In yet another demonstration of its protectionist tendencies, the United States has asked the World Trade Organisation (WTO) to examine whether India still qualifies for concessions which allow it to give export subsidies to the textiles and clothing sector. India, however, is confident that its subsidies to textiles exporters cannot be challenged at the multilateral forum as they are mostly short term.
The United States, in a recent submission to the WTO committee on subsidies and countervailing measures (SCM), stated that it has reason to believe that India has met the definition of ‘export competitiveness,’ as defined in the SCM Agreement for certain products. The agreement exempts developing country members (with per capita income below $1,000) from prohibition on export subsidies, as long as exports of individual products are lower than 3.25 per cent of world trade for two consecutive years.
“The United States requests that the Secretariat (WTO) undertake a computation of the export competitiveness of textile and apparel exports from India in accordance with Article 27.6 of the SCM Agreement,” the submission said.
According to a government official, since most of the support given by the Centre to textile exporters was on a short-term basis, there was very little risk of the United States move leading to action against India’s exports. “Things are at an initial stage. We are certainly going to keep an eye on how things develop,” he said.
At present, the subsidies being given to Indian textile exporters (which includes handicrafts and carpets) include discount on interest on loans and incentives for exporting to particular markets in the form of duty-free import scrips that can be sold in the market. These sops are part of the Centre’s efforts to help the Indian industry tide over the effects of the global economic crisis.
Confederation of Indian Textiles Industry (CITI) secretary general D.K. Nair said that since the subsidies were short term in nature, they would probably be gone by the time the WTO takes a decision on the issue. “Moreover, these subsidies may not be actionable under the WTO,” he said.
According to Mr Manab Majumdar, head of FICCI’s WTO committee, even if India’s exports of textiles and clothing turn out to be greater than 3.25 per cent, the country could easily continue to give subsidies under other flexibilities allowed by the WTO. “India is also allowed to give support to exporters under the special and differential treatment (S&DT). So I don’t foresee any problems,” he said.
A FICCI calculation shows that in 2008 India’s exports of textiles and clothing were 21 billion dollars, forming 3.4 per cent of the sector’s global trade at 612 billion dollars. In 2009, however, India’s textile exports to the European Union and the United States (which together account for more than half of India’s total textiles and clothing exports) fell due to a severe slowdown in demand.
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