Resolution of WTO disputes will strengthen India-US trade ties

PK Vasudeva

International Trade Analyst

THE office of the United States Trade Representative (USTR) announced recently that the US and India had reached an agreement to terminate ongoing disputes at the World Trade Organisation (WTO), including a fight over the then President Donald Trump’s tariffs on steel and aluminium and India’s retaliatory duties. India agreed to remove retaliatory tariffs implemented against certain US products in response to America’s institution of tariffs on steel and aluminium in 2018 under Section 232 of the 1962 Trade Expansion Act.

The six WTO disputes to be terminated are: from the US side — countervailing measures on certain hot-rolled carbon steel flat products from India, measures related to renewable energy sector, measures on steel and aluminium products; and from India’s side — measures related to solar cells and solar modules, export-related measures and additional duties on certain products from the US.

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

“We have decided to resolve long-pending trade-related issues and make a new beginning,” 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 mediapersons 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 US products, including chickpeas, lentils, almonds, walnuts, apples, boric acid and diagnostic reagents, which it imposed after Trump slapped duties on steel and aluminium imports.

“Today’s agreement represents the culmination of intensified bilateral engagement over the last two years, including through the US-India Trade Policy Forum, to deepen our economic and trade ties,” US Trade Representative Katherine Tai said in a statement. “As a result of our work, US 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,” she added.

The USTR remark on maintaining the integrity of the Section 232 measures means that India agreed to lift its trade retaliation without the US altering the steel and aluminium tariffs that Trump imposed, a USTR spokesperson said.

In addition to the two cases related to Trump’s tariffs, both nations also agreed to terminate four other WTO disputes — two each had been filed by India and the US. That still leaves one filed by the US in 2012 challenging India’s poultry trade barriers. However, a former US trade official said talks on that issue were continuing and a deal was still possible.

The two other cases terminated by the US are a 2018 complaint against Indian export subsidies 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 statement issued by Biden and Modi also highlighted India’s interest in being reinstated in the US Generalised System of Preferences (GSP) programme, which waives US import duties on thousands of goods from developing countries.

Trump kicked India out of the programme in 2019, saying that New Delhi did not provide sufficient market access to 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 US government procurement contracts.

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

Biden also invited Modi to attend as a guest the annual Asia-Pacific Economic Cooperation summit, which the US is hosting in San Francisco in November. India is not a member of the 21-economy group, but had expressed interest in joining it in the past. Biden is expected to travel to India in September for the G20 leaders’ summit, which New Delhi is hosting.

Politico had reported 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 the coming months. Tai and Goyal recently held a virtual meeting to discuss bilateral trade concerns.

In future also, there is no need to knock the door of the WTO to resolve trade disputes between the two countries. Both can amicably resolve their trade disputes because the mutual understanding between them has enhanced bilateral trust.

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