India, Brazil begin talks to resolve sugar-related trade dispute at WTO
In the world, Brazil stands tall as the largest producer and exporter of sugar, while India proudly holds the title of being the globe's second-largest sugar producer.
India and Brazil have embarked on discussions to amicably address a trade conflict concerning sugar at the World Trade Organisation (WTO). As part of this resolution process, Brazil may graciously share its technology for ethanol production with New Delhi, according to an official statement.
Brazil boasts the top position as the world's foremost producer of sugarcane and ethanol. Additionally, it is a frontrunner in advanced ethanol production technology.
"As part of our ongoing efforts to resolve the dispute, we've engaged in several rounds of discussions and held inter-ministerial meetings here. Brazil has expressed its willingness to share ethanol production technology with us. This is indeed a positive development," the official conveyed.
Ethanol serves as a vital component blended with oil for fueling vehicles. The utilization of ethanol, derived from sugarcane and other agricultural products like broken rice, promises to reduce India's heavy reliance on oil imports, given that it's the world's third-largest consumer of oil, predominantly relying on overseas shipments for its energy needs (currently at 85%). Furthermore, this move towards ethanol helps in curbing carbon emissions, aligning with a target of achieving 20% ethanol-blended petrol by the year 2025.
India, in reciprocation for this mutually agreed solution (MAS) to resolve the dispute, would also be expected to make an offering at the Geneva-based international body.
Notably, India and the United States recently successfully resolved six trade disputes and terminated a seventh case. In this resolution, New Delhi removed retaliatory duties on eight American products, including apples and walnuts, while the U.S. extended market access to Indian steel and aluminum products without imposing additional duties.
The official mentioned that India is adopting a similar approach to address grievances from other parties involved in the sugar dispute at the WTO.
In 2019, Brazil, Australia, and Guatemala raised concerns at the WTO's dispute settlement mechanism, alleging that India's subsidies to its sugarcane farmers violated global trade rules.
On December 14, 2021, a WTO dispute settlement panel ruled that India's support measures for the sugar sector did indeed conflict with global trade norms.
In January 2022, India challenged the panel's decision at the WTO's appellate body, which serves as the final authority for such disputes. However, the appellate body is currently non-operational due to disagreements among member countries regarding the appointment of its members.
Reiterating, Brazil is the world's top producer and exporter of sugar, while India claims the position of being the world's second-largest sugar producer.
Brazil, Australia, and Guatemala, all WTO members, contended that India's support measures for sugarcane producers exceeded the de minimis threshold of 10% of the total value of sugarcane production, which they considered inconsistent with the WTO's Agreement on Agriculture. They also highlighted India's alleged export subsidies, production assistance and buffer stock schemes, as well as marketing and transportation support.
As per WTO rules, any member or group of members can raise a dispute at the Geneva-based multilateral body if they believe a specific trade measure violates WTO norms.
The initial step to resolve a dispute is bilateral consultation. If both parties cannot reach an agreement through consultation, either can approach the establishment of a dispute settlement panel. The panel's decision can be appealed at the World Trade Organization's Appellate Body.
Significantly, the WTO's Appellate Body is presently non-functional due to disputes among member countries over the appointment of its members. Numerous disputes are already awaiting resolution by the appellate body, with the United States obstructing the appointment of new members.
Bilateral trade between India and Brazil surged to $16.6 billion in the fiscal year 2022-23, up from $12.2 billion in 2021-22. This growth is in favor of India.
During the 2021-22 sugar marketing year (October-September), India exported 110 lakh tonnes of sugar, making it the world's second-largest sugar exporter, earning approximately ₹40,000 crore in foreign exchange.
For the ongoing 2022-23 marketing year, which concludes this month, the Indian government permitted the export of 61 lakh tonnes of sugar. Nearly 60 lakh tonnes have already been shipped.
The government is yet to make a decision regarding sugar exports for the upcoming 2023-24 marketing year, which begins next month. In the current sugar season (October-September) of 2022-23, India's sugar production has already exceeded 330 lakh tonnes, excluding the diversion of about 43 lakh tonnes for ethanol production.
The blending of ethanol with petrol has seen significant growth, rising from 1.53% in the 2013-14 marketing year to 10% in 2021-22. To achieve the 20% target by 2025, approximately 1,016 crore litres of ethanol will be required, with around 334 crore litres designated for other purposes.
WTO member countries possess the option to resolve disputes outside the dispute settlement mechanism and subsequently inform the multilateral body accordingly.
Photo Credit: Reuters
