NEW DELHI: The US has dragged India to the WTO's dispute settlement mechanism over export subsidies, saying these incentives were harming American companies, prompting the government to state that it would engage with the Trump administration and explain its position.
The US yesterday challenged India's export subsidy programmes such as Merchandise Exports from India Scheme in the World Trade Organisation (WTO), asserting that these initiatives harm its companies by creating an uneven playing field.
They have sought consultations with India under the aegis of the global trade body's dispute settlement mechanism.
"The US has asked for a consultation process, we will engage fully in the process and we would make sure that we make our position known to the US.
We expect that they would also engage with a positive spirit with an effort to resolve a dispute with a friendly country," Commerce Secretary Rita Teaotia told reporters here.
Seeking consultation under the aegis of the WTO is the first step of dispute settlement process.
If the two nations are not able to reach a mutually agreed solution through consultation, the US may request for a WTO dispute settlement panel to review the matter.
Observing that the US has dragged India under a provision of WTO's Agreement on Subsidies and Countervailing Measures, Teaotia said that Article 27 of the same pact also provides for special and differential treatment to developing countries.
At the time the agreement came into force, developing countries with over USD 1,000 per capita gross national income (GNI) were provided a period of eight years to bring down their export subsidies.
India has stated that the WTO informed the country only in 2017 that it has crossed this threshold and hence should get the eight-year period from 2017 to cut its exports subsidies.
India has also submitted a paper in WTO in 2011 seeking clarification with regard to the year of applicability of the provision and also the extension period.
Under the pact, developing countries can seek further extension of the eight years grace period by providing cogent arguments.
"We will engage in the consultations with the US and place our position. We hope that they would be able to understand that," she said.
When asked if India will review policies with regards to export incentives and SEZs, she said that once India get the eight-year period, during that time it would look at a review of existing schemes to ensure that they comply with the WTO norms.
Further she said that several countries have crossed the USD 1,000 threshold and they have not immediately changed their export subsidy regime.
The US in its statement said that thousands of Indian companies are receiving benefits totalling over USD 7 billion annually under various export promotion programmes.
On this figure, the secretary said India would try to understand in the consultations how the US has arrived at the figure of USD 7 billion.
When asked if there is a trade war between India and the US, she said it would be "pretty irresponsible statement" as both the countries have lot of export interests in each others' markets.
"Either way, we are interested in selling to each other and we would continue to do so and wherever there are differences we will resolve them," she added.
On the question whether the government are reviewing the export schemes, she said, "we will certainly look at some of the schemes which could be reviewed and that is an ongoing process".
Most of the countries provide production subsidies to their exports but that require far larger budgetary commitments.
Production subsidies could be the way forward for India, she added.
Export subsidy programmes: the Merchandise Exports from India Scheme; Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme; SEZ; Export Promotion Capital Goods Scheme; and duty free imports have been challenged by US Trade Representative (USTR) Robert Lighthizer at WTO.
The USTR said these "apparent" export subsidies provide financial benefits to Indian exporters that allow them to sell their goods more cheaply to the detriment of American workers and manufacturers.
These export subsidy programmes harm American workers by creating an uneven playing field on which they must compete, Lighthizer said.
Through these programmes, it said India provides exemptions from certain duties, taxes, and fees; reduces import duty liability; and benefits numerous Indian exporters, including producers of steel products, pharmaceutical, chemicals, IT products, textiles, and apparel.
Export subsidies provide an unfair competitive advantage to recipients, and WTO rules expressly prohibit them, it added.
India has already lost two cases in WTO against the US -- poultry and solar sector.
In 2016, India also dragged the US to WTO against the policies of eight American states for the renewable energy sector, alleging that the domestic content requirement norms are inconsistent with global trade rules.
Besides, the country has filed a complaint against US decision to impose high fees on temporary working visas.
India's exports to the US stood at USD 42.21 billion in 2016-17, while imports aggregated at USD 22.30 billion during the same fiscal.