Bilateral Talks Between India and Brazil Aim to Address Sugar Conflict at WTO
India Engages in WTO Bilateral Talks with Brazil to Resolve Sugar Dispute
In an effort to address the ongoing sugar dispute at the World Trade Organisation (WTO), India has entered into negotiations with Brazil. Government sources have confirmed that the country’s commerce ministry is coordinating with relevant departments to find a resolution. India is also following a similar process for other complainants involved in the sugar dispute at the WTO, with the Department of Commerce working alongside concerned line ministries to explore possible alternatives.
This development holds significant importance as a WTO dispute settlement panel, on December 14, 2021, declared India’s support measures for the sugar sector to be inconsistent with global trade norms. Consequently, in January 2022, India appealed against the panel’s ruling to the WTO’s appellate body, which serves as the final authority on trade disputes of this nature.
The dispute was initiated in 2019 when Brazil, Australia, and Guatemala dragged India into the WTO’s dispute settlement mechanism, alleging that the sugar subsidies provided by the Indian government to farmers violated global trade rules. Specifically, the complainants argued that India’s support measures for sugarcane producers exceeded the de minimis level of 10% of the total value of sugarcane production, as outlined in the WTO’s Agreement on Agriculture. They also raised concerns regarding India’s alleged export subsidies, production assistance and buffer stock schemes, as well as the marketing and transportation scheme.
To resolve the dispute, bilateral consultations between the concerned parties serve as the initial step. If the consultations do not yield a resolution, either party can proceed to establish a dispute settlement panel. However, it is noteworthy that the WTO’s appellate body is currently non-functional due to disagreements among member countries regarding the appointment of its members. Consequently, many disputes are pending resolution, and the United States has been impeding the appointment of new members.
India’s bilateral trade with Brazil has shown positive growth, reaching USD 16.6 billion in the 2022-23 fiscal year, compared to USD 12.2 billion in the previous year, with the trade balance in favor of India. Notably, India has exported 3.775 million tonnes of sugar as of March 9, 2023, out of the government-allowed quota of 6 million tonnes for the ongoing marketing year. The sugar marketing year runs from October to September, and industry representatives have urged the government to increase the export quota.
While WTO member countries have the option to resolve disputes outside of the formal dispute settlement mechanism and subsequently inform the WTO, the recent agreement between India and the US to resolve six major trade disputes through the WTO showcases the importance of multilateral cooperation in addressing trade conflicts.
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