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Contributions from
the Column
Studies and reports
“Asia wants to protect itself from financial crises”
WTO bans politically motivated trade preferences
Poverty reduction must fail without women’s participation
“The ability to share must be acquired anew”
‘Washington Consensus’ was not meant to be a term for neoliberalism
2/2004 |
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[ Trade dispute ]
WTO bans politically motivated trade preferences
The tariff preferences the European Union grants to 12 developing countries as an incentive to combat drug cultivation are incompatible with international trade rules. That is what the decision of a World Trade Organisation Disputes Settlement Panel decided in a case India versus the EU. By granting tariff preferences for certain products such as textiles, the EU supports selected countries’ economies in switching from drugs to other products. India saw itself disadvantaged, and at the end of 2002 applied for the appointment of a WTO panel on the issue. One year later, last December, the panel presented its report, which upheld India’s complaint.
The EU has given trade preferences to certain drug-cultivating countries since the 1990s, to which previously there had been no objection. The situation had changed, said the Indian government in a Press statement on the WTO decision, when in 2002 Pakistan, a direct competitor, was included in the list of preferred countries. Until then, only Latin American countries were favoured. In the WTO case, the EU referred to the so-called Enabling Clause in the General Agreement on Tariffs and Trade (GATT), which allows the promotion of developing countries by deviating from the basic standard under international commercial law, the most-favoured nation principle, i.e. by granting poor countries better market access than rich ones.
India objected that the Enabling Clause permitted only the better treatment of all developing countries, not individual groups. Otherwise, the clause would result in individual developing countries being disadvantaged by favouring others. The EU argued that the clause definitely permitted the purposeful promotion of individual country groups by trade preferences. It said that just as international trade rules allowed different treatment of developing and industrialised nations, so must differentiation between developing countries be permitted. However, the WTO panel agreed with the Indian view. It said the EU’s argument would open doors to abuse of the clause, for it was easy to come up with justifications for favouring selected countries.
Trade experts see the ruling as being very important because it clarifies that the Enabling Clause does not legitimise any trade preferences that are linked to economic or political conditions. The trade policy information service Bridges, of the Geneva-based International Center for Trade and Sustainable Development, commented that this in fact promoted the equal treatment of developing countries. But, on the other hand, it could make rich countries less willing to grant developing countries trade preferences at all if these could no longer be used as instruments for political purposes. The European Union has lodged an appeal against the WTO ruling. If it is upheld, preferential treatment of individual developing countries soon could be possible only through a waiver which must be applied for from the WTO on a regular basis. By this procedure, for instance, the EU trade preferences for the ACP countries (Africa, the Caribbean, and the Pacific region) are legitimised within the framework of the Cotonou Agreement. (ell)
The WTO panel report is posted on the Internet at:
www.wto.int/english/tratop_e/dispu_e/246r_a_e.pdf
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