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WTO Dispute Settlement Bulletin

Monthly Bulletin: March 2003

Australia and WTO dispute settlement

Resolving Export Access Problems through the WTO System

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  • Do you export to one or more of the 145 markets that belong to the
    World Trade Organization?
  • Are you experiencing access problems in one or more of those markets?
  • Is the access problem caused by a regulation or directive of the importing
    government (at central, regional or local government level?) &

If you have answered "yes" to those questions, the WTO Trade
Law Branch of the Department of Foreign Affairs and Trade stands ready
to assist in developing options for resolution of your access problems.� Exporters
can contact WTO legal specialists in the Department on the following numbers:


Recent Developments

European Communities: Export Subsidies on Sugar (WT/DS283)

Thailand has requested consultations with the European Communities with
respect to certain subsidies provided by the EC in the sugar sector.�

The principal concerns of Thailand are that the EC sugar regime accords
imported sugar treatment less favourable than that accorded to domestic sugar
and provides for subsidies contingent upon use of domestic over imported
goods; that the EC accords export subsidies above its reduction commitment
specified in its Schedule of Concessions; and that sugar of an amount of
approximately 1.6 million tonnes per year benefits from export subsidies.�

Thailand considers that these subsidies are inconsistent with the EC's obligations
under Article III:4 of the GATT 1994, Articles 3.1(a), 3.1(b) and 3.2 of
the Subsidies and Countervailing Measures Agreement and Articles 3.3, 8,
9.1 and 10.1 of the Agreement on Agriculture.�

Under Article 7 of the Dispute Settlement Understanding, if the consultations
fail to settle the dispute within 60 days from the date of receipt of request
for consultations, Thailand may request the establishment of a panel.

Chile: Price Band System And Safeguard Measures Relating To Certain Agricultural
Products (WT/DS207)

The Award of the Arbitrator determining, under DSU Article 21.3(c), the
reasonable period of time for Chile to implement the recommendations and
rulings of the DSB in this case was released on 17 March.� Chile was granted
a period of 14 months, expiring 23 December 2003.�

The Award is of particular interest in that the Arbitrator took into account
the centrality of the measure in dispute to Chilean agricultural policy.� The
Arbitrator said:�

"�� I am of the view that the PBS is so fundamentally integrated into the
policies of Chile, that domestic opposition to repeal or modification of
those measures reflects, not simply opposition by interest groups to the
loss of protection, but also reflects serious debate, within and outside
the legislature of Chile, over the means of devising an implementation measure
when confronted with a DSB ruling against the original law.� In the light
of the longstanding nature of the PBS, its fundamental integration into the
central agricultural policies of Chile, its price-determinative regulatory
position in Chile's agricultural policy, and its intricacy, I find its unique
role and impact on Chilean society is a relevant factor in my determination
of the "reasonable period of time" for implementation." (para.48)�

EU announces it will seek consultations on Australia's quarantine system

The EU announced on 31 March that it had decided to request formal WTO consultations
with Australia on Australia's quarantine system.� If the dispute proceeds
to the panel stage, Australia will vigorously defend its system.����

Australia as a Complainant

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

No new developments. �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.

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

Australia and the other co-complainants in this case, have requested that
an arbitrator be appointed by the WTO Director-General under footnote 12
to DSU Article 21.3(c) to determine the reasonable period of time for the
U.S. to implement the outcomes of the "Byrd Amendment" dispute.�

Australia as a Respondent

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

No new developments.� 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)

No new developments.� 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

US: Subsidies on Upland Cotton (WT/DS267)

Brazil's request for the establishment of a panel to consider its complaint
against US domestic support programs for upland cotton was approved by the
DSB on 18 March 2003.� Argentina, Australia, Benin, Canada, China, Chinese
Taipei, the EC, India, New Zealand, Pakistan and Venezuela reserved their
third party rights in this dispute.� See further discussion on this matter
under the items on DSB Meetings below.��������

Mexico: Measures Affecting Telecommunications Services (WT/DS204)

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.�

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)

No new developments.� Canada, New Zealand and the United States have agreed
that the arbitration proceedings under DSU Article 22.6 remain suspended
for a further period until 10 April 2003 to permit further consultation.� 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)

No new developments.� 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.

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

No new developments.� Following public consultations, the EC has issued
member states with a revised draft list that could be subject to countermeasures,
as a result of the ruling in FSC case.�� On 29 January 2002 the Appellate
Body report was adopted, finding that the revised US Foreign Sales Corporations
(FSC) scheme was WTO inconsistent.� In August 2002, 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 US complaint in this dispute centres on Japanese quarantine measures
that 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,
Brazil, EC, New Zealand, and Taiwan have reserved third party rights.� The
Panel is at the interim review stage and expects to issue its final report
mid-year.

Disputes in which Australia has a Policy or Economic Interest

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

A Panel was established at the request of the U.S. on 31 March.� 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 on the treatment of grain discriminated against
imported grain inconsistently with Article III of GATT 1994 and Article 2
of the TRIMS Agreement.

So far, Chile, Chinese Taipei, the EC, Japan and Mexico have reserved third
party rights in this dispute.� Other Members wishing to reserve third party
rights may do so within 10 days of the meeting.� ����

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

On 17 March, the EC published a regulation permitting the import from Argentina
of wine to which malic acid has been added.� However, the authorisation is
valid only until a bilateral agreement on trade in wine between the EC and
Argentina is concluded.� It is not yet known whether this authorisation constitutes
a mutually agreed solution to the dispute.

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

No new developments.� 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)

No new developments.� The Panel and Appellate Body Reports adopted at the
1 February 2002 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.

EC: Generalized System of Preferences (WT/DS242)

No new developments.� Thailand has requested consultations with
the EC under Article XXIII of GATT 1994 in respect of measures under the
EC's Generalized System of Preferences ("GSP") scheme.� Consultations took
place on 14 February 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, and the application of non-economic
conditionality to the grant of GSP preferences.�

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

No new developments. Following its March 2002 request for consultations,
India's request for establishment of a panel was approved on 27 January.� 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)

Media reports indicate that the Panel's interim report in this dispute was
circulated to the parties on 26 March, and that the Panel has found against
the US safeguard action on four claims, while exercising judicial economy
on all other claims.� The interim report stage allows the parties to the
dispute to review precise aspects of the report, and to make comments, prior
to its public release.�

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 ) argued 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) were inconsistent
with U.S obligations under the GATT 1994 and Safeguards Agreement.

Turkey: Import Ban on Pet Food from Hungary (WT/DS256)

No new developments.� Hungary has requested consultations with Turkey over
its ban on the importation of pet food from any European country.� Turkey
has claimed that the ban is necessary to protect it from BSE.� 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.

Negotiations on the Dispute Settlement Understanding (DSU Review)

Since the beginning of the year, discussions in the DSU Review negotiations,
which are not part of the single undertaking, have been based on consideration
of the draft legal text in an effort to focus and progress the negotiations.� There
are a large number of proposals on the table, including several competing
proposals.

With the end of May deadline looming, the Chair has decided to produce a "Chair's
Framework document" to move the negotiations to the next stage.� The document
is due out in early April.�

Meetings of the Dispute Settlement Body: March 2003

The Dispute Settlement Body (DSB) met on 18 March (General Meeting) and
31 March (Special DSB Meeting).� The next regular DSB meeting is scheduled
for 15 April.

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

General DSB Meeting � 18 March 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. repeated its statement from previous meetings: that it was engaging
the U.S. Congress with a view to concluding a mutually acceptable resolution
of this dispute consistent with WTO rules.� The EC again urged the U.S.
to take rapid and concrete action to settle the dispute and expressed its
concern at the number of cases in which U.S. implementation was outstanding.�����

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

The U.S. stated that legislation repealing the 1916 Act had been introduced
into the U.S. House of Representatives on 4 March 2003.� In response both
the EC and Japan expressed their disappointment that the repealing Act
would not terminate pending court action as they had consistently argued
that U.S. implementation must include termination of these cases.� Both
had companies facing legal action, and incurring litigation costs in the
U.S. based on the WTO-inconsistent legislation.�

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

The U.S. reiterated its intention to work with the U.S. Congress to resolve
this dispute.� The EC repeated its hope expressed at the previous meeting
that the U.S. was taking advantage of the extended reasonable period of
time to ensure full implementation.� The EC also restated its non-acceptance
of the U.S. position that there was no need to clarify the status of Section
211 with respect to abandoned trademarks, to which the U.S. responded by
requesting the EC to provide information on which recent U.S. court decisions
had affected Section 211. The US also asserted that the DSB rulings and
recommendations in this case had not related to the issue of abandonment.� Cuba
again called for the repeal of Section 211 and associated itself with the
EC on the issue of abandoned trademarks.

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

The U.S reiterated its intention to continue to work with the U.S. Congress
toward resolving this dispute with Japan in a mutually satisfactory manner.� Japan
again urged the U.S. to pass the necessary legislation for implementation
as soon as possible.

Item 2: Second Request for Establishment of a Panel by Brazil

US: Subsidies on Upland Cotton (WT/DS267)

As this was the second request by Brazil, the Panel was established.� In
presenting its request Brazil concentrated on procedural issues.

As noted above, Argentina, Australia, Benin, Canada, China, Chinese Taipei,
the EC, India, New Zealand, Pakistan and Venezuela have reserved their
third party rights in this dispute.�

Item 3: First Request for Panel Establishment by the U.S.��

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

The U.S. made its first request for establishment of a Panel.� The U.S.
set out the basis for its panel request (see item above).� Canada exercised
its right to prevent establishment of the panel at the first DSB consideration
of the request.� It maintained that its grain sector and transportation
policies and the activities of the Canadian Wheat Board were consistent
with Canada's trade obligations, and that this had been the conclusion
of nine studies and/or investigations over the past twelve years.�

Item 4: Recourse by Brazil to Article 22.7 of the DSU and Article 4.10
of the SCM Agreement

Canada: Export Credits and Loan Guarantees for Regional Aircraft (WT/DS90)

The DSB considered that the award of the Arbitrator for the level of appropriate
countermeasures that Brazil could take against Canada following Canada's
failure to withdraw the prohibited subsidies found by the Panel within
the time period specified.� The DSB granted authorization to Brazil to
take countermeasures at the level of the arbitrators' award (USD 247, 797,
000). The EC stated its concern that Brazil had only notified a broad list
of products on which countermeasures would be imposed, which created uncertainty
that there would be equivalence between the countermeasures imposed and
the level authorised.

Canada, the EC and the U.S each expressed concern at the arbitrator's
decision to increase the level of countermeasures by 20 per cent as a punitive
measure in response to Canada's indication that it would not withdraw the
illegal subsidy.�

Item 5: Proposed nomination for the indicative list of panelists

The nomination for Brazil was approved without comment.

Special DSB Meeting

31 March

Item 1:� Designation by the DSB of a Representative to serve the function
of facilitating the information-gathering process under Annex V of SCM Agreement���

US-Subsidies on Upland Cotton� (WT/DS/267)

Pursuant to paragraph 4 of Annex V of the SCM Agreement, Brazil requested
the DSB to designate a special representative to serve the function of
facilitating the information-gathering process in this dispute.� This agenda
item was suspended by the Chair until further notice following disagreement
between the parties over whether these procedures could be used in this
dispute.� The Chair indicated he would continue his consultations with
the parties.������

Item 2:� Request for the Establishment of a Panel

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

The U.S. requested the establishment of a Panel.� As this was the second
request, a Panel was established.� Chile, Chinese Taipei, the EC, Japan
and Mexico reserved third party rights in this dispute.�


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This publication is intended to provide a general update and the information
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