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Since the inception of the World Trade Organization (WTO) in 1995, India has initiated cases against other countries eighteen times and has been complained against twenty times before the WTO Dispute Settlement Body (DSB), as of the end of 2009. India is therefore one of the most frequent developing country users of the WTO dispute settlement system. This chapter looks at the case where India contested the tariff concessions granted by the European Communities (EC) to twelve developing countries under its Generalised System of Preferences (GSP) scheme (EC – GSP case) to highlight some critical dimensions relating to India's use of the WTO dispute settlement mechanism. Some of the highlighted issues relate to the economic and political factors behind India's decision to challenge the EC, the participation of the industry and private sector stakeholders in India in the case, and measures that the Indian government can take to increase and make stakeholders' participation more effective. The EC – GSP case is chosen to demonstrate these issues as it has significant long-term implications for the trading interests of developing countries, including India's.
On 10 December 2001, the EC launched its new GSP scheme through Council Regulation (EC) No. 2501/2001. The regulation provided for five different preferential tariff preferences, and India was especially concerned with three of them: tariff preferences granted respectively under the special arrangements as reward for some countries' efforts to combat drug production and trafficking (the Drug Arrangements); under the special arrangements for the protection of labour rights (the Labour Arrangements); and under the special arrangements for the protection of the environment (the Environment Arrangements).
Disciplining farm subsidies has been one of the main objectives of the multilateral trading system ever since agriculture was included in the negotiating mandate for the Uruguay Round negotiations in 1986. The decision to extend multilateral trade rules to the agricultural sector reflected the desire of the GATT contracting parties to rein in the market-distorting subsidies. The negotiating mandate for the Uruguay Round was thus adopted to improve “the competitive environment by increasing discipline on the use of all direct and indirect subsidies” (emphasis added). However, while agreeing to the Agreement on Agriculture (AoA), the eventual outcome of the Uruguay Round negotiations on agriculture, the GATT contracting parties adopted a more nuanced approach to the disciplining of farm subsidies.
While introducing the discipline on farm subsidies, the AoA adopted a three-tiered structure in respect of the production-related subsidies, the so-called domestic support. The discipline was ostensibly based on the perceived distortions caused by each of the three sets of subsidies. Thus, subsidies that directly influenced prices and production, including price support measures and input subsidies, were reined in. These subsidies had to be reduced if they exceeded the threshold, identified as the de minimis level, and could not exceed the de minimis level if the actual spending was below this threshold. However, subsidies that “have no, or at most minimal, trade-distorting effects or effects on production” were not subjected to any discipline.