India: Are multilateral trading rules worth preserving?

Last Updated: 21 September 2018
Article by RV Anuradha
  • It is a gross misunderstanding to consider that the WTO and multilateral trading rules curtail the policy space for incentivising the domestic industry.
  • India can no longer avail of specific exemptions from the treatment of its export subsidies under WTO rules.

There is never a boring day at the President Trump's White House or for the rest of the world reading about Trump. In the fairly sedate world of trade law and policy, he has ensured that businesses and industry are talking more about WTO, trade and trade rules than ever before. The most recent development in this regard is the "United States Fair and Reciprocal Tariff Act," (reported widely by its acronym as "FART") which would give the U.S. President unilateral power to ignore the basic principle of "Most-Favoured Nation" (MFN) treatment, and instead set different tariff rates for different countries. The draft law also proposes that the President would have powers to impose tariffs higher than the "bound tariff rates" agreed at the WTO. The latter, in fact, is the situation with regard to the U.S.' imposition of the additional tariffs of 25% and 10% on imports of steel and aluminium articles, with regard to which India and several other countries have initiated dispute settlement proceedings at the WTO.

This comes close on the heels of another report which suggested that President Trump was seriously considering withdrawing from the WTO entirely.

The Trump shenanigans have had some ironic consequences as well. For instance, one of his biggest grouses against India, EU and several other countries is the high import tariffs on the Harley Davidson motor-cycles. As a retaliation against Trump's unilateral tariffs on aluminium and steel, when the EU threatened even higher tariffs against the motorcycles, Harley Davidson announced that it would shift its manufacturing outside of the U.S. to avoid tariffs and thereby maintain sales. Trump then thundered that Harley will be "taxed like never before."

The US aluminium and steel industry, who were supposed to be the beneficiaries of Trump's tariffs, have also started registering their concerns concern on the adverse impact of the tariffs on American jobs in aluminium processing and across the supply chain. And the American Institute for International Steel, Inc. along with other US based entities have challenged the constitutionality of section 232 of the US Trade Expansion Act- which is the provision under which President Trump had imposed the high tariffs on aluminium and steel in the first place.

What can possibly be done to signal a vote of confidence in multilateral trade rules?

Irony aside, all of this raises serious questions about the relevance and benefits of multilateral trading rules; and more importantly- should other countries continue to play by the rules in the face of such blatant violation by the government of one of the largest markets? And is the WTO's set of multilateral trading rules worth preserving?

I will go with a simple assumption- yes, it is, since businesses like the certainty and predictability that rules can offer. With that basic premise, it stands to reason that governments including that of India, need to consider options and strategies for signalling compatibility with multilateral trading rules.

No country has perfected the system of complete compatibility with the rules of trade, and it is so with India as well. India should therefore first develop an inward-looking strategy to address our vulnerabilities. High tariffs and domestic industry protectionism are the two of the tools most frequently used by India. Another aspect where India is on a weak footing is its export subsidies, against which the US has raised a WTO dispute.

Four possible issues are worth considering:

  • While the high tariffs within WTO bound rates are legitimate tools for protecting the domestic industry, the sudden spike in a range of tariffs in December 2017, followed by the Budget 2018 announcements earlier this year, sent a signal of rising barriers and drew much criticism from India's trading partners. Perhaps it is time for a reassessment, more as a symbolic gesture on India's approach to the value of trade liberalization.
  • Second, it is a gross misunderstanding to consider that the WTO and multilateral trading  rules curtail the policy space for incentivising the domestic industry. On the contrary, the WTO offers spaces for maintaining specific policies for encouraging the domestic industry and attracting investments. These need to be explored in full. Some ideas for this have been addressed in an earlier article for this platform. A careful exercise of WTO compatible ways to protect domestic industry needs to be undertaken prior to framing policies and schemes, and not as an afterthought. Likewise, the Government mantra of "Make in India" needs to have an inbuilt WTO-compatibility assessment which can reassure investors that the underlying premise is to attract investments and not to give preferential treatment to domestic production over imports.
  • With the increase in per capita income of over USD 1,000, India can no longer avail of specific exemptions from the treatment of its export subsidies under WTO rules. But this does not mean that subsidies can no longer be offered. The WTO offers enough policy space to design compatible schemes. This is another action point that needs to be taken up quickly.
  • India's agricultural support programmes have also been under increased scrutiny at the WTO. A careful analysis to address vulnerabilities, and design policies and schemes that are compatible, should be undertaken.

What the world needs is a vote of confidence in the rules for trade. India should consider these small, but deliberate steps towards the same.

Originally published by CNBC TV18, July 2018

RV Anuradhai s partner, Clarus Law Associates, New Delhi, and specialises in international trade and investment laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
RV Anuradha
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions