has identified as being WTO non-compliant include extremely popular ones such as the Merchandise Export from India Scheme (MEIS), the Export Promotion Capital Goods Scheme and the Special Economic Zone concessions.

India has to respond to the consultations request within 60 days and if Washington is not happy with the discussions, it could open up a full-blown dispute by asking the WTO to set up a dispute settlement panel.

“In 2011, India submitted a note to the WTO stating that the phase-out period for export subsidies should be eight years from the time a country crossed the threshold (of $1,000 GNI). We have been demanding and discussing this in the WTO,” said Teaotia.

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.

Since the countries that had crossed $1,000 GNI at the time the WTO’s Subsidies and Countervailing Measures Agreement was implemented in 1994 (as part of the General Agreement on Tariffs & Trade) had got an eight-year implementation period, India argues that developing countries crossing the thresholds subsequently also need to be given the same concession.

Replacing schemes

Commerce Ministry officials said the Centre was, meanwhile, working to replace existing export subsidy schemes with WTO-compliant incentive schemes such as subsidies for R&D and modernisation.

With India’s exports slowly getting back on track after a setback of more than two years, the government is worried that an immediate withdrawal of popular incentive schemes could hurt the sector.