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Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to developing countries under
its current scheme of generalized tariff preferences (“GSP
India presented this request pursuant to
Article 4 of the DSU, Article XXIII:1 of the GATT 1994 and paragraph
4(b) of the so-called Enabling Clause.
India considered that the tariff preferences
accorded by the EC under the special arrangements, (i) for combating
drug production and trafficking and (ii) for the protection of labour
rights and the environment, create undue difficulties for India’s
exports to the EC, including for those under the general arrangements of
the EC’s GSP scheme, and nullify or impair the benefits accruing to
India under the most favoured nation provisions of Article I:1 of the
GATT 1994 and paragraphs 2(a), 3(a) and 3(c) of the Enabling Clause.
In India’s view, the conditions under which
the EC accorded tariff preferences under the special arrangements could
not be reconciled with the requirements provided in paragraphs 2(a),
3(a) and 3(c) of the Enabling Clause.
On 20 March 2002, Venezuela requested to be
joined in the consultations. On 21 March 2002, Colombia requested to be
joined in the consultations.
On 6 December 2002, India requested the
establishment of a panel. At its meeting of 19 December 2002, the DSB
deferred the establishment of a panel.
Panel and Appellate Body proceedings
At its meeting on 27 January
2003, the DSB established a Panel. During the meeting, Brazil, Colombia,
Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, Honduras, Paraguay,
Peru, Sri Lanka, Venezuela and the US reserved their third-party rights.
On 28 January 2003, Nicaragua reserved its third-party rights. On 29
January 2003, Panama reserved its third-party rights. On 3 February,
Mauritius and Pakistan reserved their third-party rights. On 6 February,
Bolivia reserved its third party rights. On 24 February 2003, India
requested the Director-General to compose the Panel. On 6 March 2003,
the Director-General composed the Panel.
On 22 September 2003, the Chairman of the Panel
informed the DSB that it would not be possible to complete its work in
six months due to the complexity of the matter involved and that the
Panel expected to complete its work at the end of October 2003.
On 1 December 2003, the Panel report was
circulated to the Members. The Panel found that: (i) India has
demonstrated that the tariff preferences under the Special Arrangements
to Combat Drug Production and Trafficking (the “Drug
Arrangements”) provided in the EC’s GSP scheme are inconsistent
with Article I:1 of GATT 1994; (ii) the EC has failed to demonstrate
that the Drug Arrangements are justified under paragraph 2(a) of the
Enabling Clause, which requires that the GSP benefits be provided on a
“non-discriminatory” basis; and (iii) the EC has failed to
demonstrate that the Drug Arrangements are justified under Article XX(b)
of GATT 1994 since the measure is not “necessary” for the
protection of human life or health in the EC, nor is it in conformity
with the Chapeau of Article XX. (One panelist presented a dissenting
opinion that the Enabling Clause is not an exception to Article I:1 and
that India has not made a claim under the Enabling Clause.)
On 8 January 2004, the European Communities
notified its decision to appeal to the Appellate Body certain issues of
law covered in the Panel Report. On 5 March 2004, the Chairman of the
Appellate Body informed the DSB that it would not be possible for the
Appellate Body to complete its work within the 60-day period due to the
time required for completion and translation of its Report. The
Appellate Body estimated that the Report would be circulated to Members
no later than 7 April 2004.
On 7 April 2004, the Appellate Body Report was
circulated to Members. In the Report:
- The Appellate Body upheld two of the Panel’s findings ((i)
the Enabling Clause operates as an exception to Article I:1 of the
GATT 1994; and (ii) the Enabling Clause does not exclude the
applicability of Article I:1 of the GATT 1994). The Appellate Body modified,
however, one of the Panel’s findings with respect to the
relationship between Article I:1 of the GATT 1994 and the Enabling
Clause. The Appellate Body found that the complaining party is obliged
not only to claim inconsistency with Article I:1 of the GATT 1994, but
also to raise the relevant provisions of the Enabling Clause that the
complaining party argues are not satisfied by the challenged measure.
Based on these findings, and because the EC did not appeal any other
aspect of the Panel’s reasoning with respect to Article I:1, the
Appellate Body found that it need not rule on the Panel’s
conclusion as to the consistency of the challenged measure with
Article I:1 of the GATT 1994.
- The Appellate Body reversed the Panel’s legal interpretation
of paragraph 2(a) of the Enabling Clause and footnote 3 thereto, by
concluding that, in granting differential tariff treatment,
preference-granting countries are required, by virtue of the term
“non-discriminatory”, to ensure that identical treatment is
available to all similarly-situated GSP beneficiaries, that is, to all
GSP beneficiaries that have the same “development, financial and
trade needs” to which the treatment in question is intended to
respond. With respect to the consistency of the challenged measure
with the Enabling Clause, the Appellate Body upheld, albeit for
different reasons, the Panel’s conclusion that the European
Communities failed to demonstrate that the challenged measure was
justified under paragraph 2(a) of the Enabling Clause.
At its meeting on 20 April 2004, the DSB
adopted the Appellate Body report and the Panel report, as modified by
the Appellate Body report.
Implementation of adopted reports
At the DSB meeting on 19 May 2004, the
European Communities reaffirmed its intention to fully comply with the
recommendations and rulings of the DSB in a manner that respected its
WTO obligations, and that it would need a reasonable period of time to
implement the recommendations and rulings of the DSB and was willing to
discuss this matter with India in accordance with Article 21.3(b) of the
DSU. On 16 July 2004, India requested that the reasonable period of time
be determined through binding arbitration pursuant to Article 21.3(c) of
the DSU due to the failure of agreement with the European Communities on
this matter. On 4 August 2004, pursuant to the request by India of 26
July 2004, the Director-General appointed an arbitrator for the
foregoing arbitration under Article 21.3(c) of the DSU. On 20 September
2004, the Arbitrator decided that the reasonable period of time for
implementation would expire on 1 July 2005.
At the DSB meeting on 20 July 2005, the European Communities announced that the special arrangements to combat drug production and trafficking of Title IV of EC Regulation (2501/2001) had been repealed as of 1 July 2005 and a new regulation (980/2005) had been promulgated bringing the European Communities into compliance with the DSB’s recommendations and rulings. India expressed some doubts as to whether the new EC Regulation faithfully implemented the DSB’s recommendations and rulings, and it reserved its right to return to this matter in the future, as necessary.
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