(Continued)
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oral statement of india at the second substantive
meeting of the panel
1. Introduction
4.268 The European Communities makes a number of arguments
which if accepted would have considerable systemic consequences.
4.269 According to the European Communities, a tariff
advantage is accorded "conditionally" if it is accorded as compensation for
benefits received from another party. India would like to emphasize that, if the
grant of tariff preferences conditional upon the situation or policies of
exporting countries were regarded as being consistent with the
most-favoured-nation requirement of Article I:1 of GATT 1994, this fundamental
provision of the world trade order would be rendered inoperative.
4.270 The European Communities further invokes paragraph 2(a)
of the Enabling Clause in its defence and argues that the term
"non-discriminatory" in footnote 3 to the Enabling Clause allows developed
country Members to differentiate between like products originating in developing
countries under the Generalized System of Preferences ("GSP"). The European
Communities' interpretation of the term "non-discriminatory" would have
consequences as far-reaching as its interpretation of the term "unconditional".
The WTO provides a forum and a legal framework for the negotiation of reciprocal
and mutually advantageous arrangements directed to the substantial reduction of
tariffs and other barriers to trade and to the elimination of discriminatory
treatment in international trade relations. The application of tariffs on an MFN
basis is a crucial factor in providing security and predictability to the
multilateral trading system. If tariff reductions could be made conditional upon
the situation or policies of the exporting country, the WTO legal system would
no longer provide the required security and predictability and the WTO would
lose its attraction as a forum for trade negotiations.
4.271 The GSP was negotiated and adopted at the UNCTAD for
the benefit of developing countries. It was incorporated into the law of the
GATT and the WTO through the 1971 Waiver and the Enabling Clause. The developed
country Members knew, and accepted in advance, that any developed country Member
may grant, under the GSP, preferential tariff treatment to products originating
in developing countries without according the same treatment to like products
originating in other developed country Members. That is why developed country
Members are referred to as "donors" in the context of the GSP. However, the
Enabling Clause reflects no similar acceptance on the part of developing
countries that any developed country Member may grant preferential tariff
treatment to products originating in some developing countries without according
the same treatment to like products originating in other developing countries.
If the arguments of the European Communities were accepted, developing countries
would have to sacrifice market access opportunities in developed countries for
the benefit of other developing countries and would therefore also become
"donors" in the context of the GSP. Moreover, they would have to make these
sacrifices on conditions determined by developed countries. The 1971 Waiver and
the corresponding part of the Enabling Clause were never meant to bring about
such consequences and there is no accepted principle of interpretation that
would justify attaching a meaning to the term "non-discriminatory" that would
entail such consequences.
4.272 If the European Communities' defence under paragraph
2(a) of the Enabling Clause were to be upheld, in the current tariff
negotiations under the Doha Work Programme, developed country Members will
continue to have the assurance that any advantage granted by any developing
country Member to any product originating in any developed country will be
accorded immediately and unconditionally to any like product of any other
Member. However, developing country Members will not have the converse
assurance. The creation of such a lop-sided legal framework would not merely be
a disadvantage to developing country Members. The WTO's legal framework for
tariff negotiations would be fundamentally altered as far as developing
countries are concerned.
4.273 Thus, if the European Communities' defence under
paragraph 2(a) of the Enabling Clause were to be upheld, the damage caused to
the rules-based multilateral trading system would be serious and far-reaching -
and most likely, irreparable.
2. The allocation of the burden of proof
4.274 The issue of the allocation of burden of proof has been
rendered unnecessarily complex in the present case. The European Communities has
at various times construed the Enabling Clause as conferring an "autonomous
right", as conferring "a positive right", now as conferring "a negative right
and a positive right". It alleges that the burden of proof should not be
placed on the European Communities, a group of developed countries,
because the Enabling Clause was adopted for the benefit of developing
countries. The European Communities has occasionally drawn implications
beyond the allocation of the burden of proof. For instance, by characterizing
the Enabling Clause as an "autonomous right", it has attempted to characterize
the Enabling Clause as part of the elements of a claim under Article I:1 of GATT
1994.
4.275 Paragraph 2(a) of the Enabling Clause is an affirmative
defence because it does not impose any independent obligations. The requirements
under paragraph 2(a) arise only after a Member has chosen to implement a GSP
scheme. India has cited prior GATT cases that have treated the Enabling Clause
as an affirmative defence.48 As India has explained, the allocation of burden of
proof depends on whether the affirmative of a proposition is an essential
element of a claim or a defence.49 The Enabling Clause is not an essential element
of India's claim under Article I:1 of GATT 1994. Rather, it is an essential
element of the European Communities' defence. Alternatively, in India's view,
the material facts for the resolution of this dispute are uncontested.
Therefore, the Panel need not even delve into the issue of allocation of burden
of proof.
3. The relationship between the Enabling Clause and
Article I:1 of GATT 1994
4.276 The European Communities argues that the phrase
"notwithstanding the provisions of the General Agreement" in paragraph 1 of the
Enabling Clause precludes the application of Article I:1 of GATT 1994
altogether. India has responded by explaining that the Enabling Clause provides
only a limited exception to Article I:1 of GATT 1994, and that, in granting
differential and more favourable treatment to the developing countries in the
context of the GSP, it is not necessary that developed country Members be
absolved from their obligation to accord MFN treatment to like products
originating in developing countries. India notes that the European Communities
has not responded to these arguments.
4. The legal interpretation of the term
"non-discriminatory" and the UNCTAD arrangements
4.277 The interpretation of the term "non-discriminatory" in
footnote 3 to the Enabling Clause is crucial to the European Communities'
defence. The European Communities argues that, in the context of the GSP, the
term "non-discriminatory" permits differentiation between developing countries
that have different development needs (according to objective criteria). India
is of the view that the term "non-discriminatory" in the context of preferential
tariff treatment under the GSP means that there cannot be any differentiation
between like products originating in developing countries.
4.278 The textual basis for India's interpretation of the
term "non-discriminatory" is the following:
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Footnote 3 refers to the GSP as that which is "described
in the Decision of the CONTRACTING PARTIES of 25 June 1971, relating to the
establishment of 'generalized, non-reciprocal and non discriminatory
preferences beneficial to the developing countries'".
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The Preamble to the 1971 Waiver refers to the "mutually
acceptable arrangements" � that "have been drawn up in the UNCTAD concerning
the establishment of generalized, non-discriminatory and non-reciprocal
preferential tariff treatment in the markets of developed countries for
products originating in developing countries".
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As evidence of those arrangements at the UNCTAD, India
has presented the Agreed Conclusions, particularly that portion thereof
which states that "there is agreement with the objective that in principle
all developing countries should participate as beneficiaries from the
outset".
4.279 The European Communities dismisses the legal relevance
of the UNCTAD arrangements, characterizing UNCTAD resolutions as "not legally
binding". The European Communities likewise refers to the Agreed Conclusions as
not reaching "the status of a formal UNCTAD resolution or decision". The Panel
need not resolve the issue of the legal status of the UNCTAD resolutions and the
Agreed Conclusions within the law of the UN. It is sufficient for the
Panel to note that the Enabling Clause refers to the GSP referred to in the 1971
Waiver and that the 1971 Waiver in turn refers to the "mutually acceptable
arrangements" that "have been drawn up in the UNCTAD". Regardless of the formal
status of those mutually acceptable arrangements under the law of the UN, those
arrangements define the legal scope of the Enabling Clause. The European
Communities' dismissal of the legal relevance of the Agreed Conclusions renders
footnote 3 incoherent or inoperative as it would be impossible to determine the
nature of the "preferential tariff treatment" described in the preamble to the
1971 Decision without referring to the Agreed Conclusions. It is further
noteworthy that the European Communities has not provided any evidence as to any
mutually acceptable arrangements drawn up in the UNCTAD that support its
position. In particular, the European Communities has not provided any evidence
that the term "non-discriminatory" in the context of the GSP, as referred to in
footnote 3 to the Enabling Clause and the 1971 Decision, was meant to permit
developed country Members to differentiate between developing countries.
5. Paragraph 3(c) of the Enabling Clause
4.280 The European Communities argues that, if developing
countries could not be treated differently, paragraph 3(c) of the Enabling
Clause could not be complied with. The European Communities' understanding of
paragraph 3(c) and its relationship with paragraph 2(a) is erroneous. As India
has demonstrated in detail in its second written submission, the legal function
of paragraph 2(a) is to permit tariff preferences under the GSP, and that of
paragraph 3(c) is to ensure that the depth of tariff cuts and product coverage
under GSP schemes are responsive to the needs of developing countries. A
developed country can therefore perfectly well comply with the obligation to
accord the same tariff cuts to all developing countries and the obligation to
respond to the needs of developing countries.
4.281 The European Communities' argument depends on a reading
of paragraph 3(c) as referring to the needs of "individual" developing
countries. India has pointed out that neither the text nor the context of
paragraph 3(c) supports such a reading. India pointed out in particular that
other provisions of the Enabling Clause explicitly refer to "individual" needs
of developing countries while paragraph 3(c) does not. The European Communities
has not rebutted any of these arguments. India further pointed out that that the
European Communities' reading of paragraph 3(c) would render most of its own GSP
and that of all other developed countries inconsistent with this provision. In
response, the European Communities argues that paragraph 3(c) "does not require
that each preference must be responsive at the same time to the individual
development needs of each and every developing country" and that "indeed
that would be a logical impossibility".50 India submits that the European
Communities is contradicting itself by claiming at the same time that paragraph
3(c) requires a positive response to the individual needs of developing
countries and that this requirement would be a logical impossibility.
4.282 The European Communities contends that India has
conceded that paragraph 3(c) refers to individual needs.51 India has not done so.
In response to a specific question from the Panel, India merely pointed out that
even if paragraph 3(c) were interpreted to refer to individual needs,
this could be reconciled with the India's interpretation of the term
"non-discriminatory" by variations in the choice of products so as to benefit
particularly needy counties.52
4.283 The European Communities characterizes paragraph 3(c)
in its second submission as "worded in rather imprecise terms", and it claims
that "it may be argued that its is a purposive provision, which informs the
interpretation of the other provisions of the Enabling Clause, but does not, of
itself, impose any legally binding obligation".53 The European Communities thus
relies on a provision which it characterizes as "worded in imprecise terms" that
"does not impose any legally binding obligation" to justify an interpretation of
"non-discriminatory" according to which the developing countries would loose
their rights under Article I:1 of GATT 1994. The European Communities uses
paragraph 3(c) as contextual support for an interpretation that expands the
rights of developed countries but at the same time declares that this provision
establishes no obligation for developed countries. The Panel should reject this
attempt to have the cake and eat it.
4.284 The inclusion of paragraph 3(c) in the Enabling Clause
cannot have the far reaching consequences that the European Communities assumes.
Ultimately, the arguments of the European Communities for its negative
conception of "non-discrimination" have no firm basis in paragraph 3(c).
Instead, the European Communities' conception is based on a policy
argument that a unilateral power to differentiate between developing countries
would be beneficial.
4.285 The European Communities contends that there are
considerable difficulties which result from accepting India's interpretation of
"non-discriminatory" because it would "effectively deprive the developing
countries with special needs from equal development opportunities".54
4.286 This policy argument is without merit. The neediest of
the developing countries are already accommodated by the special provision for
least-developed countries in paragraph 2(d). Moreover, in respect of other
developing countries, where there is a good case for differentiation, the waiver
mechanism is available. In fact, the WTO Members have granted waivers for
measures similar to the Drug Arrangements and for trade measures benefiting the
ACP countries. Thus, India's interpretation does not prevent accommodating
differences between developing countries in accordance with the collective will
of the Members. What India's interpretation merely prevents is that special
needs of particular countries be unilaterally determined by developed countries.
The question is thus not whether special needs can be accommodated through trade
preferences, but (i) whether the developed countries should be able to do this
unilaterally and in complete disregard of the legitimate interests of other
countries with different but equally pressing needs or (ii) whether they should
do so by resorting to the proper WTO procedures.
6. Alternative arguments on non-discrimination
4.287 The European Communities has so far failed to
demonstrate that the Drug Arrangements are consistent with the concept of
non-discrimination that it attempts to introduce into WTO law. Under the
European Communities' interpretation, objective criteria have to be established
by the preference-giving country, and the preferential tariff treatment must be
granted equally to all developing countries meeting those criteria. The European
Communities contends that the designation of the beneficiary countries under the
Drug Arrangements is made in accordance with "objective, non-discriminatory
criteria".55 The European Communities claims that these criteria capture the
possibility of trafficking to the European Communities, as well as the effects
of the drug problem on individual countries. However, the European Communities
states that the criteria are not contained in a public document56 and that it is
not necessary to publish the relevant criteria.57 The European Communities has not
furnished these criteria to the Panel.
4.288 India would further like to note that:
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The European Communities has not made available to India
or to the Panel any documentation reflecting an evaluation of all developing
countries' drug profiles for inclusion into the Drug Arrangements. It
contends that this documentation is not public.58 However, elsewhere, the
European Communities states that this evaluation is based on publicly
available information.59
4.289 The European Communities' concept of
"non-discrimination" logically implies that there is a criterion equally
applicable to all developing countries and justifying the more favourable
treatment of some of them. In other words, its concept implies a right to rank
the needs of developing countries in accordance with objective criteria. Yet,
the European Communities has so far failed to indicate the criteria that it
applied when deciding that the needs of the beneficiary countries rank higher
than the needs of India and other developing countries. All that has been heard
so far from the European Communities is that the needs of the beneficiary
countries are different from those of India. However, the European Communities
has not explained why the needs of the 12 beneficiaries deserve special
preferences, while those of India and other developing countries do not.
4.290 The European Communities' concept of non-discrimination
further implies that the increased market access opportunities accorded under
the Drug Arrangements are in effect targeted to resolve the drug-related
problems of the 12 beneficiaries. The factual underpinning of the European
Communities' claim, on which it justifies the exclusion of India and other
developing countries, is that Drug Arrangements resolve problems that India and
other developing countries do not have. In fact however, the increased market
access opportunities help resolve a large variety of development needs of the
beneficiaries, including the need to reduce unemployment, the need to attract
investments and the need to improve their external financial position. The Drug
Arrangements thus help resolve to a large extent problems of the beneficiaries
that are identical to those of India and other developing countries. The factual
unpinning of the European Communities' claim is therefore baseless.
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oral statement of the european communities at the
second substantive meeting of the panel
1. Relationship between Article I:1 of the GATT and the
Enabling Clause
(a) The Enabling Clause is not an "affirmative defence"
(i) The Enabling Clause recognizes an "autonomous right"
4.291 According to India, the Enabling Clause is not an
"autonomous right" because the measures falling within its scope would otherwise
be prohibited by Article I:1 of GATT 1994. However, the same is true of Article
27.2 of the SCM Agreement and Article 3.3 of the SPS
Agreement. Yet, this did not prevent the Appellate Body from concluding that
these two provisions are not affirmative defences. Rather, according to the
Appellate Body, Article 27.2 of the SCM Agreement and Article 3.3 of the SPS
Agreement exclude a priori the application of Articles 3.2 of the SCM
Agreement and 3.1 of the SPS Agreement, respectively. Likewise, the Enabling
Clause excludes the application of Article I:1 of GATT 1994 and, therefore,
cannot be characterized as an affirmative defence justifying a violation of that
provision.
4.292 India's argumentation with regard to Article 2.1 of the
SPS Agreement falls short because Members have the right to apply customs duties
consistently with their WTO obligations. Moreover, the Appellate Body nowhere
referred to Article 2.1 but to Article 3.3 whose wording is equivalent to that
of paragraph 1 of the Enabling Clause.
(ii) The Enabling Clause imposes "positive obligations"
4.293 According to India, the Enabling Clause does not impose
"positive obligations" because developing countries cannot "compel" developed
countries to establish a GSP scheme. However, the same could be said of many
other WTO provisions, including Article I:1 of GATT 1994, which are not
"affirmative defences" because Members are free to decide whether or not to levy
customs duties on imports and, if so, at which level. Similarly, under the
Enabling Clause, the right to grant differential and more favourable tariff
treatment is subject to certain "positive obligations" set out in paragraphs 2
and 3 of the Enabling Clause, including the obligation that the preferences
granted as part of a GSP scheme must be "non-discriminatory".
4.294 On India's interpretation, other WTO provisions which
have been recognized not to be "affirmative defences" would be found to impose
no "positive obligations" such as Article 27.4 of the SCM Agreement, Article 3.3
SPS Agreement, Article 6 of the Agreement on Textiles and Clothing or Articles
VI and XIX of GATT 1994. Yet, in all these cases although they are not
compelling they have been recognized by the Appellate Body as "positive
obligation".
(iii) Previous panels have not treated the Enabling
Clause as an affirmative defence
4.295 India's argument that previous disputes panels (US -
Customs User Fee and US - MFN Footwear) have treated the Enabling
Clause as an affirmative defence is not correct either because the Panel made no
respective finding or because it was not invoked by the defendant.
(iv) The report of the Appellate Body in Brazil -
Aircraft supports the European Communities position
4.296 India's interpretation on Article 27.4 falls short
because the Appellate Body relied on the fact that Article 27 is intended to
provide Special and Differential Treatment and in any event, like Article 27.4
of the SCM Agreement, the Enabling Clause does impose positive obligations.
Finally, contrary to India's assertion, whether or not the Enabling Clause is an
affirmative defence, cannot depend on the identity of the complaining party in
each particular case. India's suggestion that the violation of the Enabling
Clause will always be invoked by a developing country vis-�-vis a developed
country is incorrect. The Enabling Clause also accords to developing countries
the right to grant certain forms of differential and more favourable treatment.
Thus, a developed country, or another developing country, could invoke a
violation of the Enabling Clause by a developing country.
(b) India has the burden to prove that Article I:1 of the
GATT applies to the Drug Arrangements
4.297 India further misinterprets that the burden of proof
"must be assessed in relation to the material elements of the plaintiff's claim"
and that since India's only claim in this dispute is that the Drug Arrangements
are inconsistent with Article I:1 of GATT 1994, and not with paragraph 2(a), it
is for the European Communities to prove that the Drug Arrangements fall within
paragraph 2(a). A provision of the WTO Agreement either is or is not
"in the nature of" an affirmative defence. The Enabling Clause is not "in the
nature" of an affirmative defence, and it does not become one simply because it
is invoked by the defendant in a particular dispute. This is evident from the
cases Brazil - Aircraft and EC - Hormones.
4.298 Regarding the burden of proof, India's reference to the
Appellate Body report in US - Wool Shirts and Blouses does not address
the issue of what is an "affirmative defence", as opposed to the negative of the
claim asserted by the complaining party. Based on the jurisprudence in Brazil
- Aircraft India bears the burden of proving that Article I:1 of GATT 1994,
and not the Enabling Clause, apply to the measure in dispute. India's
interpretation would have other unacceptable consequences. For example, a Member
complaining against an anti-dumping or a countervailing measure could limit
itself to assert a claim based on Articles I or II of GATT 1994, and then it
would be for the defendant to prove that such measure is consistent with Article
VI of GATT 1994 and the Anti-Dumping Agreement or the SCM Agreement,
respectively.
4.299 Finally, in view of India's assertion that it is not
making any claims under the Enabling Clause, the European Communities would
submit that, if the Panel were to agree that the Drug Arrangements fall within
paragraph 2(a) of the Enabling Clause, rather than within Article I:1 of GATT
1994, it should refrain from examining whether the Drug Arrangements are
consistent with paragraph 3(c) of the Enabling Clause.
(c) The Enabling Clause excludes the application of
Article I:1 of the GATT
4.300 India's contention that the Enabling Clause excludes
the application of Article I:1 "only to the extent that the granting of tariff
preferences under the GSP would be prevented if the introduction of a measure
were not allowed" has no basis on the text of the Enabling Clause. Accordingly,
the only issue before the Panel is whether the Drug Arrangements fall within
paragraph 2(a). India's thesis is also contradicted by paragraphs 2(c) and 2(d)
as these two subparagraphs allow differentiation between developing countries,
even though such differentiation is no more "necessary" to provide differential
and more favourable treatment to developing countries than it would be within
the context of a GSP.
4.301 The European Communities would underline that the
Enabling Clause is not an "exception" but one of the main forms of Special and
Differential Treatment, which in turn is one of the pillars of the WTO
Agreement. The purpose of Special and Differential Treatment is to respond to
the special needs of developing countries. Differentiating between developing
countries with different development needs is fully consistent with such an
objective. In any event, the Appellate Body has made it clear that there is no
presumption that "exceptions" should be interpreted "strictly" or "narrowly".
(d) The meaning of "unconditionally" in Article I:1 of
the GATT
4.302 In its second written submission India limits itself to
arguing that the Drug Arrangements are not covered by the Enabling Clause and,
as a result, are inconsistent with Article I:1, inter alia because they
are "not unconditional". Since the Drug Arrangements fall within the Enabling
Clause, the Panel does not need not to reach the issue of whether they are
"conditional" for the purposes of Article I:1.
4.303 In this respect, India's argument on the ordinary
meaning of "unconditional" is of little value because it leaves undefined the
meaning of "condition". As to the context, it is clear that MFN clauses can be
either "conditional" or "unconditional". And that this notion must have
identical meaning in relation to both types of clauses. Thus, the Draft
Articles on the MFN Clause of the International Law Commission give a single
definition of condition which applies to both conditional and unconditional MFN
clauses. Finally, Article I:1 of GATT 1994 contains two different obligations,
which are: first, to grant MFN treatment; and, second, to do so "immediately and
unconditionally". To say that a distinction based on the "situation" of a
country is not a "condition" is not the same as saying that such distinction is
consistent with Article I:1.
2. The Enabling Clause
(a) The meaning of "non-discriminatory" in paragraph 2(a)
(i) The GATT context
4.304 Contrary to India's assertion, no definition of
the term "non-discrimination" in the sense of equal competitive opportunities to
like products originating in different countries exists under the GATT. India's
quotation from the Appellate Body report in EC - Bananas III is
not relevant here as emphasized in the same report by the Appellate Body. The
term "discrimination" may have different meanings in different WTO contexts as
noted by the panel in Canada - Pharmaceutical Patents. The Enabling
Clause, like all the other provisions granting Special and Differential
Treatment, does not seek to provide equal competitive opportunities for like
products of different origins but it intends to create unequal competitive
opportunities in order to respond to the special needs of developing countries.
(ii) Paragraph 2(d)
4.305 Contrary to India's argument, paragraph 2(d) is not an
"exception" but is one of the forms of differential and more favourable
treatment to which paragraph 1 "applies" and, therefore, stands on the same
level as paragraph 2(a) with respect to paragraph 1. This does not render
paragraph 2(d) "redundant and meaningless" but while the two provisions overlap,
the scope of paragraph 2(d) is broader in some significant respects than that of
paragraph 2(a), for example, with regard to "preferences/special treatment" and
the context in which measure is provided. As for paragraph 2(b), it has a more
limited scope than paragraph 2(d) and is intended to cover the Special and
Differential Treatment provisions contained in the Tokyo Round plurilateral
agreements while paragraph 2(d) covers any "special treatment" with regard to
any non-tariff measure.
(iii) The use of "the" before "developing countries"
4.306 India's argument in this regard has the immediate a
contrario implication that whenever the term "developing countries" is not
preceded by the it means that the preferences may be granted to some
developing countries. The use of the word "the" in the English, Spanish and
French versions of the Enabling Clause is very disperse. Moreover, both in
French and in Spanish, articles are more frequently used than in English and
India's interpretation would render the Spanish and French versions internally
inconsistent, in particular in view of paragraph 1, 2(c) and 2(d). In addition,
India's interpretation of the term "other Members" in paragraph 1 as meaning
"the developed Members" would lead to conflicting meanings when read in
conjunction with each of the subparagraphs of paragraph 2.
(iv) The UNCTAD Arrangements
4.307 The Agreed Conclusions do not prohibit expressly such
differentiation. The only provision in the Agreed Conclusions which is relevant
to the issue of differentiation between developing countries is that the
preferences should be "non-discriminatory". Thus, on the issue before the Panel,
the Agreed Conclusions add nothing to what is already said in the Enabling
Clause. The Agreed Conclusions do no purport to establish an exhaustive
regulation of the GSP's but they take note of the statements of intentions made
by the prospective donors and record the agreement (and sometimes the lack of
agreement) of all the participants in the consultations sponsored by UNCTAD with
regard to certain basic objectives. For that reason, the silence of the Agreed
Conclusions on a certain issue can never be considered as dispositive.
4.308 As to the least-developed countries, Part V of the
Agreed Conclusions records a series of agreed objectives and statements of
intention by the prospective donor countries with a view to responding to the
special needs of the least-developed countries. The donor countries are free to
go beyond those objectives and statements of intentions, subject to the general
requirement that preferences must be inter alia "non-discriminatory".
4.309 India's reference to the Agreed Conclusions that "in
principle all developing countries should participate as beneficiaries from the
outset" does not address the different question of whether the developing
countries already designated as beneficiaries of a GSP should be granted the
same preferences. The objective cited by India was aimed at preventing donor
countries from excluding a priori certain developing countries from their
GSPs on grounds unrelated to their development needs (namely, the fact that they
granted reverse preferences to certain developed countries). The European
Communities' interpretation of "non-discriminatory" does not allow
differentiation on such grounds because under the European Communities' GSP all
developing countries are recognized as beneficiaries and all of them benefit
from preferences.
(v) Paragraph 3(c) and policy arguments
4.310 India has not provided new arguments on paragraph 3(c)
and it has produced a series of unwarranted trade policy concerns. The European
Communities, therefore, refers to its previous responses.
(b) The Drug Arrangements are "non-discriminatory"
4.311 The European Communities has explained what are the
criteria used in order to select the beneficiaries of the Drug Arrangements.
India does not address the adequacy as such of those criteria. Nonetheless, it
argues that they are not "objective" because they are not set out in the GSP
Regulation. Yet, the fact that the selection criteria are not stated in the GSP
Regulation does not prejudge of their objectivity. The European Communities has
already explained why it is not necessary to publish the selection criteria or
to lay down procedures to apply for inclusion or for removing countries from the
Drug Arrangements. As to the selection of the beneficiary countries, the burden
of proof is on India. Yet, the European Communities has explained why India,
Indonesia, the Philippines, Thailand and Paraguay are not included in the Drug
Arrangements.
3. Article XX of GATT 1994
(a) The Drug Arrangements are "necessary" for the
protection of human life and health
4.312 By suggesting that a measure must be specifically
designed to protect human life and health, India is introducing a requirement
which is nowhere stated in Article XX(b). All that is required by that provision
is that a measure must be "necessary" to protect human life or health. Article
XX(b) does not require that the protection of human life or health must be the
only, or even the main objective of the measure concerned. In any event, to the
extent India refers to the Explanatory Memorandum, this is a preparatory
document with no legal status. Yet, achieving the objective of combating drugs
would have the necessary consequence of also achieving the objective of
protecting the life and health of the European Communities' population.
4.313 As to the relevance of the "contribution", the European
Communities has already explained that the Drug Arrangements are an "important"
component of the European Communities' drug policy and, more specifically, that
they are a "necessary complement" to the financial and technical assistance
provided to the beneficiaries. India's assumption that the fight against drug
production and trafficking is simply a matter of law enforcement is at odds with
the relevant United Nations recommendations. These recommendations were
recognized by the Indian delegation at the occasion of the adoption of the 1998
Action Plan.
4.314 In this context, it is important to develop other
economic alternatives besides crop substitution in order to absorb the excess
manpower generated by the eradication of drug cultivation in rural areas, as
well to prevent the unemployed of the urban and transit areas from joining the
drug industry. Finally, India's suggestion that the Drug Arrangements would
provide an incentive for the beneficiaries to refrain from combating drug
production and trafficking is as absurd as suggesting that the general GSP
arrangements provide an incentive for India to refrain from adopting appropriate
development policies. Finally, as for technical and financial assistance it is
important that trade preferences are a necessary complement to such assistance,
rather than an alternative. Licit alternative activities cannot be dependent
indefinitely on foreign subsidies. They must be sustainable, and this requires
the opening of foreign markets for the output of such activities.
(b) The Drug Arrangements are applied consistently with
the chapeau
4.315 With respect to the chapeau of Article XX, the European
Communities recalls that the essential substantive feature of the measure in
dispute, and the one which, according to India, makes it inconsistent with
Article I:1 of GATT 1994, is the tariff differentiation between the
beneficiaries and other countries which are not affected by the drug problem.
The European Communities argues that such differentiation is "necessary" in
order to protect the life and health of its population. If the Panel were to
agree that such differentiation is "necessary" for that purpose and, therefore,
that the measure is prima facie justified under Article XX(b), it would be
illogical to examine again such differentiation under the chapeau. Rather, the
issue to be examined under the chapeau is whether the application of such
differentiation is discriminatory.
V. ARGUMENTS OF THE THIRD PARTIES
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the andean community
1. Introduction
5.1 The Governments of Bolivia, Colombia, Ecuador, Peru and
Venezuela (referred to jointly as the Andean Community) submit that the Drug
Arrangements do not constitute a violation of the European Communities' WTO
obligations. The Enabling Clause must be seen as a self-standing regime which
affirmatively establishes how developed countries are to assist developing
countries. The Enabling Clause and the GSP that it authorizes are the most
concrete and relevant forms of special and differential treatment granted by
developed countries in favour of developing countries. As such, GSP schemes are
key to the participation of developing countries in the world trading system. It
is impermissible to see the Enabling Clause as just an exception.
5.2 The Andean Community contends that the European
Communities system of tariff preferences, including the Drug Arrangements,
does fall within the scope of the Enabling Clause. The Drug Arrangements do
not violate the Enabling Clause; rather, they are a proper application of it.
5.3 The Andean Community argues that preference-giving
countries can differentiate between developing countries, and the Drug
Arrangements, in so differentiating, do not violate the Enabling Clause. The
term "non-discriminatory" should not be equated with the most-favoured-nation
(MFN) principle, rather, it should be interpreted in a way that allows for
differentiation that addresses the drug-related development needs.
5.4 The Andean Community believes that drug problems are an
internationally recognized problem and that the international community shoulder
shared responsibility for the war on drugs. The European Communities' Drug
Arrangements represent a positive response that contributes to alleviating the
enormous burden of the drug problem by fostering the development of agriculture
and industrial alternatives to drug production and trafficking.
2. The important implications of this dispute for the
Andean Community
5.5 The Andean Community argues that it has a vital interest
in the preservation of the Drug Arrangements and in the outcome of this case.
The destabilizing effects of the production and trafficking of illicit drugs on
economic and legal institutions, civil societies and political systems of
countries of the Andean Community are notorious. The Drug Arrangements are
intended to provide assistance to beneficiary countries with severe drug
production and trafficking problems in their efforts to create alternatives to
drug activities, while fostering sustainable development. Accordingly, Bolivia,
Colombia, Ecuador, Peru and Venezuela are all beneficiaries of the Drug
Arrangements and are all countries with severe drug-related problems.62
5.6 The Andean Community claims that the international
community has recognized the multiple negative effects of drugs in Bolivia,
Colombia, Ecuador, Peru and Venezuela. As the 2002 annual report of the
International Narcotics Control Board (INCB) put it: "the drug problem in
South America, particularly in the countries in the Andean sub-region has
increasingly been linked to political issues and national security issues".63
The Andean Community states that the Andean region has very particular
developmental challenges brought about by the continued cultivation and
trafficking of illegal drugs. The degree of harm caused to the region's social
and economic development by drug cultivation and trafficking is unparalleled in
any other region of the world. The drug trade has been the root-cause of many of
these problems. It has for many years, and continues today, to fuel activities
aimed at destabilizing the region.
5.7 The Andean Community further notes that the negative
impact of drug production and trafficking on the economic growth of Andean
countries has been the subject of numerous studies64, pointing out that the
sources-of-growth decomposition shows that this reversal can be accounted
entirely by changes in productivity. The time series analysis suggests that the
implosion of productivity is related to the increase in criminality which has
diverted capital and labour to unproductive activities. In turn, the rise in
crime has been the result of rapid expansion in drug trafficking activities,
which erupted around 1980.
5.8 The Andean Community contends that the huge cost of the
"War on Drugs" represents billions of dollars to the Andean countries in
financial terms and prevents adequate and much needed spending on education,
healthcare, environmental, infrastructure and other development-focused
programmes. In addition to this heavy financial burden, the cost of the 'War on
Drugs' to social and economic development may be unquantifiable. Over the years,
the fight has cost countless lives and has led to the displacement of hundreds
of thousands of people. According to the Andean Community, these and other
adverse socio-economic consequences have all been well-documented by the world's
major international aid donors, development agencies and human rights
organizations.
5.9 The Andean Community further argues that shared
responsibility for the problem of illicit drugs production and trafficking has
been recognized by the General Assembly of the United Nations.65 According to the
Andean Community, the Drug Arrangements were explicitly a response to a plea for
support from countries comprising the Andean Community, which stressed to the
European Communities that drug production and trafficking seriously undermines
social integrity and impairs economies to the point of jeopardizing development.66
As such, the preferences are a positive response that alleviate the enormous
cost to its economies and societies of this plague by fostering the development
of alternatives (agricultural and industrial) to drug production and
trafficking.
5.10 The Andean Community contends that the Drug Arrangements
are meaningful to its members. In 2000, the Andean Community's exports to the
European Communities under this special regime amounted to US$1.275 billion
(22.8 per cent of the total exports of the Andean Community to the European
Communities). Likewise, the gross value of the production under this regime was
US$2.532 billion, generating around 159,000 jobs.67 More specifically, the gross
value of the production under the GSP special regime represented in 2000, US$1
billion for Venezuela, US$678 million for Peru, US$494.5 million for Colombia,
US$245 million for Ecuador, and US$78 million in the case of Bolivia. Likewise,
the benefits of this regime in terms of direct and indirect employment in 2000
reached 53,100 jobs for Ecuador, 45,700 for Colombia 33,600 for Venezuela,
23,900 for Peru and around 3,000 for Bolivia.68
5.11 The Andean Community concludes that the removal of GSP
benefits would not only have a detrimental impact on the economic and social
development of Andean Community, but it will also impair the "War on Drugs". It
jeopardizes vital tools for the economic and social development of the countries
that comprise the Andean Community.
5.12 Bolivia states in its separate oral statement
that from 1989 to 2002, there was an 80 per cent reduction in coca production in
Bolivia from 40,000 hectares to 8,000 hectares. Meanwhile, a number of large
cartels in Bolivian territory were dismantled, and 16,439 production plants and
laboratories together with 25,579 maceration pits were destroyed. These results
were obtained through the implementation of a series of programmes which could
not have been financed by the National Treasury - indeed, 79 per cent is covered
by international cooperation. Territories that were under illicit crops have now
been replaced by alternative development product cultivation zones, and Bolivia
has become a pioneer in the sustainable management of resources.69
5.13 Bolivia claims that a large proportion of the measures
implemented to combat drug problem have been made possible through mechanisms
such as the Drug Arrangements. Poverty and the lack of opportunities and
alternatives have led a portion of its rural population to cultivate coca
leaves. Without the alternative development programmes, the "New Commitment to
Fight Drugs 2003-2008" that Bolivia presented at the 46th session of the
Commission on Narcotic Drugs would be more difficult to implement.70
5.14 Colombia argues that drug production and trafficking
takes on a particular and special form in each country and varies according to
the geographical region. In Colombia, the combined problem of drugs and
terrorism in recent years has evolved to such an extent that it presents a
medium- and long-term threat not only to Colombia but also to the entire world.
Drug trafficking has resulted in loss of productivity over the last ten years as
well as many lives.71
5.15 Colombia considers that the principle of shared
responsibility endorsed by the United Nations is an expression of the world's
commitment to tackle this grave problem on a collective basis. This principle
recognizes the situation of Colombia as having a special development need and
links market access to the fight against the production and distribution of
illicit substances. The practice of providing special preferences has existed
for more than ten years. The preferences are of considerable significance in the
fight against drug production and distribution. To deny the European Communities
the possibility to respond positively to the needs of these developing countries
would result in the loss of approximately 40,000 jobs in Colombia.72
5.16 Ecuador claims that as a poor country, the temptation of
easy and much higher gains from drug trafficking compared to low profits from
producing coffee or cacao is an important factor behind its drug problems.
Government spending on eradication of illicit drug production has reduced
financial input for other development-related programmes, such as poverty
reduction, education, health, infrastructure and environment. The extent of
damage caused by drug trafficking to Ecuador's social and economic development
is unparalleled in any other part of the world.73
5.17 Ecuador points out that the Drug Arrangements have
created a broader opportunity for diversifying its export production and
generated greater income and more employment in the country. Nonetheless, the
Drug Arrangements are only part of the response to the immense complications
posed by drug trafficking. It is Ecuador's view that dismantling the Drug
Arrangements would have adverse consequences for Ecuador's more vulnerable
population.74
5.18 Peru contends that the harmful effects of the drug
problem include the loss of export opportunities and the diversion of production
efforts to illicit activities. Technical and financial assistance is not
sufficient in the combat against drugs. Peru maintains that the Drug
Arrangements regime is a key tool for the economic development of the
beneficiary countries by helping them to diversify their crops and generate
alternative and lawful economic activities. The dismantling of the preferences
would obviously have undesirable effects on Peru's economy. In this regard, it
has not been satisfactorily shown that the cost of these benefits is being
assumed by other countries not benefiting from the Drug Arrangements.75
5.19 Venezuela states that it is facing a serious drug
trafficking problem. Venezuela has been a beneficiary of the Drug Arrangements
since 1995. The Drug Arrangements contribute to moderating the high economic and
social costs that these drug-affected countries have had to assume, notably due
to unemployment resulting from the reduction of illicit crops. The elimination
of these preferences would have a negative impact on Venezuela's economic and
social development and would aggravate underdevelopment and poverty.76
5.20 Venezuela argues that paragraph 3(c) of the Enabling
Clause permits differentiation among developing countries and does not require
that developed countries extend the preferences under the scheme to all
developing countries in responding positively to the different development,
financial and trade needs of a particular group of developing countries.7 7
3. The pivotal role of the Enabling Clause as part of the
GATT/WTO regime for developing countries and as a self-standing regime
5.21 The Andean Community notes that the Enabling Clause was
adopted during the Tokyo Round. The Enabling Clause replaced the 1971 waiver
which permitted developed contracting parties to accord, for ten years,
preferential tariff treatment to products originating in developing countries.
By contrast, the duration of the Enabling Clause is not limited.
5.22 The Andean Community argues that the Enabling Clause is
the centrepiece of the GATT/WTO framework for special and differential treatment
to developing countries. The first effort was the amendment in 1955 of Article
XVIII of the GATT, providing developing countries with tools to protect domestic
industries. The addition in 1965 of Part IV of the GATT also marked an important
step in the evolution of this framework.
5.23 According to the Andean Community, the GSP scheme was
created under the auspices of the United Nations Conference on Trade and
Development (UNCTAD) to address the concerns of developing countries. UNCTAD
reached a final agreement to establish a "mutually acceptable system of
generalized, non-reciprocal and non-discriminatory preferences" in 1968.78
Subsequent work in both UNCTAD and the Organization of Economic Co-operation and
Development (OECD) ensured that developing countries and developed nations
respectively agreed on the principles and the particulars of the GSP.79
5.24 The Andean Community notes that in 1971, the CONTRACTING
PARTIES of the GATT adopted a waiver decision in order to 'enable' GSP regimes
to coexist with the GATT rules.80 The 1971 Waiver Decision authorized the GSP
schemes for a period of ten years. This waiver was transformed into a permanent
regime by the 1979 Enabling Clause. The Enabling Clause thus put in place the
cornerstone of the special and differential treatment for developing countries
in the GATT/WTO regime. The GSP is the most concrete and relevant form of
"special and differential" treatment that developed countries offer the
developing countries. As such, GSP systems are key to the participation of
developing countries in the world trading system.
5.25 The Andean Community is of the view that the evolution
of the framework for special and differential treatment to developing countries
is still an ongoing process. Development has been recognized explicitly as a
prime concern for the WTO system. The preamble to the WTO Agreements highlight
its importance. Ongoing negotiations are also dedicated to development issues81,
and have been referred to as the "The Doha Development Round". While it is
impossible to envisage what the "special and differential treatment"
construction will be at the end of "The Doha Development Round", there has been
no suggestion that the Enabling Clause should be removed.82 The Enabling Clause is
indeed one of the very few elements that is generally accepted by both
developing and developed countries. All recognize that the Enabling Clause and
the existence of GSP schemes are fundamental to the continued participation of
developing countries in the WTO.
5.26 The Andean Community disagrees with India's argument
that the Enabling Clause is merely an exception to the MFN principle. According
to the Andean Community, the Enabling Clause is a self-standing regime,
affirmatively establishing the manner in which developed countries are to assist
developing countries. Because the Enabling Clause is self-standing and has
requirements and a terminology of its own, the MFN principle is not part of the
Enabling Clause. Without express articulation, it cannot be taken for granted
that the requirements and terms of the Enabling Clause are subservient to other
WTO principles. The Enabling Clause contains no language to that effect.
5.27 The Andean Community argues that according to the
ordinary meaning of the term "notwithstanding" set out in paragraph 1 of the
Enabling Clause, Article I:1 of GATT 1994 simply does not apply when developed
contracting parties grant preferences to developing countries. The Oxford
dictionary defines "notwithstanding" as "without regard to or prevention by".83
In other words, when preferential treatment falls under the Enabling Clause,
Article I:1 of GATT 1994 does not apply at all.
5.28 The Andean Community also contends that Article I:1 of
GATT 1994 does not offer any useful 'context' in interpreting the Enabling
Clause because there is no comparable language in the Enabling Clause to that of
Article I:1 of GATT 1994. Particularly, the requirement of providing
"unconditional" MFN treatment to all other Members does not appear in the text
of the Enabling Clause.
5.29 In its oral statement made at the first substantive
meeting of the Panel, the Andean Community argues that the non-discrimination
requirement in the Enabling Clause is different from the MFN principle. Citing
the 1978 Report on the Most Favored Nations Clause of the International Law
Commission, it concludes that the standards of non-discrimination generally
permit distinction on the basis of certain objective criteria.84
5.30 According to the Andean Community, the issue in this
case is not the MFN principle, but the requirements of the Enabling Clause
itself.85
5.31 The Andean Community claims that the notion of
non-discrimination in the Enabling Clause is understood as a command not to
treat equal situations differently or different situations equally, whereas the
MFN principle requires treating like products from all exporting countries in
the same way. Under the Enabling Clause, providing different treatment to
developing countries with different economic position does not necessarily
constitute discrimination.
5.32 The Andean Community further argues that the Enabling
Clause is not a waiver from Article I:1 of GATT 1994. Unlike its predecessor -
the 1971 Decision - the Enabling Clause is not described on its face as a
waiver. Moreover, Article XXV of GATT 1994 refers to waivers of an obligation
"imposed on a contracting party" [emphasis original] in
"exceptional circumstances". The Enabling Clause does not refer to any
exceptional circumstances, nor is it temporary. According to the Andean
Community, it goes without saying that it would be inappropriate to apply a
narrow or strict reading of exceptions or waivers that the Appellate Body
promulgates when interpreting the Enabling Clause. The Enabling Clause is
therefore a self-standing regime rather than an exception to Article I:1 of GATT
1994.
4. "Other contracting parties" in paragraph 1
5.33 The Andean Community considers that the phrase "other
contracting parties" in paragraph 1 of the Enabling Clause refers to any other
contracting parties, whether developed or developing countries. The text of the
Enabling Clause is clear in that GSP donors are permitted to differentiate
between developing countries. Paragraph 1 provides that the contracting parties
may accord differential and more favorable treatment to some developing
countries without according such treatment to "other contracting parties". The
Enabling Clause allowed developing countries to offer them to any other
contracting parties, whether developed or developing.
5.34 The Andean Community argues that this reading is
confirmed by the fact that the request to add "developed" between "other" and
"contracting parties" in paragraph 1 was not accepted in the GATT Council
meeting adopting the 1971 waiver Decision.86
5. Paragraph 3(c) of the Enabling Clause
5.35 The Andean Community contends that paragraph 3(c) allows
and requires developed countries to make distinctions between developing
countries in their GSP schemes. It requires developed countries to "design" GSP
schemes in such a way as to "facilitate and promote the trade of developing
countries" and to "respond positively" to the development, financial and trade
needs of developing countries. The developing country membership of the WTO is
vast, and it is beyond doubt that not all developing countries have the same
needs. In "designing" their GSP regimes, developed country Members have a
positive obligation to take this into account. The European Communities' Drug
Arrangements do exactly that.
5.36 The Andean Community submits that the European
Communities' GSP regime properly acknowledges drug-related problems. The Andean
Community points out that the production and trafficking of illicit drugs have
far-reaching, unparalleled implications and compromise the economic and social
development of the affected countries in a unique way. These unique development
needs have been recognized internationally.87 The kind of increased market access
provided by the Drug Arrangements has been internationally recognized as an
effective tool to alleviate the special development needs of countries affected
by drug production and trafficking. These unique problems have been recognized
within the WTO as well. For instance, the preamble to the Agreement on
Agriculture recognizes that increased market access is an effective response
to drug-related development problems.88
5.37 The Andean Community claims that additional preferences
granted to these countries by the European Communities is not only permissible,
but also desirable under the Enabling Clause because they recognize the unique
development needs and provide a response tailored to specific needs of these
countries. The Drug Arrangements seek to displace or reduce the importance of
drugs as an economic activity in the affected countries. Increased market access
encourages the production of alternative agricultural crops, as well as the
allocation of resources to industrial goods. Likewise, by raising standards of
living, the Drug Arrangements help strengthen civil institutions, which in turn,
further reduces the influence of the "drug economy" in these countries.
6. The interpretation of the term "non-discriminatory" in
footnote 3 of the Enabling Clause
5.38 For the Andean Community, it goes without saying that
enabling discrimination was not the intention of the Enabling Clause. The Andean
Community contends that differentiating between developing countries - taking
into account their different situations - does not constitute discrimination. In
other words, different treatment of situations which are objectively different
is not discriminatory. Contrarily, the Andean Community argues that
discrimination can be found when treating "like" situations differently and in
treating different situations the same. To follow India's theory of
non-discrimination - making no distinction between different categories of
developing countries - would actually institute a discrimination which would
undermine the Enabling Clause.
5.39 The Andean Community posits that in order to comply with
the requirements of paragraph 3 of the Enabling Clause, preferences must be
designed to facilitate and promote the trade of individual or groups of
developing countries and respond positively to their development needs. In other
words, the standard of non-discrimination generally permits distinctions on the
basis of certain objective criteria. Making no distinction between different
categories of developing countries as India argues would actually institute
discrimination, thus undermining the Enabling Clause.
5.40 In its oral statement at the first substantive meeting
of the Panel, the Andean Community contends that paragraphs 3(a) and 3(c) inform
the interpretation of the term "non-discriminatory". Both these subparagraphs
require that the design of GSP scheme be fashioned "to promote the trade of
developing countries" and "to respond positively to development, financial and
trade needs of developing countries". These phrases can be seen to guide and
limit the discretion of donor countries when designing their respective GSP
schemes.89
5.41 The Andean Community disagrees with Paraguay's argument
that discrimination is only envisaged for the benefit of the least-developed
countries, as set out in paragraph 2(d) of the Enabling Clause and that
differentiation between developing countries is not permitted by the Enabling
Clause. The Andean Community argues that paragraph 2(d) refers to another field
of application of the Enabling Clause unrelated to GSP. Paragraph 2(d) relates
both to tariff and non-tariff measures, whereas paragraph 2(a) of the Enabling
Clause only relates to preferential tariff treatment.90
5.42 The Andean Community takes issue with Paraguay's
suggestion that it is not necessary for a donor like the European Communities to
first establish objective criteria in the abstract - in this case, related to
drug problems - then establish a separate procedure or criteria pursuant to
which it would decide which developing countries would qualify for such
preferences.91 The Andean Community argues that nothing suggests that a donor like
the European Communities could not conduct a selection process and include the
results of this process in its GSP regulation. What matters is that the choice
of beneficiary countries reflected in the regulation corresponds with the
criteria of the Enabling Clause, notably paragraphs 3(a) and 3(c). In other
words, and contrary to Paraguay's assertion, the question of whether the
Enabling Clause permits the European Communities to differentiate between
developing countries on the basis of drug-related problems is appropriately
before the Panel.
-
costa rica
1. Introduction
5.43 Costa Rica submits that the European Communities' Drug
Arrangements are fully consistent with the provisions of the Enabling Clause.
Consequently, Costa Rica further submits that the Drug Arrangements are in
conformity with the WTO Agreement, including the MFN principle set out in
Article I:1 of GATT 1994.92
5.44 Costa Rica notes that one of several forms of
preferential treatment authorized by the Enabling Clause is preferential tariff
treatment granted by developed countries to products originating from developing
countries pursuant to paragraph 2(a) and footnote 3 of the Enabling Clause.
Costa Rica maintains that the Decision of the Contracting Parties of 25 June
1971, mentioned in footnote 3 of the Enabling Clause, exempted developed
countries from Article I:1 of GATT 1947 to the extent necessary to accord
generalized, non-reciprocal, non-discriminatory and beneficial preferential
tariff treatment.93
5.45 Costa Rica submits that the Enabling Clause does not
prohibit a developed country from granting preferential tariff treatment to
some, but not all, developing countries. The European Communities fulfils its
obligation under the Enabling Clause by designing its preferential tariff scheme
in a way that responds to the different development and trade needs of
beneficiary countries. The European Communities' Drug Arrangements comply with
terms of the Enabling Clause because eligibility is determined based on
objective and non-discriminatory criteria. Furthermore, Costa Rica argues that
duty-free market access granted under these arrangements is necessary to respond
to the different development needs of those countries whose economic, trade and
financial development is hindered by drug production and/or trafficking.94
2. The important implications of this dispute for Costa
Rica
5.46 Costa Rica emphasizes that it has a substantial interest
in the outcome of this dispute since it is a beneficiary developing country
under the European Communities' Drug Arrangements.95
Costa Rica reiterates its
request for additional third-party rights in this dispute and submits that
panels in the past have granted enhanced third-party rights on the basis of,
inter alia, the economic effect that the measures in dispute can have on
third parties.96 Accordingly, Costa Rica states that the extent of the dire
economic and social consequences that could result from the modification of the
European Communities' Drug Arrangements, especially in the absence of
substantial tariff reduction or elimination on an MFN basis by developed
countries, justify the granting of additional third-party rights to Costa Rica.97
5.47 Costa Rica points out that agricultural products that
are included in the European Communities' special tariff arrangements comprise
30 per cent of its agricultural sector and Costa Rican exports to the European
Communities in 2001 exceeded US$169 million (20 per cent of total exports to the
European Communities) under the Drug Arrangements.98
3. The Enabling Clause does not prohibit the granting of
preferential tariff treatment to some developing countries
5.48 According to Costa Rica, India's argument that developed
countries are required to extend any advantage accorded under GSP schemes to all
developing countries is based on a flawed interpretation of paragraph 1 of the
Enabling Clause, since there is nothing in the Enabling Clause requiring that
preferential treatment must be accorded to all developing countries or none.99
India's claim that the Enabling Clause excuses donor countries from according
MFN treatment to other developed countries, but not to developing countries is
mistaken.100 Costa Rica further dismisses India's interpretation that the words
"other contracting parties" in paragraph 1 of the Enabling Clause means only
developed countries.
5.49 In countering India's argument, Costa Rica argues that
unlike Article I:1 of GATT 1994, which specifies that the advantage, favour,
privilege, or immunity shall be accorded to the like products of "all
other contracting parties", paragraph 1 of the Enabling Clause does not specify
the number or category of contracting parties to which the donor country must
accord preferential treatment. Costa Rica maintains that the drafters of the
Enabling Clause would have simply added the word "developed" before "contracting
party" if they had intended that developed countries extend preferential
treatment to developing countries as a whole.101
5.50 Costa Rica posits that India's argument that tariff
preferences must be granted to all developing countries lacks legal basis
and is contrary to the object and purpose of the Enabling Clause. In this
regard, Costa Rica notes that the Enabling Clause is a fundamental part of the
rights and obligations of WTO members, which allows developed countries the
right to grant preferential treatment to the developing countries. The Enabling
Clause clarifies the scope of Article I:1 of GATT 1994 and as such, it does not
require developed countries to grant preferential treatment to the "other
contracting parties". According to Costa Rica, this means that those countries
not benefiting from preferential treatment have no right to demand such
treatment be granted to them on the basis of Article I:1 of GATT 1994.102 Costa
Rica points out that the phrase "[n]otwithstanding the provisions of Article I
of the General Agreement" in paragraph 1 of the Enabling Clause, clearly
indicates that Article I:1 of GATT 1994 does not apply to preferential treatment
accorded to developing countries under the terms of the Enabling Clause.103
5.51 Costa Rica states that India adopts an unjustifiably
rigid interpretation of "developing countries" in paragraph 1 of the Enabling
Clause. If the words "developing countries" require that the whole class of
developing countries be included, then it would follow that in paragraph 2(a),
where it states that paragraph 1 applies to "products originating in developing
countries", it also refers to this whole class. According to Costa Rica, this
would lead to an absurd interpretation insofar as developed countries would be
able to grant preferential treatment only to products that originate in all
developing countries without exception.104
5.52 According to Costa Rica, the issue of whether the GSP
requires donor countries to accord the same preferential treatment to all
developing countries was extensively discussed in 1971.105 Costa Rica argues that
the negotiating history of the Decision of the Contracting Parties of 25 June
1971106 confirms that the Contracting Parties purposefully agreed to leave open the
possibility of allowing developed contracting parties to accord preferential
treatment to some, but not all countries. In this regard, Costa Rica refers to a
failed amendment to the Decision of 1971, which proposed to add the word
"developed" to paragraph (a) of the Decision of 1971. The proposal would have
permitted developed contracting parties to accord preferential treatment to
developing countries, "without according such treatment to the products of other
developed contracting parties."107 Costa Rica construes the rejection of
this proposal - limiting the category of contracting parties that can be
deprived of preferential treatment - as a clear indication that the final text
agreed upon allows donor countries to exclude both developed and developing
countries.108 Costa Rica maintains, had the amendment been adopted, it would have
meant that developed countries were still subject to the MFN obligation under
Article I:1 of GATT 1994 and consequently would be obliged to grant MFN
treatment to developing countries even under the GSP.109
5.53 In light of the negotiating history of the Decision of
1971, Costa Rica claims that India and other countries surely knew that the GSP
would allow donor countries to grant preferential treatment to certain
developing countries without needing to satisfy Article I:1 of GATT 1994 with
respect to other developing countries.110
4. The Enabling Clause requires donor countries to
differentiate between developing countries
5.54 Costa Rica contends that the word "shall" in paragraph
3(c) of the Enabling Clause requires affirmative action on the part of donor
countries. As such, it is not merely a best endeavours clause that asks
developed countries to take into account the different conditions prevailing in
individual developing countries.111
5.55 According to Costa Rica, paragraph 3(c) of the Enabling
Clause imposes on donor countries the obligation to design and, if necessary,
modify the differential and more favourable treatment accorded, "to respond
positively to the development, financial and trade needs of the developing
countries."112 Costa Rica argues that paragraph 3(c) of the Enabling Clause
constitutes irrefutable evidence that paragraphs 1 and 2(a) should not be
interpreted as prohibiting donor countries from differentiating between
developing countries when according preferential tariff treatment on the basis
of objective criteria that recognizes and take into account the particular
economic realities of potential beneficiary countries.113
5.56 Costa Rica argues that paragraphs 3(c) and 7 illustrate
how India's interpretation of paragraphs 1 and 2(a) is inconsistent with the
object and purpose of the Enabling Clause.114 Like paragraph 3(c), paragraph 7 of
the Enabling Clause recognizes that the economic development of the
less-developed contracting parties will proceed at a different pace, and as
their economic situation improve, so too will their participation in the
multilateral trading system.115 In dismissing India's premise that the Enabling
Clause requires donor countries to accord identical treatment to all developing
countries irrespective of the latters' particular level of development, Costa
Rica questions how a donor country could comply with its obligation under
paragraph 3(c) if it is prohibited from providing additional market access to
those developing countries whose particular economic situation demand such
preferential treatment.116
5.57 Costa Rica further alleges that India's inflexible and
flawed interpretation of paragraph 3(c) of the Enabling Clause would result in
pernicious practical consequences for developing countries. Accordingly,
requiring developed countries to accord preferential treatment either to all
developing countries or to none would discourage donors from extending
preferential market access to the developing countries which require it the
most. Consequently, these consequences would frustrate a priori the
object and purpose of the Enabling Clause.117
5.58 According to Costa Rica, the European Communities' Drug
Arrangements are without a doubt consistent with paragraph 3(c) of the Enabling
Clause, as they allow farmers the opportunity to substitute illicit crops with
duty-free eligible products, as well as providing the necessary resources and
incentives to those countries faced with the problem of combatting drug
trafficking.118
5. The Drug Arrangements provided by the European
Communities are non-discriminatory
5.59 Costa Rica argues that the Enabling Clause also requires
that the selection of eligible beneficiaries be based on objective,
non-discriminatory criteria in accordance with the GSP, as described in the
decision of 1971. Costa Rica is of the view that the European Communities' Drug
Arrangements are based on this criteria and therefore are non-discriminatory.119
5.60 Costa Rica agrees with the European Communities that the
principle of non-discrimination must not be equated to the MFN principle set out
in Article I:1 of GATT 1994.120 Costa Rica notes that the European Communities
interprets the term "non-discrimination" set out in footnote 3 of paragraph 2(a)
of the Enabling Clause, as allowing donor countries to treat developing
countries differently according to their developing needs based on objective
criteria.121
5.61 Costa Rica reasserts that the evidence tendered by the
European Communities demonstrates that duty-free access granted to the 12
beneficiaries under the Drug Arrangements is a necessary response to the
different development needs of those developing countries whose economic, trade
and financial development is hindered by drug production and/or trafficking.122
6. Paragraph 3(b) of the Enabling Clause precludes
preferential treatment from constituting an impediment to the reduction or
elimination of tariffs and other restrictions to trade on an MFN basis
5.62 Costa Rica urges the Panel to take notice of the
fundamental obligation set out in paragraph 3(b) of the Enabling Clause. This
obligation not to design or use preferential arrangements under the GSP as an
impediment to multilateral trade liberalization formed part of the original
decision creating the GSP.123 Costa Rica states the purpose of allowing developed
countries to grant preferential tariff treatment by virtue of the Enabling
Clause is simply to accelerate the process of tariff elimination and the
integration of developing countries in the multilateral trading system, as
reflected by UNCTAD Resolution 21 (II). Therefore, preferential tariff treatment
should not substitute or undermine the objective of tariff elimination on an MFN
basis.124
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the central american countries of el salvador,
Guatemala, honduras and nicaragua
1. Introduction
5.63 The Central American countries of El Salvador,
Guatemala, Honduras and Nicaragua, participating as third parties in this
dispute present a joint third-party written submission and a joint oral
statement to the Panel.
5.64 The Central American countries stress that their
countries have suffered greatly from drug trafficking. The efforts and costs
associated with combatting this problem jeopardize their development agenda.125 The
Central American countries submit that in accordance with the principle of
shared responsibility, the European Communities is doing its part to eradicate
the international problem of drugs through its Drug Arrangements. In light of
their geographical location as a hub for drug trafficking, their designation as
beneficiaries under the Drug Arrangements is objectively warranted. The Central
American countries claim that the Enabling Clause does not annul the principle
contained in Article I:1 of GATT 1994; simply it does not apply in this
particular case because the Drug Arrangements are covered by the Enabling
Clause. The Central American countries assert that the Drug Arrangements are a
positive response to their development needs.126
2. The designation of the beneficiaries of the Drug
Arrangements and the assessment of the gravity of the drug problem in
Central America
5.65 The Central American countries state that Central
America is a major transit route for drug traffickers transporting drugs from
South America to the markets of North America.127 Accordingly, due to their
geographical position, geomorphologic features and socio-economic and cultural
situation, the Central American countries have been a target of international
drug activities. The Central American countries emphasize that drug trafficking
is a very deep-rooted problem and leads to instability, mainly in the areas of
security, the economy and health..128
5.66 The Central American countries emphasize that the
by-products that emerge from drug production and trafficking have afflicted
their countries and have also hampered the development of the region.
Accordingly, the region has experienced a significant increase in firearms trade
along the trafficking routes, as well as other related crimes such as; trade in
persons, stolen vehicles, money laundering and organized gangs. The substantial
amount of resources allocated by the Central American countries to combat drug
trafficking have been diverted away from vital development needs such as health
and education.129 In this regard, the Central American countries point out that
their respective poverty and illiteracy rates are alarming.130
5.67 The Central American countries argue that the
determination of which developing countries are eligible under the European
Communities' Drug Arrangements is based on objective criteria. The designation
as a beneficiary also includes an assessment of the seriousness of the drug
problem in each developing country and what efforts are made to combat against
the problem.131 The conditions of those countries with drug production and
trafficking problems differ from other countries not afflicted with such
problems. Consequently, in light of the human, economic and social cost of drug
trafficking in their countries, the Central American countries submit that they
are eligible to benefit from the Drug Arrangements.132
3. The Enabling Clause is applicable to the Drug
Arrangements
5.68 The Central American countries argue that consistent
with the objective of the Enabling Clause of granting special and more
favourable treatment, the Drug Arrangements have given developing countries an
opportunity to expand and diversify exports and to eradicate the drug problem.133
5.69 The Central American countries note that the Enabling
Clause authorizes special and more favourable treatment, "[n]otwithstanding the
provisions of Article I".134 Therefore, since the Drug Arrangements are covered by
the Enabling Clause, Article I:1 of GATT 1994 finds no application in this
dispute.135
4. The Drug Arrangements are a positive response to the
needs of developing countries
5.70 The Central American countries argue that paragraph 3(c)
of the Enabling Clause suggests that special and differential treatment should
be granted on a proactive basis, taking into account changes in the levels of
development and the development, financial and trade needs of developing
countries. Accordingly, the Drug Arrangements constitute a positive way of
implementing special and differential treatment in accordance with the specific
needs of developing countries. The Drug Arrangements have been designed to meet
the special needs of countries whose performance and development has been
jeopardized by drug problems.136
5.71 The Central American countries claim that the Drug
Arrangements are a positive response to the needs of their countries pursuant to
paragraph 3(c) of the Enabling Clause. The Central American countries assert
that the Drug Arrangements have fostered the creation of alternative development
programmes as well as the creation of licit jobs, this is testimony of the
benefits accruing from the Drug Arrangements. Additionally, the Central American
countries have witnessed a notable increase in exports of non-traditional
products to the European Community as a result of the Drug Arrangements.
Moreover, the market opportunities under the Drug Arrangements has helped to
offset losses sustained as a result of the fall in prices of traditional
exports. The Central American countries also emphasize how the spin-offs from
the Drug Arrangements have led to economic benefits and better services for
farmers and enterprises, which complement the efforts of their respective
governments in these areas. Lastly, the Central American countries claim that
the fiscal revenue gained as a result of the increase in production makes it
possible to strengthen development programmes and government institutions.137 The
Central American countries therefore consider that the social and economic
benefits derived from the Drug Arrangements should be taken into account by the
Panel.138
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mauritius
1. Introduction
5.72 Mauritius submits that the Panel should find no
inconsistency with the European Communities' administration of its GPS scheme to
the extent that it is consistent with the Enabling Clause, which Mauritius
believes provides for differential treatment to developing countries based on
their development, financial and trade needs.139 Mauritius is of the view that
India bears the burden of proof in light of WTO jurisprudence on this issue.
Also, the Drug Arrangements are consistent with the provisions of the Enabling
Clause, as they provide for non-discriminatory treatment to products originating
from developing countries where the same conditions prevail. Alternatively, the
Drug Arrangements are justified under Article XX(b) of GATT 1994.
2. India bears the burden of proof
5.73 Mauritius argues that the complainant party bears the
burden of proving that the respondent has acted inconsistently in light of the
Appellate Body's ruling in US - Wool Shirts and Blouses. Mauritius also
cites the Appellate Body's ruling in EC - Hormones as further support
that there should be no presumption that a WTO Member has acted inconsistently
with the covered agreements.140
5.74 Mauritius claims that even if one assumes that the
Enabling Clause is an exception to Article I:1 of GATT 1994, the maxim "quinque
exceptio invokat, ejusdem probare debet" (i.e. the burden of proof stays
with the party invoking the exception) would not apply because what is at issue
is not the Enabling Clause per se, but rather the conditions under which
access to the Drug Arrangements is regulated. Accordingly, since India is
claiming that the European Communities' Drug Arrangements violate the obligation
of non-discrimination set out in the Enabling Clause by not extending such
preferential treatment to all developing countries, India bears the burden of
proof. In light of the EC - Hormones case, there is no reason to presume
that the European Communities has not respected the obligation of
non-discrimination.141
3. The Drug Arrangements are non-discriminatory
5.75 Mauritius submits that India's interpretation that
paragraph 2(a) of the Enabling Clause precludes the European Communities from
distinguishing between products originating from the beneficiaries of the Drug
Arrangements and products originating from other developing countries is
incorrect. From the onset of the analysis of "non-discriminatory", Mauritius
notes that the GATT/WTO case law has not had the opportunity until now to rule
on the interpretation of paragraph 2(a) of the Enabling Clause and asserts that
the Panel will have to address whether India's interpretation is supported by a
proper reading of the Vienna Convention on the Law of Treaties.142
5.76 Mauritius argues that paragraph 1 and footnote 3 of the
Enabling Clause clearly indicate that the obligation of "non-discrimination"
differs from the MFN obligation in Article I:1 of GATT 1994. Mauritius
highlights that the terms "automatically" and "unconditionally" in Article I:1
of GATT 1994 are not found in the Enabling Clause and that only a footnote
refers to "non-discriminatory". Mauritius is of the view that differentiation
between countries does not automatically imply "discrimination" as long as such
differentiation is based on objective and reasonable grounds. According to
Mauritius, the concept of "discrimination" is elaborated in the chapeau of
Article XX of GATT 1994, where it is unambiguously stated that discrimination is
unjustifiable if it does not account for differences among countries. The
chapeau calls for non-discrimination between products originating in countries
"where the same conditions prevail". Mauritius claims that the foregoing should
provide useful guidance when interpreting the principle of non-discrimination.
Thus, Mauritius submits that the Drug Arrangements are consistent with the
provisions of the Enabling Clause as they provide for non-discriminatory
treatment to products originating from developing countries where the same
conditions prevail.143
5.77 Mauritius argues that the Drug Arrangements grant more
preferential treatment to some developing countries that are willing to make an
extra effort and take positive measures to combat the serious drug problem the
world is currently facing. Mauritius submits that the Enabling Clause allows
donor countries to grant more preferential treatment to some developing
countries. Firstly, the text of the Enabling Clause explicitly permits
distinctions to be drawn between developing and least-developing countries.
Secondly, since paragraph 3(c) clearly allows modifying a GSP scheme in order to
"respond positively to the development, financial, and trade needs of developing
countries", it follows that these needs are not the same for a heterogeneous
group such as the developing countries. Thirdly, further support is found in
paragraph 3(a) of the Enabling Clause.144
4. The Drug Arrangements are justified through recourse
to Article XX(b) of GATT 1994
5.78 Mauritius submits that even if the Panel disagrees with
the foregoing and reaches the opposite conclusion, the Drug Arrangements in any
event are justified under Article XX(b) of GATT 1994 because they are a
necessary means to help human health.145
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pakistan
1. Introduction
5.79 Pakistan states that it fully endorses the arguments
advanced by the European Communities. In this regard, Pakistan disagrees with
the following three points raised by India: (1) the Enabling Clause does not
permit developed countries to discriminate between developing countries; (2) the
Drug Arrangements required a waiver; and (3) Pakistan's inclusion in the Drug
Arrangements is designed to respond to the policy objectives of the European
Communities rather than the needs of the developing countries.
2. Article I:1 of the GATT 1994 does not apply to the
Enabling Clause
5.80 Pakistan argues that Article I:1 of GATT 1994 is
inapplicable to the Enabling Clause in light of the wording of paragraph 1 of
the Enabling Clause. Pakistan contends that the Enabling Clause does not require
that the same preferential treatment be granted to all developing
countries since the entire GSP scheme is based on the granting of preferential
treatment to different developing countries, taking into account their
development needs. Accordingly, the Enabling Clause enables special and
differential treatment of developing countries. Therefore, if preferential
treatment is covered by any subparagraph of paragraph 2, then Article I:1 of
GATT 1994 does not apply.146
3. The Drug Arrangements do not require a waiver
5.81 Pakistan rejects India's claim that the Drug
Arrangements are not justified without a waiver. Pakistan argues that unlike
Article XXV of GATT 1994 and Article IX of the WTO Agreement, which refer
to waivers of obligations imposed on a Member in exceptional circumstances,
the Enabling Clause does not mention exceptional circumstances nor is it
temporary. Therefore, Pakistan submits that there is no need for the European
Communities to obtain a waiver for its Drug Arrangements.147
4. The inclusion of Pakistan in the Drug Arrangements is
not to further the policy objectives of the European Communities
5.82 Pakistan contends that India's claim that the
circumstances in which Pakistan was included in the Drug Arrangements indicates
that the Drug Arrangements are designed to respond to the policy objectives of
the European Communities is not borne out by the facts. Pakistan argues that
like the other beneficiaries of the Drug Arrangements, Pakistan is also
particularly affected by drug trafficking, as it lies on a popular route for
drug smuggling. With the increase of poppy cultivation in Afghanistan, Pakistan
faces a continuous drug trafficking problem. According to Pakistan, in 2002, it
seized a total of 9.5 tons of heroin - the largest annual seizure of heroin by
any country in the world.148
5.83 According to Pakistan, the European Communities
recognized at the time it included Pakistan, that the instability in Afghanistan
invariably led to greater drug trafficking through Pakistan. Most of the poppy
cultivation in Afghanistan is located in areas contiguous to the tribal belt of
Pakistan. In this area of the country, Pakistan point out that poppy had been
eliminated through sustained efforts. However, Pakistan states that without
strong measures, poppy cultivation in the tribal belt may re-emerge. Pakistan
asserts that its efforts to address drug production and trafficking have been
acknowledged by the UNDCP, declaring Pakistan poppy-free and a role model in the
region.149
5.84 Pakistan claims that the increase of exports is worth
approximately US$300 million as a result of the Drug Arrangements, and has led
to the creation of 60,000 job opportunities. Consequently, a vast majority of
those possibly tempted by drug trafficking have been provided with alternative
sources of income. In light of the foregoing, Pakistan submits its inclusion in
the Drug Arrangements was not designed exclusively to respond to the policy
objectives of the European Communities.150
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panama
1. Introduction
5.85 Panama asserts that it is necessary to maintain the
preferential tariff treatment granted under the Drug Arrangements because it is
a crucial instrument of support in the current struggle it is waging to combat
drug trafficking.151
5.86 Panama disagrees with India's claim that paragraph 1 of
the Enabling Clause requires developed countries to grant preferential treatment
to all developing countries in conformity with Article I:1 of GATT 1994.
Moreover, Panama argues that the Enabling Clause allows preferential treatment
to be granted to developing countries on a selective basis, despite the MFN
obligation.
2. The important implications of this dispute for Panama
5.87 Panama states that the following features of the country
make it conducive for the trafficking of drugs: (1) geographical position; (2)
inter-ocean canal; (3) international financial centre; (4) airport
infrastructure; (5) maritime efficiency; (6) free circulation of the dollar as
legal tender; and (7) the largest free-trade zone in the hemisphere.152
5.88 Panama points out that its authorities have made notable
efforts in curbing drug trafficking. Accordingly, there has been a noteworthy
increase in seizures of heroin in recent years. Panama points out that in 2001
the highest drug seizures were for cocaine followed by those for heroin and
crack.153
5.89 Panama states that between 2000 and 2003 the primary
destinations for these drugs were Spain (39 per cent), Mexico (34 per cent) and
the United States (21 per cent).154
5.90 Panama is of the view that the Drug Arrangements send a
strong message from the developed countries to Panama and the region that it is
possible to emerge from poverty by undertaking modest, yet lawful activities.155
5.91 Panama states that in 2001 Panamanian exports to the
European Community totalled US$162.9 million. Approximately 20 per cent of
Panama's exports are directed to the European Community. Panama asserts that the
tariff preferences under the GSP promote Panamanian exports to the European
Community and have a direct impact on development in Panama.156 Consequently, the
Drug Arrangements also diminish the degree of interdependence between Panama and
the United States; Panama's traditional trading partner and accounting for more
than 50 per cent of its exports.157
3. The Enabling Clause is drafted as a statute separate
and distinct from the provisions of Article I:1 of GATT 1994
5.92 Panama argues that the Enabling Clause is special
legislation governing the general legislation of the GATT 1994 with respect to
differential and more favourable treatment of developing countries in accordance
with the arrangements outlined in paragraph 2. Panama emphasizes that paragraph
1 begins by pointing out that the rules of Article I:1 of GATT 1994 have no
bearing on the granting of differential and more favourable treatment to
developing countries.158
5.93 Panama argues that paragraph 2 clearly identifies which
schemes of preferences will be excluded from the provisions of Article I:1 of
GATT 1994. Also, Panama contends that footnote 2 clearly establishes the right
of Members to reserve their position in cases not covered by the Enabling
Clause. According to Panama, India's interpretation seeks to confuse the cases
explicitly cited in the Enabling clause with other schemes to which Article I:1
of GATT 1994 is applicable.159
5.94 Panama contends that paragraph 3 unambiguously states
that the granting of "differential and more favourable treatment" is consistent
with the Enabling Clause and proceeds to give an exhaustive list of requirements
governing such treatment. Consequently, the fact of stating that preferential
treatment shall be granted under the Clause [sic] itself and listing the
relevant requirements clearly removes such treatment set out in paragraph 2 of
the Enabling Clause from the scope of Article I:1 of GATT 1994.160
5.95 Panama submits that to disavow the status of the
Enabling Clause as a separate and distinct statute is to disregard its special
character by subsuming it within the very same provision from which it was
excluded.161
4. The Drug Arrangements are not in contravention of
Article I:1 of GATT 1994, and paragraph 2(a) of the Enabling Clause
5.96 Panama argues that the Enabling Clause allows
preferential treatment to be granted to developing countries on a selective
basis, despite Article I:1 of GATT 1994. Panama dismisses India's argument that
the principle of unconditional MFN treatment found in Article I:1 of the GATT
1994 applies equally to the GSP schemes under the Enabling Clause. According to
Panama, the MFN principle has been made subject to the special mechanism of the
Enabling Clause.162
5.97 Panama contends that the discrimination alleged by India
is based on an erroneous approach. The unilateral nature of the GSP allows
donors the possibility of applying objective criteria in selecting the
beneficiaries of preferential treatment. Panama states the criteria are
determined on the basis of an overall assessment of the seriousness of the drug
problem in each developing country. The selection of beneficiaries pursuant to
paragraph 2(a) of the Enabling Clause should be interpreted as the exercise of
the right of donor countries to grant preferential tariff treatment in the
specific case, rather than being discriminatory. Panama contends that for India
to claim that special and more favourable treatment covered by paragraph 1
should be accorded to all developing countries is to add an interpretative
qualification not found in the text of the Enabling Clause.163
5. The Enabling Clause authorizes differentiation between
beneficiaries without establishing discrimination
5.98 Panama disagrees with India's argument that the Drug
Arrangements discriminate between developing countries because they do not
extend to all developing countries. According to Panama, this flawed
interpretation is based on the extension of Article I:1 of GATT 1994 to the
Enabling Clause and would result in legal uncertainty and frustrate the offering
of positive incentives. It would also undermine the purposes for which the
Enabling Clause was established. Panama further contends that India's
interpretation of extending preferences to all as opposed to the principle of
generalization (to a number of beneficiaries) embodied in the Enabling Clause,
would cause donor countries to considerably limit the scope of their GSP schemes
in terms of the number of programmes as well as the coverage of benefits.164
5.99 Panama further argues that it is unable to agree with
India's interpretation in light of paragraph 3(c) of the Enabling Clause.
According to Panama, the provisions of paragraph 3(c) can never be complied with
if India's interpretation that any differential benefit automatically
constitutes discrimination is accepted. The needs of developing countries vary
considerably from one region to another or even between countries of the same
region. Panama claims that if paragraph 3(c) did not provide flexibility in
designing incentive schemes, we would face inflexible schemes which might not be
advantageous to those developing countries that derive no benefits from more
generic schemes. Moreover, there would be no way of preventing more advanced
developing countries from receiving benefits to the detriment of schemes
designed for those developing countries whose size, capacities and
infrastructure are infinitely less advanced. Therefore, Panama submits that
paragraph 3(c) of the Enabling Clause provides for the possibility of designing
different schemes of preferences and modifying them in accordance with the
developments observed.165
6. The Drug Arrangements are a positive response to the
development needs of Panama and are supported by paragraph 3(c) of the
Enabling Clause
5.100 Panama states that a major obstacle in accelerating
economic growth and development of developing countries is the inability to
compete on equal terms with the markets of developed countries. This impediment
is compounded when a country must devote significant manpower and financial
resources to combat drug trafficking and its many related nefarious by-products.166
5.101 Following an exhaustive analysis of the Drug
Arrangements, it is Panama's position that they do not violate Article I:1 of
GATT 1994 since they are fully covered by paragraphs 2(a) and 3(c) of the
Enabling Clause.167
5.102 According to Panama, the Drug Arrangements also promote
industrial development which simultaneously triggers a chain of social benefits,
culminating in an improved quality of life as well as boosting commercial
growth. This is reflected in improved production capacity which should lead to
an increased land area being devoted to sowing, as well as the establishment of
new domestic export firms, flows of investment capital, better employment
conditions and a sooner than expected decline in criminal opportunities.168
5.103 Panama asserts that the positive effects of the Drug
Arrangements in promoting local development can be witnessed by the fact that
the majority of the more than 140 companies engaged in non-traditional export
products that were registered in Panama in 2001 are located in rural areas.169
5.104 Panama states that the European Communities has
directed this special stimulus scheme to those countries traditionally
susceptible to drug trafficking problems in any of their criminal forms.
Accordingly, Panama is of the view that the Drug Arrangements are consistent
with the spirit of tariff preference schemes insofar as any additional
favourable and differential treatment has trade and development objectives.170
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paraguay
1. Introduction
5.105 Paraguay states it has a substantial interest in this
matter from two distinct standpoints. First, the matter before the Panel
involves systemic issues that have a significant bearing on the interpretation
and application of basic principles of the multilateral trading system,
particularly the most-favoured-nation-treatment obligation ("MFN") and the
proper application of the provisions concerning Special and Differential
Treatment (S&D) to developing countries. It is in Paraguay's interest that the
Panel does not create exceptions from the MFN principle that have not been
negotiated among Members and preserves the rights and obligations of Members as
stipulated in Article 3.2 of DSU.
5.106 On a more specific level, Paraguay states it has a
particular interest in this dispute as one of the developing country Members
adversely affected by the Drug Arrangements. Tariff preferences granted to some
developing countries adversely affect the exports of all developing countries
excluded from the tariff preferences. To that extent, the "cost" of the
preferences granted to a limited group of developing countries is borne by the
developing countries excluded from the Drug Arrangements, including Paraguay.
5.107 Paraguay states that it has suffered and continues to
suffer from the discriminatory treatment accorded by the European Communities.
Paraguay has consistently maintained in various fora of the WTO that tariff
preferences accorded to developing countries under the Enabling Clause must, in
accordance with its terms, be formulated and applied in a "generalized,
non-reciprocal and non-discriminatory" manner.
2. Preliminary
issue of joint representation
5.108 With respect to the preliminary issue of joint
representation raised by the European Communities during the first panel
meeting, Paraguay and India submitted a joint statement to the Panel on 14 May
confirming that both India and Paraguay had consented to be represented
simultaneously by the ACWL in this dispute.
5.109 In a communication to the Panel dated 28 May 2003
regarding this preliminary issue171, Paraguay stated that in light of the fact they
are both developing countries, India and Paraguay are entitled to the support of
the ACWL, whether as parties or as third parties. Paraguay also recalls the
Appellate Body statement in EC - Bananas III that it, "can find nothing
in the � WTO Agreement, the DSU or the Working Procedures, nor in customary
international law or the prevailing practice of international tribunals, which
prevents a WTO Member from determining the composition of its delegation in
Appellate Body". Paraguay claims that the same observation applies equally to
the composition of the delegation in panel proceedings.
5.110 Paraguay contends that the WTO dispute settlement
procedures establish rules of ethics for panelists and members of the Appellate
Body but not for lawyers representing the Members of the WTO, whether they are
lawyers of a Member's legal service or lawyers engaged for a particular dispute.
Paraguay is of the view that conflicts of interest concerns would normally be
the primary concern of the individual Members involved. For these reasons,
Paraguay believes that the request of the European Communities for the Panel to
rule on the matter of legal ethics lacks basis and should be rejected.
3. Systemic concerns
(a) The elimination of discrimination is a primary
objective of the multilateral trading system
5.111 Paraguay states that one of the primary objectives of
the WTO Agreement, as stated in its preamble, is "the elimination of
discriminatory treatment in international relations".
5.112 Paraguay argues the elimination of discriminatory
treatment is a fundamental element of the rules of the multilateral trading
system. The interpreter of the WTO Agreement must therefore assume that the
principle of non-discrimination applies unless the Members of the WTO have
explicitly and clearly agreed otherwise. Any departure from the MFN principle
entails trade benefits for some and trade losses for others, and thereby
modifies the negotiated balance of rights and obligations. Any departure from
this principle can therefore only result from negotiations among Members. The
Members of the WTO have never agreed that the developed countries may grant
tariff preferences to a selected group of developing countries. The European
Communities has sought the required agreement by requesting a waiver but has
failed to obtain it. The Drug Arrangements have therefore remained unilateral
and consequently are WTO-inconsistent departures from the MFN principle.
5.113 Paraguay also argues that developing countries had
never given their consent that developed countries could discriminate between
developing countries, except in favour of least-developed countries.172 Paraguay
states that to its recollection, no developed country had ever taken the
position that developed countries could differentiate between developing
countries under the GSP during the Uruguay Round negotiations. Accordingly,
Paraguay claims that there may have been violations of the Enabling Clause at
the time the Uruguay Round negotiations were taking place, but Members had
chosen to tolerate those violations then.173
(b) The issue of discrimination on the basis of
"objective criteria" is not a matter before the Panel
5.114 The European Communities and India agree that under the
Enabling Clause, preferential tariff treatment under the GSP must be
"non-discriminatory"; however they differ in their interpretations of this term.
The European Communities alleges that the Enabling Clause permits developed
countries to treat differently "developing countries which, according to
objective criteria have different development needs.174
5.115 According to Paraguay, this argument is not pertinent
to the measures India decided to submit to the Panel.
5.116 Paraguay asserts the measures at issue are the Drug
Arrangements as set out in the Regulation. Unlike the provisions governing the
special incentive arrangements for the protection of labour rights or the
special incentive arrangements for the protection of the environment, the
provisions of the Regulation establishing the Drug Arrangements do not
establish: (i) any "objective criteria" for the inclusion of developing
countries in the Drug Arrangements; nor (ii) any procedure or criteria for their
inclusion. The provisions simply state that a group of named countries are
entitled to special preferences. Paraguay is not part of that group and nowhere
does the Regulation state which "objective criteria" Paraguay would have to meet
to become part of that group. Paraguay argues that the plain fact is that the
incentives under the Drug Arrangements are confined to specific beneficiaries
pre-designated by the European Communities, not to countries meeting certain
criteria.
5.117 Paraguay argues that the measures at issue thus
discriminate in favour of specified countries, not in favour of countries
meeting defined criteria. The question of whether the Enabling Clause permits
the European Communities to adopt GSP schemes that discriminate between
developing countries on the basis of objective criteria is therefore not a
matter before the Panel for purposes of Article 11 of the DSU. In any case, as
elaborated below, the Enabling Clause does not authorize differentiation in
treatment between developing countries.
5.118 Paraguay argues that the European Communities'
interpretation of non-discrimination based on criteria of "legitimate
objectives" and "reasonable means" is too open-ended to provide any assurances
that abuses will not occur and that such abuses can be legally disciplined by
panels in a consistent manner.175
(c) The Enabling Clause in any case does not permit
differentiation in treatment between developing countries in the context of
GSP schemes
5.119 Paraguay states that all developing countries have
different development needs. The Enabling Clause does not permit developed
countries to grant differential treatment to some developing countries on the
basis that they have "different development needs". If this were the case, there
would be no need to explicitly provide for paragraph 2(d) of the Enabling
Clause, which specifically authorizes "special treatment of the least
developed among the developing countries in the context of any general or
specific measures in favour of developing countries". Thus, discrimination
between developing countries is envisaged only for the
least-developed countries, not for any group of developing countries having
"different development needs", whether least developed or not. It is not
sufficient for the European Communities to assert that its criterion for
differentiation is "justified", it must show that the criterion for
differentiation used by it is expressly envisaged under the Enabling Clause.
Paraguay claims that it has manifestly failed to do so in the present case.
5.120 Paraguay contends that not only is the European
Communities' interpretation contradicted by paragraph 2(d) of the Enabling
Clause, it also runs contrary to the agreement reached between developing and
developed countries in the context of the UNCTAD, as reflected in paragraph 2(a)
of the Enabling Clause. Paragraph 2(a) limits the scope of departure from
Article I:1 of GATT 1994 solely to preferential tariff treatment which is in
accordance with the "Generalized System of Preferences" as described in the
"Decision of the Contracting Parties of 25 June 1971" (the 1971 Waiver"). The
1971 Waiver authorizes a waiver from Article I:1 of GATT 1994 to allow
"developed contracting parties � to accord preferential treatment to products
originating in developing countries and territories generally the
preferential tariff treatment referred to in the Preamble to this Decision".
The preamble in turn states:
"� Recalling that at the Second UNCTAD, unanimous
agreement was reached in favour of the early establishment of a mutually
acceptable system of generalized, non-reciprocal and non-discriminatory
preferences beneficial to the developing countries in order to increase the
export earnings, to promote the industrialization, and to accelerate the
rates of economic growth in these countries;
Considering that mutually acceptable arrangements
have been drawn up in the UNCTAD concerning the establishment of
generalized, non-discriminatory, non-reciprocal preferential tariff
treatment in the markets of developed countries for products originating in
developing countries " (emphasis added)
5.121 Paraguay notes that the mutually acceptable
arrangements drawn up in UNCTAD are contained in the "Agreed Conclusions of the
Special Committee on Preferences"176 ("Agreed Conclusions") adopted by the Trade
and Development Board on 13 October 1970. The Agreed Conclusions represent the
outcome of negotiations held over a period of over two years pursuant to
Resolution 21 (II) of the Second Conference held in New Delhi.
5.122 According to Paraguay, under the European Communities'
interpretation, subgroups of developing countries can be singled out for
preferential treatment as long as, "according to objective criteria they have
different development needs", which implies that developed country Members can
unilaterally determine those criteria. However, under the Agreed Conclusions, no
such flexibility was envisaged. They merely envisaged that the developed
countries could: (i) utilize "safeguard mechanisms"177; and (ii) arguably, exclude
certain countries from beneficiary status altogether.178 However, Paraguay claims
there is absolutely no reference to the notion that the developed countries
should be able to distinguish between the countries that they have recognized to
be developing countries. This is also clear from Part V of the Agreed
Conclusions which expressly refers to "Special Measures in Favour of the Least
Developed Among the Developing Countries". No further basis for differential
treatment between developing countries was envisaged.
5.123 Paraguay submits that following the European
Communities' reading of the Enabling Clause, it is possible to grant tariff
preferences to a set of developing countries without granting the same tariff
preferences to least-developed countries, as long as the set of developing
countries have distinct development needs. This illustrates the difficulty with
the standard proposed by the European Communities. According to Paraguay,
least-developed countries could experience trade diversion to developing
countries merely because these favoured developing countries have a
"developmental need" considered to be especially pressing by a developed
country. In the present case, it is difficulties faced on account of drug
production and trafficking; but in others it could be, for example, "transition
from military rule", "high population growth", "literacy rate", "high levels of
corruption", or "degree of rural electrification". While developing countries
have a variety of developmental needs; the Enabling Clause does not allow
developed country Members to pick and choose amongst these needs in granting
tariff preferences. Instead, it envisages one uncontroversial category of
permissible differentiation in favour of the countries determined by the United
Nations to be the most needy - special treatment for least-developed countries.
Paraguay submits that the European Communities fails to explain how the
developmental problems of countries confronting drug production and trafficking
are unique and more pressing than the developmental problems faced by other
developing countries on account of a host of other factors.
5.124 Paraguay further argues that if the European
Communities' interpretation of the Enabling Clause is upheld, the GSP would be
an instrument to exercise undue influence towards developing countries by
granting tariff preferences selectively. This in turn would transform the GSP
from an instrument of generosity of developed countries into a perversion of the
GSP that is detrimental to the developing countries.179
5.125 Paraguay posits that the implication of the European
Communities' approach is that developed countries could manipulate the GSP
system so as to pursue their own political agenda and that the rule-based
character of the multilateral trading system would be completely undermined. In
this context, Paraguay emphasizes that the rules-based multilateral trading
system was established precisely to ensure a level playing field in which all
Members, regardless of their level of economic development or political power,
conduct their trade relations in accordance with rules and norms established by
the Members themselves acting through the WTO. Paraguay argues that the European
Communities' approach further exacerbates the intrinsic disadvantages of
developing countries.
5.126 Paraguay submits it is clear that the discriminatory
nature of the Drug Arrangements results in obstacles to exports of the
developing countries discriminated against. The Drug Arrangements have
pernicious effects on current exports and also impede the creation of future
trade opportunities. Any assessment of the measures before the Panel must take
into account the need of investors and traders for clear and predictable rules
permitting them to plan their activities. Paraguay asserts that creating the
possibility for developed countries to distinguish between the developing
countries on the basis of unilaterally determined criteria would remove all
predictability in the trade relations between developed and developing
countries.
5.127 Paraguay is of the view that the European Communities'
interpretation of the concept of non-discrimination cannot therefore be
reconciled with paragraph 3(a) of the Enabling Clause, which mandates that GSP
schemes "shall be designed to facilitate and promote the trade of
developing countries". Nor can it be reconciled with the requirements of
paragraph 3(c) of the Enabling Clause which stipulates that GSP schemes shall be
designed to respond positively to the "trade needs" of developing countries.
5.128 Paraguay rejects the European Communities' argument
that paragraph 3(c) of the Enabling Clause provides a basis for it to
effectively determine what the developing needs of developing countries are and
consequently to provide differential treatment between developing countries on
that basis.180 Accordingly, Paraguay argues that in EC - Bananas III the
Appellate Body affirmed that the non-discrimination obligation of the GATT 1994
such as Article I:1 thereof, apply to imports of like products, except when
these obligations are specifically waived. Therefore, Paraguay submits that the
term "non-discrimination" pursuant to the Enabling Clause is the same as
"non-discrimination" under Article I:1 of GATT 1994, since the Enabling Clause
is part of the GATT 1994.181 Paraguay states that paragraph 3(c) deals with the
design of the tariff preferences (e.g. product coverage, depth of tariff
cuts) and not the principle of non-discriminatory treatment in the context of
Article I:1 of GATT 1994.182
(d) The waiver mechanism provides the required
flexibility
5.129 Paraguay argues that if Members wish to implement
discriminatory measures inconsistent with their obligations under the WTO
Agreement, they may do so only by resorting to Article IX of the WTO Agreement.
Article IX of the WTO Agreement provides them with the flexibility to deviate
from their WTO obligations. The waiver procedures give potentially affected
Members the opportunity to redress any adverse effect of preferences favouring a
group of countries by negotiating compensatory market access commitments. In
this way, Article IX limits the damage caused to other Members by measures which
are not consistent with the provisions of the WTO Agreement.
5.130 Paraguay states that in 1976 it was affected by the
special and differential treatment granted only to ACP Countries under the Lom�
Convention. Nonetheless, the European Communities resorted to the waiver
mechanism in order to obtain the consent of the membership and redress the
damage to the affected developing countries. As a result, other Members,
including Paraguay, were given the opportunity to request compensatory
concessions from the European Communities.
5.131 Paraguay maintains that the present situation is
completely different. By unilaterally proceeding to implement the Drug
Arrangements without the benefit of a waiver, the European Communities has
disregarded the multilateral nature of the WTO system and has deprived Paraguay
and other developing country Members of the opportunity to mitigate the damage
created by the discriminatory character of the Drug Arrangements.
4. Concerns specific to the situation of Paraguay
5.132 Paraguay states that many developing countries which
face drug problems are excluded from the coverage of the Drug Arrangements. The
European Communities has even referred to some of these countries in paragraph
140 of its submission. As far as Paraguay is concerned, due to its specific
geographical location, it faces severe drug trafficking problems. Paraguay
points out that its government and society are engaged in combating this
problem. Considerable resources have had to be reallocated from other social
endeavours in order to deal with it. The situation of Paraguay in terms of drug
trafficking is comparable to that of some of the countries included as
beneficiaries under the Drug Arrangements. Yet, Paraguay recalls that it has not
been included in the Drug Arrangements, which calls into question the European
Communities' claim that the designation of beneficiary countries of the Drug
Arrangements is "made in accordance with objective, non-discriminatory
criteria".183
5.133 Paraguay states that it also is severely affected by
drug-related problems. Paraguay's problems have been acknowledges by other
countries in the region including some of the beneficiaries, which have signed
various cooperation agreements with Paraguay in the fight against drug
production and trafficking.184 However, despite its drug-related problems, Paraguay
does not seek to benefit from measures which undermine the right of developing
countries to MFN treatment.185 Paraguay states that it believes that the long-term
interests of all the developing countries are better served by a secure and
predictable trading system where the rules are consistently applied.186
5.134 Paraguay claims that the Drug Arrangements have caused
trade diversion since its first inception in 1990. Prior to 1990, several
Paraguayan goods were competitive export commodities to the European
Communities. Paraguay states that after the introduction of the Drug
Arrangements, exports of these products from Paraguay to the European
Communities considerably declined. In contrast, exports of like products from
some of the beneficiary countries have risen. Thus, Paraguay restates that the
implementation of the Drug Arrangements has resulted in trade diversion in
favour of the beneficiary countries.
5.135 Paraguay asserts that its enterprises are at a
competitive disadvantage vis-�-vis their competitors in the beneficiary
countries not only because they are denied equivalent market access
opportunities. Paraguayan enterprises also have to bear the cost of combating
drug trafficking (through internal taxes). Even within Paraguay's domestic
market, the negative effects of the tariff preferences are felt. While several
of Paraguay's products cannot enter the European Communities because of the
competitive disadvantages resulting from the tariff preferences under the Drug
Arrangements, producers in the beneficiary countries are able to enhance their
export capacity and thereby attain economies of scale in production. Paraguayan
producers are unable to attain similar economies of scale. As a result, Paraguay
argues that producers in other beneficiary countries have enhanced their
competitive position vis-�-vis Paraguayan producers even in the
Paraguayan domestic market.
5.136 Paraguay states that 90 per cent of its exports are
agricultural and that the discriminatory barriers encountered by Paraguayan
exports in the European Community market have had a detrimental effect on its
economy.187
5.137 Paraguay states that not only is there trade diversion
both in the European Community market and in the Paraguayan domestic market. As
a result of the discriminatory tariff preferences under the Drug Arrangements,
there has also been an "investment diversion". The proximity between Paraguay
and some of the beneficiary countries creates the incentive to shift investments
away from Paraguay and towards these countries. Moreover, international
investment flows in sectors benefiting from the Drug Arrangements are diverted
away from Paraguay. Paraguay notes that in instance, three major industries
which had previously invested in Paraguay had to transfer these investments to
other developing countries enjoying preferential tariff treatment.188
5.138 Paraguay claims the damage that the implementation of
the Drug Arrangements has caused to it is exacerbated by the particularities of
the geographical location of Paraguay. As a land-locked nation, Paraguay has to
bear higher transport costs in order to export its products to the European
Communities. The development of Paraguay is critically affected by this factor.
On the European Communities reading of the Enabling Clause, a GSP truly
responsive to the needs of development can therefore not focus exclusively on
the problems specific to a selected group of countries. Paraguay argues that it
must take into account the considerable variety of problems facing the
developing countries and therefore create benefits for all of them.
5. Conclusion
5.139 Paraguay submits that the Drug Arrangements are
inconsistent with the requirements of the MFN obligation under Article I:1 of
GATT 1994 and are not justified under the Enabling Clause. As a result, Paraguay
has suffered from trade and investment diversions.
5.140 Paraguay requests the Panel to find that the measures
at issue are inconsistent with the European Communities' obligations under the
WTO Agreement. In the absence of a waiver agreed upon by the membership,
Paraguay respectfully requests the Panel to suggest to the European Communities
to apply the tariff preferences under the Drug Arrangements to all developing
countries, as contemplated under the Enabling Clause.
-
united states
1. Introduction
5.141 The United States asserts that it is participating in
this dispute because of the systemic importance of the issues presented, and the
potential implications of any recommendations and rulings by the DSB. The United
States asserts that it takes no position on whether the Drug Arrangements are
consistent with the European Communities' WTO obligations. The United States
urges the Panel to adopt a careful, prudent approach in resolving this dispute,
one which is confined to the specific facts in this case and which takes care to
avoid going beyond the particular circumstances of this dispute.189
5.142 The United States is of the view that the Enabling
Clause is not an affirmative defence, but rather a positive rule that authorizes
Members to grant trade preferences to developing countries under certain
circumstances.190 The United States disagrees with India that the wording of
paragraph 1 of the Enabling Clause requires developed countries to extend any
advantage accorded under a GSP scheme to all developing countries.191 The United
States also disagrees with India's interpretation of "non-discriminatory" under
the Enabling Clause.192 In addition, the United States addresses various issues
regarding Article XX of GATT 1994193, as well as, the preliminary issue of legal
representation raised by the European Communities during the first substantive
meeting of the Panel.194
2. The preliminary issue of legal representation
5.143 The United States notes that the preliminary issue
raised by the European Communities involves the common legal representation of a
party to the dispute and a third party. The United States indicates that it
would agree with the European Communities if its argument is that, as a general
matter, third parties could not use common representation as a way to enhance
their rights, role, or status in a dispute. However, the United States
emphasizes that there is no indication that this is the case in this dispute. To
address this concern, it should be made clear when the ACWL is speaking on
behalf of India, and when it is speaking for other delegations. The United
States asserts that it does not see a bar in principle to the ACWL representing
more than one party in this particular dispute. The United States notes that
conflicts of interest concerns would normally be the primary concern of the
individual Members involved. The United States also states that given the
decision on expanded third-party rights, it is not clear that there is a
confidentiality issue in this case.195
3. The Enabling Clause excludes the application of
Article I:1 of GATT 1994
5.144 The United States agrees with the European Communities
that the Enabling Clause is not an affirmative defence justifying a violation of
Article I:1 of GATT 1994. According to the United States, the Enabling Clause
forms part of the GATT 1994 as an "other decision" pursuant to paragraph
(1)(b)(iv) of GATT 1994. Therefore, the Enabling Clause has co-equal status with
the GATT 1947 (part of the GATT 1994 pursuant to paragraph 1(a) thereof). In
this regard, the Enabling Clause is part of the overall balance of rights and
obligations agreed to in the GATT 1994 and the WTO Agreement, and is not merely
an "affirmative defense" to Article I:1 of the GATT 1947.196
5.145 The United States points to the phrase, "[n]otwithstanding
the provisions of Article I of the General Agreement" as excluding the
application of Article I:1 of GATT 1994. The United States points out
that the dictionary definition of the word "notwithstanding" is "in spite
of", which in turn denotes that Members may grant preferential treatment under
the Enabling Clause "in spite of" the obligation to extend MFN treatment
unconditionally.197
5.146 The United States asserts that unlike the 1971 Waiver,
the Enabling Clause contemplates a general, permanent and separate authorization
that is available "notwithstanding" Article I:1 of GATT 1994. In this respect,
there is no need to determine whether a measure is inconsistent with Article I:1
of GATT 1994 before applying the Enabling Clause. The Enabling Clause is a
positive rule providing authorization and establishing obligations in itself.198
5.147 The United States likens the situation in this dispute
with that of US - Wool Shirts and Blouses, where the Appellate Body held
that a provision described by a party as an "exception" was not an affirmative
defence, but rather was "an integral part" of the arrangement under the
Agreement on Textiles and Clothing that "reflects an equally carefully drawn
balance of rights and obligations."199
5.148 According to the United States, not only is India's
legal position incorrect, but the consequences of its interpretation would be
unfortunate. In this regard, the United States asserts that placing the burden
on developed countries to defend actions that benefit developing countries would
create a disincentive for developed countries to voluntarily grant preferential
treatment under the Enabling Clause. Additionally, this would have the
unfortunate effect of making treatment more difficult to defend. Accordingly,
India would have the Panel conclude that preferential tariff treatment should be
presumed not to be covered under the Enabling Clause, and that it is
incumbent upon the developed country to prove otherwise.200
5.149 The United States claims that India's argumentation
also suffers from internal contradictions. On the one hand, regarding the
"affirmative defence" claim, India asserts that paragraph 2(a) does not impose
positive obligations or positive rules establishing obligations in themselves,
while on the other hand, India claims that preferential tariff treatment must be
non-discriminatory and states, "[t]here is no dispute that this is a binding
requirement."201 According to the United States, India cannot have it both ways,
seeing legal requirements in the text when they benefit India, while denying the
existence of obligations when it wants the European Communities to bear the
burden of proof.202
5.150 In light of the foregoing, the United States rejects
India's claim that the European Communities bears the burden of proving that the
Drug Arrangements are consistent with the Enabling Clause because it is an
"affirmative defence". The United States asserts that India's argument that the
Drug Arrangements are inconsistent with Article I:1 of GATT 1994 is irrelevant,
unless India can first establish that the Drug Arrangements are inconsistent
with the Enabling Clause.203
4. "All" developing countries
5.151 The United States disagrees with India that the wording
of paragraph 1 of the Enabling Clause requires developed countries to extend any
advantage accorded under a GSP scheme to all developing countries. The text of
the Enabling Clause leads to the opposite conclusion.204
5.152 According to the United States, India's argument that
"developing countries" in paragraph 1 must be read as though the term "all" had
been inserted before "developing countries" is groundless because the Enabling
Clause refers in all cases either to "developing countries" or "the developing
countries" and never to "all developing countries". Moreover, India's
interpretative approach does not work in other parts of the Enabling Clause. The
United States argues that India would certainly not support the parallel
argument that the use of the word "parties" in "developed contracting parties"
of paragraph 2(a) means that "all developed countries" must accord preferential
tariff treatment in order for any developing country to take advantage of it.205
5.153 The United States agrees with the European Communities
and other third parties that the reference in paragraph 1 of the Enabling Clause
to "other contracting parties" cannot be limited to "other developed
contracting parties", as India suggests. According to the United States, the
Enabling Clause allows India and other developing countries to grant
differential and more favourable treatment to other developing countries. The
Enabling Clause specifically provides for developing countries to grant
preferential treatment to other developing countries, as in the case of
paragraph 2 (c).206
5.154 The United States contends that if India's
interpretation of paragraph 1 were correct, it would render paragraph 2(c) a
nullity, as less-developed countries that had entered into an arrangement under
paragraph 2(c) would have to extend preferential treatment to all developing
counties, including those that had not entered into such arrangement. In
addition, the United States contends that paragraph 2(d) of the Enabling Clause
is also directly at odds with India's argument that all developing countries
must be treated the same. Lastly, the United States agrees with other parties in
this dispute that paragraphs 3(c) and 7 of the Enabling Clause demonstrate that
India's "one size fits all" approach is incompatible with the Enabling Clause.207
5. The Enabling Clause reference to "non-discriminatory"
5.155 The United States notes that paragraph (a) of the 1971
Decision permits developed country contracting parties to accord preferential
tariff treatment to products originating in developing countries and territories
"with a view to extending to such countries and territories generally the
preferential tariff treatment referred to in the Preamble to this Decision." The
1971 Decision does not elaborate on the significance of the use of the term
"with a view to", but rather simply requires that the treatment must be that
referred to in the preamble. The preamble notes unanimous UNCTAD agreement on
establishment of a (1) mutually acceptable system of (2) generalized, (3)
non-reciprocal and (4) non-discriminatory preferences beneficial to the
developing countries.208 The United States claims that India's arguments ignore the
elements other than non-discriminatory.209
5.156 The United States disagrees with India's argument that
"non-discriminatory" in the context of the Enabling Clause means
"unconditionally" as the term is used in Article I:1 of GATT 1994. The United
States notes, like other parties involved in this dispute, that the word
"unconditionally" is simply not found in the text of the Enabling Clause. As
previously mentioned, the United States asserts that the Enabling Clause
excludes the application of Article I:1 altogether, including the
"unconditionally" requirement of Article I:1 of GATT 1994. In light of the fact
that the Enabling Clause excludes the application of Article I:1 of GATT 1994,
and that the Enabling Clause does not include an "unconditionally" requirement,
the United States claims it is not necessary for the Panel to address the
European Communities' extended arguments on the meaning of the word
"unconditionally."210
5.157 The United States contends that in the same way India
seeks to import into the Enabling Clause the "unconditionally" requirement of
Article I:1 of GATT 1994, it also seeks to import into the term
"non-discriminatory" a "conditions of competition" test similar to that applied
under some, but not all, of the provisions of Articles I and III of GATT 1994.
However, the United States maintains that unlike Articles I and III of GATT
1994, the 1971 Decision simply employs the term "non-discriminatory," and there
is no indication that the analysis of this term is intended to be the same as
that under a "like product" analysis. The United States asserts that the
Appellate Body has recognized that "discrimination" is not the same as the
"national treatment" test under Article III of GATT 1994.211
5.158 The United States generally agrees with the European
Communities that a GSP scheme may be described as "non-discriminatory" if it
differentiates between unequal situations. As previously mentioned, paragraphs
3(c) and 7 of the Enabling Clause appear to contemplate explicitly that
preferential treatment need not be granted on a "one size fits all" basis and
that distinctions among developing countries tailored to their development,
financial and trade needs are specifically contemplated. According to the United
States, India's approach to "non-discriminatory" would appear to render
"generalized" redundant or meaningless since "generalized" means "less than
all".212
5.159 The United States does not disagree with the European
Communities that a GSP scheme may be described as "non-discriminatory" if based
on objective criteria and on an overall assessment of all relevant
circumstances. The United States asserts that under India's approach, GSP
schemes would have to be administered on a "lowest common denominator" basis. In
this respect, a GSP scheme could be applied only to the extent it addressed
needs that were identical among developing countries, and it could not be
adapted with respect to particular needs of sub-sets of developing countries.
The United States notes that the 1971 Decision calls for a "mutually acceptable
system" of preferences, and that a Member has the right, not the
obligation, to accord preferential treatment. Accordingly, the United States
emphasizes that while a "one size fits all" obligation to grant any preferences
to all developing countries may be acceptable to India for purposes of this
dispute, it is doubtful that it would be acceptable to other beneficiary
countries or to GSP donor countries, or even to India in a different dispute.213
5.160 The United States joins the many developing third party
countries in this dispute that have pointed out the practical difficulty of
reading legal obligations into the Enabling Clause not found in the text. The
United States asserts that India is asking the Panel to read into the Enabling
Clause an obligation that is not legally supported in the text and that, as a
matter of trade policy, would, contrary to the purpose of the Enabling Clause,
create a disincentive for Members to extend tariff preferences to
developing countries.214
6. Article XX of GATT 1994
5.161 The United States asserts that it takes no position on
whether the European Communities' measures are inconsistent with Article XX of
GATT 1994. According to the United States, there is no need for the Panel to
address this issue as the dispute should be decided on the basis of the Enabling
Clause.215 Nonetheless, the United States comments that both the European
Communities and India err in their use of the phrase "least trade restrictive
measure" in addressing whether the Drug Arrangements are "necessary" under
Article XX(b) of GATT 1994.216
5.162 The United States submits that nowhere in the ordinary
meaning of "necessary" is there a meaning of "least trade restrictive", nor does
"necessary" take on the meaning of "least trade restrictive" from the context of
Article XX or the object and purpose of the GATT 1994. The United States notes
that the concept of "not more trade-restrictive" appears in both the Agreement
on Technical Barriers to Trade and the Agreement on the Application of Sanitary
and Phytosanitary Measures. Therefore, the fact that the WTO drafters did not
use this phrase in the GATT 1994 demonstrates, according to the United States,
that they did not intend to include this concept in Article XX(b).217
5.163 The United States notes that the Appellate Body
addressed the applicable standard for evaluating whether a measure is
"necessary" under Article XX(b) of GATT 1994 in EC - Asbestos and did not
use the standard of "least trade restrictive". The issue before the Appellate
Body was whether an alternative measure is reasonably available that is "not
inconsistent with" other GATT provisions, or if no such alternative measure is
reasonably available, whether the measure chosen "entails the least degree of
inconsistency with other GATT provisions". The United States argues that "less
inconsistent" would require one to examine the degree of inconsistency with the
Agreement, whereas "less trade restrictive" would require one to examine the
degree of trade effect of a measure.218
48 Panel Report, US - Customs User Fee, and Panel Report,
US - MFN Footwear, see second written submission of India, para. 56.
49 Ibid., para. 48.
50 Replies of the European Communities to questions from the
Panel to both parties and third parties, para. 167.
51 Second written submission of the European Communities, paras.
51-52.
52 Reply of India to question No. 15 from the Panel to both
parties. The European Communities cites India's replies to questions Nos. 16 and
17 from the Panel to both parties which do not record any concession on this
point.
53 Replies of the European Communities to questions from the
Panel to both parties and third parties, para. 57.
54 First written submission of the European Communities, para.
84.
55 Ibid., para. 116.
56 Replies of the European Communities to questions from India,
para. 5.
57 Replies of the European Communities to questions from the
Panel to both parties and third parties, para. 136.
58 Replies of the European Communities to questions from India,
para. 12
59 Replies of the European Communities to questions from the
Panel to both parties and third parties, para. 144.
60 Replies of the European Communities to questions from India,
para. 21.
61 Replies of the European Communities to questions from the
Panel to both parties and third parties, para. 145.
62 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 5, where in footnote 3 it refers to the paras.
126-131of the First written submission of the European Communities.
63 [emphasis original] Joint third-party submission of Bolivia,
Colombia, Ecuador, Peru and Venezuela And, para. 7, where in footnote 4 it
refers to the para. 316 of the First written submission of the European
Communities and the INCB 2002 Annual Report, annexed thereto as Exhibit (EC-5).
64 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 11, where in footnote 5 it refers to Exhibit (EC-7)
annexed to the First written submission of the European Communities.
65 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 15, where in footnote 9 it cites the General Assembly
of the United Nations, A/RES/56/124 of 19 December 2001.
66 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 12, where in footnote 6 it refers to the preamble of
Council Regulation 3835/90 of 20 December 1990 amending Regulations (EEC) No
3831/90, (EEC) No 3832/90 and (EEC) No 3833/90 in respect of the system of
generalized tariff preferences applied to certain products, OJ L 370/126.
67 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 13, where in footnote 7 it cites SG/di 416; 6 June
2002; Andean Community: The Advantages of the GSP Special Regime.
68 Ibid.
69 Oral statement of Bolivia, paras. 12, 13 and 15.
70 Oral statement of Bolivia, paras. 14 and 17.
71 Oral statement of Colombia, paras. 5, 7 and 12.
72 Oral statement of Colombia, paras. 9, 10, 13 and 15.
73 Oral statement of Ecuador, pp.1-2.
74 Oral statement of Ecuador, p. 2.
75 Oral statement of Peru, paras. 5, 9 and 12.
76 Oral statement of Venezuela, pp. 1 and 2.
77 Oral statement of Venezuela, p. 2.
78 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 24, where in footnote 15 it cites Resolution 21(II),
'Preferential or free entry of exports of manufactures and semi-manufactures of
developing countries to the developed countries', adopted at UNCTAD II, 1968,
reprinted in H.D. Shourie, UNCTAD II - A Step Forward, New Delhi (1968),
343-344.
79 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 24, where in footnote 16 it refers to statements made
in: GATT, Minutes of meeting of the Council, C/M/69, 28 May 1971.
80 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 125, where in footnote 17 it cites the Decision of the
Contracting Parties of 25 June 1971 (BISD 18S/24).
81 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 30, where in footnote 19 it cites the Doha WTO
Ministerial 2001: Ministerial Declaration of 20 November 2001, WT/MIN(01)/DEC/1,
at para. 2.
82 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 32, where in footnote 21 it refers to the
re-affirmation of the Enabling Clause in the Doha Implementation decision, �
12.2.
83 [emphasis original] Joint third-party submission of Bolivia,
Colombia, Ecuador, Peru and Venezuela, para. 37, where in footnote 24 it cites:
The Concise Oxford Dictionary of Current English, 7th Edition.
84 First oral statement on behalf of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 3.
85 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 41.
86 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 51, where in footnote 31 it cites the GATT, Minutes of
meeting of the Council, C/M/69, 28 May 1971.
87 As mentioned above, by the General Assembly of the United
Nations. See also the 2002 annual report of the International Narcotics Control
Board mentioned above, which specifically noted the enormity of the drug problem
in South America.
88 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 63, where in footnote 37 it refers to para. 112 of
first written submission of the European Communities.
89 First oral statement of Bolivia, Colombia, Ecuador, Peru and
Venezuela, para. 4.
90 First oral statement of Bolivia, Colombia, Ecuador, Peru and
Venezuela, paras. 8-9.
91 Joint third-party submission of Bolivia, Colombia, Ecuador,
Peru and Venezuela, para. 6, where in footnote 2, it cites paragraph 9 of
Paraguay's third party submission.
92 Third-party submission of Costa Rica, para. 1.
93 Third-party submission of Costa Rica, para. 13.
94 Third-party submission of Costa Rica, paras. 1 and 2.
95 Third-party submission of Costa Rica, para. 9.
96 Third-party submission of Costa Rica, paras. 7 and 11.
97 Third-party submission of Costa Rica, para. 9.
98 Third-party submission of Costa Rica, para. 9.
99 Third-party submission of Costa Rica, para. 16; Oral
statement of Costa Rica, paras. 6 and 9.
100 Oral statement of Costa Rica, para. 3.
101 Third-party submission of Costa Rica, para. 18.
102 Oral statement of Costa Rica, para. 4.
103 Oral statement of Costa Rica, para. 5.
104 Third-party submission of Costa Rica, para. 19
105 Oral statement of Costa Rica, para. 9.
106 Third-party submission of Costa Rica, para. 20, where in
footnote 15 Costa Rica states: "The Decision of 1971 still possesses legal
authority, albeit limited. It is incorporated, by direct reference, into the
Enabling Clause. It defines and sets the parameters of the GSP pursuant to which
the developed countries may grant preferential tariff treatment to developing
countries notwithstanding the provisions of Article I of GATT."
107 [emphasis original] See third-party submission of Costa Rica,
para. 20, where in footnote 16 Costa Rica cites: Council of the GATT, Minutes of
Meeting held in the Palais des Nations, Geneva, on 25 May 1971, C/M/69, 28 May
1971 (Exhibit CR -1).
108 Third-party submission of Costa Rica, para. 20.
109 Oral statement of Costa Rica, para. 14.
110 Oral statement of Costa Rica, para. 17.
111 Third-party submission of Costa Rica, para. 22.
112 Oral statement of Costa Rica, para. 20.
113 Third-party submission of Costa Rica, para. 21.
114 Third-party submission of Costa Rica, para. 25.
115 Third-party submission of Costa Rica, para. 24.
116 Third-party submission of Costa Rica, para. 25.
117 Third-party submission of Costa Rica, para. 26.
118 Third-party submission of Costa Rica, para. 23.
119 Third-party submission of Costa Rica, para. 27.
120 Oral statement of Costa Rica, para. 20.
121 Third-party submission of Costa Rica, para. 28, where in
footnotes 19, 20 and 21, Costa Rica refers to and cites paras. 28, 61 and 75
respectively of the First written submission of the European Communities.
122 Oral statement of Costa Rica, para. 29.
123 Third-party submission of Costa Rica, paras. 30-31, where
Costa Rica refers to the "Agreed Conclusions of the Special Committee on
Preferences", UNCTAD, Document TD/B/330, p. 7 at para. 2 (ii) (b) of Part IX
(Exhibit CR-2).
124 Third-party submission of Costa Rica, para. 32.
125 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, para. 2.
126 Joint oral statement of El Salvador, Guatemala, Honduras and
Nicaragua, p. 1.
127 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, para. 8 and para. 9, where an excerpt of the 2001 Report
of the International Narcotics Control Board is cited stating that almost 50 per
cent of cocaine arriving into the Unites States annually transits through
Central America and Mexico.
128 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, para. 10.
129 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, paras. 11-15.
130 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, para. 16, where in footnote 4 the following poverty and
illiteracy figures are provided for each of the four countries: In El Salvador,
39 per cent of the population lives in poverty and 16 per centin extreme
poverty. As regards education, the illiteracy rate for those aged over 15 years
is 15 per cent (2001 data). In Guatemala, 79.9 per cent of the population and
75.5 per cent of households live in conditions of poverty; 59.3 per cent of them
in conditions of extreme poverty. As regards education, the rate of illiteracy
among the population aged over 15 is 32.7 per cent. In Honduras, 64 per cent of
households live in poverty. Regarding education, in 2001, the rate of illiteracy
among the population aged over 15 years was 20 per cent. In Nicaragua, 75 per
cent of the population lives in conditions of poverty, according to the index of
unsatisfied basic needs. Almost one third (31.2 per cent) lives in some degree
of poverty, while the remaining households live in extreme poverty (43.6 per
cent) because they lack from two to four basic needs. Only one quarter of
households (25 per cent) are not in the poverty category. Sixty per cent of the
population is in urban areas and 40 per cent in rural areas, but 75 per cent of
poor people are in rural areas. As regards education, the urban rate of school
attendance is 79, whereas in rural areas it is 69 per cent.
131 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, para. 6.
132 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, para. 7.
133 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, para. 21.
134 Joint oral statement of El Salvador, Guatemala, Honduras and
Nicaragua, p. 2.
135 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, para. 22.
136 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, paras. 23-27.
137 Joint third-party submission of El Salvador, Guatemala,
Honduras and Nicaragua, paras. 28.
138 Joint oral statement of El Salvador, Guatemala, Honduras and
Nicaragua, p. 2.
139 Third-party submission of Mauritius, p. 1.
140 Third-party submission of Mauritius, p. 1.
141 Third-party submission of Mauritius, pp. 1-2.
142 Third-party submission of Mauritius, p. 3.
143 Third-party submission of Mauritius, pp. 4-5.
144 Third-party submission of Mauritius, pp. 5-6.
145 Third-party submission of Mauritius, p. 6.
146 [emphasis original] Oral statement of Pakistan, para. 2.
147 [emphasis original] Oral statement of Pakistan, para. 3.
148 Oral statement of Pakistan, para. 4.
149 Oral statement of Pakistan, paras. 4-5.
150 Oral statement of Pakistan, paras. 6-8.
151 First oral statement of Panama, p. 3.
152 Third-party submission of Panama, p. 7.
153 Third-party submission of Panama, p. 7, where Panama provides
the following data: Seizures in 2001 of cocaine, heroin, and crack were
2,655,984.49, 87,231.32 and 4 434.55 grams respectively.
154 Third-party submission of Panama, p. 7
155 First oral statement of Panama, p. 3.
156 Third-party submission of Panama, p. 6.
157 First oral statement of Panama, p. 3.
158 Third-party submission of Panama, p. 3.
159 Third-party submission of Panama, p. 3.
160 Third-party submission of Panama, p. 3.
161 First oral statement of Panama, p. 2.
162 Third-party submission of Panama, p. 3.
163 Third-party submission of Panama, p. 4.
164 Third-party submission of Panama, pp. 4-5.
165 Third-party submission of Panama, p. 5.
166 Third-party submission of Panama, p. 5.
167 Third-party submission of Panama, p. 5.
168 Third-party submission of Panama, p. 6.
169 Third-party submission of Panama, p. 6 and footnote 8 where
is stated: The basic exports of these companies were melons, watermelons,
leather etc. Panamanian plant product exports amounted to B 173.7 million in
2001. The final destination of 85.5 per cent of those exports (B 139.4 million)
was the European Union, from which it must be concluded that the emergence of
those companies was due to the development of Panama's relations with the market
concerned during that period.
170 Third-party submission of Panama, p. 6.
171 Letter of 28 May 2003 from the Permanent Mission of Paraguay
to the Panel regarding the role of the Advisory Centre on WTO Law as counsel to
both India and Paraguay.
172 Second oral statement of Paraguay, para. 6.
173 Second oral statement of Paraguay, para. 7.
174 First written submission of the European Communities, para.
84.
175 Second oral statement of Paraguay, para. 17.
176 Report of the Special Committee on Preferences on the second
part of its fourth session, 21 September - 12 October 1970 ( TD/B/ 329/ Rev.1).
177 Part III of the Agreed Conclusions.
178 Part IV of the Agreed Conclusions.
179 First oral statement of Paraguay, para. 9.
180 First oral statement of Paraguay, para. 16.
181 First oral statement of Paraguay, para. 18.
182 First oral statement of Paraguay, para. 19.
183 First written submission of the European Communities, para.
116.
184 First oral statement of Paraguay, para. 19.
185 First oral statement of Paraguay, para. 20.
186 First oral statement of Paraguay, para. 21.
187 First oral statement of Paraguay, para. 26.
188 First oral statement of Paraguay, para. 24.
189 Third-party submission of the United States, para. 2; first
oral statement of the United States, para. 14.
190 Third-party submission of the United States, paras. 4-9;
second oral statement of the United States, paras. 2-4.
191 First oral statement of the United States, paras. 2-6.
192 First oral statement of the United States, paras. 7-14.
193 Third-party submission of the United States, para. 10; second
oral statement of the United States, paras. 6-8.
194 First oral statement of the United States, para. 15.
195 First oral statement of the United States, para. 15.
196 Third-party submission of the United States, paras. 4-5.
197 [emphasis original] Third-party submission of the United
States, para. 6.
198 Third-party submission of the United States, para. 7.
199 Third-party submission of the United States, para. 8, where
in footnote 5 it cites, US - Wool Shirts and Blouses, DSR 1997:1, 323, at
337 .
200 [emphasis original] Second oral statement of the United
States, para. 3.
201 Second oral statement of the United States, para. 4, where in
footnote 4 it refers to para. 79 of India's second submission.
202 Second oral statement of the United States, para. 4
203 Third-party submission of the United States, para. 9.
204 First oral statement of the United States, para. 3.
205 [emphasis original] First oral statement of the United
States, para. 4.
206 [emphasis original] First oral statement of the United
States, para. 5.
207 [emphasis original] First oral statement of the United
States, para. 6.
208 First oral statement of the United States, para. 8.
209 First oral statement of the United States, para. 9.
210 First oral statement of the United States, para. 10.
211 First oral statement of the United States, para. 11 and
footnote 12 where it cites the Appellate Body Report, US - Gasoline, p.
23.
212 First oral statement of the United States, para. 12 and
footnote 14 where it cites, The New Shorter Oxford Dictionary, 4th
Edition, p. 1074 (defining "generalize" as "Bring into general use; make common,
familiar, or generally known; spread or extend; apply more generally; become
extended in application.").
213 [emphasis original] First oral statement of the United
States, para. 13.
214 [emphasis original] First oral statement of the United
States, para. 14.
215 Third-party submission of the United States, para. 10; second
oral statement of the United States, para. 6.
216 Second oral statement of the United States, para. 6.
217 Second oral statement of the United States, para. 7.
218 Second oral statement of the United States, para. 8 and
footnote 7 where it cites the Appellate Body Report, EC - Asbestos,
paras. 170-171.