US on its another demonstration of its protectionist tendencies has asked the World Trade Organisation (WTO) to examine whether India still qualifies for concessions which allow it to give export subsidies to the textiles and clothing sector. But India being very confident about its position said that its subsidies to textiles exporters cannot be challenged at the multilateral forum as they are mostly short term.

In a recent submission to the WTO committee on subsidies and countervailing measures (SCM), US stated that “it has reason to believe that India has met the definition of ‘export competitiveness’, as defined in the SCM Agreement for certain products. The agreement exempts developing country members (with per capita income below $1,000) from prohibition on export subsidies, as long as exports of individual products are lower than 3.25% of world trade for two consecutive years.”

“The US requests that the Secretariat (WTO) undertake a computation of the export competitiveness of textile and apparel exports from India, in accordance with Article 27.6 of the SCM Agreement,” the submission declared.

According to a government official, “Things are at an initial stage. We are certainly going to keep an eye on how things develop.”

Presently, the subsidies which are being given to Indian textile exporters (which include handicrafts and carpets) also includes discount on interest on loans and incentives for exporting to particular markets in the form of duty-free import scrips that can be sold in the market. These sops are mainly part of the Centre’s efforts to help the Indian industry tide over the effects of the global economic crisis.

Confederation of Indian Textiles Industry (CITI) secretary general D K Nair pointed out that the subsidies were short term in nature, they would probably be gone by the time the WTO takes a decision on the issue. “Moreover, these subsidies may not be actionable under the WTO,” he said.

According to Manab Majumdar, head of Ficci’s WTO committee, though “India’s exports of textiles and clothing turn out to be greater than 3.25%, the country could easily continue to give subsidies under other flexibilities allowed by the WTO.”

“India is also allowed to give support to exporters under the special & differential treatment (S&DT). So, I don’t foresee any problems,” he said.

A Ficci calculation viewed that in 2008 India’s exports of textiles and clothing were $21 billion, forming 3.4% of the sector’s global trade at $612 billion. In 2009, however, India’s textile exports to EU and the US (which together account for more than half of India’s total textiles and clothing exports) fell due to a severe slowdown in demand.