Stefania Bianchi

India’s victory over the European Union (EU) at the World Trade Organisation (WTO) Wednesday is being claimed to be a triumph for all developing countries. WTO rejected an appeal by the EU to maintain a set of tariff preferences that the EU claimed would reduce production and trafficking of illegal drugs. The WTO held that the EU scheme violates global free trade rules. WTO said that the trade scheme unfairly discriminated against India by granting Pakistan special trade privileges.

The EU’s ‘drug arrangements’ scheme has offered preferential treatment to countries combating illicit drugs. The ‘arrangements’ give tariff preferences to these countries for a range of agricultural and industrial products. The scheme was offered to 11 Latin American countries (Bolivia, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Nicaragua, Honduras, Panama, Peru and Venezuela) and Pakistan. The EU believes the highest production of narcotics such as opium takes place in these countries. These drugs are sold illegally on European streets. The EU says its system of preferences helped these countries focus on legal crops, and helped their economies grow.

India complained that inclusion of Pakistan in the scheme has cost Indian producers some 250 million dollars in textile exports, because they face higher tariffs than export of similar goods from Pakistan. The trade row began in March 2002 when India claimed that the EU’s generalised system of preferences (GSPs) distorted trade. India argued that the selection process was arbitrary because countries such as Burma, Thailand and other big drug producers had been excluded.

A report by the WTO this week declared that the EU’s GSP drug regime was not based on “objective and transparent criteria for the selection of the beneficiary countries.” The report added that WTO rules on the granting of trade preferences required equal treatment for countries with the same “development, fina-ncial and trade needs.” The WTO ruled that preference must be done on “objective and transparent criteria.”

The ruling means that the EU will now have to abolish or change the programme governing low import tariffs from Pakistan. The EU admitted in a statement Wednesday that the EU ‘arrangements’ had been found to be unfair. But EU Trade Commissioner Pascal Lamy tried to play down the ruling. He said developing countries would benefit from the WTO’s decision. “Today’s decision makes it clear that we can continue to give trade preferences to developing countries according to their particular situation and needs, provided this is done in an objective, non-discriminatory and transparent manner,” he said in statement. Lamy’s spokeswoman Arancha Gonzalez said the EU would work out how to apply the ruling.

India said that it had scored a “significant gain” at the WTO, adding that the findings were also a “timely reminder that trade policy instruments cannot be used to serve political objectives.” A release by the Indian Department of Commerce says India did not dispute the EU’s right to give financial assistance to “individual developing countries fighting against the drug menace.” It said the Indian case was that this “could not be done at the expense of other developing countries facing different but equally pressing needs.” India strongly supports the need to resolve special problems of developing countries, the release said. “In India’s view, the principal way of addressing such problems is by according primacy to the development dimension in the ongoing Doha work programme, which otherwise appears to have been given short shrift.” — IPS