Dispute Settlements that have No Parallel

July 18, 2023

GS Paper II International Relations

Context:

India and the U.S. have mutually resolved all six trade disputes pending at the World Trade Organisation.

Background: WTO Appellate Body’s Redundancy:

The WTO Appellate Body has been non-functional since 2019, causing a deadlock in resolving trade disputes.
Six long-standing trade disputes between India and the US were left unresolved due to the lack of a functioning Appellate Body.
The disputes covered various sectors and products, making their resolution challenging.

Pragmatic Resolution of Disputes:

Both countries decided to end the six trade disputes through bilateral negotiations and mutual understanding.
They accepted each other’s domestic challenges in dispute compliance, realizing the importance of burying differences.

The six disputes involved:

	Disputes	Settlement
Section 232 tariffs	In 2018, the USA imposed tariffs on steel and aluminum imports from India, citing national security concerns. India retaliated by imposing tariffs on US goods, including soybeans, almonds, and walnuts.	The USA agreed to receive and consider requests for exclusions from Section 232 measures with approval rates of 70% for steel products and 80% for aluminium products from India. India agreed to remove the additional duties, which were retaliatory in nature, on certain U.S. agricultural imports.
Domestic content requirements	The USA has challenged India’s domestic content requirements for solar cells and modules, arguing that they violate WTO rules. India has argued that the requirements are necessary to support its renewable energy sector.	India agreed to phase out its domestic content requirements for solar cells and modules over a period of five years. The USA agreed to withdraw its challenge to the requirements at the WTO.
Export subsidies	The USA has challenged India’s export subsidies for information technology products, arguing that they violate WTO rules. India has argued tha the subsidies are necessary to support its IT sector.	India agreed to eliminate its export subsidies for information technology products. The USA agreed to withdraw its challenge to the subsidies at the WTO.
Special economic zone	The USA has challenged India’s special economic zones, arguing that they violate WTO rules by providing preferential treatment to foreign investors. India has argued that the zones are necessary to attract foreign investment.	India agreed to make some changes to its special economic zones, but the details of the changes have not been made public. The USA agreed to withdraw it challenges to the zones at the WTO.
Intellectual property rights	The USA has accused India of not doing enough to protect intellectual property rights. India has argued that it is taking steps to improve its IP protection regime.	India agreed to take steps to improve its IP protection regime. The USA agreed to withdraw its concerns about India’s IP protection regime at the WTO.
Anti-dumping duties	The USA has imposed anti-dumping duties on several Indian products, arguing that they are being sold in the US market at below fair market value. India has challenged the duties, arguing that they are unjustified.	India and the USA agreed to establish a working group to discuss the issue of anti-dumping duties. The working group will meet regularly to try to resolve the issue

Mechanism of Trade Dispute Settlement at WTO:

According to WTO rules, a member country can file a case in the WTO, if they feel that a particular trade measure is against the norms of the world body.
Bilateral consultation is the first step to resolving a dispute.
If both sides are not able to resolve the matter through consultation, either of them can approach the establishment of a dispute settlement panel.
The panel’s ruling or report can be challenged by WTO’s appellate body.
Currently, the appellate body is not functioning because of differences among member countries to appoint its members.

New Chapter in India-US Trade Relations:

Resolving six separate disputes through diplomacy and bilateral negotiations is unprecedented.
The deal sets a template for other WTO members and showcases a pragmatic approach to dispute resolution.
The resolution comes at a time when India-US trade relations are strengthening and opens the way for deeper economic engagements.

About The World Trade Organization (WTO):

WTO is the only international organization that deals with the rules of trade between countries. It provides a forum for countries to negotiate trade rules and settle economic disputes between them.
Formation: Founded in 1995, the WTO is run by its 164 members, and according to its rules, all decisions are taken through consensus and any member can exercise a veto.
Aim: To promote free trade, which is done through trade agreements that are discussed and signed by the member states.