Wto India-Ec Gsp Dispute

INTRODUCTION

The overall purpose of this case note is to highlight the

relevance for international environmental law of the

recent World Trade Organization (WTO) decision on

the use of 'positive' conditionality in the Generalized

System of Preferences (GSP) of the European Community

(EC).

1

Although the

India-EC GSP

dispute was not

directly concerned with environmental conditionality

per se

, this WTO ruling has, nevertheless, broader

implications for the EC's capacity to use unilateral trade

preferences as an incentive to promote developing

countries' compliance with international environmental

regimes. This was recognized in the subsequent

GSP reform proposed by the European Commission.

2

More generally, this note will argue that the jurisprudential

approach of the Appellate Body opens the way

for WTO-consistent use of unilateral trade

incentives

linked to international environmental norms, in addition

to the environment-related unilateral trade

restrictions

already permitted under the General Agreement on Tariffs

and Trade (GATT), Article XX, general exceptions.

3

The first part of this case note provides an introduction

to the current structure of the Community's GSP,

paying particular attention to the so-called 'GSP Environment'.

The second part presents the main conclusions

of the Appellate Body's decision in the

India-EC

GSP Case

, underscoring its relevance for the provision

of additional trade preferences to developing countries

complying with international environmental agreements.

The third part concentrates on the environmental

component of the new 'GSP-plus' proposed by the

Commission following this WTO ruling. The case note

will conclude with a critical analysis of the potential

improvements and drawbacks of this new incentive

arrangement, not only in terms of WTO compatibility,

but also in providing a meaningful mechanism for

encouraging ratification and compliance with international

environmental regimes.

THE CURRENT GENERALIZED

SYSTEM OF PREFERENCES OF

THE EC

The GSP is a unilateral trade policy instrument

through which major industrialized countries grant

preferential tariff treatment

4

to products originating in

developing countries on a non-reciprocal and voluntary

basis, and without extending the same treatment

to the 'like products' from other industrialized countries.

The EC was the first industrialized GATT party to

put in place a GSP scheme in 1971, which is currently

governed by Council Regulation (EC) No 2501/2001.

5

Under the current GSP scheme, five different arrangements

are in operation, offering different trade

preferences in terms of product coverage and tariff

1

WTO DS 1 December 2003,

European Communities - Conditions

for the Granting of Tariff Preferences to Developing Countries

, WT/

DS246/R; and WTO AB 7 April 2004,

European Communities -

Conditions for the Granting of Tariff Preferences to Developing

Countries

,

WT/DS246/AB/R (AB-2004-1) (hereinafter 'Panel Report'

and 'AB Report' respectively).

2

Communication of 7 July 2004 from the Commission to the Council,

the European Parliament and the Economic and Social Committee,

Developing Countries, International Trade and Sustainable Development:

The Function of the Community's System of Preferences

(GSP) for the Ten-Year Period from 2006-2015, COM (2004) 461

final (hereinafter 'Commission's Communication'). European Commission,

Proposal for a Council Regulation applying a Scheme of

Generalized Tariff Preferences, COM (2004) 699 final (Brussels,

20 October 2004) (hereinafter 'Commission's Proposal').

3