Background
The U.S. has been examining whether countries are importing goods produced using forced labour and whether structural excess capacity in certain sectors is harming the U.S. economy.
India maintains that its approach should be based on specific and verifiable evidence, rather than assumptions about entire countries, regions or sectors.
India has highlighted its constitutional and international commitments against forced labour:
Article 23 of the Constitution prohibits trafficking in human beings and forced labour.
India has ratified ILO Conventions No. 29 and 105 relating to forced labour.
India amended its Foreign Trade Policy in July 2026 to prohibit imports of goods produced using forced labour.
On excess capacity, India argues that its manufacturing capacity is primarily driven by domestic demand as well as global markets.
Key Issues
Forced Labour
India stated that its commitment to eliminating forced labour is absolute and unconditional.
India's position includes:
Constitutional prohibition under Article 23.
Ratification of ILO Conventions 29 and 105.
Prohibition on imports of goods produced using forced labour.
Preference for evidence-based and due-process-oriented measures.
Structural Excess Capacity
India rejected the characterisation that it has structural excess capacity in sectors identified by the G20 Presidency.
According to India's position:
India is one of the fastest-growing large economies.
Manufacturing is supported substantially by domestic demand.
India is developing manufacturing value chains from design to finished products.
Manufacturing capacity is intended to serve both domestic and international markets.
WTO Rules
India stressed that trade-related measures should:
Be consistent with WTO rules.
Be based on verifiable evidence.
Follow due process.
Avoid unilateral measures based on broad assumptions.
India also pointed to existing WTO-compatible instruments such as:
Anti-dumping duties
Countervailing duties
What is Structural Excess Capacity?
Structural excess capacity refers to a situation where production capacity persistently exceeds effective demand, potentially resulting in:
Excess supply in international markets.
Lower or distorted prices.
Increased exports.
Possible dumping or trade distortions.
India argued that industrial capacity itself is not necessarily the problem. The concern arises when production is artificially supported through hidden subsidies or other forms of state support, leading to trade distortions.
Challenges
India–U.S. trade tensions
Differences over forced-labour imports and excess capacity could create additional trade barriers.
Protectionism vs. WTO rules
Measures intended to address trade distortions may become protectionist if not properly justified under WTO disciplines.
Evidence and due process
Determining whether a country or sector has structural excess capacity requires reliable and sector-specific evidence.
Developing-country policy space
India argues that developing economies should retain sufficient policy space to industrialise and build manufacturing capacity.
Global supply-chain restructuring
Diversification away from concentrated production can strengthen supply-chain resilience, but may also create pressure for trade restrictions.
Way Forward
Address forced-labour concerns through evidence-based and transparent mechanisms.
Strengthen domestic monitoring of supply chains and import compliance.
Use WTO-consistent trade-remedy instruments where genuine dumping or subsidisation is established.
Promote dialogue between India and the U.S. rather than unilateral trade actions.
Distinguish between legitimate industrial capacity and capacity created through trade-distorting subsidies.
Ensure that supply-chain diversification does not become a pretext for discriminatory trade restrictions.
Preserve adequate policy space for developing countries to industrialise.
Strengthen cooperation through the G20, WTO and ILO.
Conclusion
The problem arises out of the larger debate surrounding trade liberalisation, resilience in supply chains, labour issues, and industrial policy. While India has maintained its position that ending forced labour is an absolute commitment, it believes that any trade measures involving labour issues and overcapacity should be based on verifiable evidence and the WTO guidelines. The challenge is to tackle trade distortions without hampering the industrialisation process of developing countries.
