US recently took action against India’s export subsidies at the World Trade Organisation.

This can be seen as another example of the superpower’s growing economic aggression against trade partners.

 

Subsidy issue in detail –

 

Last year the WTO had officially notified that India’s per capita Gross National Income (GNI) had crossed $1,000 three years in a row. According to WTO rules, countries can give export subsidies only as long as their per capita GNI is below $1,000.

 

Once it is established that the higher income is there to stay (with three consecutive years of GNI breaching the $1,000 threshold), countries can no longer enjoy the special dispensation of export subsidies which is otherwise banned under WTO rules.

 

However, India continues using export subsidies.

 

Recently, US took action against India’s export subsidies at the World Trade Organisation.

 

India’s stand at WTO:

 

  • In its defence, India has said that it believes that it is entitled to an eight-year phase-out period.
  • The contention is based on the argument that when the Agreement on Subsidies and Countervailing Measures was implemented in 1994-95, the countries with GNI higher than $1,000 got eight years to get rid of their export subsidies and, therefore, it should get the same.
  • But the two situations are not comparable as initially the phase-out period was extended to give comfort to members when the pact kicked in and more than two decades have passed since then.

 

India’s stance on various issues at the WTO :

 

  • India called for respecting mandates and decisions made at earlier ministerial, including the Doha Development Agenda (DDA).
  • It pushed for preserving the mandate of special and differential treatment to poor and developing nations.
  • Special treatment allows longer time frames to such nations than their developed counterparts to implement a particular trade agenda, among other facilities.
  • India has been calling for the need for developed nations to cut their massive trade-distorting farm subsidies.

 

Suggestions:

 

The government should hold wide-ranging discussions with industry and related ministries to look at the best possible alternatives to the export subsidy schemes which could include technology upgrading funds, capital expenditure subsidies and funds for research and development.

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