On textile subsidy cuts, govt readies WTO defence

Indian negotiators are busy weaving their strategy ahead of the upcoming meeting of the committee on subsidies and countervailing measures (SCM) of the World Trade Organisation (WTO) in October.

At stake is the $77 billion textiles industry that employs 3.5 crore workers directly and about 4.7 crore  indirectly.

The United States, the single largest importer of India’s textiles products, accounting for around $10 billion trade, has moved the committee against India’s policy of subsidising its textiles exports.

According to WTO’s SCM rules, a developing country like India can provide export subsidies to its exporters till the time it reaches export competitiveness threshold.

This threshold is reached when a country achieves a share of 3.25% of world trade in two consecutive years.

India has long crossed that threshold, according to WTO data.
In 2008, 2009 and 2010, the country’s share in world textile trade was 3.5%, 4% and 4%, respectively. Figures for 2011 are expected in a few weeks.

So, what’s the gameplan?
“There is ambiguity over the definition of a product in the WTO rule book. It does not clearly define the product,” an Indian negotiator at the WTO told DNA.

In the WTO rule book, article 27.6 of ASMC defines a product as “section heading” of the harmonised system (HS) nomenclature.

But there is no such term in the products category. “Section and heading are two different categories,” said the negotiator.
The WTO rule book classifies traded products through HS of customs classification, which includes section (Roman 2 digit), chapter (numerical 2 digit), heading (2 digits) and subheading
(2 digit).

While textiles as a sector are covered under Section XI of the HS system, different products are defined under 14 chapters (50-63). These products are further classified under headings and subheadings.

“While we have surpassed the export competitiveness threshold on section-based calculations, if we calculate on the basis of the 14 chapters, then only seven of our products fall in the competitive category,” said the official.

The US has asked India to withdraw schemes like Technology Upgradation Fund Scheme (TUFS) and Technology Mission on Cotton (TMC).

India isn’t willing to oblige. “Schemes like TUFS and TMC are not provided to only exporters. These schemes are extended to the domestic sector as well,” said the official.

Indian negotiators are depending on Article 3 of ASCM, which talks about “subsidies contingent, in law or in fact, whether solely or as one of the several conditions, upon export performance”.

“Duty Entitlement Pass Book, which was essentially a subsidy scheme, has already been withdrawn by us in October 2011,” said the negotiator.

India runs many other schemes, such as special economic zones, export oriented units and focus market schemes, which may be interpreted as prohibited export subsidies.

“Even if the Indian government has to withdraw its subsidies for the textiles sector, the Indian government should follow the example of quota phase-out by the USA and EU under the provisions on agreement on textiles and clothing. Subsidies of low impact can be withdrawn first and those with serious implications can be withdrawn at the end of the phase out period that India would be entitled to,” said DK Nair, secretary general, Confederation of Indian Textiles Industry.