World Trade Organization and Indian Tariffs on US Goods

  Jun 22, 2020

World Trade Organization and Indian Tariffs on US Goods

What is the issue?

WTO decided to establish a dispute settlement panel to decide on a disagreement over India’s decision to impose higher tariffs on 28 US products.

Why did it come up?

United States in 2018 imposed a global additional tariff of 25% and 10% on import of steel and aluminium products, respectively in the name of national security. India had levied higher duties on US goods in 2019 including apples, walnuts, chickpeas, lentils, boric acid and diagnostic reagents. India did so after deferring them for almost a year since it first announced them. The US then dragged India to the WTO for according “less favourable treatment” to its products in July.

India blocked the US request to WTO to set up a panel to settle its disagreement over the issue of retaliatory tariffs.

But, WTO later decided to establish a panel to settle a disagreement over India’s decision to impose higher tariffs on 28 US products. 

What is the US argument?

The US, in its request, claimed the additional duties with an annual value of trade worth $1.1 billion are inconsistent with the provisions of the General Agreement on Tariffs and Trade by unfairly discriminating against US imports vis­à­vis those from other members. 

How did India respond?

India argued that the duties or the “rebalancing measures are in direct response to the unwarranted restrictions imposed by the US” on its goods.  India said that it considers that the US higher tariffs measures a disguised safeguard intended to protect the US’s domestic industry in the garb of national security.”

Since it is a global measure of the US, did India have international support?

The EU and China backed India, supporting the right of members to impose their own rebalancing measures against the US’ unilateral actions. China, the EU, Japan, Russia and Turkey are the other countries that gave India support by taking similar line.

How are disputes settled in the WTO?

Any member can drag any other member to the dispute settlement process for violating rules. First step is, WTO wants them to negotiate and solve between themselves. If it is not possible, a panel is set up. The ruling of the panel can be appealed against before an appellate body whose orders are final and binding.

What if one of the members does not accept the verdict?

The victim party can cross-retaliate in proportion the violation as in the Airbus case (given elsewhere in this Book)

What is the Appellate Body?

The Appellate Body is composed of seven Members who are appointed by the Dispute Settlement Body (DSB) to serve for four-year terms. Each person may be reappointed for another four-year term. Terms are staggered, ensuring that not all Members begin and complete their terms at the same time. A Division of three Members is selected to hear each appeal.

What is the DSB?

There is General Council composed of all ambassadors of members. It acts as the Dispute Settlement Body (DSB) to deal with disputes between WTO members. The DSB has authority to establish dispute settlement panels and Appellate Body. 

Is there any crisis in the Appellate Body?

Yes, there is. Its membership is dwindling as no new members are appointed for many years due to the US opposition.US does not believe in multilateralism.