WTO news: what’s been happening in the WTO

WTO NEWS: 1998 NEWS ITEMS

29 October 1998
Panel set to examine EC's complaint against US tax treatment
for FSCs

The Dispute Settlement Body, on 22 September, established a panel to examine the European Communities' complaint that the United States' tax treatment for “foreign sales corporations” or FSCs violated provisions of the WTO Agreements on Subsidies and Countervailing Measures and on Agriculture, and the GATT 1994.

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The EC, in reiterating a panel request first made at the previous DSB meeting, said that the measure in question was an instrument designed to assist US exports. It said that the taxation system granted export subsidies it resulted in profits of US parent companies being exempted from taxes.

The United States said that the EC had raised a matter that it had considered resolved. It viewed the EC panel request as legally unwarranted and commercially unjustified action, and was confident its arguments would prevail in the panel process.

Canada reserved third-party rights to participate in the panel proceedings.

Panel report adopted

The DSB considered a panel report, circulated on 24 August, on the EC's complaint against India's patent protection for pharmaceutical and agricultural products. The panel found that India had not complied with its obligations under Article 70.8(a) of the TRIPS Agreement by failing to establish a legal basis that adequately preserves novelty and priority in respect of applications for product patents for pharmaceutical and agricultural chemical inventions, and was also not in compliance with Article 70.9 of the TRIPS Agreement by failing to establish a system for the grant of exclusive marketing rights.

The EC welcomed the report as confirming its views in this dispute. It requested the adoption of the report.

India said it was prepared to join a possible consensus for the adoption of the report It said that the aspects of the report had raised certain systemic issues, including its concerns over the initiation by the EC of panel proceedings on a matter that had already been examined by a panel (upon a complaint by the United States), and where the EC had participated as a third party. India stressed that it recognized its obligations under the TRIPS Agreement, and had established the required “mailbox” for product patents when the WTO entered into force. It said that its differences with the EC in this regard concerned certain legal issues.

The DSB adopted the panel report.

US measure affecting government procurement

The European Communities and Japan made separate requests for the establishment of a panel to examine a law enacted by Massachusetts that prohibited the awarding of state contracts to companies that do business in or with Myanmar. They contended that this measure violated provisions of the plurilateral Agreement on Government Procurement.

The EC said that if this law was allowed to stand, it would undermine a fundamental principle of the agreement, namely that political considerations should not be part of decision-making with regard to the awarding of procurement contracts. It stressed that its request did mean the EC approved practices of Myanmar.

Japan said that it had been working with Myanmar on the question of human rights both bilaterally and in the Human Rights Commission. It said that improvements were required in this area in Myanmar but this did not justify an imposition of trade measures by any government.

The United States expressed regret about the panel requests, citing its common interest with the EC and Japan in improving the human rights situation in Myanmar. It said that with the assistance of Massachusetts officials, it would continue efforts to reach a mutually-agreed solution with the EC and Japan, and thus was not in a position to agree to a panel at that meeting.

Implementation of DSB recommendations

Canada presented its fifth status report on the implementation of the DSB recommendations on the periodicals dispute. It said that it was working for legislative changes that would enable it to comply fully with the recommendations by 30 October, including the revocation of excise taxes on foreign periodicals and changes to the postal subsidy programme.

The United States expressed concern over plans in Canada to introduce legislation that would continue the discrimination against foreign magazines. It said it would closely monitor the situation, and that it was prepared to use its legal rights, if necessary.

The EC presented its second status report on the implementation of the DSB recommendations concerning its banana regime. It said that it had adopted a regulation that partially implemented the recommendations, and that it had begun negotiations with substantial suppliers with regard to the allocate of shares in the EC banana tariff-rate quotas.

Under a separate item in the agenda, the United States, also speaking on behalf of Ecuador, Guatemala, Honduras, Mexico and Panama, expressed concerns over what it said was the EC's failure to comply with the DSB's recommendations regarding its regime for the importation, sale and distribution of bananas. It expressed regret that the EC had refused their proposal for the reconvening of the original panel to examine the consistency of the revised EC measures. The United States believed that the EC's measures to comply with the DSB recommendations were inconsistent with WTO provisions because the market allocation for the ACP and Latin American countries was almost the same, and the new criteria for distributing import licenses appeared to be discriminatory. In its view, if the EC believed that its measures were WTO-consistent, it should welcome the opportunity to prove this before the original panel.

The EC stressed that its implementation of the DSB recommendations was on schedule, and that the time-period for doing so had not yet expired. It said that a panel could not be established to examine the proposed EC measures because these were not yet final. The EC said it would not object to the original panel examining its final measures.

Many delegations said that the WTO Dispute Settlement Understanding was not completely clear and precise on the procedures in the implementation stage of the dispute-settlement process.

“Other business”

Korea said that it had withdrawn its request for a panel to examine its complaint against the United States' imposition of anti-dumping duties on imports of colour TVs from Korea. It said this was in response to a final determination by the United States, in August, to revoke the anti-dumping duty order on Samsung Electronics.

The EC expressed concern over a request by Indonesia to implement the DSB recommendations regarding measures affecting the automobile industry over a 15-month period, which it viewed as excessively long. The two other complainants in this case, Japan and the United States, expressed the hope that agreement with Indonesia over implementation would be reached soon.

Indonesia emphasized that it would comply fully with the DSB recommendations. However, it requested a maximum period of time to do so in the lights of its critical economic situation. Indonesia said that a transitional period was needed to phase out the automobile programme in question so as not to further exacerbate the unemployment problem. It said that the government had revoked import duty and luxury tax exemption subsidies to the producers of the National Car, and that it would take further measures to implement the DSB recommendations.