Dispute Settlement Body 19 March 2004

DSB establishes two panels

Dispute Settlement Body establishes panels to examine US' methodology for calculating dumping margins (DS294), and EC's shipbuilding subsidies (DS301). The DSB elects Ambassador Amina Mohamed of Kenya as its Chairperson.

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This summary has been prepared by the WTO Secretariat’s Information and Media Relations Division to help public understanding about developments in WTO disputes. It is not a legal interpretation of the issues, and it is not intended as a complete account of the issues. These can be found in the reports themselves and in the minutes of the Dispute Settlement Body’s meetings.

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New Chairperson

The DSB elected by acclamation Ambassador Amina Mohamed of Kenya as its next Chairperson. She thanked delegations for electing her as Chairperson of the DSB and pledged to carry out her functions to the best of her ability.


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DS136 & DS162: US — Anti-Dumping Act of 1916

The US stated that it was committed to implementing all DSB recommendations and rulings and that the US Trade Representative, Amb. Zoellick had been urging Congress in recent weeks to work on necessary legislation to bring the US into compliance with its WTO obligations. With reference to this case, the US said that legislation repealing the 1916 Act was pending in both the US Senate and the US House of Representatives and that the repealing bill before the House was favourably reported out of the Committee on the Judiciary on 29 January 2004. The EC welcomed the positive vote by the House Committee on the Judiciary and said that the EC was expecting that the next steps towards implementation would be taken without delay. The EC reminded the US that WTO arbitrators had recognized the EC's right to suspend concessions and that prompt and full implementation by the US would make it unnecessary for the EC to use this right. Japan said that it was extremely concerned about the lack of the implementation by the US, and that this persistent non-action by the US was damaging the credibility of the dispute settlement system. Japanese companies were incurring substantial costs to defend themselves under the WTO-inconsistent 1916 Act and that for the US to fully comply with the rulings of the DSB, the repealing legislation must have retroactive effect so that all pending cases would be effectively terminated. Japan said that it had not yet made a final decision on the reactivation of DSU Article 22 arbitration, but would like to remind the US of its right to suspend concessions and other obligations.

DS176: US — Section 211 Omnibus Appropriations Act of 1998

The US recalled that the EC and the US had agreed to extend the reasonable period of time for implementation in this dispute until 31 December 2004, and stated that the US administration was committed to working with the US Congress to find the appropriate statutory measures that would resolve this dispute. The EC said that there were two bills pending in the House and the Senate that would effectively repeal Section 211. The repeal of the Act would demonstrate the commitment of the US to effective and non-discriminatory protection of intellectual property rights. Cuba said that the failure by the US to abide by the recommendations and rulings of the DSB was damaging the credibility of the dispute settlement system. It said that the status report provided by the US was inadequate and that the US had been avoiding its obligations by assuring the DSB that it was in the process of repealing the 1916 Act. What was needed was concrete action to fulfil the recommendations and rulings of the DSB.

DS184: US — Anti-dumping measures on certain hot-rolled steel products from Japan

The US referred to the decision by the DSB on 10 December 2003 to extend the reasonable period of time for the implementation of its recommendations and rulings to 31 July 2004. It said that with respect to the DSB's recommendations and rulings that had not been addressed in the 23 November 2002 anti-dumping duty determination of the US Department of Commerce, the US administration was committed to working with Congress to find a solution to this matter. Japan expressed regret over the failure by the US to comply before the end of the first session of the 108th Congress. It said that this was the second time that the period of time for the implementation had been extended at the request of the US, yet no demonstrable steps had been taken by the US to bring its measures into conformity with the relevant rules of the WTO. Japan urged the US to introduce the necessary legislative amendments for consideration and passage during the second session of the 108th Congress.

DS217 & DS234: US — Continued Dumping and Subsidy Offset Act of 2000

The US referred to its previous status report and said that legislation to bring the Continued Dumping and Subsidy Offset Act into conformity with US WTO obligations was introduced in the US Senate on 19 June 2003 and in the House of Representatives on 10 March 2004. Furthermore, the US administration had proposed the repeal of this Act in its budget proposal for the 2005 fiscal year and was committed to working with Congress to achieve further progress in resolving this dispute. A number of the complaining parties, including Canada, Chile, EC, Japan and Korea expressed disappointment about the failure by the US to repeal the Byrd Amendment. They urged the US Administration to take concrete steps to repeal this Act which unfairly penalized exporters twice. They said that unless the Act was repealed promptly, they would proceed to suspend concessions and other obligations to the US, which could only further disrupt trade between them and the US.

DS207: Chile — Price band system and safeguard measures relating to certain agricultural products

Chile said that it had complied with the recommendations and rulings of the DSB and considered this matter closed. Argentina said that the measures implemented by Chile did not fully implement the DSB's recommendations and rulings and as such the matter could not be considered closed. However, Argentina was willing to consult with Chile with a view to finding a mutually satisfactory solution to the dispute.

DS257: US — Final countervailing duty determination with respect to certain softwood lumber from Canada

Canada informed the DSB that following the adoption of the Panel and Appellate Body reports by the DSB on 17 February 2004, Canada and the US held consultations and agreed not to convene a special meeting of the DSB, but that the US would inform the DSB of its intention regarding implementation in a letter, which it had subsequently sent on 5 March 2004. In the letter, the US had stated that it was prepared to meet with Canada and discuss implementation options. Canada was looking forward to entering into discussions with the US as soon as possible with a view to reaching an agreement on the reasonable period of time for the implementation of the DSB's recommendations and rulings.

The US said that it intended to implement in a manner that respected its obligations. It said that it had already begun evaluating options for bringing its measures into conformity and that it looked forward to meeting with Canada in the near future in order to reach agreement on the reasonable period of time.


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Panels established

DS294: US — Laws, regulations and methodology for calculating dumping margins (“zeroing”)

The DSB established a panel in response to a request by the EC (WT/DS294/7/Rev.1) even though this was the first time that the amended panel request had appeared on its agenda. The EC said that by applying the “zeroing” methodology, the US was in breach of its obligations under the relevant WTO rules. The EC thanked the US for accepting the establishment of the panel at this present meeting.

The US said that as regards the substance of the EC's claim, the US disagreed with the view that the Antidumping Agreement required investigating authorities to offset calculated dumping margins with so-called “negative margins”.

The following Members reserved their third-party rights: Argentina, Brazil, China, Chinese Taipei, India, Japan, Korea, Mexico and Norway.

DS301: EC — Measures affecting trade in commercial vessels

The DSB established a panel, as this was the second time that the matter had appeared on its agenda (WT/DS301/3). Korea said that the Temporary Defense Mechanism established by the EC pursuant to Council Regulation 1177/2002 of 27 June 2002, as well as implementing legislation adopted by certain EC member states violated Article 23 of the DSU, which prohibited Members from taking unilateral action in disputes.

In response, EC said it deplored what it termed as procedural manoeuvring by Korea. EC said that it was engaged in consultations with Korea over some measures, which were also the subject of this panel request. It would have been more logical if Korea had waited for the outcome of the consultations before proceeding with this request. EC said that should Korea decide to proceed with its request, the EC would vigorously defend its measures before the Panel.

China, Japan and the US reserved their 3rd-party rights.


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Other business

Statement by the US on the Award of the Arbitrator in DS136 US Anti-Dumping Act 1916

The US said that it was committed to full compliance with its WTO obligations in this dispute and was pleased with the finding by the arbitrator that the EC had no current right to suspend concessions towards the US. It said, however, that the recent award of the arbitrator raised a number of significant issues concerning the operation of Articles 22.6 and 22.7 of the DSU which merited serious reflection. While the US appreciated that the arbitrator strove for a balanced result in his award, Article 22.7 did not mandate a balanced result, but a balance between the level of suspension proposed and the level of nullification or impairment. Thus, if the level of nullification and impairment is zero, the award must also be zero. The US also said that the arbitrators disregarded the fact that no specific judgments or settlements under the 1916 Act – not past, current, or certainly future – were within the terms of reference of the original dispute, nor were they the subject of DSB rulings.

The US further stated that the arbitrators did not always correctly apply the principles enunciated in Article 22.6 of the DSU. While the arbitrator had stated that in determining the level of nullification and impairment, it was necessary to rely on “credible, factual and verifiable information” and that claims that were “too remote or too speculative” or “not meaningfully quantified” were to be rejected, he nevertheless concluded that final judgments under the 1916 Act “clearly nullify or impair” EC benefits without analysis beyond the fact that the dollar figures were final, public and verifiable. Similarly, they held that public settlements could be used to measure nullification or impairment for the same reason. After holding that the EC's proposed suspension measure was not equivalent to the level of nullification or impairment, they proceeded to define the level of nullification or impairment as a formula to be applied by the EC based on future effects. By not fixing the level, the arbitrators abandoned their responsibility and departed from previous WTO awards. It appeared that the arbitrators relied heavily on Article 3.8 of the DSU to hold that the level of nullification or impairment was greater than zero, even though there were no current judgments, public settlements or pending cases against EC companies. This reasoning was faulty and contradicted the award given by the arbitrators in the Banana case, where the arbitrators held that with respect to trade in goods, the nullification or impairment of US benefits was equal to zero.

It would seem to follow from the award that a Member could only rebut the presumption of nullification or impairment during panel proceedings, and not in an arbitration under Article 22.6. Such a distinction was unwarranted and had no textual basis. The US concluded by saying that if the arbitrators' reasoning was correct, then every past arbitration was wrong and every future arbitration should follow that reasoning. There was no basis for applying different standards in different disputes. It was the hope of the US that the approach adopted by the arbitrators in the 1916 would not be repeated.

The EC said that the award of the arbitrators was significant at least in three respects. First, it reaffirmed that a Member might not violate its obligations with impunity. The non-implementation of DSB recommendations and rulings necessarily led to nullification or impairment and created the right to suspend equivalent obligations or concessions. Second, it confirmed that the benefits accruing under the WTO Agreements were not limited to trade benefits. Third, it recognised that the level of suspension of concessions or obligations might be varied to reflect the actual level of nullification or impairment caused by the non-implementation of the DSB's recommendations and rulings. The EC said that these principles were important for the proper and effective functioning of the dispute settlement system. The EC expressed disappointed that the arbitrators did not include litigation costs in their award, given the significant costs incurred by EC companies to defend themselves under the WTO-inconsistent Act. A number of Members, including Canada, India and Japan, expressed support for the award given by the arbitrators.


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Next meeting

The next meeting of the DSB is scheduled for 20 April 2004.

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