New Delhi: Acting on India's request, the World Trade Organisation (WTO) will set up a panel to probe a complaint over tariff preferences given by the European Union (EU) for countries that combat drug trafficking or that comply with labour and environmental standards.

India asked for a second time on January 27 for establishing a three-member dispute settlement panel to investigate its complaint, after its official told a meeting of the Dispute Settlement Body of the Geneva-based world trade body that talks with the EU on the issue remained unresolved despite further talks.

Under WTO rules, a second request is automatically granted and a panel established.

The Indian official V P Haran told the meeting that the EU's "generalised system of preferences" (GSP) violated global trade rules.

The official said the GSP regime was set up to allow exceptions to the WTO's 'most favoured nation' obligation, which prevents a country discriminating between their trading partners.

But, the official argued, it only went as far as permitting discrimination against developed countries in favour of developing ones in order to facilitate and promote the trade of developing countries.

Imposing any kind of condition as a prerequisite for gaining benefits under the GSP scheme still breached the WTO's agreements, the official said.

An EU official is reported to have described India's action as "regrettable" and urged India to withdraw the panel request, a source said.

He also said India's action would hamper all developed countries' efforts to address the developmental problems of developing countries.

PTI