Abstract
In India-Export Measures, the United States challenged a range of Indian measures as prohibited export- contingent subsidies, and a WTO panel largely agreed. This article examines the factors at play in the United States’ decision to bring the challenge. At the level of policy, the United States case reflects India’s graduation from the protections afforded developing nations’ export-contingent subsidies under the Agreement on Subsidies and Countervailing Measures. A closer examination, however, shows that India ramped up its export-contingent subsidies just as the SCM Agreement required it to wind those subsidies down. Moreover, the expanded Indian subsidies led to increased import competition with the politically influential metals and pharmaceutical sectors in the United States, which pushed the U.S. challenge. We reflect on the larger implications of the challenge for the future of trade rules on industrial policy. In particular, we note that the United States pursued a trade enforcement policy that would have the effect of increasing pharmaceutical prices in the United States, by reducing subsidies for imported generic drugs, at a time at which the Trump administration allegedly was trying to reduce the price of prescription drugs. This disconnect suggests the need for both greater transparency in trade policy and greater governmental coordination on the connection between trade policy and other policy priorities.
Highlights
In India-Export Measures, the United States challenged a range of Indian measures as prohibited exportcontingent subsidies, and a WTO panel largely agreed
The expansion of India’s export-contingent subsidies—most of which the panel in India-Export Measures concluded constitute export-contingent subsidies in violation of the Agreement on Subsidies and Countervailing Measures (“SCM Agreement”)—had the unintended consequence of increasing Indian exports significantly to traditional Indian export markets like the United States and the EU
The Merchandise Exports from India Scheme (MEIS) program, in other words, indicated an expansion of India’s export-oriented industrial policy, rather than the contraction contemplated by the SCM Agreement
Summary
Industrial policy is on the minds of world leaders. China and other developing nations have practiced industrial policy to seemingly great effect, developing new high-value exports and pushing their economies up the value chain. At a time at which it was actively undermining the WTO Appellate Body and imposing WTO-inconsistent tariffs in a bid to revive U.S manufacturing, the Trump Administration sought to use the WTO dispute settlement system to curb India’s industrial policy While it largely won the case, from a technical point of view it amounted to a Pyrrhic victory, as India appealed the decision “into the void,” depriving the decision of binding legal effect. The expansion of India’s export-contingent subsidies—most of which the panel in India-Export Measures concluded constitute export-contingent subsidies in violation of the Agreement on Subsidies and Countervailing Measures (“SCM Agreement”)—had the unintended consequence of increasing Indian exports significantly to traditional Indian export markets like the United States and the EU Those increased exports spurred action by two influential import-competing sectors in the United States: pharmaceuticals and metals. The decision suggests the need for greater transparency in trade enforcement decisions
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