TRADE UPDATE #47

Dangerous International Waters

01/11/2019

It has been a tough week for India internationally. First, news started trickling that many Indian rice exporters were having a difficult time procuring payments from Iran. Banking sanctions imposed on the Middle Eastern nation by the United States mean that payments from Iranian buyers have become highly erratic, causing worry in the Indian export community. Additionally, India also announced that it had begun inquiries into alleged export subsidization by South Korea of a certain type of rubber. The probe aims to check if South Korea’s subsidies are having a ripple effect on India’s domestic rubber industry.

The Indian probe into South Korea appeared ironic on 31st October when India lost its export incentive case against the US at the WTO. The US had challenged the validity of India’s key export subsidy scheme, the MEIS, and the WTO ruled that the program violated its norms. Indian officials said they would appeal the ruling.

On the other hand, a high-level advisory group constituted by the government on trade and policy released its report, advocating steps to easy entry into the Indian market for foreign investors. The report came even as the government announced that it was mulling removing certain levies and taxes on SEZs to boost exports. Given rising trade tensions, the government needs to maintain its focus on building goodwill to ensure Indian exports stay afloat in dangerous international waters in the coming months.


INTERNATIONAL TRADE

India loses export incentive case filed by US at WTO, to appeal against the ruling

India suffered a setback at the World Trade Organization (WTO) in a dispute against the US that had challenged its key export subsidy schemes including the one for special economic zones. The WTO has ruled that these export subsidy programs violated provisions of the trade body’s norms. New Delhi is likely to appeal the ruling before the organisation’s Appellate Body, officials said. A dispute panel in the WTO ruled that these export subsidy programs provided by the Indian government violated provisions of the trade body’s norms.


BILATERAL RELATIONS

India starts probe into alleged exports subsidisation of rubber by South Korea.

The government has initiated a probe into alleged exports subsidisation on a particular kind of rubber by South Korea, which is impacting the domestic industry, according to a notification. The Commerce Ministry’s investigation arm the Directorate General of Trade Remedies (DGTR) has started the probe to see whether the subsidy programs of South Korea for exports of ‘Styrene Butadiene Rubber’ are impacting domestic industry.


BILATERAL TRADE

Erratic payments from Iran put commodity exporters in a fix

Indian exporters of commodities such as basmati rice, tea, sugar and soyabean meal are worried over increasingly erratic payments from Iran owing to the banking sanctions imposed by the United States. While the rice industry says more than Rs. 2,000 crore has yet to be reimbursed to Indian traders, tea and sugar traders said that payments have been delayed by a fortnight to a month. “Indian basmati rice exporters are facing issues in getting payments of over Rs. 1,500 crore for rice exported to Iran. Further, another Rs. 500-600 crore worth of rice for Iran is either stuck up in ports or godowns due to various issues,” said Vijay Setia, President, All India Rice Exporters Association.


POLICY

High-level advisory suggests panel for easier entry to foreign investors

A high-level advisory group (HLAG) on trade and policy has recommended simpler regulatory and tax framework for overseas investment funds, allowing individual investment from abroad in Indian debt and capital markets, and state-specific policies to facilitate foreign direct investment in agro-processing. The group also favors a single ministry for the regulation of medical devices across the value chain, an independent commission on pharmaceuticals and biotechnology, a simpler medical visa regime and health insurance portability of social security entitlements across countries.


POLICY

Govt plans to remove minimum alternate tax on SEZs, boost exports

To raise investments and boost exports from the Special Economic Zones (SEZs) across the country, the government is considering removing minimum alternate tax (MAT), reduction of duties on domestic sales, and allowing job work. At an inter-ministerial meeting last month, the Piyush Goyal-led commerce department has asked the revenue department to consider whether MAT can be removed from the export turnover from SEZs, sources said.


OTHER NEWS

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