Australia and WTO dispute settlement

Monthly Bulletin
June-July 2003

In this issue


Recent Developments

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

The Panel issued its report on 15 July 2003. The Panel concluded that Japan’s quarantine measure in this case was inconsistent with the WTO Agreement on Sanitary and Phytosanitary Measures. 

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

The Arbitrator appointed under Article 21.3(c) of the DSU to determine the reasonable period of time for the U.S. to implement the DSB’s rulings and recommendations in this dispute released his award on 13 June 2003.  The Arbitrator awarded the U.S. an 11 month reasonable period of time, which will expire on 23 December 2003. 

US: Subsidies on Upland Cotton (WT/DS267)

Australia’s Third Party Submission in this dispute was lodged on 15 July 2003.  Australia also made a substantive Oral Statement at the Panel’s meeting with third parties to the dispute on 24 July 2003.  Australia’s written Submission and Oral Statement focussed on matters relating to: 

Australia’s written Submission and Oral Statement will shortly be available on the Department of Foreign Affairs and Trade’s website. 

Australia as a Complainant

European Communities: Export Subsidies on Sugar (WT/DS/265)

Australia joined Brazil and Thailand in requesting a World Trade Organization panel to examine whether EU sugar export subsidies comply with world trade rules at the 21 July Dispute Settlement Body meeting in Geneva.  The EU rejected the request for establishment of a panel but cannot block a second request.  Australia’s statement to the DSB is attached. 

The three complainants claim that the EU’s sugar regime provides direct and indirect export subsidies on sugar at levels that are inconsistent with the EU’s obligations under the Agreement on Agriculture and the Agreement on Subsidies and Countervailing Measures.  

A WTO Panel usually takes 9 –12 months to report.  Findings may be appealed on questions of law - a process of about three months.

View Australia to Formally Challenge EU Sugar Subsidies, media release issued by the Minister for Trade, Mr Vaile.

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

See item in Recent Developments above.

European Communities: Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs (WT/DS290/1)

No new developments.  On 27 May Australia held consultations with the European Communities concerning EC legislation covering the registration and protection of geographical indications (“GIs”) on products such as cheese, beer, processed meat and fruit.  Australia’s consultations were held jointly with consultations on the same legislation requested by the US.  Australia and the U.S. sought, through questions, to clarify the operation of the EC legislation and an explanation of how the EC measure conformed with the WTO Agreement.  The EC provided some additional information about the relevant EU regulation.  

Australia as a Respondent

Australia: Certain Measures Affecting the Importation of Fresh Fruit and Vegetables (WT/DS270)

The Philippines requested a panel to examine whether Australia’s quarantine measures for fresh fruit and vegetables (including bananas) comply with WTO rules at the 21 July Dispute Settlement Body meeting in Geneva.  Australia exercised its right to prevent establishment of a panel at the first DSB consideration of this request.  Australia’s statement to the DSB is attached. 

A WTO Panel usually takes 9 –12 months to report.  Findings may be appealed on questions of law - a process of about three months.

Australia: Certain Measures Affecting the Importation of Fresh Pineapple Fruit (WT/DS/271)

No new developments.  On 18 October 2002, the Philippines requested consultations with Australia regarding its quarantine measures for fresh pineapple fruit.  Consultations were held in Geneva on 15 November 2002.  Thailand and the EC participated as third parties.

Australia: Quarantine Regime for Imports (WT/DS287) 

Formal consultations between the EC and Australia on the Australian quarantine regime, both as such and as applied to certain specific cases, were held on 8 May 2003.  The EC considers that Australia’s quarantine system and its application to particular products (pigment and poultry meat) may be contrary to the Sanitary and Phytosanitary Agreement (SPS Agreement), and in particular, but not limited to, its Articles 2.2, 2.3, 3.3, 4.1, 5.1, 5.6 and, if applicable, 5.7, 8 and Annex C.  Canada, Chile, India and the Philippines joined the consultations as third parties. 

Disputes Involving Australia as a Third Party

EC:  Measures affecting the approval and marketing of biotech products (WT/DS291, 292 and 293)

Consultations were held with the EC in June 2003 in relation to the WTO challenge by Argentina, Canada and the U.S. to the European Union’s moratorium on approvals for the import of genetically modified organisms (GMOs).

Australia, Brazil, Chile, Colombia, India, Mexico, New Zealand and Peru participated in the consultations as third parties.

Canada:  Measures Relating to Exports of Wheat (WT/DS276)

In this dispute, the U.S. is claiming that the wheat sales practices of Canada and the Canadian Wheat Board are inconsistent with Article XVII of GATT 1994 on State-Trading Enterprises and that Canadian measures discriminated against imported grain.

Australia, Chile, Chinese Taipei, the EC, Japan and Mexico have reserved third party rights.

US: Subsidies on Upland Cotton (WT/DS267)

See item in Recent Developments above.

Mexico: Measures Affecting Telecommunications Services (WT/DS204)

No new developments.  The Panel has not been able to complete its work in 6 months due to time needed for translation of documents and the complexity of the issues. The Panel now expects to complete its work in August 2003. 

Australia, Brazil, Canada, Cuba, the EC, Guatemala, Honduras, India, Japan and Nicaragua reserved third party rights in this dispute. 

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)

No new developments. Members have been notified of mutually agreed solutions by Canada and the United States and by Canada and New Zealand.  Under the agreements, which are similar but in slightly different terms, Canada reports that it has eliminated its commercial export milk (CEM) program at provincial level as of 30 April 2003, that it won’t exceed its export subsidy reduction commitments for the marketing year 2002 for butter and skim milk powder but that it will for cheese and other milk products because of long term CEM contracts in place at the time of the Appellate Body Report, and that it will meet its commitment for all dairy products for 2003. 

As a result, the U.S. and NZ have withdrawn their retaliation requests and Canada has withdrawn its request for Article 22.6 arbitration. 

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

On 23 June 2003, the US and the EC notified the WTO of a mutually satisfactory temporary arrangement in this dispute.  Under the arrangement: 

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

No new developments.  On 7 May the WTO Dispute Settlement Body (DSB) authorised the EU to increase customs duties as a further step towards retaliatory sanctions against the US in the Foreign Sales Corporations (FSC) case.  The EU had challenged the tax benefits through the FSC for major US exporting companies such as Boeing and Microsoft.  A dispute settlement panel ruled the law illegal in 2001 and gave the EU the right to raise tariffs.  The EU will now be able to impose countermeasures against the US, as it has the DSB authorisation and also has notified the full list of products on which such countermeasures can be levied.  The US$4 billion retaliation figure is a record high in WTO dispute settlement.

Shortly after the DSB approval, EU Trade Commissioner Pascal Lamy was quoted as saying that the EU will "review the situation in the autumn," and if there is no sign that compliance is on the way at that time, it would start the legislative procedure for the adoption of countermeasures by 1 January 2004.  The US said it is taking action to amend the FSC legislation.

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

See item in Recent Developments above.

Meetings of the Dispute Settlement Body: June and July 2003

The Dispute Settlement Body (DSB) met on 24 June and 21 July (General Meetings).  The next regular DSB meeting is scheduled for 29 August.

Australia uses DSB meetings to monitor progress and to register its views on disputes of interest. The agendas of the 24 June and 21 July DSB meetings were as follows:

General DSB Meeting –24 June 2003

Item1: Implementation of recommendations adopted by the DSB - Status Reports

United States: Section 110(5) of the US Copyright Act (WT/DS160/18/ADD.12)

The U.S. reported that it and the EC had concluded a “mutually satisfactory temporary arrangement”with respect to this dispute, in the form of a USD3.3 million payment to the EC covering a three year period from 21 December 2001.  The EC expressed its satisfaction with the arrangement reached but said it nevertheless expected the U.S. to continue working towards compliance with the ruling.  Australia reiterated its concerns about the discriminatory nature of the compensation arrangement.

 

United States: Anti-Dumping Act of 1916 (WT/DS136/14/ADD.12, WT/DS162/17/AD.12)

The U.S. reported that three bills were now before the U.S. Congress repealing the 1916 Act, one of which would also terminate all pending cases.  The EC and Japan repeated their position that the repealing bill must also terminate pending cases and called on the U.S. to pass such legislation as soon as possible.

 

United States: Section 211 Omnibus Appropriations Act of 1998 (WT/DS176/11/ADD.5)

The U.S. again said that it was working closely with Congress to resolve this dispute.  The EC noted as a positive move that a bill had been introduced in Congress a week earlier that would provide a scheme of measures to ensure an effective protection of intellectual property rights both in Cuba and the U.S.

 

United States: Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan (WT/DS184/15/ADD.5)

The U.S. said the administration was supporting the passage of specific amendments to the U.S. Anti-Dumping Duty Law that would implement the recommendations and rulings in this dispute.  Japan expressed concern that no amendments of the relevant U.S. statute had as yet been introduced to Congress and urged the U.S. to strengthen its efforts to implement as early as possible.

 

Egypt: Definitive Anti-dumping Measures on steel rebar from Turkey (WT/DS211)

Egypt reported that its investigating authority had re-examined the dumping calculations and general injury assessment in light of the panel’s recommendations and submitted revised assessments to the interested parties.  Turkey raised questions about the methodology and calculations relating to the revised dumping assessment.

Item 2: First request for Panel establishment by EC 

Korea: Measures affecting Trade in Commercial Vessels (WT/DS273)

The EC set out the basis for its panel request: that export schemes by the state owned Korea Export-Import Bank and debt forgiveness and debt-to-equity swaps by Government-owned or Government-controlled financial institutions were prohibited (because they were export contingent) and actionable (because they cause adverse effects to EU industry).  Korea denied any inconsistency with the Agreement on Subsidies and Countervailing Measures and exercised its right not to agree to panel establishment at the first request.

Item 3: First request for Panel establishment by Antigua and Barbuda 

US: Measures affecting the Cross-border supply of Gambling and Betting services (WT/DS285)

Antigua and Barbuda set out the basis for its panel request: that the U.S. prohibition on gambling and betting services offered from outside the U.S. appeared to conflict with U.S. obligations under GATS and its GATS schedule of specific commitments.  The U.S. responded that cross-border gambling and betting services were not within the scope of U.S. specific market access commitments under GATS.  The U.S. exercised its right not to agree to panel establishment at the first request.

Item 4: Proposed Nomination for the Indicative List of Governmental and Non-Governmental Panelists 

The nomination from the EC was approved.

Item 5:  Update to Annual Report to the General Council

The Secretariat will prepare an update covering developments in 2003.  The update will be transmitted to the 24 July General Council meeting and then included in the General Council’s report to the Cancun Ministerial meeting.

General DSB Meeting –21 July 2003

Item 1: Implementation of recommendations adopted by the DSB - Status Reports

United States: Anti-Dumping Act of 1916 (WT/DS136/14/ADD.12, WT/DS162/17/AD.12)

The U.S. again referred to the three bills before the U.S. Congress repealing the 1916 Act, one of which would also terminate all pending cases.  The EC said that if the U.S. did not pass legislation repealing the 1916 Act and terminating pending legislation prior to the Congressional summer recess the EC would reactivate suspended arbitration on the level of suspension of obligations under DSU Article 22.6.  Japan reminded the U.S. of its right to suspend concessions or other obligations and said it would consider the situation in light of the EC’s statement.

 

United States: Section 211 Omnibus Appropriations Act of 1998 (WT/DS176/11/ADD.5)

The U.S. referred to its recent agreement with the EC to extend the reasonable period of time for implementation in this dispute to 31 December 2003.  The EC said it had given the U.S. more time to comply as a result of the introduction in June of a Bill in Congress repealing Section 211 and asked the U.S. administration to tell Congress that this extended time frame should result in full implementation. Cuba again criticised the delay in U.S. implementation in this dispute. 

 

United States: Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan (WT/DS184/15/ADD.5)

The U.S. again said the administration was supporting the passage of specific amendments to the U.S. Anti-Dumping Duty Law that would implement the recommendations and rulings in this dispute.  Japan commented that the U.S. administration had not shown any evidence of its support for this legislation and urged the U.S. to pass the required legislation as early as possible. 

 

Egypt: Definitive Anti-dumping Measures on steel rebar from Turkey (WT/DS211)

Egypt reported, as per its Status Report, that its investigating authority had re-examined the comments received from the Turkish Government and two Turkish companies on its revised injury and dumping assessments.  Turkey noted Egypt’s undertaking that it would take these comments into account but expressed concern that there was no tangible outcome only ten days before the end of the reasonable period of time (RPT).  It called for the dumping assessment to be revoked before the end of the RPT. 

Item 2: Request for Panel establishment by EC 

Korea: Measures affecting Trade in Commercial Vessels (WT/DS273)

The EC made its second request for a Panel.  Korea again asserted the WTO consistency of its measures.  The DSB agreed to establish the Panel, initiate the Annex V SCM Agreement Procedures for developing information concerning serious prejudice and appoint Mr Szepsi as Facilitator.  China, Japan, Mexico, Norway, Chinese Taipei and the U.S. reserved their third party rights. 

Item 3: Request for Panel establishment by Antigua and Barbuda

US: Measures affecting the Cross-border supply of Gambling and Betting services (WT/DS285)

Antigua and Barbuda briefly reiterated its reasons for seeking this Panel and sought to respond to some of the comments made by the U.S. at the 24 June DSB meeting.  The DSB established a Panel.  Canada, the EC, Mexico and Chinese Taipei reserved their third party rights. 

Item 4: Request for Panel establishment by the Philippines

Australia: Certain Measures affecting the Importation of Fresh Fruit and Vegetables (WT/DS270)

The Philippines requested a panel to examine whether Australia’s quarantine measures for fresh fruit and vegetables (including bananas) comply with world trade rules.  Australia exercised its right to prevent establishment of a panel at the first DSB consideration of this request.  Australia’s Statement to the DSB is set out below.

Items 5A, B&C: Request for Panel establishment by Australia, Brazil and Thailand

European Communities: Export Subsidies on Sugar (WT/DS265/21),

(WT/DS266/21), (WT/DS283/2)

Australia, Brazil and Thailand made first requests for a WTO Dispute Panel to examine EC Sugar export subsidies.  The EC opposed the requests.  A panel was not established at this DSB meeting.  Australia’s Statement to the DSB is set out below.

Item 6: Report of the Panel

U.S.: Rules of Origin for Textiles and Apparel Products (WT/DS243R and CORR.1)

The U.S. welcomed the Panel’s finding that the U.S. rules of origin at issue in the dispute were not inconsistent with its obligations under the Agreement on Rules of Origin.  India, the complainant, criticised the Report.  It suggested the issues examined by the Panel and its interpretations be taken up in other fora.  The Philippines and China were also critical of the report.  The Panel report was adopted by the DSB.

Item 7: Appointment of Appellate Body Members

The DSB agreed to launch the process for reappointment/possible reappointment of Appellate Body Members.

Item 8: Proposed Nomination for the Indicative List of Governmental and Non-  Governmental Panelists 

The nomination from Peru was approved without comment

Item 9: Other business 

The U.S. made a statement on its implementation in U.S. –Countervailing Measures concerning certain products from the EC. 

Dispute settlement body - 21 July 2003

Item 4:   Australia –Certain Measures affecting The Importation Of Fresh Fruit And Vegetables

Statement by Australia

Australia is disappointed with the decision by the Philippines to proceed with a request for the establishment of a panel.  As we have indicated to the Philippines throughout our ongoing discussions, Australia’s quarantine system is fully WTO consistent.  We are confident that the dispute settlement process will reach the same conclusion, if the Philippines continue to pursue this matter. 

While it is the right of every WTO Member to use the dispute settlement procedures, it is unfortunate that the Philippines considered it necessary to use these procedures to seek to resolve concerns which could be addressed more constructively through bilateral mechanisms.  We remain open to further consultations with the Philippines.

Given these circumstances, we can not agree to the establishment of a panel at this meeting.

Australia would like to take this opportunity to raise our serious concerns, which we expect would also be shared by other Members, about the specific approach taken by the Philippines in framing its panel request.  The Philippines appears to be interested in making a broad systemic challenge to Australia’s quarantine regime, rather than contesting the WTO-consistency of import conditions contained in specific SPS measures.  Such a challenge would strike at the fundamental right of WTO Members to have quarantine systems providing for the WTO-consistent application of measures to achieve the level of SPS protection deemed appropriate to protect human, animal or plant life or health within their territory.   Many WTO Members maintain approaches to quarantine which are either similar to Australia’s system, or have similar elements.  We would expect they will share our serious concerns about the implications of a challenge to the fundamental right of WTO Members to maintain an appropriate quarantine regime.

Given the broad and all encompassing nature of the Philippines’panel request, as well as its lack of specificity in relation to any particular fruit or vegetable product, Australia has strong doubts about the consistency of the request with the requirements of Article 6.2 of the Dispute Settlement Understanding.  We have previously raised with the Philippines our related concerns with the lack of specificity in its request for consultations.  At this stage, we are continuing to examine these issues, but want to take this early opportunity to signal our concerns and to reserve our WTO rights in this regard.

Thank you.

Item 5:   Ec- Export Subsidies On Sugar (WT/DS265/21)

Request for establishment of panel
Statement by Australia

Australia joins with Brazil and Thailand in seeking today the establishment of a panel to consider our concerns regarding the EC sugar export subsidies.

The details of Australia’s request are set out in document WT/DS265/21.  However, given the number of misrepresentations and factual inaccuracies in some official statements concerning Australia’s request, we want to set out clearly today what Australia’s request is about and what it is not about.

(A) What this complaint is about

This request for a panel concerns the application of the WTO treaty rules to the EC sugar regime in relation to subsidies on sugar exported by the EC.

It concerns the existing WTO export subsidy obligations that the EC owes to Australia, which Australia paid for in the Uruguay Round.

Australia exports around 80% of its sugar production and Australian sugar producers are entitled to hold a legitimate expectation that Australia will protect its WTO treaty rights.

The measures at issue constitute direct and indirect subsidies on the export of EC sugar, which Australia considers are inconsistent with the EC’s WTO export subsidy obligations.

The export subsidies are provided to EC sugar producers under a regime whose design, construction and application are expressly for the purposes of remunerating the EC sugar industry.[3]  As the Commission itself has noted, it is a closed regime.[4]

The facts are straightforward:

(B) What this request is not about

Contrary to what has been said in official statements from the EC and elsewhere, the complaint is not about EC preferential access arrangements. Australia has given assurances that it would not challenge the preferential arrangements that the EC accords to some ACP sugar exporters.  As is clear from Australia’s panel request, we have honoured those assurances.  No one can accuse Australia of bad faith in that regard.

Any claim to the contrary is a smokescreen designed to deflect the debate from the central issue of the EC’s non-observance of its export subsidy obligations in the sugar sector.

There is nothing in Australia’s complaint that would affect the capacity of the EC to deliver on its treaty obligations to developing countries, but the EC has refused to provide assurances that it will continue to honour those commitments.

The European Commission has not elaborated on its unfounded assertion that a legitimate WTO complaint about the subsidies that the EC grants to its sugar exporters will hurt developing countries.[8]

Is the EC suggesting that the cost of implementation of its own WTO and other treaty obligations must be met by other countries, in addition to the price that other WTO members have already paid in negotiating strengthened WTO rules, many of them of significant benefit to the EC?

All WTO members should be rightly concerned about the implications for EC observance of its WTO and other treaty obligations –as well as the value of any of the EC's negotiating offers in the Doha Round.

(C) Conclusion

The EC’s export subsidies on sugar are clearly in excess of its WTO obligations to limit such subsidies.

Australia's consultations with the EC last November were characterised by a refusal on the part of the EC to provide factual information on the EC sugar regime, including information which the EC has itself commissioned. It is regrettable that the EC has refused to respond to requests of a factual nature as part of the dispute settlement consultations and also in the context of WTO transparency provisions.

In accordance with Australia’s rights under the WTO Dispute Settlement Understanding and other WTO Agreements, Australia therefore requests the establishment of a panel to examine the claims in Document WT/DS265/21.


[3] Paragraph (2) of Council Regulation (EC) No 1260/2001 on the common organisation of the markets in the sugar sector.

[4] Evidence by Falkenberg, EU Commission official, to House of Commons Select Committee on International Development.

[5] Speech by Commissioner Fischler to 50th CEFS Congress, Vienna, 16 June 2003

[6]By the EC’s own estimates, EC direct export subsidies on sugar have ranged between €1 –€1.6 billion a year over the period 1997-2000.  EC sugar exports are now of the order 6 million tonnes

[7]Average annual domestic consumption is significantly lower (less than 13 million tonnes) than the quantities of EC sugar eligible for direct domestic and export subsidies under quota guarantees to Member States (in total around 15 million tonnes).

[8] Commission press release of 10 July 2003


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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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