The global market has recently witnessed Australia referring India to the World Trade Organization (WTO) over subsidies granted to sugarcane farmers. This is not a one-off instance, as various countries have repetitively raised concerns at the WTO about different welfare and subsidy programs initiated by the Indian government.
Previous Complaints Against India
On November 12, the United States filed a complaint against India, accusing it of disbursing excessive cotton subsidies beyond what the WTO allows. Moreover, a settlement panel upheld Japan’s complaint regarding India imposing safeguard duty on imports of hot-rolled steel flat products between September 2015 and March 2018, leading to India losing this trade dispute.
Furthermore, as per a communication submitted by the US in May 2018 under the provisions of the WTO Agreement on Agriculture (AoA), India allegedly ‘under-reported’ the domestic support provided to wheat and rice from 2010-11 to 2013-14, thereby violating its commitments under the AoA.
A significant blow was dealt to India in 2016 when the dispute settlement panel ruled in favor of the US’s complaint against India’s mandatory procurement of a part of solar panels and modules for projects under the Jawaharlal Nehru National Solar Mission from domestic producers.
Australia’s Perspective
Australia declared in no uncertain terms that it would lean on established global trading rules to support its farmers’ interests and maintain parity between Australia’s sugar industry and India’s domestic industry.
India’s Stand
India responded strongly to these claims, arguing that its sugar exports adhere to WTO rules. Rather than subsidizing exports, India provides a production subsidy. Regarding allegations of Market Price Support (MPS) violating WTO norms, India refuted them and demanded that MPS be calculated with a more recent reference period instead of the 1986/88 prices, a remnant from the WTO’s inception.
| Countervailing Duty | A duty imposed on imported goods to neutralize the subsidy provided by the exporter country. |
| Anti-Dumping Duty | A protectionist tariff imposed by a domestic government on foreign imports priced below fair market value. It is used to safeguard local businesses and markets against cheap imports that could potentially undercut them. |
Agreement On Agriculture (AoA)
The Agreement On Agriculture (AoA), designed to eliminate trade barriers and foster transparent market access and integration of global markets, stands on three main pillars: domestic support, market access, and export subsidy. The goal is to reduce domestic subsidies that distort free trade and fair pricing, cut progressive tariffs to allow free trade, and regulate subsidies ensuring they don’t result in dumping cheap products in other countries, thus damaging their domestic agricultural sector.
Fundamental Principles of WTO
The WTO trading system adheres to principles such as Most Favored Nation (MFN) and National Treatment, which stress equal treatment between different nations and between foreigners and locals, respectively. It also advocates for free trade through lowering trade barriers and maintaining predictability via stability and binding commitments. Additionally, it encourages fair competition and economic reforms, offering special assistance and trade concessions to developing nations.
Role of Dispute Settlement Body (DSB)
The World Trade Organization (WTO)’s Dispute Settlement Body (DSB) plays a crucial role in resolving trade disputes among member countries. Comprising all WTO members, the DSB holds exclusive authority to establish panels of experts for case consideration and to accept or reject panel findings or appeal results. Crucially, it also monitors the implementation of rulings and recommendations and authorizes retaliation in cases of non-compliance.