India Appeals Against WTO Panel's Ruling On Sugar Export Subsidies

India has appealed against a ruling of the World Trade Organisation's (WTO) trade dispute settlement panel which ruled that the country's domestic support measures for sugar and sugarcane are inconsistent with global trade norms, an official said.

The appeal was filed by India in the WTO's  Appellate Body, which is the final authority on such trade disputes.  India has stated that the WTO's dispute panel ruling has made certain "erroneous" findings about domestic schemes to support sugarcane producers and exports and the findings of the panel are completely "unacceptable" to it.

The panel in its ruling on December 14, 2021 recommended India to withdraw its alleged prohibited subsidies under the Production Assistance, the Buffer Stock, and the Marketing and Transportation Schemes within 120 days from the adoption of this report.

Ruling in favour of Brazil, Australia and Guatemala in their trade dispute against India over New Delhi's sugar subsidies, the WTO panel has stated that the support measures are inconsistent with WTO trade rules.

The official said that the dispute panel's findings are unreasonable and not supported by the WTO rules and also evaded key issues which it was obliged to determine.

"The panel's findings on alleged export subsidies undermine logic and rationale. India has appealed in the appellate body of the WTO against the panel's ruling," the official added.

In 2019, Brazil, Australia and Guatemala dragged India into the WTO's dispute settlement mechanism alleging that New Delhi's domestic support measures to producers of sugarcane and sugar and export subsidies are inconsistent with global trade rules including various provisions of the WTO's Agreement on Agriculture, Agreement on Subsidies and Countervailing Measures, and the General Agreement on Trade and Tariffs (GATT).

Brazil is the largest producer and exporter of sugar in the world. India is the world's second largest sugar producer after Brazil. In December 2020, the government had approved a subsidy of Rs 3,500 crore to sugar mills for the export of 60 lakh tonnes of sweetener during the ongoing marketing year 2020-21 as part of its efforts to help them clear outstanding dues to sugarcane farmers.

In the previous marketing year 2019-20 (October-September), the government had provided a lump sum export subsidy of Rs 10,448 per tonne. Mills exported 5.7 million tonnes of sugar against the mandatory quota of 6 million tonnes set for the 2019-20 season (October-September), according to official data.

These three countries, which are members of the WTO, had complained that India's support measures to sugarcane producers exceeds the de minimis level of 10 per cent of the total value of sugarcane production, which according to them was inconsistent with the Agreement on Agriculture.

They had also flagged India's alleged export subsidies, subsidies under the production assistance and buffer stock schemes, and the marketing and transportation scheme.

According to WTO rules, a WTO member or members can file a case in the Geneva-based multilateral body if they feel that a particular trade measure is against the norms of the WTO.

Bilateral consultation is the first step to resolve a dispute. If both the sides are not able to resolve the matter through consultation, either can approach for the establishment of a dispute settlement panel. The panel's ruling or report can be challenged at the World Trade Organization's Appellate Body.

Interestingly, the appellate body of the WTO is not functioning because of differences among member countries to appoint members in this body. Over 20 disputes are already pending with the appellate body. The US has been blocking the appointment of the members.

Even if the body, which is the final arbiter on such trade disputes, starts working from now, it would take over an year to take up India's appeal.

According to trade experts, if the appellate body also passes a ruling against India's support measures, New Delhi has to abide by that and make appropriate changes in the way it provides those measures.