India to contest US complaint at WTO

Official sources said the cabinet’s decision was guided by the reasoning that India’s national interests cannot be subsumed by the WTO. It was further argued that the United States does not hesitate to use its own trade laws — as opposed to the WTO’s multilateral rules — to protect its national interests, and that India was within its rights to protect its own national interest asit saw fit.

The US had requested the constitution of a WTO dispute settlement panel last October to investigate India’s restrictive import regime after protracted bilateral talks failed to yield a solution. The panel was established towards the end of last year. However, consultations have been continuing between the two countries to see if the matter could be resolved bilaterally. Today’s decision signifies that India will no longer aim for such a resolution and will contest the WTO case instead.

The disagreement on India’s so-called quantitative restrictions (QRs) on imports at the outset had involved, apart from the US, the European Union, Australia, New Zealand and Japan. But India arrived at a mutually agreeable timeframe for phasing out its QRs over six years with the EU, Australia, New Zealand and Japan.

The United States is the only country to have taken the matter to the WTO dispute-settlement process. Since WTO rules stipulate that trading concessions allowed by one member country to anothermust be extended to all other members, India’s QR removal will apply to all its WTO trading partners.

But the US remains dissatisfied by its offer on several counts. First, whereas India has insisted on a QR phaseout in three phases — of three, two and one year respectively — for the over 2,700 items under dispute, the US wants the phaseout to be done in four stages of two, two, one and one year.

The other issue bedevilling the Indo-US negotiations was one of what is called "frontloading" and "backloading" in trading parlance. This means that while the US wanted India to free imports of items of interest to American exporters in the early part of the phase-out schedule, India wanted to open up many of them towards the end of the phase-out period.

But the trickiest issue perhaps was the American insistence that alongside a schedule to phase out its QRs, India should also negotiate its tariff bindings on the items whose imports are to be opened up. This means is that while freeing up these imports forthe first time, India would also have to agree to the levels beyond which it would not raise tariffs on such imports. Binding tariffs at low levels would take away its freedom to protect domestic industry through high tariffs.