Alleging violation of a global trade rule for export competitiveness in textiles, the US has opposed India’s latest round of incentives to boost exports. The US raised this issue after India increased support for exports of several products including textiles while expanding the scope of the Merchandise Exports from India Scheme (MEIS) on October 30,.

Leading markets including African countries came under government exports of cotton fabrics, both woven and knitted, and made-ups, under the MEIS. When the export share of a developing country with per capita income below $1,000 a year touches 3.25 percent in any product category for two consecutive calendar years, it is deemed to have gained ‘export competitiveness’. This is as per the World Trade Organisation's agreement on subsidies and countervailing measures.

For eight years, from the second year of breach, such a country is then required to phase out export subsidies for the items. The WTO mandates developing countries to phase out the export subsidies within the eight-year period, preferably in a progressive manner. in 2010, the WTO had asked India to consider phasing out the subsidies for textiles and clothing.

India cannot give additional subsidy during the phase-out period said a US official and the US has flagged the issue of export competitiveness in textiles. India has crossed the export limit and the government is aware of this but the market is moving slow, said another official in the Cotton Textiles Export Promotion Council.