The Hindu : India wins dispute with EC

Online edition of India's National Newspaper
Wednesday, Dec 03, 2003

Business

Business

India wins dispute with EC

By Our Special Correspondent

NEW DELHI DEC. 2. In a major relief to exporters, India has won a case at the World Trade Organisation (WTO) against the European Communities (EC) providing special tariff preferences to Pakistan and 11 other developing countries. The EC had given this facility by making Pakistan a beneficiary country under a special tariff arrangement for combating drug production and trafficking under its Generalised System of Preferences (GSP) from 2002 to 2004.

The WTO dispute settlement panel has ruled that the EC has violated its multilateral obligations under the Most Favoured Nation (MFN) treatment clause by granting such preferences to 12 countries under this `drug arrangements' window without extending these to other developing countries. The panel has also ruled that the EC failed to show that the drug arrangements are justified under the Enabling Clause of GATT/WTO which otherwise allows developed countries to grant tariff preferences to developing countries without giving the same advantage to other countries. According to the Union Commerce Ministry, India will seek adoption of the panel report as early as possible though disputing parties have a right to appeal a decision to the Appellate body. The dispute has been resolved 11 months after the panel was set up at India's request in January this year.

The dispute, the Ministry has explained in a statement, had arisen because the EC included Pakistan as a beneficiary country under the special tariff arrangement for combating drug production and trafficking from 2002 to 2004. The scheme was operational even earlier but the beneficiaries were restricted to Andean and Central America countries, which did not affect Indian exports to the European Union (EU). But with the inclusion of Pakistan as a beneficiary country from January 1 2002, Indian exports were directly affected as the two countries are competitors in the EU markets in several sectors such as clothing.

The significant advantage given to Pakistan products thus affected substantial trade flowing from India to the EU.

The WTO ruling is likely to provide some relief to Indian exporters to the EC, especially those in the apparel sector, the Ministry says.

It says India invoked dispute settlement proceedings after having exhausted all avenues for a negotiated settlement with the EC. The dispute settlement panel has, it notes, vindicated India's stand that the tariff preferences under the drug arrangements are not given unconditionally to all developing countries.

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