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M.R. Subramani

CHENNAI, Feb. 2

INDIA has dragged the US again to the World Trade Organisation (WTO) dispute body over denial of free access to its textile and apparel products export.

According to the complaint lodged by India with the Dispute Settlement Body (DSB) of WTO, the denial of free access is through changes that the US has made to the rules of origin for textile and apparel exports between 1996 and 2000. It is for the third time that India has raised this issue at WTO.

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 stipulated that if a grey cloth was produced in a particular country then it was 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 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 said in its complaint.

For the EC the US rules say the textile and apparel goods must be made in a country from a fabric that is dyed and printed and undergoes two of the finishing operations such as bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing or moireing.

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

"The amendment says dyeing, printing and other finishing operations that are ordinarily performed to turn grey fabric into a useful article of commerce no longer confer origin (of a specified textile product)," India complained.

For products such as silk scarves, blankets, beds, table and kitchen linen, the place where the grey fabric is made is deemed as the country of origin. Similarly for apparels, the countries where the component parts are cut into shape are not treated as the country of origin.

India's contention is that the US rules now distinguish between textiles or apparel products and other industrial items; fabrics made of wool and other fibres; different made-up non-apparel products processed from fabric made of wool or cotton and those made from other fibres; and made-up non-apparel products made of fabric with more than 16 per cent cotton and those made of fabric with 16 per cent or less cotton.

"The changes thus resulted in extraordinarily complex rules under which the criteria that confer origin vary between similar products and processing operations. The structure of changes, the circumstances under which they were adopted and their effect on the conditions for competition for textiles and apparel products suggest that they serve trade policy purposes," India said.

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.

Overall, this is India's ninth complaint against the US and, of this, five complaints have been on Washington's textile trade policy. The US, on the other hand, has filed three complaints_ challenging the quantitative restrictions, patents and auto policies_ against India.

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