WTO panel rules against India in ICT tariff dispute with EU, others

April 18, 2023

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A World Trade Organization panel said that India had violated global trading rules in a dispute with the European Union, Japan and Taiwan over import duties on IT products.

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The WTO panel recommends India bring such measures into conformity with its obligations under the General Agreement on Tariffs and Trade (GATT 1994).
The panel further suggested that India should amend its tariffs on these products to align with global trading rules.
The EU has also approached India to resolve the matter through a multi-party interim appeal arbitration arrangement (MPIA).

Why does the dispute arise?

India, which is signatory to the 1996 Information Technology Agreement (ITA), is required to eliminate tariffs on a range of products, including mobile handsets.
However, starting the 2007-08 Union Budget, India imposed tariffs on a clutch of electronic items to curb cheap electronic imports from China and promote India’s home-grown manufacturing.
In 2019, the EU challenged India’s introduction of import duties of between 7.5% and 20% for a wide range of IT products, such as mobile phones and components, as well as integrated circuits, saying they exceeded the maximum rate. Japan and Taiwan filed similar complaints that same year.

Impact of ruling

Since the appellate body of WTO — its highest adjudicating authority — is dysfunctional due to the absence of judges, the adverse report of the dispute settlement panel will not have any immediate impact.
The Commerce ministry said that India will appeal against this ruling.

How imposition of tariff benefitted India?

It resulted in significant investments, including those from Apple and Foxconn.
India became the second largest producer of mobile phones with a valuation of 5277 crore in FY22.
The mobile phone exports crossed $10 billion in FY23.

MPIA (Multi-party interim appeal arbitration arrangement)

It is an alternative system for resolving WTO disputes that are appealed by a member in the absence of a functioning and staffed WTO Appellate Body.
The MPIA embodies the WTO appellate review rules and in a dispute between members, it will supersede the previous appeal processes and also apply to future disputes between members.
Any member can join the MPIA by notifying the Dispute Settlement Body and a range of members have done so.
However, India is against MPIA as a mechanism and is in favor of the restoration of the WTO appellate body.

World Trade Organization (WTO)

It is an international institution that oversees the global trade rules among nations.
It was established in 1995.
The WTO has 164 member countries.
It superseded the 1947 General Agreement on Tariffs and Trade (GATT).
The GATT traces its origins to the 1944 Bretton Woods Conference, which laid the foundations for the post-World War II financial system and established two key institutions, the International Monetary Fund (IMF) and the World Bank.
The main function of the organization is to help producers of goods and services, exporters, and importers protect and manage their businesses.

Electronics Sector in India

India is a 76-billion-dollar manufacturing economy with 16 billion dollars of exports in FY 2021-22.
Electronics as a sector has jumped to the 6th largest export from India this year.
Mobile phones constitute the single largest component of electronics exports from India.
By 2026, India has clearly laid out a goal of 300-billion-dollar manufacturing with a 120 billion dollar of exports.

Government Efforts

As a first step, India used the Phased Manufacturing Program (PMP) to build a USD 36 billion mobile industry.
India is now pushing for global exports via Production Linked Incentives (PLI) and a total production of USD 300 bn.
With exports as its key focus, the government is working on policies that will increase domestic value addition over the next few years.
India Semiconductor Mission
Semicon India programme

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Source: TH