After China, India faces US heat for export-linked subsidies at WTO

Mint

17-07-2025

New Delhi: India has come under America's scanner at the World Trade Organization (WTO) over alleged export-linked subsidies, joining a list of countries facing similar probes that had until recently focused on China.
According to a WTO document reviewed by Mint, the US has named four Indian product categories—lined paper products, oil country tubular goods, high chrome cast iron grinding media and 2,4-Dichlorophenoxyacetic acid—in its latest countervailing duty probes.
Incentives or subsidies aimed at promoting exports are prohibited under WTO rules.
One of the Indian products targeted by the US is lined paper of the kind used in school notebooks. India is the world's second-largest exporter of this key product and any move by the US to put these under increased tariffs will impact factories in Tamil Nadu and Maharashtra, said analysts.
The investigations launched by Washington cover more than 20 product categories and come even as India and the US negotiate a bilateral trade agreement, with the fifth round of talks for the first tranche of the deal currently underway.
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India's chief negotiator, Rajesh Agarwal, is in Washington to seal a pre-harvest deal before a 31-July deadline.
Impact on paper exports
For India, the spotlight falls on sectors critical to both domestic manufacturing and export earnings. Indian lined paper products—such as school notebooks, ruled writing pads, composition books, and diaries—are in demand in the US due to their low price and good quality.
'The US-India BTA offers a game-changing opportunity for Indian lined paper exporters. Currently, India holds an 8.5% market share ($80.3 million) compared to Vietnam's 27% ($254 million) in the $944-million US stationery market, primarily due to a 36% tariff burden," said Manoj Kumar Reddy, senior policy consultant, Centre for Digital Economic Policy Research (C-DEP), an independent policy think tank.
Removing the additional 26% duty would level the playing field, allowing India's established manufacturing hubs in Tamil Nadu and Maharashtra to compete on a more equal footing in terms of quality and scale. With India already ranking second globally in paper notebook exports, tariff relief could significantly boost market penetration."
Key players in the segment include companies such as ITC and Navneet.
Queries regarding the impact of the US action sent to ITC's head of communications remained unanswered.
In its submission of FY25 earnings to the Securities and Exchange Board of India (Sebi) on 22 May, Sunil Gala, MD of Navneet Education Ltd, said, 'Overseas exports of stationery witnessed 12% growth instead of the 15% that was expected. Since our major exports are to the US, the final impact—positive or negative—of the US tariffs is unknown until the US finalizes tariffs for each country."
'Thankfully, the company has not faced any order cancellations so far. But when it comes to new seasons or deciding the volumes for each product category, all our customers are saying 'wait and watch'. They are unwilling to comment, as they are awaiting the final tariff decision," Gala said in his Sebi filing.
'However, we are very positive about gaining market share through our current and upcoming product offerings in the US When we speak with our customers, many express a preference for India, but they are still non-committal on a long-term basis, pending the US tariff decision," he added.
The export figures for notebooks and other goods under this category could not be ascertained till press time.
Another category under investigation is oil country tubular goods (OCTG), which includes casing pipes, tubing, drill pipes, and seamless steel pipes used in petroleum extraction and drilling operations.
The US, with its active shale exploration and offshore drilling, has been a key buyer.
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According to a report by the think-tank Global Trade Research Initiative (GTRI), India exported $4.56 billion worth of iron, steel, and aluminium products to the US in FY25, most of which comprised iron and steel articles and castings. High-grade OCTG, which includes casing and tubing essential to the energy sector, forms a significant part of these exports.
High chrome cast iron grinding media—typically used in cement plants, thermal power stations and mining—are another export item under scrutiny. These wear-resistant steel balls and grinding elements are important for crushing and milling in heavy industries. While export values in this niche segment are comparatively low, the category has seen steady growth amid rising global demand.
According to the WTO filing, the US is also investigating whether India's export promotion schemes provide an unfair advantages to domestic producers of 2,4-D, a herbicide that is primarily used to control broadleaf weeds in wheat and rice.
Trade experts say, if proven to involve trade-distorting subsidies, the cases could lead to the imposition of countervailing duties by the US Department of Commerce, making Indian products costlier and potentially less attractive to American importers.
Domestic industry concerns
Indian exporters fear this could erode their competitiveness in key markets and push companies to alter strategies or explore alternative destinations.
'WTO matters will be handled as per the rules. We are closely monitoring the situation," said a senior official, asking not to be named.
Queries sent to the commerce ministry seeking a response remained unanswered at press time.
'India exports a lot of notebooks and other such goods under the lined paper products category to the US. The issue is that the US has inked an agreement with Indonesia and has levied a 19% tariff on their products. There is also a higher duty on Chinese goods, and these two geographies are India's key competitors," said Abhash Kumar, a trade economist.
'As of now, India faces a 10% baseline tariff, and since we are waiting for the trade deal to be signed, if we end up facing a higher tariff than Indonesia, we will be at a disadvantage. The other concern is trade diversion due to the higher tariffs on China, which India needs to keep an eye on," he said.
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According to commerce ministry data, Indian goods exports to the US in the last financial year (FY25) increased by 11.6%, from $77.52 billion in FY24 to $86.51 billion in FY25. Imports from the US also rose, but by a smaller margin of 7.42%, increasing from $42.20 billion to $45.33 billion during the fiscal year that ended on 31 March.
In Q1 of FY26, India's exports to the US stood at $25.52 billion compared to $20.89 billion in the corresponding period of the last fiscal (FY25 Q1), while imports grew from $11.52 billion in FY25 Q1 to $12.86 billion in FY26 Q1.