WTO ruling on IT products: Govt seeks to address trade bloc's tariff worry

Issue to be taken up next week's India-EU Trade & Tech Council meet

Weeks after the World Trade Organization’s (WTO) ruling against India over imposition of import duties on IT products, New Delhi has asked the trade bloc to share its concerns over tariffs.

The government has started engaging with the European Union (EU) bilaterally, and believes that the EU has not been majorly affected by the imposition of IT tariffs, considering that the inbound shipments of IT products, such as mobile phone, telephone handsets, among other such products, from the trade bloc isn’t high.

According to data compiled by the commerce department, the EU’s share of total imports of such information and communication technology products (ICT) products into India during the calendar year 2022 was at only 3.03 per cent, estimated at $550 million.

The issue will be taken up as early as next week during the meeting of the India-EU Trade and Technology Council.

“There are multiple forums–trade and technology council, WTO committee-level meetings, where both sides are talking about WTO’s ICT case. Considering that the EU is a key trade partner, India has asked them to share their concerns since there are no major imports coming from the trade bloc. The EU is yet to get back to India on this,” a senior government official told Business Standard.

BONE OF CONTENTION

• 2019: European Union (EU) says India imposed between 7.5% and 20% import duties on a range of IT products, such as mobile phones 
• Taking country to the WTO, EU said New Delhi imposed more tariffs than what it had committed to in its tariff schedule at the WTO
• India wants to understand the concerns as EU’s imports of these IT products was estimated at only 3% in 2022

“There are different options that both sides are exploring, though nothing concrete has been firmed up till now,” the official said.

Bilateral talks between both sides and a possible solution on the issue can put a pause on the escalation of trade tensions.

Last month, a WTO panel ruling favoured three complainant nations — EU, Japan, and Chinese Taipei — and said India violated global trading norms over imposition of import duties on IT products, such as mobile phone, components, and telephone handsets. It also asked New Delhi to eliminate tariffs on technology products.

In an official statement, the European Commission had then said that the EU exports of such technology affected by India’s violations was up to €600 million annually. “While this is already significant, the real impact on European companies, which also export from other countries to India, is considerably higher,” it had said after the WTO dispute settlement panel came up with the report.

India had argued that its measure of levying duty against the IT products is ‘legally valid’ as these products do not fall under the ambit of the 1996 Information Technology Agreement -1 (ITA-1). This is because at the time of signing the agreement, products, such as smartphones, didn’t exist and, hence, it is not bound to eliminate tariffs on such products. 

Starting the 2007-08 Budget, India imposed tariffs on a slew of electronics items, especially to curb cheap electronic imports from China and promote India’s domestic manufacturing. Import levies on items, such as mobile phones, go up to 20 per cent, which the EU believes goes against WTO commitments.

Soon after the WTO ruling, India had said it would appeal against the judgment. However, since the appellate body at the WTO is dysfunctional, it will be an appeal in void. 

“Since this of a larger policy interest, India will file an appeal and will not relent on this. That is our position,” the official said.

Business Standard had on April 25 reported quoting an EU spokesperson that the EU may impose retaliatory tariffs on Indian goods if New Delhi doesn’t abide by the WTO ruling. Thereafter, Indian officials said New Delhi will hit back at the EU in case the trade bloc decides to invoke its domestic law to impose retaliatory tariffs on India.