Recently, the Dispute Settlement Body (DSB) of the World Trade Organisation (WTO) has established two dispute settlement panels in response to the import duties India has imposed on several Information and Communication Technology (ICT) products such as mobile phones. The creation of these panels took place at the request of Japan and Taiwan, raising the number of panels examining similar tariff-related issues to three. In June 2020, the European Union (EU) had formed a panel against India concerning the identical issue.
Dispute Panels and India’s Customs Duties on Imported ICT Products
These panels’ goal is to determine if the customs duties India places on certain ICT product imports violate WTO norms. The panels were created to deliberate on the 20% customs duty that India levied on mobile phones and other ICT products. In July 2017, India initially instituted a 10% customs duty on these items, which was raised to 15% later the same year. Despite WTO members’ opposition, this customs duty was further increased to 20%.
International Concerns Over India’s Increased Custom Duties
Several countries, including the EU, USA, China, Singapore, Taiwan, Canada, Japan, and Thailand, initiated consultations with India, claiming that the increase in duties significantly impacts them. The goods under dispute include cellular telephones or other wireless networks; base stations; machines for receiving, converting, transmitting, or regenerating voice, images, or other data, etc.
Complainants’ Arguments Against India’s Custom Duties
Japan and Taiwan claim that their unsuccessful consultations with India led them to request the panels. Along with the EU, they have argued that the products in question fall under the tariff lines for which India has bound the rate at 0% in its WTO schedule of commitments. They state that India is applying tariffs on ITC goods falling under five tariff lines exceeding the 0% bound rate and that, for specific products, the applied tariff rate was as high as 20%.
India’s Response to the WTO Panels and Complainant’s Arguments
India managed to block Japan’s first panel request by arguing that the complaint undermined India’s sovereignty. The country also rejected the EU’s proposal to consolidate the complaints into one panel to save time and resources. The Indian government asserts that all three complainants are attempting to force the country to adhere to the commitments under the Information Technology Agreement-II (ITA-II) that it never agreed to.
Understanding the Information Technology Agreement (ITA)
The ITA is a plurilateral agreement enforced by the WTO concluded by 29 participants in the 1996 Ministerial Declaration on Trade in Information Technology Products. It seeks to fast-track and deepen the reduction of trade barriers for the critical ICT industry. Currently, the number of participants has grown to 82, representing nearly 97% of world trade in IT products. India is a signatory to this agreement.
The Expansion of the Information Technology Agreement (ITA-II)
Several developed countries proposed expanding the scope of the ITA, referred to as ITA-II. In December 2015, over 50 members concluded the expansion of the agreement at the Nairobi Ministerial Conference. It now covers an additional 201 products valued at over USD 1.3 trillion per year. The objective was to increase the coverage of IT products subject to zero customs duty, address non-tariff measures, and expand the number of signatory countries. Despite these changes, India chose not to participate due to its discouraging experience with ITA-I, which nearly eliminated the IT industry in the country. As a result of the agreement, China has greatly benefited, increasing its global market share from 2% to 14% between 2000-2011.
