India joins US-led excess capacity initiative amid Section 301 scrutiny

India has joined a US-led initiative of fifteen countries to tackle structural excess manufacturing capacity in key sectors, including automobiles, batteries, solar panels, chemicals and semiconductors, amid scrutiny of its own manufacturing policies under a US Section 301 investigation into the same issue.

Experts say New Delhi must move carefully, balancing cooperation with its own manufacturing ambitions. The country has so far maintained that its manufacturing capacity is geared to meet both domestic and global demand.

15-country grouping targets market distortions

India was among 14 economies that joined the US in signing a Joint Ministerial Statement on October 7, following discussions at the G20 Trade Ministers’ meeting in Milwaukee on September 30-October 1.

The other signatories include the European Union, Japan, South Korea and Mexico, all of which, like India, are also subjects of the US Section 301 investigation into structural excess capacity. Argentina, Australia, Canada, France, Germany, Poland, Türkiye, and the United Kingdom are also part of the grouping.

The joint statement called on countries to end non-market policies and practices that distort markets and contribute to structural excess capacity. “We note that in the absence of such steps, an increasing number of countries are taking action to defend their industries, workers, and economies from distortions resulting from such policies and practices…such individual efforts will be more effective if concerned countries cooperate, share information, and take complementary action, wherever possible,” it highlighted.

Automobiles, batteries and semiconductors in focus

The initiative will initially focus on automobiles and electric vehicles, batteries, chemicals, foundational semiconductors and solar panels. The signatories will establish dedicated sectoral platforms to exchange information and explore complementary action to address the impact of excess capacity on domestic industries, workers and supply chains, per the statement.

India faces test over manufacturing ambitions

Trade policy think tank Global Trade Research Initiative (GTRI) said India was now joining Washington in tackling the very issue under scrutiny in its own manufacturing. The US launched its Section 301 investigation into structural excess capacity across 16 economies in March.

“The initiative also exposes a question of consistency: participating economies are coordinating against market distortions without confronting the US over its own trade-rule violations during the past two years,” GTRI founder Ajay Srivastava said.

For India, the test is whether this cooperation protects domestic manufacturing or gives Washington greater legitimacy to challenge India’s industrial expansion, he added. “Signing the declaration should not amount to accepting the case against Indian manufacturing,” he said.

US says initiative will address excess production

US Trade Representative Jamieson Greer said on Wednesday that the initiative aimed to tackle production that exceeded global demand and was sustained by government policies and interventions.

“Over the course of the US G20 presidency, numerous economies raised instances of structural excess capacity and production in economies that persistently exceeded global demand and were sustained by foreign government’s non-market policies and practices..Left unchecked, these issues will continue to cripple domestic industries, displace local production, and hinder our ability to raise the standard of living for workers and their families,” he said.

No tariffs or quotas announced yet

No specific tariffs, quotas or other trade restrictions have been announced under the initiative. Senior officials have begun work and are expected to meet at the technical level before December to develop terms of reference, share non-confidential information and data, assess the impact of excess capacity and identify information gaps, the joint statement pointed out.

Other countries not in the OECD have also been invited to join the initiative.