Sops for textiles in new FTP raise US hackles at WTO

The newly packaged export incentives in the latest foreign trade policy (FTP) have created fresh trouble for the textile sector at the World Trade Organisation (WTO).

The US has accused India of handing out additional export subsidies to the sector which has become globally competitive and should not be incentivised going by global trade rules.

India, however, has defended itself, saying that it has three more years to remove all subsidies and a number of schemes in the textile sector had either been removed or should not be considered as export subsidies.

Criticising the new sops announced recently for the textiles sector at a recent meeting of the WTO’s committee on safeguards and countervailing measures in Geneva, the US representative said that providing new incentives to the sector is a step backwards as India is supposed to remove all textile export subsidies this year.

“We have not provided additional sops to the exporters of textiles and garments. On the contrary, we have reduced the quantum of benefits going to the sector. Just because the incentive scheme has a new name doesn’t mean the sops are additional,” a Commerce Ministry official told BusinessLine .

However, both countries expressed hopes of sorting out their differences through bilateral meetings.

The five-year FTP announced last month came up with a new incentive scheme for goods exports — the Merchandise Export Incentive Scheme — under which most textiles and garments sectors have been entitled to sops worth 2 per cent of their exports, which is lower than the 3 per cent or higher sops that the sector received under the older schemes.

According to the WTO rules, India has become export competitive in the textile sector as it has already accounted for more than 3.25 per cent of share in world trade for two consecutive years and needs to phase out export subsidies to the sector in eight years.

While the US says that India became competitive in 2007 and should thus remove all subsidies in 2015, India maintains that its export competitiveness was calculated in 2010 and it has time till 2018 to remove the subsidies.