Dispute Settlement Body 20 April 2004

DSB adopts reports on EC's GSP scheme

At its meeting on 20 April 2004, the Dispute Settlement Body adopted the Appellate Body and panel reports on India's complaint concerning the EC's GSP scheme (DS246).

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

The US said that legislation repealing the 1916 Act was pending in both the US Senate and the US House of Representatives, that progress was being made and that the US Administration was committed to working with Congress to achieve further progress in resolving this dispute with the EC and Japan. The EC said that three and half years had lapsed since the DSB made its recommendations in this case. During this period, repealing bills were introduced in the US Congress, but they were not even discussed, let alone action being taken on them. It was as such a welcome development that the House Committee on Judiciary recently voted in favour of the repealing bill paving the way for its consideration by the full House of Representatives. The EC expected the US to continue with its efforts and ensure the repeal of the 1916 Act as soon as possible, otherwise it would have no option than to use its right to suspend the application to the US of its obligations under the GATT 1994 and the Anti-Dumping Agreement. Japan said that it was extremely concerned about the lack of the implementation of the DSB's recommendations and rulings by the US. 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 recommendations and rulings of the DSB, the repealing legislation must have retroactive effect so that all pending cases would be effectively terminated. Japan urged the US to provide detailed status reports in the future stating the progress being made towards the repeal of the 1916 Act. Japan concluded by saying 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: United States — 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 presently 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: United States — Anti-dumping measures on certain hot-rolled steel products from Japan

The US recalled 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 with the DSB's recommendations and rulings before end of the first session of the 108th Congress. It said that this was the second time that the period of 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 WTO. Japan urged the US to introduce the necessary legislative amendments for consideration and passage during the second session of the 108th Congress. Japan stated that it was prepared to have recourse to its rights under the DSU, should the US fail to implement the recommendations and rulings of the DSB.

DS217 & DS234: United States — Continued dumping and subsidy offset act of 2000

The recalled 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 which was submitted on 2 February 2004. The US said that the US Administration was committed to working with Congress to achieve further progress in resolving this dispute. A number of the complaining parties, including the Canada, Chile, EC, India and Japan 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, but was willing to hold consultations with Argentina within the framework of their bilateral agreement. Argentina said that the measures implemented by Chile did not fully implement the DSB's recommendations. It was, however, willing to consult with Chile with a view to finding a mutually satisfactory solution to the dispute.

DS219: EC — Anti-dumping duties on malleable cast iron tube or pipe fittings from Brazil

Brazil made a statement concerning a communication from the EC (WT/DS219/13, dated 23 March 2004)) in which the EC had notified the DSB of the measures it had taken to implement the rulings. Brazil contested the claim by the EC that it had fully implemented the rulings in this case by reassessing its determinations. Brazil said that even though the EC had recalculated the dumping margin without using the “zeroing” methodology, it had not fully implemented the findings of the Appellate Body relating to the due process requirements contained in the Anti-Dumping Agreement. It said that in failing to consider properly the comments offered by the Brazilian company, the EC had breached Articles 6.2 and 6.4 of the Anti-Dumping Agreement and could therefore not claim to have fully implemented. Brazil said that investigating authorities were obliged not only to analyse all the injury factors listed in Article 3.4 of the Anti-Dumping Agreement, but also to disclose it to the affected parties so that they could respond to them effectively. A simple post facto disclosure of the analysis of the injury factors which was undisclosed during the initial investigation was not enough and was inconsistent with the terms of the Anti-Dumping Agreement. Brazil reserved its rights to pursue the matter further if necessary.

The EC disputed the claim by Brazil and stated that in reassessing the dumping margin, the EC took into account not only the “zeroing”-related findings, but also those concerning publication and disclosure. The new EC Council Regulation (EC) No. 436/2004, which had already been notified to the DSB, explained in detail the Commission's reassessment both in terms of procedure and substance in compliance with the “publication” requirements of the Anti-Dumping Agreement and also the relevant Panel and Appellate Body findings. The EC said that it was ready to provide Brazil with any further explanations it may need.


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Adoption of reports

DS246: EC — Conditions for the granting of tariff preferences to developing countries

India said that while it was satisfied with the finding by the Appellate Body that the EC's drug arrangements were inconsistent with Article I.1 of the GATT 1994 and could not be justified under the Enabling Clause, it was concerned about the reasoning adopted by the Appellate Body in reaching its conclusions and the systemic implications of this case. In particular, it was concerned about how the Appellate Body interpreted the term “non-discriminatory” in footnote 3 to paragraphs 2(a) of the Enabling Clause. Unlike the panel which had interpreted this provision to mean that preference-giving countries were obliged to give identical tariff preferences under their GSP schemes to all developing countries without differentiation, except for the implementation of a priori limitations, the Appellate Body held that “a GSP scheme may be 'non-discriminatory' even if 'identical' tariff treatment is not accorded to 'all' GSP beneficiaries” and that “GSP schemes may be 'non-discriminatory' when the relevant tariff preferences are addressed to a particular 'development, financial [or] trade need' and are made available to all beneficiaries that share that need.” India said that there was no textual or contextual basis for these findings of the Appellate Body on non-discrimination, and that the import of its ruling was to negate MFN rights of developing countries as between themselves, and absolve developed countries from their corresponding MFN obligations towards developing countries. In reaching this conclusion, the Appellate Body ignored all the relevant rules of interpretation, the negotiating history of GSP schemes as reflected in UNCTAD documents and its own jurisprudence in previous cases. The Appellate Body erred by relying on paragraph 3(c) of the Enabling Clause to interpret the term 'non-discrimination' in paragraph 2, as paragraph 3 only regulated how Members were to make use of the rights conferred upon them by paragraph 2. Contrary to the opinion of the Appellate Body, it did not confer rights additional to those set out in paragraph 2 of the Enabling Clause.

India also criticised the allocation of the burden of proof in this case. It said that the Appellate Body erred in finding that it was incumbent on India as the complainant in this case to raise the Enabling Clause, notwithstanding that it was an exception. In attempting to reconcile this ruling with its previous ruling in US–Wool Shirts and Blouses, where it held that “[a]s a general rule, the burden of proof for an 'exception' falls on the respondent, that is, ... on the party 'assert[ing] of a particular defence”, the Appellate Body drew a novel distinction between (i) proving an exception as a defence and (ii) asserting the exception and said that it was up to a complaining party to “define the parameters within which the responding party must make a defence.” This ruling was not supported by WTO law nor by the jurisprudence of international tribunals and general principles of law. It was a creation of the Appellate Body which could have severe ramifications in future cases, as complaining parties would be obliged to anticipate every possible exception that could be raised in defence.

In conclusion, India said that the ruling could have implications for existing tariff concessions and for the on-going negotiations for improved market access, as there could be no assurances that “the concessions they obtain in exchange for the concessions they grant ... [would] not be eroded by discriminatory treatment”.

The EC welcomed the Appellate Body report and said that it was particularly satisfied with the ruling that preference-giving countries could differentiate among GSP beneficiaries under certain conditions, so as to respond positively to the special needs of a certain class of developing countries. The EC was disappointed, however, with the conclusion by the Appellate Body that the Drug Arrangements violated paragraph 2(a) of the Enabling Clause, as they did not meet due process requirements and were not administered fairly. Notwithstanding its reservations, the EC was reflecting on how it could fully implement the DSB's recommendations and rulings.

Brazil, Canada, Costa Rica, Ecuador, El-Salvador, Malaysia, Mexico, Paraguay, Philippines, Thailand and the US also commented on the Appellate report. The DSB adopted both the reports.


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Other business

The US made a statement in connection with the case “US — countervailing duties on certain corrosion-resistant carbon steel flat products from Germany” (DS213). The US informed the DSB that the US had fully implemented the DSB's recommendations and rulings on 1 April 2004 by revoking the countervailing duty order on corrosion-resistant carbon steel flat products from Germany. He said that the notice of revocation was published in the 1 April 2004 edition of the Federal Register, Volume 69, page 17, 131.

The DSB Chairperson drew Members' attention to the communication from the Appellate Body (WT/AB/WP/8) containing some proposed amendments to the Appellate Body working procedures in light of experience acquired in the past eight years. The Chairperson said that pursuant to Article 17.9 of the DSU and the DSB Decision of 19 December 2002 on “Additional Procedures for Consultations Between the Chairperson of the DSB and WTO Members” (WT/DSB/31), it was her intention to place this item on the agenda of the 19 May DSB meeting, so that Members could express their views on the proposed amendments, which she would subsequently transmit to the Appellate Body and request that they be taken into account. She said that if Members so wished, she was prepared to convene an open-ended informal consultation prior to the formal meeting on 19 May, so that they could have an informal exchange of views. She asked Members who wanted to submit their comments in writing to do so by 26 May 2004.


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Next meeting

The next regular meeting of the DSB will take place on 19 May 2004.

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