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June 21, 2018

June 21, 2018 @ 11:21 AM

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Why India Has Dragged USA To WTO?

Why India Has Dragged USA To WTO


Post MBA entrance exams when you will face GD & PI and during this period, your information on current affairs will prove to be very handy, not only content wise but you will remain a confident personality.

Read Following article on "Why India Has Dragged USA To WTO?"

The World Trade Organization (WTO) came into being on January 1, 1995, as a successor of General Agreement of Tariff and Trade (GATT) to set the rules of trade among the nations. While the GATT was mainly dealing with the trade in goods, WTO also covered trade in services, intellectual property and procedures for settlement in trade related disputes between the member countries. Since its existence, WTO is organizing ministerial level meetings every alternate year to formulate the rules for international trade with the ultimate objective of bringing down the trade barriers and help in growth through international trade.

Disputes At WTO

While the WTO consistently tries to remove the tariff and non-tariff barriers in the international trade, the leaders of respective countries continue to impose duties on imports due to the local populist pressure. Since the inception of WTO and due to the phenomenon of globalization, a continuous decline in the protectionist measures was witnessed across the world during the past decades; however, after the election of Donald Trump as the US President, a reversal of this trend is witnessed.

Recently, Donald Trump either increased or imposed the duties on the products imported from various countries as a protectionist measure to give a boost to the domestic industries. Consequently, an upsurge in complaints against the US at WTO was witnessed.

Trade Dispute Between India And The US

Due to the protectionist measures undertaken by Donald Trump, India also dragged the US to WTO over the imposition of import duties on steel and aluminium. On March 9, 2018, the US President levied a 25% tariff on steel and a 10% tariff on aluminium imported from all countries except Canada and Mexico after which India complaint to the WTO that such duties are against the global trade norms set by it. Earlier in 2016 also, India filed a dispute against the US challenging the domestic content requirements and subsidies provided by eight American states.

On the other hand, the US has also requested WTO over the alleged export subsidies provided by India. It said the subsidies through various export promotion programmes, special economic zones and duty-free imports for the exporters' programme creates uneven playing field for its domestic players. Earlier in 2013 also, US dragged India to WTO after its solar panel exports to India fell by 90%. In September 2016, the Appellate Body of WTO ruled against India and asked the latter to remove mandatory requirements for manufacturing solar cells and modules by 14 December 2017.

As a retaliatory measure, the Indian government has also sought at WTO to suspend concession to the 30 products imported from the US which will be equivalent to the amount of trade affected by US measures. Earlier in May 2018 also, India proposed to raise duties by up to 100% on 20 products such as almonds, apple and specific motorcycles imported from the US. These moves were proposed under the WTO Agreement on Safeguards.

Possible Outcomes

Though there is nothing new in the trade disputes between India and the US, however, the recent ones are different from the earlier ones as the new protectionist measures are inspired form Donald Trump’s election slogan ‘Buy American, Hire American’ and it has potential to initiate a global trade war. If other countries will start reciprocating the US measures, the global trade will start falling and the market for the companies will shrunk from global to domestic one. This in turn will reduce the producers profit and consequently the employment situation. Before any such outcome, it is imperative for the countries like India to approach the international organizations like WTO since the US measures have the potential to undone all the progress made by the WTO and other international bodies over the past decades.

Many experts also fear that Indian move to drag US to WTO may backfire as India has a surplus against the US in balance of trade. However, the primary objective of the US move is to reverse the balance of trade in favour of the US. Therefore, the Indian move to drag the US to WTO is not just for the mutual beneficial bilateral trade but also to maintain the healthy environment for international trade.   

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