WTO Panel Rules Against India

Q. Why is this in News?
A. Recently, a World Trade Organization (WTO) Panel has ruled against India in a dispute over information technology (IT) tariffs with the European Union (EU) and other countries.

Q. What are the Key Highlights?
A. 

• Background:
  • India has been looking to promote domestic IT manufacturing and reduce its dependence on imports, but this approach has been challenged by the EU and other countries, who argue that such measures are Protectionist and violate Global Trade Rules.
  • In 2019, the EU challenged India's introduction of import duties of between 7.5% and 20% for a wide range of IT products, such as mobile phones and components, as well as integrated circuits, saying they exceeded the maximum rate.
  • Japan and Taiwan also complained the same.
• Ruling:
  • The panel found that India's tariffs on certain IT products violated global trading rules, as they were inconsistent with the terms of the Information Technology Agreement (ITA).
    • The ITA is a global trade agreement that aims to eliminate tariffs on a wide range of IT products. India is signatory to the 1996 ITA.
  • The ruling has highlighted the need for India to align its trade policies with global norms and obligations.
  • It also underscores the challenges that developing countries like India face in balancing their domestic policy objectives with their international trade commitments.
• India’s Argument:
  • India argued that at the time of signing the ITA, products such as smartphones did not exist and hence, it was not bound to eliminate tariffs on such items.
• Implications:
  • According to the European Commission, the EU is India's third-largest trading partner, accounting for 10.8% of total Indian trade in 2021.
  • The WTO ruling against India may have significant implications for trade relations between India and the EU, as well as Japan and Taiwan.
  • India may be required to lower or eliminate the import duties that were challenged by the EU and other countries. This could have an impact on India's domestic manufacturing sector, which has been protected by such tariffs.

Q. What Options does India have after the WTO ruling?

A. 

• India has a choice to appeal against the WTO ruling over IT tariffs, but if India Appeals the case will be held in Legal Purgatory.
• This is because the WTO's top appeals bench is no longer functioning due to the US opposition to judge appointments.
  • Legal purgatory is used to describe a situation where a legal case or dispute is in a state of limbo, without resolution or a clear path forward.
  • This situation can be particularly challenging for countries that are seeking to resolve trade disputes in a transparent and rules-based manner, as it undermines the effectiveness of the WTO's dispute settlement mechanism.