Australia and WTO dispute settlement
MONTHLY BULLETIN: SEPTEMBER 2002
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European Communities Export Subsidies on Sugar Request for Consultations by Australia (WT/DS/265)
On Friday 27 October 2002, Australia and Brazil lodged requests for consultations with the EC over its sugar regime. The two countries, which have launched separate actions, are both arguing that the EC has exceeded its WTO export subsidies commitments.
Australia is also alleging that the subsidies paid to sugar refiners are discriminatory and breach EC obligations in regard to National Treatment Obligations, as the subsidy paid for refining EC sugar is not available for refining imported sugar. Finally, Australia is arguing that there may also be discrepancies in the refunds paid to incorporated products, or products containing sugar, in comparison to sugar sold as the end product. The Minister for Trade, Mr Vaile, has issued a press release on Australia's request for consultations. This can be found at:
The actions underway do not challenge the preferential sugar imports granted by the EC to ACP/India. Instead, the complaints centre on the effect of EC sugar that is exported onto the world market, and the effect that this has on the world price. Oxfam has come out in support of the cases, criticising the impact of the EC's policies on developing countries. The press release can be found at www.oxfam.co.uk.
Australia is seeking to schedule consultations in late October or early November. A copy of Australia's request for consultations can be found by entering the document number (WT/DS265) in the search function on the WTO web-site, which can be found at http://docsonline.wto.org/gen_search.asp.
United States Continued Dumping and Subsidy Offset Act of 2000 (the "Byrd Amendment")
The report of the WTO dispute panel considering the complaint by Australia, Brazil, Canada, Chile, the European Communities (EC), India, Indonesia, Japan, Korea, Mexico and Thailand against the US Byrd Amendment legislation was released on 16 September. The Minister for Trade, Mr Vaile, has issued a media release on the dispute. That release is available at http://www.trademinister.gov.au/releases/2002/mvt112_02.html.
In relation to the principal claims made by the complaining parties, the panel said:
- the Appellate Body in US Antidumping Act of 1916 considered Article VI of GATT 1994 in conjunction with the Anti-Dumping Agreement as a whole to determine the permissible responses to dumping (definitive anti-dumping duties, provisional measures and price undertakings). This approach is equally applicable to determining permissible responses to subsidisation under the SCM Agreement, notwithstanding a difference in the text of Article 1 of the Anti-Dumping Agreement and Article 10 of the SCM Agreement. Accordingly, the permissible responses to subsidisation are definitive countervailing duties, provisional measures, undertakings and countermeasures. To the extent the legislation is a "specific action against a subsidy" but not one of these permissible responses to subsidisation, it would be inconsistent with Article 32.1 of the SCM Agreement;
- the test applied by the Appellate Body in US Antidumping Act of
1916 that "the ordinary meaning of the phrase 'specific action against
dumping' within the meaning of Article 18.1 [of the Anti-Dumping Agreement]
is action that is taken in response to situations presenting the constituent
elements of 'dumping' " was not conclusive of whether a measure constituted
"specific action against dumping";
- to be "against" dumping, the measure at issue must also have an "adverse bearing" on dumping; and
- while at first sight the legislation contains no reference to the constituent elements of dumping, "there is a clear, direct and unavoidable connection between the determination of dumping and offset payments" under the legislation;
- Article 18.1 of the Anti-Dumping Agreement refers only to measures that
act against "dumping" as a practice. There is no express requirement that
the measure act against the imported dumped product, or entities connected
to, or responsible for, the dumped good. A measure need not act directly
against dumping to be "against" dumping;
- the legislation operates "against" dumping because it has an adverse bearing on dumping: anti-dumping duties neutralise any competitive advantage enjoyed as a result of dumping, but the combination of anti-dumping duties and the offset payments transfers that competitive advantage to the domestic producers of the like product who benefit from the offset payments;
- the adverse bearing on dumping created by the offset payments is compounded by the financial incentive for domestic producers to file or support anti-dumping and countervailing applications, which will in all likelihood result in a greater number of investigations and hence a greater number of anti-dumping/countervailing duty orders. The prospect of an increased number of investigations will disrupt the trading environment for foreign producers/exporters that may be engaged in dumping;
- as a consequence, the legislation constitutes a non-permissible "specific action against dumping" contrary to Article 18.1 of the Anti-Dumping Agreement; and
- the legislation is also a non-permissible "specific action against a subsidy", contrary to Article 32.1 of the SCM Agreement.
The panel also found in favour of the complaining parties' claim that the legislation is contrary to Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement concerning "standing" requirements for the initiation of anti-dumping and countervailing investigations. The panel considered that the legislation in effect mandates domestic producers to support an application and renders the threshold tests of those Articles completely meaningless.
However, the panel found against the claims of some of the complaining parties in relation to price undertakings under Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement, actionable subsidies under Article 5(b) of the SCM Agreement and unreasonable and partial administration of US laws and regulation under Article X:3(a) of GATT 1994.
The United States is entitled to appeal the panel's findings.
Australia's submissions and statements to the panel, and the panel's report, are available at http://18.104.22.168/trade/negotiations/disputes/wto_disputes-US_AD.html
European Communities: Measure Affecting Imports of Wine (WT/DS263/1)
Argentina has requested dispute settlement consultations with the EC in relation to the EC's requirements concerning wine acidification processes. Argentina claims EC regulations and measures are inconsistent with Articles 2 and 12 of the Agreement on Technical Barriers to Trade; Articles I.1 and III.4 of the General Agreement on Tariffs and Trade (GATT 1994); and Article XVI.4 of the WTO Agreement.
Australia as a Complainant (2)
United States Continued Dumping and Subsidy Offset Act of 2000 (the "Byrd Amendment") (WT/DS217 and WT/DS204)
See New Developments above.The Panel's report was circulated on 16 September 2002. The report cannot be considered by the Dispute Settlement Body for adoption until 20 days after circulation and shall be adopted within 60 days of circulation unless appealed.
European Communities Export Subsidies on Sugar request for consultations by Australia (WT/Ds/265)
See New Developments above.
Disputes Involving Australia as a Third Party (8)
Mexico Measures Affecting Telecommunications Services (WT/DS204)
The Panel established at the 17 April DSB Meeting has started its work. Third Party submissions are due on 14 November.
The US alleges 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.
Australia, Brazil, Canada, Cuba, the EC, Guatemala, Honduras,
India, Japan and Nicaragua are third parties to this dispute.
Chile: Price Brand System and Safeguard Measures Relating to Certain Agricultural Products (WT/DS207)
The Appellate Body released its report on 23 September , upholding the panel's 3 May 2002 finding that Chile's price band system (PBS) applying to certain agricultural products was inconsistent with Article 4.2 of the Agreement on Agriculture. The Appellate Body reversed the panel's finding that the duties resulting from the PBS were inconsistent with the second sentence of Art II: 1(b) of GATT 1994 on the basis that the panel had acted inconsistently with Art 11 of the DSU as it was "not part of the matters before the panel". Chile had thereby been denied due process of a fair right of response. The Appellate Body also decided it was not necessary to make a separate finding on whether the PBS also results in a violation of the first sentence of Art II: 1(b) of GATT 1994 in light of its finding of inconsistency with the Agricultural Agreement Art 4.2.
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. The rights of third parties form part of Australia's proposal to the Doha round negotiation on the review of the Dispute Settlement Understanding (TN/DS/W/8).
Canada: Measures Affecting the Importation of Milk and the Exportation of Dairy Products (WT/DS103 and WT/DS113)
On 23 September Canada filed its notice of appeal against the 26 July 2002 Article 21.5 Panel report, which upheld the joint U.S. NZ complaint against Canadian dairy export subsidies. Third party submissions are due on 18 October and the oral hearing is to be held on 31 October. The Appellate Body is scheduled to report on 23 December 2002.
On 26 July the Panel released its finding 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.
United States: Section 110(5) Copyright Act ("Homestyle" exemption) (WT/DS160)
No new developments. 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 advising that the US Administration continues to engage the US Congress with a view to concluding a mutually acceptable resolution of the dispute.
The EC and US sought arbitration under Article 25 of the DSU to determine the level of nullification or impairment of benefits to the EC as a result of the operation of section 110(5)(B) of the US Copyright Act. The arbitrator assessed the level of nullification and impairment at US$1.1 million per year.
United States: Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea (WT/DS202)
No new developments. 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)
Following the 30 August 2002 ruling that the EU has the legal right to apply countermeasures to the value of US$4 billion, the EC released its draft list of products potentially subject to retaliation on 13 September. The list will be open for public consultation for two months.
The WTO ruled had ruled on 14 January 2002 against the US revised Foreign Sales Corporations (FSC) scheme. This follows an earlier WTO ruling which upheld the EU's complaint against the original scheme as providing prohibited export subsidies to US companies in the form of tax exemptions against US imports.
Canada: Export Credits and Loans Guarantees for Regional Aircraft (WT/DS222)
No new developments. 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)
On 4 September the U.S. presented its first written submission on Japan's quarantine measures on apples for fire blight. Australia's third party submission is due on 14 October and the Panel will meet with third parties on 22 October. The Panel timetable provides for the interim report to be issue on 3 February 2003 and the final report to be circulated on 4 April 2003.
The Japanese quarantine 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 claimed non-violation. 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.
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 report on section 129(C)(1) of the Uruguay Round Agreements Act was adopted at the DSB meeting of 30 August.
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 most recent Status Report lodged by the US notes that the United States Administration has held consultations with the US Congress concerning appropriate statutory measures and continues to work with the Congress on resolving the dispute.
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. In a related development, the EC has requested a waiver
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. The US exercised its right to prevent the establishment of the Panel requested by Brazil on processed orange and grapefruit products, but it can not block a second request scheduled for 1 October 2002.
Brazil claims that the exemption from this tax of products produced in whole or in part from citrus fruit grown within the US 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 US 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)
No new developments. The eight complainants (Brazil, China, the European Communities, Japan Korea, New Zealand, Norway and Switzerland ) 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)
No new developments. Hungary has requested consultations with Turkey over its ban on the importation of pet food from any European country. Turkey has claimed that the ban is necessary to protect it from BSE, 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)
No new developments. 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: September 2002
A special DSB meeting was held on 16 September. The next regular DSB meeting is scheduled for 1 October.
Australia uses DSB meetings to monitor progress and to register its views on disputes of interest. The agenda of the August DSB meeting was as follows (any Australian interventions are indicated):
DSB Special Meeting 16 September 2002
Request for the establishment of a Panel
EC Provisional safeguard measures on imports of certain steel products (WT/DS260/4)
The US made its second request for a panel to be established on the EC's provisional safeguard measures on certain steel products . The US questions the consistency of the law under both the Agreement on Safeguards and Article XIX GATT. The EC rejected this claim.
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.