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WTO Dispute Settlement Bulletin

Monthly Bulletin: May 2002

Australia and WTO dispute settlement

RESOLVING EXPORT ACCESS PROBLEMS THROUGH THE WTO SYSTEM

  • Are you an exporter or intending to export?
  • Do you export to one or more of the 144 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


Chile Price Band System and Safeguard Measures Relating to Certain Agricultural
Products

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.
Chile is expected to appeal against this decision.

The Panel found that the PBS was similar to a variable import levy and
a minimum import price, both of which were required to be converted into
ordinary customs duties during the Uruguay Round pursuant to Article 4.2
of the Agreement on Agriculture. By maintaining a measure that should have
been converted, Chile was in breach of Article 4.2 of the Agreement on Agriculture.

Chile's PBS was also inconsistent with Article II:1(b) of the GATT 1994,
which prohibits WTO members from applying any duties or charges of any
kind, other than ordinary customs, unless they are recorded in their Uruguay
Round Schedules. In this case, the other duties or charges levied by
Chile through the PBS are not recorded in Chile's Schedule and, therefore,
inconsistent with Article II:1(b).

Argentina also alleged that Chile's application of safeguard measures on
imports of wheat, wheat flour and edible vegetable oils in November 1999
breached Article XIX:1(a) of GATT 1994 and the Agreement on Safeguards.
Although Chile withdrew the safeguard measures in November 2001, the Panel
nevertheless considered the WTO-consistency of the withdrawn measures.
The Panel found that Chile had acted inconsistency with these provisions,
by failing to meet the necessary requirements for the imposition of safeguards.

The factual background to this case is that Chile uses a price band system
to stabilise prices for sugar, vegetable oils, wheat and wheat flour. The
Customs Service assesses import prices on a weekly basis and if the price
of an imported product covered by the price band system falls below an established
reference price, it adds a specific duty in U.S dollars to the ad valorem
rate to bring the import price up to the reference price. As a result of
low world prices in the late 1990s, the combination of the additional specific
duty and the applied tariff has regularly taken the ad valorem equivalent
well above Chile's 31.5 per cent bound rate, in breach of Chile's Uruguay
Round commitments. On 26 November 1999 Chile imposed safeguards on wheat,
wheat flour and edible vegetable oils.

Although Australia did not have a direct commercial interest in this case,
we reserved our third party rights in view of our strong systemic interest
in the full implementation of agricultural market access concessions negotiated
during the Uruguay Round. Australia did not make a submission in this
case.


Australia as a Complainant (1)

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

The Panel's report is expected to be issued in Geneva on 10
July 2002.

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: /trade/negotiations/disputes/wto_disputes-US_AD.html


Disputes involving Australia as a Third Party (8)

Mexico Measures Affecting Telecommunications Services (WT/DS204)

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)

Panel report made public on 3 May 2002 (see above for details).

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)

The Article 21.5 panel held its meeting with the parties (U.S and New
Zealand) and third parties (Australia, Argentina and the EC) on 22-23 April.
In Australia's statement we addressed the application in this matter of
the elements of Article 9.1(c) of the Agreement on Agriculture on export
subsidies, including payments and by virtue of governmental action.
The parties to this dispute are arguing that, since the Appellate Body's
Article 21.5 Report did not make any findings on the consistency of Canada's
new measures, they continue to believe that Canada's implementation measures,
introduced as a result of the DSB's original recommendations and rulings,
are inconsistent with its WTO obligations. The final report has been delayed
and is now expected mid-June.

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

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). At the 22 May DSB meeting the U.S made
a statement noting that it had been engaged in discussions with the EC to
find a positive and mutually acceptable resolution of the dispute. The
EC registered its disappointment in the U.S status report, noting that it
had been 22 months since the adoption of the Panel Report and during this
time the U.S had made no effort to implement the ruling. The EC also noted
that bilateral discussions had not yet resulted in a temporary solution.
Australia registered our concern at the U.S implementation and possibly
discriminatory compensation arrangements (it is understood this would involve
the U.S paying the EC U.S$1.1 million per annum over three years pending
implementation of the Panel's findings). (See report from 22 May DSB meeting
below) The U.S did not respond.

United States: Definitive safeguard measures on imports of circular
welded carbon quality line pipe from Korea (WT/DS202)

The Appellate Body and Panel Reports were adopted at the 8 March DSB
meeting. 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 the
U.S implementation of the DSB report. As no mutually satisfactory time has
been agreed Korea has requested binding arbitration on this point pursuant
to Article 21.3(c) of the DSU.

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

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 was due on 29 April, but is now expected to be issued
on 17 June. 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 there are still significant differences of opinion within
the U.S on how this will be achieved and on timing.

Canada: Export credits and loans guarantees for regional aircraft (WT/DS222)

Brazil has indicated its intention to seek WTO authorisation for countermeasures
of U.S$3.36 billion, 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). It has placed its request on the agenda for the 3 June special
meeting of the DSB. Canada referred to ongoing bilateral discussions, but
also stated that it did not believe it was required to implement the Panel
ruling with respect to aircraft delivered prior to May 20. Further bilateral
discussions are taking place in parallel with the WTO action. Brazil's
request raises systemic issues related to sequencing and retrospectivity.

Disputes in which Australia has a policy or economic interest (10)

Japan: Measures affecting agricultural products (Varietal testing)
(WT/DS76)

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 Act
(WT/DS221)

No new developments. Canada is challenging the legality of a specific
aspect of the U.S statute controlling the U.S implementation of DSB rulings.
A panel was established at the 23 August 2001 DSB meeting, and was constituted
on 30 October. Third party rights were reserved by the EC, India, Japan
and Chile.


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

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 (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' 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
Countries (WT/DS246)

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.
Venezuela and Colombia have requested to be joined in the consultations
but have no entitlement to be joined as India's request for consultations
was made under Article XXIII GATT 1994. This dispute raises similar systemic
issues for Australia as EC: Generalized System of Preferences (above).

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

The U.S requested the establishment of a Panel at the 22 May DSB meeting,
this was blocked by Japan. The U.S has placed its request on the agenda
for the 3 June DSB meeting, when the Panel must be established under
DSB procedures.

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, several provisions
of the SPS Agreement and Article 14 of the Agreement on Agriculture.
The U.S has also made a non-violation claim. The U.S stressed that it
has made significant efforts to address Japan's concerns, including carrying
out joint research in 2000 which concluded that mature symptonless apples
were not carriers of fireblight.

At the 22 May meeting Japan made a strongly worded statement regretting
the U.S termination of consultations and decision to proceed to a Panel.
Its SPS measures were indispensable for preventing the introduction of
the fire blight. Japan called for further discussions on technical matters.

United States: Equalizing Excise Tax Imposed by Florida on Processed
Orange and Grapefruit Products (WT/DS250)

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 1994.

A U.S judicial decision recently overturned the 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/DS 251, WT/DS 252, WT/DS 253, WT/DS 254)

The U.S blocked the establishment of a Panel at the 22 May DSB meeting.
The EC announced that it would make a second Panel request at the special
DSB meeting on 3 June. The EC said that unfortunately the joint consultations
held in April 2002 had not led to an amicable solution and it was therefore
requesting a WTO panel.

The EC noted that the Appellate Body had already condemned all six U.S
safeguards brought to WTO: on wheat gluten, lamb, line pipe, underwear,
shirts and blouses and cotton yarn. The EC was confident that the WTO
would again rule against the abuse by the U.S of the WTO safeguard provisions.
The U.S responded that it regretted that the EC had chosen to challenge
the U.S safeguard measures which were fully WTO consistent.

Japan condemned the U.S measures as a clear violation of the WTO. Japan
announced that it had filed a panel request on 21 May 2002 and had requested
a special meeting of the DSB on 3 June to consider its request. Korea
said that the U.S steel safeguard measures had led to a spiral of protectionist
measures in steel trade. Korea cited as an example China's announcement
of their own provisional safeguard measures on 21 May 2002. Korea said
that it had also requested a special meeting of the DSB on 3 June when
it would request the establishment of a panel. Brazil informed the DSB
that on 21 May 2002 it had requested consultations with the U.S on its
safeguard measures. Cuba registerd its concerns about the effects of
the U.S measures on global steel trade.

The EC, Japan, Korea, China, Switzerland and Norway held joint consultations
with the U.S on 11-12 April concerning the definitive safeguard measures
imposed by the U.S on imports of certain steel products. The U.S agreed
to third party participation in the consultations by Canada, Mexico, New
Zealand and Venezuela. 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 affecte by the tax treatment. The U.S requested
intervention as a Third Party.

Meeting of the Dispute Settlement Body: May 2002

The DSB, consisting of all the Members of the WTO, met on 22 May 2002.
Special DSB meetings will be held on 3 June, 7 June, 14 June and the next
regular DSB meeting on 24 June 2002. Australia uses DSB meetings to monitor
progress and to register its views on disputes of interest. The agenda of
the May DSB meeting was as follows (any Australian interventions are indicated):

DSB Meeting 22 May 2002

1.A Surveillance of Implementation of Recommendations adopted by the DSB

United States Section 110(5) of the U.S Copyright Act
(WT/DS160)

- status report by the U.S

The U.S said that it continued to be engaged in discussions with
the EC to find a positive and mutually acceptable resolution of the
dispute.

The EC registered its disappointment in the U.S status report. Australia
registered the following points in its statement:

  • Concern about the continued delay in the U.S implementation of
    DSB rulings in this dispute
  • Concern about the apparent discriminatory nature of the proposed
    compensation arrangements that we understand have been agreed between
    the U.S and the EC
  • Registered our expectation that any compensation arrangement reached
    in this case be applied on a non-discriminatory basis.

1.B Surveillance of Implementation of Recommendations adopted by the
DSB

United States Anti-Dumping Act of 1916 (WT/DS162)

The U.S repeated the information set out in its status report confirming
that it was continuing to work for the enactment of legislation repealing
the 1916 Act.

The EC and Japan expressed disappointment with the delay in U.S implementation.
Japan noted that the suspended Article 22.6 arbitration could be re-activated
after 30 June. The EC registered its concern that judicial proceedings
under the 1916 Act against EC firms would resume in August, and threatened
recourse to arbitration if this occurred.

1.C Surveillance of Implementation of Recommendations adopted by the
DSB

Argentina - Definitive Anti-Dumping Measures on Ceramic Floor
Tiles from Italy (WT/DS189)

Argentina informed the DSB that it had fully implemented the DSB
recommendations and rulings by revoking the anti-dumping measures
at issue. The EC welcomed the rapid solution to the dispute and congratulated
Argentina for its efforts.

2. Surveillance of Implementation of Recommendations adopted by the
DSB

India Measures Affecting the Automotive Sector (WT/DS146 and
WT/DS175)

India confirmed its intention to implement the Panel report, which
was adopted at the 5 April DSB meeting, but said it would need a reasonable
period of time. The U.S said it looked forward to discussions on
prompt implementation. The EC registered its expectation for rapid
implementation.

3. Panel Request

United States Sunset Review of Anti-Dumping Duties on Corrosion-Resistant
Carbon Steel Flat Products from Japan (WT/DS244)

At Japan's request a Panel was established with Third Party rights
registered by Canada, Chile, EC, India, Korea, Norway and Venezuela.

4. Panel Request

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

A request by the U.S for the establishment of a Panel was blocked
by Japan.

The U.S argues that Japan's measures blocking importation of apples
in connection with fire blight were not scientifically based and were
inconsistent with the SPS Agreement. Japan strongly disputed this
claim.

5. Panel Request

United States Definitive Safeguard Measures on imports of certain
steel products (WT/DS248)

The EC requested the establishment of a Panel, arguing that the U.S
measures were not consistent with WTO safeguard requirements. The
U.S exercised its right to prevent the establishment of a Panel at
the first DSB consideration of the request. The U.S considers the
safeguard measures to be fully consistent with the applicable portions
of the Safeguard Agreement .

6. Panel Request

United States Rules of Origin for Textile and Apparel Products
(WT/DS243)

India requested the establishment of a Panel. This was blocked by
the U.S, which argued that its legislation was fully consistent with
the WTO.

The U.S expressed its serious concern at the Secretariat making a
correction in the circulated copy of India's Panel request by adding
a reference to Article 2 of the Agreement on Rules of Origin. The
Secretariat argued that the reference had been included in the original
letter and was clearly an unintended omission, characterising the
action as a correction of a typographical error and not a change
of substance.

7. Request for Article 21.5 Panel

European Communities Anti-Dumping Duties on Imports of Cotton-type
Bed Linen from India (WT/DS141)

Following India's withdrawal of its Panel request at the April DSB
meeting an Article 21.5 Panel was established to examine the EC's
compliance with the DSB recommendations and rulings. The DSB agreed
to refer this matter to the original Panel.

The EC expressed surprise at India's request, stating that it believed
it had fully and faithfully implemented the DSB recommendations and
rulings. Third Party rights were reserved by the U.S and Japan.



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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.

For more information and copies of previous issues, visit Australia and WTO
dispute settlement
.

For more general information relating to the Doha
Round of Trade negotiations, see the WTO
Doha Round Bulletin
.

Last Updated: 9 January 2013
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