This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.
See also:
> One-page summary of key findings of this dispute
> The basics: how disputes are settled in WTO
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> Text of the Dispute Settlement Understanding
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The summary below was up-to-date at
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 5 October 2000, Argentina
requested consultations with Chile concerning:
- the price band system established by Law 18.525 (as
subsequently amended by Law 18.591 and Law 19.546), as well as
implementing regulations and complementary and/or amending provisions; and
- the provisional safeguard measures adopted on 19
November 1999 by Decree No. 339 of the Ministry of Economy and the
definitive safeguard measures imposed on 20 January 2000 by Decree No. 9
of the Ministry of Economy on the importation of various products,
including wheat, wheat flour and edible vegetal oils.
Argentina considered that these measures raised
questions concerning the obligations of Chile under various agreements.
According to Argentina, the provisions with which the measures relating to
the said price band system are inconsistent, include, but are not limited
to, the following: Article II of the GATT 1994, and Article 4 of the
Agreement on Agriculture. According to Argentina, the provisions with
which the safeguard measures are inconsistent, include, but are not
limited to, the following: Articles 2, 3, 4, 5, 6 and 12 of the Safeguards
Agreement, and Article XIX:1(a) of the GATT 1994.
On 19 January 2001, Argentina requested the
establishment of a panel. At its meeting on 1 February 2001, the DSB
deferred the establishment of a panel.
Panel and Appellate Body proceedings
Further to a second request to
establish a panel by Argentina, the DSB established a panel at its meeting
of 12 March 2001. Australia, Brazil, Colombia, Costa Rica, the EC,
Ecuador, El Salvador, Guatemala, Honduras, Japan, Nicaragua, Paraguay, the
US and Venezuela reserved their third party rights. On 7 May 2001,
Argentina requested the Director-General to determine the composition of
the Panel. On 17 May 2001, the Panel was composed.
On 23 November 2001, the Panel informed the DSB that it
would not be able to complete its work in six months due to the scheduling
requests of the parties. The Panel expected to complete its work by the
end of March 2002. On 3 May 2002, the Panel circulated its report to
Members. The Panel concluded that:
- the Chilean PBS is inconsistent with Article 4.2 of
the Agreement on Agriculture and Article II:1(b) of GATT 1994;
- as regards the Chilean safeguard measures on wheat,
wheat flour and edible vegetable oils:
- Chile has acted inconsistently with Article 3.1 of
the Agreement on Safeguards by not making available the relevant minutes
of the sessions of the CDC through an appropriate medium so as to
constitute a “published” report;
- Chile has acted inconsistently with Article
XIX:1(a) of GATT 1994 because the CDC failed to demonstrate the existence
of unforeseen developments, and Article 3.1 of the Agreement on Safeguards
because the CDC’s report did not set out findings and reasoned conclusions
in this respect in its report;
- Chile has acted inconsistently with Article
XIX:1(a) of GATT 1994 and Articles 2 and 4 of the Agreement on Safeguards
because the CDC failed to demonstrate the likeness or direct
competitiveness of the products produced by the domestic industry, and,
consequently, failed to identify the domestic industry;
- Chile has acted inconsistently with Article
XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on
Safeguards because the CDC failed to demonstrate the increase in imports
of the products subject to the safeguard measures required by those
provisions;
- Chile has acted inconsistently with Article
XIX:1(a) of the GATT 1994 and Article 4.1(a), 4.1(b) and 4.2(a) of the
Agreement on Safeguards because the CDC did not demonstrate the existence
of a threat of serious injury;
- Chile has acted inconsistently with Articles 2.1
and 4.2(b) of the Agreement on Safeguards because the CDC did not
demonstrate a causal link;
- Chile has acted inconsistently with Article
XIX:1(a) of GATT 1994 and Article 5.1 of the Agreement on Safeguards
because the CDC did not ensure that the measures were limited to the
extent necessary to prevent or remedy injury and facilitate adjustment;
- Argentina failed to establish that Chile has
acted inconsistently with the requirement of Articles 3.1 and 3.2 of the
Agreement on Safeguards to conduct an “appropriate
investigation” because Argentina allegedly did not have a full
opportunity to participate in the investigation and did not have access to
any public summary of the confidential information on which the Chilean
authorities may have based their determination.
On 24 June 2002, Chile notified its decision to appeal
to the Appellate Body certain issues of law covered in the Panel Report
and certain legal interpretations developed by the Panel.
On 23 September 2002 the report of the Appellate Body
was circulated. The Appellate Body:
- found that the Panel acted inconsistently with
Article 11 of the DSU by making its finding, in paragraph 7.108 of the
Panel Report, that the duties resulting from Chile’s price band system are
inconsistent with Article II:1(b) of the GATT 1994, on the basis of the second
sentence of that provision, which was not before the Panel, and,
therefore, reverses this finding;
- decided that the Panel did not err in choosing to
examine Argentina’s claim under Article 4.2 of the Agreement on
Agriculture before examining Argentina’s claim under Article II:1(b) of
the GATT 1994;
- with respect to Article 4.2 of the Agreement on
Agriculture:
- upheld the Panel’s finding, in paragraphs 7.47 and
7.65 of the Panel Report, that Chile’s price band system is a border
measure that is similar to variable import levies and minimum import
prices;
- reversed the Panel’s finding, in paragraphs 7.52
and 7.60 of the Panel Report, that an “ordinary customs duty” is
to be understood as “referring to a customs duty which is not applied
on the basis of factors of an exogenous nature”;
- upheld the Panel’s finding, in paragraphs 7.102
and 8.1(a) of the Panel Report, that Chile’s price band system is
inconsistent with Article 4.2 of the Agreement on Agriculture;
- decided, in the light of these findings, that it
was not necessary to rule on whether Chile’s price band system is
consistent with the first sentence of Article II:1(b) of the GATT
1994.
The Appellate Body recommended that the DSB request
Chile to bring its price band system, as found, in its and in the Panel
Report as modified by its Report, to be inconsistent with the Agreement on
Agriculture, into conformity with its obligations under that Agreement.
At its meeting on 23 October 2002, the DSB adopted the
Appellate Body Report and the Panel Report, as modified by the Appellate
Body Report.
Implementation of adopted reports
At
the DSB meeting of 11 November 2002, Chile stated that it intended to
comply with the recommendations and rulings of the DSB. To that end, Chile
was engaged in consultations with Argentina to find a mutually
satisfactory solution to the dispute. Chile further stated that it would
need a reasonable period of time to bring its measures into conformity
with the recommendations and rulings of the DSB. On 6 December 2002, Chile
informed the DSB, that to date Chile and Argentina had been unable to
agree on the length of the reasonable period of time and thus Chile was
requesting that the determination of the reasonable period of time be the
subject of binding arbitration in accordance with Article 21.3(c) of the
DSU. On 16 December 2002, Argentina and Chile informed the DSB that they
have agreed to postpone the deadline for the binding arbitration which
would now be completed no later than 90 days from the appointment of the
arbitrator (instead of 90 days from the date of adoption of the rulings
and recommendations of the DSB). Also on 16 December 2002, Argentina and
Chile requested Mr John Lockhart, Member of the Appellate Body, to act as
arbitrator for the purposes of Article 21.3(c) of the DSU. On 17 December 2002, Mr John Lockhart accepted the appointment of arbitrator.
On 17 March 2003, the arbitrator circulated its award.
The Arbitrator concluded that the “reasonable period of time”
that should be extended to Chile to implement the recommendations and
rulings of the DSB in this dispute was 14 months (23 December 2003).
At the DSB meeting on 2 October 2003, Chile stated that
on 25 September 2003 Law No 19.897 to establish a new price band system
had been promulgated replacing Law No 18.525. The new Law would come into
force on 16 December 2003: i.e. prior to the expiry of the reasonable
period of time for compliance. Argentina raised detailed questions
concerning the new Law. Chile noted the statement by Argentina and
requested that Argentina make its questions available in writing.
At the DSB meeting on 7 November 2003, Chile stated
that Law No 19.897 was scheduled to come into force on 16 December 2003:
i.e. prior to the expiry of the reasonable period of time for compliance,
and that, with this new law, Chile had complied with the DSB’s
recommendations and rulings. Argentina stated that the new system did not
comply fully with the recommendations and rulings of the DSB, as it
retained most of the essential features of the previous system; and it was
still waiting for the responses to its questions concerning the new price
band system. Argentina also stated that, given the close relationship
between the Chile and Argentina, it was still willing to explore the
possibility of reaching a mutually satisfactory solution to this dispute.
At the DSB meeting on 1 December 2003, Chile said that
it had already adopted a number of measures to comply with the DSB’s
recommendations, as stated previously. Argentina reiterated its view that
the measures taken by Chile to comply with the recommendations did not
constitute the implementation in this case since the price band system
would continue to be maintained. Argentina considered that it would be
appropriate for the parties to enter into negotiations on compensation
before the expiry of the deadline for implementation. Brazil said that it
also considered that the measures taken for compliance by Chile were still
not consistent with the provisions of the Agreement on Agriculture.
On 24 December 2003, Argentina and Chile informed the
DSB that they had agreed on certain procedures under Articles 21 and 22 of
the DSU.
At the DSB meeting on 23 January 2004, Chile and
Argentina noted that they had concluded a bilateral agreement regarding
the procedures under Articles 21.5 and 22 of the DSU. In this regard,
Chile noted that the issue of sequencing between Articles 21.5 and 22
required a multilateral solution since ad hoc agreements only applied to
specific disputes. Argentina noted that the parties would shortly enter
into consultations regarding the implementation issues.
Compliance proceedings
On 19 May 2004, Argentina requested consultations under Article 21.5 of the DSU. On 29 December 2005, Argentina, considering that the measures adopted by Chile to implement the recommendations and rulings of the DSB were inconsistent, inter alia , with Article 4.2 of the Agreement on Agriculture, the second sentence of Article II:1(b) of the GATT 1994, and hence, Article XVI:4 of the WTO Agreement, requested the establishment of an Article 21.5 compliance panel. At its meeting on 20 January 2006, the DSB agreed to refer the matter raised by Argentina to the original panel. Australia, Colombia, the European Communities and the United States reserved their third party rights. Subsequently, Brazil, Canada, China, Peru and Thailand reserved their third party rights.
On 4 April 2006, the parties agreed on the composition of the Panel. On 8 June 2006, the Chairman of the Panel informed the DSB that it would not be possible to circulate its report within 90 days after the date of referral to the original panel due to time required for the translation of the submissions. The Panel expects to complete its work by November 2006. On 13 November 2006, the Chairman of the Panel informed the DSB that on 23 October 2006, the Panel had issued its final report to the parties in the dispute. However, due to the time required for the translation of the report into French and Spanish, the Panel would not be able to circulate the report to Members within the 90-day period foreseen in Article 21.5 of the DSU. The Panel indicated that it expected to circulate its report to Members by mid-December 2006, at the latest.
On 8 December 2006, the Article 21.5 panel report was circulated to Members. The Panel found that:
- by continuing to maintain a border measure similar to a variable import levy and to a minimum import price, Chile was acting in a manner inconsistent with Article 4.2 of the Agreement on Agriculture and had failed to implement the recommendations and rulings of the DSB.
- it was unnecessary, for the resolution of the dispute, to make separate findings under Articles II:1(b) of GATT 1994 and XVI:4 of the WTO Agreement.
On 5 February 2007, Chile notified its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 19 February 2007, Argentina notified its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 30 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report, the Appellate Body would not be able to circulate its report within 60 days. It estimated that the report would be circulated no later than 7 May 2007.
On 7 May 2007, the Appellate Body report was circulated to Members. The Appellate Body found:
- that the Panel did not err in its allocation of the burden of proof;
- that the Panel did not err in its interpretation of Article 4.2 and footnote 1 of the Agreement on Agriculture, or in its application of those provisions to the measure at issue, and, therefore (i) upheld the Panel's finding that the measure at issue is a border measure similar to a variable import levy and to a minimum import price within the meaning of footnote 1 to Article 4.2 of the Agreement on Agriculture; and (ii) upheld the Panel's finding that, by maintaining a border measure similar to a variable import levy and and to minimum import price, Chile is acting inconsistently with its obligations under Article 4.2 of the Agreement on Agriculture and has not implemented the recommendations and rulings of the DSB.
- that the Panel did not fail to discharge its duties under Article 11 of the DSU to conduct an objective assessment of the matter before it or under Article 12.7 of the DSU to set out a basic rationale for its findings; and
- in the light of these findings, that because the condition on which Argentina's other appeal is predicated had not been fulfilled, it was not necessary to consider that appeal.
At its meeting on 22 May 2007, the DSB adopted the Article 21.5 Appellate Body report and the panel report, as upheld by the Appellate Body report. |
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