Australia and WTO dispute settlement

Monthly Bulletin: June 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:

Discussion paper on standards of review under WTO agreements

The attached discussion paper entitled “National Sovereignty, International Review and the World Trade Organisation: An analysis of standard of review under the World Trade Organisation”, was prepared by Christine Ratnasingham in June 2002 under the Law Internship Program of the Centre for International and Public Law at the Australian National University in Canberra. 

The paper examines the standard of review in relation to the panel and Appellate Body (AB) approaches to World Trade Organization (WTO) disputes. The views and conclusions expressed in this paper – and any errors therein – are those of the author and cannot be attributed to the Department of Foreign Affairs and Trade.


RECENT DEVELOPMENTS

European Communities – Trade Description of Sardines (WT/DS231/R)

On 29 May 2002, a WTO panel found that an EC Regulation, restricting the use of the term “Sardines” to the fish species “Sardinops Pilchardus”, was inconsistent with Article 2.4 of the Agreement on Technical Barriers to Trade (TBT Agreement).  The EC has since announced that it will appeal the finding.

Peru sought to market its fish species “Sardinops sagax” as “Peruvian Sardines” in the EC (in accordance with Codex Stan 94).  The EC claimed that only products from the fish species “Sardina Pilchardus” could use the term “Sardines” as a descriptor (in accordance with the EC Regulation).  Peru argued that the EC Regulation was inconsistent with Articles 2 and 12 of the TBT Agreement, Article XI:1 of the GATT 1994 and the principle of non-discrimination under Articles I and III of the GATT 1994.  The panel found that the EC Regulation breached Article 2.4 of the TBT Agreement and recommended to the DSB that the EC bring its measure into conformity with its obligations under this Agreement.

This is the first panel decision to consider the substantive obligations under Article 2.4 of the TBT Agreement.  Article 2.4 does not mandate the use of technical regulations or international standards but requires that Members use technical regulations where they are required and relevant international standards where they exist, as a basis for their technical regulations (except when such international standards would be ineffective or inappropriate in fulfilling the legitimate objectives pursued).  TBT rules in this regard are different from those applicable under the SPS Agreement.

The panel found that the naming standard set out in paragraph 6.1.1(ii) Codex Stan 94 was a relevant international standard and that it was not used as a basis for the EC Regulation.  The panel concluded that the EC failed to establish the “legitimate obejectives” defence – that is the EC had not demonstrated that Codex Stan 94 would be an ineffective or inappropriate means for the fulfilment of the legitimate objectives pursued by the Regulation (namely, consumer protection, market transparency and fair competition).  The panel therefore found that the EC Regulation was inconsistent with Article 2.4 of the TBT Agreement.  In its finding the panel discussed the meaning of “technical regulation” through a textual reading of its definition in Annex 1.1 of the TBT Agreement.  The panel considered that labelling and naming requirements are essentially a “means of identification” of a product and therefore fall within the scope of the definition of technical regulation.

US/NZ – WTO Ruling on Canadian Dairy Export Subsidies (WTDS103 and WT/DS113)

The Final Report (confidential to the parties) was issued to the parties on 24 June.  The Report will be circulated to WTO Members around mid July.

On 25 June, NZ Trade Negotiations Minister Jim Sutton released a statement in response to overseas media reports that a WTO panel had upheld the joint US – NZ complaint against Canadian Dairy export subsidies.  Minister Sutton 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 Canclief, have issued a statement advising that Canada will appeal the WTO compliance panel's ruling. 

Australian to be WTO Panel Member

Paul O'Connor, Regional Director, Australian Customs Service in Western Australia has been selected to become a member for the Article 21 panel in relation to EC - Anti-dumping on Linen (WT/DS141).


Australia as a Complainant (1)

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

The issue of the panel report has been delayed.  A revised release date has not yet been announced.

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.
Contact: nadia.krivetz@dfat.gov.au

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

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.  At the 24 June DSB meeting, Chile announced that it had filed a notice of appeal against the panel report.  It is expected that Argentina will not file a counter-appeal.  The oral hearing is expected to be held in the last week of July or the first week of 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)

See “Recent Developments” above.

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

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).  At the 24 June DSB meeting, the U.S made a 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 noted the efforts of the U.S administration in working with the U.S Congress and expressed hope that there would be rapid progress.  Australia registered its concern at the delay in U.S implementation and the apparent discriminatory nature of compensation arrangements that might be negotiated.  Australia noted that no information had been provided on the nature of the intended solution and asked if the U.S could provide this information to the DSB.  In response the U.S claimed that any implementation arrangement reached with the EC in the copyright dispute would be consistent with the WTO covered agreements.  The EC also responded by stating that there were no agreements to notify in the context of this dispute (see report from 24 June DSB meeting below).

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

The Appellate Body and panel Reports were adopted at the 8 March DSB meeting.  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 the U.S implementation of the DSB report. As no mutually satisfactory time has been agreed Korea requested binding arbitration on this point pursuant to Article 21.3(c) of the DSU.  Mr Yasuhei Taniguchi, Appellate Body Member, has been appointed as Arbitrator.

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

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 was due on 29 April, but is now expected to be issued on 15 July.  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 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).  Brazil placed its request on the agenda for the 3 June special meeting of the DSB (Brazil's request raises systemic issues related to sequencing and retrospectivity).  This item was deferred at the 3 June DSB until the meeting on 24 June where Brazil made a retaliation request to take appropriate countermeasure 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 US.  Australia reserved its third party rights.  Brazil and the EC also reserved third party rights.

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)

No new developments.  Canada is challenging the legality of a specific aspect of the U.S statute controlling the U.S 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)

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/DS 251, WT/DS 252, WT/DS 253, WT/DS 254)

At the 3 June DSB meeting, three separate panel requests were put forward by the EC, Japan and Korea in relation to this matter.  Given this was the second DSB consideration of the EC's request, a panel was established.  The U.S exercised its right to prevent the establishment of the panels requested by Japan and Korea.  At the 7 June DSB meeting, the U.S exercised its right to block China's first DSU panel request on steel.  At the 14 June DSB meeting,  the DSB accepted the second-time requests for panels by Japan and Korea and decided to refer these cases to the panel which had been established on 3 June to examine the EC complaint.  The 14 June DSB meeting also considered the first panel requests by Switzerland and Norway.  At the 24 June DSB meeting, the three additional complaints by China, Norway and Switzerland against U.S steel safeguard measures were referred to the panel already established to examine the complaints raised by the EC, Japan and Korea (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).  If congress does not remove the measure, it is expected that Chile will request panel establishment at the DSB meeting on 29 July.


Meeting of the Dispute Settlement Body: June 2002

Special meetings of the DSB were held on 3, 7 and 14 June and a Regular DSB meeting was held on 24 June.   The next DSB meeting is scheduled for 29 July.

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

Special DSB Meeting – 3 June 2002

1.    Panel request

United States – Definitive Safeguard Measures on Imports of Certain Steel Products

Three separate panel requests were put forward by the EC, Japan and Korea in relation to the United States' definitive safeguard measures on imports of certain steel products.

Given this was the second DSB consideration of the EC's request, a panel was established.  The EC expressed disappointment at the delay in the establishment of a penal and registered its expectation that the panel would proceed as expeditiously as possible.  Six of the other potential complainants registered third party rights (Brazil, China, Korea, Japan, Norway and Switzerland) as well as Canada, Taiwan and Thailand. 

The U.S exercised its right to prevent the establishment of the panels requested by Japan and Korea.  Both Japan and Korea expressed regret at the U.S decision to block the establishment of the panels.

2.    Panel request

Japan – Measures affecting the importation of apples (WT/DS245/2)

As this was the second DSB consideration of the U.S request, a panel was established.  Australia reserved its third party rights.  Brazil, NZ and the EC also reserved third party rights.

3.    Surveillance of Implementation of Recommendations adopted by the DSB

Canada – Export Credits and Loan Guarantees for Regional Aircraft : Recourse by Brazil to Article 4.10 of the SCM Agreement and Article 22 of the DSU (WT/DS222/7)

Pursuant to the bilateral agreement signed by Brazil and Canada on 1 June 2002, Brazil requested the DSB to defer consideration of this item until the 24 June DSB meeting.  Brazil and Canada both indicated that the purpose of the requested DSB decision was to grant them additional time to decide on how to proceed with this dispute.  Both countries further indicated that the deferral will not affect Brazil's right to request authorisation to take appropriate countermeasures pursuant to Article 4.10 of the SCM Agreement and Article 22.2 of the DSU.  The DSB took a decision along these lines.


Special DSB Meeting – 7 June 2002

1.    Panel request

United States – Definitive Safeguard Measures on Imports of Certain Steel Products

The U.S exercised its right to block China's first DSU panel request on steel.  The EC and Korea criticised the U.S's continued use of delaying tactics to prevent the commencement of WTO panel proceedings to review the WTO consistency of its safeguard measures. 


Special DSB Meeting – 14 June 2002

1.A    Panel requests

United States – Definitive Safeguard Measures on Imports of Certain Steel Products (WT/DS249/6)

Japan and Korea requested the establishment of a panel.  The DSB agreed that the panel established on 3 June to examine the EC's complaint against U.S steel safeguards would also examine the complaints by Japan and Korea.  The U.S blocked the first panel request by Switzerland and Norway.


Regular DSB Meeting – 24 June 2002

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

United States – Section 110(5) of the U.S Copyright Act: Status Report by the United States (WT/DS160/18/ADD.5)

The U.S noted that it was working hard to reach a mutually acceptable arrangement consistent with WTO rules.  The EC noted the efforts of the U.S administration in working with the U.S congress, and expressed hope that there would be rapid progress.

Australia registered its concern about U.S delay in implementation and the apparent discriminatory nature of the proposed compensation arrangement with the EC.  We noted that there was no information on the nature of the intended solution and asked the U.S to provide this information to the DSB.  The U.S claimed that any implementation arrangement would be WTO consistent.  The EC stated that there was no agreement to notify in the context of this dispute.

1. B   Surveillance of implementation of recommendations adopted by the DSB

United States – Anti-Dumping Act of 1916: Status report by the United States (WT/DS136  – WT/DS162)

The U.S mentioned its additional status report (provided on June 13) and repeated information set out in that report.  The U.S stated it would continue to work towards reaching a mutually satisfactory resolution to this dispute with the EC and Japan.  The EC and Japan registered their concern with the delay and Japan noted that it would be able to re-activate the suspended Article 22.6 arbitration from 30 June.

2.    Panel request

United States – Rules of origin for textiles and apparel products (WT/DS243/5/REV1)

At India's request, a panel was established at the meeting.  The EC, Pakistan and the Philippines registered third party rights.  The U.S raised its concern about the Secretariat's action to modify the circulated version of India's original panel request.  The U.S emphasised that panel requests should be circulated exactly as submitted by the complaining party and, if required can be amended through Members acting in good faith to resolve the problem.

3.    Panel request

United States – Definitive safeguard measures for imports of certain steel products (WT/DS252/5)

The three additional complaints by China, Norway and Switzerland in this matter were referred to the panel already established to examine complaints raised by the EC, Japan and Korea.

4.    Panel request

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

Turkey exercised its right to prevent establishment of a panel at the first DSB consideration of the request from Ecuador. 

5.    Panel request

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

Peru exercised its right to prevent the establishment of a panel at the first DSB consideration of the request by Chile.  It is expected that if Peruvian Congress does not remove the measure, Chile will request panel establishment at the DSB meeting on 29 July.

6.    Surveillance of implementation of recommendations adopted by the DSB

Canada – Export credits and loan guarantees for regional aircraft ):  Recourse by Brazil to Article 4.10 of the SCM Agreement and Article 22.2 of the DSU (WT/DS222/7 and CORR.1).

It was agreed that this matter would be referred to arbitration.  Brazil requested that the DSB, pursuant to Article 4.10 of the SCM Agreement and Article 22.2 of the DSU, grant Brazil authorisation 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.


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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.