India – US: Dance over WTO Claims (Part 2)

A few days ago we saw why US dragged India to the WTO. In this article we will try to understand why the tariffs were imposed by US, why India has filed a claim against the US at the WTO, and whether it has a legal basis.

Why has India taken US to the WTO?

On March 8th 2018, President Trump announced tariffs on import on material into the US. These tariffs would apply to the steel and aluminium, with the former getting 25% duty and the latter 10%. President Trump believed this would be a move to help both the economy and the national security.

President Trump placed his exemptions based on Section 232 of the Trade Expansion Act of 1962 and Section 604 of the Trade Act of 1974.

To protest against these tariffs, India has requested to hold consultations with the US.

Why have the Tariffs been placed?

Image result for trump signing the trade tariff proclamations
President Trump Signing the Proclamations

Hindu Business Line reported President Trump’s reasons as follows:

Trump said the “unfair” foreign trade practices were not merely an “economic disaster” but a “security disaster” and by signing the two proclamations he was defending America’s national security. “We want to build our ships, we want to build our planes, we want to build our military equipment with steel, with aluminium from our country. And now we’re finally taking action to correct this long-overdue problem. It’s a travesty,” he said.

Stating that he wants a lot of steel coming to the US, Trump asserted that he wants it to be “fair”. “We want our workers to be protected and we want, frankly, our companies to be protected. By contrast, we will not place any new tax on product made in the US. So there’s no tax if a product is made in the USA. You don’t want to pay tax? Bring your plant to the USA. There’s no tax,” he said.

What remedy does India plead for?

When implementing the duties on March 23rd 2018, certain exemptions were made. Countries such as Argentina, Australia, Brazil, Canada, Mexico, South Korea and members of the European Union are exempt from these tariffs. These exemptions from the tariffs are based on section 232 Tariff Modifications. In fact, a White House statement reads as follows:

Today, based on ongoing dialogues, President Donald J. Trump authorized the modification of the Section 232 tariffs on steel and aluminum imports to suspend the tariffs for certain countries before they take effect.  These suspensions are based on factors including ongoing discussions regarding measures to reduce global excess capacity in steel and aluminum production by addressing its root causes.

India wants to be included in the exemptions list released by the US. As such it has sought for consultations with the US before the WTO.

Does India have a legal basis for this request?

India filed the request for consultations at the WTO on 18th May 2018. It has based its arguments on the basis of GATT and Agreement of Safeguards (AOS) as follows:

  • Articles XIX:1(a), XIX:2 of the GATT 1994 and Articles 2.1, 2.2, 3.1, 4.1, 4.2, 5.1, 7, 9.1, 11.1(a), 12.1, 12.2 and 12.3 of the Agreement on Safeguards because the measures at issue are, in effect and in substance, safeguard measures and the United States has adopted and implemented the measures at issue inconsistently with its obligations, both substantive and procedural, as set out under the said provisions of the GATT 1994 and the Agreement on Safeguards.

  • Article 11.1(b) of the Agreement on safeguards and Article XI:1 of the GATT 1994 to the extent that the United States seeks, through the adoption of the measures at issue, any voluntary export restraints, orderly marketing arrangements or any other similar measures on the export or the import side.

  • Article II:1(a) and (b) of the GATT 1994, because the United States has imposed import duties on certain steel and aluminium products in excess of the duties set forth and provided in Part -I of the United States’ Schedule of Concessions and Commitments annexed to the GATT 1994.

  • Article I:1 of the GATT 1994, because the measures at issue do not apply uniformly to all imports of certain steel and aluminium products into the United States irrespective of their origin and thereby the measures at issue discriminate against imports of the said steel and aluminium products originating from India, with respect to the advantage, favour, privilege or immunity extended by the United States to certain selected WTO Members.

  • Article XI:1 of the GATT 1994, because the measures implicitly introduce restrictions in the form of quotas, as the said measures reduce the imports of steel and aluminium products from the trade levels as existed prior to these measures.

  • Article X:3(a) of the GATT 1994, because the United States has failed to administer its laws, regulations, decisions and rulings in relation to the measures at issue in a uniform, impartial and reasonable manner.

For a complete overview of India’s request to the US for consultations, click here.

Thus, you can see that although similar recourse to dispute settlement has been taken by both India and US, it deals with two differing aspects of trade. The one where US requested for consultations was regarding the trade subsidies, while this is regarding India’s claim for exemptions from the trade duties imposed on it.

Let me know what you think about these WTO claims and their possible outcomes.

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