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May 17, 2018

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Landmark judgment: WTO ‘Supreme Court’ rules in Pak favour

ISLAMABAD: In a major development, the supreme dispute settlement body of the World Trade Organisation (WTO) ruled in favour of Pakistan, rejecting the appeal of the European Union (EU) in the famous Polyethylene Terephthalate (PET) countervailing duty case, in Geneva on Wednesday.

The WTO Appellate Body, which is the highest dispute settlement forum on trade issues at global level, is regarded as the “World Trade Supreme Court” in trade dispute litigation. PET, popularly also called Resin, is bottle-grade polyester chip, which is used in production of disposable PET bottles for mineral water beverages.

The three-member bench, while rejecting the appeal of the second largest trading block, the EU -- representing 28 nations of Europe, upheld the determination of the WTO Panel which had ruled in Islamabad’s favour on July 6, 2017.

The forum upheld the panel decision, which had ruled that measures adopted by the European Commission on export of PET, – a chemical used in the making of mineral water bottles, against WTO law and rules. The panel of WTO adjudicators had categorically held that measures applied by EU on Pakistani PET were inconsistent with the Subsidies and Countervailing Measures Agreement (SCM) of the WTO. The EU had appealed against the initial decision.

This is being seen as a big diplomatic success of Pakistan at the multilateral forum in Geneva by trade experts. The report was released by the WTO apex body in Geneva. The EU way back in 2010 imposed a crippling countervailing duty on Pakistan’s PET being exported to Europe. As per conservative estimates, the unfair trade protection measures imposed by EU seven years ago caused a loss of approximately 300 million Euros to Pakistan’s nascent chemical industry.

Pakistan had filed a case of unfair trade practices in March 2015 against 28-country EU. International trade law experts have labelled it as a success of Pakistan’s trade diplomacy, which will have far reaching effects in protecting Pakistan’s exports globally.

Pakistan built the case that the EU’s countervailing measures were inconsistent with their obligations under the General Agreement on Tariffs and Trade (GATT) and the Agreement of Subsidies and Countervailing Measures (SCM Agreement). The US and China participated in the case as third-party observers. Pakistan was represented during the proceedings by the Pakistan Mission to the WTO and the Advisory Centre on WTO Law (ACWL).

Pakistan’s Ambassador to WTO Dr Syed Tauqir Shah told The News from Hangzhou, China, where he is leading a Pakistan delegation on e-commerce: "By the grace of Allah, this is an extremely positive development for Islamabad’s trade in particular and multilateral trading system in general.

“In an era when protectionism is looming large on the global trade horizon, this decision strengthens global trading community’s trust in multilateral trading system. A developing country like Pakistan getting a decision from the highest adjudicating body against economic giant like EU, is a triumph of global rule of law and invaluable institution called WTO.”

The ambassador, who personally led and coordinated the effort to defend Pakistan’s position at WTO, said that in present times, WTO and its crown jewel the dispute system is under tremendous pressure due to policies and actions of one of the big economic powers. A decision like this is a testimony to utility and value of the system, and gives confidence and strength to developing members of WTO, which form 80 percent of the membership, he said.

He added that contesting a case at the international dispute forum is a team work, and joint effort of many national agencies and private sector exporters, particularly Ministry of Commerce, National Tariff Commission, State Bank of Pakistan, Federal Board of Revenue and Pakistan’s WTO Geneva Mission. He hoped that the findings of the WTO panel would boost Pakistan’s exports and also help ward off future trade restrictions being based on similar trade remedy practices.

The EU had imposed countervailing duty thereby challenging Pakistan’s Manufactured Bond Scheme (MBS) administered by the FBR, the long-term finance given for export-oriented projects (LTF-EOP), and many prevailing commercial practices in Pakistan, Dr Tauqir Said.

“As a result, this ruling will dissuade and restrict other member countries from applying such trade restrictive measures against Pakistani exports and has sanctified our schemes and their administration, namely MBS and LTF-EOP. This decision has systemic implications for all trading nations, and is being viewed by experts with a lot of interest. Pakistan has always met its WTO obligations, and this decision of the Appellate Body clearly demonstrates that the Pakistan’s trade policies are strictly in accordance with the WTO rules”.

The ambassador said there is a lot of learning for Pakistan’s trade policymakers and implementers, like the FBR and the Ministry of Commerce, vis-a-vis administration of its trade facilitation schemes and their documentation.

“We have to play by the global rules of the game, and be prepared for strict scrutiny. There are no winners or losers, every dispute decided at the WTO is a victory for the rule-based global system called the WTO, this is about global rule of law, wherein multilateral systems guarantee the rights of developing countries through fair, impartial and transparent procedures,” he concluded.

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