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WTO backs India in tariff row

New Delhi, Dec. 2: The dispute settlement panel of the World Trade Organisation (WTO) has ruled in India’s favour over the violation of norms by the European Commission (EC) in granting tariff preferences to 12 countries under the ‘drug arrangements’ window of the generalised system of preferences (GSP) scheme without extending these preferences to other developing countries.

The decision of the WTO dispute settlement panel has come as a major victory for India and is likely to provide some relief to Indian exporters to EC, particularly those in the apparel segment, who are otherwise disadvantaged by duty concessions to Pakistan under the “drug arrangements”.

The WTO 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 ones. However, the verdict can be contested at the Appellate Body.

According to commerce ministry, India will seek adoption of the panel report at the earliest, in accordance with the provisions of the dispute settlement understanding.

India’s dispute with EC had arisen primarily because the latter had included Pakistan as a beneficiary country under its special tariff arrangement for combating drug production and trafficking under the GSP scheme for the years 2002-04.

The scheme was in operation even in earlier years with the beneficiaries being restricted to Andean and Central American countries. However, India was forced to move the WTO panel when Pakistan was included in the scheme as Indian exports have been adversely affected since January 2002.

The 9.6 per cent tariff preference granted to Pakistani apparel products has been reflected in a sudden and significant decline in the flow of Indian goods to EC.

The EC countries have been taking the stand that Pakistan had a crucial role to play in the control of drugs, such as heroin, which is distilled from the poppy grown in Afghanistan and illegally in the north western frontier province of Pakistan. This heroin eventually makes its way to the youth of the western countries and was wreaking havoc with the younger generation.

The WTO decision also comes at a time when India’s relations with Pakistan are on the mend with the Delhi-Lahore bus service being restored and the air corridor between the two countries also being thrown open.

India has been championing the cause of the developing countries at the WTO and had also locked horns with the developed countries at the Cancun conference over the contentious issue of the high subsidies that the western countries are paying their farmers.

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