WTO panel rules against India in ICT tariff dispute

The dispute settlement panel of the World Trade Organization (WTO) has ruled that India’s imposition of tariffs on mobile phones and electronic components violates its commitment under the Information Technology (IT) Act under the multilateral trade body.

Key points

• The rulings came in on disputes raised by the European Union (EU), Chinese Taipei, and Japan.

• India said since the appellate body of WTO — its highest adjudicating authority — is dysfunctional due to the absence of judges, the adverse report of the dispute settlement panel will not have any immediate impact.

• India is signatory to the 1996 Information Technology Agreement (ITA), is required to eliminate tariffs on a range of products, including mobile handsets.

• Starting 2007-08 Union Budget, India imposed tariffs on a clutch of electronic items to curb cheap electronic imports from China and promote India’s home-grown manufacturing.

• Many countries had complained that the imposition of tariffs on IT products by India was against the principles agreed upon under ITA.

India’s stand

• At the time of signing the ITA, products such as smartphones did not exist and hence, it was not bound to eliminate tariffs on such items.

• The WTO dispute settlement panel said that India had failed to demonstrate that this assumption constituted an essential basis of India’s consent to be bound by the certified Schedule.

• The panel also found that India was put on notice of the possibility that its WTO tariff commitments in its Harmonized System (HS) 2007 Schedule may have expanded from those outlined in its HS 2002 Schedule, and similarly, that its WTO tariff commitments in its HS 2007 Schedule may have expanded from those outlined in the ITA .

Multi-party interim appeal arbitration arrangement (MPIA)

• The EU has approached India to resolve the matter through a multi-party interim appeal arbitration arrangement (MPIA). H

• However, India is against MPIA as a mechanism and is in favour of the restoration of the WTO appellate body.

• MPIA is an alternative system for resolving WTO disputes that are appealed by a member nation in the absence of a functioning WTO appellate body.