DISPUTE SETTLEMENT

Note

This summary has been prepared by the WTO Secretariat’s Information and External 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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DS561: Turkey — Additional Duties on Certain Products from the United States

The United States submitted its first request for a panel to examine additional duties imposed by Turkey on certain products imported from the US. The Turkish duties are in response to the US decision last year to impose duties on imports of steel and aluminum.

The US noted that its duties were taken as national security actions and are therefore fully justified under Article XXI of the GATT. Turkey and other WTO members are pretending that the US actions are safeguards and further pretending that their unilateral, retaliatory duties constitute "suspension of substantially equivalent concessions" under the WTO's Safeguards Agreement, the US said; just as these members appear ready to undermine the dispute settlement system by throwing out the plain meaning of Article XXI and 70 years of practice, so too are they ready to undermine the WTO by pretending to follow WTO rules while taking measures blatantly against those rules. 

Turkey said it regretted the US request for the panel and said the real reason members find themselves in this situation today is not because of the Turkish action but because of the unwarranted and unjustified unilateral US action, which was intended to protect US producers from the competitive effects of imports. Like many other members, Turkey had no choice but to react. In imposing its duties, the US made no effort to consult with Turkey on the matter or to maintain a balance of substantially equivalent concessions as required under the Safeguards Agreement. Last August the US doubled its duties on Turkish steel imports without any explanation and threatened to do the same with aluminum imports. Turkey is fully entitled to take the action it did; it is ready to engage with the US on the matter, and as a result the US request is premature and Turkey is not in a position to agree to the establishment of a panel.

The European Union said it welcomed Turkey's decision to resort to its right to suspend equivalent obligations vis-a-vis the United States. Turkey and other members are not undermining the dispute settlement system but standing up to the abuse by the US of Article XXI of the GATT, the EU said.

The DSB took note of the statements and agreed to revert to the matter.

DS472, DS497:  Brazil — Certain Measures Concerning Taxation and Charges

Brazil both welcomed and criticized the Appellate Body's findings in the dispute initiated by the European Union and Japan against certain Brazilian measures intended to support its domestic automobile and high-tech industries. The Appellate Body circulated its ruling on 13 December

Brazil said it was pleased the Appellate Body reversed several legal errors committed by the panel and made a number of important systemic clarifications. In particular, Brazil welcomed the Appellate Body's reversal of the panel's findings that the so-called PEC and RECAP programmes provide subsidies in the form of foregone government revenue otherwise due, based on the panel's selection of an erroneous benchmark.  

Brazil also welcomes the Appellate Body's finding that, with limited exceptions, production requirements or other requisites aimed at defining the class of eligible Brazilian producers under the subsidy programmes do not require the use of domestic over imported goods as well as the Appellate Body's reversal of the panel's broad finding that any aspects of a subsidy resulting in product discrimination are not covered by the exception to the WTO's national treatment obligation under Article III:8(b) of the General Agreement on Tariffs and Trade (GATT) 1994.

However, Brazil said it was particularly troubled by the Appellate Body's majority reading of the terms "payment of subsidies" in Article III:8(b). Under this interpretation, subsidies given exclusively to domestic producers not in the form of "expenditure of revenue" but as credit guarantees, provision of goods or services as well as revenue foregone would all be illegal, as long as they can be shown to affect – as they do – the conditions of competition between domestic and imported products. Brazil argued in its appeal that Article III:8(b) makes no distinction as to what types of subsidies are covered by the exception and that subsidies in the form of "revenue foregone" should not be subject to the national treatment obligation. 

Brazil highlighted the consequences of the Appellate Body majority's findings - scores of measures routinely notified by WTO members as subsidies in the form of revenue foregone would be prohibited, including tax relief on research and development expenditures which many developed countries provide to their industries. Domestic subsidies on agricultural products that do not involve the "expenditure of revenue" could also be found illegal. In Brazil's view, the Appellate Body could not possibly have meant to say that any subsidy that does not involve a cash payment and which affects conditions of competition in favour of domestic products can never be justified under Article III:8(b), and it hopes the majority's interpretation is understood in a manner that avoids the dire systemic consequences that it could otherwise entail.

The European Union said it welcomed the overall outcome of the dispute which vindicated most of the claims advanced by the EU with respect to the Brazilian tax measures, in particular that the measures discriminate against EU automotive and information and communications technology (ICT) intermediate and final products. The EU took note of the Appellate Body's reversal of the panel findings regarding the PEC and RECAP programmes but said it accepted the report unconditionally. The EU said it expects that Brazil will promptly comply with the ruling, in particular by withdrawing the prohibited subsidies without delay.

Japan said it welcomes the findings that certain measures concerning taxation and charges by Brazil are in breach of its obligations under GATT 1994 and the Agreement on Subsidies and Countervailing Measures. The Appellate Body clearly ruled that all of the tax incentive programmes for the automotive sector and ICT products at issue provide incentives to use domestic over imported goods and were thus inconsistent with the national treatment obligations under Article III of the GATT 1994. 

Japan has concerns with some of the Appellate Body findings, specifically those concerning the identification of the benchmark for comparison related to the financial contributions of certain exporting companies as well as with the long time needed to complete the dispute proceedings (three and a half years). It urged Brazil to fully and promptly implement the ruling without introducing any new measure which would undermine its implementation.

The DSB adopted the panel reports, as modified by the Appellate Body.

DS381:  United States — Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products

The United States thanked the compliance panels and the Appellate Body for their work in the DS381 proceedings, which culminated with the Appellate Body's 14 December ruling on the modified US measure establishing conditions under which producers may choose to market tuna as "dolphin safe" in the United States. The proceedings began more than a decade ago when Mexico challenged the US tuna labelling requirements as discriminatory. The US in particular commended the compliance panels for their detailed and comprehensive review and analysis of the factual record before them, which served as the basis for their correct conclusions, and for the Appellate Body's upholding of the panels' findings.

However, the United States criticized what it said was the Appellate Body's development of increasingly demanding legal standards under the WTO's Agreement on Technical Barriers to Trade and the GATT 1994 during the proceedings, standards which were not based on the text of the relevant provisions and which negotiators did not agree to. The US was forced to expend considerable resources trying to defend successfully what was always an environmental measure with no elements of protectionism.

It is unclear how many other members would have been able to invest such resources, the US said; other members faced with similar multiple, protracted dispute settlement proceedings might be forced to abandon their legitimate objective and withdraw the measures rather than face the possibility of retaliatory measures by another member.  Indeed, under the standard the Appellate Body has developed, it seems likely that only WTO members with significant resources to devote to the effort will be able to defend legitimate public policy measures that have any effect on trade.

Mexico said its government and industry have played an important role in protecting dolphins against the adverse effects of tuna fishing and that, thanks to Mexico's efforts, the United States modified its labelling measure twice, resulting in higher requirements being imposed in fisheries other than those fished by Mexico. The methods used by the Mexican tuna fleet are regulated by the Agreement on the International Program for the Conservation of Dolphins (AIDCP), which is recognized by the UN's Food and Agriculture Organization of the United Nations as the most sustainable. The Eastern Tropical Pacific region where the Mexican tuna fleet operates is subject to measures for the protection of dolphins which no other region in the world meets, Mexico argued.

In contrast, tuna from other fisheries, caught by the US fleet and fleets from other countries, can freely use the dolphin-safe label, even when there is no guarantee that dolphins will not be harmed in those fisheries. Many dolphins are being killed in other tuna fisheries, and illegal, undocumented and unregulated fishing in these areas makes impossible the precise tracking of dolphins. Unfortunately, by refusing to acknowledge the continuing differences between the sustainable fishing practices of the Mexican fleet and the destructive fishing practices of other countries in other fisheries, the US measures, coupled with the decision of the Appellate Body, will have the effect of encouraging the use of unsustainable fishing methods that are harmful to both dolphins and other marine species, Mexico said.

The DSB adopted the Appellate Body report and the compliance panel reports as upheld by the Appellate Body.

Next meeting

The next meeting of the DSB will take place on 28 January.

More information on WTO dispute settlement is available here.

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