Context: India has notified the World Trade Organisation (WTO) that it plans to impose $7.6 billion in retaliatory tariffs on import of the selected US goods. This is in retaliation for the US increasing duties on steel and aluminium imports to 25%.
The US stance at the WTO is that the tariffs on Indian goods were imposed on national security grounds and should not be regarded as safeguard measures.
Relevance of the Topic : Prelims: Key facts related to GATT, WTO Agreement on Safeguards (AoS).
India’s Response
- India maintains that the measures taken by the US are not consistent with the General Agreement on Tariffs and Trade 1994, and the Agreement on Safeguards (AoS). The US failed to notify the WTO and did not conduct the mandatory consultations under Article 12.3 of the WTO Agreement on Safeguards. Hence, India has the right to retaliate.
- India has the right to impose reciprocal measures under WTO rules due to adverse trade effects, after the expiration of thirty days from the date of this notification.
- The US tariffs have affected $7.6 billion worth of Indian exports, leading to an estimated $1.91 billion in additional duties. India aims to recover this equivalent amount by suspending concessions or increasing tariffs on the US goods.
WTO Agreement on Safeguards
- WTO AoS allows the countries to temporarily restrict imports (E.g., through higher tariffs or quotas) to protect a domestic industry from serious injury caused by a sudden surge in imports.
- Safeguard measures must be applied to imports from all countries equally. No selective targeting of countries is allowed, unlike anti-dumping measures.
- Countries must notify the WTO about the proposed safeguard measures and must provide evidence of injury and details of the proposed action.
- As per Article 12.3, Countries imposing safeguards must hold consultations with affected countries before applying the measure. Failure to do so allows the affected countries to take retaliatory measures.
- Safeguard measures are temporary. Maximum initial duration is 4 years, extendable up to 8 years under strict conditions. Measures must be progressively liberalised (i.e., reduced in severity) over time.
- Countries affected by the measure can seek compensation. If not provided, they can take countermeasures (retaliatory tariffs), as India is planning.
If India does go ahead with its retaliatory measures, it would not be the first time. In June 2019, India imposed higher tariffs on 28 products from the US, after the U.S. removed India from its Generalised System of Preferences (GSP) and refused to discontinue its 2018 steel and aluminium tariffs. The duties, covering $240 million in trade value, were withdrawn in 2023.