India appeals against WTO order on sugar

In News

• India has appealed against a ruling of the World Trade Organization’s (WTO) trade dispute settlement panel which ruled that the country’s domestic support measures for sugar and sugarcane are inconsistent with global trade norms. 

About

• WTO’s Appellate Body: The appeal was filed by India in the WTO’s Appellate Body, which is the final authority on such trade disputes.
• According to WTO rules: a WTO member or members can file a case in the Geneva-based multilateral body if they feel that a particular trade measure is against the norms of the WTO.
  • Bilateral consultation is the first step to resolving a dispute. If both the sides are not able to resolve the matter through consultation, either can approach for the establishment of a dispute settlement panel. The panel’s ruling or report can be challenged at the World Trade Organization’s Appellate Body.
• The panel in its ruling recommended: India to withdraw its alleged prohibited subsidies under the Production Assistance, Buffer Stock, and Marketing and Transportation Schemes within 120 days from the adoption of this report.
  • Ruling in favor of Brazil, Australia, and Guatemala in their trade dispute against India over India’s sugar subsidies, the WTO panel has stated that the support measures are inconsistent with WTO trade rules.
• Brazil is the largest producer and exporter of sugar in the world. India is the world’s second largest sugar producer after Brazil.

Issues

• Subsidies are inconsistent: In 2019, Brazil, Australia, and Guatemala dragged India into the WTO’s dispute settlement mechanism alleging that India’s domestic support measures to producers of sugarcane and sugar and export subsidies are inconsistent with global trade rules.
  • It includes various provisions of the WTO’s Agreement on Agriculture, Agreement on Subsidies and Countervailing Measures, and the General Agreement on Trade and Tariffs (GATT).
  • These three countries, which are members of the WTO, had complained that India’s support measures to sugarcane producers exceed the de minimis level of 10 percent of the total value of sugarcane production, which according to them was inconsistent with the Agreement on Agriculture.
• MAEQ Scheme: is of the same essence as other alleged export subsidies identified in the complainants’ requests for the establishment of a panel.
  • India considers that the Panel has picked a few broad similarities while ignoring the differences between MAEQ and the other alleged exports subsidy measures.
• No Appellate Body division: It said that given the ongoing lack of agreement among WTO members regarding the filling of Appellate Body vacancies, there is no Appellate Body division available at the current time to deal with the appeal.
  • Even if the body, which is the final arbiter on such trade disputes, starts working from now, it would take over a year to take up India’s appeal.
• Legally binding: If the appellate body also passes a ruling against India’s support measures, India has to abide by that and make appropriate changes in the way it provides those measures.
• Australia accused India: of “failing” to notify its annual domestic support for sugarcane and sugar subsequent to 1995-96, and its export subsidies since 2009-10, which it said were inconsistent with the provisions of the SCM Agreement.

India’s argument

• Clear outstanding dues: The government had approved a subsidy of Rs 3,500 crore to sugar mills for the export of 60 lakh Tonnes of sweetener during the ongoing marketing year 2020-21 as part of its efforts to help them clear outstanding dues to sugarcane farmers.
• Within the WTO’s agreement: India has said that the panel has erred in finding that India’s fair and remunerative price and state advised price constitute market price support under the WTO’s agreement of agriculture.
• Within its terms of reference: India has sought review of the panel’s finding that the scheme for providing assistance to sugar mills for expenses on marketing costs, including handling, upgrading and other processing costs and costs of international and internal transport and freight charges on the export of sugar is within its terms of reference.
• Errors in findings: India has stated that the WTO’s dispute panel ruling has made certain “erroneous” findings about domestic schemes to support sugarcane producers and exports and the findings of the panel are completely “unacceptable” to it.
• Article 3 of the SCM Agreement: The requirements of Article 3 of the SCM Agreement are not yet applicable to India and that India has a phase-out period of 8 years to eliminate export subsidies, if any, pursuant to Article 27 of the SCM Agreement.
• India argued: That its “mandatory minimum prices are not paid by the central or state governments but by sugar mills, and hence do not constitute market price support.
  • The panel rejected this argument saying market price support does not require governments to purchase or procure the relevant agricultural product.

Way Forward

• While calculating subsidies: Today’s prices cannot be compared to prices in 1986-88. This is wrong. A larger battle has to be fought on how much price support can India give in the WTO.

Source: ET