EU slaps duties on antibiotics exports

This is the first time that punitive final duties have been imposed on Indian exports on grounds of export subsidy, and paves the way for large-scale targeting of India’s export promotion schemes by its trading partners, of which the EU is the largest.

The EU announced in Brussels on Tuesday that EU ministers had agreed to convert provisional duties to definitive ones. The provisional duties were imposed in June after an investigation began in September last.

The duties, which go up to 14.6 per cent, will remain in place for five years. The antibiotics in question are amoxicillin trihydrate, ampicillin trihydrate and cefalexin.

Already,several other Indian exports are being investigated by the European Commission, the EU’s executive body, for evidence that export subsidies on them cause injury to the EU’s domestic producers.

Indian exports involved in these investigations are stainless steel bright bars, stainless steel fine wires and polyester textured filament yarn. The United States too has just begun its first anti-subsidy investigation against Indian exports of elastic rubber tape.

India contended, in the investigation of the antibiotics case, that the five export subsidy schemes targeted by the EU are consistent with the World Trade Organisation Agreement on Subsidies and Countervailing Measures (ASCM).

The agreement (ASCM) allows developing countries with a per capita income of under $ 1,000 a year to give export subsidies. Countervailing duties may be imposed against such subsidies only if the exports cause injury to the producers of their trading partners.

The export schemes in question are the Passbook Scheme, DutyEntitlement Passbook Scheme, Income Tax Exemption Scheme, Export Promotion Capital Goods Scheme, and the Export-Processing Zones and Export-Oriented Units Scheme.

The duties were imposed in spite of India pointing out that the maximum increase in the exports of the antibiotics had taken place between 1993 and 1994, when only one of the export schemes — the Income Tax Exemption Scheme — was in force. That had, in fact, been in place since the 1960s.

India pointed out that these exports had become competitive because of the drastic fall in the price of an outsourced raw material which European antibiotics firms manufactured themselves and so did not benefit from.

It also said these exports had declined sharply between 1996 and 1997 from about ecu 51 million (roughly $75 million) by 68.5 per cent in value terms and 33 per cent in volume terms. India had lost market share in these products in the EU between 1996 and the period of investigation.