Trade dispute with India over sugar subsidies

In News

• Recently, the World Trade Organisation dispute resolution panel has ruled against India’s sugar subsidies, and in favour of complainants Brazil, Guatemala and Australia.

Background

• In 2019, Brazil, Australia and Guatemala had approached the WTO complaining against India for providing alleged support in favour of producers of sugarcane and sugar (domestic support measures), as well as all export subsidies that India allegedly provides for sugar and sugarcane (export subsidy measures).
• Australia requested the establishment of a Panel and on August 15, 2019, the Dispute Settlement Body (DSB) established the panel.

Major Points of WTO Report

• The panel observed that for five consecutive sugar seasons, from 2014-15 to 2018-19, India provided non-exempt product-specific domestic support to sugarcane producers in excess of the permitted level of 10 per cent of the total value of sugarcane production. 
  • As a result, it found that India was acting inconsistently with its obligations under the Agreement on Agriculture (AoA).
• The panel also found that the challenged schemes are export subsidies within the meaning of Article 9.1(a) of the Agreement on Agriculture. 
• India violated the WTO agriculture agreement when it provided excessive non-exempt product-specific subsidies to sugarcane producers between 2014 and 2019. 
  • India has provided subsidies contingent upon export performance, inconsistent with the SCM Agreement.
• India’s foreign direct investment (FDI) policy “remains ambiguous and can be strengthened.
  • It noted that companies face lengthy approval processes to invest here with “targeted restrictions that remain in place in strategic sectors.
• Recommendations
  • It recommended India to withdraw its subsidies under the Production Assistance, the Buffer Stock, and the Marketing and Transportation Schemes within 120 days from the adoption of the Report.

Response of India

• The findings of the Panel are “completely unacceptable” to India.
• India believes that its measures are consistent with its obligations under the WTO agreements.
• India has initiated all measures necessary to protect its interest.
  • It filed an appeal at the WTO against the report, to protect the interests of its farmers.

Impacts 

• There would be no impact of the WTO Panel’s findings on Sugar on any of India’s existing and ongoing policy measures in the sugar sector as the Indian government is not extending any assistance for shipments. 
• This is because global sugar prices are ruling higher on lower production and supply woes. 

Way Forward

• Bilateral consultation is the first step to resolving a dispute. If both sides are not able to resolve the matter through consultation, either can approach for the establishment of a dispute settlement panel.
  • According to WTO rules, a WTO member or members can file a case in the Geneva-based multilateral body if they feel that a particular measure is against the norms of the WTO.
• Continuing on the reform path would enhance the competitiveness of Indian businesses both in India and abroad.

Source: IE