DISPUTE SETTLEMENT

DS: European Union — Measures Affecting Tariff Concessions on Certain Poultry Meat Products

This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

  

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Current status

 

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Key facts

Short title:
Complainant:
Respondent:
Third Parties:
Agreements cited:
(as cited in request for consultations)
Request for Consultations received:
Panel Report circulated: 28 March 2017

  

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Latest document

  

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Summary of the dispute to date

The summary below was up-to-date at

Consultations

Complaint by China.

On 8 April 2015, China requested consultations with the European Union regarding measures to modify the European Union tariff concessions on certain poultry meat products.

China claims that the measures are inconsistent with Articles I, II, XIII and XXVIII of the GATT 1994.

 

Panel and Appellate Body proceedings

On 8 June 2015, China requested the establishment of a panel. At its meeting on 19 June 2015, the DSB deferred the establishment of a panel.

At its meeting on 20 July 2015, the DSB established a panel. Brazil, the Russian Federation and the United States reserved their third-party rights. Subsequently, Argentina and Canada also reserved their third‑party rights.

On 23 November 2015, China requested the Director-General to compose the panel. On 3 December 2015, the Director-General composed the panel. On 11 July 2016 the Chair of the panel informed the DSB that the panel expected to issue its final report to the parties by early December 2016, in light of the complexity of the legal issues and in accordance with the timetable adopted by the panel after consultation with the parties.

On 28 March 2017, the panel report was circulated to Members.

The European Union initiated two distinct tariff renegotiation exercises under Article XXVIII:5 of the GATT 1994. The first was initiated in 2006, and covered three tariff concessions (“First Modification Package”); the second was initiated in 2009, and covered seven other tariff concessions (“Second Modification Package”). The European Union determined that Brazil and Thailand were the only WTO Members that held a “principal” or “substantial” supplying interest in the tariff concessions at issue, based on the share of imports into the European Union that different Members held over the three-years preceding the initiation of each of the two negotiation exercises (i.e. 2003-2005 for the First Modification Package, and 2006-2008 for the Second Modification Package). Following the negotiations and bilateral agreements reached with Brazil and Thailand, the European Union replaced its unlimited tariff concession on each of the poultry products at issue with a tariff-rate quota (TRQs). The European Union allocated the majority of each of those TRQs to Brazil and/or Thailand, because these two Members accounted for the majority of imports of these products into the European Union in the years preceding the initiation of the negotiation exercises in 2006 and 2009. The total volume of each TRQ, and the allocation of each TRQ among supplying countries, was based on the import levels into the European Union over the same period (i.e. 2003-2005 for the First Modification Package, and 2006-2008 for the Second Modification Package).

From January 2002 through to July 2008, imports of poultry products from China into the European Union were prohibited as a consequence of several SPS measures (the WTO-consistency of which was not at issue in this dispute). Following a relaxation of the SPS measures in July 2008, and while the negotiations under the Second Modification Package were ongoing, imports of poultry products from China under two of the seven tariff lines at issue in the Second Modification Package increased significantly over the period 2009-2011. By the time that the European Union concluded its negotiations under the Second Modification Package in late 2011, China accounted for more than 50% of imports into the European Union under those two tariff lines.

Before the Panel, China claimed that the European Union acted inconsistently with various provisions of the GATT 1994, including Article XXVIII:1, Article XXVIII:2, Article XIII:2(d), the chapeau of Article XIII:2, Article XIII:1, Article XIII:4, Article I:1, and Article II:1. China advanced separate claims under these provisions in respect of each of the ten TRQs at issue.

With respect to two of the ten TRQs at issue in this dispute, the Panel found that the European Union's allocation of TRQ shares among supplying countries was inconsistent with the requirements of Article XIII:2. Specifically, the Panel upheld China's claim that its increased ability to export poultry products to the European Union following the relaxation of the SPS measures in July 2008 was a “special factor” that had to be taken into account by the European Union when determining which countries had a “substantial interest” in supplying the products concerned, or when determining the TRQ shares to be allocated to the category of “all other” countries that were not recognized as substantial suppliers (including China) pursuant to Article XIII.

The Panel rejected China's other claims in this dispute, concluding that:

  1. China had not demonstrated that the European Union acted inconsistently with Article XXVIII:1 by refusing to recognize that China held a principal or substantial supplying interest in the concessions at issue in the First and Second Modification Packages;
     
  2. China had not demonstrated that the tariff rates and the TRQs negotiated and implemented by the European Union under the First and Second Modification Packages are inconsistent with Article XXVIII:2 read in conjunction with paragraph 6 of the Understanding on the Interpretation of Article XXVIII, by failing to maintain a general level of reciprocal and mutually advantageous concessions not less favourable to trade than that existing prior to the modification;
     
  3. China had not demonstrated that the European Union acted inconsistently with Article XIII:2(d) by determining which countries had a substantial interest in supplying the products concerned on the basis of their actual share of imports into the European Union, rather than on the basis of an estimate of what import shares would have been in the absence of the SPS measures restricting poultry imports from China;
     
  4. China had not demonstrated that the European Union acted inconsistently with the chapeau of Article XIII:2 by determining the size of the TRQ shares to be allocated to the category of “all other” countries that were not recognized as substantial suppliers (including China) on the basis of their actual share of imports into the EU, rather than on the basis of an estimate of what import shares would have been in the absence of the SPS measures restricting poultry imports from China;
     
  5. China had failed to demonstrate that the European Union acted inconsistently with the chapeau of Article XIII:2 by not allocating an “all others” share of at least 10% for all of the TRQs under the First and Second Modification Package;
     
  6. China had not demonstrated that the European Union acted inconsistently with Article XIII:1 by allocating all or the vast majority of the TRQs to Brazil and Thailand;
     
  7. China had not demonstrated that the European Union acted inconsistently with Article XIII:4 of the GATT 1994 by refusing to enter into meaningful negotiations with China;
     
  8. China had not demonstrated that the European Union acted inconsistently with Article I:1 by allocating all or the vast majority of the TRQs to Brazil and Thailand;
     
  9. China had not demonstrated that the European Union acted inconsistently with Article II:1 of the GATT 1994 by giving effect to the modifications resulting from the Article XXVIII negotiations prior to the changes being reflected in the authentic text of its Schedule through certification;
     
  10. Insofar as China was claiming that the European Union acted inconsistently with paragraph 7 of the Procedures for Negotiations under Article XXVIII or paragraph 1 of the Procedures for Modification and Rectification of Schedules, such claims were not properly before the Panel;
     
  11. Insofar as China was claiming that the European Union acted inconsistently with Article II:1 by implementing the higher out-of-quota rates arising from the First Modification Package over the period 2007-2009, such claim was not properly before the Panel.;
     
  12. China's contention that the European Union acted inconsistently with the chapeau of Article XIII:2 and Article XIII:4 by failing to proactively disclose the historical trade data, the representative period selected or the special factors appraised were new claims that are outside the Panel's terms of reference; and
     
  13. China's contention that the European Union acted inconsistently with Article XIII:1 and the chapeau of Article XIII:2 by failing to annually update the initial TRQ allocations constitute new claims that are outside the Panel's terms of reference.

At its meeting on 19 April 2017, the DSB adopted the panel report.

 

Reasonable period of time

On 16 May 2017, the European Union informed the DSB that it intended to implement the DSB's recommendations and rulings in a manner that respects its WTO obligations and that it would need a reasonable period of time to do so. The European Union reconfirmed this information at the DSB meeting on 22 May 2017.

On 21 June 2017, the European Union and China informed the DSB that they were seeking to mutually agree on a period under Article 21.3(b), even if such agreement is reached beyond the time provided for in Article 21.3(b). In addition, the European Union and China informed the DSB of their common understanding on the applicable deadlines if the matter were referred to arbitration under Article 21.3(c) of the DSU. On 15 May 2018, the European Union and China informed the DSB that in the event that they were unable to reach a mutually agreed solution, or the European Union failed to carry out its obligations set out in the mutually agreed solution, the reasonable period of time would be deemed to have ended on 19 July 2018.

 

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