3.1 Special and Differential Treatment

India's primary defense, at least in terms of emphasis, was that it remains entitled to special or differential treatment under Article 27 of the SCM Agreement. Article 27.2 exempts certain developing countries from the SCM Agreement's prohibition on export-contingent subsidies.

Beyond the strict legal question of whether such subsidies are permitted, India's ability to employ such subsidies in 2020 would create a divisive asymmetry. India is currently the fifth largest economy in the world as measured by GDP, coming in ahead of the United Kingdom, France, Italy, Brazil, and Canada (World Bank, 2019a). Its GDP growth rate is also at the top of the world's major economies, lagging only China (World Bank, 2019b). Allowing India to use forms of industrial policy, such as export-contingent subsidies, that are denied to other major economies strikes leaders in countries like the United States as unfair (US Trade Representative, 2019). Such an asymmetry becomes even more important as developed countries have taken a renewed interest in industrial policy, especially in light of the COVID-19 pandemic (see, for example, Biden, Reference Biden2020; Meyer, Reference Meyer2020; Rubio, Reference Rubio2020; Arato, Claussen, and Heath, Reference Arato, Claussen and Heath2020).

Article 27.2 of the SCM Agreement provides that:

The prohibition of paragraph 1(a) of Article 3 [on export-contingent subsidies] shall not apply to:

1. (a) developing country Members referred to in Annex VII.

2. (b) other developing country Members for a period of eight years from the date of entry into force of the WTO Agreement, subject to compliance with the provisions in paragraph 4.

Developing countries can thus be exempt from the prohibition on export-contingent subsidies in two ways. First, they can be covered by Annex VII. As relevant to India, Annex VII provides that it (among other developing countries) ‘shall be subject to the provisions which are applicable to other developing country Members according to paragraph 2(b) of Article 27 when GNP [gross national product] per capita has reached $1,000 per annum’.Footnote ³ In other words, Annex VII applies to a subset of developing countries until they reach a GNP of $1,000 per year, an event referred to as ‘graduating’ from Annex VII. Second, all developing countries are exempt during the eight-year grace period offered by Article 27.2(b).

India did not dispute that it had graduated from Annex VII. It thus only claimed exemption under Article 27.2(b)'s eight-year grace period for all developing countries. The crux of the dispute turned on when the eight-year grace period in Article 27.2 began. The United States argued that it began for all developing countries (including India) on 1 January 1995, ‘the date of the entry into force of the WTO Agreement’, and ended eight years later on 1 January 2003 (India–Export Related Measures, para. 7.25). India, however, argued that the grace period did not begin until it attained a GNP per capita of $1,000 per annum, the date of its graduation from Annex VII, which it alleged occurred at the end of 2016. India thus argued that the eight-year grace period began in 2017 and lasted until 2025 (India–Export Related Measures, para. 7.24).

Egypt and Sri Lanka supported India's position as third parties. Both countries – along with Bolivia, Cameroon, Congo, the Dominican Republic, Guatemala, Guyana, Indonesia, Morocco, and the Philippines – graduated from Annex VII on or before 2017.Footnote ⁴ India's interpretation would thus have had the effect of extending the eight-year grace period to them as well (although the precise beginning and ending dates would have varied based on the date of graduation). Egypt and Sri Lanka argued that the United States’ interpretation was unfair and inequitable because of how it distinguished among developing countries. Wealthier developing countries, those that entered the WTO with more than $1,000 per capita GNP, would have eight years to phase out their export-contingent subsidies. Those poorer developing countries covered by Annex VII, on the other hand, would have to suddenly eliminate their export-contingent subsidies upon graduation. Running the eight-year graduation period from the date of graduation from Annex VII would thus treat developing countries similarly, giving them all eight years to phase out export-contingent subsidies after they had achieved a degree of wealth (India–Export Related Measures, para. 7.26).

Unsurprisingly, the panel found that the plain meaning of ‘the date of entry into force of the WTO Agreement’ unambiguously referred to 1 January 1995, the date on which the WTO Agreement came into force (India–Export Related Measures, para. 7.39). India did not contest the plain meaning of the language, but instead argued that the panel should depart from the plain meaning of Article 27.2(b) in light of the context, the object and purpose of the SCM Agreement, and supplementary means of interpretation India–Export Related Measures, para. 7.40). India emphasized, for instance, the language in Annex VII providing that upon graduation India would be ‘subject to the provisions which are applicable to other developing country Members according to paragraph 2(b) of Article 27 [the eight-year grace period]’ (italics added). India argued that the United States’ interpretation would render the italicized portion of Annex VII without effect. In India's view, a country like India that graduated from Annex VII after 1 January 2003 would never be ‘subject to the provisions … [of] paragraph 2(b) of Article 27’.

The panel easily rejected this argument. It found that Article 27.2(b) entitled all developing countries to the same eight-year grace period from 1 January 1995 until 1 January 2005. WTO members covered by Annex VII received longer protection if they did not graduate until after 1 January 2003; if they graduated before 1 January 2003, they would be treated like other developing country members, entitled only to whatever remained of the eight-year period. That reading gave effect to all of the language in article 27.2, although whether both provisions would actually apply separately to an Annex VII country depended on a future event that was uncertain during the Uruguay Round negotiations – attaining $1,000 per year in GNP.

The panel rejected several legally unpersuasive arguments by India to inject uncertainty into the plain meaning of ‘the date of entry into force of the WTO Agreement’. For example, Article 27.4 provides that ‘Any developing country member referred to in paragraph 2(b) [the eight-year grace period] shall phase out its export subsidies within the eight-year period, preferably in a progressive manner.’ India argued that because ‘the eight-year period’ in Article 27.4 is not qualified by ‘the date of entry into force of the WTO Agreement’, it must refer to a different eight-year period than Article 27.2. However, since Article 27.4 expressly refers to Article 27.2 and uses the definite article ‘the’ to refer to the eight-year period, the panel had no trouble concluding that Article 27.4 referred to the same eight-year period as Article 27.2 (India–Export Related Measures, Section 7.3.3.2.3.). Likewise, the panel declined to depart from the plain meaning for the policy reasons suggested by Egypt and Sri Lanka (as well as India).Footnote ⁵

3.2 Exemptions or Remission of Taxes on Exports

India argued that four of these schemes – all but the SEZ Scheme – are not subsidies within the meaning of the SCM Agreement. The SCM Agreement's definition of a subsidy is narrower than the colloquial understanding of the term, and a measure is entirely outside the SCM Agreement's disciplines if it does not qualify as a ‘subsidy’ under the Agreement. To qualify, a measure must constitute (1) a financial contribution, (2) by the government or any public body, (3) that confers a benefit.Footnote ⁶ Moreover, footnote 1 to the SCM Agreement carves out certain measures as not constituting subsides, even if they meet this definition. It provides:

From this, the panel distilled a four-part test. In order to qualify for the carveout in footnote 1, a measure must be (1) an exemption or remission (2) of duties or taxes, (3) on an exported product, (4) not an excess of the duties and taxes which have accrued (India–Export Related Measures, para. 7.170).

Consistent with the introductory cross-references in footnote 1, the panel also found that these elements are qualified or elaborated in various ways by, most relevantly, Annex I of the SCM Agreement, which contains an illustrative list of prohibited export subsidies ((India–Export Related Measures, para. 7.186). In order to qualify for protection under footnote 1, the panel found that a measure must also avoid falling within one of the illustrative examples of export subsidies identified in Annex I. Three such examples – Annex I(g), (h), and (i) – speak to exemptions or remissions of indirect taxes or import charges.

Of most relevance to the case, the panel found that Annex I(h) and (i) imply that an exemption or remission of duties or taxes is ‘on an exported product’ when it is on inputs that are consumed in the production of the exported product. By way of example, an exemption from import duties on tires put on cars that are then exported would qualify for the protection of footnote 1, read in light of Annex I(i). Because the tires are entirely incorporated into the exported car, an import duty on the tires is essentially a duty on the exported car itself. Such a duty can be subject to exemption without qualifying as subsidy under footnote 1.

The United States largely prevailed in arguing that the challenged measures did not fall within the scope of footnote 1. The United States was able to show that most of the measures at issue allowed exemptions or remissions for duties or taxes on products that would not necessarily be consumed in the production of a product or incorporated into that product. Many of the products that qualified for exemption or remission, for instance, were capital goods such as machinery or equipment (India–Export Related Measures, para. 7.202). India argued that such capital goods are inputs because they ‘contribute to the final cost of the exported product’, and thus duties or taxes on such capital goods were effectively taxes on the exported product itself. But the panel rejected this interpretation. Because capital goods are not physically incorporated into, or consumed in the production of, the exported product, exemption or remission of duties or taxes on capital goods does fall within the carveout of footnote 1 (India–Export Related Measures, para. 7.216). The panel also found that the MEIS, which gave exporters ‘reward’ credit based on their exports, did not even qualify as an exemption or remission of duties or taxes paid. The amount of such credits was, the panel found, determined without reference to the amount of duties or taxes paid on the exported products (India–Export Related Measures, paras. 7.288–7.289).

Although the United States largely prevailed on the application of footnote 1, India was successful in shielding several of its measures. The United States did not persuade the panel that the EOU Scheme's exemption from the central excise tax applied to products not incorporated into the exported product (the United States did successfully make this showing with regard to the EOU's exemption from import duties) (India–Export Related Measures, para. 7.235). Likewise, the panel found that a number of the specific conditions attached to duty-free treatment under the DFIS Scheme required that the imported product be used in the production of the associated exported product (India–Export Related Measures, paras. 7.264–7.265). As a consequence, these measures did constitute an exemption from a duty on an exported product, and thus were entitled to the benefits of footnote 1.

3.3 The Measures Do Not Constitute Export-Contingent Subsidies

India argued that the measures it was unable to shield under footnote 1 (the bulk of its measures) did not qualify as subsidies within the meaning of the SCM Agreement and, if they did, were not contingent on exports and thus not prohibited. Recall that in order to qualify as a subsidy, a measure must make a (1) financial contribution, (2) by the government or any public body, that (3) confers a benefit. As the measures at issue were government policies, only the first and third elements were at issue.

The panel found India's primary arguments redundant to its arguments regarding footnote 1 and rejected them on that basis. It then proceeded to conclude that the EOU, EPCG, SEZ, and DFIS constituted financial contributions by India in the form of foregone revenue otherwise due. Moreover, consistent with prior decisions, the panel found that a benefit is necessarily conferred whenever revenue otherwise due is foregone. With respect to tax exemptions, ‘the market does not give such gifts’ (India–Export Related Measures, para. 7.445). The panel found that the MEIS, the ‘reward’ for exports, constituted a direct transfer of funds, and thus a financial contribution, by India. Because ‘no private entity acting pursuant to commercial considerations would provide money's worth to another commercial entity for no consideration’, the panel found that the MEIS scheme also created a benefit (India–Export Related Measures, paras. 7.438, 7.462–7.463).

The panel also concluded that all of the challenged measures are export contingent in law, meaning that the conditions in the law itself required exports (India–Export Related Measures, para. 7.482). This finding obviated the need to inquire into actual or anticipated exports – that is, real world effects of the measure. Such real-world effects are an element of export-contingency in fact, but not in law. India did not bother to argue that the EPCG or MEIS schemes were not contingent on exports, instead arguing that such subsidies fell within footnote 1. With respect to the other programs, India argued variously that the programs had purposes beyond simply encouraging exports, or that the subsidies could be available on conditions other than export-contingency. The panel rejected these arguments, finding that it was sufficient for the United States to show that export contingency was one objective among many, or that it was one possible basis on which a subsidy might be awarded.

3.4 The Aftermath

Perhaps unsurprisingly, India appealed the panel's decision in November 2019. As the Appellate Body lacks a quorum to hear cases, India's appeal thus defeats the adoption of the panel report. As a technical legal matter, then, the Dispute Settlement Body has not adopted the decision against India or the recommendation to remove its offending measures. This is ironic, of course, because a major complaint of the United States has been that the WTO does not do enough to constrain China and its model of government support for the economy. Here, the United States’ own tactics inhibit its ability to obtain redress for subsidies from another major developing country.

4.1 The Law of Unintended Consequences

In standard trade theory, an export subsidy benefits exporters, often at the expense of domestic consumers and foreign producers. Domestic consumers in the subsidizing country suffer because export contingent subsidies make it more profitable for domestic producers to sell overseas, raising prices for the product at home, while foreign producers suffer because they must compete with subsidized imports. While domestic consumers have only domestic law and politics as a recourse, foreign producers can ask their government to bring a WTO dispute in an effort to remove the negative welfare effects of the subsidy.

The MEIS policy was applied to specific products intended for specific export markets, albeit with the intention of promoting exports to new markets. Thus, although the case was brought by the United States, the policy was much more focused on providing Indian exporters with incentives to sell in new third country markets. This raises the question: if the subsidies distorted competition, which producers have been hurt and where? In textbook applications, typically export subsidies hurt producers in the importing country. As we show below, evidence suggests that India's programs spurred growth in exports across the board, but the MEIS program did not succeed in shifting export growth away from traditional export markets like the United States and the EU. In fact, India's exports to traditional markets rose disproportionately more than exports to new markets. It is perhaps unsurprising that this expansion of export-oriented growth to developed countries like the United States, at a time when WTO rules required India to have phased out such programs, would draw a challenge.

The MEIS scheme provided bigger credits to Indian firms for exports to new markets, largely consisting of countries outside the United States and EU. Country Group A, which includes the US and the EU, are traditional export markets of India. The scheme aimed to diversify exports to new markets and therefore higher rates were assigned for exports to Country Group B, which is largely comprised of many Asian, African, and South American countries. The smallest countries across the world and certain South Asian countries are classified under Country Group C, which received the smallest subsidies.

Figure 1 provides a summary glance at India's trade with these three groups. Before 2015, when the MEIS policy came into effect, Indian exports were growing at relatively similar rates across the less targeted group of EU/US markets (Country Group A) and Country Group C that received the smallest subsidies. Exports to traditional markets, i.e., Country Group A, continued to grow and they in fact, grew much more than exports to Country Group C, which received the smallest subsidies. Indeed, as an absolute matter exports to the traditional markets in Country Group A rose much faster after 2015, while exports to Country Group C increased only slightly. The difference can be seen in Figure 1 by comparing the solid black and dashed gray lines after 2015. In contrast, the targeted markets in Country Group B were following somewhat different trends earlier, relative to the least targeted countries in Group C and had no better growth rates than the less targeted markets in Group A after the MEIS policy came into being.

Figure 1. Evolution of Indian exports to country groups targeted by MEIS scheme

Source: COMTRADE data extracted from WITS at HS 2007 classification for Total Exports of India to Markets by MEIS Classification. MEIS country classification taken from the Foreign Trade Policy 2015-2020. Exports in logs.

Table 1 provides the export values in USD across the three types of markets before and after 2015. Exports to Country Groups B and C show small comparable increases after 2015, while traditional markets in Group A that were partly targeted saw much larger increases. This suggests that import competition in traditional markets might still be playing a role in why the United States brought this case (as opposed to, say, a Country in Group B, exports to which were more heavily subsidized). The policy did not have its desired outcome of growth in new markets. At the same time, it increased exports to the United States just as the United States was beginning to take more aggressive action to register its discontent with foreign industrial policies.

Table 1. Average annual exports of India (in billion USD) to MEIS country groups between 2009 and 2019

Source: COMTRADE data extracted from WITS at HS 2007 classification for Total Exports of India to Markets by MEIS Classification. MEIS country classification taken from the Foreign Trade Policy 2015–2020.

A more systematic analysis of these trends is provided below in Table 2, where the value of exports per product (6-digit HS code) to the relevant country group is regressed on the subsidy in the period after MEIS was introduced, together with controls – time fixed effects and product fixed effects.Footnote ⁷

Table 2. Exports from India to Country Groups A and B and MEIS subsidy for the country group and product, 2009–2019

Notes: Standard Errors clustered by Product and Subsidy Level in parentheses.

**p < 0.05.

Source: COMTRADE data extracted from WITS at HS 2007 classification for Total Exports of India to Markets by MEIS Classification. MEIS country classification taken from the Foreign Trade Policy 2015–2020. Exports in logs. All HS codes that do not change in 2012 and 2017 are included and make up 96.9 per cent of all observations.

Table 2 shows that exports to Country Group A increased while those to Country Group B, which were the new markets targeted by the subsidy, show no such increase for Country Group B. In other words, a 1% export subsidy raises exports to traditional markets by 3.2% but does not have any trade-enhancing effects in new markets. The average subsidy for Country Group A is 2.1% (and the median subsidy is 2%), implying that on average exports per product to Country Group A increased by 6.72%.

The policy therefore does not seem to have had its desired effect of expanding into new markets. India's MEIS program, despite its intentions, created much more subsidized import competition for producers within traditional developed countries like the United States and the EU.

4.2 The Dog that Didn't Bark, and Those that Did

Evidence from the United States suggests that some expected import-competing interests, including those affected by some of the older Indian programs, pushed for a challenge. But some likely challengers did not push for a challenge.

We begin with the dogs that did bark. Two sectors of the US economy have been particularly active in shaping US policy toward India's export subsidies: pharmaceuticals and metals. First, the US pharmaceutical industry competes in the United States with generic Indian pharmaceuticals. US pharmaceutical companies have fought efforts to make generic drugs more readily available since the 1984 Hatch–Waxman Act paved the way for generic drug manufacturers – based domestically and overseas – to register and sell biosimilar drugs with minimal FDA oversight (Thomas, Reference Thomas2013). Generic drugs make up 90% of prescriptions written in the United States and 20% of the total annual expenditure on drugs (around USD $73 billion) (Kolchinsky, Reference Kolchinsky2020). Given the economic incentives, US pharmaceutical companies’ resistance to generics is unsurprising.

India is the world's largest manufacturer of generic drugs and the United States is its largest customer, importing nearly $6 billion of its drugs in 2019.Footnote ⁸ Indian drug manufacturers benefit from both the EOUFootnote ⁹ and SEZFootnote ¹⁰ schemes at issue in India–Export Related Measures and stand to lose if the subsidies are withdrawn. MFJ International, a lobbying firm with ties to an Indian pharmaceutical industry group, the Indian Pharmaceutical Alliance, submitted a public comment to the Office of the US Trade Representative opposing India–Export Related Measures in 2018, the lone public comment on the case.Footnote ¹¹ Although reports indicate that over the last several years major US pharmaceutical companies have lobbied USTR on issues related to ‘intellectual property in the WTO’,Footnote ¹² India IP issues,Footnote ¹³ free trade agreements and trade negotiations,Footnote ¹⁴ and ‘biopharmaceutical innovation policy issues’,Footnote ¹⁵ none specifically mention India–Export Related Measures. Nevertheless, given Indian drug companies’ substantial share of the generic drug market, it is clear that American pharmaceutical companies would benefit from reducing the competitiveness (and increasing prices) of Indian generic drugs, a fact of which USTR must have been aware. Indeed, MJF's comment on USTR's decision to bring the case highlights just this dynamic.Footnote ¹⁶

The Trump Administration's decision to challenge an export subsidy program that results in lower drug prices in the US is particularly interesting given President Trump's stated interest in lowering drug prices.Footnote ¹⁷ The availability of generic drugs is critical to reducing drug prices.Footnote ¹⁸ Moreover, President Trump has not been shy about seeking to lower prices by importing drugs from abroad. His central proposal to lower drugs has been to facilitate their purchase from Canada. Critics of his proposal have pointed out it is unlikely to be implemented, from which they infer that President Trump is unwilling to take on US pharmaceutical companies in order to lower drug prices (Abutaleb and McGinley, Reference Abutaleb and McGinley2019). The US decision to bring India–Export Related Measures – a trade policy decision calculated to increase US consumer costs to the benefit of US pharmaceutical producers – would seem to support this view.

Turning to metals, the Trump Administration support for the sector is hardly a secret. US Trade Representative Robert Lighthizer represented steel interests in private practice, and the Administration's national security tariffs on steel and aluminum imports are in many ways the most brazen of the Administration's trade actions. Although the metal industry's efforts have been largely (and loudly) focused on increasing US tariffs through Section 232, the industry has also prioritized decreasing foreign subsidies, which depress global prices and thus the prices of any imports with which domestic producers compete. The American Iron & Steel Institute, for instance, has indicated support for India–Export Related Measures on several occasions. AISI's 2019 profile of the metals industry notes that ‘foreign government subsidies … have resulted in massive global steel overcapacity’,Footnote ¹⁹ and its website lists ‘pursu[ing] WTO enforcement actions against foreign government policies that are inconsistent with WTO obligations’ as one of its trade policy initiatives.Footnote ²⁰ Most directly, AISI submitted a letter addressed to Edward Gresser, Assistant US Trade Representative, in response to the USTR's request for comments on its annual National Trade Estimate Report on Foreign Trade barriers.Footnote ²¹ In the letter, AISI specifically lists the export subsidies at issue in India–Export Related Measures as harmful to the US steel industry and ‘applauds the Trump administration’ for initiating the proceedings.Footnote ²²

A look at the petitioners in International Trade Commission import injury investigations sheds further light on how the metals industry created pressure for a WTO challenge. The ITC has initiated at least nine investigations of Indian subsidies since 2018, and every investigation has involved some or all of the subsidies at issue in India–Export Related Measures. Several of the 23 petitioners are subsidiaries of multi-billion dollar metals producers based in the United States, Europe, and, ironically, India.Footnote ²³

Drawing on product-level trade data, the evolution of exports in pharmaceuticals and metals can be compared with other products that were also subsidized. Figure 2 reveals that chemical or allied industries (including pharmaceuticals) and metal exports from India to its traditional markets in Europe and the United States did, in fact, experience higher growth rates than other products that were subsidized through the MEIS programme. While metal exports fluctuated after the MEIS programme came into effect in 2015, chemical exports saw strong growth. It is no surprise then that the clamor for the case came from these two sectors, which saw much higher exports from India during the period.

Figure 2. Evolution of Indian exports to Country Group A by products targeted by the MEIS scheme

Source: COMTRADE data extracted from WITS at HS 2007 classification for Total Exports of India to Markets by MEIS Classification. MEIS country classification taken from the Foreign Trade Policy 2015–2020. Exports in logs. Chemicals or allied industries refer to HS codes 28 to 38 and base metals and articles of base metals refer to HS codes 72 to 83. Other MEIS products refer to all other HS codes for which there is a MEIS subsidy in place. Export value index is the log of export value divided by the log value in 2010.

Using time and product fixed effects as controls, Table 4 confirms this result for chemical exports, which show much greater increases with respect to the MEIS subsidy. In particular, exports from India to Group A countries rises by 2.9% more for a unit subsidy compared to other products that were also subsidized by the MEIS programme. Results for metals, on the other hand, are weaker (available upon request) and do not reveal a similar increase relative to other subsidized products.

Table 4. Exports from India to Country Group A and MEIS subsidy for the country group by product, 2009–2019

Notes: Standard errors clustered by product and subsidy level in parentheses.

**p < 0.05.

Source: COMTRADE data extracted from WITS at HS 2007 classification for Total Exports of India to Markets by MEIS Classification. MEIS country classification taken from the Foreign Trade Policy 2015–2020. Exports in logs for all HS codes that do not change in 2012 and 2017. Chemicals or Allied Industries refer to HS codes 28 to 38.

Now, a brief word about the dog that didn't bark. India's export subsidies contain several programs aimed at the export of technology and services. Therefore, competing US technology firms would have been obvious candidates who would want to push for a challenge, but they were in fact missing from action. Within the family of EOU subsidy programs, the Software Technology Park (STP) scheme was established in 1991 with the objective of promoting the development of software and software services.Footnote ²⁴ Like the other EOU schemes, it allows for the duty-free import of goods, but the STP is directed at the production of software and ‘professional services’ for export.Footnote ²⁵ There is really no discernable difference between the STP and the other EOU programs. In fact, the STP and EHTP schemes are both administered by the same organization, Software Technology Parks of India (STPI), and the export value from STP units, worth approximately $50 billion for 2017–2018, dwarfed other EOU schemes.Footnote ²⁶

Likewise, there is a services companion to the MEIS program, the Services Exports from India (SEIS) scheme. As the name suggests, this scheme aims to encourage the export of services, but it is otherwise similar to the MEIS in that service providers earn reward credits or ‘scrips’ valued at a percentage (5%–7%) of their total foreign exchange earnings.Footnote ²⁷ The SEIS program is also considerably smaller than MEIS. In 2018–2019, only 6,376 scrips were awarded, as opposed to 298,350 awarded under MEIS.Footnote ²⁸

As it turns out, US-based technology and financial services companies appear to be significant beneficiaries of the STP program. EOU schemes like the STP program allow for 100% foreign equity,Footnote ²⁹ so technology giants like Google and Microsoft operating in India are able to take advantage of the STP scheme. And while data on individual beneficiaries of the program are not available, Software Technology Parks India, the entity that administers the STP program, maintains publicly-available records of companies registered with its regional offices. US technology and financial services companies registered with the STPI include Amazon, Google, Dell, Oracle, American Express, Blackrock, Fidelity, Goldman Sachs, and JP Morgan.Footnote ³⁰ Indeed, American tech companies invest a huge amount in India, exemplified by Google's recent announcement that it would be investing $10 billion ‘in India's digital future’. In announcing the $10 billion investment, Google CEO Sundar Pichai stated, ‘As we make these investments, we look forward to working alongside Prime Minister Modi and the Indian government, as well as Indian businesses of all sizes to realize our shared vision for a Digital India’ (Pichai, Reference Pichai2020).

The decision to leave the STP scheme unchallenged may tell us little directly about US trade policy. The SCM Agreement only covers trade in goods. Trade in services, such as technology and financial services, are covered by the General Agreement on Trade in Services (GATS). While the GATS’ general rules apply to subsidies, the GATS itself defers subsidy-specific rules to further, as-yet uncompleted, negotiations.Footnote ³¹ Thus, while consultations on the STP program are certainly possible, and a challenge might be (either as regards to goods exported under the STP program or possibly under the GATS general rules), WTO rules are considerably less clear in condemning programs like the STP program.

4.3 Summary

The MEIS program expanded India's export-contingent subsidies right at the time that WTO rules required India to wind down its export-contingent subsidies. Moreover, despite its intention to spur export growth to new export markets, the MEIS program resulted in much faster growth in exports to the United States. That growth in exports caught the attention of politically influential import-competing sectors in the United States, bringing greater urgency to the United States’ efforts. At the same time, though, limitations on WTO rules prevented the United States from including components of the Indian programs that benefit US technology and financial firms – firms that might have opposed the challenge in the first place.