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Special Economic Zones Face the WTO Test
Analysing the cause of the recent dispute between the United States and India, and its implications for the incentives provided to special economic zones, the need for a change in strategy regarding the existing pattern of export incentive schemes is emphasised.
Special economic zones (SEZs) in India are likely to face a spate of new challenges from some of India’s major trading partners. Recently, the United States (US) has submitted a request for consultation to the Chairperson of the Dispute Settlement Body (DSB) of the World Trade Organization (WTO).1 In this document, the US has suggested that India is unfairly subsidising its exporters through various fiscal incentives and subsidy programmes. According to the United States Trade Representative (USTR), many of these subsidy programmes are prohibited by the Subsidies and Countervailing Measures (SCM) Agreement of the WTO. The subsidy schemes mentioned by the USTR include the fiscal incentives given by India to its SEZs. If the US manages to prove that these subsidies are indeed prohibited, as per the WTO definition, then India will have no option but to remove a large number of incentives given to SEZs. This may have serious implications for these SEZs.
Incentives Given to SEZs
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