TWN Info Service on WTO and Trade Issues (Dec10/08)
EU presents WTO duty-free waiver request for
Geneva, 2 Dec (Kanaga Raja) -- The European Union (EU) this week presented its request for a waiver from its obligations under the GATT 1994 for a period of two years with respect to the granting of unlimited tariff free or other preferential tariff treatment for certain products originating in Pakistan, presenting the proposal as an aid to reconstruction efforts in Pakistan following its unprecedented floods.
The EU presented its waiver request (G/C/W/640) at a meeting of the Council for Trade in Goods on Tuesday (30 November).
The request appears to have elicited the support
without conditions of some countries including
The Council is to revert to the subject at its next meeting in January.
The EU request for a waiver from its obligations
under the provisions of Article I: 1 and Article XIII of the GATT 1994,
if granted, would permit the EU to provide preferential treatment for
imports originating in
In its communication to the Goods Council, the EU highlighted the purpose of its request.
It said that in July and August 2010, following
heavy monsoon rains, devastating floods affected extensive regions of
According to UN sources, it added, the flooding
affected some 20 million people and 20% of
"Humanitarian aid is of course the primary instrument in this kind of situation," said the EU, noting that since the beginning of the natural disaster, the collective contribution of the EU to the humanitarian effort has exceeded 415 million Euro.
The EU further said that at the same time it is
conscious of the importance of smoothly moving from humanitarian relief
to the reconstruction phase. "In this context, the EU is ready
to use all means available to facilitate
The EU communication said that it is foreseen
that certain products originating in
The EU highlighted a list of 75 dutiable product
lines of importance for
The products for which it is envisaged to grant unlimited duty free access or limited tariff preferences are listed in two annexes to the draft waiver decision proposed by the EU.
Products originating in Pakistan that are to be exempt from custom duties upon importation into the EU range from dried mushrooms and truffles, to gloves, single and multiple cotton yarn, bleached and unbleached plain woven fabrics of cotton, anoraks, jackets, trousers, nightshirts and other garments, and footwear.
Products originating in Pakistan subject to annual duty-free tariff quotas upon importation into the EU include ethyl alcohol, other dyed woven fabrics of cotton, pantyhose, tights, stockings, socks and other hosiery and footwear, women's or girl's cotton denim trousers and breeches, women's or girl's garments, and toilet and kitchen linen.
The EU communication said that in order to ensure
an immediate, but also sustainable impact on the economic recovery of
The EU said it reserves its right to request an
extension of this duration by another year if it considers that this
is necessary for the economic recovery of
The EU was of the view that the tariff preferences provided under the envisaged autonomous regime do not create any impediment to the reduction or the elimination of tariffs or other restrictions to trade on a most-favoured-nation basis. Furthermore, the tariff preferences under the autonomous regime will not affect benefits to other developing countries under the EU's GSP scheme, it added.
The EU said that it is prepared to give full consideration to representations made to it by other WTO Members and to engage in consultations with them as may be necessary.
A trade diplomat who participated in the Goods Council meeting classified the reactions to the EU's proposal into three groups of countries. In the first group were those that were in favour of the EU proposal. The middle group of countries highlighted their reservations and concerns over the proposal but said that they would support it. In the third group were those that said that further consultations would be needed.
The trade diplomat told SUNS that in the first group were the United States, China, Pakistan, Colombia, Chile, Turkey and one or two others that said that they were in favour of the EU proposal, without mentioning any conditions or reservations.
According to the trade diplomat, a middle group
of countries said that they had many systemic concerns with the EU proposal
but that they would support it based on the humanitarian angle that
is being advanced by the EU. These countries were
These countries, according to the trade diplomat,
raised their concerns over the EU proposal, saying that these concerns
would need to be addressed, but that they would support the EU request.
The trade diplomat noted that among these countries,
Trade officials said that
According to the trade diplomat, while being critical
of the proposal,
The trade diplomat further said that
According to the trade diplomat, the third group
of countries said that there is need for further consultations concerning
the EU proposal. These included
According to the trade diplomat,
In a detailed statement at the Goods Council meeting, India said that Pakistan has had an unprecedented flood in 2010, which apart from taking a heavy toll of more than 1,700 lives, has also damaged or destroyed crops, food grains, livestock, houses and valuable infrastructure like school buildings, hospitals, roads, bridges, railway lines and electric transmission lines.
"Our heart goes out to the people of
To implement their proposal, said
"This has raised systemic issues, which too merit deeper analysis and serious consideration. The members need to reflect on what impact such a waiver may have on the multilateral trading system in the long run and how such a waiver will impact the poor and disadvantaged people living in other countries."
On the efficacy part of the proposal,
Another aspect of the proposed measure is that because of the export oriented nature of the industries covered and the distance between most of the flood affected areas and the centres of production as well as rigidities in inter-sectoral labour mobility in developing countries, the industries sought to be benefited are most unlikely to absorb significant numbers of landless agricultural labour or rural artisans from the flood affected areas, added India.
India said that it has also come across reports to the effect that since the concessions are primarily in the sub-sectors of cotton yarn and fabrics and the cotton crop has been badly affected by the floods, some downstream industry bodies of Pakistan, e. g. the Bedwear Exporters Association, the Hosiery Manufacturers Association and the Readymade Garments Manufacturers and Exporters Association feel that the tariff concessions would adversely affect the overall exports of the country.
A prestigious Pakistani magazine, "Dawn -
Economic and Business Review", in its edition of November 22-28,
"We are afraid the answer to this question
is not very encouraging. As is well known, every country tries its best
not to export its taxes along with its export products through schemes
for duty waivers or duty reimbursements for the exported products. This
is most likely to happen in the instant case also. Thus, it is not clear
why EU has opted for such an indirect way of providing assistance to
the flood affected people and infrastructure in the flood affected areas
As regards the systemic implications of the EU
India noted that even in the case when BOP (balance-of-payment)
problems had led to Greece offering preferential tariff concessions
to Russia in the old GATT days, the Working Party set up to go into
the issue had stated as follows in paragraph 11 of its report of 14
October 1970 (L/3447-18S/179): "A major objection of principle
was raised by most members of the Working Party to the granting of a
waiver to cover preferential tariff treatment. The Protocol was not
"It may be germane to mention that natural disasters do not figure even once, since 1948, as a reason for providing GATT/WTO waivers to the grant of tariff preferences. Though each natural disaster leaves behind a trail of death and destruction and no value can be put on even a single human life lost, it needs to be remembered that in the 2004 Tsunami, which accounted for more than 230,000 lives in 14 countries, including only developing countries and LDCs, no tariff preferences were given to any of the affected countries."
Also, noted India, paragraph 1 of the Understanding in Respect of Waivers of Obligations under the General Agreement on Tariffs and Trade 1994 lays down as follows: "A request for a waiver or for an extension of an existing waiver shall describe the measures which the Member proposes to take, the specific policy objectives which the Member seeks to pursue and the reasons which prevent the Member from achieving its policy objectives by measures consistent with its obligations under GATT 1994 ".
"If we were to create a precedent for granting MFN waivers for natural disasters for the first time in 63 years of GATT/WTO existence, it would seriously damage the cause of certainty and predictability of the multi-lateral trading system."
Will such natural disasters also qualify as "Exceptional
circumstances justifying a waiver" criteria within the meaning
of Article IX: 3 of the Marrakesh Agreement, asked
"All the members need to look at the issues that we have flagged so that collectively we come up with credible and meaningful assistance for the victims as well as to rebuild the infrastructure in the flood affected areas. The EU proposal, as currently framed, appears deeply flawed, both in terms of its scant potential to help the flood affected victims and the reconstruction effort in the flood affected areas as well as the near certainty of its causing collateral systemic and commercial damage to the MFN principle and the poor workers in other developing countries respectively."
At the barest minimum, therefore, the EU proposal
would need further consultations for addressing the concerns just outlined,
According to trade officials,
While expressing solidarity with
According to trade officials,
Both the EU and
The Council agreed to revert to this matter at its next meeting late January next year. +