The DSB adopts the second compliance Panel and Appellate Body reports in the FSC dispute

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Adoption of Appellate Body and Panel reports  

When a panel report comes out, it is either adopted by the Dispute Settlement Body or appealed by one or more main parties to the dispute. When the Appellate Body report comes out, it is automatically adopted by the DSB — unless there is consensus to reject it — and becomes binding.
  

DS108: US Tax Treatment for ‘Foreign Sales Corporations’

The DSB adopted the Appellate Body and the Panel reports on the European Communities’ second recourse to Article 21.5 in this dispute.

The EC said that the Appellate Body report confirmed the WTO incompatibility of the transitional and grandfathering provisions in the American Jobs Creation Act, repealing the FSC/ETI. The EC recalled that the countermeasures were initially introduced at a lower level than the amount allowed by the WTO arbitrator in 2002 and they were suspended. The EC notified the DSB that a mandatory EC legislation provide the reintroduction of the suspended sanctions 60 days from the DSB's adoption of the compliance panel and appeal body reports. Finally, the EC requested further information regarding the “Trade Sanctions Avoidance Act”, a repealing bill introduced on 8 March 2006 into the US Congress.

The US said that while it was disappointed that the Appellate Body did not reverse the compliance panel in the issues on appeal, it was pleased that the Appellate Body provided clarification on these issues. In addition, the US said that although the conclusion confirmed that the US had largely withdrawn the subsidies at issue, this second proceeding provided little more than the first proceeding results.
Following the US statement, the EC reacted by saying that the remaining benefit to be over 750 million dollars was not insignificant and added that these benefits would last possibly until 2012 and even beyond.

Brazil also argued that unless and until a WTO Member remove the WTO inconsistency of its challenged measures, every compliance proceeding must conclude that the illegality found in the original proceeding remains.

  

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Request for information-gathering process and facilitator under Annex V of the Subsidies Agreement 

DS317: United States — Measures Affecting Trade in Large Civil Aircraft

According to Annex V, the process is initiated to obtain information necessary “to analyze the adverse effects caused by the subsidized product” (para 2), and “shall be completed within 60 days of the date on which the matter has been referred to the DSB” (para 5). The purpose of the facilitator is “to ensure the timely development of the information necessary to facilitate expeditious subsequent multilateral review of the dispute” (para 4).

The EC recalled that it requested at the last DSB meeting, on the 17 February 2006, the establishment of a panel to help to resolve a number of procedural matters in the dispute of large civil aircraft and the initiation of the procedures for developing information-gathering under Annex V of the SCM Agreement. Although the panel was established, the EC explained that the US could not agree to the request of information-gathering process. As a consequence, the EC asked again the DSB to consider this issue at today's meeting. It said that to obtain information under Annex V was a right and the US simply had been denying this right to the EC.

The US mentioned that it was surprising that the EC was seeking initiation of an annex V process at that time. It invited Members to recognize that the EC was asserting a unilateral right to reopen an information-gathering process that had already ended with regard to the initial EC allegations of subsidization of large civil aircraft. The US also argued that procedures under Annex V were extensive, including an extension of the period from 60 days to 90 days and a submission of 40,000 pages of information (the majority of them pertaining to NASA and Defense Department programmes). As a result, the US concluded that there was no basis for the EC's request and that the US was not in position to consent to the initiation of Annex V procedures.

In response to the US, the EC explained that Annex V procedures should be established automatically by the DSB upon request and that Parties should co-operate. There was no reason why not to resume the Annex V procedures immediately. The EC said that the US by continuing to block the process was violating its basic duty to co-operate.

Brazil, as a third party, emphasised that Annex V provisions were clear and unconditional, with its paragraph 2 and 5 setting out no additional requirement for the establishment of the procedures but the request itself and the referral of the matter to the DSB. Brazil also reserved its rights to participate as a third party in the procedures.

The DSB took note of the statements made.

  

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Other business 

DS296: US — Countervailing duty Investigation on dynamic random access memory Semiconductors from Korea

The US was pleased to report to the DSB the implementation of the rulings in this dispute. The US announced that the US Department of Commerce published, on 8 March 2006, a notice in the Federal Register concerning the Commission redetermination.

Korea considered that the US had not fully implemented the panel recommendation. Korea said that it was in the process of determining an appropriate course of action in response.

  

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Next meeting 

The next regular meeting of the DSB will be on 17 March 2006.