INDIA WINS GSP CASE AGAINST EC
AT THE WTO
A
WTO dispute settlement panel established at India’s request in
January 2003 has upheld India’s contention that the European Communities
has violated its GATT/WTO obligations in granting tariff preferences
to 12 countries under the "Drug Arrangements" window
of its GSP scheme without extending these preferences to other
developing countries. The Panel has also ruled that the EC has
failed to demonstrate that the Drug Arrangements are justified
under the Enabling Clause, which otherwise allows the developed
countries to grant tariff preferences to developing countries
without allowing the same advantage to developed countries. India
would seek the adoption of the panel report at the earliest in
accordance with the provisions of the Dispute Settlement Understanding.
Disputing parties in the WTO have a right to appeal a decision
of the panel to the Appellate Body. This WTO ruling is likely
to provide some relief to the Indian exporters to EC, particularly
those in the apparel sector, who are otherwise disadvantaged by
duty concessions to Pakistan under the Drug Arrangements.
India’s dispute
with EC had arisen primarily because EC included Pakistan as beneficiary
country under its Special Tariff Arrangement for Combating Drug
Production and Trafficking under its GSP Scheme for the years
2002-04. Such a scheme was in operation even in earlier years
with beneficiaries being restricted to ANDEAN and Central American
countries. While the scheme, in India’s view was not compatible
with WTO rules even then, it had not agitated the matter in WTO
since it was not significantly affected. However, with the inclusion
of Pakistan as a beneficiary country with effect from 1.1.2002,
Indian exports were directly affected, since there are a number
of export sectors such as clothing where the two countries are
close competitors in the EC market. The sudden and significant
(a 9.6 % tariff preference for instance on certain apparel products)
advantage granted to Pakistani products has disadvantaged a significant
level of trade flowing from India to EC.
India invoked dispute
settlement proceedings
of the WTO in this case
with
extreme reluctance and after having exhausted all available avenues
for
a
negotiated settlement with the EC. The matter was taken up repeatedly
with the EC at various levels including at the ministerial level.
Even after initiating the dispute under WTO’s dispute settlement
procedures in March 2002, India continued its effort in seeking
a bilateral solution to the problem with EC.
However at no stage did EC respond positively
to India’s concerns. India continued these efforts even after
the panel proceedings were at an advanced stage. During the panel
proceedings India also clarified that while it did not dispute
EC’s right to give financial assistance
to individual developing countries facing problems relating to
drug production and trafficking, this could not be done at the
expense of other developing countries facing different but equally
pressing needs.
India also urged EC to obtain a WTO waiver for these arrangements
through prescribed procedures under the WTO Agreement. Certain
other beneficiaries of the Drug Arrangements implored EC to seek
a waiver. However, EC insisted on continuing the dispute.
The WTO panel has
vindicated India’s stand that the tariff preference
under the Drug Arrangements are not given
unconditionally to all developing countries.
The Panel was not convinced by EC’s contention that the Drug Arrangements
are justified under the Enabling Clause. The Panel found that
the EC’s Drug Arrangements, as a GSP scheme, do not provide identical
tariff preferences to all developing countries and that
the differentiation is neither for the purpose of special treatment
to the least-developed countries, nor in the context of the implementation
of a priori measures.
The panel has
recommended that the Dispute Settlement Body requests the EC to
bring its measure into conformity with its obligations under GATT.
Indian exporters to the EC have suffered considerable loss on
account of the 10% tariff concessions available to exports from
Pakistan of similar products. They can now hope to obtain some
succour after the EC implements the findings of the panel in this
dispute.
