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WTO Dispute Settlement Bulletin

Monthly Bulletin: September 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:

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please send an email to wto.disputes@dfat.gov.au
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Recent Developments

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

On Friday 27 October 2002, Australia and Brazil lodged requests
for consultations with the EC over its sugar regime. The two
countries, which have launched separate actions, are both arguing
that the EC has exceeded its WTO export subsidies commitments.

Australia is also alleging that the subsidies paid to sugar refiners
are discriminatory and breach EC obligations in regard to National
Treatment Obligations, as the subsidy paid for refining EC sugar
is not available for refining imported sugar. Finally, Australia
is arguing that there may also be discrepancies in the refunds
paid to incorporated products, or products containing sugar, in
comparison to sugar sold as the end product. The Minister for
Trade, Mr Vaile, has issued a press release on Australia's request
for consultations. This can be found at:

The actions underway do not challenge the preferential sugar
imports granted by the EC to ACP/India. Instead, the complaints
centre on the effect of EC sugar that is exported onto the world
market, and the effect that this has on the world price. Oxfam
has come out in support of the cases, criticising the impact of
the EC's policies on developing countries. The press release can
be found at www.oxfam.co.uk.

Australia is seeking to schedule consultations in late October
or early November. A copy of Australia's request for consultations
can be found by entering the document number (WT/DS265) in the
search function on the WTO web-site, which can be found at http://docsonline.wto.org/gen_search.asp.

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

The report of the WTO dispute panel considering the complaint
by Australia, Brazil, Canada, Chile, the European Communities
(EC), India, Indonesia, Japan, Korea, Mexico and Thailand against
the US Byrd Amendment legislation was released on 16 September.
The Minister for Trade, Mr Vaile, has issued a media release on
the dispute. That release is available at http://www.trademinister.gov.au/releases/2002/mvt112_02.html.

In relation to the principal claims made by the complaining parties,
the panel said:

  • the Appellate Body in US Antidumping Act of 1916 considered Article
    VI of GATT 1994 in conjunction with the Anti-Dumping Agreement as a whole
    to determine the permissible responses to dumping (definitive anti-dumping
    duties, provisional measures and price undertakings). This approach is
    equally applicable to determining permissible responses to subsidisation
    under the SCM Agreement, notwithstanding a difference in the text of Article
    1 of the Anti-Dumping Agreement and Article 10 of the SCM Agreement. Accordingly,
    the permissible responses to subsidisation are definitive countervailing
    duties, provisional measures, undertakings and countermeasures. To the
    extent the legislation is a "specific action against a subsidy" but not
    one of these permissible responses to subsidisation, it would be inconsistent
    with Article 32.1 of the SCM Agreement;
  • the test applied by the Appellate Body in US Antidumping Act of
    1916
    that "the ordinary meaning of the phrase 'specific action against
    dumping' within the meaning of Article 18.1 [of the Anti-Dumping Agreement]
    is action that is taken in response to situations presenting the constituent
    elements of 'dumping' " was not conclusive of whether a measure constituted
    "specific action against dumping";
    • to be "against" dumping, the measure at issue must also have an "adverse
      bearing" on dumping; and
    • while at first sight the legislation contains no reference to the
      constituent elements of dumping, "there is a clear, direct and unavoidable
      connection between the determination of dumping and offset payments"
      under the legislation;
  • Article 18.1 of the Anti-Dumping Agreement refers only to measures that
    act against "dumping" as a practice. There is no express requirement that
    the measure act against the imported dumped product, or entities connected
    to, or responsible for, the dumped good. A measure need not act directly
    against dumping to be "against" dumping;
    • the legislation operates "against" dumping because it has an adverse
      bearing on dumping: anti-dumping duties neutralise any competitive
      advantage enjoyed as a result of dumping, but the combination of anti-dumping
      duties and the offset payments transfers that competitive advantage
      to the domestic producers of the like product who benefit from the offset
      payments;
    • the adverse bearing on dumping created by the offset
      payments is compounded by the financial incentive for domestic
      producers to file or support anti-dumping and countervailing
      applications, which will in all likelihood result in a greater
      number of investigations and hence a greater number of anti-dumping/countervailing
      duty orders. The prospect of an increased number of investigations
      will disrupt the trading environment for foreign producers/exporters
      that may be engaged in dumping;
    • as a consequence, the legislation constitutes a non-permissible
      "specific action against dumping" contrary to Article 18.1
      of the Anti-Dumping Agreement; and
    • the legislation is also a non-permissible "specific action
      against a subsidy", contrary to Article 32.1 of the SCM
      Agreement.

The panel also found in favour of the complaining parties' claim
that the legislation is contrary to Article 5.4 of the Anti-Dumping
Agreement and Article 11.4 of the SCM Agreement concerning "standing"
requirements for the initiation of anti-dumping and countervailing
investigations. The panel considered that the legislation in
effect mandates domestic producers to support an application and
renders the threshold tests of those Articles completely meaningless.

However, the panel found against the claims of some of the complaining
parties in relation to price undertakings under Article 8.3 of
the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement,
actionable subsidies under Article 5(b) of the SCM Agreement and
unreasonable and partial administration of US laws and regulation
under Article X:3(a) of GATT 1994.

The United States is entitled to appeal the panel's findings.

Australia's submissions and statements to the panel, and the
panel's report, are available at http://203.6.171.3/trade/negotiations/disputes/wto_disputes-US_AD.html

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

Argentina has requested dispute settlement consultations with
the EC in relation to the EC's requirements concerning wine acidification
processes. Argentina claims EC regulations and measures are inconsistent
with Articles 2 and 12 of the Agreement on Technical Barriers
to Trade; Articles I.1 and III.4 of the General Agreement on Tariffs
and Trade (GATT 1994); and Article XVI.4 of the WTO Agreement.

Australia as a Complainant (2)

United States Continued Dumping and Subsidy Offset Act
of 2000 (the "Byrd Amendment") (WT/DS217 and WT/DS204)

See New Developments above.

The Panel's report was circulated on 16 September 2002. The
report cannot be considered by the Dispute Settlement Body for
adoption until 20 days after circulation and shall be adopted
within 60 days of circulation unless appealed.

European Communities Export Subsidies on Sugar request
for consultations by Australia (WT/Ds/265)

See New Developments above.

Disputes Involving Australia as a Third Party (8)

Mexico Measures Affecting Telecommunications Services
(WT/DS204)

The Panel established at the 17 April DSB Meeting has started
its work. Third Party submissions are due on 14 November.

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, Section 5 of the GATS Annex on Telecommunications
and GATS Article XVII.

Australia, Brazil, Canada, Cuba, the EC, Guatemala, Honduras,
India, Japan and Nicaragua are third parties to this dispute.

Chile: Price Brand System and Safeguard Measures Relating
to Certain Agricultural Products (WT/DS207)

The Appellate Body released its report on 23 September , upholding
the panel's 3 May 2002 finding that Chile's price band system
(PBS) applying to certain agricultural products was inconsistent
with Article 4.2 of the Agreement on Agriculture. The Appellate
Body reversed the panel's finding that the duties resulting from
the PBS were inconsistent with the second sentence of Art II:
1(b) of GATT 1994 on the basis that the panel had acted inconsistently
with Art 11 of the DSU as it was "not part of the matters before
the panel". Chile had thereby been denied due process of a fair
right of response. The Appellate Body also decided it was not
necessary to make a separate finding on whether the PBS also results
in a violation of the first sentence of Art II: 1(b) of GATT 1994
in light of its finding of inconsistency with the Agricultural
Agreement Art 4.2.

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
negotiation on the review of the Dispute Settlement Understanding
(TN/DS/W/8).

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

On 23 September Canada filed its notice of appeal against the
26 July 2002 Article 21.5 Panel report, which upheld the joint
U.S. NZ complaint against Canadian dairy export subsidies.
Third party submissions are due on 18 October and the oral hearing
is to be held on 31 October. The Appellate Body is scheduled
to report on 23 December 2002.

On 26 July the Panel released its finding 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.

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

No new developments. 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 advising
that the US Administration continues to engage the US Congress
with a view to concluding a mutually acceptable resolution of
the dispute.

The EC and US sought arbitration under Article 25 of the DSU
to determine 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. The arbitrator assessed the level of nullification
and impairment at US$1.1 million per year.

United States: Definitive Safeguard Measures on Imports
of Circular Welded Carbon Quality Line Pipe from Korea (WT/DS202)

No new developments. 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"
(WT/DS108)

Following the 30 August 2002 ruling that the EU has the legal
right to apply countermeasures to the value of US$4 billion, the
EC released its draft list of products potentially subject to
retaliation on 13 September. The list will be open for public
consultation for two months.

The WTO ruled had ruled on 14 January 2002 against the US revised
Foreign Sales Corporations (FSC) scheme. This follows an earlier
WTO ruling which upheld the EU's complaint against the original
scheme as providing prohibited export subsidies to US companies
in the form of tax exemptions against US imports.

Canada: Export Credits and Loans Guarantees for Regional
Aircraft (WT/DS222)

No new developments. 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)

On 4 September the U.S. presented its first written submission
on Japan's quarantine measures on apples for fire blight. Australia's
third party submission is due on 14 October and the Panel will
meet with third parties on 22 October. The Panel timetable provides
for the interim report to be issue on 3 February 2003 and the
final report to be circulated on 4 April 2003.

The Japanese quarantine measures complained of by the U.S. include
the prohibition of imported apples from orchards where fire blight
is detected (or if it is detected within a 500 metre buffer zone),
a requirement for three orchard inspections a year and post-harvest
treatment of exported apples with chlorine. The U.S argues that
these measures are inconsistent with Japan's obligations under
Article XI of GATT 1994, the SPS Agreement and Article 14 of the
Agreement on Agriculture. The U.S has also claimed non-violation.
A Panel was established at the 3 June DSB meeting on request by
U.S. Australia reserved its third party rights. Brazil, Taiwan,
New Zealand and the EC also reserved third party rights. The
Panel comprises Michael Cartland (Chair), Kathy-Ann Brown and
Christian Haberli.

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

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)

The Panel report on section 129(C)(1) of the Uruguay Round Agreements
Act was adopted at the DSB meeting of 30 August.

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 most recent Status
Report lodged by the US notes that the United States Administration
has held consultations with the US Congress concerning appropriate
statutory measures and continues to work with the Congress on
resolving the dispute.

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'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.
In a related development, the EC has requested a waiver

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. 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. The US exercised its right to prevent
the establishment of the Panel requested by Brazil on processed
orange and grapefruit products, but it can not block a second
request scheduled for 1 October 2002.

Brazil claims that the exemption from this tax of products produced
in whole or in part from citrus fruit grown within the US 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 US 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)

No new developments. The eight complainants (Brazil, China,
the European Communities, Japan Korea, New Zealand, Norway and
Switzerland ) argue that the definitive safeguard measures imposed
by the U.S in the form of an increase in duties on imports of
certain flat steel, hot-rolled bar, cold-finished bar, rebar,
certain welded tubular products, carbon and alloy fittings, stainless
steel bar, stainless steel rod, tin mill products and stainless
steel wire and in the form of a tariff rate quota on imports of
slabs (all effective as of 20 March 2002) are inconsistent with
U.S obligations under the GATT 1994 and the Agreement on Safeguards.

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, 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)

No new developments. 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: September 2002

A special DSB meeting was held on 16 September. The next regular
DSB meeting is scheduled for 1 October.

Australia uses DSB meetings to monitor progress and to register
its views on disputes of interest. The agenda of the August DSB
meeting was as follows (any Australian interventions are indicated):

DSB Special Meeting 16 September 2002

Request for the establishment of a Panel

EC Provisional safeguard measures on imports of certain
steel products (WT/DS260/4)

The US made its second request for a panel to be established
on the EC's provisional safeguard measures on certain steel
products . The US questions the consistency of the law
under both the Agreement on Safeguards and Article XIX GATT.
The EC rejected this claim.

This publication is intended to provide a general update and
the information within it should not be relied on as complete
or definitive.


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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