US vex over India handing out additional export subsidies to textile in FTP at WTO

US has expressed concern over the newly incentive package announced for textile sector in the latest foreign trade policy by Indian Government at a recent meeting of the World Trade Organization (WTOs) committee on safeguards and countervailing measures in Geneva.

The US has accused India of handing out additional export subsidies to the sector which has become globally competitive and should not be incentivized going by global trade rules.

India, however, has defended itself, stating that it has three more years to remove all subsidies and a number of schemes in the textile sector had either been removed or should not be considered as export subsidies.

The US representative said that providing new incentives to the sector is a step backwards as India is supposed to remove all textile export subsidies this year.

Commerce Ministry official said that they have not provided additional sops to the exporters of textiles and garments. On the contrary, they have reduced the quantum of benefits going to the sector. Just because the incentive scheme has a new name doesn’t mean the sops are additional.

The five-year FTP announced last month came up with a new incentive scheme for goods exports — the Merchandise Export Incentive Scheme — under which most textiles and garments sectors have been entitled to sops worth 2 per cent of their exports, which is lower than the 3 per cent or higher sops that the sector received under the older schemes

According to the WTO rules, India has become export competitive in the textile sector as it has already accounted for more than 3.25 percent of share in world trade for two consecutive years and needs to phase out export subsidies to the sector in eight years.

According to the US, India became competitive in 2007 and should thus remove all subsidies in 2015, while India is of the view that it has time till 2018 to remove the subsidies based on its export competitiveness calculated in 2010.

However, both countries expressed hopes of sorting out their differences through bilateral meetings.