KARACHI: The World Trade Organisation (WTO) said on July 6 that the measures adopted by the European Commission agai­nst the import of Pakistan’s polyethylene terephthalate (PET) — a chemical used in manufacturing mineral water bottles — violated the rules of the global trade body.

The European Commission imposed a five per cent countervailing duty in 2010 on the import of PET from Pakistan in order to protect European producers. Popularly known as resin, PET is bottle-grade polyester chip that is used in the production of disposable bottles for beverages.

“The WTO categorically ruled that measures applied by the European Commission on Pakistan’s PET were inconsistent with the Subsidies and Countervailing Measures Agreement of the WTO,” a statement released by the Ministry of Commerce said on Friday.

“As per conservative estimates, the unfair trade protection measures imposed by the EU seven years ago caused a loss of approximately 300 million euros to Pakistan’s nascent chemical industry,” the ministry’s statement said.

The countervailing duty was supposed to lapse on Sept 30, 2015 under a sunset clause in the EU law. However, it is not clear whether the European Comm­ission renewed the trade restriction or not. Traditionally the EU does not renew trade restrictions of this sort if they have been challenged in the WTO. The statement quoted Commerce Minister Khurram Dastgir Khan as saying that the findings of the WTO panel will boost Pakistan’s exports and help the government ward off future trade restrictions.

According to the dispute settlement summary issued by the WTO, Pakistan formally requ­ested consultations with the global trade body in October 2014. The country requested the establishment of a panel in February 2015. Subsequently, the dispute settlement board (DSB) of the WTO established a panel in May 2015 to look into Pakistan’s grievances.

But the panel’s work was delayed as a result of a lack of available experienced lawyers in the secretariat. After several delays, the panel circulated its final report to Members on July 6.

The European Commission termed Pakistan’s Manuf­acturing Bond Scheme a “countervailable subsidy” contingent on export performance. But Pakistan claimed that the commission “improperly determined the existence of a financial contribution”. The panel found that the commission acted inconsistently with WTO rules by failing to provide a “reasoned and adequate explanation”.

Pakistan also claimed that the European Commission failed to satisfy its obligation to disclose the results of the verification visit to the exporting producer in Pakistan. The panel upheld Pakistan’s claim and found that the commission failed to adequately provide the results of the verification visit to Novatex Ltd.

Exact data on Pakistan’s PET exports to the EU is not available, but earlier press reports suggested the country’s share in the EU’s total PET imports was negligible.

Published in Dawn, July 8th, 2017