By IPS Correspondents
BRUSSELS, Apr 8 2004 (IPS)

India’s victory over the EU at the World Trade Organisation Wednesday is being claimed to be a triumph for all developing countries.

The World Trade Organisation (WTO) rejected an appeal by the European Union (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.

The world body 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.

India complained to the WTO 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, financial and trade needs.”

The WTO ruled that the EU could choose countries that would be given trade preference, but said this 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.

“The EU failed to demonstrate that its ‘drug arrangements’ are based on objective and transparent criteria that would allow all developing countries similarly situated to qualify for preferences,” it said.

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.

“This is certainly good news for many developing countries whose preferential access to the EU was being put at risk by India’s WTO challenge,” he added.

Lamy’s spokeswoman Arancha Gonzalez said the EU would work out how to apply the ruling.

India said Wednesday 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.”

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