Australia and WTO dispute settlement

Monthly Bulletin: January 2002

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RESOLVING EXPORT ACCESS PROBLEMS THROUGH THE WTO SYSTEM

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  • Do you export to one or more of the 142 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:

 

RECENT DEVELOPMENTS

WTO ruling against US export tax subsidies

The WTO has again ruled against United States (US) tax subsidies for export in the long-running Foreign Sales Corporations (FSC) dispute between the United States and the European Communities (EC).  Under the United States scheme, US companies are provided tax breaks linked to exports.  The illegal export subsidies have an impact on the competitive trading opportunities of Australian exporters in all markets.

The Panel and Appellate Body reports were adopted by the Dispute Settlement Body on 29 January.  The EC had earlier sought WTO authorisation for retaliation against the US for US$4 billion, the annual value of the tax subsidies.  This retaliation request will now be examined by a WTO arbitrator which is expected to report by the end of March.

Under the WTO rules, the US may offer compensation usually in the form of reduced tariff rates if it cannot bring its measure into conformity.  The EC is however under no obligation to accept compensation.

US International Trade Commission Investigation into Steel

Recent media reports have highlighted the possibility of the United States introducing restrictions on steel imports.  Problems in the US steel sector have been long-running, including large so-called legacy costs (social security obligations) and economic inefficiencies.

Last June the US Administration announced a safeguards enquiry to be undertaken by the United States International Trade Commission (USITC).  The enquiry, the largest safeguards investigation ever initiated by the US, found that imports were causing serious injury to the US industry and recommended the imposition of a range of import restrictions.  President Bush has until 6 March to decide what action the Administration will take.

Severe import restrictions are a major concern as they would have a significant impact on both Australian steel exports to the US and on global steel trade generally.  A number of countries, most notably the European Union, have signalled their intention to take dispute action in the WTO against any US measures.  Australia also has concerns about the legal basis for the USITC's findings and, 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.


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 will take place on 5-6 February.  This will be an opportunity for the eleven co-complainants (including Australia) to present their arguments 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.  The Panel is expected to release its final report on 10 July 2002.  A copy of Australia's submission 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.

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

The US and New Zealand have requested a second recourse to Article 21.5 following the Appellate Body's inability (due to an insufficient factual basis in the Panel Report) to make any findings in its Article 21.5 Report on the consistency of Canada's new measures.  The matter has been referred to the original panel for the second time.  Australia, the EC and Argentina have reserved their third-party rights to participate in the Panel's proceedings.  Canada, New Zealand and the US have reached agreement to suspend the Panel's work until 18 February 2002.  They have also reached additional understandings regarding procedures under Article 21 and 22 of the DSU, which include Canada's agreement that the arbitration requested by Canada under Article 22.6 of the DSU remain suspended pending the work of the compliance Panel. 

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

The EC and the US are understood to have come to an agreement regarding compensation in this case.  Under this agreement, pending implementation of the Panel's findings the US will pay the EC US$1.1 million per annum over three years.  This is in line with the Arbitrators' award of US$1.1 million per year as the level of nullification and impairment of benefits to the EC resulting from the WTO-inconsistent US measure.  However, it is the first time that an arrangement has involved the payment of monetary compensation in the WTO dispute settlement system.  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 US has appealed the Panel's finding that the US line pipe measure was imposed inconsistently with certain provisions of GATT 1994 and the Safeguards Agreement.  Australia has made a third party submission.  An oral hearing was held on 15 January 2002 and the Appellate Body's report is due by 15 February 2002.

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

In its report issued on 14 January, the Appellate Body has rejected the US appeal and upheld the Article 21.5 Panel's core findings that the US replacement measure provides export subsidies inconsistent with US WTO obligations, including under the Agreement on Agriculture.  Arbitration on the EC's request for DSB authorisation for retaliation against the US to the value of US$4 billion per year will now resume following the adoption of the Appellate Body and Panel reports.  (See also report in Recent Developments above).

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

In its report issued on 28 January, the Panel upheld Brazil's claim that the Canadian Export Development Corporation's (EDC) provision of financing to three Canadian civil airlines constituted prohibited export subsidies contrary to the Subsidies and Countervailing Measures Agreement.  The Panel recommended that Canada withdraw these subsidies within 90 days.  Other claims made by Brazil pertaining to related Canadian measures, including the EDC's Corporate Account and Canada Account programmes as such, were rejected.


Disputes in which Australia has a policy or economic interest (4)

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)

The EC Council Regulation giving effect to Phase II of its bilateral settlements with the US and Ecuador in this dispute was adopted on 19 December 2001 and entered into force on 1 January 2002.  This follows the waivers granted to the EC for its new banana import regime at the Doha Ministerial Conference in November 2001.

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 Appellate Body released its report on 2 January 2002.  It upheld aspects of the EC appeal, finding that the U.S. law known as Section 211 (which prevents U.S. 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.  It also reversed the Panel's finding that trade names (company or business names that are not registered as trademarks) are not covered under the TRIPS Agreement, finding that WTO Members do have an obligation under this Agreement to provide protection to trade names.  In addition, the Appellate Body upheld the one issue appealed by the US, overturning the Panel's finding that Section 211 denied parties fair and equitable judicial procedures to enforce trademark rights.


Meetings of the Dispute Settlement Body: January 2002

The DSB, consisting of all the Members of the WTO, met on 18 January and 29 January 2002. The next regular DSB meeting will be held on 1 February 2002.  Australia uses DSB meetings to monitor progress and to register its views on disputes of interest. The agendas of the January DSB meetings were as follows (any Australian interventions are indicated):

Special DSB Meeting 18 January 2002

1. Panel Request

Argentina Definitive Safeguard Measure on Imports of Preserved Peaches (WT/DS238)           request for the establishment of a Panel by Chile

A Panel was established, with the EC, Paraguay and the US reserving third party rights.  At Chile's request the process of panel composition was deferred to allow for further consultations between the parties.

2. Requests by the EC and Japan for DSB authorisation to retaliate under DSU Art. 22

United States Anti-Dumping Act of 1916 (WT/DS162)

The EC and Japanese retaliation requests were referred to arbitration following the US objection to the level of suspension of obligations proposed by the EC and Japan and its claim that the principles and procedures of Article 22.3 had not been followed.  The EC, Japan and the US foreshadowed a request to suspend the arbitration to allow for prompt US implementation.

The retaliation proposed by the EC and Japan (authorisation to suspend the application of obligations under GATT 1994 and the Anti-Dumping Agreement so as to allow the introduction of a measure with the equivalent effect of the WTO-inconsistent provisions of the US Act solely against the US) led to some systemic concerns being raised by Chile, Brazil, Hong King (China) and Venezuela.

Australia also noted the systemic issues raised but suggested that some of the concerns raised would be addressed if the US proceeded with implementation as soon as possible.

 3. Request by the EC for DSB authorisation to retaliate under DSU Article 22

United States Section 110(5) of the US Copyright Act (WT/DS160)

The EC retaliation request was referred to arbitration following the US objection to the level of suspension of obligations proposed by the EC and its claim that the principles and procedures of Article 22.3 had not been followed.  The EC and the US both indicated that a request would be made to suspend the arbitration so as to facilitate a positive outcome to ongoing discussions (including on a compensation arrangement) in this dispute.

The following were the main points made in Australia's statement:

  • Australia is concerned that any compensation arrangement agreed between the US and the EC be applied on a non-discriminatory basis.
  • Australia expects the US to comply with the WTO findings as quickly as possible and is concerned that any compensation arrangement not significantly delay US implementation.

4. Other Business

Colombia and Costa Rica registered their disappointment that their request to be joined as third parties in consultations between Thailand and the EC in respect of measures under the EC's Generalized System of Preferences scheme had not been granted.

Special DSB Meeting 29 January 2002

1. Adoption of Panel and Appellate Body Reports

United States Tax Treatment for "Foreign Sales Corporations" (WT/DS108)
- Recourse to Article 21.5 of the DSU by the EC
The Article 21.5 Appellate Body and Panel Reports were adopted.

Australia noted that the prohibited export subsidies in this dispute directly impacted on the competitive trading opportunities of Australian exporters in all markets, and urged the United States to comply as quickly as possible with the WTO findings and remove the export subsidies.


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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.