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WTO Dispute Settlement Bulletin

Monthly Bulletin: June-July 2003

Australia and WTO dispute settlement

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:

  • the meaning of Article 13 of the Agreement
    on Agriculture
    (the "peace clause");
  • the conditions applicable to "green
    box" domestic support under Annex 2 to the Agreement on Agriculture; and
  • whether "cotton user marketing certificates" under
    the United States' 2002 Farm Act are prohibited export and local content subsidies.

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:

  • the US will make a $US3.3 million lump-sum payment to a fund to
    be set up by performing rights societies in the EC for the provision of general
    assistance to their members and the promotion of authors'rights; and
  • the lump sum payment "serves
    as a mutually satisfactory temporary arrangement regarding the dispute for
    the three-year period commencing 21 December 2001."

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:

  • The EC system of export subsidies on sugar was tried- and found
    wanting- under prior GATT rules, but the EC did not make any adjustments
    to its regime to bring it into GATT conformity
  • As noted by Commissioner Fischler, the EC sugar regime has kept
    its fundamental elements virtually unchanged for the last thirty years[5]
  • As an outcome of the Uruguay Round, strengthened disciplines on
    agricultural export subsidies now apply to all WTO members
  • In accordance with its obligations under the WTO Agreement on Agriculture,
    the EC –like all other WTO members - is required to limit its budgetary outlays for export
    subsidies and the quantities benefiting from such subsidies.
  • The EC budgetary outlays for export subsidies on sugar and the quantities
    benefiting from such subsidies are in excess of those limits[6]
  • The EC has neither sought - nor received - a waiver for non-observance
    of its WTO obligations in respect of export subsidies on sugar
  • A simple examination of the factual aspects of the EC sugar regime
    makes it clear that the EC does not intend to deliver on its WTO obligations
    in the sugar sector
  • The EC regime ensures that most surplus-to-consumption sugar produced
    in its Member states is always exported, through a combination of direct
    and indirect export subsidies and a mandatory requirement to export all surplus
    to quota sugar
  • the EC sugar regime delivers a structural surplus of over 6 million
    tonnes –well in excess of its WTO export subsidy obligations[7]
    • the regime ensures the neutralisation of domestic
      competition from imports under WTO tariff quota bindings, by including
      the so-called "equivalent"of imports from the ACP and India in the quantities of EC-produced sugar eligible
      for direct export subsidies
    • EC sugar produced in excess of quota–currently
      over 3 million tonnes –is prohibited from entering the domestic supply chain and must be exported.
(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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