Countervailing Duties: US and EU Responses to India’s RoDTEP Scheme

Introduction

• Recent developments in global trade witnessed the imposition of countervailing duties (CVDs) by the United States and the European Union on specific Indian goods, citing India’s initiation of the Remission of Duties and Taxes on Export Products (RoDTEP) scheme in January 2021 as the impetus. This move has sparked tensions between these economic powers, prompting a deeper understanding of CVDs, their implications, and India’s response.

Understanding Countervailing Duties (CVDs)

• Definition: CVDs are tariffs levied to counterbalance the adverse impacts of subsidies provided by a foreign government to their export industries.
• Purpose: Protection of domestic industries from unfair competition arising from imports subsidized by the exporting country’s government.
• Investigation & Imposition: Requires a domestic investigation to confirm subsidy presence and impact on domestic industries. Imposition must comply with World Trade Organization (WTO) rules.
• Types of Subsidies: Encompasses direct fund transfers, tax concessions, loan guarantees, and provision of goods/services at discounted rates.
• Calculation & Duration: Duty amounts correlate with the value of the foreign subsidy and are temporary, subject to review and removal.
• Global Use: Widely employed by countries like the US, EU, Canada, and India.
• Controversies & Impact: Can lead to trade disputes, higher import costs, and controversy over protectionist measures.

India’s Defense and Response

• Defense Strategy: India’s government and affected exporters vigorously defended against the subsidy allegations, presenting various programs and schemes at Central and State levels.
• Mode of Defense: Defense presented through written and oral responses during investigations.
• Potential WTO Dispute: India expressed openness to bilateral resolution while acknowledging the option of approaching the WTO Dispute Settlement mechanism.

Implications and Conclusion

• Growing Trade Tensions: The imposition of CVDs by the US and EU signals escalating trade tensions with India, specifically concerning the RoDTEP scheme.
• Impact on Indian Exports: Potential repercussions on Indian exporters could disrupt trade dynamics with these global economic powers.
• Prospect of WTO Involvement: The possibility of this dispute reaching the WTO underscores the complexity of international trade laws, emphasizing the importance of navigating global trade policies judiciously.