US moves WTO accusing India of giving fresh export subsidies to textile industry.

NEW DELHI: The US has accused India of wrongfully giving fresh export subsidies to its textile industry instead of phasing them out as mandated by the World Trade Organisation. It has also complained to the multilateral body about the country ignoring its requests for bilateral discussions on the issue.

Turkey, too, has expressed its unhappiness at the alleged rise in textile exports from India and its industry being pitted against subsidised Indian products.

New Delhi, however, has rejected the allegations.

"India has not flouted any norms in textiles and is yet to have clarity on its obligations to phase out subsidies," a government official told ET. "However, it has no problems with bilateral discussions with any country and has made this clear at a recent meeting of the WTO committee on subsidies and countervailing measures in Geneva."

The subsidies and countervailing measures agreement of the WTO allows countries with per capita income below $1,000 (about 50,000) to give export subsidies until exports are lower than 3.25% of world trade in that particular commodity. India's share in the global market for textiles crossed the limit in 2007 and is almost 4% now. Since countries are given eight years to remove the subsidies, India has time until 2015 to do so.

The US is concerned about the additional sops that have been given to the textile sector recently as part of the government's efforts to help exporters fight the global slowdown.

This includes incentives for exporting textiles under the focus product and focus market schemes where cash subsidies of 2%-3% of the export value is given for exports to particular destinations and for exporting identified products.

A special market-linked focus products scheme for the readymade garments sector for exporting to the EU and the US announced last year has also been extended till the end of the current fiscal.

"Our textile exports, especially to the EU, have been hit hard due to the ongoing slowdown.

We understand that we have to dismantle our export subsidies for the textile sector by 2015, but till that time we cannot ignore it as it employs million of workers," the official said.

The Indian textile industry is certainly not ready for withdrawal of support.

"The weak recovery in the EU and the US has reduced the purchasing power of the people in these markets leading to the shortfall in the overall demand. Moreover, exports were also getting hit due to inflation and high cost of fuel," said A Sakthivel, chairman of Apparel Export Promotion Council.

Sakthivel added that the government needs to act to reduce the industry's vulnerability to external shocks.

Exports of garments-the country's eighth largest exported item-fell 19.46% year-on-year to $3.41 billion in the first five months of the fiscal. Exports of cotton yarn, fabrics and made-ups declined 3% to $ 2.8 billion over the same period.

The export target for textile products, however, is at $40.50 billion for 2012-13, which is about 22% higher than the previous year.

Commerce department officials said India has to first reach a common understanding on issues related to its obligations under the WTO agreement. "We are open to discussions with WTO officials and interested members. But we do not want to be forced into taking hurried action," the official said.

Source : economictimes.indiatimes.com