EU, China and Thailand step in on WTO complaint over India

Legislation | 28 May 2019

More countries have joined the fray in a complaint over Indian import tariffs.


According to a new communication from the World Trade Organisation (WTO), the EU, China and Thailand have now sought to weigh in on a consultation concerning tariffs imposed by India on information and communications technology products.

A case had already been filed by Japan at the WTO after India added levies to certain electronics products, including mobile phones.

Indeed, the government said last year it would be raising customs duty from 15 to 20 per cent on imported mobile phones and some parts and accessories used on phones and televisions, such as machines for reception, conversion and transmission or regeneration of voice, images or other data.

The move was aimed at protecting local manufacturing and creating more jobs in the country as part of Indian prime minister Narendra Modi's 'Make in India' initiative.

It followed up this hike with an additional ten per cent tax on imports of key smartphone components including populated printed circuit boards.

In response to this, Singapore, Canada and Chinese Taipei had already joined Japan by requesting to join a dispute consultation against India under the WTO's dispute settlement body.

Japan alleges that imposing import duties on these products infringes WTO rules, since India had committed to zero per cent bound tariffs.

Now, in a separate communication, China has also said it has an interest in the consultations because it is one of the world's biggest exporters of information technology products.

The EU has stated that, in light of new developments, it wishes to join the consultations - and Thailand claims the import duties could "substantially" affect its sales and exports, so it will be adding its name to the list too.

All of the nations or blocs say they have an interest in the trade of IT products with India and seeking consultation is the first step in the WTO's dispute settlement process, which states any member can file a complaint if it perceives that another country's trade policies or actions are violating global trade norms and impacting their trade.

Those seeking to join the consultation will require approval from India and Japan before the matter can continue.

The move is sure to come as something of a blow to India, which has been a WTO member since 1995 and is a key trading partner with China, Thailand and, in particular, the EU.

Last year, the EU was actually India's largest trading partner, accounting for €92 billion worth of trade in goods and putting it above both China and the US. The EU is also the leading destination for Indian exports.

Meanwhile, India is the EU's ninth largest trading partner and the bloc sent 2.3 per cent of its total trade in goods there in 2018.

India is also the world's fastest-growing large economy with a GDP growth rate of around seven per cent - and the Organisation for Economic Cooperation and Development recently said its lead over China is widening as a result of the latter's trade war with the US.

Consequently, this could have been the ideal time to capitalise on the advantages and make more of global trade, rather than applying new tariffs that could stunt it.

However, India's trade regime and regulatory environment have always been relatively restrictive, with negotiations for a free trade agreement between it and the EU suspended in 2013 due to technical barriers to trade and deviation from international standards and agreements.

There was further bad news in March this year when US president Donald Trump notified Congress he wanted to end the favourable treatment of India under the Generalized System of Preferences, which had been in place since the 1970s and ensured many products from India could enter the US duty-free.

He also said he would penalise nations that do business with Iran and Russia, which includes India - although Washington has granted waivers that protect it thus far.

Undoubtedly, though, this will be a worrying time for India - and some analysts have suggested it could be time to move urgently away from the protectionism and import substitution that saw it fail economically after its independence in the 20th century.

By opening itself up to trade and foreign investment, it could not only reap the economic rewards, but also avoid the attention of the WTO and its dispute resolution system.

If you have any concerns about your business's trade with India, please feel free to contact MIC or explore our range of specialist trade compliance products.