India to approach WTO against duty hike by the US

World leaders and global agencies have warned the US against the worst effects of trade wars.

The Government of India is mulling the options to approach the World Trade Organization’s (WTO) dispute settlement body challenging the decision of the US to increase import duty on aluminum and steel, reported The Times of India.

Earlier this month, President Donald Trump announced that the US would impose 25 percent import tariff on steel and 10 percent on aluminum to protect the domestic producers.

The move is seen as an attempt by the Trump administration to reduce America’s high trade deficit with several countries. This was evident in a tweet put out by Trump a few weeks back.

“When a country (US) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump tweeted supporting raising the import tariff.

The commerce and industry department has held consultations with experts including former officials who have experience in dealing with WTO regarding the issue. But, the government is yet to finalize its decision since two opinions have arisen out of the talks.

While one group argues for directly approaching the trade dispute body, another one wants the government to wait till other members of the WTO approach the trade dispute body. However, the government is wary of making a move considering India’s interest in software exports to the US.

India exported goods of iron and steel worth $1.26 billion to the US in the financial year 2016-17 and $960.58 million in the April-October period of 2017-18. While iron and steel exports were $330.17 million and $207.89 million, respectively and the export of aluminum articles were $350.15 million and $285.46 million in the same period.

Media reports say that the US is targeting imports of solar panels, washing machines, and steel, and the decision will not have any significant impact on India since the country doesn’t export these products in huge volume to the US. But, experts have raised concerns over the possibility of imposing similar import control measures in other areas also.

World leaders and global agencies have warned the US against the worst effects of trade wars. S&P Global Ratings said that the US decision may invite retaliatory action from the EU and China leading to a global trade war resulting in reduced global economic growth.

A report by Kotak Institutional Equities noted that “steel exports to the US by other countries can decline by 9-14 MT due to the imposition of higher import duties and ramp-up in its domestic steel mill utilization rates by 80-85 percent from 72 percent at present.”

However, the US decision has once again paved the way for India to engage in a trade dispute with one of its greatest allies.

Earlier, the US had brought India to the WTO alleging that the Solar Mission unveiled by India in 2011 discriminated against foreign companies. The issue was raised in 2013 citing 90 percent reduction in America’s solar exports to India since 2011.

The US won the dispute when the judges ruled against India last year saying it violated the rules by compelling manufacturers to use Indian-made cells and modules.

Washington raised the same issue again recently claiming that India’s solar policy in an attempt to protect its booming solar industry. But, India rejected the allegations saying that it has changed the rules to conform with the WTO regulations after the order last year and the arguments of the US for punitive trade sanctions were groundless.

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