Dispute Settlement Body 20 July 2005

The DSB establishes panels to examine aircraft subsidy disputes

The Dispute Settlement Body, on 20 July 2005, established two panels to examine, respectively, the United States' complaint on European Communities' subsidies to Airbus, and the EC's complaint regarding US subsidies to Boeing.

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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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Panels established  

These are cases that have completed the consultation phase, the first stage of a dispute. When consultations have failed, member governments are entitled to ask for a panel to be set up to examine the dispute. According to the rules, the respondent can reject the first request. At the second request, a panel is automatically established.

DS316: European Communities and Certain Member States — Measures Affecting Trade in Large Civil Aircraft

The United States said that over its 35-year history Airbus had benefited from massive amounts of European Union member states and European Communities subsidies.

The United States requested for the second time [the first request was made on 13 June 2005] that a panel examine these subsidies. The US also requested that the DSB initiate an Annex V of the Subsidies and Countervailing Measures' Agreement procedure. [This is a procedure to obtain from the government of the subsidizing member information necessary to establish the existence and amount of subsidization, the value of total sales of the subsidized firms, as well as information necessary to analyse the adverse effects caused by the subsidized product.]

The US added that it remained ready and willing to negotiate an agreement to end the subsidies for the development and production of large civil aircraft.

The EC noted that the US had made no attempt to address the deficiency in its panel request.

The EC said that it could not agree to a simultaneous initiation of the Annex V procedure. The EC mentioned that it had held consultations on this matter with the US but that these had not yet been successful.

The DSB agreed to establish a panel. Australia, Brazil, Canada, China, Japan and Korea reserved their third party rights.

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

The EC regretted that it had to request the establishment of a panel. The EC said that in spite of genuine attempts on its part to settle the case amicably, the US was not prepared to move an inch. The EC added that this proceeding would clearly show how massively Boeing had been subsidized over the last 30 years in blatant violation of the Subsidies Agreement and the 1992 Agreement between the EC and the US.

Concerning the US' request for an Annex V procedure, the EC noted that it had not been able to reach agreement with the US and that it would revert to the DSB on that matter at a future meeting.

The US called the EC request “broad but without merit”. The US said that although it would vigorously defend the measures at issue, it remained open to the possibility of resolving the disagreements with the EC before the DSB issued its ruling.

The DSB agreed to establish a panel. Australia, Brazil, Canada, China, Japan and Korea reserved third party rights.

DS327: Egypt — Anti-Dumping Duties on Matches from Pakistan

Pakistan said that it considered Egypt's anti-dumping measures on matches to be inconsistent with WTO rules. Pakistan added that this was a disagreement between friends and that it would not affect the relations between the two countries.

Egypt regretted Pakistan's decision to proceed with a panel and said that it remained open to further consultations. Egypt stated that the panel would confirm that Egypt's anti-dumping measures were WTO consistent.

The DSB agreed to establish a panel. The EC, Japan, the US and China reserved their third party rights.


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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.

DS296: United States — Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea

The US was pleased by the Appellate Body's reversal of the panel's finding and the thorough and professional analysis by the Appellate Body of the panel's numerous errors.

The US mentioned the Appellate Body's assessment that the panel had gone beyond its role as the reviewer of the investigating authority's decision. The US also welcomed the Appellate Body's recognition that evidence of entrustment or direction was likely to be circumstantial in nature, and that this evidence had to be considered in its totality.

Korea expressed grave reservations regarding the Appellate Body report. Among other complaints, Korea said that, contrary to the rule which limits an appeal to issues of law covered in the panel report, the Appellate Body had carried out de novo review of the facts.

The EC welcomed the Appellate Body and said that it brought very useful and thoughtful guidance on the key notions of “entrustment” and “directions of a private body” in the Subsidies Agreement.

Canada also welcomed the report but regretted that some legal issues had not been addressed by the Appellate Body.

The DSB adopted the Appellate Body report and the panel report as amended by the Appellate Body.


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After a ruling has been adopted, the DSB keeps under surveillance the implementation of the ruling until the issue is resolved.

Within 30 days after the date of adoption, the Member concerned must inform the DSB of its intentions in respect of implementation of the ruling.

Six months after the implementation time period has been fixed, the Member must start presenting at each DSB a status report of its implementation — until full implementation.

Implementation intentions

DS301: European Communities — Measures Affecting Trade in Commercial Vessels

The EC noted that it had already brought its measures into conformity since the Council Regulation establishing a Temporary Defence Mechanism for shipbuilding had expired on 31 March 2005.

Korea complained that the EC member states continued to make disbursements linked with the measures deemed illegal by the panel. Korea said that the panel's recommendations also applied to the disbursement schemes if they were still operational.

Korea reserved its compliance rights.

The EC argued that the panel had made a clear distinction between the “decision to grant aid” and “the disbursement of aid”. The EC said that the panel had declined to make recommendations on “the disbursement of aid”.

Implementation status reports

The United States presented the following status reports:

DS176: US — Section 211 Omnibus Appropriations Act of 1998

The US said that Administration was working with Congress to implement the DSB's rulings.

The EC recalled that two bills were pending respectively in the Senate and the House of Representatives that would repeal Section 211. The EC said that adoption of these bills would bring a satisfactory solution to this dispute. The EC added that it had decided not to request retaliation at this stage, but to reserve its rights in the future to do so. [See below under “Procedural understandings”]

Cuba lamented the US' lack of implementation and said that the third implementation deadline had expired on 30 June 2005.

DS184: US — Anti-Dumping Measures on Certain Hot-Rolled Steel

The US said that Administration continued to work with Congress to pass specific legislative amendments that were introduced in Congress and that would implement the DSB's rulings.

Japan noted that a bill that would amend the relevant US anti-dumping statute had been introduced in Congress on 19 May 2005 but regretted that no further steps had been taken to pass this bill. Japan said that it was unlikely that this bill would be passed by the implementation deadline of 31 July 2005. Japan said that for this reason it had recently reached a procedural understanding with the US regarding retaliation rights. [See below under “Procedural understandings”]

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

The US said that Administration would continue to work with Congress to enact legislation.

The EC recalled that since 1 May 2005, it had been applying a 15% additional import duty on imports of certain products from the United States.

Canada said that it, too, was applying sanctions. Canada called on the US to repeal the act.

Japan said that it was closely watching how the US Congress would proceed. Japan called on the US to intensify its efforts to secure a prompt repeal of the act.

Korea recognized the introduction of legislation repealing the act as a positive sign but was disappointed by the lack of substantial progress since the introduction of the bill.

India said that it preferred compliance to retaliation and urged the US to use the remaining few days left of its current Congressional Session to repeal the act.

Mexico said that its internal process would be ready in the coming months to start retaliation. Mexico added, however, that this would be a last recourse and that it preferred implementation.

Brazil expressed concern and disappointment at the lack of progress. Brazil urged the US to promptly repeal the act.

DS160: US — Section 110(5) of the US Copyright Act

The US said that Administration would continue its consultations with Congress and would continue to confer with the EC.

The EC expressed great concern. The EC said that Section 110(5) was institutionalizing piracy in the US music sector. The EC recalled that it had reserved its rights to reactive at any point in time the arbitration on its retaliation request.

Mexico presented the following status report:

DS204: Mexico — Measures Affecting Telecommunications Services

Mexico said that it had produced new legislation on the resale of telecommunications services and that under these new rules, foreign companies in Mexico would be able to provide long distance telephone services. Mexico indicated that it had agreed with the US to a new implementation deadline of 29 July 2005, to allow it to publish this new legislation.

The US said that it intended to carefully review Mexico's modified regulations.

The European Communities presented the following status report:

DS246: EC — Conditions for the Granting of Tariff Preferences to Developing Countries

The EC announced that on 27 June 2005 the new General System of Preferences (GSP) had been adopted and been published in the Official Journal of the European Union on 30 June 2005. The EC added that according to the new system, the special arrangements to combat drug production and trafficking at the heart of the dispute had been repealed on 1 July 2005. The EC said that it had thus fully implemented the DSB rulings.

India said that it was still carefully examining details of the Council Regulation but that it observed, on a preliminary basis, that WTO members may have systemic concerns with the special incentive arrangement for sustainable development and good governance.

India explained that in order to receive tariff preferences under the EC's special incentive arrangement, countries had to ratify and effectively implement specific conventions related to human and labour rights, narcotics and psychotropic substances, environment and governance principles.

India reserved its rights to return to this matter in the future.

Canada presented the following status report:

DS276: Canada — Measures Relating to Exports of Wheat and Treatment of Imported Grain

Canada informed the DSB that amendments to the Canada Transportation Act and the Canada Grain Act and associated regulatory changes would come into force on 1 August 2005. Canada said that this would bring it into compliance.

The US thanked Canada for the information.


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Procedural understandings  

Members party to a dispute sometimes clarify among themselves what procedures they will follow to solve a dispute.

DS176: US — Section 211 Omnibus Appropriations Act of 1998

The EC explained that rather than requesting authorization to retaliate at this stage, it had concluded an agreement with the US preserving each other's rights in the future.

The US recalled that according to the agreement, the DSB upon request by the EC would grant authorization to suspend concessions unless the DSB decided by consensus not to do so, or unless the United States objected to the level of suspension proposed.

Cuba complained that the text of the agreement was ambiguous and did not specify at what point the EC would request retaliation.

DS184: US — Anti-Dumping Measures on Certain Hot-Rolled Steel

Japan announced that on 7 July 2005, the US and Japan had reached an understanding according to which Japan would not at this stage request authorization to suspend concessions but would retain its rights to do so at any future date.

The US said that this understanding would assist the parties in their effort to resolve this dispute in a mutually agreeable manner.


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Adoption of compliance panel report  

A compliance report assesses whether a government found at fault has fully complied with a ruling. The report, when it comes out, must be adopted by the Dispute Settlement Body.

DS245: Japan — Measures Affecting the Importation of Apples

The US was pleased that the panel agreed that Japan's revised measures relating to US apple fruit were maintained without sufficient scientific evidence. The US hoped that Japan would now bring itself into compliance. The US noted that the US and Japan had further suspended the arbitration on the level of retaliation until August 31 2005 to allow Japan to undertake necessary domestic procedures.

Japan regretted that the Panel had found Japan's revised phytosanitary measures at issue inconsistent with the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS). Japan complained that the panel had imposed on Japan a very heavy burden of proof. Japan noted that the panel confirmed that Japan would be entitled to verify that only mature, symptomless apples would be actually exported to Japan from the United States.

The EC trusted that Japan would revise its SPS practices in a manner consistent with the panel ruling and that apple fruit from all origins would benefit from the same conditions for import.

The DSB adopted the compliance panel report.


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Appointment / Re-appointment of Appellate Body members  

The Chairman of the DSB recalled that the term of office for three Appellate Body members — Messrs Luiz Olavo Baptista, John Lockhart and Giorgio Sacerdoti — would expire on 11 December 2005. He said that pursuant to Article 17.2 of the DSU, the DSB could decide to re-appoint them for a further 4-year term or appoint new persons to replace them. He informed the DSB that all three were interested in staying. He said that he had held consultations with delegations and that it appeared that there was consensus on reappointing the three Appellate Body members. The Chairman proposed that a decision on this matter be taken at the DSB meeting of 27 September 2005.


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Next meeting  

The next regular meeting of the DSB will be on 31 August 2005.

A special meeting of the DSB will take place on 3 August 2005 to address, among other issues, the possible initiation of an Annex V procedure in the two cases regarding “Measures Affecting Trade in Large Civil Aircraft” (DS316 and DS317).

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