Context: One of the significant outcomes of Prime Minister Narendra Modi’s official state visit to the U.S. was the decision of the two countries to end six long-standing trade disputes at the World Trade Organization (WTO). In view of the continuing impasse in the appointment of ‘judges’ to hear appeals at the Appellate Body, a meaningful resolution of these disputes was almost out of sight. Three cases settled as part of the deal are before the defunct Appellate Body, while the rest could have potentially been ‘appealed into the void’.
Major Points of Dispute Settlement between India and the USA
- The settled disputes involved a challenge of the domestic content requirements under India’s National Solar Mission. India too challenged certain sub-federal programmes implemented in the U.S. in the renewable energy sector and won the case.
- India and US also settled disputes involving some of its foreign trade policy schemes, including the special economic zone (SEZ) and export-oriented unit schemes. In particular, certain corporate tax deductions provided under the SEZ scheme faced an uncertain future
- The most major of the dispute that was stelled involved a challenge by India against the controversial Section 232 tariffs imposed under the U.S. Trade Expansion Act, 1962. The U.S. had imposed an additional duty of 25% on steel and 10% on aluminium, triggering a series of WTO challenges and unilateral trade responses. India considered these as safeguard measures and imposed retaliatory measures.
- Against that backdrop, settling disputes in all six cases shows a pragmatic approach on the part of two strong trading partners. They have accepted each other’s domestic challenges in dispute compliance and realised the importance of burying differences.
Dispute Settlement Mechanism:
Resolving trade disputes is one of the core activities of the WTO. A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO.
- Settling disputes is the responsibility of the Dispute Settlement Body (the General Council in another guise), which consists of all WTO members.
- The Dispute Settlement Body has the sole authority to establish “panels” of experts to consider the case, and to accept or reject the panels’ findings or the results of an appeal.
- It monitors the implementation of the rulings and recommendations, and has the power to authorize retaliation when a country does not comply with a ruling.
First stage: Consultation (up to 60 days). Before taking any other actions the countries in dispute have to talk to each other to see if they can settle their differences by themselves. If that fails, they can also ask the WTO director-general to mediate or try to help in any other way.
Second stage: The panel (up to 45 days for a panel to be appointed, plus 6 months for the panel to conclude). If consultations fail, the complaining country can ask for a panel to be appointed
Appeals
- Either side can appeal a panel’s ruling. Sometimes both sides do so. Appeals have to be based on points of law such as legal interpretation — they cannot re-examine existing evidence or examine new issues.
- Each appeal is heard by three members of a permanent seven-member Appellate Body set up by the Dispute Settlement Body and broadly representing the range of WTO membership.
- The appeal can uphold, modify or reverse the panel’s legal findings and conclusions. Normally appeals should not last more than 60 days, with an absolute maximum of 90 days.
- The Dispute Settlement Body has to accept or reject the appeals report within 30 days and rejection is only possible by consensus.
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