On October 31, 2019, a World Trade Organization (“WTO”) dispute settlement panel issued a decision in favor of the United States in a dispute challenging a number of India’s subsidy programs. In the dispute, the United States argued that $7 billion worth of export subsidies that India provided to its steel, pharmaceutical, chemical, information technology, and textile industries were inconsistent with India’s obligations under the WTO’s Subsidies and Countervailing Measures Agreement (the “SCM Agreement” or “the Agreement”).

The SCM Agreement addresses two basic categories of subsidies—prohibited and actionable subsidies. Among the prohibited subsidies are those that are contingent upon the exportation of the manufactured goods. Because these types of subsidies provide an unfair advantage to recipients, they are prohibited outright under the Agreement. However, Article 27 of the Agreement provides a limited exception for developing countries, i.e., special and differential treatment, where such countries may continue to provide export subsidies until they reach a specified economic benchmark. India was among those developing countries until it met its economic benchmark in 2015.

In the dispute, which was initiated in March 2018, the United States challenged five of India’s export subsidies programs which have provided subsidies to thousands of Indian companies. Among other things, the United States argued that India could not use its previous developing country status to justify those programs. The United States asserted that India must remove its export subsidies programs because India no longer satisfied the economic benchmark for developing countries. In its decision, the Panel held that the exemption under Article 27 did not apply to these subsidies and that India was subject to the prohibition on export subsidies. Moreover, the Panel held that the United States had established that each subsidy program was contingent upon export performance.

United States Trade Representative Robert Lighthizer stated that the Panel’s decision was “a resounding victory for the United States” and that it will help “ensure American workers are able to compete on a level playing field.” Although the Panel recommended that India withdraw each of the programs within a period of up to 180 days from the date of adoption of the Panel’s report, India can appeal the Panel’s decision to the WTO’s Appellate Body within 90 days, which would delay the adoption of the report.