Bridges Weekly Trade News Digest • Volume 7 • Number 15 • 30th April 2003
Dispute Settlement: Preliminary Ruling Against India In Textiles Case
On 11 April, a WTO panel on a dispute brought by India against US rules of origin for textiles issued its confidential preliminary ruling, in favour of the US. A final report in the dispute is expected in another 30 days. The conclusions are however unlikely to change. The US - Rules of Origin on Textile and Apparel Products dispute (WT/DS243, available at http://docsonline.wto.org), involved a challenge by India with regard to US modifications to rules of origin provisions in domestic law made in 1996. According to India, the modifications (Section 334 of the Uruguay Round Agreements Act, Section 405 of the Trade and Development Act of 2000 and the customs regulations implementing these provisions) essentially changed, to India’s disfavour, the prevailing rules of origin in international trade in textiles. Prior to the US modifications, textile and apparel products, like other industrial products, could be considered to originate in a country if they had undergone "substantial transformation" in that country. India claimed that its balance of concessions had been nullified or impaired in accordance with Article XXII (1)(a) of the General Agreement on Tariffs and Trade (GATT) as a result of the US legal changes in 1996.According to India, the modifications were also in violation of US commitments under the WTO Agreement on Rules of Origin (ARO), and in particular Article 2(b), which restricts Members from using their rules of origin regime to "pursue trade objectives directly or indirectly". Hence, India stated that "the structure of the changes, the circumstances under which they were adopted and their effect on the conditions of competition for textiles and apparel products suggest that they serve trade policy purposes" (India’s request for consultations, WT/DS243/1).
In two cases brought by the EC over the same US measure modifying its rules of origin (WT/DS85 and WT/DS151), the US was able to strike a deal with the EC, essentially making certain exemptions of textile products from the applicability of the modified US rules. In India’s view therefore, the US "discriminated against the Indian exports over exports from the EU member countries".
The panel’s unfavourable decision against India was based on the fact that India was unable to demonstrate, using "hard evidence," how "its exports were restricted over the past seven years due to the US measure". A final panel report is expected for public circulation in about 60 days from the date of the interim report. India is likely to appeal to the Appellate Body. According Munir Ahmed of the International Textiles and Clothing Bureau, a close observer of the case, it is a "clear and simple case" and India "should definitely appeal".
ICTSD reporting; "WTO Textile Ruling Stuns India", ASIA TIMES, 18 April 2003.