Australia and WTO dispute settlement

Monthly Bulletin: May 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


Chile Price Band System and Safeguard Measures Relating to Certain Agricultural Products

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 is expected to appeal against this decision.

The Panel found that the PBS was similar to a variable import levy and a minimum import price, both of which were required to be converted into ordinary customs duties during the Uruguay Round pursuant to Article 4.2 of the Agreement on Agriculture. By maintaining a measure that should have been converted, Chile was in breach of Article 4.2 of the Agreement on Agriculture.

Chile's PBS was also inconsistent with Article II:1(b) of the GATT 1994, which prohibits WTO members from applying any duties or charges of any kind, other than ordinary customs, unless they are recorded in their Uruguay Round Schedules. In this case, the other duties or charges levied by Chile through the PBS are not recorded in Chile's Schedule and, therefore, inconsistent with Article II:1(b).

Argentina also alleged that Chile's application of safeguard measures on imports of wheat, wheat flour and edible vegetable oils in November 1999 breached Article XIX:1(a) of GATT 1994 and the Agreement on Safeguards. Although Chile withdrew the safeguard measures in November 2001, the Panel nevertheless considered the WTO-consistency of the withdrawn measures. The Panel found that Chile had acted inconsistency with these provisions, by failing to meet the necessary requirements for the imposition of safeguards.

The factual background to this case is that Chile uses a price band system to stabilise prices for sugar, vegetable oils, wheat and wheat flour. The Customs Service assesses import prices on a weekly basis and if the price of an imported product covered by the price band system falls below an established reference price, it adds a specific duty in U.S dollars to the ad valorem rate to bring the import price up to the reference price. As a result of low world prices in the late 1990s, the combination of the additional specific duty and the applied tariff has regularly taken the ad valorem equivalent well above Chile's 31.5 per cent bound rate, in breach of Chile's Uruguay Round commitments. On 26 November 1999 Chile imposed safeguards on wheat, wheat flour and edible vegetable oils.

Although Australia did not have a direct commercial interest in this case, we reserved our third party rights in view of our strong systemic interest in the full implementation of agricultural market access concessions negotiated during the Uruguay Round.  Australia did not make a submission in this case.


Australia as a Complainant (1)

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

The Panel's report is expected to be issued in Geneva on 10 July 2002.

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: /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, 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)

Panel report made public on 3 May 2002 (see above for details).

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)

The Article 21.5 panel held its meeting with the parties (U.S and New Zealand) and third parties (Australia, Argentina and the EC) on 22-23 April. In Australia's statement we addressed the application in this matter of the elements of Article 9.1(c) of the Agreement on Agriculture on export subsidies, including payments and by virtue of governmental action. The parties to this dispute are arguing that, since the Appellate Body's Article 21.5 Report did not make any findings on the consistency of Canada's new measures, they continue to believe that Canada's implementation measures, introduced as a result of the DSB's original recommendations and rulings, are inconsistent with its WTO obligations. The final report has been delayed and is now expected mid-June.

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 22 May 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 registered its disappointment in the U.S status report, noting that it had been 22 months since the adoption of the Panel Report and during this time the U.S had made no effort to implement the ruling. The EC also noted that bilateral discussions had not yet resulted in a temporary solution. Australia registered our concern at the U.S implementation and possibly discriminatory compensation arrangements (it is understood this would involve the U.S paying the EC U.S$1.1 million per annum over three years pending implementation of the Panel's findings). (See report from 22 May DSB meeting below) The U.S did not respond.

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 has requested binding arbitration on this point pursuant to Article 21.3(c) of the DSU.

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 17 June. 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 of U.S$3.36 billion, 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). It has placed its request on the agenda for the 3 June special meeting of the DSB. Canada referred to ongoing bilateral discussions, but also stated that it did not believe it was required to implement the Panel ruling with respect to aircraft delivered prior to May 20. Further bilateral discussions are taking place in parallel with the WTO action. Brazil's request raises systemic issues related to sequencing and retrospectivity.

Disputes in which Australia has a policy or economic interest (10)

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)

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' 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. Venezuela and Colombia have requested to be joined in the consultations but have no entitlement to be joined as India's request for consultations was made under Article XXIII GATT 1994. This dispute raises similar systemic issues for Australia as EC: Generalized System of Preferences (above).

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

The U.S requested the establishment of a Panel at the 22 May DSB meeting, this was blocked by Japan. The U.S has placed its request on the agenda for the 3 June DSB meeting, when the Panel must be established under DSB procedures.

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, several provisions of the SPS Agreement and Article 14 of the Agreement on Agriculture. The U.S has also made a non-violation claim. The U.S stressed that it has made significant efforts to address Japan's concerns, including carrying out joint research in 2000 which concluded that mature symptonless apples were not carriers of fireblight.

At the 22 May meeting Japan made a strongly worded statement regretting the U.S termination of consultations and decision to proceed to a Panel. Its SPS measures were indispensable for preventing the introduction of the fire blight. Japan called for further discussions on technical matters.

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

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 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)

The U.S blocked the establishment of a Panel at the 22 May DSB meeting. The EC announced that it would make a second Panel request at the special DSB meeting on 3 June. The EC said that unfortunately the joint consultations held in April 2002 had not led to an amicable solution and it was therefore requesting a WTO panel.

The EC noted that the Appellate Body had already condemned all six U.S safeguards brought to WTO: on wheat gluten, lamb, line pipe, underwear, shirts and blouses and cotton yarn. The EC was confident that the WTO would again rule against the abuse by the U.S of the WTO safeguard provisions. The U.S responded that it regretted that the EC had chosen to challenge the U.S safeguard measures which were fully WTO consistent.

Japan condemned the U.S measures as a clear violation of the WTO. Japan announced that it had filed a panel request on 21 May 2002 and had requested a special meeting of the DSB on 3 June to consider its request. Korea said that the U.S steel safeguard measures had led to a spiral of protectionist measures in steel trade. Korea cited as an example China's announcement of their own provisional safeguard measures on 21 May 2002. Korea said that it had also requested a special meeting of the DSB on 3 June when it would request the establishment of a panel. Brazil informed the DSB that on 21 May 2002 it had requested consultations with the U.S on its safeguard measures. Cuba registerd its concerns about the effects of the U.S measures on global steel trade.

The EC, Japan, Korea, China, Switzerland and Norway held joint consultations with the U.S on 11-12 April concerning the definitive safeguard measures imposed by the U.S on imports of certain steel products. The U.S agreed to third party participation in the consultations by Canada, Mexico, New Zealand and Venezuela. 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 affecte by the tax treatment. The U.S requested intervention as a Third Party.

Meeting of the Dispute Settlement Body: May 2002

The DSB, consisting of all the Members of the WTO, met on 22 May 2002. Special DSB meetings will be held on 3 June, 7 June, 14 June and the next regular DSB meeting on 24 June 2002. Australia uses DSB meetings to monitor progress and to register its views on disputes of interest. The agenda of the May DSB meeting was as follows (any Australian interventions are indicated):

DSB Meeting 22 May 2002

1.A Surveillance of Implementation of Recommendations adopted by the DSB

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

The U.S said that it continued to be engaged in discussions with the EC to find a positive and mutually acceptable resolution of the dispute.

The EC registered its disappointment in the U.S status report. Australia registered the following points in its statement:

  • Concern about the continued delay in the U.S implementation of DSB rulings in this dispute
  • Concern about the apparent discriminatory nature of the proposed compensation arrangements that we understand have been agreed between the U.S and the EC
  • Registered our expectation that any compensation arrangement reached in this case be applied on a non-discriminatory basis.

1.B Surveillance of Implementation of Recommendations adopted by the DSB

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

The U.S repeated the information set out in its status report confirming that it was continuing to work for the enactment of legislation repealing the 1916 Act.

The EC and Japan expressed disappointment with the delay in U.S implementation. Japan noted that the suspended Article 22.6 arbitration could be re-activated after 30 June. The EC registered its concern that judicial proceedings under the 1916 Act against EC firms would resume in August, and threatened recourse to arbitration if this occurred.

1.C Surveillance of Implementation of Recommendations adopted by the DSB

Argentina - Definitive Anti-Dumping Measures on Ceramic Floor Tiles from Italy (WT/DS189)

Argentina informed the DSB that it had fully implemented the DSB recommendations and rulings by revoking the anti-dumping measures at issue. The EC welcomed the rapid solution to the dispute and congratulated Argentina for its efforts.

2. Surveillance of Implementation of Recommendations adopted by the DSB

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

India confirmed its intention to implement the Panel report, which was adopted at the 5 April DSB meeting, but said it would need a reasonable period of time. The U.S said it looked forward to discussions on prompt implementation. The EC registered its expectation for rapid implementation.

3. Panel Request

United States Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan (WT/DS244)

At Japan's request a Panel was established with Third Party rights registered by Canada, Chile, EC, India, Korea, Norway and Venezuela.

4. Panel Request

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

A request by the U.S for the establishment of a Panel was blocked by Japan.

The U.S argues that Japan's measures blocking importation of apples in connection with fire blight were not scientifically based and were inconsistent with the SPS Agreement. Japan strongly disputed this claim.

5. Panel Request

United States Definitive Safeguard Measures on imports of certain steel products (WT/DS248)

The EC requested the establishment of a Panel, arguing that the U.S measures were not consistent with WTO safeguard requirements. The U.S exercised its right to prevent the establishment of a Panel at the first DSB consideration of the request. The U.S considers the safeguard measures to be fully consistent with the applicable portions of the Safeguard Agreement .

6. Panel Request

United States Rules of Origin for Textile and Apparel Products (WT/DS243)

India requested the establishment of a Panel. This was blocked by the U.S, which argued that its legislation was fully consistent with the WTO.

The U.S expressed its serious concern at the Secretariat making a correction in the circulated copy of India's Panel request by adding a reference to Article 2 of the Agreement on Rules of Origin. The Secretariat argued that the reference had been included in the original letter and was clearly an unintended omission, characterising the action as a correction of a typographical error and not a change of substance.

7. Request for Article 21.5 Panel

European Communities Anti-Dumping Duties on Imports of Cotton-type Bed Linen from India (WT/DS141)

Following India's withdrawal of its Panel request at the April DSB meeting an Article 21.5 Panel was established to examine the EC's compliance with the DSB recommendations and rulings. The DSB agreed to refer this matter to the original Panel.

The EC expressed surprise at India's request, stating that it believed it had fully and faithfully implemented the DSB recommendations and rulings. Third Party rights were reserved by the U.S and Japan.



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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.