Australia and WTO dispute settlement

MONTHLY BULLETIN: AUGUST 2002

RESOLVING EXPORT ACCESS PROBLEMS THROUGH THE WTO SYSTEM

  • Are you an exporter or intending to export?
  • Do you export to one or more of the 144 markets that belong to the World Trade Organization?
  • Are you experiencing access problems in one or more of those markets?
  • Is the access problem caused by a regulation or directive of the importing government (at central, regional or local government level?)

If you have answered "yes" to those questions, the WTO Trade Law Branch of the Department of Foreign Affairs and Trade stands ready to assist in developing options for resolution of your access problems.  Exporters can contact WTO legal specialists in the Department on the following numbers:

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RECENT DEVELOPMENTS

United States: Tax Treatment for "Foreign Sales Corporations" (WT/DS108)

On 30 August 2002, the WTO arbitrator ruled the amount of appropriate countermeasures to be US$4 billion. The EU now has the legal right to apply this level of retaliation against US imports.

On 14 January 2001, the WTO ruled against the US revised Foreign Sales Corporations (FSC) scheme. This follows an earlier WTO ruling which upheld the EU's complaint against the original scheme as providing prohibited export subsidies to US companies in the form of tax exemptions against US imports. The US sought recourse to arbitration under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement on the EC's retaliation claim of US$4 billion arguing that the annual level of retaliation should not exceed US$956 million.

The arbitrator determined that the suspension by the EC of concessions under the GATT 1994 in the form of the imposition of a 100 percent ad valorem charge on imports of certain goods from the US in a maximum amount of $US4 billion per year, would constitute appropriate countermeasures within the meaning of Article 4.10 of the SCM Agreement

Negotiations on the Dispute Settlement Understanding (DSU)

Australia is an active participant in the negotiations for review of the DSU which is aimed at improving and clarifying its provisions. Australia is working closely with Members to meet the DSU Review deadline of May 2003.

Australia submitted a formal proposal on the DSU Review to the Dispute Settlement Body on 27 June 2002. The proposal identifies the following five areas where improvements and/or clarifications could be made to the DSU:

  • The need to address anomalies in the current dispute settlement time-frames for safeguards;
  • The need to ensure that the rights of non-parties to a dispute are respected, particularly in relation to compensation rights;
  • The need to ensure that the actual level of retaliation imposed by a complaining party is consistent with the level of retaliation authorised by the Dispute Settlement Body;
  • The potential for possible time saving in the dispute settlement procedure;
  • The usefulness of adopting a consolidated understanding on agreed procedures under Articles 21 and 22 of the DSU to replace the current need for ad hoc bilateral agreements.

In order to progress DSU Review negotiations the Chair has issued a compilation of negotiating proposals and a "checklist" of issues consisting of 12 topics (consultations, panel establishment, panel composition, panel proceedings, panel working procedures, third parties, Appellate Body, Appellate Review, surveillance implementation of DSB recommendations, compensation, suspension of concessions or other obligations, overall timeframes). A number of Dispute Settlement Body Special Sessions have been scheduled between September and the end of 2002 (10-11 September, 14 October, 13-15 November and 16-18 December). These meetings will be supplemented by informal "Focus Group" meetings. The aim is that all topics in the checklist will be discussed in both the Special Session and the Focus Group by 15 November.

Australia will continue to engage in the DSU Review process which will intensify over the next few months as Members try to focus the negotiations with the aim to producing a draft negotiating text in early 2003.

New Head of Legal Affairs Division of WTO Secretariat

Mr S Bruce Wilson has been appointed as the new Director of the WTO Legal Affairs Division. Mr Wilson is a US national and has worked as governmental official as well as a private sector lawyer primarily in the areas of international trade and public policy.


Australia as a Complainant (1)

United States: Continuing Dumping and Subsidy Offset Act of 2000 ("Byrd Amendment") (WT/DS217 and WT/DS234)

No new developments. The proceedings are at the interim review stage.

The eleven co-complainants (including Australia) are arguing that the United States Continued Dumping and Subsidy Offset Act of 2000 (the "Byrd Amendment") is inconsistent with U.S obligations under GATT 1994, the Anti-Dumping Agreement and the Agreement on Subsidies and Countervailing Measures. This Act requires U.S customs authorities to distribute anti-dumping and countervailing duties assessed on imports to U.S domestic parties that supported the original petition for anti-dumping or countervailing duties to be imposed. Copies of Australia's submissions to the "Byrd Amendment" Panel can be found at: http://203.6.171.3/trade/negotiations/disputes/wto_disputes-US_AD.html


Disputes involving Australia as a Third Party (8)

Mexico Measures Affecting Telecommunications Services (WT/DS204)

The U.S is arguing that Mexico has failed to implement its GATS commitments for the cross-border supply of basic telecommunications services. It alleges that certain measures largely embodied in Mexico's International Long Distance Rules breach Sections 1 and 2 of the basic telecommunications Reference Paper incorporated into Mexico's Schedule of Commitments, Section 5 of the GATS Annex on Telecommunications and GATS Article XVII. A Panel was established at the 17 April DSB Meeting. Australia, Brazil, Canada, Cuba, the EC, Guatemala, Honduras, India, Japan and Nicaragua have reserved their third party rights in this dispute. On 26 August, following a request by the US, the Director-General appointed three panellists to hear the dispute.

Chile: Price band system and safeguard measures relating to certain agricultural products (WT/DS207)

Circulation of the report of the Appellate Body has been delayed from 23 August until 23 September.

On 3 May 2002, a WTO Panel found that Chile's price band system (PBS) applying to certain agricultural products was inconsistent with Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994. Its imposition of safeguards with respect to wheat, wheat flour and edible vegetable oils was inconsistent with Article XIX:1(a) and the Agreement on Safeguards. Chile announced at the 24 June DSB meeting that it would appeal against the Panel report. An Appellate Body oral hearing was held on 6-7 August.

European Communities (EC): Measures affecting meat and meat products (Hormones) (WT/DS26)

No new developments. The EC is still facing WTO authorised retaliation by the U.S and Canada because of its failure to implement within a reasonable period of time. It was earlier reported that the U.S and the EC were engaged in discussions on a compensation arrangement. Australia has registered its expectation that any compensation will be applied on a non-discriminatory basis.

Canada: Measures affecting the importation of milk and the exportation of dairy products (WT/DS103 and WT/DS113)

On 26 July 2002, the WTO issued the Article 21.5 Panel report which upheld the joint U.S NZ complaint against Canadian dairy export subsidies. Canada is to appeal the report.

The Panel found that, through its CEM scheme and the continued operation of Special Milk Class 5(d), Canada acted inconsistently with its obligations under Articles 3.3 and 8 of the Agreement on Agriculture, by providing export subsidies within the meaning of Article 9.1(c) in excess of its quantity commitment levels specified in its Schedule for exports of cheese and "other dairy products". Alternatively, the Panel found that the CEM scheme was inconsistent with Article 10.1 of the Agreement on Agriculture, and therefore that Canada acted inconsistently with its obligations under Article 8 of this Agreement.

United States: Section 110(5) Copyright Act ("Homestyle" exemption) (WT/DS160)

No new developments. At the DSB meeting on 29 July, the U.S confirmed that in accordance with Article 21.6 of the DSU an additional status report in this dispute was provided on 18 July 2002 and that it continues to work hard to reach a mutually acceptable arrangement consistent with WTO rules.

The EC and US sought arbitration under Article 25 of the DSU to determine the level of nullification or impairment of benefits to the EC as a result of the operation of section 110(5)(B) of the US Copyright Act. The arbitrator assessed the level of nullification and impairment at US$1.1 million per year.

United States: Definitive safeguard measures on imports of circular welded carbon quality line pipe from Korea (WT/DS202)

No new developments. On 26 July, the WTO issued the arbitrator's report regarding the compliance period in this matter. It was not necessary for the arbitrator to issue an award in this arbitration given that the parties agreed that the reasonable period of time (RPT) for the U.S. to implement the recommendations and rulings of the DSB shall expire on 1 September 2002. The agreement on the RPT between the parties was circulated on 31 July.

The Appellate Body largely found in favour of Korea's challenge to the February 2000 U.S line pipe safeguard. Since the adoption of the Report, pursuant to Article 21.3(b) of the DSU, Korea and the U.S have conducted discussions to reach agreement on a "reasonable period of time" for U.S implementation of the DSB report.

United States: Tax Treatment for "Foreign Sales Corporations" (WT/DS108)

See "Recent developments" section.

Canada: Export credits and loans guarantees for regional aircraft (WT/DS222)

No new developments. Brazil has indicated its intention to seek WTO authorisation for countermeasures arising from disagreement about what was needed to complete implementation. Brazil commented that Canada had failed to implement DSB rulings to withdraw the subsidy within 90 days (which expired on 20 May 2002). At the DSB meeting on 24 June, Brazil made a retaliation request to take appropriate countermeasures in the amount of US$3.36 billion. Canada requested, and the DSB agreed, that Brazil's retaliation request be referred to arbitration under Article 22.6.

Japan: Measures Affecting the Importation of Apples (WT/DS245)


The Panel examining the US complaint against Japan's quarantine measures on apples for fire blight has started its work. Australia's third party submission is due on 14 October and the Panel will meet with third parties on 22 October. The Panel timetable provides for the interim report to be issue on 3 February 2003 and the final report to be circulated on 4 April 2003.

The Japanese measures complained of by the U.S include the prohibition of imported apples from orchards where fire blight is detected (or if it is detected within a 500 metre buffer zone), a requirement for three orchard inspections a year and post-harvest treatment of exported apples with chlorine. The U.S argues that these measures are inconsistent with Japan's obligations under Article XI of GATT 1994, the SPS Agreement and Article 14 of the Agreement on Agriculture. The U.S has also made a non-violation claim. A Panel was established at the 3 June DSB meeting on request by U.S. Australia reserved its third party rights. Brazil, Taiwan, New Zealand and the EC also reserved third party rights. The Panel comprises Michael Cartland (Chair), Kathy-Ann Brown and Christian Haberli.


Disputes in which Australia has a policy or economic interest (8)

Japan: Measures affecting agricultural products ("Varietal testing") (WT/DS76)

No new developments. Japan reached an agreement with the U.S on a mutually satisfactory solution last September. Australia has registered its expectation that the outcome will be applied in a non-discriminatory manner to the products of all WTO members.

United States: Section 129(c)(1) of the Uruguay Round Agreements Act (WT/DS221)

The Panel report on section 129(C)(1) of the Uruguay Round Agreements Act was adopted at the DSB meeting of 30 August (see "DSB meetings" below).

The Panel issued its report on 15 July 2002. The Panel found that Canada had failed to establish that the U.S. statute was inconsistent with provisions of the Anti-Dumping Agreement, the Agreement on Subsidies and Countervailing Measures, Article VI of GATT 1994 and the WTO Agreement, which Canada had claimed mandates a violation of these agreements. Canada argued that irrespective of whether duty assessments in anti-dumping and subsidy cases are approached differently under a prospective or retrospective duty assessment system, where a Member has agreed to implement an adverse DSB ruling, it must make all subsequent substantive duty determinations in accordance with that ruling following the expiration of the reasonable period of time.

United States: Section 211 Omnibus Appropriations Act (WT/DS176)

No new developments. The U.S and the EC have reached a mutual agreement on the reasonable period of time for the U.S to implement the recommendations and rulings of the DSB in this dispute. The Panel and Appellate Body Reports adopted at the 1 February DSB meeting found that portions of the U.S legislation were inconsistent with U.S obligations under the WTO Agreement. In the light of these findings, which call for legislative action by the U.S Congress, the U.S and the EC have agreed that the reasonable period of time will expire on 31 December 2002, or on the date on which the current session of the U.S Congress adjourns, whichever is later, and in no event later than 3 January 2003.

The Section 211 law is aimed at preventing foreign companies from registering trademarks that were used in connection with property confiscated by Cuba without compensation.

EC: Generalized System of Preferences (WT/DS242)

No new developments. Thailand has requested consultations with the EC under Article XXIII of GATT 1994 in respect of measures under the EC's Generalized System of Preferences ("GSP") scheme. Consultations took place on 14 February. Thailand is claiming that, through its GSP scheme as implemented, the EC fails to carry out its obligations under Article I of GATT 1994 (Most-Favoured-Nation Treatment) and the Enabling Clause, as incorporated into GATT 1994. Thailand has also made a non-violation claim. This dispute raises a number of systemic issues of interest/concern to Australia, including jurisprudence on GSP graduation, the application of non-economic conditionality to the grant of GSP preferences and the potential for this issue to be divisive for developing countries.

EC: Conditions for the Granting of Tariff Preferences to Developing Countries (WT/DS246)

No new developments. India has requested consultations with the EC on similar issues to Thailand's request above. India has cited Article I.1 of GATT 1994 (Most-Favoured-Nation Treatment) and the Enabling Clause as the legal basis for its concerns with regard to tariff preferences to selected countries under special arrangements for combating drug production and trafficking, and tariff preferences accorded under special incentive arrangements related to EC-determined standards on the protection of labour rights and the environment. This dispute raises similar systemic issues for Australia as EC: Generalized System of Preferences (above).

United States: Equalizing Excise Tax Imposed by Florida on Processed Orange and Grapefruit Products (WT/DS250)

The US exercised its right to prevent the establishment of the Panel requested by Brazil on processed orange and grapefruit products (see "DSB Meetings" below).

Brazil claims that the exemption from this tax of products produced in whole or in part from citrus fruit grown within the U.S treats imported products less favourably than domestic products and is in violation of national treatment obligations under Article III.2 of GATT 1994. Brazil also makes other national treatment violation claims, including that the use of the proceeds of the tax to advertise and promote Florida grown citrus and citrus products with no promotion of imported citrus products violates Article III.4 and III.1 of GATT 1994.

A U.S judicial decision recently overturned the way in which the excise was applied, ruling that it should be payable by all juices in Florida. U.S States previously exempt from paying the tax are now objecting to paying a tax which is used exclusively to promote Florida juice.

US: Definitive Safeguard Measures on Imports of Certain Steel Products (WT/DS248, WT/DS249, WT/DS251, WT/DS252, WT/DS253, WT/DS254, WT/DS258, WT/DS259)

No new developments. Brazil requested that a Panel be established and Brazil's complaint was referred to the Panel already established by China, EC, Japan, Korea, New Zealand, Norway and Switzerland so that a single Panel would consider all eight Panel requests (see report from DSB meetings below).

The complainants argue that the definitive safeguard measures imposed by the U.S in the form of an increase in duties on imports of certain flat steel, hot-rolled bar, cold-finished bar, rebar, certain welded tubular products, carbon and alloy fittings, stainless steel bar, stainless steel rod, tin mill products and stainless steel wire and in the form of a tariff rate quota on imports of slabs (all effective as of 20 March 2002) are inconsistent with U.S obligations under the GATT 1994 and the Agreement on Safeguards.

Turkey Import Ban on Pet Food from Hungary (WT/DS256)

No new developments. Hungary has requested consultations with Turkey over its ban on the importation of pet food from any European country. The ban is designed to protect Turkey from BSE. Hungary argues that as it is BSE free, the pet food is not made from ruminants and is for cats and dogs, the ban is unscientific and inconsistent with the WTO. Specifically, Article XI of GATT 1994, Articles 2.2, 2.3, 5.1, 5.2, 5.6, 6.1, 6.2 and 7 and Annex B of the SPS Agreement and Article 14 of the Agreement on Agriculture.

Peru Certain Taxes on Agricultural Products (WT/DS255)

Chile has sought consultations with Peru on Peruvian law 27.614 which Chile considers may be in breach of WTO National Treatment provisions. Chile has identified fresh fruit, vegetables, fish, milk, tea and other "natural" products as being affected by the tax treatment. The U.S requested intervention as a third party.

At the 24 June DSB meeting, Peru exercised its right to block establishment of a Panel requested by Chile (However, a Panel would be automatically established at the second request). Although it was expected that Chile would request Panel establishment at the DSB meeting on 29 July this item was withdrawn by Chile prior to adoption of the Agenda for this meeting (see report on DSB meetings below).


Meeting of the Dispute Settlement Body: August 2002

A regular DSB meeting was held on 30 August. The next DSB meeting is a special meeting on 9 September to consider adoption of the Panel Report on countervailing measures concerning certain products from the EC.

Australia uses DSB meetings to monitor progress and to register its views on disputes of interest. The agenda of the August DSB meeting was as follows (any Australian interventions are indicated):

Regular DSB Meeting 30 August 2002

1. Implementation of the recommendations of the DSB

United States Anti-dumping and Countervailing measures on steel plate from India

The US outlined its intention to implement DSB recommendations on steel plate from India. India argued for an early implementation date as there is no need to amend any legislation to implement the DSB recommendations, consolations will now take place to establish a reasonable period of time for implementation.

2. Request for establishment of Panel

United States Final countervailing duty determination with respect to certain softwood lumber from Canada (WT/DS257/3)

The US exercised its right to prevent the establishment of the Panel requested by Canada on softwood lumber. The US said that by targeting proposed review processes this latest Panel request continued a trend by Canada of challenging lumber-related measures that the US had never implemented.

 

3. Request for the establishment of a Panel

United States Equalizing excise tax imposed by Florida on processed orange and grapefruit products (WT/DS250/2)

The US exercised its right to prevent the establishment of the Panel requested by Brazil on processed orange and grapefruit products. The US noted that Brazil had not requested consultations on the Florida law as recently amended and presently in effect.

4. Request for the establishment of a Panel

EC Provisional safeguard measures on imports of certain steel products (WT/DS260/4)

The EC exercised its right to prevent the establishment of the Panel requested by the US on safeguard measures on steel. The US questioned the consistency of the law under both the Agreement on subsidies and countervailing measures and Article XIX GATT. The EC rejected this claim.

5. Report of the Panel

United States Countervailing duties on certain corrosion resistant carbon steel flat products from Germany (WT/DS213/R and CORR.1)

This item was removed from the Agenda. The US has confirmed its intention to appeal against the Panel report on countervailing duties on certain steel products from Germany.

6. Report of the Panel

United States Section 129(C)(1) of the Uruguay Round Agreements Act (WT/DS221/R)

The Panel Report on section 129(C)(1) of the Uruguay Round Agreements Act was adopted by the DSB.

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id=ftn2[2] This publication is intended to provide a general update and the information within it should not be relied on as complete or definitive.


The Monthly Bulletin is an overview of Australian involvement in WTO Dispute Settlement from the WTO Trade Law Branch of the Department of Foreign Affairs and Trade . It updates Australian involvement in specific WTO disputes and, more generally, in disputes in which Australia has a policy or economic interest. Also included are the agendas of meetings of the WTO Dispute Settlement Body (DSB), with specific reference to any Australian interventions.

For more information and copies of previous issues, visit Australia and WTO dispute settlement.

For more general information relating to the Doha Round of Trade negotiations, see the WTO Doha Round Bulletin.