India : 8 Yrs To Phase Out Textile Export Subsidies

New Delhi does not have to immediately discontinue prohibited export subsidies being extended to textile and apparel products and is required to phase these out over a period of eight years after their export competitiveness is established under the World Trade Organisation Agreement on Subsidies & Countervailing measures (ASCM), reports Financial Express.

Washing-ton’s recent move through WTO for determining the export competitiveness of these products so as to make out a case for ending the subsidies will therefore have no impact on the sector, say commerce ministry officials.

They explain that prohibition of export subsidies does not apply to India and 19 other developing countries listed in Annexure VII of the Agreement. The list was drawn up during the Uruguay Round of multilateral trade negotiations. In their case, the subsidies need to be phased out only over a period of eight years after the export competitiveness of textile and apparel products is established. Included in the list is Pakistan.

China is among the developing countries that have been excluded from the list and all of them will have to phase out the export subsidies in two years once their competitiveness is established. The reason for China’s exclusion was that it was not admitted to WTO as a member when the Uruguay round negotiations were on, officials add.

The export competitiveness of a product as stated in Article 27.5 of the agreement will be established if the product has reached a share of at least 3.25 per cent of world trade of that product for two consecutive calendar years. The competitiveness shall exist either on the basis of a notification by the country concerned or on the basis of a computation undertaken by WTO.

For the purpose of Article 27.5, a product is defined as a section heading of the harmonised system nomenclature (HSN). If any developing country member other than those listed in Annexure VII wants to continue the export subsidies beyond the permissible eight-year period, it has to enter into consultations with the committee on subsidies and countervailing measures which will examine all relevant economic, financial and development needs of the member in question.

As regards actionable subsidies, action may not be authorised or taken under Article 7 of the Agreement unless nullification or impairment of tariff concessions or other obligations under the GATT 1944 is found to exist as a result of subsidies.