The World Trade Organization (WTO) has today ruled in favor of EU in a major case challenging India’s tariff on key information and communication technology (ICT) products. In its panel ruling, the WTO upheld all EU claims against India and found that India’s tariffs of up to 20% on certain ICT products, such as mobile phones, were not in line with its WTO commitments, and thus are illegal. The amount of EU exports of such technology affected by India’s violations is up to €600 million annually. While this is already significant, the real impact on European companies, which also export from other countries to India, is considerably higher.
The panel confirmed that India’s tariffs could not be justified by any of the reasons India brought forward in this case. India could not invoke the Information and Technology Agreement (ITA) to escape the commitments made in its WTO schedule, nor limit its zero-duty commitment to products that existed at the time of this commitment and exclude more recent technological products falling under the same tariff line. The panel also confirmed that no mistake was committed when determining India’s tariff commitments, including when the tariff lines nomenclatures were updated, and refused to examine India’s request to rectify its tariff commitments. Such changes would need to be negotiated among WTO Members.
India has since 2014 gradually introduced customs duties of up to 20% on products such as mobile phones, mobile phone components and accessories, line telephone handsets, base stations, static converters or electric wires and cables.
The EU considered that these duties were in direct breach of WTO rules since India is obliged under its WTO commitments to apply a zero-duty rate to such products. The EU initiated this WTO dispute settlement case in 2019. The panel issued its final report to all WTO Members on 17 April 2023. Japan and Taiwan filed parallel cases (DS584/DS588) in 2019 following EU’s initiative. These two parallel cases cover the same issue (tariffs on ICT products) and almost the same products. The WTO is expected to rule on these cases today as well.
The panel opined that India’s tariffs could not be justified by any of the reasons India brought forward in this case. India could not invoke Info Tech Agreement to escape commitments made in its WTO schedule, nor limit its zero-duty commitment to products that existed at the time of this commitment & exclude more recent technological products falling under the same tariff line. EU sees these duties as direct breach of WTO rules since India is obliged under its WTO commitments to apply a zero-duty rate to such products. The EU initiated this WTO dispute settlement case in 2019. The panel issued its final report to all WTO Members on 17 April 2023
The WTO recommend that India bring such measures into conformity with its obligations”, WTO Panel said. In 2019, EU challenged India’s import duties between 7.5% and 20% on IT products, like mobile phones & components, including integrated circuits, saying they exceeded the maximum rate. Brussels in a statement said that up to 600 million euros ($654.66 million) of its exports were directly affected by India’s tariffs on an annual basis. Respect for the rules-based trading system is vital for a good trade relationship,” EU’s trade department added in a tweet, describing the tariffs as illegal.
Valdis Dombrovskis, Executive Vice-President and Commissioner for Trade asserted that I welcome the WTO panel’s verdict and hope that India will act swiftly to remove all illegal tariffs. He added that strict respect by India of its WTO commitments will send a clear and positive signal to European businesses that India provides an open, predictable and attractive business environment. This is even more relevant at a time when we are negotiating an ambitious trade deal with India.
The WTO Panel further found that India did not satisfy the requirements of Article 48 of the Vienna Convention. However, the Panel found that India had failed to demonstrate that this assumption constituted an essential basis of India’s consent to be bound by certified Schedule. The Panel also found that India was put on notice of the possibility that its WTO tariff commitments in its HS2007 Schedule may have expanded from those set forth in its HS2002 Schedule, and similarly, that its WTO tariff commitments in its HS2007 Schedule may have expanded from those set forth in the ITA. Thus, even if Article 48 applied in WTO dispute settlement (which the Panel did not consider it necessary to address), the circumstances did not satisfy the requirements of Articles 48(1) and (2) of the Vienna Convention. Likewise, India is expected to appeal a recent ruling by a panel of WTO on its imposition of tariffs on mobile phones and electronic components in a bid to ensure that the ruling does not impact the country’s domestic manufacturing goals, especially in a sector which has seen capacity building.
India is a signatory to the Information Technology Agreement (ITA) which came into effect in July 1997 and accounts for more than 95 per cent of the world trade in products such as computers, telecom equipment, semiconductors and scientific instruments. As part of a signatory to the agreement, India is required to eliminate tariffs on these products.
The writer is Islamabad based regular contributor.