The United States is being unfair to India in trade. Resist it – analysis
While Prime Minister Narendra Modi wants to make President Donald Trump’s next visit to India memorable, the United States (USA) has expressed his desire to push for a hard trade negotiation, which makes it unlikely a Agreement during the visit. The sign of this came when, a few days before the visit, the United States stripped India of its status as a “developing” country in the World Trade Organization (WTO). According to the United States Trade Representative (USTR), countries such as India will not be considered “developing” when it comes to the imposition of countervailing duties (CVD).
Under WTO law, countries can impose CVD on subsidized imports, which harms domestic producers in the importing country. The imposition of CVD is regulated by the Subsidies and Countervailing Measures (SCM) agreement in the WTO. According to Article 11.9 of the SCM agreement, an ECV investigation against a WTO member country must be terminated if the amount of the subsidy is de minimis (too trivial to deserve consideration). the de minimis margin is defined as less than 1% ad valorem. However, according to the SCM agreement, the de minimis The standard for developing countries is 2% or less. The highest de minimis The standard for developing countries is an example of special and differential treatment (S&DT). The US decision not to consider India as a “developing” country means that India would no longer benefit from 2% de minimis standard, thus increasing the vulnerability of Indian exports to the US. UU. for the action of CVD.
To decide whether a country is “developing” or not, the USTR has presented the following criteria. First, the Gross National Income (GNI) per capita of a country must be less than $ 12,375. Second, the country’s share in world trade should be less than 0.5%. Thirdly, the country must not be a member of the Organization for Economic Cooperation (OECD), nor request membership in the OECD, or the European Union or the Group of Twenty (G20).
Being a low middle income country, the GNI per capita of India is much lower than $ 12,375. However, India is off the list of “developing” countries in the US. UU. Because its participation in world trade is over 0.5% and India is a member of the G20.
It is interesting to note that the USTR criteria for designating countries as “developing” have no basis in WTO legislation. Under the WTO system, countries generally fall into three categories: developed, developing and least developed countries (LDCs). While Article XI.2 of the WTO agreement states that the state of the LDCs of a country in the WTO is based on the United Nations recognizing that state, the agreement does not mention any criteria for determining the status of a country ” Developing”. Consequently, according to accepted wisdom, countries designate themselves as “developing” to take advantage of S&DT provisions. These S&DT provisions provide developing countries with the much-needed political space to prepare to compete with developed countries in world trade.
The unilateral revocation of the status of “developing” country of the member countries of the WTO by the US. UU., Based on its own subjective criteria, is a clear violation of international law and another attack on the global rules-based commercial order. In addition, economically, it is strange to suggest that a country is not “developing” simply by focusing on two factors, namely participation in world trade and belonging to the G20, ignoring all other facts. India, along with China, South Africa and other countries countered the assertion of the United States in the WTO last year by submitting a detailed document. In its document, India provided solid data to prove that it is still a poor country and, therefore, requires the provisions of C&D. For example, the document documents that India’s per capita GDP is very low; India has 364 million people living in multidimensional poverty, the highest in the world; the internal subsidies granted to each farmer in India are scarce $ 227, which is 267 times less than that granted in the United States; India has a very low research and development (R&D) capacity with only 216 R&D researchers per million people.
Since the United States does not consider India a “developing” country for the purposes of CVD action, it also means that there is no possibility for the United States to restore the Generalized System of Preferences (GSP), a preferential trading program of the United States that provides privileged market access to poorer countries. The United States had rescinded the state of India as a beneficiary country of the GSP last year.
All these factors will throw a key in the work of a trade agreement between the two countries, regardless of when the negotiations resume. India should not enter into a trade agreement with the United States only for political purposes, until the United States agrees to play the game according to the rules.
Prabhash Ranjan is an assistant professor of law in the faculty of legal studies at the University of South Asia.
The opinions expressed are personal.