India seeks to settle WTO import duty dispute with EU on ICT goods through free trade talks

India seeks to resolve a WTO import duty dispute with the European Union on certain information and technology products through the proposed free trade agreement, which is under active negotiations, an official said.

Following a ruling of the World Trade Organisation's (WTO) dispute panel on April 17 that import duties imposed by India on certain information and technology (ICT) products such as mobile phones and components, base stations, integrated circuits and optical instruments violate global trading norms, India and the European Union (EU) are discussing ways to resolve the matter amicably outside the ambit of the WTO.

As part of the discussion, the EU has sought duty concessions from India on these goods as it was violative of the global trade norms, but India has stated that it would be again a breach of WTO rules, if the concessions be extended only to the EU, the official said.

“They are seeking duty concessions, which according to India can be discussed only under the free trade agreement (FTA). India can consider something under the FTA, but not on MFN (most favoured nation) basis,” the official added.

Under the MFN basis, a WTO member country can not give import duty concessions of goods only to one country or region as it would be a violation of global trade rules. All the 164 members of the Geneva-based multi-lateral body have to provide equal/national treatment to each other by extending MFN status.

For India, cutting duties on these items would be difficult as the government is focusing on boosting domestic manufacturing of electronic goods to reduce imports. A production-linked incentive scheme has been launched to support the manufacturing of different IT hardware products in the country. Imports of electronic goods rose by 11.63 per cent to USD 51.4 billion during April-October this fiscal.

The European Union and Chinese Taipei both have requested the World Trade Organisation's dispute settlement body not to adopt the panel's ruling against India with regard to an ICT duty dispute to enable the countries to resolve the issue mutually.

On April 2, 2019, the EU challenged the introduction of import duties by India at WTO on a wide range of ICT products like mobile phones and components, base stations, integrated circuits and optical instruments.

The EU had claimed that the measures appear to be inconsistent with certain provisions of WTO. Later, Chinese Taipei and Japan joined the dispute.

Since Japan has filed its motion for the adoption of the panel's report at Dispute Settlement Body (DSB) meeting at WTO, India, in response, filed its notice of appeal in the WTO's appellate body.

Interestingly, the appellate body is not functioning because of differences among member countries over the appointment of its members. Several disputes are already pending with this body. The US has been blocking the appointment of the members.

According to the EU, India has been applying duties ranging from 7.5 per cent to 20 per cent and the levies affect EU exports worth Euro 600 million per year.

In October 2018, India hiked import duty on certain communication items, including base stations, to up to 20 per cent as part of efforts to check a widening current account deficit by curbing imports and boosting domestic manufacturing. India has recently resolved all the trade disputes of the WTO with the US through mutually agreed solutions.