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M.R. Subramani

CHENNAI, June 27

THE Dispute Settlement Body (DSB) of the World Trade Organisation (WTO) has accepted India's request to set up a dispute settlement panel on the US' denial of free access to its textile and apparel products export.

The decision to set up the panel was taken at the DSB meeting earlier this week. India had moved the WTO in January against the changes made by the US to the rules of origin

for textile and apparel exports between 1996 and 2000.

The US had blocked India's request to set up the panel last month. But with New Delhi pressing its claim again this month, the DSB had no other option. Under WTO rules, a country can block the request for setting up a panel for the first time when it is taken up by the DSB.

India said it was insisting on setting up the panel since discussion with Washington on February 7 and March 26 yielded no results.

"The structure of the rules of origin, their implementation and administration, the circumstances under which they were adopted and their effect on the conditions of competition for textiles and apparel products demonstrate that they are used as instruments to pursue trade objectives. Moreover, they create restrictive, distorting and disruptive effects on international trade, pose unduly strict requirements... ," India said in its complaint.

The dispute dates back to June 1997 when the US amended its rules of origin of textile and apparel products in 1996 after the Agreement on Rules of Origin 1994 under the then General Agreement on Tariffs and Trade (GATT).

Prior to the change in the rules of origin, textile and apparel products were treated on par with other industrial goods. Also, a good was destined to originate from a particular country on undergoing "substantial" value-addition.

However, the amended rules stipulate that if a grey cloth is produced in a particular country, it is deemed to originate from that country. India's contention is that a fabric is said to have originated from a country where it is turned into a useful product.

India contends that the US rules of origin had undergone at least two changes between 1996 and 2000. The latest change was made in 2000 following a verbal accord with the European Community. But "that takes into account the particular interests of EC", India claimed.

"The main objective of the changes appears to have been to protect the US textiles and clothing industry against import competition," New Delhi has contended.

India had initially lodged a complaint on this in June 1997 and again in January 1999. Besides India, Pakistan, Japan, Honduras and a few other countries have also been affected by this amendment.

The GATT Agreement stipulates that the rules of origin should not be used as instruments to pursue trade objectives and create restrictive, distorting or disruptive effects on international trade.

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