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Info Service on Free Trade Agreements New Delhi, 28 Jun (D. Ravi Kanth) — The Joint Statement issued by the United States President Joe Biden and the Indian Prime Minister Narendra Modi on 22 June did not mention two issues which have been a bone of contention between the two countries on the trade front. The Joint Statement has remained silent on the issue of the termination of the current moratorium on levying customs duties on electronic transmissions, whereby Washington wants the moratorium to be made permanent, while India wants the moratorium to be terminated by March 2024, as agreed by trade ministers at the WTO’s 12th ministerial conference (MC12) last June. No mention of the moratorium in the Joint Statement indicates India’s strong resolve to terminate the moratorium in spite of the pressure put on India by the US and the European Union at the WTO. According to a trade official, who asked not to be quoted, “removal of the moratorium will not only benefit the developing countries by providing policy space for digital industrialization but will also benefit the developed countries like the US and the EU, as it will help the governments to regulate their imports via Mode 1, as more and more services which were delivered via Mode 4 (highly regulated by the developed countries) are now being exported via Mode 1 to these countries. Moreover, the dangers of Artificial Intelligence (AI) are now being recognized by the US and the EU, and to what extent AI enters the countries via electronic transmissions is not yet clear”. India has stayed out of the mega Free Trade Agreements (FTAs) like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) pushed by the US, and the Regional Comprehensive Economic Partnership (RCEP), and has merely taken an observer status in the trade pillar of the Indo-Pacific Economic Framework for Prosperity (IPEF). The silence in the Joint Statement on India joining the IPEF trade pillar could be because of the reluctance of the US to admit India into the trade pillar negotiations on grounds that New Delhi could lower the overall level of ambition to suit its interests, particularly in the area of setting enhanced standards, said a trade official, who asked not to be identified. The Joint Statement merely says, “The leaders reaffirmed that the Indo-Pacific Economic Framework (IPEF) is an important pillar of our collective and collaborative efforts to build resilience in our supply chains, harness transformations in clean energy, and accelerate progress of our economies through anti-corruption efforts, efficient tax administrative practices, and capacity building measures.” According to paragraph 43 of the Joint Statement, the leaders of the US and India welcomed “the initiation of discussions between both sides at an official level on issues related to bilateral government procurement.” While it may appear that India has made a “volte-face” on government procurement in the trade section of the US-India Joint Statement in Washington last week, the fact remains that India has been negotiating an FTA with the EU for decades and has re-launched the negotiations in 2021 but it has never agreed to open its government procurement sector to the EU. India has been an observer in the plurilateral Government Procurement Agreement (GPA) at the WTO since 2010 but has no plans to join it. There is a very limited possibility of India agreeing to anything under the GPA with the US in spite of the launching of the bilateral talks, which may effectively mean nothing with the upcoming elections next year. Despite the successes claimed by the US and India following the Indian prime minister’s visit to Washington last week, the actual gains for both countries are likely to be minimal. There is also no mention of a permanent solution for public stockholding programs for food security purposes in developing countries, a primary interest of India at the WTO. Further, in the Joint Statement, “the leaders welcomed the substantial conclusion of negotiations on the proposed IPEF Supply Chain Agreement and committed to working with other partners expeditiously to conclude negotiations of the agreements under the clean economy and fair economy pillars to deliver concrete benefits that enhance the economic competitiveness and prosperity of countries in the Indo-Pacific. President Biden invited India to attend the APEC Summit in San Francisco in November 2023 as a guest of the host.” JOINT STATEMENT ON TRADE DISPUTES AT WTO In paragraph 43 of the Joint Statement issued by the two leaders, there is mention of trade disputes between the two countries at the WTO, and the Generalized System of Preferences (GSP) that was terminated by the Trump administration in 2019. It said that the US and India “have also taken steps toward deepening bilateral cooperation to strengthen our economic relationship, including trade ties.” According to the Joint Statement, “Underscoring the willingness and trust of both countries in resolving trade issues, the leaders welcomed the resolution of six outstanding WTO disputes between the two countries through mutually agreed solutions as well as their understandings on market access related to certain products of significance to the bilateral trade relationship.” The resolution of six outstanding WTO disputes through mutually agreed solutions is claimed as a big victory. “It is a big victory for India and is a mutually beneficial arrangement for both countries,” the Indian commerce minister Mr Piyush Goyal told reporters on 23 June. He appeared rather jubilant that India and the US will not have any trade disputes by the end of this year. “All the six major ones have gone,” the minister said, adding that “for the first time bilaterally we are ending the disputes. It is a package deal.” The disputes relate to the Trump regime’s imposition of steel and aluminum tariffs, which India has raised along with several other countries including China at the WTO; India retaliated against Trump’s decision in 2018 by raising a dispute in June 2019 over 28 US products such as chickpeas, lentils, almonds, walnuts, apples, boric acid, and diagnostic reagents; India similarly lost a trade dispute on sanitary/phytosanitary grounds in 2015 and the issue is expected to be resolved soon, according to Mr Goyal; countervailing duties on certain hot-rolled carbon steel flat products; and certain subsidies provided by the US States for solar products and other green subsidies. Out of the six disputes, India is a complainant in three disputes, while the US is also a complainant in three disputes. The resolution of these disputes comes close on the heels of the continued dysfunctionality of the Appellate Body. Since December 2019, the US has unilaterally blocked appointments to the Appellate Body and it may never agree to the continuation of the Appellate Body in its previous state. As previously reported in the SUNS, some of the US proposals in the informal discussions on the reform of the WTO’s dispute settlement system clearly suggest that Washington seems determined to ensure only a “toothless” Appellate Body. GENERALIZED SYSTEM OF PREFERENCES According to the Joint Statement issued by the US and India, “India highlighted its interest in the restoration of its status under the US Generalized System of Preferences program, which could be considered in relation to eligibility criteria determined by the US Congress. The leaders supported intensifying the work to advance progress on issues related to the eligibility criteria.” As previously reported in the SUNS, the GSP programs provide a margin of preference in the tariffs of developing country exports to developed countries so as to increase competitiveness in the developing countries. The 1968 UNCTAD-II resolution on the GSP that entered into force in 1971 calls for schemes by preference- giving countries that are “generalized, non-reciprocal, non-discriminatory system of preferences in favour of the developing countries, including special measures in favour of the least advanced among the developing countries.” (The corresponding GATT decision enabled the preference-giving countries to do this without having to extend benefits to all members under the Most-Favored-Nation clause.) The donor countries are allowed to design their own preference schemes. Further, the Enabling Clause, which legitimizes the legal basis for the extension of non-reciprocal trade preferences to and among developing countries, was adopted at the meeting of the Contracting Parties that concluded the Tokyo Round of the GATT in 1979. The decision on “Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries”, which is referred to as the Enabling Clause, and Part IV of the GATT (adopted much earlier) offer longer time periods for implementing agreements and commitments, lower levels of commitments and measures to increase trading opportunities. Clearly, the Enabling Clause (now part of the WTO’s GATT-acquis) states unambiguously that the developed countries do not expect the developing countries, in the course of trade negotiations or bilateral trade relations, “to make contributions which are inconsistent with their individual development, financial and trade needs.” “To correct historic discrimination, from Enabling Clause to Agreement on Textiles and Clothing, developing Members fought hard to get special and differential treatment in the negotiations and as well all know, it was an arduous journey,” China’s trade envoy Ambassador Zhang Xiangchen told the WTO’s General Council last week. Against this backdrop, the US decision to terminate the GSP benefits to Indian exporters would be tantamount to an aggressive pursuit of its unilateral trade policies, said a trade envoy who asked not to be quoted. The US, which has been calling on India to enter into bilateral free trade agreement negotiations, has exerted unprecedented pressure on the Indian government to fall in line with its unilateral demands for market access. The US sought market access for dairy products and medical equipment, two areas which India has not conceded because of its public policy priorities. India, which is one of the most disease-burdened countries in the world with the largest number of people living below the poverty line, cannot afford imports of dairy products and expensive medical equipment, and has remained steadfast on this issue. Significantly, as per the Joint Statement, “Prime Minister Modi also expressed India’s interest towards being recognized as a Trade Agreements Act-designated country by the United States to further enhance the integration of both economies and to further promote trade and investment between two countries.” The Joint Statement appears to be silent on whether the US and India would resolve their differences over the extension of the MC12 Ministerial Decision on the TRIPS Agreement to COVID-19 diagnostics and therapeutics. In a nutshell, the gains that India and the US have secured seem few and far between, while the silence on key issues like the e-commerce moratorium and the IPEF seems to say a lot.+
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