Eleven major economies have placed their support behind the US in challenging export subsidy measures that benefit Indian exporters in a range of industries, including textiles and apparel.

Earlier this year, the US requested dispute settlement consultations with the Government of India at the World Trade Organization (WTO) to challenge the measures. Now, it is understood the European Union (EU) and countries including Brazil, Canada, China and Japan are supporting its claim that the schemes violate fair trade law.

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According to a statement released by the Office of the US Trade Representative in March, the programmes being challenged are: the merchandise exports from India scheme; the export-oriented units scheme and sector-specific schemes, including the electronics hardware technology parks scheme; special economic zones; the export promotion capital goods scheme; and a duty-free imports for exporters programme. 

These apparent export subsidies provide financial benefits to Indian exporters that allow them to sell their goods more cheaply to the detriment of American workers and manufacturers, the statement said.

According to Indian Government documents, thousands of Indian companies are receiving benefits to the tune of more than US$7bn annually from these programmes, which also provide exemptions from certain duties, taxes, and fees; reduce import duty liability; and benefit numerous Indian exporters – including producers of textiles, and apparel.

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Developed nations, including the US, have long argued that export subsidies provide an unfair competitive advantage to recipients, pointing out that WTO rules prohibit them. It is the aim of the Agreement on Subsidies and Countervailing Measures (ASCM) to gradually lower and finally prohibit export subsidies provided by nations so that global trade becomes equitable, according to India’s Business Standard.

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An exception to this rule is for specified developing countries that may continue to provide export subsidies temporarily until they reach a defined economic benchmark of a $1000 per capita income. India was initially within this group, but was informed last year by the WTO Secretariat in a report that it had crossed the threshold back in 2015.

Other countries that are now backing the US claim are Egypt, Kazakhstan, Korea, the Russian Federation, Sri Lanka, Taiwan and Thailand.

Exports from Special Economic Zones (SEZs) increased by more than 6,000% from 2000 to 2017 and accounted for more than $82bn in exports or 30% of India’s export volume in 2016. In addition, exports from the export-oriented units scheme and sector-specific schemes increased by more than 160% from 2000 to 2016.