Why in the News?

Invoking the Agreement on Safeguards (AoS), India has notified the WTO of its plan to impose $724 million in retaliatory tariffs on the U.S. for breaching trade commitments through unilateral auto import duties.

What is the Agreement on Safeguards (AoS)?

• Overview: It is a World Trade Organization (WTO) treaty that allows countries to apply temporary trade barriers—called safeguard measures—when a domestic industry is harmed by a surge in imports.
• Purpose in Practice: The agreement maintains global trade discipline, offering legal protection tools but with checks to avoid abuse.
• Conditions for Use: Safeguards can only be used when there is clear evidence of serious injury or threat to domestic producers due to increased imports.
• Rules-Based System: The agreement ensures safeguard actions are transparent, time-bound, and non-discriminatory, preventing misuse for permanent protectionism.
• Key Rules:
  • Article 12.3: Before acting, a country must notify and consult with other WTO members who may be affected by the safeguard.
  • Article 8: If consultation fails, the affected country can retaliate by suspending trade benefits equal to the loss it suffered.
  • Ban on Informal Restrictions: AoS strictly prohibits voluntary export restraints or informal quotas that evade WTO rules, ensuring fairness.

India’s Use of the AoS – The 2025 U.S. Tariff Case:

• Trigger: The U.S. had imposed 25% tariffs on Indian-origin vehicles and parts in March 2025, which India claims are safeguard measures disguised as unilateral tariffs.
• Violation of Rules: India alleges that the U.S. did not follow Article 12.3 (mandatory consultations) and thus violated both AoS and GATT 1994 rules.
• Impact on Indian Exports: India estimates that $2.89 billion worth of exports have been affected and that the U.S. collected nearly $723.75 million in duties, matching India’s proposed retaliation.
• India’s Justification: India asserts that this move is legal under WTO rules, not protectionist, and aims to defend its export interests while continuing trade talks with the U.S.

India’s Changing Role in WTO Safeguard Policy:

• Early Strategy (1995–2010): India was initially cautious at the WTO, accepting tough terms under TRIPS, GATS, and AoA, and rarely used legal tools like retaliation, focusing more on diplomatic solutions.
• Recent Assertiveness (Post-2010): India now actively invokes WTO rules like AoS to protect its interests and has won key disputes—such as:
  • The solar panel case against the U.S.
  • Legal challenges to EU’s export restrictions on food.
• Global Leadership Role: India has taken the lead among developing countries to protect food security rights and push for fairer global trade terms, especially at Bali (2013) and Nairobi (2015) WTO summits.

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