World Trade Organization (WTO)

With reference to the World Trade Organization (WTO), consider the following statements:

1. The WTO’s dispute settlement panel had ruled that India, by subsidising sugar producers, was breaking rules framed under the General Agreement on Tariffs and Trade (GATT) which govern international trade.
2. The WTO Appellate Body’s decision will be considered final on the dispute.

Which of the statements given above is/are correct?

A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2

Answer: Both 1 and 2

Explanation: India filed an appeal with the Appellate Body of the World Trade Organization (WTO) disputing a verdict by the WTO’s dispute settlement panel last month on sugar subsidies.

The WTO’s dispute settlement panel had ruled that India, by subsidising sugar producers, was breaking rules framed under the General Agreement on Tariffs and Trade (GATT) which govern international trade.

In 2019, Australia, Brazil, and Guatemala complained against India at the WTO arguing that subsidies offered by the Indian government to sugar producers were against the rules governing international trade.

They argued that these subsidies, which include both domestic subsidies as well as export subsidies, exceed the limits imposed by WTO trade rules.

According to WTO rules, subsidies cannot exceed 10% of the total value of sugar production. These countries believe that subsidies offered by India have led to increased production of sugar and caused the price of sugar to drop significantly in the global market.

After two years, the WTO ruled in December that India’s sugar policy was favouring domestic producers through subsidies to the detriment of foreign producers.

The panel recommended that India withdraws its alleged prohibited subsidies under the Production Assistance, the Buffer Stock, and the Marketing and Transportation Schemes within 120 days from the adoption of this report.

India has stated that the WTO’s dispute panel ruling has made certain “erroneous” findings about domestic schemes to support sugarcane producers and exports and the findings of the panel are completely “unacceptable” to it.

India is the second-largest sugar producer in the world after Brazil and it is estimated that more than 5 crore people depend on the cultivation of sugarcane alone for their livelihood.

The WTO Appellate Body’s decision will be considered final on the dispute.

In case India refuses to comply with the decision, it might have to face retaliatory action from other countries.

This could be in the form of additional tariffs on Indian exports and other stringent measures.

Incidentally, the appellate body of the WTO is not functioning because of differences among member countries to appoint members, and disputes are already pending with it. The U.S. had blocked the appointment of members.

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