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India’s trade dispute with America has reached to a next level in the World Trade Organization (WTO), as India asked the WTO to form a panel against the USA for imposing high import duties on aluminium and certain steel products.

India decision to urge WTO to set up panel came after both countries failed to resolve the issue in a bilateral talk process under the WTO’s dispute settlement mechanism.

Dispute settlement in WTO

  • Disputes in the WTO are essentially about broken promises. WTO members have agreed that if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. That means abiding by the agreed procedures, and respecting judgements.
  • A dispute arises when one country adopts a trade policy measure or takes some action that one or more fellow-WTO members considers to be breaking the WTO agreements, or to be a failure to live up to obligations. A third group of countries can declare that they have an interest in the case and enjoy some rights.
  • However, when any dispute arises between the member countries, consultation is the first step of the dispute settlement process in the organisation. If two countries are not able to reach a mutually agreed solution through consultation, a country can request for a WTO dispute settlement panel to review the matter.
  • So, now, when India has asked the WTO for establishment of the dispute panel on the matter, means consultation did not work.

What’s the case?

Earlier US President Trump imposed the tariffs levying 25% on steel import and 10% on aluminium. While imposing the tariffs, US justified it by saying that it’s a matter of national security and hence it is the ‘safeguard’ under WTO rule and out of purview the WTO’s remit. This imposition of high import duties affected the exports of Indian businesses of these products. And India believes that US move is not in compliance with global trade norms.

It is estimated that India exports steel and aluminium goods worth about $1.6 billion a year to USA. India, Russia, Japan, China, European Union and Turkey have all dismissed US claim regarding the U.S. tariffs as ”safeguards” under the WTO rules, entitling them to a combined $3.5 billion in annual compensation. They dragged the US in the WTO for tariff imposition which triggered global trade tensions.

Impacts on India

  • As per the experts, America’s decision to impose tariffs will impact India’s export of these goods and hit global trade. The entire basis of the US action is based on its own perception of security threat issue. This cannot be a ground to impose these duties.
  • However, some experts are also in the opinion that dragging the US in the dispute over the issue is not a positive step, since India had a trade surplus with America.
  • Both countries are also involved in several other disputes in the WTO, including in the areas of poultry, export incentives, solar and steel.
  • In retaliation to the imposition of duties by the US, India had decided to increase customs duty on 29 American products such as almond, walnut, pulses and iron and steel items. The duties would come into effect from December 17.

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