India, China and Pakistan today upped the ante on one of the most complex issues — rules of origin — in the global trading system, where World Trade Organisation members failed to agree on the rules since 1998.
During a general council meeting, the highest body to take day-to-day decisions, the three Asian countries called for setting up of an urgent “deliberative” process to finish the work on the harmonisation of non-preferential rules of origin, that has become a major protectionist barrier for several members in the global trading system.
Several industrialised and developing countries, including the European Union and Norway, lent support to the proposal from India, China, and Pakistan, highlighting the need to resolve the rules of origin on fast track.
But, Australia, New Zealand, and Canada saw no need for such an urgent process under the general council chair, trade diplomats said.
The US, which has the most complex rules of origin that cause problems for exporters in several countries, indicated it was still reviewing the Indian proposal. The US said the work on rules of origin is highly technical, suggesting it doesn’t make sense for the GC to take up the issue right away, trade diplomats said.
In its proposal “Harmonization Work Programme (HWP) Under the Agreement on Rules of Origin- the Way Forward”, the three countries deplored the endemic stalemate to accelerate work on binding rules of origin because of persistent opposition from some members.
They urged the GC chair to oversee the “deliberative process” to discuss all outstanding issues in the HWP “with the objective of preparing the ground for a formal decision in the next ministerial conference as provided for in Article 9.4 of the agreement on rules of origin.”
India said “globalisation of production” has reinforced the need for an early agreement on rules of origin as “much of the global production of goods takes place in stages, using materials and components produced in different countries”.
India argued there was no common understanding among members on what constituted “the last substantial transformation” at the core of the country of origin status as different members are using their own criteria to determine the source of goods of multi-country origin — where more than one country is involved in the production process.
Indian textile exporters, for example, are forced to adopt one set of rules for supplying to the United States and another set for exports to Canada or other countries because of absence of a harmonisation of non-preferential rules of origin.
“The multiplicity of rules has given rise to a situation where the same product could be required to meet the value added criterion in one country, manufacturing or processing operations criterion in another and tariff change criterion in a third country,” the three countries said in their proposal.
The manner in which countries applied the rules of origin convey the impression that these rules are increasingly being viewed as trade policy instruments per se instead of as a device to support trade policy instruments.
Though India managed to include the harmonization work program for rules of origin in Doha, there was little progress in the committee on rules of origin because of the continued opposition from some key members, trade diplomats said.
