India and the WTO

The defeats, and what each cost

India complied after every one of them, which is a fact worth stating: the record is one of a member that litigates hard and implements.

The three appeals into the void

Since the Appellate Body lost its quorum on 11 December 2019, an appeal cannot be heard, and India has filed three.

India: Export Related Measures, WT/DS541/R, circulated 31 October 2019, held the Export Oriented Units, Electronics Hardware Technology Park, Export Promotion Capital Goods, Special Economic Zones and Merchandise Exports from India schemes to be prohibited export subsidies under Article 3.1(a), India having crossed the per capita income threshold in Annex VII(b). India appealed on 19 November 2019. The policy answer was to replace MEIS with the Remission of Duties and Taxes on Exported Products scheme, designed as a remission of embedded taxes rather than a subsidy, and that redesign is the model.

India: Sugar and Sugarcane, DS579, DS580 and DS581, reports circulated 14 December 2021, appealed 11 January 2022.

India: ICT Tariffs, DS582, panel report circulated 17 April 2023, appealed 8 December 2023.

None of those reports has been adopted and no obligation to comply has arisen. India is not a participant in the Multi-Party Interim Appeal Arbitration Arrangement.

Raising India's share without hurting its producers

The 2022 question, and the legal answer is a rule of thumb. Support production, not exportation, and do not discriminate between imported and domestic inputs. That single sentence reconciles the two halves of the question, and it explains the whole pattern of the cases: MEIS fell because it was contingent on export; the solar and automotive requirements fell because they were contingent on using Indian goods; production linked incentives and RoDTEP survive because they are neither.

Four further points complete the answer. Trade facilitation and logistics, where India's own reforms have moved it up the rankings, reduce costs without breaching anything. Standards capacity, so that Indian exports meet SPS and TBT requirements rather than being turned back. Services, where India's advantage is largest and its market access complaints are strongest. And the defensive use of trade remedies, where India is among the world's heaviest users of anti-dumping and does so within Article VI.

A worked example

One product shows the whole of India's relationship with the system.

Take a generic medicine.

Before 1995 India's Patents Act 1970 granted process patents only for medicines and food, with a short term, and that policy built the industry that supplies a large share of the world's generics.

In the Uruguay Round India resisted TRIPS harder than almost any member, on precisely this ground, and accepted the package in exchange for the textiles phase-out, the first agricultural disciplines and the transition periods.

TRIPS Article 65 then gave India ten years, to 1 January 2005, before product patents were required, and Article 70.8 required it to accept applications in the meantime, the mailbox. India tried to do that by administrative instruction; India: Patents (Mailbox), adopted 16 January 1998, held that a sound legal basis was required, and the Patents (Amendment) Act 1999 followed.

The 2005 amendment then made product patents available, and India built its defences inside the text rather than against it: section 3(d) on new forms of known substances, section 84 compulsory licences after three years, and the pre-grant and post-grant opposition machinery, each of which uses Articles 27, 31 and 62 rather than defying them.

In 2001 India helped obtain the Doha Declaration on TRIPS and Public Health, and the Article 31bis amendment of 2017 turned that into treaty text.

And in 2020 India and South Africa proposed a waiver of TRIPS obligations for pandemic vaccines, obtaining a narrow decision at the Twelfth Ministerial Conference in June 2022.

Resist, accept, implement, litigate, then reform from inside. That sequence is the answer to almost every India question this paper sets.

Quick revision

• Contracting party to GATT from 1948; original member of the WTO.
• Led the Uruguay Round opposition with Brazil; accepted the package for textiles, agriculture disciplines and TRIPS transitions.
• Won EC: Bed Linen (zeroing, 12 March 2001), EC: Tariff Preferences (Enabling Clause, 20 April 2004), US: Hot-Rolled Steel from India (public body, 19 December 2014).
• Lost India: Patents (1998), India: Quantitative Restrictions (1999), India: Autos (2002), India: Agricultural Products (2015), India: Solar Cells (2016), and complied after each.
• Three appeals into the void: DS541 (19 November 2019), sugar DS579 to DS581 (11 January 2022), DS582 (8 December 2023). Not an MPIA participant.
• The rule of thumb for policy: support production, not exportation, and never condition support on using domestic goods. That is why RoDTEP survives where MEIS did not.

Test yourself

1. Trace India's position in the trading system from 1948 to the present. India was a founding contracting party to GATT in 1948 but pursued import substitution, so for four decades it was inside the system without being a beneficiary of it, particularly because textiles and clothing, its principal manufactured export interest, had been removed from GATT discipline by the Multifibre Arrangement. In the Uruguay Round it led, with Brazil, the opposition to placing services, intellectual property and investment on the agenda, securing at Punta del Este in 1986 the procedural compromise of a separate services track, and it ultimately accepted the package in exchange for the ten year phase-out of the textile quotas, the first disciplines on agricultural support and the transition periods in TRIPS Article 65. Between 1995 and 2005 it implemented, amending the Patents Act in 1999, 2002 and 2005 and removing import licensing on 2,714 tariff lines by 1 April 2001, largely under the compulsion of adverse rulings. Since then it has been among the most active users of the system, complainant in about twenty five disputes and respondent in about thirty, a leader of developing country coalitions on agriculture, and since 2019 the holder of three appeals that cannot be heard.

2. Which disputes has India won, and what did each establish? Three principally. In EC: Bed Linen, adopted 12 March 2001, the Appellate Body condemned zeroing, the practice of treating export transactions priced above normal value as zero rather than as negative margins when calculating a weighted average dumping margin, as inconsistent with Article 2.4.2 of the Anti-Dumping Agreement; India won, and the ruling opened a long line of decisions against the practice in every form. In EC: Tariff Preferences, adopted 20 April 2004, it held the Enabling Clause to be an exception to Article I:1 which the respondent must invoke and justify, and required that any differentiation among developing country beneficiaries respond to a development, financial or trade need assessed against an objective standard and be open to all similarly situated beneficiaries; India won, and the European drug arrangements window that had excluded it fell. In US: Countervailing Measures on Hot-Rolled Steel from India, adopted 19 December 2014, it held that an entity is a public body only if it possesses, exercises or is vested with governmental authority rather than merely being state owned, and condemned the use of facts available and the cumulation of subsidised with dumped imports; India won substantially.

3. How can India increase its share of global trade without harming its domestic producers, consistently with WTO law? The legal rule that reconciles the two halves is that a member may support production but not exportation, and may not condition support on the use of domestic rather than imported goods. Every Indian defeat illustrates one limb or the other: the Merchandise Exports from India Scheme and its companions fell in DS541 because they were contingent on export performance and India had lost the Annex VII(b) exemption, while the automotive indigenisation requirement and the National Solar Mission's domestic content requirement fell because they conditioned an advantage on buying Indian. The schemes that survive are those built on the right side of that line, notably production linked incentives and the Remission of Duties and Taxes on Exported Products scheme, which is designed as a remission of embedded taxes rather than a subsidy. Beyond that, four avenues are lawful and effective: reducing trade costs through facilitation and logistics, building the standards and testing capacity that SPS and TBT requirements demand of exporters, pressing India's services interests where its comparative advantage is greatest and its market access grievances strongest, and using anti-dumping and safeguard remedies defensively within the disciplines of Article VI and Article XIX.