India has initiated a request for consultations with the European Union (EU) under the World Trade Organization's (WTO) safeguard agreement, addressing concerns over new import measures imposed on certain ferroalloys. The EU's recent decision introduces country-specific tariff-rate quotas, a move that has immediate implications for exporters. These quotas limit the volume of ferroalloy imports that can enter the EU duty-free, with tariffs increasing for volumes exceeding the set limits.
This action by India reflects its concerns regarding the potential impact of these measures on its ferroalloy exports to the European market. The request for consultations marks the first step in a dispute settlement process under the WTO, providing an opportunity for India and the EU to discuss the issue and seek a mutually agreeable solution.
Ferroalloys are crucial in steel production, contributing essential properties like strength and corrosion resistance. India is a significant exporter of ferroalloys, and the EU is a key market for these products. The imposition of tariff-rate quotas by the EU could therefore affect Indian manufacturers' ability to compete in the European market.
The EU's justification for these measures likely revolves around protecting its domestic industry from increasing import competition. Safeguard measures are permitted under WTO rules when a surge in imports threatens to cause serious injury to domestic producers. However, these measures must be applied in a non-discriminatory manner and should be limited to the extent necessary to prevent or remedy the injury.
India's challenge to the EU's measures suggests that it believes the safeguard measures are either unjustified or disproportionate, or not in line with WTO requirements. Through the consultation process, India will seek to understand the EU's rationale and explore potential ways to mitigate the impact on its exports. This could involve seeking adjustments to the quota levels or exploring alternative solutions that address the EU's concerns without unduly restricting trade.
The consultations between India and the EU will be closely watched by other WTO members, as the outcome could have implications for the use of safeguard measures and the overall balance of trade relations. If the consultations do not result in a satisfactory resolution, India has the option to request the establishment of a WTO panel to adjudicate the dispute. The panel would review the evidence and arguments presented by both sides and issue a ruling on whether the EU's measures are consistent with WTO rules.
The issue of trade restrictions and tariffs has been a recurring theme in EU-India trade relations. Indian steelmakers have reportedly struggled to sell alloy in the EU market. The European Steel Association (EUROFER) has previously voiced concerns about the potential negative impacts of a free trade agreement (FTA) with India on strategic industrial sectors in Europe. EUROFER has emphasized the importance of a level playing field and the protection of strategic industries during negotiations with India. They have also highlighted the differences in social, environmental, and climate requirements between India and the EU, cautioning against any exemptions or concessions for India under the Carbon Border Adjustment Mechanism (CBAM).
In the meantime, it is expected that Indian exporters will explore other markets.
