Australia and WTO Dispute Settlement
Monthly Bulletin: September 2001
Australian Appointed to WTO Appellate Body
The Hon John Lockhart, AO, QC, has been appointed to fill one of the three upcoming vacancies on the WTO Appellate Body. The other two new members appointed were Mr Luiz Olavo Baptista of Brazil and Mr Giorgio Sacerdoti (Italy/European Communities - EC). Mr Lockhart was selected for the position from a high calibre field and is expected to take up his position in early 2002. Mr Lockhart is currently Executive Director at the Asian Development Bank in the Philippines and will also bring to the position his experience as a former Judge of the Federal Court of Australia and Judicial Consultant to the World Bank. This will be the highest-level appointment achieved by an Australian in the WTO system.
Media Release: Australia Appointed to Key WTO Body - Minister for Trade (26 September)
Korea Removes Remaining WTO-inconsistent Measures on Beef
In accordance with the 10 September 2001 implementation timetable agreed between Korea, Australia and the United States (US), Korea has removed its remaining measures restricting the sale of imported beef in Korea. This means that Korea has now removed all 12 of the WTO-inconsistent restrictions successfully challenged by Australia and the US. Removal of these restrictions will allow Australian beef to be sold in around 45,000 retail butcher shops (compared to around 5,000 at present) and is expected to contribute around $60 million a year in increased Australian beef exports to Korea.
- A background paper on the WTO dispute is attached to this Bulletin
RESOLVING EXPORT ACCESS PROBLEMS THROUGH THE WTO SYSTEM
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Australia as a Complainant (3)
Korea: Measures affecting imports of fresh, chilled and frozen beef (WT/DS169 and WT/DS161)
In accordance with the 10 September 2001 implementation timetable agreed between Korea, Australia and the US, Korea has removed the remaining WTO-inconsistent measures (the dual retail system and discriminatory record keeping requirements) that restricted the sale of imported beef in Korea. Australia will continue to monitor Korea's implementing measures.
United States: Safeguard measure on imports of fresh, chilled and frozen lamb meat (WT/DS177 and WT/DS178)
The US has notified that it is putting in place arrangements for the termination on 15 November 2001 of its tariff rate quota on lamb imports from Australia and New Zealand. This follows the agreement Australia reached on 31 August with the US Administration on the implementation of the WTO Appellate Body's finding that US safeguard measures on lamb meat were WTO inconsistent. Access to the US lamb market will be unrestricted after 15 November.
United States: Continuing Dumping and Subsidy Offset Act of 2000 (Byrd Amendment) (WT/DS217 and WT/DS234)
Canada's and Mexico's request for a panel has been handled under Article 9 of the Dispute Settlement Understanding (DSU) on procedures for multiple complaints. A single panel will therefore hear these complaints and the complaints by Australia, Brazil, Chile, the EC, India, Indonesia, Japan, Korea and Thailand. Consultations are underway on the composition of the panel. Australia has registered its third party rights in the complaints by Canada and Mexico.
Disputes involving Australia as a Third Party (10)
Chile: Price band system and safeguard measures relating to certain agricultural products (WT/DS207)
A panel meeting with parties and third parties was held on 13 September. The final report is scheduled to be publicly released on 21 February 2002.
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.
United States: Import prohibition of certain shrimp and shrimp products (the shrimp/turtle" case) (WT/DS58)
Malaysia has appealed the Article 21.5 (implementation) panel report circulated on 15 June 2001, which found that the revised US shrimp import measure was provisionally' consistent with Article XX of the GATT 1994. The Appellate Body held an oral hearing in this dispute on 4 September. Australia made an oral statement in line with our third party written submission (available on DFAT's webpage at http://www.dfat.gov.au/trade/negotiations/environment/us_shrimp.html). The Appellate Body's report is due by 22 October 2001.
Canada: Measures affecting the importation of milk and the exportation of dairy products (WT/DS103 and WT/DS113)
Canada has appealed the Article 21.5 panel finding in favour of the US and New Zealand that the revised Canadian measures are export subsidies. An oral hearing has been scheduled for 26 October and the Appellate Body's report is due by 3 December 2001.
United States: Section 110(5) Copyright Act ("Homestyle"exemption) (WT/DS160)
No new developments. The US and the EC are engaged in negotiations on compensation and have jointly requested arbitration pursuant to Article 25 of the Dispute Settlement Understanding to determine the level of nullification and impairment of benefits to assist these negotiations. Australia has registered its expectation that any compensation will be non-discriminatory.
United States: Measures treating export restraints as subsidies (WT/DS194)
The Panel's report was adopted at the 23 August 2001 DSB meeting.
United States: Definitive safeguard measures on imports of circular welded carbon quality line pipe from Korea (WT/DS202)
No new developments. The Chairman of the Panel has advised that the Panel expects to complete its work shortly.
United States: Tax Treatment for Foreign Sales Corporations (WT/DS108)
The US has until 19 October to decide whether it will appeal the finding by the Article 21.5 compliance panel that the revised US FSC scheme is inconsistent with US WTO obligations. If the US does not appeal the panel's report will be adopted by the DSB at its October meeting and the US must initiate new efforts to bring the FSC into compliance.
Brazil: Export financing program for aircraft (WT/DS46)
The second Article 21.5 Panel reported was adopted at the 23 August 2001 DSB meeting. The Panel found that Brazil's export financing program (PROEX III) was not inconsistent, on its face, with the WTO Subsidies Agreement.
Canada: Export credits and loans guarantees for regional aircraft (WT/DS222)
No new developments. The first substantive meeting of the parties and third parties was held on 27-28 June 2001. The panel is scheduled to release its report publicly in October 2001.
Disputes in which Australia has a Policy or Economic Interest (6)
Japan: Measures affecting agricultural products (Varietal testing) (WT/DS76)
Japan outlined its agreement with the US on a mutually satisfactory solution at the 25 September DSB meeting. Japan is modifying its rules governing the conditions for lifting import prohibitions on the fruits and nuts at issue in the dispute. 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)
No new developments. The EC is continuing its efforts to obtain the two waivers it requires to implement its bilateral settlements with the United States and Ecuador in this dispute.
Brazil: Measures affecting patent protection (WT/DS199)
No new developments. The United States and Brazil notified to the DSB in July that a mutually satisfactory solution on the matter had been found.
United States: Section 129(c)(1) of the Uruguay Round Agreements Act (WT/DS221)
No new developments. A panel with standard terms of reference was established at the 23 August 2001 DSB meeting. Third party rights were reserved by the EC, India, Japan and Chile. Canada is challenging the legality of a specific aspect of the US statute controlling the US implementation of DSB rulings.
European Communities: Measures Affecting Soluble Coffee (WT/DS209)(Consultation request)
No new developments. The EC and Brazil announced on 11 July that they had reached an agreement to solve their dispute over soluble coffee with the EC agreeing to provide greater access to its market to soluble coffee from Brazil. The EC is expected to publish a directive on the settlement shortly.
United States Section 211 Omnibus Appropriations Act (WT/DS176)
No new developments. In its report released on 6 August 2001, the panel ruled in favour of the EU's claim that a U.S. law known as Section 211, which prevents U.S. recognition of trademarks and other intellectual property used in connection with confiscated property, violates WTO rules. The panel also found that WTO intellectual property rules do not cover trade names (company or business names that are not registered as trademarks). The EU has indicated that it will appeal the latter finding.
Meetings of the Dispute Settlement Body: September 2001
The DSB, consisting of all the Members of the WTO, met on 10 September and 25 September 2001. The next regular DSB meeting will be held on 15 October 2001. Australia uses DSB meetings to monitor progress and to register its views on disputes of interest. The agenda of the September DSB meetings were as follows (any Australian interventions are indicated):
Special DSB Meeting 10 September 2001
1. Implementation of the recommendations of the DSB
United States Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan (WT/DS184).
The US notified of its intent to implement the Appellate Body decision adopted on 23 August.
2. Panel Request
US Countervailing Measures concerning Certain EC Products (WT/DS212)
Panel established at the request of the EC.
3. Panel Request
US Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany (WT/DS213)
Panel established at the request of the EC.
4. Panel Request
US Definitive Safeguard Measures on Imports of Steel Wire Rod and Circular Welded Carbon Quality Line Pipe (WT/DS214)
Panel established at the request of the EC.
5. Panel Request
US Continued Dumping and Subsidy Offset Act of 2000 (Byrd Amendment) (WT/DS234)
The Panel request by Canada and Mexico was handled under Article 9 of the DSU, so that a single panel will consider this complaint and the complaint by Australia, Brazil, Chile, the EC, India, Indonesia, Japan, Korea and Thailand.
DSB Meeting 25 September 2001
1. Surveillance of Implementation of Recommendations adopted by the DSB
European Communities - Regime for the Importation, Sale and Distribution of Bananas (WT/DS27)
The EC presented a further status report on progress in its implementation of the understandings reached with the US and Ecuador on its banana import regime.
2. Japan Measures Affecting Agricultural Products
Japan - Measures Affecting Agricultural Products (WT/DS76/1)
Japan provided a brief outline of its agreement with the US on a mutually satisfactory solution to this dispute.
Australia stated that we were pleased that a mutually satisfactory solution had finally been reached by Japan and the United States on this dispute. We had previously expressed concerns at the ongoing delays in implementation. We said that Australia has an ongoing interest in implementation, and we hope that this agreement will be applied in a non-discriminatory manner to the products of all WTO Members. We also flagged that there is continuing uncertainty about the application of the revised measures to other WTO members. Finally, we welcomed Japan's invitation to contact the relevant authorities in Tokyo for additional details.
3. Appointment of Appellate Body Members
The DSB agreed to the recommendation of the Selection Committee to appoint the following persons as members of the Appellate Body: (1) Luiz Olavo Baptista (Brazil); (2) John S. Lockhart (Australia); (3) Giorgio Sacerdoti (Italy/EC).
Australia expressed its support for the Selection Committee's recommendation for the upcoming vacancies on the Appellate Body and thanked the Selection Committee for its work. We said we were pleased that such a number of high calibre candidates had been put forward for the vacancies, and also with the process of selection and steps taken by Candidates to meet with delegations. Australia congratulated the chosen candidates and stated that we believed that all three would make valuable contributions to the work of the Appellate Body. We also expressed our appreciation to the outgoing Appellate Body members, stating that individually and with their colleagues, they have helped ensure that the Appellate Body has been firmly established as a key institution in the multilateral trading system.
4. Adoption of the 2001 Draft Annual Report of the DSB (WT/DSB/W/170 and Add.1)
The DSB adopted its 2001 Annual Report on the understanding that it would be further updated by the Secretariat to include actions taken by the DSB at its 25 September meeting.
5. Other Business
Korea Measures Affecting Imports of Fresh, Chilled, and Frozen Beef (WT/DS161, WT/DS169)
Korea made a statement on its implementation of the DSB recommendations.
Australia stated that it was pleased that Korea has taken action to remove restrictions on retail outlets for imported beef. We said that we were examining Korea's implementing measures and reserved our WTO rights.
Delivering trade liberalisation from the border to the butcher's shop
1. Korea is Australia's third largest market for beef. As a result of a GATT challenge in 1988, Korea undertook limited import liberalisation, but maintained a range of restrictions on imported beef.
2. In 1999, Australia and the United States initiated WTO dispute settlement proceedings against a range of Korean measures affecting the import and sale of beef from Australia and the United States.
3. In December 2000, the WTO complaint by Australia and the United States was upheld. The adverse WTO findings against Korea involved some 12 measures, ranging from quantitative controls and other forms of discrimination at the border, through almost the entire wholesale and retail distribution chain, including discrimination at the level of supermarkets and small butchers shops. Those measures are listed at the end of this paper.
4. The complaint - that required the marshalling of extensive documentary evidence - would not have succeeded without the committed support and input from the Australian beef industry.
5. Korea has since eliminated the majority of those restrictions, which will serve to free up imports at the border and the wholesale distribution chain. The remaining measures - the dual retail system and discriminatory record keeping requirements - are to be removed by 10 September 2001, in accordance with the timetable agreed between Korea, Australia and the United States. Korea intends to introduce new record-keeping requirements for domestic and imported beef.
6. Australia, the United States and Korea agreed on an implementing period, expiring on 10 September 2001. The agreement provides for a consultation clause, which has been observed. Arising from those consultations, Korea modified some of its proposed replacement measures, including signboard and record keeping requirements. Australian beef exporters were consulted throughout the consultation process. Both Australia and the United States have forcibly registered concerns that new forms of discrimination should not replace the existing WTO-inconsistent measures. Australia reserves the right to challenge any new forms of discrimination through special accelerated WTO legal proceedings.
7. Because of a substantial public stock overhang and also because of falls in beef consumption - linked to "mad cow" and foot and mouth disease, together with a slow down in the Korean economy - the WTO-driven liberalisation of the Korean beef market may not immediately translate to commercial opportunities for Australian beef exporters. However, there is a rising demand for competitively priced imported beef and, with reductions in public stocks, there could be a rapid increase in Korean imports from next year.
8. Removal of the restrictions will allow Australian beef to be sold in some 45,000 retail butcher shops (compared to around 5,000 at present).
9. Australian exports to Korea could increase from 50,000 tonnes (around A$150 million) this year to 90,000 tonnes (around A$270 Million) next year, due to stronger demand in Korea and WTO-driven market liberalisation (estimated to contribute around A$60 million a year). The ability and commitment of Australian exporters to service the market and to meet a wide range of product specifications should help to achieve increased market share in Korea (Australia's market share is currently 34%). The abolition of the dual retail system will enable consumers to compare the price and quality of Australian beef with that of domestic beef.
The WTO-inconsistent measures:
10. As an outcome of WTO legal proceedings ending in December 2000, some 12 Korean measures were found to be WTO-inconsistent. Those measures included:
- The price mark-up applied additional to the tariff;
- The limitations on participation in the "Simultaneous Buy and Sell" (SBS) system; including a `super-group' membership requirement; the restriction on the range of end-users; the prohibition on cross-trading between end-users and super-groups; the quotas and sub-quotas allocated to super-groups according to annual plans rather than demand; and the recording requirements;
- The requirement that the beef imported through the Livestock Products Marketing Organisation (LPMO) be distributed only through the wholesale market;
- The LPMO's minimum wholesale price;
- A discretionary licensing system;
- The dual retail system for beef (including the obligation for department stores and supermarkets authorised to sell imported beef to hold a separate display, and the obligation for foreign beef shops to bear a sign "Specialized Imported Beef Stores");
- The requirement that the supply of beef from the LPMO 's wholesale market be limited to specialised imported beef stores;
- The more stringent record-keeping requirements imposed on purchasers of foreign beef imported by the LPMO than on purchasers of domestic beef;
- The prohibition against cross-trading between end-users of the SBS system;
- Additional labelling requirements imposed on foreign beef imported through the SBS system;
- LPMO delays in calling tenders and discharge practices;
- Discrimination against grass-fed beef in tenders.
 This publication is intended to provide a general update and the information within it should not be relied on as complete or definitive.
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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.
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