Industry And Cluster | News & Insights

India Can Continue Disputed Export Subsidy Schemes.

Published: December 12, 2019

SILVERLINING IN WTO Appellate body to be defunct as no. of judges falls below the threshold of 3

Global trade dispute settlement will come to a standstill from Wednesday with the Appellate Body of the World Trade Organization (WTO) becoming dysfunctional as the number of judges on the body falls below the minimum threshold of three.

The US has blocked the appointment of judges for more than two years, crippling the multilateral trade agency’s dispute settlement mechanism. It has criticised the body for its “flawed” interpretation in various cases, failure to issue reports within the mandatory 90-day period, its composition and compensation to the members.

Two AB members – the US’ Thomas Graham and India’s Ujal Singh Bhatia – will retire on Wednesday after their second term of four years ends, leaving only China’s Hong Zhao in the body who will continue till November 2020.

However, this may have a silver lining for India in the short term as it gives New Delhi the option to continue with its key export subsidy schemes, including the one for special economic zones which it appealed last month after losing the case to the US.

“We can make use of this time to introduce new schemes,” said an official, but added there is moral pressure because the dispute panel has already found fault with the export schemes.

At present, there are 14 appeals in the body. Of these, two relate to India. One is against the US for claiming that India’s export subsidy programmes hurt American workers. The other is with Japan which relates to safeguard duties imposed by India on imports of iron and steel products.

Last month, India appealed a WTO dispute settlement panel ruling that had recommended withdrawal of its key export subsidy schemes in 90-180 days. The panel had ruled that MEIS, EoUs Scheme and others violated provisions of the trade body’s norms.

WTO members take their trade disputes to the Dispute Settlement Body (DSB) which has authority to establish panels whose composition depends on mutual consent of the parties involved otherwise the WTO Secretariat sets it up.

Once the panels come out with their reports, these can be appealed at the Appellate Body. Wednesday onwards the global trade watchdog’s dispute settlement mechanism will be effective only till the time a panel report is not appealed otherwise it would become void and not be adopted.

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