Australia and WTO dispute settlement

Monthly Bulletin: February 2002

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RESOLVING EXPORT ACCESS PROBLEMS THROUGH THE WTO SYSTEM

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RECENT DEVELOPMENTS

US International Trade Commission Investigation into Steel

The January Bulletin featured an update on the possibility of the United States introducing import restrictions on steel imports following the safeguards enquiry conducted by the United States International Trade Commission (USITC) last year. A decision by President Bush on what action the Administration will take is due on 6 March.

Australian Ministers and industry have been in regular contact with the US Administration to explain that the Australian steel industry is an unsubsidised, restructured and globally competitive industry and to put forward suggestions on what action could be taken. Once the President's decision has been announced, Mr Vaile will consider all options for protecting Australia's commercial and trade policy interests in this case, including possible WTO action given our concerns about the legal basis for the USITC's findings.

Australian to Serve on Panel

Mr Robert Arnottt, formerly with Australia's Department of Foreign Affairs and Trade, has been selected to serve as a panellist in United States Softwood Lumber (WT/DS236). This panel was established by the DSB at its 5 December 2001 meeting, at the request of the Canada.

A list of Australian nationals who have served or are serving as WTO panellists and of Australian experts who have advised WTO Panels can be found on DFAT's web-site at http://www.dfat.gov.au/trade/negotiations/wto_disputes.html

WTO Disputes in the Automotive Sector

A summary of WTO disputes that have related to the automotive sector is attached to this Bulletin for the information of readers.

 

Australia as a Complainant (1)

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

The first oral hearing before the Panel, held on 5-6 February, highlighted the key legal and factual issues facing the Panel in this dispute. 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 US obligations under GATT 1994, the Anti-Dumping Agreement and the Agreement on Subsidies and Countervailing Measures. This Act requires US customs authorities to distribute anti-dumping and countervailing duties assessed on imports to US domestic parties that supported the original petition for anti-dumping or countervailing duties to be imposed. A second oral hearing before the Panel has been scheduled for 12 March. The Panel is expected to release its final report on 10 July 2002. 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 (7)

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

No new developments. The Panel is expected to complete its work by the end of March 2002.

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 US and Canada because of its failure to implement within a reasonable period of time. We understand that the US and the EC are engaged in discussions on a compensation arrangement.

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

A Panel has been composed to consider the US and New Zealand's second recourse to Article 21.5 in this dispute and will hold its oral hearing on 23 April. The US and New Zealand have submitted that, since the Appellate Body's 21.5 Report did not make any findings on the consistency of Canada's new measures, they continue to believe that Canada has failed to comply with the original recommendations and rulings of the DSB. Australia, the EC and Argentina have reserved their third-party rights to participate in the Panel's proceedings. Third party submissions are due on 25 March. The final report is due by 22 May.

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

Following the US failure to bring its measures into conformity within the agreed reasonable period of time, the EC requested DSB authorisation to suspend concessions pursuant to Article 22.2 of the DSU. The US objected to the level of suspension of obligations proposed by the EC and the matter has been referred to arbitration. However, the arbitration was suspended as the EC and the US continue to be engaged in discussions with respect to this dispute, including on a compensation arrangement. It is understood that this compensation arrangement will involve the US paying the EC US$1.1 million per annum over three years pending implementation of the Panel's findings. This the first time that a compensation arrangement in the WTO dispute settlement system has involved the payment of monetary compensation. Australia has continued to register its expectation that any compensation will be applied on a non-discriminatory basis.

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

The Appellate Body has largely found in favour of Korea's challenge to the February 2000 US line pipe safeguard. It found that the safeguard exceeded the extent of the remedy allowed under the Safeguards Agreement as it was not tailored to the injury caused by imports alone. It also found that elements of the US International Trade Commission injury investigation that preceded the imposition of the safeguard were inconsistent with the Safeguards Agreement. However, the Appellate Body also reversed one Panel finding and upheld another to find in favour of the US on certain aspects. The Appellate Body's findings may have implications for the current US consideration of trade remedies for steel (see Recent Developments above).

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

The adoption of the Panel and Appellate Body reports (following the Appellate Body's finding that the US replacement measure was WTO-inconsistent) has triggered the re-activation of the suspended arbitration on the EC's USD 4 billion retaliation claim. The US has objected to the level claimed by the EC and has argued that the annual retaliation by the EC should not exceed USD 956 million. The arbitration procedure has been extended to 90 days by the arbitrators and is expected to be concluded by the end of April. Following the circulation of the arbitration report, the EC can seek DSB authorisation to proceed with the retaliatory action against the US specified in the arbitrator's award.

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

The Panel's report was adopted at the 19 February DSB meeting. The Panel's findings had upheld Brazil's claim that the Canadian Export Development Corporation's (EDC) provision of financing to three Canadian civil airlines (for the specific transactions, not the programmes themselves) constituted prohibited export subsidies contrary to the Subsidies and Countervailing Measures Agreement (SCM Agreement). The Panel recommended that Canada withdraw these subsidies within 90 days. Canada and Brazil are engaged in discussions on implementation. Upon adoption of the report, Canada, the US and the EC were critical of the Panel's finding that an exemption from a prohibition on export subsidies under the SCM Agreement (relating to OECD interest rate provisions) did not apply. (See also the report under the 19 February DSB meeting below).

Disputes in which Australia has a policy or economic interest (5)

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

No new developments. Japan reached an agreement with the US 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.

EC: Regime for the Importation, Sale and Distribution of Bananas (WT/DS27)

Following the entry into force in January of a new EC banana import regime, giving effect to Phase II of the bilateral understandings that the EC had reached with the US and Ecuador, the US terminated its DSB-authorised suspension of concessions against the EC that had been in place since 1999. The new regime relies for its WTO-consistency on waivers granted to the EC at the Doha Ministerial Conference in November 2001. The EC has said that it will move to a tariff-only banana import regime by 2006, when these waivers expire, in order to remain in full conformity with its WTO obligations. (See also the report on the 1 February DSB meeting below).

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

No new developments. Canada is challenging the legality of a specific aspect of the US statute controlling the US implementation of DSB rulings. A panel was established at the 23 August 2001 DSB meeting, and was constituted on 30 October. Third party rights were reserved by the EC, India, Japan and Chile.

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

The Panel and Appellate Body Reports were adopted at the 1 February DSB meeting. The US told the 19 February DSB meeting that it would need a reasonable period of time to implement the DSB recommendations (see reports on these meetings below). The Appellate Body had upheld aspects of the EC appeal in finding that the US law known as Section 211 (which prevents US recognition of trademarks and other intellectual property used in connection with confiscated property) is inconsistent with US national treatment and most-favoured-nation obligations under the WTO TRIPS Agreement. In a finding that was welcomed by both the EC and the US, it also reversed the Panel's finding on trade names (company or business names that are not registered as trademarks) and found that WTO Members do have an obligation under this Agreement to provide protection to trade names.

EC: Generalized System of Preferences (WT/DS242)

Thailand has requested consultations with the EC under Article XXIII of GATT 1994 in respect of measures under the EC' 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 request is linked to the EC's WTO waiver request for its GSP scheme in relation to additional preferences for a designated list of countries. Costa Rica, Guatemala, Honduras, Nicaragua and Colombia requested to be joined in the consultations as third partiesbut Thailand exercised its rights under Article XXIII to reject the requests. 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.

Meetings of the Dispute Settlement Body: February 2002

The DSB, consisting of all the Members of the WTO, met on 1 February and 19 February 2002. The next regular DSB meeting will be held on 8 March 2002. Australia uses DSB meetings to monitor progress and to register its views on disputes of interest. The agendas of the February DSB meetings were as follows (any Australian interventions are indicated):

DSB Meeting 1 February 2002

1. Surveillance of Implementation of Recommendations adopted by the DSB

EC Regime for the Importation, Sale and Distribution of Bananas (WT/DS27) - status report by the EC

The EC confirmed that the Council Regulation giving effect to Phase II of the bilateral understandings with the US and Ecuador concerning the EC's implementation had entered into force. The EC noted that further action would be required in 2004 in anticipation of the shift to a tariff-only scheme in 2006. The EC considered that it had now fully implemented the DSB recommendations and requested that this item be removed from the agenda of future DSB meetings.

Ecuador, Honduras and Colombia welcomed the EC's notification but stressed that the EC would only be in conformity with its WTO obligations once the tariff-only scheme was introduced in 2006. They expressly reserved their WTO rights, including the right to seek further recourse to an Article 21.5 implementation panel in the event of any future disagreement concerning the EC's implementation.

The US noted that it had terminated the DSB authorised suspension of concessions against the EC that had been in place since 1999.

2. Surveillance of Implementation of Recommendations adopted by the DSB

United States Section 110(5) of the US Copyright Act (WT/DS160)
- status report by the US

The US made a brief statement noting that it had been engaged in discussions with the EC to find a positive and mutually acceptable resolution of the dispute. The EC said that, notwithstanding these useful discussions, it remained concerned about the lack of progress on compliance by the US

 

Australia registered our ongoing interest in US implementation and our expectation that any compensation arrangement would be applied on a non-discriminatory basis. The US assured Members in response that any such compensation arrangement would be consistent with the WTO covered agreements.

3. Surveillance of Implementation of Recommendations adopted by the DSB

United States Anti-Dumping Act of 1916 (WT/DS162)
- status report by the US

The US noted that a bill to repeal the 1916 Act and prevent entry of judgments pursuant to that Act had been introduced into Congress, and said that it was continuing to work with the EC and Japan to reach a mutually satisfactory solution to this dispute.

 

The EC said that the Introduction of this bill into Congress was a first step, but compliance would only be achieved once the law was effectively repealed and pending cases terminated. Japan urged the US to move forward with its implementation.

 

4. Report of the Panel

India Measures Affecting the Automotive Sector (WT/DS146 and WT/DS175)

 

This item was withdrawn from the agenda as India appealed the Panel Report.

 

5. Adoption of Panel and Appellate Body Reports

United States Section 211 Omnibus Appropriations Act of 1998 (WT/DS176)

 

The Panel and Appellate Body Reports were adopted.

 

The EC and the US welcomed the Appellate Body's confirmation that trade names do come within the TRIPS Agreement. Both welcomed some of the findings while expressing disappointment with others. The US also draw attention to two systemic issues raised by the Reports: (1) the Panel's findings with respect to a complaining party's burden of presenting a prima facie case in WTO dispute settlement proceedings and (2) the Appellate Body's revised position on municipal law and the scope of Appellate Body review.

6. Negotiations on Improvements and Clarifications of the DSU

This item was withdrawn from the agenda due to then ongoing consultations concerning the Trade Negotiations Committee that will oversee the Doha Round of Trade Negotiations, including this negotiation.

 

Special DSB Meeting 19 February 2002


1. Implementation of the Recommendations of the DSB

United States Section 211 Omnibus Appropriations Act of 1998 (WT/DS176)

The US stated that it intends to comply with the DSB recommendations and that it requires a reasonable period of time in which to do so.

2. Report of the Panel

Canada Export Credits and Loan Guarantees for Regional Aircraft (WT/DS222)

Canada did not appeal this Report, and accordingly the Panel Report was adopted.

 

Canada, the US and the EC expressed concern at the implications of the Panel's findings for the interpretation of paragraph (k) of Annex I of the Subsidies and Countervailing Measures Agreement (SCM Agreement), and specifically the need to protect the matching provisions of the OECD arrangement on export credits. While welcoming the decision, Brazil expressed its dissatisfaction that the SCM Agreement obligated Members to abide by an OECD arrangement to which it was not a member.

3. Election of the Chairman

Ambassador Castillo (Uruguay) was elected Chair of the Dispute Settlement Body.


WTO DISPUTES IN THE AUTOMOTIVE SECTOR

(as at February 2002)

Australia - Automotive leather subsidies (WT/DS126)

  • Complaint by USA on loans and grants provided to Howe Leather, involving claims of inconsistency with Article 3 of Agreement on Subsidies and Countervailing Measures (SCM)
  • Proceedings completed, panel found inconsistency with Article 3.1(a) of SCM and implementation panel also found some inconsistency with replacement measures. Australia has eliminated WTO-inconsistent measures. Mutually satisfactory solution notified 24 July 2000.

Brazil Measures affecting trade and investment in the automotive sector (WT/DS51, WT/DS52, WT/DS65 and WT/DS81)

  • Complaint by Japan, USA and EC, covering Article I (MFN), III (National Treatment) and XI (quantitative restrictions) of GATT 1994, Article 2 of Agreement on Trade Related Investment measures (TRIMS) and Articles 3 and 27 of SCM
  • At consultation stage

Canada Certain measures affecting the automotive industry (WT/DS 139 and WT/DS142)

  • Complaints by Japan and the EC, claiming inconsistency with Articles I (MFN) III (National Treatment), and XVII (State Trading) of GATT 1994 and Articles II, VI and VII of the General Agreement on Services (GATS), Article 2 of TRIMS and Article 3 of SCM.
  • Proceedings completed. Canada was found to be acting inconsistently with the provisions of Article I, III.4 and XVII of GATT 1994 and Article 3.1(a) of SCM.

India - Autos (WT/DS146, WT/DS175)

  • Complaints by European Communities (EC) and USA about Articles III (national Treatment) and XI (quantitative restrictions) of GATT 1994 and Article 2 of TRIMS
  • Panel found that India had acted inconsistently with its obligations under Articles III:4 and XI of GATT 1994
  • Panel findings are subject to appeal

Indonesia - Certain measures affecting the automobile industry (WT/DS54, WT/DS55, WT/DS64)

  • Complaint by EC, Japan and USA, covering Articles I (most-favoured-nation, or MFN), II and X of GATT 1994 Articles 2 and 5 of TRIMS, Articles 3,6,and 28 of the SCM and Articles 3, 20 and 65 of the Agreement on Trade Related Intellectual Property (TRIPS)
  • Proceedings completed, Indonesia found not to be in compliance. in respect of Articles I and II: 2 of GATT 1994, Article 2 of TRIMS and Article 5(c) of SCM. Indonesia has eliminated WTO-inconsistent measures.

Peru Countervailing duties on buses from Brazil (WT/DS112)

  • Complaint by Brazil
  • At consultation stage

Philippines Measures affecting trade and investment in the automotive sector (WT/DS195)

  • Complaint by USA about Philippines Motor Vehicle Development Plan, covering the following WTO legal issues:
    • Articles III and XI of GATT 1994 (National Treatment and Quantitative Restrictions); Article 2 of TRIMS and Article 3 SCM
  • At panel stage

Poland Import regime for automobiles (WT/DS19)

  • Complaint by India.
  • Following consultations, the parties notified a mutually satisfactory solution on 16 July 1996.

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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.