A logo is seen at the headquarters of the World Trade Organization in Geneva on October 5, 2022. , Photo Credit: Reuters
heyFollowing complaints brought by the European Union (EU), Japan and Taiwan, three World Trade Organization (WTO) dispute settlement panels found India’s tariffs on certain information and communications technology (ICT) products such as mobile phones inconsistent with India’s WTO obligations. Are. , Specifically, the panel concluded that India violated Article II of the General Agreement on Tariffs and Trade (GATT) because India’s tariffs violated its goods schedule. Since one of the central objectives of the WTO is to promote transparency and predictability in the multilateral trading order, WTO member countries have a legal obligation not to exceed their ‘bound’ or maximum tariff rates set out in their goods schedules. Do not apply tariff rates. , Goods schedules are based on the classification system of the World Customs Organization, which assigns trade products with specific names and numbers. It is also known as Harmonized System of Nomenclature (HSN). Due to the continuous emergence of new products due to technological innovations, the HSN system is regularly updated to reflect new products, also known as ‘transpositions’.
logic of panels
To justify higher tariff rates, India argued that its binding tariff commitments on ICT products are contained in the WTO Ministerial Declaration on Trade in Information Technology Products (ITA Agreement), which India acceded to in 1997. Adopted in 1996 the ITA Agreement, an arrangement through which WTO member countries agree to eliminate tariffs on IT products. However, commitments under ITA become binding on a country under Article II.1(a) and (b) of GATT if they are included in the goods schedule. Accordingly, the Panel held that India’s Goods Schedule, not the ITA, is the source of India’s legal obligations on tariffs, including on products covered by the ITA.
The panel also rejected India’s contention that its commitments under the ITA are “stable”. India argued that its commitments under the Goods Schedule did not cover products that emerged due to technological innovations after the conclusion of the ITA. But the panel held that the ITA cannot override the tariff commitments given in India’s Goods Schedule.
Lastly, the panel also rejected India’s argument on the basis of Article 48 of the Vienna Convention on the Law of Treaties, which inter alia declares that an error in the treaty shall invalidate the consent of the State. India argued that an error had occurred during the transfer of its freight schedule from the HSN 2002 edition to the HSN 2007 edition. The Panel accepted India’s contention that at the time of transposition, India had assumed that its ITA undertakings had restricted the scope of their Goods Schedule – that is, the transposition process in the HSN 2007 edition did not comply with India’s tariff commitments. Scope not expanded. Nevertheless, the Panel held that India had failed to show that this assumption was a necessary basis for India’s consent to the Goods Schedule. In any case, the panel noted that India was put on notice that its commitments under the Goods Schedule may be extended during the transposition process.
appeal ‘in the void’
Accordingly, the panel has recommended that India reduce its tariff rates and adapt them to its goods schedule, but it is unlikely that India will follow through. Compliance would mean the elimination of the high protective tariff wall that India has erected in the hope of promoting domestic manufacturing of ICT products. In fact, relying on Article 17 of the WTO’s Dispute Settlement Agreement (DSU), India is likely to appeal against the panel’s decision. However, the Appellate Body that hears appeals has ceased to exist since 2019 as the United States is blocking the appointment of members to the body. Thus, India’s appeal will go to naught. Legally, India is not required to abide by the panel’s decisions until its appeals are heard.
Relying on Article 25 of the DSU, the European Union and some other WTO member countries have created an alternative appellate mechanism – the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). However, India is not a party to it and will not use it to resolve the dispute.
EU retaliation
Can EU impose trade sanctions on India if India doesn’t comply with rules, and appeals void? Under WTO law, the EU cannot do this. WTO law does not allow countries to impose trade restrictions while an appeal is pending. Retaliatory measures in the form of trade sanctions can be imposed only after the authorization of the dispute settlement body, which consists of all WTO members.
Notwithstanding the above, the EU has developed a legal mechanism according to which if a country files an appeal against a panel under Article 17 of the DSU, and refuses to use the MPIA to resolve the dispute , then the EU can trade unilaterally. Sanctions against the losing country. The EU aims to use the stick of trade sanctions to induce countries such as India to join the MPIA. However, such countermeasures would be inconsistent with WTO law. Individual countries like India cannot be held responsible for the missing appellate body. Even if the EU does not impose trade sanctions, it can use this decision as a bargaining chip in the ongoing free trade agreement talks with India. In such a situation, India needs to tread carefully.
Prabhash Ranjan is Professor and Vice Dean of Jindal Global Law School. views are personal