INDIA TO LOSE $350-MN IN EXPORTS ON EU'S PREFERENTIAL TARIFFS

Who did the WTO appellate body favour in the recent ruling on the EU's Generalised System of Preferences (GSP) regime - India or the EU?

Well, both India and EU believe they have been vindicated by the appellate body. While the government of India lost no time in issuing a statement to trumpet India's "victory", according to the EU trade commissioner Pascal Lamy, the appellate body's ruling had made it clear that the "EU can continue to give trade preferences to developing countries according to their particular situations and needs."

The result: despite the Indian government's jubilation over exposing the lack of transparency and objectivity in EU's GSP regime for developing countries, Pakistan will likely continue to enjoy 10% tariff concessions in its exports to the EU. That is, India will continue to lose roughly $350m in exports to the EU due to the tariff disadvantage vis a vis Pakistan.

Mr Lamy, in a note that virtually refutes the Indian government's view of the appellate body's ruling on April 7, added that the ruling was good news for developing countries whose preferential access to the EU was being put at risk by India's challenge. According to the EU, the ruling reversed the finding of a WTO panel (dispute settlement body) in December '03 and rejected India's claim that WTO rules do not allow differentiation between developing countries.
India had earlier challenged before the DSB the EU's system of trade preferences to "seriously drug-affected" countries (GSP drug regime). India's argument was that the regime discriminated among developing countries. India had said that EU's GSP regime was contrary to WTO's "enabling clause", which allows preferential and more favourable treatment to developing countries.

The appellate body had held that EU's current GSP regime is not based on objective and transparent criteria for the selection of the beneficiary countries. But there will be no bar on EU to give differential tariff preferences to developing countries that are not LDCs (least developed countries).
This is because the December '03 ruling of a WTO panel, that identical and non-discriminatory tariff preferences need to be accorded to non-LDC developing countries, was reversed by the appellate body.

So, a note issued by Mr Lamy's Brussels office says that EU will now examine the appellate body report in detail to consider its practical implications for the EU legislation concerning the matter. That is, the EU is going to make its law competent to allow differential tariff treatment among developing countries.
In '02, the WTO dispute settlement panel, had struck down trade (tariff) concessions accorded by the EU to Pakistan. Challenging the EU's "discriminatory" GSP regime, India had claimed that it incurred huge losses in exports to the EU, thanks to tariff concessions Pakistan enjoyed under the drug arrangements window. Apart from Pakistan, South American, Caribbean and African countries are also beneficiaries of the EU GSP regime aimed at combating illegal drugs production and trafficking.