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US prepares the ground for a possible trade war with India

United States has flayed half a dozen Indian export subsidy schemes and said they harmed the American Industry by creating an uneven level playing field in global trade. The schemes the US Trade representative said besides providing financial benefits to Indian exporters, allowed them to sell their products at cheaper rates to the detriment of US Industry. If India is not amenable to reason during the bilateral talks, US would press the World Trade Organization to set up a dispute settlement mechanism to resolve the issue according to media reports..

The USTR in a statement released last week identified them as Merchandise Exports from India Scheme; Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware United Technology Parks Scheme, Special Economic Zones, Export Promotion Capital Goods Scheme and Duty Free Imports for Exporters Program.

"These export subsidy program harmed American workers by creating an uneven playing field on which they must compete, the statement said.

USTR will hold  the country’s trading partners accountable by vigorously enforcing US rights under our trade agreements and by promoting fair and reciprocal trade through all available tools,.

The statement assumes political significance as it is timed during the visit of the New Indian foreign secretary Vijay Gokhale. Mr Gokhale who assumed office last month is on a maiden visit to Washington and  his program includes meeting with the USTR. US President Donald Trump had publicly taken exception to India’s decision to levy customs duty on import of US motorcycles.

 India the statement said has given exemption from certain duties, taxes, and fees which benefits numerous Indian exporters, including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel.

Thousands of Indian companies are receiving benefits totaling to over $7 billion annually from these programs, USTR has alleged. The export subsidies provide an unfair competitive advantage to recipients.

A limited exception to this rule is for specified developing countries that may continue to provide export subsidies temporarily until they reach a defined economic benchmark. India was initially within this group, but it surpassed the benchmark in 2015. India's exemption has expired, but India has not withdrawn its export subsidies.

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 India introduced the Merchandise Exports from India Scheme in 2015, which has rapidly expanded to include more than 8,000 eligible products, nearly double the number of products covered at its inception.

Exports from Special Economic Zones increased over 6,000 per cent from 2000 to 2017, and in 2016, exports from Special Economic Zones accounted for over $82 billion in exports, or 30 per cent of India's export volume.

Exports from the Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme, increased by over 160 per cent from 2000 to 2016, it asserted.

Stating that consultations are the first step in the WTO dispute settlement process, The USTR said if the US and India are not able to reach a mutually agreed solution through consultations, it may request the establishment of a WTO dispute settlement panel to review the matter.


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