Australia and WTO dispute settlement

Monthly Bulletin: July 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:

 


RECENT DEVELOPMENTS

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. Minister Sutton (in a media release on 25 June) said it was an extremely positive result which highlighted the strength of the WTO export subsidy disciplines. The Canadian International Trade Minister, Pierre Pettigrew, and Agricultural Minister, Lyle Vanclief, have issued a statement advising that Canada will appeal the WTO compliance Panel's ruling.

In order to comply with the DSB's ruling that Canada had provided export subsidies through its Special Milk Classes 5(d) and (e) in excess of its quantity commitment levels specified in Canada's Schedule, Canada deregulated milk for export processing through introducing a new category known as commercial export milk (CEM). This enables milk to be provided to dairy processors/exporters for the export of manufactured dairy products below the value of the milk to the producer. There is no limit on the sales of CEM to processors/exporters. Processors are prohibited from selling milk on the domestic market; CEM must be exported. Processors are also exempted from purchasing milk for export at regulated domestic prices. The only way that producers can sell above-quota or non-quota milk is if it is exported or used as animal feed.

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.


Australia as a Complainant (1)

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

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)

No new developments. 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, Canada, Cuba, the EC, Guatemala, Japan and Nicaragua have reserved their third party rights in this dispute.

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

At the 24 June DSB meeting, Chile announced that it had filed a notice of appeal against the Panel report. The Appellate Body Division will hold an oral hearing on 6 and 7 August. The Report is due on 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.

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)

See New Developments section above.

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

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 (see report on DSB meetings below)

Arbitration over the level of suspension of obligations proposed by the EC following the U.S failure to bring its measures into conformity within the reasonable period of time remains suspended (but can be reactivated at the request of either party).

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

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)

No new developments. Arbitration is continuing on the EC's U.SD 4 billion retaliation claim. The U.S has objected to the level claimed by the EC and has argued that the annual retaliation by the EC should not exceed U.SD 956 million. The arbitrators' report has been delayed. Following the circulation of the arbitration report, the EC can seek DSB authorisation to proceed with the retaliatory action against the U.S specified in the arbitrator's award. President Bush assured European leaders at a May 2 Summit that he would ensure U.S compliance with the WTO ruling. However, it is reported that there are still significant differences of opinion within the U.S on how this will be achieved and on timing.

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

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)


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.

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.


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 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)

No new developments. Brazil has held consultations with the U.S on the Equalizing Excise Tax imposed by the State of Florida on processed orange and grapefruit products produced from citrus fruit grown outside the U.S. Brazil is claiming 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)

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)

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: June 2002

A Special meeting of the DSB was held on 8 July and a Regular DSB meeting was held on 29 July. The next DSB meeting is scheduled for 30 September.

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

Special DSB Meeting 8 July 2002

1. Panel request

United States Definitive Safeguard Measures on Imports of Certain Steel Products (WT/DS258/9)

 

New Zealand's WTO complaint against the U.S steel safeguards was referred to the existing Panel tasked with examination of the complaints raised by the other six complainants.


General DSB Meeting 29 June 2002

1.A Surveillance of implementation of recommendations approved by the DSB

United States Section 110(5) of the US Copyright Act: Status Report by the United States

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. The U.S noted that it was working hard to reach a mutually acceptable arrangement consistent with WTO rules. The EC noted the ongoing efforts of the U.S administration, but expressed concern about the delay in congressional action.

 

1. B

United States Antidumping Act of 1916: Status Report by the United States (WT/DS136/14 WT/DS162/17)

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. The U.S noted that the bills have been introduced which would repeal the 1916 Act and apply to all pending court cases. The EC expressed concern over the delay on implementation of this case noting that the bills introduced have not been adopted by Congress and stressed the urgency of positive developments in this case.

2. Panel request

Turkey Certain import measures for fresh fruit (WT/DS237/3)

 

The Panel was established at Ecuador's request. Third party rights were reserved by the EC and U.S. Ecuador agreed to defer proceeding with Panel composition in order to allow the changes to Turkey's import procedures for fresh fruit to be examined and for further bilateral discussions aimed at resolving the dispute. Turkey noted that there had been a change in legislation and that the legal basis for the Panel no loner existed.

3. Panel request

Peru Tax treatment on certain imported products (WT/DS255/3)

This item was withdrawn by Chile prior to adoption of the agenda.

4. Panel request

United States Definitive safeguard measures on imports of certain steel products (WT/DS259)

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.

5. Panel request

United States Final countervailing duty with respect to certain softwood lumber from Canada (WT/DS257/2)

Canada requested the establishment of a Panel to consider the final countervailing duty determination made by the U.S on 21 March with respect to certain softwood lumber from Canada. The U.S exercised its right to prevent Panel establishment upon first DSB consideration. The U.S expressed concern with Canada's inclusion in the request of a measure (expedited reviews) that had not been mentioned in the consultation request and had not been the subject of consultations. The U.S urged Canada to drop its challenge to the initiation of the expedited reviews or file a new request for consultations with the U.S so that this issue can be discussed. Canada did not respond.

6. Report of the Panel

United States Anti-Dumping and Countervailing Measures on Steel Plate from India (WT/DS206)

The report was adopted. India welcomed the Panel's finding that the U.S acted inconsistently with its obligations under Article 6.8 and Para 3 of Annex II of the Anti-Dumping Agreement (ADA) but expressed disappointment at the Panel's findings in relation to Article 15 of the ADA. The U.S thanked the Panel for their careful and thoughtful examination of the complex matters involved in this dispute. The U.S did however mention that they did not agree with the Panel's acceptance of post hoc arguments from India in the form of affidavits that were not raised during the anti-dumping investigation and the subsequent rejection of U.S arguments on the same issue on the grounds that those arguments were post hoc. Chile as a third party in this dispute welcomed the Panel's finding and expressed their desire to see their arguments regarding the mandatory language in the Spanish text of Paragraphs 3 and 5 of Annex II of the ADA incorporated into the Panel report in accordance with Article 10.2 of the DSU.

 

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[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.