Trade Disputes between the United States and India Resolved
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Issue Net Edition | Date : 10 Jul , 2023

On June 22, 2023, the United States Trade Representative (USTR) announced that the United States and India reached an agreement to terminate ongoing  disputes at the World Trade Organization (WTO) including a fight over former President Donald Trump’s tariffs on steel, aluminium and India’s retaliatory duties.Additionally, India agreed to remove retaliatory tariffs implemented against certain U.S. products in response to the U.S.’s institution of Section 232 tariffs on steel and aluminium in 2018.

The six World Trade Organization disputes to be terminated are:

    • United States – Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India;
    • India – Certain Measures Relating to Solar Cells and Solar Modules;
    • United States – Certain Measures Relating to the Renewable Energy Sector;
    • India – Export Related Measures;
    • United States – Certain Measures on Steel and Aluminium Products; and
    • India – Additional Duties on Certain Products from the United States.

However, while the countries have agreed to terminate the outstanding disputes at the WTO, the U.S. did not take the next step of exempting India from Section 232 tariffs. Indeed, the statement issued by the USTR highlighted the success of the negotiations while explicitly stating that, “the resolution maintains the integrity of the U.S. 232 measures.” According to the terms of the resolution, the U.S. will continue to monitor the efficacy of the Section 232 tariffs against India and will continue to process exemptions to the tariffs consistent with past practices.

“We have decided to resolve long-pending trade-related issues and make a new beginning,” Indian Prime Minister Narendra Modi said at a joint news conference with President Joe Biden following their White House meeting.

The agreements are a surprising development, after National Security Council spokesperson John Kirby told reporters at a press briefing earlier not to expect “a specific resolution on trade issues coming out of these next few days.”

In fact, India has agreed to remove retaliatory tariffs on certain U.S. products, including chickpeas, lentils, almonds, walnuts, apples, boric acid and diagnostic reagents, that it imposed after Trump slapped duties on steel and aluminium imports using Section 232 of the 1962 Trade Expansion Act.

“Today’s agreement represents the culmination of intensified bilateral engagement over the last two years, including through the U.S.-India Trade Policy Forum, to deepen our economic and trade ties,” U.S. Trade Representative Katherine Tai said in a statement. “As a result of our work, U.S. agricultural producers and manufacturers will now enjoy renewed access to a critical global market and we will strengthen our trade relationship with one of our closest partners”.

USTR said the resolution “also maintains the integrity of the U.S. Section 232 measures.” That means India agreed to lift its trade retaliation without the U.S. altering the steel and aluminium tariffs that Trump imposed, a USTR spokesperson said.

In addition to the two cases related to Trump’s tariffs, the United States and India also agreed to terminate four other WTO disputes. Two of those had been filed by India and two by the United States.

That still leaves one filed by the United States in 2012 challenging India’s poultry trade barriers. However, one former U.S. trade official said he heard talks on that issue were continuing and a deal was still possible. The USTR spokesperson said he had “no news to share at the moment or preview beyond what we announced today.”

The two other cases terminated by the United States are a 2018 complaint against Indian export studies and a 2013 complaint against Indian domestic content requirements for solar cells. 

India terminated a 2016 complaint against state-level subsidies and domestic content requirements for renewable energy and a 2012 complaint over US countervailing duties on certain steel products’.

The statementissued by Biden and ModiIndiaalso highlighted India’s interest in  being reinstated in the U.S. Generalized System of Preferences (GSP) programme, which waives U.S. import duties on thousands of goods from developing countries.

Trump kicked India out of the programme in 2019 on the grounds they were not providing sufficient market access for American goods. Biden and Modi agreed to intensify work on issues related to India’s eligibility criteria, the joint statement said.

The leaders also welcomed the initiation of talks on government procurement issues. That could lead to India’s designation as a “Trade Agreements Act” country, which would help its companies compete for U.S. government procurement contracts.

In another trade area, Biden reiterated his administration’s commitment to work with U.S. Congress to lower barriers to U.S. exports to India of high performance computing technology and source code.

Biden also invited Modi to attend as a guest the annual Asia-Pacific Economic Cooperation summit, which the U.S. is hosting in San Francisco in November. India is not a member of the 21-economy group, but has expressed interest in joining in the past. Biden is expected to travel to India in September for the G-20 leaders’ summit, which Modi is hosting this year.

Politico reported last that there could be a package of agreements to resolve the WTO disputes. But Kirby dismissed that possibility. “That’s not what this is about,” he said of Modi’s White House visit. “This is really about the strategic nature of the relationship and driving it forward.”

That ran against a previous pledge by Tai and Indian Commerce Minister Piyush Goyal, issued in January, to try to resolve the WTO disagreements in coming months. Tai and Goyal also met virtually to discuss bilateral trade concerns recently.

In future also there is no need to knock the door of WTO to resolve trade disputes between the two countries. Both the countries can amicably resolve their trade disputes because the mutual understanding between the two countries has increased faith element in each other.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Col (Dr) PK Vasudeva

is author of World Trade Organisation: Implications for Indian Economy, Pearson Education and also a former Professor International Trade.

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