DS: India — Measures Concerning Sugar and Sugarcane

This dispute concerns India's domestic support to sugarcane producers and export subsidies for sugar. Guatemala challenged:

• India's mandatory minimum prices for sugarcane (the Fair and Remunerative Price (FRP) and State-Advised Prices (SAPs)), as market price support within the meaning of the Agreement on Agriculture, as well as other payments and policies in favour of sugarcane producers, as non-exempt direct payments or other non-exempt policies within the meaning of the Agreement on Agriculture, and
• three assistance schemes, as WTO-inconsistent export subsidies, that operate in conjunction with India's Minimum Indicative Export Quotas (MIEQs) or Maximum Admissible Export Quantity (MAEQ). Guatemala claimed that India's schemes constitute subsidies within the meaning of the Agreement on Agriculture, as well as subsidies contingent upon export performance within the meaning of the SCM Agreement.

Domestic support

Regarding India's alleged domestic support to sugarcane producers, the Panel found that, for five consecutive sugar seasons, from 2014-15 to 2018-19, India provided non-exempt product-specific domestic support to sugarcane producers in excess of the permitted level of 10% of the total value of sugarcane production. Therefore, the Panel found that India is acting inconsistently with its obligations under Article 7.2(b) of the Agreement on Agriculture.

The threshold issue before the Panel was whether “market price support” within the meaning of the Agreement on Agriculture only exists when the government pays for or procures the relevant agricultural product. India argued that its mandatory minimum prices are not paid by the Central or State Governments but by sugar mills, and hence do not constitute market price support. The Panel found, however, that market price support does not require governments to purchase or procure the relevant agricultural product, and thus rejected India's argument.

Export subsidies

Regarding India's alleged export subsidies for sugar, the Panel found that the challenged schemes are export subsidies within the meaning of Article 9.1(a) of the Agreement on Agriculture. Having found this, the Panel did not consider it necessary to address Guatemala's claim that the same schemes are also inconsistent with Article 9.1(c) of the Agreement on Agriculture. Since India's WTO Schedule does not specify export subsidy reduction commitments with respect to sugar, the Panel found that such export subsidies are inconsistent with Articles 3.3 and 8 of the Agreement on Agriculture.

The Panel also found that under the four challenged schemes, India provides subsidies contingent upon export performance within the meaning of the SCM Agreement, inconsistently with its obligations under Articles 3.1(a) and 3.2 of the SCM Agreement. India argued that the “period of eight years” referred to in Article 27.2(b) of the SCM Agreement continued to exempt India from the application of the prohibition on export subsidies. This raised the question of whether this transition period began on the date of India's graduation from Annex VII(b) of the SCM Agreement or from the date of entry into force of the WTO Agreement. The Panel found that the eight-year transition period under Article 27.2(b) starts from the date of entry into force of the WTO Agreement, and concluded that this special and differential treatment provision did not apply to India.

The Panel recommended that India withdraw its prohibited subsidies within 120 days from the adoption of the Report, in accordance with Article 4.7 of the SCM Agreement. In the interim review process, India argued that, because Article 19 of the Agreement of Agriculture prevails over Article 4.7 of the SCM Agreement, the Panel should not recommend such a time period. The Panel nonetheless found that no conflict exists between the two provisions and did not reconsider the recommended time period of 120 days. In determining this particular period, the Panel took into consideration, inter alia, the impact of the COVID 19 pandemic on the functioning of the public sector in India.