Negotiations at the World Trade Organisation (WTO) between India and the European Union (EU) have hit a roadblock with India sticking to its decision on levying import duties on a range of ICT goods including mobile phones and their components, a government official told Moneycontrol on condition of anonymity.
ICT or information and communication technology goods encompass computers and associated hardware, communication equipment, consumer electronic goods and electronic components, among others.
India has argued that it imposes duties on ICT products to protect its domestic industry, the same way the EU imposes tariffs on steel to protect its own industry.
“Their steel tariffs are extremely high and in violation of WTO norms. But so far, India has refrained from filing for compensation in good faith and due to the ongoing FTA (free trade agreement, a bilateral treaty) negotiations. There is no way we can also bring down our ICT duties,” a government official privy to the matter said.
India and EU collectively asked for additional time to continue negotiations rather than approaching the appellate tribunal of the WTO. The two sides filed for a deferment of three months on June 2, which was accepted by the WTO on June 15.
"The Dispute Settlement Body (DSB) agreed to a request from the European Union and India for additional time for the DSB to consider the adoption of the panel ruling. The DSB will now have until September 19 to adopt the panel report unless either the EU or India appeal the panel's findings or the DSB decides by consensus not to adopt the panel ruling," a WTO notification issued on June 15 read.
The WTO’s dispute panel said in a report on April 17 this year that import duties imposed by India on certain information and technology products violate global trading norms.
If the talks between the two disputing parties fail, the EU could adopt the WTO panel filings and India could take the case to the WTO Appellate Body.
The Appellate Body is a standing committee of seven members with a four-year term that presides over appeals against judgments passed in trade-related disputes brought by WTO members.
It is pertinent to mention that there is no Appellate Body Division available at present to deal with the appeals. The tribunal has been inoperative for two years due to the US hindering the appointment of judges. Till the time the tribunal gets all members, all appeals are considered an 'appeal into the void’.
“Technically and legally speaking, India is within its rights to carry on applying its duties until the matter goes to the appellate body. With the body being currently dysfunctional, India can continue levying the import duties even after that,” former Indian ambassador to the WTO Jayant Dasgupta said.
India and the EU are discussing the electronic imports matter bilaterally at many platforms including during FTA negotiations, under the India-EU Trade and Technology Council (TTC) as well as at WTO.
Negotiations between the two sides have to conclude by September 19, and in case there is no consensus, the EU has the option to retaliate by piling up duties on other products from India, Dasgupta added.
The deadlock
In March 2018, the US imposed tariffs on steel imports of 25 percent. These measures applied to the EU as of June 2018. The EU reacted by imposing retaliatory tariffs on EU-bound US products in late June 2018. A provisional EU safeguard on steel imports followed in July 2018. The bloc decided to implement a final safeguard measure in February 2019, with a deadline of four years which was further extended by three years in 2021, to be applicable till 2024.
India is seeking lower import duties on steel from the EU as Indian steelmakers have struggled to gain a significant foothold in one of the world's biggest markets. Meanwhile, the EU is looking for lower duties from India on its ICT products which India says have been levied to protect its industry from dumping of ICT goods from China.
According to Dasgupta, talks can move forward and negotiations may come through if both parties decide to give the other some leeway. “India may not be inclined to keep tariffs high for all items as its electronic items are doing well with PLIs (production-linked incentives) and the EU may not be as interested in the Indian market as it was in 2019,” Dasgupta said.
The dispute
In 2019, Taiwan, Japan and the EU filed a dispute challenging the import duty levied by India on a range of ICT goods including mobile phones and their components, among others. India levies an import duty between 7.5 percent and 20 percent on such goods.
The EU had argued that these tariffs directly breached India’s obligations under WTO rules to impose zero duty on these goods. The EU filed a case on the alleged violations, followed by similar cases against India’s tariffs filed by Japan and Taiwan the same year.
Brazil, Canada, China, Indonesia, South Korea, Norway, Pakistan, the Russian Federation, Singapore, Thailand, Turkey, Ukraine, and the US have joined as third parties in these disputes.
While the case with Taiwan has been deferred till September, India has already filed an appeal against Japan, which has sent the case into void.
However, India expects little impact on the country’s ICT products as the EU’s share of total imports of ICT products into India during calendar year 2022 was at 3.03 percent (estimated at $ 550 million), while Japan’s and Taiwan’s were at 0.33 percent (estimated at $ 24 million) and 2.86 percent (estimated at $ 235 million), respectively.
Moreover, India has brought its duty rates to 0 percent with respect to two of the contested products, headphones and electric convertors, since February 2022.
India-EU FTA
The fifth round of relaunched India-EU FTA negotiations recently concluded its fifth round in 76 technical sessions held in New Delhi between June 15 and 27. As per commerce ministry officials, discussions on all 20 policy areas continue to gain traction.
During the fifth round, modalities for exchange of market access offers in goods and government procurement were discussed.
India-EU FTA talks had been suspended in 2013 after 16 rounds of negotiations since 2007, following sharp differences on crucial issues between the two sides. The negotiations (on ICT goods) may very well impact India-EU FTA talks as well, said Dasgupta.
“These talks are irritants which sour the FTA pitch and negotiating environment. The trust which has been built gets eroded,” he said.
Both sides have been extra careful to not appear strident, Pradeep S Mehta, Chairman, CUTS Institute for Regulation and Competition, is an active member of high-level panels on policies for World Trade Organisation (WTO) points out.
"India has not taken any escalatory action and is only maintaining the tech tariffs that the WTO panel found violative. India-EU FTA is already being negotiated in the shadow of other equally contentious issues for the Indian side, such as the EU's Carbon Border Adjustment Mechanism (CBAM)," he says.
The next round of talks are only scheduled to be held in mid-October in Brussels, which gives a window to the two sides to find common ground on these issues.
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