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India’s anti-subsidy plan to hit China

The government is ready with a plan to act against countries that provide subsidy to local producers and make exports more competitive. Although anti-subsidy action is a trade defence measure, permitted by the World Trade Organisation (WTO), the move is expected to hit China the most.

Commerce department officials told reporters that the government is setting up a Directorate General of Trade Remedies (DGTR) over the next few weeks, which will deal with anti-subsidy and countervailing action.

The new directorate will also deal with anti-dumping action, which is initiated against foreign manufacturers who sell in India below-cost and impact domestic products.

The third trade defence tool - safeguard duty - is initiated in case of a surge in imports and will remain with the revenue department. In all three cases, the WTO provides for imposition of duty to prevent any surge.

Countervailing duty can be imposed only after the authorities have determined that there is a specific subsidy, relating to export performance. Besides, it has to push for the use of domestic goods over imported products that are used on manufacturing an export article.

Further, the country that initiates anti-subsidy action has to prove that the subsidy is given to a limited number of persons or units involved in manufacturing or exporting the product.

Trade experts, however, warned that proving subsidies and taking countervailing is most difficult among the three as information is difficult to obtain. Under WTO's Agreement on Subsidies & Countervailing Measures, only those subsidies that are not in the banned category face duty.

In case of prohibited list, members have to move WTO. Sources said that the commerce department has also roped in WTO to help train manpower for anti-subsidy action. "We should be in a position to initiate anti-subsidy action in two months or so," said a senior officer in the commerce department.

Official are studying action that has been initiated in various countries to prepare a potential list of products on which anti-subsidy action can be initiated.

Trade economists said that the move will hit China the most as it has attracted maximum attention globally. "It will create level-playing field with Chinese imports. In any case the government is preparing a plan to counter the threat from across the border," said an expert.