Before the Appellate Body of the World Trade Organization

European Communities - Export Subsidies on Sugar (AB-2005-2)

Other Appellant's Submission of Australia

Geneva, 28 January 2005

TABLE OF CONTENTS

INTRODUCTION AND EXECUTIVE SUMMARY.. 6

I.          LEGAL ARGUMENTS. 10

A.    The Panel's Decision to Exercise Judicial Economy was Based on Errors of Law and Legal Interpretation  10

  1. Introduction. 10
  2. The Panel's findings under the Agreement on Agriculture are not sufficient to fully resolve the matter at issue  10
  3. A panel is not only entitled to recommend withdrawal of the measure and to specify the time period in the circumstances before it, but is obliged to do so in the event of a finding of inconsistency with Article 3 of the SCM Agreement13
  4. The Panel incorrectly characterised Australia's rights under the SCM Agreement as being limited to what might - but would not necessarily be - more rapid compliance. 16
  5. The exercise of judicial economy serves to deprive Australia of its rights and to diminish its rights under the SCM Agreement and the DSU, including, but not limited to, Article 19.2 of the DSU.. 16
  6. The Panel's "additional considerations" are legally and factually incorrect.  There was sufficient factual and legal argumentation before the Panel which would have enabled it to examine the consistency of the subsidies with the SCM Agreement17
  7. Conclusion. 20

B.     An Examination of Australia's Claims and Arguments Under the SCM Agreement Would Lead to a Conclusion of Inconsistency with the Provisions of Articles 3.1(a) and 3.2 of that Agreement21

  1. Introduction. 21
  2. There are sufficient factual findings by the Panel and undisputed facts presented to the Panel to enable the Appellate Body to complete the legal examination and to reach conclusions. 21
  3. Conclusion. 26

II.         REQUEST FOR DECISIONS AND RULINGS. 26

ATTACHMENT: Text of Australia's comments of 17 August 2004 on the Panel's Interim Report

DISPUTE SETTLEMENT CASES CITED IN THIS SUBMISSION

Short Title

Full Title

Argentina - Footwear Safeguard

Argentina - Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, Appellate Body Report

Australia-Salmon

Australia - Measures Affecting Importation of Salmon, WT/DS18/AB/R, Appellate Body Report

Canada-Dairy Panel Report

Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/DS103/R, WT/DS113/R, Panel Report

Canada-Dairy Appellate Body Report

Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products,WT/DS103/AB/R, WT/DS113/AB/R, Appellate Body Report

Canada-Dairy (First 21.5) Panel Report

Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products (Recourse to Article 21.5 of the DSU by New Zealand and the United States),WT/DS103/RW, WT/DS113/RW, Panel Report

Canada-Dairy (First 21.5) Appellate Body Report

Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products (Recourse to Article 21.5 of the DSU by New Zealand and the United States) WT/DS103/AB/RW, WT/DS113/AB/RW, Appellate Body Report

Canada-Dairy (Second 21.5) Panel Report

Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products (Second Recourse to Article 21.5 of the DSU by New Zealand and the United States), WT/DS103/RW2, WT/DS113/RW2, Panel Report

Canada-Dairy (Second 21.5) Appellate Body Report

Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products (Second Recourse to Article 21.5 of the DSU by New Zealand and the United States), WT/DS103/AB/RW2, WT/DS113/AB/RW2, Appellate Body Report

Korea - Dairy Safeguards

Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, Appellate Body Report

US-FSC Panel Report

United States - Tax Treatment for "Foreign Sales Corporations", WT/DS108/R, Panel Report

US-FSC Appellate Body Report

United States - Tax Treatment for "Foreign Sales Corporations", WT/DS108/AB/R, Appellate Body Report

US-FSC (21.5) Panel Report

United States - Tax Treatment for "Foreign Sales Corporations" (Recourse to Article 21.5 of the DSU by the European Communities), WT/DS108/RW, Panel Report

US-FSC (21.5) Appellate Body Report

United States - Tax Treatment for "Foreign Sales Corporations" (Recourse to Article 21.5 of the DSU by the European Communities), WT/DS108/AB/RW, Appellate Body Report

US - Gasoline Appellate Body Report

United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, Appellate Body Report

US - Upland Cotton

Unites States - Subsidies on Upland Cotton, WT/DS267/R and WT/DS2/AB/R/Corr.1, Panel Report

INTRODUCTION AND EXECUTIVE SUMMARY

1.          In accordance with Australia's Notice of Other Appeal, Australia appeals the Panel's decision to exercise judicial economy and to decline to examine Australia's claims under Articles 3.1(a) and 3.2 of the Agreement on Subsidies and Countervailing Measures (the "SCM Agreement"),[1] and the Panel's consequent failure to make a recommendation in accordance with Article 4.7 of that Agreement.

2.          In this submission, Australia will demonstrate that the Panel's decision to exercise judicial economy was based on errors in issues of law and legal interpretation and as such, would deprive Australia of its rights under the SCM Agreement and the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU") and would also diminish rights under that Agreement and Understanding.

3.          As confirmed by the Panel, Australia's claims under the SCM Agreement come within the Panel's terms of reference.[2] [3]

4.          Under those circumstances, the Panel was obliged to address Australia's SCM claimsin accordance with the provisions of Article 7.2 of the DSU and to apply the special and additional rules and procedures of the SCM Agreement to its findings and recommendations - specifically Article 4.7 of that Agreement - as provided in Article 1.2 and Appendix 2 of the DSU.

5.          In accordance with the Panel's functions under Article 11 of the DSU, the Panel was required, inter alia, to make an objective assessment of conformity with the SCM Agreement, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the SCM Agreement.  A Panel's proper exercise of the functions assigned it serves to meet the objectives of the DSU identified in Articles 3.2, 3.4 and 3.7 of that Understanding.

6.          The Panel's decision to exercise judicial economy resulted in non-observance of those provisions.  The Panel's justification for the non-observance of those provisions is based on flawed legal findings, interpretation and reasoning.

7.          The Panel considered that its exercise of judicial economy was justifiable, based on the following errors of law and legal interpretation:

(a)                the Panel's findings under the Agreement on Agriculture should be sufficient to fully resolve the matter at issue;

(b)                there was some issue whether the Panel was entitled to make a recommendation to withdraw the measure and to specify a time period in accordance with the provisions of Article 4.7 of the SCM Agreement in the circumstances before it;

(c)                the Panel was not required to rule on Australia's claims under the SCM Agreement "merely to obtain what might - but would not necessarily be - more rapid compliance";

(d)                the exercise of judicial economy did not diminish Australia's rights within the meaning of Article 19.2 of the DSU; and

(e)                additional considerations, related to the Panel's perception that Australia focussed on its claims under the Agreement on Agriculture and the manner of Australia's presentation of its claims under the SCM Agreement relative to the presentation of its claims under the Agreement on Agriculture.

8.          Australia's legal arguments in support of its claims of error may be summarised as:

(a)                the Panel incorrectly characterised the provisions of Article 4.7 of the SCM Agreement as being limited to a time period for withdrawal of a measure and as conferring rights limited to "more rapid compliance";

(b)                the Panel failed to take into account all of the rights conferred under the SCM Agreement, including the specificity of recommendations under Article 4.7 of the SCM Agreement anda consequential right under Article 4.10 of that Agreement;

(c)                the Panel also failed to take into account rights deriving from observance of the provisions of the DSU;

(d)                the application of relevant Appellate Body jurisprudence would lead to a conclusion that the Panel applied false judicial economy;

(e)                the Panel's reasoning that it might not be entitled to make a recommendation under Article 4.7 of the SCM Agreement for withdrawal of the measure within a specified time period was in conflict with its finding that the SCM Agreement applies to export subsidies in excess of reduction commitments under the Agreement on Agriculture and the fact that other panels and the Appellate Body have not identified such constraints; and

(f)                  the additional considerations are not as described by the Panel and are not applicable to a decision to exercise judicial economy.

9.          Australia's rights have been affected by the Panel's decision to exercise judicial economy on the basis of errors of law and legal interpretation.  Australia identifies those rights as being in regard to:

(a)                an assessment of conformity with the SCM Agreement (Article 11 of the DSU);

(b)                a recommendation that the EC withdraw a prohibited subsidy without delay (Article 4.7 of the SCM Agreement);

(c)                specification of a time period within which the prohibited subsidy must be withdrawn (Article 4.7 of the SCM Agreement);

(d)                in the event that such recommendation is not followed within the specified time period, DSB authorization to take appropriate countermeasures (Article 4.10 of the SCM Agreement);

(e)                preservation of Australia's rights under Articles 3 and 4.10 of the SCM Agreement, arising from a recommendation under Article 4.7 of that Agreement (Article 3.2 of the DSU);

(f)                  satisfactory settlement of the matter in accordance with Australia's rights under the DSU and under the SCM Agreement (Articles 3.4 and 3.7 of the DSU);

(g)                have such findings made by the Panel as will assist the DSB in making the recommendations or in giving the rulings provided for in Articles 3 and 4.7 of the SCM Agreement (Article 11 of the DSU);

(h)                application of the special and additional rules and procedures of Article 4.7 of the SCM Agreement, in accordance with the provisions of Article 1.2 and Appendix 2 of the DSU; and

(i)                  that a Panel's findings cannot diminish Australia's rights under a covered agreement (Article 19.2 of the DSU).

10.      Australia requests that the Appellate Body find that the Panel's findings were based on errors in issues of law and legal interpretation in respect of all of the reasons advanced by the Panel to support its decision to exercise judicial economy and that Australia's WTO rights have been deprived or diminished in consequence.

11.      Australia further requests that the Appellate Body preserve Australia's rights under Articles 4.7 and 4.10 of the SCM Agreement by ruling - on the basis of factual findings by the Panel and the undisputed facts on the Panel record - on Australia's claims under Articles 3.1(a) and 3.2 of the SCM Agreement and to make the recommendation provided for in Article 4.7 of that Agreement.

12.      In regard to the provisions of Articles 3.1(a) and 3.2 of the SCM Agreement, Australia claimed that those subsidies in excess of the EC's reduction commitments for sugar - on C sugar and ACP/India equivalent sugar - are prohibited subsidies under the SCM Agreement, as they constitute export subsidies contingent, in law or in fact, on export performance.

13.      In respect of C sugar, Australia argued before the Panel that there is a subsidy to sugar producers and that the subsidy in question comes within the definition of an export subsidy provided in Item (d) of Annex I (the "Illustrative List")of the SCM Agreement, as the ECprovides, through the EC regime, for C sugar beet for processing into C sugar for export at prices lower than beet for domestic production; on terms more favourable than those commercially available on world markets.  Australia also argued, in the alternative, that the subsidies for C sugar come within the definition of a subsidy within the meaning of Article 1.1 of the SCM Agreement - as the EC regime provides for income or price support and a benefit is conferred on sugar producers.  The export contingency element is demonstrated as C sugar must be exported (unless reclassified into quota sugar within defined limits).

14.      In respect of ACP/India equivalent sugar, Australia argued that the subsidy in question - a direct export subsidy on EC quota sugar to EC sugar producers contingent on export performance - comes within the definition of an export subsidy within the meaning of Item (a) of the Illustrative List of the SCM Agreement.  This argument was not contested by the EC.

I.           LEGAL ARGUMENTS

                     A.            The Panel's Decision to Exercise Judicial Economy was Based on Errors of Law and Legal Interpretation

1.      Introduction

15.      Australia identifies the following errors of law and legal interpretation:

(a)                that the Panel's findings under the Agreement on Agriculture were sufficient to fully resolve the matter before it(paragraph 7.383 of the PanelReport);

(b)                that there was some issue whether the Panel was entitled to make a recommendation to withdraw the measure and to specify a time period in accordancewith the provisions of Article 4.7 of the SCM Agreement in the circumstances before it (paragraph 7.384 of the Panel Report);

(c)                that the Panel was not required to rule on Australia's claims, merely in order to obtain what might- but would not necessarily be - more rapid compliance (paragraph 7.384 of the Panel Report);

(d)                that the exercise of judicial economy did not diminish Australia's rights within the meaning of Article 19.2 of the DSU (paragraph 7.385 of the Panel Report); and

(e)                an additional consideration, related to the Panel's perception of focus by Australia on its claims under the Agreement on Agriculture and because, according to the Panel, Australia had not set forth its claims under Article 3 of the SCM Agreement in quite as clear and unambiguous manner as under the Agreement on Agriculture (paragraphs 6.15 and 7.386 of the Panel Report).

2.      The Panel's findings under the Agreement on Agriculture are not sufficient to fully resolve the matter at issue

16.      The Panel erred in its interpretation of "what needs to be done" to bring a prohibited export subsidy into conformity with the SCM Agreement.

17.      In support of the Panel's conclusions that its findings under the Agreement on Agriculture should be sufficient to fully resolve the matter at issue, the Panel cited the principles set forth by the Appellate Body in Australia - Salmon.[4]  The Panel drew on the Appellate Body's reasoning in Australia- Salmon to conclude that it is sufficient for a panel to inform the Member concerned "as to what needs to be done, rather than on when it needs to be done."[5]

18.      The Panel has erred in categorising the relevant provisions of the SCM Agreement as provisions relating to when implementing action needs to be taken to bring a measure into conformity.  The Panel's reference to "the normal rules regarding the timing of implementation, applicable in most WTO disputes"[6] carries with it the implicit view that Article 4.7 of the SCM Agreement is a normal rule.  It is not, as clearly provided by Article 1.2 of the DSU.

19.      The Panel incorrectly applies the principles of judicial economy set forth in Australia - Salmon.  Australia does not disagree with the Panel's consideration that the principles set forth in the Appellate Body report in regard to judicial economy are relevant to WTO dispute settlement generally.[7]  Australia would go further, in arguing that the principles have particular application to the exercise of judicial economy in the present dispute.  As stated by the Appellate Body in Australia - Salmon:

"To provide only a partial resolution of the matter at issue would be false judicial economy."[8]

20.      As noted by Australia at the Interim Review,[9] the Appellate Body's decision in Australia - Salmon did not involve claims under the SCM Agreement,[10] but rather individual claims under the SPS Agreement.  Moreover, the Appellate Body in that dispute found the Panel to be in error of law in exercising judicial economy in respect of provisions of the same agreement.[11]  It follows that, if a panel is acting in error in failing to address the other provisions of the same agreement, the jurisprudence from that dispute does not support the exercise of judicial economy in relation to the provisions of another agreement.

21.      Article 1.2 of the DSU mandates the application of special or additional rules and procedures in regard to the provisions of the covered agreements identified in Appendix 2 of the DSU.  Appendix 2 identifies, inter alia, the rules and procedures of Articles "4.2 through 4.12" of the SCM Agreement.  Australia submits that Article 4.7 of that Agreement prescribes the duty of a panel in regard to what needs to be done.  Unlike the discretionary authority of a panel under Article 19.1 of the DSU to suggest ways in which the Member concerned could implement a panel's recommendations, Article 4.7 of the SCM Agreement is prescriptive as to what needs to be done by a panel.  A panel finding of a prohibited subsidy requires the panel to recommend that the Member concerned withdraw the subsidy without delay and to specify a time period within which the measure must be withdrawn.

22.      The requirement, that "... the panel shall recommend that the subsidizing Member withdraw the measure without delay"[emphasis added] imposes a single, distinct duty on a panel as to what needs to be done as a recommendation, as compared to discretion to make a suggestion - additional to a recommendation - on what might be doneto bring a measure into conformity.

23.      Article 4.7 of the SCM Agreement is not limited to rapid compliance.  A recommendation under that provision has legal consequences and implications for Australia's legal rights under other WTO provisions

24.      The first sentence of Article 4.7 of the SCM Agreement refers to whatneeds to be done as a single action.  A panel cannot recommend that the Member concerned withdraw a subsidy and separately provide a discretionary recommendation that the measure must be withdrawn without delay.  The duty of a panel - in accordance with the second sentence of Article 4.7 - to specify a time period within which a measure found to be a prohibited subsidy must be withdrawn, while involving a specific duty to recommend when implementing action needs to be taken,informs and gives precision to the term "without delay" in regard to what must be done.

25.      As set forth in paragraph 8.5 of the Panel Report, the recommendation is insufficiently prescriptive in regard to "what needs to be done" in regard to findings of inconsistency under the SCM Agreement provisions.  The recommendation in question does not specify that the subsidies in question be withdrawn.  Nor does it specify that the subsidies in question must be withdrawn without delay, within a specified time period.  Although the recommendation would not prevent the EC from withdrawing the measures without delay, it does not compel such course of action.

 

26.      The requirement to provide a specific recommendation of what needs to be done in accordance with the provisions of Article 4.7 of the SCM Agreement has legal consequences.  First, a recommendation under Article 4.7 gives rise to a right, under Article 4.10, to take countermeasures in the circumstances described in that provision.  Second, the specification of recommendations in accordance with Article 4.7 means that there is no need for recourse to the procedures of Article 21 of the DSU for establishing a reasonable period of time for implementation.  A finding, under Article 3.2 of the SCM Agreement, thatthe EC is granting and maintaining prohibited subsidies, leads to a recommendation that the subsidies in excess of reduction commitments under the Agreement on Agriculture be withdrawn without delay.  Hence, a recommendation under the SCM Agreement is more conducive to resolution of the matter at issue and to a positive solution to a dispute, in keeping with the objectives of the DSU as provided by Article 3.7 of the DSU.

3.      A panel is not only entitled to recommend withdrawal of the measure and to specify the time period in the circumstances before it, but is obliged to do so in the event of a finding of inconsistency with Article 3 of the SCM Agreement

27.      The Panel cites paragraph 6.99 of Canada-Dairy (First 21.5) Panel Report to supports its statement that:

"There is some issue as to whether this Panel is entitled to make such a recommendation and to specify such a time period in the circumstances before it".[12]

28.      Australia submits that the Panel's reasoning in this regard is in conflict with its statement, at paragraph 7.381 of the Panel Report, that:

"In principle, therefore, the Panel could also examine the Complainants claims that the regime, or parts thereof, constitute an export subsidy inconsistent with Article 3 of the SCM Agreement, in accordance with the Panel's terms of reference."

29.      The Panel's reasoning in that regard is entirely consistent with the cumulative application of obligations in the two Agreements, as confirmed by WTO jurisprudence.[13]

30.      However, the Panel's reasons for the exercise of judicial economy in this dispute, as presented in paragraph 7.384 of the Panel Report, go to the core legal question of the application of the SCM Agreement to export subsidies on agricultural products.  If accepted, the Panel's reasoning could mean that export subsidies on agricultural products could not be challenged under the SCM Agreement.  Such practice would render inutile the relevant provisions of the SCM Agreement and the Agreement on Agriculture, which are expressly predicated on the application of the SCM Agreement to agricultural export subsidies except as provided in the Agreement on Agriculture.  As the Panel has already found that the Agreement on Agriculture does not provide for subsidies in excess of reduction commitments, it follows that all provisions - including the provisions of Article 4.7 - of the SCM Agreement apply.  Indeed, Article 1.2 of the DSU requires the Panel to make such recommendation.

31.      As stated by the Appellate Body in United States - Standards for Reformulated and Conventional Gasoline Appellate Body Report:

"An interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility."[14]

32.      However, on the basis of the Panel's reasoning, Article 1.2 of the DSU and Article 4.7 of the SCM Agreement would be reduced to inutility.

33.      Australia considers that the Panel gave inappropriate weighting to paragraph 6.99 of Canada-Dairy (First 21.5) Panel Report in the circumstances before it.

34.      First, Australia draws attention to paragraph 6.101 of that report which outlines a further consideration which would appear to have influenced the Panel and which is not present in this dispute.  The passage reads:

"In addition, the Panel notes that the practical relevance of this question should be assessed in the light of the "Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding in the follow-up to the dispute in Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products" which the parties to the dispute have concluded. [Footnote omitted]  Pursuant to these Agreed Procedures, it is envisaged that, if the Appellate Body were to confirm and the DSB to adopt the Panel's recommendations based on the Panel's findings under Article 9.1(c) of the Agreement on Agriculture, an Article 22.6 arbitrator would, in any case, relatively soon thereafter decide what level of suspension of concessions or other obligations should be authorized against Canada."

35.      Second, the Panel's exercise of judicial economy and its conclusion in Canada-Dairy (First 21.5) Panel Report were not appealed and hence are not determinative of a Panel's authority to recommend withdrawal of a subsidy in accordance with the provisions of Article 4.7 of the SCM Agreement.

36.      Third, the Panel failed to consider the relevance of the findings in the US-FSC dispute settlement reports and which were cited by the complainants during the panel proceedings.[15] [16] In that dispute, neither the Panel nor the Appellate Body sought to exclude export subsidies applied to agricultural products from the scope of their findings of inconsistency with the SCM Agreement.

37.      Nor have other panel and Appellate Body reports considered there to be any legal obstacle to including subsidies applied to agricultural products in a recommendation to withdraw a measure generally available to both agricultural and non-agricultural goods.[17]

38.      Fourth, the EC's statement of 17 April 2000 to the DSB on adoption of the US-FSC Panel Report and the US-FSC Appellate Body Report is also relevant.[18]

39.      Fifth, the Panel's exercise of judicial economy on these grounds does not contribute to security and predictability in the multilateral trade system, as envisaged in Article 3.2 of the DSU.  The clear message from the various US - FSC dispute settlement reports, as well as from US-Upland Cotton, is that other panels and the Appellate Body saw no reason to exercise judicial economy in respect of claims under the SCM Agreement, in addition to findings under the Agreement on Agriculture.

40.      The Panel in US-Upland Cotton followed the approach taken in the US-FSC dispute settlement reports.  The Panel in that dispute made a number of findings under the SCM Agreement additional to findings under the Agreement on Agriculture in relation to export subsidies applied exclusively to agricultural products.[19]  Those findings have not been appealed, hence, should the Appellate Body uphold any of the panel findings in respect of export subsidies under the SCM Agreement, the Complainants in that dispute will be accorded rights under Article 4.7 of the SCM Agreement and will not be required to resort to the provisions of Articles 21.3 of the DSU.

41.      As noted by the Panel in para 7.352 of the Panel Report, WTO Members are not obliged to maintain export subsidies, but are only authorised to maintain them as exceptions to the prohibition in Articles 8 and 3.3 of the Agreement on Agriculture.  In order to benefit from such exception, a WTO Member must comply with the provisions of that Agreement in respect of budgetary outlay and quantity commitments specified in its schedule.[20]  If it does not comply with both of those commitments, it cannot be acting in conformity with Article 8 of that Agreement, as the Panel correctly found.

42.      It was therefore within the Panel's authority to recommend withdrawal of the export subsidies in excess of the EC's reduction commitments, subject to a finding of inconsistency of such measures with the provisions of Article 3 of the SCM Agreement.  Such an approach would be consistent with the approach of other panels, and consistent also with that of the Appellate Body.

43.      Further, Article 3.4 of the DSU imposes a duty on the panels to make recommendations aimed at achieving a satisfactory settlement of the matter in accordance with the rights and obligations under the covered agreements.  The covered agreements include the SCM Agreement, including the provisions of Article 4.7 of that Agreement, which imposes a duty on a panel to recommend withdrawal of a measure found to be a prohibited subsidy within a specified time period.  In that context, the Panel Report does not record a rejection of the arguments put forward by Australia, in response to Question 52, to the effect that the C sugar export subsidies could be withdrawn without affecting the right of the EC under other WTO provisions to maintain price support in the form of domestic subsidies and other, more indirect arrangements controlling imports as a means of market price support.

4.      The Panel incorrectly characterised Australia's rights under the SCM Agreement as being limited to what might - but would not necessarily be - more rapid compliance

44.      In paragraph 7.384 of the Panel Report, the Panel incorrectly characterises Australia's rights under the SCM Agreement as being limited to obtaining more rapid compliance.

45.      Such statement constitutes an incorrect interpretation of the rights under the SCM Agreement, as identified in paragraph 9 of this Submission.

46.      Further, a recommendation under Article 4.7 has legal consequences.  The more general recommendation provided by Article 19.1 of the DSU may involve different legal procedures in regard to the specificity of what must be done and when it needs to be done.  It would also not provide the consequential right to countermeasures under Article 4.10 of the SCM Agreement.  Those legal consequences constitute rights.

47.      Additionally, the statement in paragraph 7.384 of the Panel Report does not correctly record Australia's position, as reflected in Australia's response to Question 1.

5.      The exercise of judicial economy serves to deprive Australia of its rights and to diminish its rights under the SCM Agreement and the DSU, including, but not limited to, Article 19.2 of the DSU

48.      As argued in the preceding paragraphs of this Submission, Australia's rights are not limited to the rights conferred by Article 19.2 of the DSU.  Those rights are identified in paragraph 9 of this Submission

49.      Consequent on a finding of inconsistency with Article 3 of the SCM Agreement, Australia has a right to withdrawal of a subsidy within a specified period of time.  That right obviates the need for negotiation or arbitration on a reasonable period of time.  The specificity of a recommendation under that provision also reduces the scope for disagreement between the parties on implementing measures.

50.      Second, in accordance with the special rules and procedures of the SCM Agreement, Australia would have right of recourse to the provisions of Article 4.10 of that Agreement in the even of non-implementation within the specified time period.

51.      Third, Australia's rights under the provisions of Articles 3.2, 3.4, 3.7, 11 and 19.2 of the DSU would be diminished

6.      The Panel's "additional considerations" are legally and factually incorrect.  There was sufficient factual and legal argumentation before the Panel which would have enabled it to examine the consistency of the subsidies with the SCM Agreement

52.      In addition to the reasoning addressed in the preceding paragraphs of this submission, the Panel put forward additional considerations to justify its decision to exercise judicial economy, seemingly related to the presentation of argumentation by Australia.[21]  This justification may be summarised as follows:

(a)                Australia had not set forth its claims under Article 3 the SCM Agreement "...in quite as clear and unambiguous a manner as under the Agreement on Agriculture.  Rather, [it had] focused on [its] claims under the Agreement on Agriculture";[22]

(b)                Panels depend upon the active participation of the parties to clarify and develop the issue presented in a dispute;[23] and

(c)                "...many of the Complainants' references to the SCM Agreement were made in the context of their claims under the Agreement on Agriculture."[24]

53.      The relevant paragraph in the Panel Report remained unchanged from the corresponding paragraph in the Interim Report.[25]  At the Interim Review, Australia requested that the Panel reconsider its comments in paragraph 7.381 of the Interim Report.[26] [27]

54.      The Panel's decision not to examine Australia's claims under the SCM Agreement serves to foreclose Australia's rights to secure a recommendation under Article 4.7 of the SCM Agreement.  In this instance, the exercise of judicial economy results in non-application of the special or additional rules and procedures found in the SCM Agreement, which Article 1.2 of the DSU requires to be applied.  The special or additional rules and procedures confer a right to withdrawal of a prohibited measure within a specified time period, as compared to the more general DSU right that a measure will be brought into conformity within a negotiated or arbitrated reasonable period of time - they also confer a right to take countermeasures under Article 4.10 of the SCM Agreement.

The Panel has erred in law in determining that Australia's claims under the SCM Agreement were insufficiently clear and unambiguous

55.      There was no assertion on the part of the EC that Australia's claims in regard to the provisions of the SCM Agreement were insufficiently clear and unambiguous.  The EC did not seek a ruling from the Panel in that regard.  In essence, the Panel has gone beyond its own jurisdiction in making an implied ruling on deficiency of a claim without being requested to do so by the respondent party.

56.      As to the Panel's perception of the lack of clarity and of ambiguity of Australia's presentation, Australia notes that Panel's comments are couched in relative terms, by way of comparison with Australia's presentation of its claims under the Agreement on Agriculture.  Such comparisons are not of themselves legally relevant.  The legal relevance of the clarity and ambiguity of a presentation relates to burden of proof, i.e. a determination whether a complainant has sufficiently advanced its claims and arguments that would enable a panel to conclude whether the complainant had sufficiently met the standard for a finding of a prima facie presumption of inconsistency.  The Panel makes no such finding in its report.

57.      The Panel has also erred in its reasoning in drawing such comparisons.  The claims involved different legal provisionsand hence required that the supporting evidence and argumentation be presented in a different way, including the sequential examination of claims and arguments under the two Agreements.

58.      Australia does not disagree that panels depend on the active participation of the parties to clarify and develop the issues presented in a dispute.  However, panels, as well as the parties, have a role in clarification and development of issues before them, consistent with a panel's right to seek information under Article 13 of the DSU.

59.      Australia actively participated in the Panel proceedings relating to clarification and development of the issues relating to its claims under the SCM AgreementAustralia fully responded to the counter arguments and rebuttals made by the EC.  The Panel has notmade any finding that Australia's arguments and supporting evidence were insufficient to lead to a prima facie presumption, or that the EC had rebutted any prima facie case.

60.      The Panel was empowered, through the provisions of Article 13.1 of the DSU, to seek clarification of arguments presented by the parties and, to that end, put a total of 75 questions to the parties. Australia responded promptly to the questions from the Panel and was ready to respond to any further requests for clarification, consistent with the requirement of Article 13.1 of the DSU that"A Member should respond promptly and fully to any request by a panel for such information as the panel considers necessary and appropriate."

61.      Of those questions, the Panel's questions in relation to claims and arguments under the SCM Agreement were limited to some nine questions.[28]  Of those nine questions, five of them[29] related to the application of export subsidy definitions of the SCM Agreement tothe Agreement on Agriculture.  Of the remaining four questions[30] - of which only three were directed to the Complainants,[31] - none of those questions were directed to seeking clarification of the detail of Australia's argumentation that the measures applying to C sugar and ACP/India equivalent sugar constitute export subsidies as defined in the SCM Agreement.

62.      Australia notes that the Panel did not suggest that there was insufficient evidence or legal argumentation to examine Australia's claims under the SCM Agreement.  For instance, the Panel did not draw parallels with the evidence submitted by the United States in Canada-Dairy Panel Report.[32]

63.      The Panel has failed to apply its own reasoning to Australia's claims and arguments under the SCM Agreement, which as previously noted[33] relate to export subsidies in excess of the EC's reduction commitments under the Agreement on Agriculture.  The approach by Australia was taken in the context of the Panel's own order of examination, related to:

(a)                the relationship between the two Agreements;

(b)                in the case of C sugar, the fact that Australia's claims and arguments under Article 10.1 of the Agreement on Agriculture necessarily required recourse to theexport subsidy definitions of the SCM Agreement and hence involved substantially the same argumentation; and

(c)                in the case of ACP/India equivalent sugar, the direct correlation between the export subsidy definitions of Article 9.1(a) of the Agreement on Agriculture and Item (a) of the Illustrative List of the SCM Agreement.

64.      Australia provided comprehensive argumentation to support its claims under the SCM Agreement and in counter-argumentation to the EC's rebuttal arguments.[34]

65.      Some of Australia's references to the SCM Agreement were necessarily made in the context of claims under the Agreement on Agriculture (for instance in regard to claims in the alternative under Article 10.1 of that Agreement) but the claims and arguments in relation to the SCM Agreement were fully developed.  There was a sufficiency of evidence and arguments which would have enabled the Panel to reach findings in regard to Australia's claims under the SCM Agreement.

66.      In the particular context of claims in relation to ACP/India equivalent sugar, any finding that the subsidy in question constituted an export subsidy within the meaning of Article 9.1(a) of the Agreement on Agriculture would also mean that the measure in question would constitute an export subsidy within the definition of Item (a) of the Illustrative List of the SCM Agreement, given that the export subsidy definition of Article 9.1(a) of the Agriculture Agreement incorporates the definitions of Item (a) of the Illustrative List of the SCM Agreement. On the basis of the Panel's conclusions that there is prima facie evidence that the EC is providing export subsidies within the meaning of Article 9.1(a) of the Agreement on Agriculture[35]the Panel clearly considered Australia's arguments to be sufficiently developed to reach such a conclusion.

7.      Conclusion

67.      Australia concludes that:

(a)                the Panel erred in law in its decision to exercise judicial economy in relation to Australia's claims under the SCM Agreement - the Appellate Body should reverse the Panel's decision;

(b)                the Panel's decision served to deprive Australia of, or to diminish, its rights under the SCM Agreement and the DSU; and

(c)                that those rights would be preserved by the Appellate Body completing the analysis with an examination of Australia's claims under the SCM Agreement and a conclusion on those claims.

                     B.            An Examination of Australia's Claims and Arguments Under the SCM Agreement Would Lead to a Conclusion of Inconsistency with the Provisions of Articles 3.1(a) and 3.2 of that Agreement

1.      Introduction

68.      Should the Appellate Body find that the Panel erred in law in its decision to exercise judicial economy, Australia requests the Appellate Body preserve Australia's rights to a ruling under Article 3.1(a) and 3.2 of the SCM Agreement by completing the Panel's analysis and going on to make the recommendation provided under Article 4.7 of that Agreement.

2.      There are sufficient factual findings by the Panel and undisputed facts presented to the Panel to enable the Appellate Body to complete the legal examination and to reach conclusions

69.      Australia submits that here are sufficient factual findings by the Panel and undisputed facts presented to the Panel for the Appellate Body to complete the examination of Australia's claims under Articles 3.1(a) and 3.2 of the SCM Agreement and, if it upholds those claims, to make a recommendation under Article 4.7 of the SCM AgreementAustralia therefore requests that the Appellate Body follow the course of action taken by the Appellate Body and panels in other disputes such as Australia -Salmon.

70.      Australia's claims and arguments under Articles 3.1(a) and 3 2 are partly summarised in paragraphs 4.2, 4.102-4.107, 4.112-4.117, 4.119-4.121, 4.232. 4.234-4.237, 4.240, 4.242, 4.244-4.245, 4.249-4.253, 4.255. 4.261-4.263, and Appendix D of the Panel Report.  The claims and arguments in full, together with the EC's counter arguments, are identified in the footnote to this paragraph.[36]

ACP/India equivalent sugar

71.      As described in paragraph 3.11 of the Panel Report, the EC grants export refunds - paid directly from the EC budget - for the export of all sugar except for C sugar.  ACP/India equivalent sugar - that is, directly subsidised exports of sugar of approximately 1.6 million tonnes - comprises sugar other than C sugar.  The EC did not contest the evidence of Australia that the export refunds on ACP/India equivalent sugar are in fact export subsidies on EC quota sugar, i.e. sugar other than C sugar. [37]

72.      Australia argued that the export subsidies on ACP/India equivalent sugar constitute direct export subsidies within the meaning of Item (a) of the Illustrative List of the SCM Agreement,[38]andtherefore came within the definitional scope of Article 3.1(a) of that Agreement.  The EC did not contest that argument, on either factual or legal grounds.[39]

73.      Nor has the EC appealed the Panel's conclusion, based on the same evidence, that:

"there is prima facie evidence that the European Communities has been providing export subsidies within the meaning of Article 9.1(a) of the Agreement on Agriculture to what it considers to be exports of "ACP/India equivalent sugar" since 1995".[40]

74.      The Panel's conclusion was based on the same factual findings argued by Australia in regard to Item (a) of the Illustrative List of the SCM Agreement, that is, that exports of ACP/India equivalent sugar receive export subsidies within the meaning of Article 9.1(a) of the Agreement on Agriculture.[41]

75.      The definition of an export subsidy in Article 9.1(a) of the Agreement on Agriculture incorporates the definition contained in Item (a) of the Illustrative List of the SCM Agreement.  Article 9.1(a) refers to "the provision by governments or their agencies of direct subsidies ... to a firm, to an industry, to producers of an agricultural product, to a cooperative or other association of such producers, or to a marketing board, contingent on export performance".  Item (a) of the Illustrative List of the SCM Agreement refers to "The provision by governments of direct subsidies to a firm or an industry contingent upon export performance".

76.      Australia submits that the factual finding in regard to the conclusion of inconsistency with Article 9.1(a) of the Agreement on Agriculture is directly applicable to a finding of fact that the EC is also providing export subsidies within the meaning of Item (a) of the Illustrative List of the SCM Agreement.[42]

77.      Australia argued that the export subsidies in question - as defined in Item (a) of the Illustrative List of the SCM Agreement - constitute a prohibited subsidy under Article 3.1(a) of the SCM Agreement andtherefore violate Article 3.2 of that Agreement.[43]  The EC did not seek to rebut that argument (except to the extent that the SCM Agreement does not apply to agricultural products).[44]

C sugar

78.      Australia argued that there were export subsidies on C sugar within the meaning of Item (d) of the Illustrative List of the SCM Agreement.  Australia also argued, in the alternative, that export subsidies were being granted to C sugar within the meaning of Article 1.1 of the SCM Agreement.

79.      In regard to the Item (d) definition, the basis of Australia's arguments (recorded in paragraphs.4.102 - 4.107 of the Panel Report) was that, under the EC regime:

(a)                C beet is provided for use in export production for C sugar (which must be exported unless carried over[45]) on terms more favourable than for the provision of quota beet for use in domestic production;[46] [47]

(b)                that the more favourable terms for C beet are mandated by the EC regime, in regard to the dispensation from the minimum prices payable for beet for processing into quota sugar;[48]

(c)                that the C beet is provided on terms more favourable than those commercially available on world markets, on the basis of factual evidence that commercial quantities of beet could not be acquired on the world market on any terms.[49]

80.      The EC did not contest the factual basis of the arguments, but argued that the basic test of in regard to elements (a) and (b) cited above was whether the EC mandated the provision of C beet or C sugar.[50]  The EC did not address the third element; hence the third element is not at legal issue.

81.      Australia rebutted the EC's counter-arguments that the test in regard to the first two elements was one of a government mandating provision or production, arguing that the "mandatory" element does not attach to the production of a good, but to the government scheme.[51]  The test was not whether the EC supplied the C beet, but whether the EC mandated the production of C beet to exporters on the same terms as beet sold on the domestic market, i.e. whether the beet grower had the freedom to sell C beet to exporters on the same terms that he or she obtained for beet destined for the domestic sugar market.  This was clearly not the case: C beet did not benefit from the fixed minimum price guarantee for quota beet and could not be used to produce sugar for sale on the domestic market.[52]

82.      In particular, Australia argued that the EC's interpretation, if accepted, would limit the application of Item (d) to state trading operations and that the test does not relate to the relative freedom of a beet grower to grow C beet, but whether the EC mandates the provision of C beet to processors of C sugar for export on the same terms as that for beet provided for sugar supplied to the domestic market.  Australia noted that C beet does not benefit from the minimum price guarantee for quota beet and cannot be used to produce sugar for sale on the domestic market.  Australia further noted that the EC sugar regime in fact provided for the regulation of C beet prices, a fact not contested by the EC.[53]

83.      Australia therefore submits that in regard to all three elements of the definition of Item (a) of the Illustrative List of the SCM Agreement, it has established a prima facie case, on the basis of uncontested facts, that C sugar exports come within that definition.  Australia further submits that the EC rebuttal arguments in regard to the first two elements are based on incorrect legal interpretations and that the EC has not provided any rebuttal of any kind in regard to the third element.

84.      Should the Appellate Body confirm Australia's arguments - on the basis of the facts and legal interpretation - that there are export subsidies on C sugar within the meaning of Item (d) of the Illustrative List of the SCM Agreement, it follows that the EC grants and maintains a subsidy on C sugar contingent on export, inconsistently with the provisions of Articles 3.1(a) and 3.2 of the SCM Agreement.

85.      In the alternative, Australia argued that the EC regime provides a subsidy to C sugar within the meaning of Article 1.1 of the SCM Agreement, as income or price support to C sugar, in the sense of Article XVI of GATT 1994 within the definitional scope of Article 1.1(a)(2) of that Agreement, and that a benefit is conferred within the meaning of Article 1.1(b) of that Agreement.[54]

86.      In regard to the first test - any form of income or price support in the sense of Article XVI of GATT 1994, Australia cited the factual evidence that the regime was explicitly designed to provide income support for beet growers and sugar processors through a minimum price scheme for quota beet; through the intervention price arrangements; and through the high import barriers that served to support EC market prices for growers and processors.[55]

87.      On the basis of those facts, Australia argued the cross-subsidies provided to C sugar exports through the income and price support for quota beet and quota sugar operated directly or indirectly to increase exports of C sugar within the sense of Article XVI of GATT 1994, including Article XVI:4.[56]

88.      In response to those definitional arguments, the EC counter-argued on the basis that the price support was not export contingent and there was no requirement to produce C sugar.  The EC did not however seek to rebut Australia's argument that income or price support was provided to C sugar as such.[57]

89.      In the context of "benefit" within the meaning of Article 1.1(b) of the SCM Agreement, Australia argued that, on the basis of jurisprudence, the term "benefit" referred broadly to any "favourable or helpful factor or circumstance afforded the recipient of a measure and required a comparison between the situation of a recipient of such measure and the situation of a recipient absent such measure".  If the measure delivered any advantage to the recipient, a benefit was conferred.  The recipients of income or price support under the EC regime enjoyed an advantage: the exclusion of C beet from minimum price guarantees conferred an advantage on the sugar processor; as do the cross-subsidies offsetting the export of C sugar at below cost of production.[58]

90.      Australia further argued that the provision of C beet at lower prices than quota beet for C sugar manufacture was conditional on the export of C sugar, on the basis of the facts that C sugar was manufactured exclusively from C beet and that C sugar must be exported (unless carried over).  The regime therefore provided a subsidy contingent on export performance.[59]  Australia further argued that, contrary to the EC's interpretation of export contingency, the contingency attaches to the export, not to the price support.[60] This interpretation was consistent with the jurisprudence in the Canada - Dairy decisions.[61]

91.      Should the Appellate Body accept Australia's legal arguments that - on the basis of the facts and jurisprudence - a subsidy is provided to C sugar within the meaning of Article 1.1 of the SCM Agreement, and that such subsidy is contingent in fact on export performance within the meaning of Article 3.1(a) of that Agreement, it follows that the EC grants and maintains a prohibited subsidy, inconsistent with the provisions of Article 3.2 of that Agreement.

3.      Conclusion

92.      Should the Appellate Body uphold Australia's claims under the SCM Agreement in whole or in part, Australia requests that the Appellate Body recommend that the EC withdraw the subsidy without delay, in accordance with the provisions of Article 4.7 of the SCM Agreement.  Australia also requests that the Appellate Body specify the time period for withdrawal as 90 days, as requested by Australia during the panel proceedings.[62]

II.        REQUEST FOR DECISIONS AND RULINGS

93.      Australia requests that the Appellate Body make the following decisions and rulings:

(a)                that the Panel erred in its exercise of judicial economy and in declining to examine Australia's claims under Article 3 of the SCM Agreement;

(b)                that there were sufficient factual findings by the Panel and undisputed factual evidence before the Panel that would enable the Appellate Body to complete the Panel's analysis on those claims;

(c)                on the basis of a finding in (b) above, the Appellate Body will complete the examination of those claims to preserve Australia's rights under Articles 4.7 and 4.10 of the SCM Agreement and Articles 1.2, 3.2, 3.4, 3.7, 11 and 19.2 of the DSU;

(d)                that the EC is granting and maintaining export subsidies on ACP/India equivalent sugar and C sugar; inconsistently with the provisions of Articles 3.1(a) and 3.2 of the SCM Agreement; and

(e)                consequently, that the EC withdraw the subsidies within 90 days of DSB adoption of the Panel and Appellate Body reports, in accordance with Article 4.7 of the SCM Agreement.

ATTACHMENT: Text of Australia's comments of 17 August 2004 on the Panel's Interim Report

 

17 August 2004

Mr Warren Lavorel
Chair of the Panel on
European Communities -
Export Subsidies on Sugar
C/o Ms Christina Schroder
Agriculture and Commodities Division
World Trade Organization
Centre William Rappard
Rue de Lausanne  154
CH-1211 Geneva  21

Dear Mr Chairman,

EUROPEAN COMMUNITIES - EXPORT SUBSIDIES ON SUGAR (WT/DS265)

Australia's Comments on the Panel's Interim Report

I refer to your letter dated 4 August 2004 and to Australia's letter dated 11 August 2004 in which we undertook to provide written comments on the interim report of the panel in the dispute European Communities - Export Subsidies on Sugar (WT/DS265) by 17 August 2004.

Pursuant to Article 15.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Australia hereby submits its written request for the panel to review precise aspects of the interim report prior to circulation of the final report to the WTO Members.

Australia requests that the panel review those paragraphs of the interim report that are listed in Annex I to this letter.

This letter, and the attached interim report, explain the substance of our request for review in respect of each paragraph identified in Annex I.

In the attached interim report, Australia has included suggested changes marked with "track changes" and comments using Word's "comments" function.

Australia's requests for the review of paragraphs 7.380 to 7.382 were too large to be included as "comments" to the attached interim report.  Thus, we have set out those requests in Annex II to this letter.

Copies of this letter, its annexes and its attachment are being provided directly to the other parties in this dispute.

Yours sincerely,

John Larkin
Charge d'Affaires a.i
Acting Permanent Representative of Australia to the WTO

cc:     H.E. Mr. Carlo Trojan, Permanent Representative of the European Communities to the WTO
H.E. Mr. Luiz Felipe de Seixas Corrêa, Permanent Representative of Brazil to the WTO
H.E. Mrs Puangrat Asavapisit, Permanent Representative of Thailand to the WTO

ANNEX I

Section III

Paragraphs 3.6, 3.8 and 3.11.

Section IV

Paragraphs 4.29, 4.39, 4.69, 4.77, 4.179, 4.194, 4.198, 4.199, 4.215, 4.232, 4.245 and 4.246.

Section VII

Paragraphs 7.6, 7.13, 7.44, 7.45, 7.51, 7.57, 7.72, 7.88, 7.115, 7.118, 7.128, 7.191, 7.195, 7.200, 7.205, 7.243, 7.244, 7.245, 7.248, 7.251, 7.261, 7.262, 7.280, 7.291, 7.297, 7.304, 7.306, 7.316, 7.327, 7.328, 7.342, 7.369, 7.372, 7.379, 7.380, 7.381 and 7.382.

Section VIII

Paragraphs 8.1 and 8.3.

ANNEX II

Paragraphs 7.380 and 7.382

Australia requests that the Panel reconsider its decision to exercise judicial economy in regard to findings under the SCM Agreement. 

For the following reasons, Australia considers that findings in regard to the SCM Agreement are necessary to ensure prompt compliance.

In the first place, Australia requests that the Panel make an assessment and come to conclusions on the application of the relevant provisions of the SCM Agreement, given that the EC has contested the claims and arguments of Australia that (a) the SCM Agreement has application to agricultural products; and (b) that the SCM Agreement may apply to the same measures as at issue in the Agreement on Agriculture.

Second, Australia has claimed that the measures at issue are prohibited under the SCM Agreement.  The prohibitions of the SCM Agreement have no direct counterpart in the reduction commitment obligations of the Agreement on Agriculture, where the obligations attach, inter alia, to the grant and maintenance of Article 9.1 listed export subsidies in excess of scheduled commitment levels, or, in the case of unscheduled products, in regard to any Article 9.1 listed export subsidies (Articles 3.3 and 8).  The first question of the Panel to the parties illustrates the distinction in the relevant obligations under the two agreements. 

Third, in regard to the reference to the Appellate Body decision in Australia-Salmon (para 7.380 of the Interim Report), the relevance of this reference should be considered in context.  That dispute did not involve claims under the SCM Agreement and hence the Appellate Body's comments relate to the discretionary authority vested in Panels and the Appellate Body under the DSU (including Article 19), as compared to the duty imposed on panels under the terms of Article 4.7 of the SCM Agreement.  Article 4.7 of the SCM Agreement imposes a duty on the Panel to recommend the time period for withdrawal of the measure. 

Australia considers that the time period for elimination of an SCM prohibited subsidy is an important element in the effective resolution of disputes described in para 7.378 of the Interim Report, as reflected in Article 4.7 of the SCM Agreement.

In the context of Article 19.2 of the DSU, Australia considers that a decision not to examine claims under the SCM Agreement would serve to diminish the rights of Australia under a covered agreement in regard to the implementation time period in the event of its claims succeeding.

Under such circumstances, Australia considers that the exercise of judicial economy in this instance would result in a false judicial economy of the kind referred to in para 7.378 of the Panel's Interim report.

Paragraph 7.381

Australia requests that the Panel reconsider the comments in this paragraph. 

The statements that the Complainants have focused their claims under the Agreement on Agriculture and thatmany of the references to the SCM Agreement were made in the context of their claims under the Agreement on Agriculture need to be put into the context of:

(a) the relationship between the Agreement on Agriculture and the SCM Agreement, including the order of examination, as reflected in the Panel's approach (paras 7.376 and 7.377 of the Interim Report refer);

(b) the fact that claims and arguments under Article 10.1 of the Agreement on Agriculture necessarily require recourse to the export subsidy definitions in the SCM Agreement.  In the case of C sugar, the definitional aspects - and hence arguments - are essentially the same under the relevant provisions of both Agreements; and

(c) in the case of ACP/India equivalent sugar, as the definitions of direct export subsidies provided in Article 9.1(a) of the Agreement on Agriculture and Item (a) of Annex I of the SCM Agreement are comparable, it is in order to draw on definitional arguments under the Agreement on Agriculture for the purpose of relevant claims under the SCM Agreement.

In the context of the Panel's comments on ambiguity, Australia notes that its responses to the Panel's Question 54 were made in relation to the burden of proof requirements of Article 10.1 of the Agriculture Agreement.  

Australia considers that it provided comprehensive argumentation to support its claims and in rebuttal of EC arguments under the SCM Agreement.  Australia refers to paras 144-195 and paras 208-210 of its first written submission; to paras 55-71 and 100-101 of its rebuttal submission; to its response to Questions 1, 54, 55, 72, 73 and 74; paras 14-15 of its oral statement of 30 March 2004; and to paras 53-55 and 58-61 of its oral statement of 11 May 2004."



[1] Paragraphs 6.14-6.15 and 7.380-7.387 of European Communities - Export Subsidies on Sugar, WT/DS265/R (the "Panel Report").

[2] In paragraph 7.381 of the Panel Report, the Panel found that, "In principle therefore the Panel could also examine the Complainants claims that the regime or parts thereof, constitute an export subsidy inconsistent with Article 3 of the SCM Agreement, in accordance with the Panel's terms of reference."

[3] In its request for establishment of a Panel (Appendix D of the Panel Report), Australia submitted, inter alia, that EC export subsidies in excess of the EC's reduction commitments on sugar were inconsistent with the EC's obligations under Articles 3.1(a) and 3.2 of the SCM AgreementAustralia identified the subsidies provided by the EC for C sugar and ACP/India equivalent sugar as providing export subsidies in excess of the EC's export subsidy reduction commitments.

[4] Paragraph 223 of Australia-Salmon.

[5] Paragraph 7.384 of the Panel Report.

[6] Paragraph 7.384 of the Panel Report.

[7] Paragraph 7.382 of the Panel Report.

[8] Paragraph 223.

[9] Australia's comments on the Panel's Interim Report (without the attachment) are reproduced in full in the Attachment to this Submission.

[10] Paragraph 6.14 of the Panel Report.

[11] Paragraph 226.

[12]Paragraph 7.384 of the Panel Report.

[13] Paragraphs 123-125 of Canada-Dairy (First 21.5) Appellate Body Report; paragraph 75 of Korea - Dairy Safeguard; and paragraph 81 of Argentina - Footwear Safeguard.

[14] Page 23.

[15] Paragraphs 4.261-4.266 of the Panel Report.  See also Australia's Response to Question 1.

[16] US-FSC Panel Report; US-FSC Appellate Body Report; US-FSC (21.5) Panel Report; and US-FSC (21.5) Appellate Body Report.

[17]Paragraph 8.8 of US-FSC Panel Report; paragraph 177(a) of US-FSC Appellate Body Report; and paragraphs 225 and 229-231 of US-FSC (21.5) Appellate Body Report.

[18] WT/DSB/M/77.  There is nothing in that statement to indicate that the EC regarded the SCM Agreement rulings as being limited to industrial products.

[19]Paragraphs 8.1(d)(i), 8.1(e)(i), 8.1(e)(ii), 8.1(e)(iii), 8.3(a), and 8.3(b) of US-Upland Cotton.

[20] Article 3.3 of the Agreement on Agriculture.

[21] Paragraph 7.386 of the Panel Report.

[22] Paragraph 7.386 of the Panel Report.

[23] Paragraph 7.386 of the Panel Report.

[24] Paragraph 7.386 of the Panel Report.

[25] Paragraph 7.381 of the Interim Report.

[26] Australia's comments at the Interim Review are set out in full in the Attachment to this Submission.

[27]Australia notes from paragraph 6.15 of the Panel Report that the observations by the Panel in paragraph 7.386 of its Panel Report:

"... should not be taken in any way as a criticism of the manner in which the parties argued a highly complex case under tight time constraints.  The point is merely that the focus of the dispute was understandably on the Agreement on Agriculture and that this was an additional consideration relevant to the Panel's judgement to exercise judicial economy in this case."

[28] Questions 1, 2, 52, 54, 55, 71, 72, 73, and 74.

[29] Questions 1, 2, 54, 71, and 73.

[30] Questions 52, 55, 72 and 74.

[31] Questions 52, 55 and 72.

[32] See paragraph 6.93 of Canada-Dairy (First 21.5) Panel Report.

[33] See footnote 3.

[34] Paragraphs 144-195 and 208-210 of Australia's First Written Submission; paragraphs 14-15 of Australia's oral statement of 30 March 2004; paragraphs 55-71 and 100-101 of Australia's Rebuttal Submission; paragraphs 53-55 and 58-61 of Australia's oral statement of 11 May 2004; and Australia's responses to Questions 1, 52, 54, 55, and 72-74.

[35] Paragraph 8.1(a) of the Panel Report.

[36]Australia's claims and arguments in full are contained in Australia's Request for the Establishment of a Panel (WT/DS265/21) and in the following paragraphs of Australia's written submissions, oral statements and responses to questions:

(a)            Australia's First Written Submission: paragraphs 26-30, 37-38 147-178, 187-195, 208-210, 211(f), and 211(l);

(b)            Australia's Rebuttal Submission: paragraphs 57-71, 100-101, 163(f) and 163(l); and

(c)            Australia's oral statements:

a.        30 March 1994: paragraphs 29, 38, 69, and 70

b.       11 May 2004: 53,-55, 58-61, and 88; and

(d)            Australia's response to Questions: 31, 33, 54, 55, 71, 72, and 73.

The EC's counterarguments are presented in:

(a)            The EC's First Written Submission: paragraphs 73-85, 203, 204(6), and 205(5);

(b)            The EC's Second Written Submission: paragraphs 106-107, 139, and 140-143;

(c)            The EC's oral statement of 11 May 2004: paragraphs 18-19 and 105-109; and

(d)            The EC's responses to Questions: 4 (paragraph 41), 6, 31, 33, 54, 55, 71,72, 73, and 74.

[37] Paragraph 4.177 of the Panel Report.

[38] Paragraph 37 of Australia's First Written Submission.

[39] Paragraph 203 of the EC's First Written Submission and paragraph 139 of the EC's Second Written Submission.

[40] Paragraph 8.1(e) of the Panel Report.

[41] Paragraphs 7.234 and 7.237 of the Panel Report.

[42] Article 27(11) of Regulation 1260/2001 (submitted as Exhibit COMP-5F) provides that export refunds are payable on proof of export.  All persons established within the Community are eligible to tender for refunds (Article 29(2)).

[43] Paragraph 4.232 of the Panel Report.

[44] Paragraph 4.233 of the Panel Report and paragraph 139 of the EC's First Written Submission.

[45] Paragraph 3.4 of the Panel Report.

[46] Paragraph 3.8 of the Panel Report.

[47] Paragraph 4.103 of the Panel Report.

[48] Paragraphs 4.104-4.105 of the Panel Report.

[49] Paragraphs 4.106-4.107 of the Panel Report.

[50] Paragraphs 4.109-4.111 of the Panel Report.

[51] Paragraph 4.105 of the Panel Report and paragraph 53 of Australia's oral statement of 11 May 2004.

[52] Paragraph 4.112 of the Panel Report.

[53] Paragraphs 57-59 of Australia's Second Written Submission.  See also Australia's response to Question 31.

[54] Paragraphs 4.113-4.116, 4.119-4.121, and 4.232 of the Panel Report.  The Panel Report does not record Australia's arguments in respect of Article 1.1 of the SCM Agreement in regard to Australia's claims under that Agreement.  However, paragraphs 188 and 195 of Australia's First Written Submission incorporate by reference all of the definitional arguments made in the context of Article 10.1 of the Agreement on Agriculture.

[55] Paragraph 4.114 of the Panel Report.

[56] Paragraph 4.115 of the Panel Report.

[57] Paragraph 4.118 of the Panel Report.

[58] Paragraph 4.116 of the Panel Report; paragraphs 169-178 of Australia's First Written Submission; and Australia's response to Question 55.

[59] Paragraph 4.117 of the Panel Report.

[60] Paragraph 4.119 of the Panel Report.

[61] Paragraphs 177-178 of Australia's First Written Submission; Paragraphs 44 , and 61-66 of Australia's Second Written Submission; and Australia's response to Question 54.

[62] Paragraph 212 of Australia's First Written Submission.