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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DS353: United States — Measures Affecting Trade in Large Civil Aircraft — Second Complaint

The European Union said that, in light of the decision by the WTO arbitrator on 15 September, it was requesting authorization from the Dispute Settlement Body (DSB) to take countermeasures with respect to the United States at a level not exceeding US$ 3,993,212,564 annually. Details are set out in WT/DS353/35.

The EU said the action marks the end of some 16 years of litigation in which the US complained about EU subsidies to Airbus, while the EU complained about US subsidies to Boeing. These include various Washington State tax exemptions, the FSC/ETI tax exemption, which was found in earlier phases of this dispute to be a prohibited subsidy, NASA and US Department of Defence research and development subsidies and various other measures.

The EU said it recognised that the world, and the situation in the aircraft sector, is now different than it was 16 years ago, and that this was an opportunity to leave the path of litigation and to seek a negotiated solution of these matters.  The EU said it is not in the interests of anyone that the EU and the US now proceed to mutually imposed retaliation, but if the US remains out of compliance and does not suspend its current countermeasures against the EU, Brussels has no choice but to exercise its rights.

The United States said it regretted the EU's request for the right to retaliate and said the arbitrator's decision only related to the Washington State tax breaks that were eliminated more than six months previously.  If the EU were to impose the countermeasures in response to a measure that has been terminated, that would be contrary to WTO rules and would force a US response that would move the two parties away from finding a solution to the aircraft disputes.

The US said it recently provided proposals for a reasonable settlement that would provide a level playing field for the US, the EU and the United Kingdom, and that with serious engagement, the parties should be able to find a resolution in a short period of time.

The United Kingdom said it was pleased that the arbitrator authorized nearly US$ 4 billion in countermeasures and that it hoped the award would lead to substantive progress in negotiations for a fair and balanced settlement in order to finally put an end to these disputes.

Pursuant to the request of the European Union, the DSB agreed to grant authorization to suspend the application to the United States of tariff concessions or other obligations consistent with the arbitrator's decision.

DS543: United States — Tariff Measures on Certain Goods from China

China issued a statement expressing disappointment with the US decision to appeal the panel ruling in DS543.  China accused the United States of taking advantage of the current paralysis of the WTO's Appellate Body, a paralysis caused by the US refusal to allow the appointment of new Appellate Body members, in order to prevent the adoption of the panel report.  It said the panel correctly concluded the US was applying the tariffs in a discriminatory manner by directly targeting China and applying the tariffs above its WTO bound (i.e. maximum) rates in violation of WTO rules, something the US did not even contest in the proceedings. 

China said the panel correctly rejected the US claims that the matter should not have been ruled upon by the WTO since it was being dealt with separately in the US-China bilateral negotiations and that the tariffs were nevertheless justified as an exception under Article XX(a) of the General Agreement on Tariffs and Trade (GATT) on public morals grounds.  This ruling is a victory not only for China but for the whole multilateral trading system, it said, adding the US tariffs not only seriously harmed numerous Chinese firms but also seriously damaged trade relations between the United States and China. China said it was high time for all WTO members to show responsibility and counter the tendency towards unilateralism and protectionism.

The United States said the findings in the panel ruling are based on legal errors. It stated that the ruling reflects a major missed opportunity for the WTO to address the most serious problem facing WTO members that seek a balanced and fair world trading system, namely aggressive state policies that seek to dominate broad industrial sectors. These unfair trade practices have cost US innovators, workers and businesses billions of dollars every year and harm every member, and every industry in every member, that relies on technology for maintaining competitiveness. 

The tariff measures the US took in response to China's practices, said the US, led to the historic Phase One agreement concluded earlier this year, under which China committed to end some, though not all, of its unfair and harmful technology transfer practices. China would not have agreed to the Phase One deal were it not for the tariffs at issue in this dispute, the US said.  Accordingly, the panel's findings against the US amount to an acknowledgment that the WTO system, as currently formulated, is an impediment to an improved world trading system.  Even if adopted, this panel ruling would not promote a resolution of any dispute between the US and China since China has already taken the unilateral decision that that US measures could not be justified and already imposed its own tariffs on US goods, the US said.

Russia expressed its disappointment that members continue to file appeals in the absence of a functioning Appellate Body, with five such “appeals into the void” to date. It cited in particular the EU's decision to file an appeal against the panel ruling in Russia's complaint against the EU in DS494, even though the EU practices at issue were already found in earlier Appellate Body rulings to be inconsistent with WTO rules, Russia said. 

The EU took the floor to say that it was not trying to avoid a resolution of the DS494 dispute but in fact had proposed to Russia that the appeal be taken up under the new multi-party interim appeal arrangement (MPIA) it has set up with other WTO members. That offer still stands, the EU said.

DS234: United States — Continued Dumping and Subsidy Offset Act of 2000

The European Union reiterated its request that the United States cease transferring anti-dumping and countervailing duties to the US domestic industry, arguing that every such disbursement was a clear act of non-compliance with the rulings on this matter. Canada supported the EU statement, while the United States said it has taken all actions necessary to implement the ruling.

DS316: European Communities and Certain Member States — Measures Affecting Trade in Large Civil Aircraft: Implementation of the Recommendations adopted by the DSB

The United States said that once again the European Union has failed to provide a status report to the DSB concerning dispute DS316, the US complaint against government subsidies for Airbus. The EU repeated that the matter is subject to new compliance proceedings that are still ongoing and thus there was no obligation on the EU to submit a status report.

The United States said it disagrees with the EU assertion that recent steps taken by its members meant the EU has achieved full compliance with the Airbus ruling. It reiterated that six of the eight EU launch aid subsidies for Airbus that a WTO compliance panel found continue to cause adverse effects are not addressed by these new measures, and the changes to the French and Spanish launch aid loans are marginal and insufficient to withdraw the subsidies. 

The EU replied that some of the measures mentioned by the US have actually been amended. The other contested measures relate to the Repayable Launch Investment for the development of the A380 aircraft model. The EU noted that Airbus decided last year to wind down production of the A380 and that the last of the aircraft rolled off the production line several weeks ago. Thus, the measures do not cause any more adverse effects on the United States, said the EU.

DS371 Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines

The chair of the DSB, Ambassador Dacio Castillo (Honduras), reported to members that consultations with the Philippines and Thailand were still ongoing with regards to resolving their differences in a dispute over the next steps in the DS371 proceedings. The chair noted that he had recent meetings with both sides and that, given the consultations were still ongoing, he did not intend to hold a discussion on the matter.

Both the Philippines and Thailand made statements reiterating their positions on the matter as expressed in previous DSB meetings. Both said they were still committed to finding a mutually acceptable solution to the matter. However, the Philippines said it should become increasingly clear to the chair and others that Thailand, as the losing party in the dispute, was not able to engage constructively in a solution. The Philippines said that under the mandatory applicable WTO rules, there were only two solutions: either the DSB accepts the Philippines' request to impose retaliation on Thailand for non-compliance, or Thailand objects to the Philippines' request and the matter is referred to arbitration.

Thailand said there were no possible interpretations of the WTO dispute rules or its earlier sequencing agreement with the Philippines which would allow the Philippines to proceed with its request. The Philippines' retaliation request is without legal foundation because it was made long after the expiry of the 30-day deadline to submit such a request. The real problem, Thailand said, was the absence of a functioning Appellate Body; it was imperative that a solution be found to this crisis.

Brazil, Australia and the EU all said the ongoing dispute underlined the importance of having a functioning Appellate Body. The EU added that the Philippines and Thailand could resort to alternative means of resolving their dispute, such as using the MPIA.

Appellate Body appointments

Mexico, speaking on behalf of 121 members, once again introduced the group's proposal to start the selection processes for six vacancies in the Appellate Body. The extensive number of members submitting the proposal reflects a common concern over the current situation in the Appellate Body that is seriously affecting the overall WTO dispute settlement system against the best interest of members, Mexico said for the group.

Nearly 20 members took the floor to reiterate the importance of resolving the impasse over the appointment of new members as soon as possible and re-establishing a functioning Appellate Body. 

The United States reiterated its position set out in previous DSB meetings, namely that it was still not in a position to support the proposal to start the selection process because its systemic concerns regarding Appellate Body overreach and abuse of its authority remain unaddressed. Without an accurate diagnosis of the problems which led to the current situation, members cannot evaluate the effectiveness of any likely solution, the US said.

Surveillance of implementation

The United States presented status reports with regard to DS184, “US — Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan”,  DS160, “United States — Section 110(5) of US Copyright Act”, DS464, “United States — Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea”, and DS471, “United States — Certain Methodologies and their Application to Anti-Dumping Proceedings Involving China”.

The European Union presented a status report with regard to DS291, “EC — Measures Affecting the Approval and Marketing of Biotech Products.”

Indonesia presented its status reports in DS477 and DS478, “Indonesia — Importation of Horticultural Products, Animals and Animal Products.” 

Other business

Indonesia made a statement regarding its dispute with Australia in DS529, “Australia — Anti-Dumping Measures on A4 Copy Paper”.

Next DSB meeting

The next DSB meeting will take place on 27 November.

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