India Firmly Rejects US Trade Probes, Advocates for Bilateral Dialogue
In a strong diplomatic move, the Indian government has officially dismissed claims made by the US Trade Representative (USTR) regarding Section 301 investigations against India. The government emphasized that such concerns should be addressed through bilateral discussions, especially while negotiations for a trade agreement are actively underway, rather than through unilateral measures.
Background of US Investigations and Indian Response
Following a setback on reciprocal tariffs in the Supreme Court, the Trump administration initiated two Section 301 probes. These investigations target structural excess capacity and failure to act on forced labor, involving several countries, including India. An Indian delegation, led by chief negotiator Darpan Jain, is scheduled to hold talks with American counterparts in Washington, starting Monday.
Commerce Secretary Rajesh Agrawal stated, "We are looking at finalising the legal agreement, which is a logical follow-up of the joint statement released on February 7. There is a need for further discussions and follow-up engagement to take this forward. The US has initiated investigations involving several countries. Both sides will sit together and discuss how these issues need to be structured and addressed."
Detailed Rebuttal to Forced Labor Allegations
In its filing on forced labor, the Indian commerce department highlighted that India has international commitments on this subject. Given the International Labour Organisation's robust framework, the department argued there is no necessity for any member of the international agency to unilaterally initiate a probe. Additionally, it pointed out that the US labor department's list of goods produced by child or forced labor has limited exposure to downstream goods manufactured in India.
The government also systematically rebutted claims across various sectors, outlining the norms governing:
- Handicrafts
- Leather
- Carpet
- Gems and jewellery
In the textiles sector, the government asserted that, apart from a strong legal and compliance ecosystem, Indian entities have not relied on cotton imports from high-risk regions such as Xinjiang. Furthermore, imports of man-made fibers or accessories from other countries are buyer-driven and subject to strict compliance verification by global brands.
Countering Claims of Structural Excess Capacity
Similarly, the government countered allegations of structural excess capacity by arguing that increases in nominal capacity align with projected rises in demand. It also dismissed the charge that India's $42 billion trade surplus with the US is due to overproduction or excess capacity, describing it as "a macroeconomic phenomenon which is a product of a concatenation of circumstances."
The government further elaborated, "... the initiation notice is effectively challenging the foundational principles of comparative advantage that underpin international commerce."
It emphasized that capacity created in sectors such as:
- Solar modules
- Textiles
- Petrochemicals
- Health
- Automotive
- Construction goods
was primarily driven by domestic demand. The government concluded, "Across industries specified in the initiation notice, India's manufacturing growth is anchored in domestic demand. More crucially, USTR's selective focus on specific sectors, in which India happens to have a global trade surplus, does not automatically establish that India has 'structural excess capacity' in some of the indicated sectors."
