Trade Concerns Over Forced Labour and Excess Capacity

Syllabus: GS2/ IR, GS3/ Economy

Context

• India has defended its trade policies at the G20 Trade Ministers’ Meeting against U.S. concerns about forced-labour-linked imports and structural excess capacity.

About forced-labour import 

• A forced-labour import refers to a good imported into a country that has been manufactured, wholly or partly, using forced labour at some stage of its production.
• Structural excess capacity refers to a situation where production capacity in a sector persistently exceeds domestic and global demand, potentially resulting in overproduction, falling prices and trade distortions.

India’s Stand on Forced-Labour Trade Measures

• WTO-Based Approach: India has emphasised that concerns regarding unfair trade practices should be addressed through existing WTO-compatible instruments, including:

• Anti-dumping duties: These are additional import duties imposed when a foreign company exports a product at a price lower than its normal value, causing or threatening injury to the domestic industry.
• Countervailing duties: These are additional import duties imposed to offset the advantage enjoyed by foreign producers because of subsidies provided by their governments.
• Evidence-based approach: India has argued that trade restrictions should be based on specific and verifiable evidence concerning particular goods, companies or supply chains rather than assumptions about an entire country or sector.

Legal Framework in India

• The Bonded Labour System (Abolition) Act, 1976, prohibits systems of labour where people, including children, work under conditions of servitude to pay off debt, and also provides a framework for rehabilitating released labourers. 
• Constitutional Provisions: Article 23 prohibits traffic in human beings, begar (forced labor) and other similar forms of forced labor. 
• India has ratified ILO Convention No. 29 (Forced Labour Convention, 1930) and ILO Convention No. 105 (Abolition of Forced Labour Convention, 1957).
• Import prohibition: In July 2026, India amended its Foreign Trade Policy to prohibit the import of goods produced using forced labour.
• The Child and Adolescent Labour (Prohibition and Regulation) Act, 1986 (amended in 2016) completely bans the employment of children under 14 years in all occupations and processes, while regulating the work of adolescents aged 14 to 18 years.

What are the challenges?

• Establishing forced labour in global supply chains is difficult because imported products may involve multiple layers of producers, subcontractors, intermediaries and suppliers spread across different countries.
• Small and medium-sized enterprises will face higher compliance costs because supply-chain audits, certification, documentation and due-diligence mechanisms can be expensive and technically demanding.
• Different countries adopt different definitions and enforcement standards for forced labour, creating regulatory fragmentation and increasing compliance burdens for Indian businesses engaged in international trade.
• Forced-labour-related import restrictions can raise concerns about protectionism if trade measures are imposed without specific evidence linking particular goods or producers to forced labour.

Way Ahead

• India and the U.S. should strengthen bilateral dialogue and evidence-sharing mechanisms on forced labour and trade distortions.
• Trade-related investigations should maintain transparency, due process and sector-specific evidence.
• India should strengthen domestic enforcement against forced labour and improve the traceability of its supply chains.
• WTO-consistent trade-remedy mechanisms should remain the preferred route for addressing dumping and subsidy-related distortions.

Source: TH