WTO Dispute Settlement Bulletin
Monthly Bulletin: July 2002
Australia and WTO dispute settlement
RESOLVING EXPORT ACCESS PROBLEMS THROUGH THE WTO SYSTEM
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Canada: Measures affecting the importation of milk and the
exportation of dairy products (WT/DS103 and WT/DS113)
On 26 July 2002, the WTO issued the Article 21.5 Panel report which
upheld the joint U.S NZ complaint against Canadian dairy export subsidies.
Minister Sutton (in a media release on 25 June) said it was an extremely
positive result which highlighted the strength of the WTO export subsidy
disciplines. The Canadian International Trade Minister, Pierre Pettigrew,
and Agricultural Minister, Lyle Vanclief, have issued a statement advising
that Canada will appeal the WTO compliance Panel's ruling.
In order to comply with the DSB's ruling that Canada had provided export
subsidies through its Special Milk Classes 5(d) and (e) in excess of
its quantity commitment levels specified in Canada's Schedule, Canada
deregulated milk for export processing through introducing a new category
known as commercial export milk (CEM). This enables milk to be
provided to dairy processors/exporters for the export of manufactured
dairy products below the value of the milk to the producer. There is
no limit on the sales of CEM to processors/exporters. Processors are
prohibited from selling milk on the domestic market; CEM must be exported.
Processors are also exempted from purchasing milk for export at regulated
domestic prices. The only way that producers can sell above-quota or
non-quota milk is if it is exported or used as animal feed.
The Panel found 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.
Australia as a Complainant (1)
United States: Continuing Dumping and Subsidy Offset Act of 2000
(Byrd Amendment) (WT/DS217 and WT/DS234)
The proceedings are at the interim review stage.
The eleven co-complainants (including Australia) are arguing
that the United States Continued Dumping and Subsidy Offset Act of
2000 (the Byrd Amendment) is inconsistent with U.S obligations
under GATT 1994, the Anti-Dumping Agreement and the Agreement on Subsidies
and Countervailing Measures. This Act requires U.S customs authorities
to distribute anti-dumping and countervailing duties assessed on imports
to U.S domestic parties that supported the original petition for anti-dumping
or countervailing duties to be imposed. Copies of Australia's submissions
to the Byrd Amendment Panel can be found at: http://188.8.131.52/trade/negotiations/disputes/wto_disputes-US_AD.html
Disputes involving Australia as a Third Party (8)
Mexico Measures Affecting Telecommunications Services
No new developments. The U.S is arguing that Mexico has failed to
implement its GATS commitments for the cross-border supply of basic
telecommunications services. It alleges that certain measures largely
embodied in Mexico's International Long Distance Rules breach Sections
1 and 2 of the basic telecommunications Reference Paper incorporated
into Mexico's Schedule of Commitments, Section 5 of the GATS Annex on
Telecommunications and GATS Article XVII. A Panel was established at
the 17 April DSB Meeting. Australia, Canada, Cuba, the EC, Guatemala,
Japan and Nicaragua have reserved their third party rights in this dispute.
Chile: Price band system and safeguard measures relating
to certain agricultural products (WT/DS207)
At the 24 June DSB meeting, Chile announced that it had filed a notice
of appeal against the Panel report. The Appellate Body Division will
hold an oral hearing on 6 and 7 August. The Report is due on 23 September.
On 3 May 2002, a WTO Panel found that Chile's price band system (PBS)
applying to certain agricultural products was inconsistent with Article
4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT
1994. Its imposition of safeguards with respect to wheat, wheat flour
and edible vegetable oils was inconsistent with Article XIX:1(a) and
the Agreement on Safeguards.
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)
See New Developments section above.
United States: Section 110(5) Copyright Act (Homestyle
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 and that it continues to work hard to reach
a mutually acceptable arrangement consistent with WTO rules (see report
on DSB meetings below)
Arbitration over the level of suspension of obligations proposed by
the EC following the U.S failure to bring its measures into conformity
within the reasonable period of time remains suspended (but can be reactivated
at the request of either party).
United States: Definitive safeguard measures on imports
of circular welded carbon quality line pipe from Korea (WT/DS202)
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
No new developments. Arbitration is continuing on the EC's U.SD 4
billion retaliation claim. The U.S has objected to the level claimed
by the EC and has argued that the annual retaliation by the EC should
not exceed U.SD 956 million. The arbitrators' report has been delayed.
Following the circulation of the arbitration report, the EC can seek
DSB authorisation to proceed with the retaliatory action against the
U.S specified in the arbitrator's award. President Bush assured European
leaders at a May 2 Summit that he would ensure U.S compliance with the
WTO ruling. However, it is reported that there are still significant
differences of opinion within the U.S on how this will be achieved and
Canada: Export credits and loans guarantees for regional
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)
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.
The Japanese measures complained of by the U.S include the prohibition
of imported apples from orchards where fire blight is detected (or if
it is detected within a 500 metre buffer zone), a requirement for three
orchard inspections a year and post-harvest treatment of exported apples
with chlorine. The U.S argues that these measures are inconsistent
with Japan's obligations under Article XI of GATT 1994, the SPS Agreement
and Article 14 of the Agreement on Agriculture. The U.S has also made
a non-violation claim.
Disputes in which Australia has a policy or economic interest (8)
Japan: Measures affecting agricultural products (Varietal testing)
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
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 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
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.
EC: Conditions for the Granting of Tariff Preferences to Developing
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. Brazil has held consultations with the U.S on
the Equalizing Excise Tax imposed by the State of Florida on processed
orange and grapefruit products produced from citrus fruit grown outside
the U.S. Brazil is claiming that the exemption from this tax of products
produced in whole or in part from citrus fruit grown within the U.S
treats imported products less favourably than domestic products and
is in violation of national treatment obligations under Article III.2
of GATT 1994. Brazil also makes other national treatment violation
claims, including that the use of the proceeds of the tax to advertise
and promote Florida grown citrus and citrus products with no promotion
of imported citrus products violates Article III.4 and III.1 of GATT
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,
Brazil requested that a Panel be established and Brazil's complaint
was referred to the Panel already established by China, EC, Japan, Korea,
New Zealand, Norway and Switzerland so that a single Panel would consider
all eight Panel requests (see report from DSB meetings below).
The complainants argue that the definitive safeguard measures imposed
by the U.S in the form of an increase in duties on imports of certain
flat steel, hot-rolled bar, cold-finished bar, rebar, certain welded
tubular products, carbon and alloy fittings, stainless steel bar, stainless
steel rod, tin mill products and stainless steel wire and in the form
of a tariff rate quota on imports of slabs (all effective as of 20 March
2002) are inconsistent with U.S obligations under the GATT 1994 and
the Agreement on Safeguards
Turkey Import Ban on Pet Food from Hungary (WT/DS256)
Hungary has requested consultations with Turkey over its ban on the
importation of pet food from any European country. The ban is designed
to protect Turkey from BSE. Hungary argues that as it is BSE free,
the pet food is not made from ruminants and is for cats and dogs, the
ban is unscientific and inconsistent with the WTO. Specifically, Article
XI of GATT 1994, Articles 2.2, 2.3, 5.1, 5.2, 5.6, 6.1, 6.2 and 7 and
Annex B of the SPS Agreement and Article 14 of the Agreement on Agriculture.
Peru Certain Taxes on Agricultural Products (WT/DS255)
Chile has sought consultations with Peru on Peruvian law 27.614 which
Chile considers may be in breach of WTO National Treatment provisions.
Chile has identified fresh fruit, vegetables, fish, milk, tea and other
natural products as being 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: June 2002
A Special meeting of the DSB was held on 8 July and a Regular DSB meeting
was held on 29 July. The next DSB meeting is scheduled for 30 September.
Australia uses DSB meetings to monitor progress and to register its
views on disputes of interest. The agendas of the July DSB meetings
were as follows (any Australian interventions are indicated):
Special DSB Meeting 8 July 2002
1. Panel request
United States Definitive Safeguard
New Zealand's WTO complaint against the U.S steel safeguards
General DSB Meeting 29 June 2002
1.A Surveillance of implementation of recommendations approved by
United States Section 110(5) of
The U.S. confirmed that in accordance with Article 21.6 of the
United States Antidumping Act of
The U.S confirmed that in accordance with Article 21.6 of the
2. Panel request
Turkey Certain import measures for
The Panel was established at Ecuador's request. Third party
3. Panel request
Peru Tax treatment on certain imported
This item was withdrawn by Chile prior to adoption of the agenda.
4. Panel request
United States Definitive safeguard
Brazil requested that a Panel be established and Brazil's complaint
5. Panel request
United States Final countervailing
Canada requested the establishment of a Panel to consider the
6. Report of the Panel
United States Anti-Dumping and Countervailing
The report was adopted. India welcomed the Panel's finding that
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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
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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