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WTO Dispute Settlement Bulletin

Monthly Bulletin: January 2003

Australia and WTO dispute settlement

Resolving Export Access through the WTO System

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    level?)

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stands ready to assist in developing options for resolution of your
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Recent Developments (1)

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

The Appellate Body report considering the appeal by the United States
against the findings of the WTO panel in this dispute was released on 16
January 2003. The dispute was initiated by Australia, Brazil, Canada,
Chile, the European Communities (EC), India, Indonesia, Japan, Korea, Mexico
and Thailand.

In relation to the panel's principal finding that the Byrd Amendment was
inconsistent with Article 18.1 of the Anti-Dumping Agreement and Article
32.1 of the Agreement on Subsidies and Countervailing Measures ("SCM Agreement"),
the Appellate Body:

  • upheld
    the panel's finding that the Byrd Amendment was "specific" action
    against dumping or subsidisation within the meaning of Article 18.1 of
    the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement, considering
    that payments under the legislation are inextricably linked to, and strongly
    correlated with, determinations of dumping or subsidisation;
  • upheld
    the panel's finding that 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";
  • upheld
    the panel's finding that there is no requirement that, to be against dumping
    or a subsidy, a measure must come into direct contact with the imported
    product or an entity responsible for that product;
  • considered
    that the design and structure of the Byrd Amendment is such that the
    measure has an adverse bearing on and dissuades the practices of dumping
    or subsidisation,
    or creates an incentive to terminate such practices, by transferring
    financial resources from the producers/exports of dumped or subsidised
    goods to their
    domestic competitors and is therefore against dumping or a subsidy
    within the meaning of Article 18.1 of the Anti-Dumping and Article 32.1
    of the SCM Agreement;
  • upheld
    the panel's finding that the Appellate Body in US Antidumping Act
    of 1916
    had 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), and that that approach was equally applicable to
    determining
    permissible responses to subsidisation under the SCM Agreement, notwithstanding
    textual differences between 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 multilaterally authorised countermeasures; and
  • upheld
    the panel's finding that the Byrd Amendment is a non-permissible specific
    action against dumping or a subsidy, contrary to Article 18.1 of the
    Anti-Dumping Agreement and Article 32.1 of the SCM Agreement.

The Appellate Body did, however, reverse the panel's finding that the
Byrd Amendment is inconsistent with 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
Appellate Body concluded that the text of those provisions did not support
the panel's reasoning, as those provisions require no more than a formal
examination of whether a sufficient number of domestic producers have expressed
support for an application. The Appellate Body also rejected the panel's
conclusion that the United States "may be regarded as not having acted
in good faith", stating that it would be necessary to prove more than mere
violation of a substantive treaty provision to support such a conclusion.

The Dispute Settlement Body adopted both the panel and Appellate Body
reports on
27 January 2003.

Negotiations on the Dispute Settlement Understanding (DSU)

Australia continues to actively participate in the negotiations on the
DSU which have intensified as they enter their second and final stage. Australia
proposal has suggested the following improvements:

  • Accelerated time-frames for disputes on safeguard actions;
  • Third party rights to compensation;
  • Consistency between the level of retaliation imposed by a complainant
    and the level of retaliation authorised by the Dispute Settlement Body;
  • Time-savings in the dispute settlement procedures;
  • Consolidated understanding on agreed procedures under Articles 21 and
    22 of the DSU.

The Chair has scheduled monthly Dispute Settlement Special Sessions in
the lead up to the deadline for conclusion of the negotiations in May 2003. These
Special Sessions will be supplemented by informal "focus Group" meetings. The
Chair is aiming to complete discussions on proposals and provide a draft
Chair's legal text by the end of March.

Australia as a Complainant (2)

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

See Recent Developments above.

European Communities Export Subsidies on Sugar Request for Consultations
by Australia (WT/DS/265)

Australia and Brazil (WT/DS/266) held joint consultations with the European
Communities in Geneva on 21-22 November over their sugar regime. The consultations
were attended by a record number of third parties (seventeen), mainly ACP
(African, Caribbean and Pacific) countries and Canada, Colombia and India. At
the consultations the EC did not provide answers to many of Australia and
Brazil's questions and subsequent communications have not proved fruitful. Australia
is seeking further information including economic data. Decisions regarding
next steps in the case will be taken once this advice has been received.

Australia as a Respondent (2)

Australia - Certain Measures Affecting the Importation of Fresh Fruit and
Vegetables (WT/DS/270)

On 18 October 2002 Philippines requested consultations with Australia
regarding its quarantine measures for fresh fruit and vegetables (including
bananas). Consultations were held in Geneva on 15 November 2002. Thailand
and the EC participated as third parties.

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

On 18 October 2002, the Philippines also 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.

Disputes Involving Australia as a Third Party (8)

Mexico Measures Affecting Telecommunications Services (WT/DS204)

The Panel hearing was held on 18 December 2002. The Panel is due to issue
its interim report on 5 May 2003.

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, and section 5
of the GATS Annex on Telecommunications.

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. The rights of third parties form part of Australia's proposal to
the Doha round negotiations on the review of the Dispute Settlement Understanding
(TN/DS/W/34).

Canada: Measures Affecting the Importation of Milk and the Exportation
of Dairy Products (WT/DS103 and WT/DS113)

The report of the Appellate Body Second Recourse to Article 21.5 Implementation
Report was circulated on 20 December 2002.

On 17 January 2003, the reports of the Panel and Appellate Body Second
Recourse to Article 21.5 Implementation Report - were adopted by the DSB. Australia
made an oral statement (See attached report on DSB meeting of 17 January)
welcoming the findings and conclusions. Australia stressed the importance
of full implementation of export subsidy commitments and highlighted the
Appellate Body's comments in relation to the "spill over" effects of domestic
support to benefit export production. Canada and the EC were critical
of the Appellate Body report, arguing that the report blurred the distinction
between domestic support measures and export subsidies. Canada, New Zealand
and the United States have agreed to request that the arbitration proceedings
under DSU Article 22.6 remain suspended until 7 February 2003. This is
pursuant to the agreement reached on 18 December 2001 between the parties
regarding procedures under DSU Articles 21 and 22.

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

The US has stated it continues to work towards a mutually acceptable resolution. Through
arbitration under Article 25 of the DSU, 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, has been assessed at US$1.1 million
per year (see DSB Meeting 27 January below).

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

On 29 January 2002, the Dispute Settlement Body adopted the Appellate
Body report. The revised US Foreign Sales Corporations (FSC) scheme was
found to be WTO inconsistent. On 30 August the arbitrator ruled that the
EU has right to apply countermeasures to the value of US$4 billion.

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

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 timetable
provides for the final report to be circulated in May 2003.

Disputes in which Australia has a Policy or Economic Interest (8)

Canada Measures Relating to Exports of Wheat (WT/DS/276)

The US has requested WTO dispute settlement consultations on Canadian
Wheat Board (CWB) export and import practices. Canada has rejected all
requests, including by Australia, the EC, Japan and Mexico, for participation
as third parties at the consultations phase of the dispute. If the dispute
moves beyond consultations to a formal WTO panel, the Government will need
to consider Australia's participation at that time.

European Communities: Measure Affecting Imports of Wine (WT/DS263/1)

No developments. On 4 September 2002, Argentina 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.

Korea - Measures Affecting Trade In Commercial Vessels (WT/DS273)

On 21 October 2002, the EC requested dispute settlement consultations
with Korea regarding Korean measures affecting trade in commercial vessels,
including advance payment of refund guarantees, pre-shipment loans, corporate
restructuring packages and tax concessions. The EC claims the Korean measures
are inconsistent with the Agreement on Subsidies and Countervailing Measures.

United States: Section 211 Omnibus Appropriations Act (WT/DS176)

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 30 June 2003. The most
recent Status Report lodged by the U.S notes that the United States Administration
has held consultations with the U.S Congress concerning appropriate statutory
measures and continues to work with the Congress on resolving the dispute
(see DSB Meeting 27 January below).

EC: Generalized System of Preferences (WT/DS242)

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 2002. Thailand is claiming
that, through its GSP scheme as implemented, the EC has failed 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 has the potential
for this issue to be divisive for developing countries.

EC: Conditions for the Granting of Tariff Preferences to Developing Countries
(WT/DS246)

Following its March 2002 request for consultations, India's request for establishment
of a panel was approved on 27 January (see DSB Meeting 27 January below). 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 systemic issues for Australia similar to those
identified in 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. On 1 October 2002, a panel was established regarding
U.S measures on processed orange and grapefruit products. Brazil claims
that the exemption from this tax of products produced in whole or in part
from citrus fruit grown within the U.S treats imported products less favourably
than domestic products and is in violation of national treatment obligations
under Article III.2 of GATT 1994. Brazil also makes other national treatment
violation claims, including that the use of the proceeds of the tax to
advertise and promote Florida grown citrus and citrus products with no
promotion of imported citrus products violates Article III.4 and III.1
of GATT 1994.

A U.S judicial decision recently overturned the way in which the excise
was applied, ruling that it should be payable by all juices in Florida. U.S
States previously exempt from paying the tax are now objecting to paying
a tax which is used exclusively to promote Florida juice.

US: Definitive Safeguard Measures on Imports of Certain Steel Products
(WT/DS248, WT/DS249, WT/DS251, WT/DS252, WT/DS253, WT/DS254, WT/DS258, WT/DS259)

A panel was established to hear this matter on 29 July 2002. 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.

On 11 November 2002, Chinese Taipei made a separate request for dispute
settlement consultations with the US regarding definitive safeguard measures
on certain steel imports (WT/DS274).

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. Turkey has claimed that the ban
is necessary to protect it from BSE. It is claimed the ban is inconsistent
with 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.

Meeting of the Dispute Settlement Body: January 2003

Dispute Settlement Body (DSB) met on 8, 17 and 27 January. The next regular
DSB meeting is scheduled for 19 February.

Australia uses DSB meetings to monitor progress and to register its views
on disputes of interest. The agenda of the January DSB meetings were as
follows:

DSB Meeting 8 January 2003

Panel Established

United States Preliminary Determinations with Respect to Softwood
Lumber from Canada (WT/DS264)

A Panel was established at Canada's request, with the EC and India
reserving third party rights.

Reports of the Appellate Body and Panel

United States Countervailing Duties on Certain Corrosion Resistant
Steel Products from Germany (WT/DS213)

The Panel and Appellate Body reports were adopted.

DSB Meeting 17 January 2003

Implementation of the Recommendations of the DSB

United States: Countervailing Duties on Certain Corrosion Resistant
Carbon Steel Flat Products from Germany (WT/DS213)

The US stated its intention to implement the DSB recommendations
but said it needed a reasonable period of time in which to do so
and invited the EC to enter into Article 21.3(B) DSU Consultations
on reasonable period of time. The EC called on the U.S to implement
the DSB rulings promptly.

Appellate Body Report

Canada: Measures Affecting the Importation of Milk and the Exportation
of Dairy Products (WT/DS103 and WT/DS113)

The Appellate Body and Panel reports in the second recourse to Article
21.5 in this dispute were adopted. Australia made an oral statement
(attached). Canada, New Zealand and the United States have agreed
to request that the arbitration proceedings under DSU Article 22.6
remain suspended until 7 February 2003. This is pursuant to the
agreement reached on 18 December 2001 between the parties regarding
procedures under DSU Articles 21 and 22.

DSB Meeting 27 January 2003

Implementation of the Recommendations of the DSB

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

The US referred to its most recent status report and indicated that
it was continuing to work to conclude a positive and mutually acceptable
resolution. The EC expressed disappointment at the lack of US action
and urged the US to comply.

United States: Anti-Dumping Act of 1916 (WT/DS136/14/ADD.11)

The US referred to its additional status report in this case and
said it was working to achieve progress in resolving this dispute
with the EC and Japan. Japan expressed concerns about the damage
the WTO inconsistent measure was having on its companies.

United States: Section 211 Omnibus Appropriations Act (WT/DS176)

The U.S drew members' attention to its most recent status report
and its agreement with the EC to extend the reasonable period of
time for implementation until 30 June 2003. The EC said it considered
a satisfactory settlement to this dispute was more important than
strict adherence to the initial deadline. Cuba expressed disappointment
at the lack of progress.

United States: Anti-Dumping Measures on Certain Hot-Rolled Steel
Products from Japan (WT/DS184/15/ADD.4)

The US referred to its most recent report it would continue to work
to resolve this dispute in a mutually satisfactory manner. Japan
expressed its regret at the U.S delay in implementing and said that
U.S continued non-compliance was affecting confidence in the dispute
settlement system.

United States: Countervailing Measures Concerning Certain Products
from the EC

The U.S stated its intention to implement DSB rulings in this dispute
but explained that it needed a reasonable period of time to do so. The
EC indicated that it was ready to discuss the reasonable period of
time but this should be short. Mexico expressed interest in the
U.S bringing its measure into compliance as it had requested consultations
with the U.S on its countervailing duties investigations methodology.

Request for Establishment of a Panel

Report of the Appellate Body and Panel

United States: Continued Dumping and Subsidy Offset Act of 2000
(The "Byrd Amendment") (WT/DS217/AB/R - WT/DS234/AB/R, WT/DS217/R WT/DS234/R

The Dispute Settlement Body adopted both the panel and Appellate
Body reports (see New Developments above).

EC: Conditions for Granting of Tariff Preferences to Developing
Countries (WT/DS246/4)

A Panel was established at India's request with thirteen members
requesting third party status: Brazil, Colombia, Costa Rica, Cuba,
Ecuador, El Salvador, Guatemala, Honduras, Paraguay, Peru, Sri Lanka,
Venezuela and the US.


DISPUTE SETTLEMENT BODY - 17 JANUARY 2003

STATEMENT BY AUSTRALIA

ITEM 2.A : CANADA - MEASURES AFFECTING THE IMPORTATION OF MILK AND
THE EXPORTATION OF DAIRY PRODUCTS: SECOND RECOURSE TO ARTICLE 21.5 OF
THE DSU BY NEW ZEALAND AND THE UNITED STATES

  • MR CHAIRMAN
  • WE JOIN WITH OTHERS IN WELCOMING THE FINDINGS AND
    CONCLUSIONS OF THE APPELLATE BODY REPORT IN THE SECOND RECOURSE TO ARTICLE
    21.5 IN
    THIS DISPUTE.
  • . THE FULL IMPLEMENTATION OF EXPORT SUBSIDY RULES FOR
    AGRICULTURAL PRODUCTS IS IMPORTANT TO AUSTRALIA.
  • WE NOTE THAT THIS ISSUE HAS BEEN A LONGSTANDING ONE,
    THE EFFECT OF WHICH HAS BEEN THE CONTINUING UTILISATION OF EXPORT SUBSIDIES
    ON DAIRY PRODUCTS BY CANADA ABOVE ITS COMMITMENT LEVELS.
  • WE WISH TO HIGHLIGHT IN PARTICULAR THE APPELLATE BODY'S
    COMMENTS IN RELATION TO THE "SPILL OVER" EFFECTS OF DOMESTIC
    SUPPORT TO PROVIDE CERTAIN BENEFITS TO EXPORT PRODUCTION.
  • IMPORTANTLY, THE APPELLATE BODY NOTES IN PARAGRAPH 148
    THAT THE TEXT OF ARTICLE 9.1(C) OF THE AGRICULTURE AGREEMENT FOCUSES ON "THE
    CONSEQUENCES OF GOVERNMENTAL ACTION", NOT THE INTENT OF GOVERNMENT. IT
    FURTHER NOTES THAT "SUBSIDIES MAY BE GRANTED IN BOTH THE DOMESTIC
    AND EXPORT MARKETS, PROVIDED THAT THE DISCIPLINES IMPOSED BY THE AGREEMENT
    ON THE LEVELS OF SUBSIDISATION ARE RESPECTED. IF GOVERNMENTAL ACTION IN
    SUPPORT OF THE DOMESTIC MARKET COULD BE APPLIED TO SUBSIDISE EXPORT SALES,
    WITHOUT RESPECTING THE COMMITMENTS MEMBERS MADE TO LIMIT THE LEVEL OF EXPORT
    SUBSIDIES, THE VALUE OF THESE COMMITMENTS WOULD BE UNDERMINED".
  • WE REGARD THIS AS AN IMPORTANT OUTCOME IN REINFORCING
    THAT WTO MEMBERS CANNOT CIRCUMVENT THEIR AGRICULTURAL EXPORT SUBSIDY
    COMMITMENTS. AS
    THE APPELLATE BODY NOTES "CANADA MUST ENSURE THAT IT CONFINES, TO
    ITS EXPORT SUBSIDY REDUCTION COMMITMENT LEVELS, ANY EXPORT "PAYMENTS" WHICH
    ARE "FINANCED BY VIRTUE OF THE GOVERNMENTAL ACTION CANADA TAKES TO
    REGULATE THE DOMESTIC MILK MARKET".
  • AUSTRALIA LOOKS FORWARD TO CANADA'S IMPLEMENTATION OF THE
    FINDINGS, AND ENCOURAGES ALL MEMBERS TO ENSURE THEIR COMPLIANCE WITH
    THEIR AGRICULTURAL
    EXPORT SUBSIDY COMMITMENTS.


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[2] This publication is intended to provide a general
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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.

Last Updated: 9 January 2013
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