The World Trade Organisation (WTO) recently ruled that India’s support measures for sugar and sugarcane contradict international trade norms, a decision that India has contested. This ongoing dispute highlights the divisive issue of sugar subsidies within the global trade arena. This article provides an overview of the WTO, its agreements, and the current situation regarding sugar subsidies.
India’s Appeal Against the WTO Ruling
In response to the WTO ruling, India filed an appeal to the organisation’s Appellate Body. India asked the appellate body to reassess the conclusions and recommendations of the Panel, focusing on “errors of law or legal interpretation” found in the panel report. India also sought to revisit the panel’s finding that the scheme providing assistance to sugar mills for marketing and transportation costs under the Maximum Admissible Export Quantity Scheme fell within its terms of reference.
Complaints Against India’s Subsidy Measures
Australia, Brazil, and Guatemala launched complaints against India’s domestic support and export subsidy measures, citing violation of various articles of the WTO’s Agreement on Agriculture and the Agreement on Subsidies and Countervailing Measures, as well as Article XVI of the General Agreement on Trade and Tariffs. All three nations argued that India’s support to sugarcane producers exceeded the de minimis level of 10% of the total value of sugarcane production. They also criticized India’s alleged export subsidies and failing to disclose annual domestic support for sugarcane and sugar post-1995-96 and export subsidies since 2009-10 to the WTO.
The WTO’s Agreement on Subsidies and Countervailing Measures (SCM)
The SCM agreement was designed to regulate the use of subsidies and the actions countries can take to counteract their effects. A country can either use the WTO’s dispute-settlement procedure to seek the withdrawal of the subsidy or to remove its adverse effects or conduct its own investigation and place additional import charges on subsidized imports that are found to harm domestic producers.
The WTO’s Agreement on Agriculture
The Agreement on Agriculture aims to eliminate trade barriers and promote transparent market access and integration of global markets. It is overseen by the WTO’s Agriculture Committee, which provides a platform for members to address related concerns.
The General Agreement on Tariffs and Trade (GATT)
Established in 1948, GATT sought to phase out import quotas and reduce tariffs on merchandise trade. Although replaced by the WTO in 1995, the provisions of the original GATT were incorporated into the GATT 1994 as part of the WTO formation agreement.
India’s Stand on the Subsidy Issue
India has defended its position by stating that the complainants failed to prove that India violated the Agreement on Agriculture with its market price support for sugarcane and various schemes. India also argued that it possesses an 8-year phase-out period to eliminate export subsidies under Article 27 of the SCM Agreement.
Panel Findings and Recommendations
The dispute settlement panel found India’s domestic support and export subsidy measures in the sugar sector violated international trade rules. The panel recommended that India brings its WTO-inconsistent measures into line with its obligations under the Agreement on Agriculture and the SCM Agreement and withdraw its alleged prohibited subsidies within 120 days.
Dispute Resolution at WTO
In the event of a conflict, WTO members can seek resolution through bilateral consultation. If this proves unsuccessful, either party can request the establishment of a dispute settlement panel. The panel’s ruling can then be challenged at the WTO’s Appellate Body, although this body is currently non-operational due to differences among member countries regarding appointment of members.
