INDIA CHALLENGES EU GSP SCHEME ON ENVIRONMENT AND LABOUR STANDARDS

On 19 December 2002, India requested the establishment of a WTO panel to determine whether provisions under the EU's Generalised System of Preferences (GSP) tariff programme relating to labour rights, the protection of the environment and combating the production and trafficking of illicit drugs is compatible with WTO rules. The dispute request is the first ever to contest a trade measure used to promote respect for labour rights. The EU blocked the first request for the establishment of a panel at a subsequent meeting of the Dispute Settlement Body on the same day. However, any follow-up request from India would automatically be accepted by the DSB, and India has stated that the request will be tabled at a meeting of the Dispute Settlement Body on 27 January. The EU expressed "deep regret and surprise" over India's decision to seek a panel, maintaining that India "has chosen to ignore that the EU's GSP scheme is an autonomous regime granted on a non-reciprocal, generalised and non-discriminatory basis."

The EU GSP programme

The EU's GSP programme grants preferential access to imports from developing countries, favouring countries that apply norms for labour rights and the protection of the environment. India is contesting two provisions under the programme that offer special tariff treatment to countries identified by the EU for their efforts to combat illicit drug production and trafficking as well as countries that comply with labour and environmental policy standards fixed by the EU. In requesting the panel, India says these special tariff preferences are inconsistent with Article I of the WTO's General Agreement on Tariffs and Trade (GATT) requiring any advantage or privilege granted to the imports of one WTO Member to be automatically extended to all Members.

India also claims that the special preferences violates Articles 2(a), 3 (a) and 3(c) of the 28 November 1979 GATT Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries, popularly known as the Enabling Clause. Paragraph 2(a) of the Enabling Clause calls for the establishment of "nonreciprocal and nondiscriminatory preferences" under GSP schemes, while paragraphs 3(a) and 3(c) require that preferences be designed to "facilitate and promote the trade of developing countries" and "respond positively to the development, financial and trade needs of developing countries."

The EU's special preferences for combating drug production were targeted by Brazil in a complaint brought in October 2000. Brazil objected to the EU giving special concessions on soluble coffee imported from several of its South American neighbours because of their efforts to combat drugs, while at the same time "graduating" Brazil's coffee exports from the GSP scheme. The two sides later reached a deal giving Brazil duty-free access for up to 10,000 metric tons of soluble coffee.

ICTSD Reporting; "EU Blocks India's Request for Panel on GSP Labor, Environment Provisions," WTO REPORTER, 20 December 2002.