India and the US appear to be on the verge of a trade war over subsidies as Indian commerce secretary refuted the US charge in WTO that India is subsidising its exports.
The US Foreign Trade Representative (USFTR), Robert Lightheizer's office on Wednesday, had communicated to the commerce ministry, challenging India's various export subsidy programmes which amounted to $7 billion. The US has sought 'dispute settlement consultations' by invoking a resolution mechanism of the WTO on Wednesday.
"We do not consider this $7 billion as export subsidy. Some are tax forgone and others. We will try and understand the basis of their assumptions first," Rita Teotia, commerce secretary said, confirming that her ministry is seeking legal advice to prepare New Delhi's official response on the US objections. An official response will be sent soon.
As per WTO rules, India must respond within 60 days.
The US objections note that from the year 2013 India had notched a per capita GDP of $1000 – a benchmark that trigger actions against any developing nation continuing with export subsidies. However, Teotia said that, "our understanding was that under the WTO provisions, developing countries are provided a time of 8 years to comply."
"We also have the right to seek extension of export subsidies for upto three years, a year before expiry of subsidy," she said.
Teotia said that India will engage with the US and place its position. "We hope they understand the very clear and logical position on this already in the WTO," said Teotia.
The commerce secretary said that either way both India and the US are interested in selling to each other. This year, both imports from the US and exports from India had increased.
Teotia credited the openness of market access to US in India and hoped the same will be reciprocated. The US exports to India amounted to $75 billion so far this year, a healthy rise over last year.
Leaders of the two nations would meet at the WTO mini-ministerial to be held in New Delhi later next week. India is likely to bring up for discussion a number of issues, including trade restrictions imposed by the US on import of solar panels, duties on its export of steel and aluminium among several others.
"We are not a national security threat to the US," maintained the commerce secretary.
The GoI programmes under the US radar include the Merchandise Exports from India Scheme (MEIS); Export Oriented Units Scheme (EoU) and sector specific schemes, including Electronics Hardware Technology Parks Scheme; Special Economic Zones (SEZ); Export Promotion Capital Goods Scheme (EPCG); and a duty free imports for exporters programme, announced by finance minister Arun Jaitley in the Union budget this year.
"These apparent export subsidies provide financial benefits to Indian exporters that allow them to sell their goods more cheaply to the detriment of American workers and manufacturers," the USFTR said in a statement.
"USTR will continue to hold our trading partners accountable by vigorously enforcing US rights under our trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO," it said.