How to read the WTO panel’s sugar report against India

Relevance: WTO, Dispute Settlement Body, Sugar subsidies

News: A panel set up by the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) has ruled against India’s sugar subsidies.

What was the complaint against India?

Australia, Brazil, and Guatemala complained that India’s domestic support and export subsidy measures appeared to be inconsistent with various articles of the WTO, namely

Agreement on Agriculture: It was alleged that India’s domestic support to sugarcane producers exceeds the de minimis level of 10% of the total value of sugarcane production.

The Agreement on Subsidies and Countervailing Measures (SCM): Australia accused India of failing to notify its annual domestic support for sugarcane and sugar after 1995-96, and its export subsidies since 2009-10.

Article XVI (which concerns subsidies) of the General Agreement on Trade and Tariffs (GATT): India’s export subsidies under the production assistance and buffer stock schemes, and the marketing and transportation schemes violated Article XVI of GATT.

What did the panel find?

Firstly, India’s domestic support to sugarcane producers is inconsistent with its obligations under Article 7.2(b) of the Agreement on Agriculture.

The panel found that for five consecutive sugar seasons (2014-15 to 2018-19), India provided non-exempt product-specific domestic support to sugarcane producers in excess of the de minimis level.

Secondly, on India’s argument that mandatory minimum prices by sugar mills, do not constitute market price support. The panel said that market price support does not require governments to purchase or procure the relevant agricultural product.

Thirdly, on India’s alleged export subsidies for sugar, the panel said that since India’s WTO Schedule does not specify export subsidy reduction commitments with respect to sugar, such export subsidies are inconsistent with Articles 3.3 and 8 of the Agreement on Agriculture.

Fourthly, with respect to Australia’s claims regarding India’s notification obligations, the panel’s report said that India had violated its obligation under Article 18.2 of the Agreement on Agriculture.

Also, by failing to notify to the SCM Committee its export subsidies for sugar under the Production Assistance, the Buffer Stock, the Marketing and Transportation, and the DFIA Schemes, India has violated its obligations under Articles 25.1 and 25.2 of the SCM Agreement.

What was India’s argument in the WTO panel?

India said that the complainants have failed to prove that India’s market price support for sugarcane, and its various schemes violate the Agreement on Agriculture.

It also argued that the requirements of Article 3 of the SCM Agreement are not yet applicable to India and that India has a phase-out period of 8 years to eliminate export subsidies.

India also argued that its mandatory minimum prices are not paid by the central or state governments but by sugar mills, and hence do not constitute market price support.

Will India’s sugar industry or sugarcane farmers be impacted by the panel’s rulings?

No, because high global prices and the Centre’s biofuels programme have ensured continued shipments even without subsidy.

But, the WTO panel’s findings that India’s domestic support to sugarcane growers is exceeding the permitted de minimis level has profound implications.

What is the way forward?

India needs to initiate  all measures necessary to protect its interest and file an appeal at the WTO against the report, to protect the interests of its farmers.

Source: This post is based on the article “How to read the WTO panel’s sugar report against India” and “WTO’s findings on India’s domestic support to sugarcane growers has profound implications” published in Indian Express on 18^th Dec 2021.