WTO: India-US trade dispute

Syllabus subtopic: Bilateral, regional and global groupings and agreements involving India and/or affecting India's interests

Prelims and Mains focus: About the Inda-US trade dispute; GSP and its benefits; WTO: structure and functions

News: The World Trade Organisation's (WTO) dispute settlement body has set up a panel to examine the US complaint against India which had increased customs duties on 28 American goods last year.

Background

• The US in July had dragged India to the WTO by filing a complaint against New Delhi's move to increase customs duties, alleging the decision as inconsistent with the global trade norms.

• The US had alleged that the additional duties imposed by India "appears to nullify or impair the benefits accruing to the US directly or indirectly" under the GATT 1994.

• It had stated that India does not impose these duties on products originating in the territory of any other WTO member nation.

About GATT

The General Agreement on Tariffs and Trade (GATT) is a WTO pact, signed by all member countries of the multi-lateral body, aims to promote trade by reducing or eliminating trade barriers like customs duties.

How is a dispute settled in WTO?

• As per the WTO's dispute settlement process, the request for consultations is the first step in a dispute.
• Consultations give the parties an opportunity to discuss the matter and find a satisfactory solution without proceeding further with litigation.
• After 60 days, if consultations fail to resolve the dispute, the complainant may request adjudicated by a panel.

India-US trade dispute

• India's exports to the US in 2017-18 stood at USD 47.9 billion, while imports were at USD 26.7 billion. The trade balance is in favour of India.

• The US has rolled back export incentives from India under its GSP programme and New Delhi has imposed higher customs duties on 28 American products including almond, pulses, walnut, chickpeas, boric acid and binders for foundry moulds.

• The other products on which duties were hiked include certain kind of nuts, iron and steel products, apples, pears, flat rolled products of stainless steel, other alloy steel, tube and pipe fittings, and screws, bolts and rivets.

• The duties were hiked as retaliation to the US move to impose the highest customs duties on certain steel and aluminium goods.

Generalised System of Preferences (GSP):

The Generalized System of Preferences (GSP) is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories.

What is the objective of GSP?

The objective of GSP was to give development support to poor countries by promoting exports from them into the developed countries. GSP promotes sustainable development in beneficiary countries by helping these countries to increase and diversify their trade with the United States.

Benefits of GSP:

1. Indian exporters benefit indirectly – through the benefit that accrues to the importer by way of reduced tariff or duty free entry of eligible Indian products
2. Reduction or removal of import duty on an Indian product makes it more competitive to the importer – other things (e.g. quality) being equal.
3. This tariff preference helps new exporters to penetrate a market and established exporters to increase their market share and to improve upon the profit margins, in the donor country.

About World Trade Organisation (WTO)

• Officially commenced on 1 January 1995 under the Marrakesh Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948
• An organization that intends to supervise and liberalize international trade
• HQ – Geneva, Switzerland
• Official language – English, French, Spanish

Evolution of WTO

WTO Structure

Director General

• Appointed by ministerial conference
• Has four years term.
• Heads Secretariat at Geneva