India-USA : Export Subsidy Issue


The US Trade Representative (USTR) has challenged Indian export subsidy schemes at World Trade Organisation (WTO), saying these programmes harm its manufacturing sector and workers by creating an uneven playing field.


What are the allegations?

  • According to USTR, at least half a dozen Indian programmes provide financial benefits to Indian exporters, which allow them to sell their goods more cheaply to detriment of US workers and manufacturers.
  • These programs are Merchandise Exports from India Scheme (MEIS), Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme, Special Economic Zones (SEZs), Export Promotion Capital Goods Scheme (EPCGS) and Duty Free Imports for Exporters Programme.
  • It has alleged that through these programmes, India has given exemption from certain duties, taxes, and fees which benefits numerous  exporters, including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel.
  • It also has alleged that earlier India was under limited exception rule under WTO specified for developing countries. It allowed specified countries to continue to provide export subsidies temporarily until they reach defined economic benchmark.
  • But now it has surpassed benchmark in 2015. India’s exemption has expired, but India has not withdrawn its export subsidies and in fact it has increased size and scope of these programs.


Why this is happening now?

  • The US administration under President Donald Trump has taken various protectionist measures in an attempt to bring down its trade deficit from around $800 billion annually.
  • For this, it is holding its trading partners accountable by vigorously enforcing US rights under various trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO.
  • Earlier in March 2018, the Trump administration had announced tariffs of 25% and 10% on all steel and aluminium imports citing national security issue.