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SHARP DIVERGENCE ON DSU REVIEW

by Chakravarthi Raghavan


Geneva, 7 Oct 99 -- Sharp divergences of views came out at the WTO General Council Wednesday over the issue of the "review of the Dispute Settlement Understanding" and on whether any recommendations should go before the Seattle Ministerial meeting.

Under a ministerial decision at Marrakech in 1994 (p 465 of legal texts of Uruguay Round agreements), the Ministerial Conference was invited to complete a full review of the dispute settlement rules and procedures under the WTO, within four years of the entry into force of the WTO, and take a decision on the occasion of its meeting after the completion of the review whether to continue, modify or terminate such dispute settlement rules and procedures.

The discussions at the General Council brought out a three-way division of views: some who insisted that the time limit set for completing the review ended in July, and the process could not be endlessly carried forward; some others who agreed with this position, but were willing to give a final deadline of 15 October and a last chance and continue a de facto informal review process to agree on changes, but that this must come to an end one way or another at the latest by 15 October; and a few others who want the process to be continued until Seattle.

While apparently there is some agreement within a small group of negotiators on changes to sequence actions under Art.21.5 and 22 of the DSU in disputes over implementation of decisions and rulings (see SUNS #4512), and a few other purely technical and procedural changes, moves by the US (and possibly the EC too) to tie these up with allowing NGOs to provide "briefs" to panels have been rejected by the others.

After two efforts by the Chairman, Amb. Ali Mchumo to gavel a decision (to continue the review consultations and have it done by the Dispute Settlement Body), the issue on Wednesday evening remained in a limbo of sorts, with the General Council due to "revert" to this issue later.

Unofficially, some of those whose position is that the review is over, and those who agree but informally are willing to have a further go at achieving consensus but with a definite 15 October deadline, seem to be willing to participate in any further informal consultations on what to do, and have made clear that they can't go indefinitely reviewing, and would not agree to allow the panels to receive unsolicited opinions from outside or opening up the panel process for outside observers.

Apart from the general provision of continuing the GATT practice of decisions by consensus, but enabling a vote if no consensus is possible, changes to the WTO's Dispute Settlement Understanding specifically require a consensus.

In an 'oral report' on the review process, read out on his behalf by Mchumo, Amb. Akao of Japan had noted that the General Council in December 1998 had decided that the review process, including the preparation of the report, is to be completed by end July 1999. Also, on 15-16 February, when the General Council debated an EC motion for an authoritative interpretation of the relationship between Art. 21.5 and 22 (but without being able to decide since consensus was blocked), the General Council had asked the DSU review process to take up this question too and endeavour to reach an agreement by end July.

Akao reported that after a number of informal meetings, both by the 31 July deadline, and even thereafter, in good faith discussions continued, to agree on recommendation to modify the DSU rules and procedure. These discussions had not been completed until the 22 September DSB meeting, where too "no agreement was reached on a recommendation to continue the DSU review." The General Council, Akao said, should now decide on how to proceed and what action to take on the DSU review.

After reading out the statement, Mchumo gavelled a decision to take note of the report and revert to the matter later, while meanwhile he would ask the DSB and its chair to continue consultations.

But Mexico and Malaysia questioned this. Mexico said the period for review had ended without a consensus, even though informal consultations continued to take place after end July, but without a mandate. Mexico asked how the issue could even appear on the General Council agenda?

Malaysia said that it could not agree to another extension of time, excepting under three conditions.

Firstly, any package out of the review process will not legitimise or facilitate in any way information to the panels in the form of amicus curiae briefs.

Secondly, no panel process can be opened to the public.

Thirdly, there should be an explicit agreement that in the absence of any agreement on changes, the Council should recommend that the present DSU will continue.

Specifically, Malaysia proposed that the Council decide not to extend the review process, and recommend to the Ministerial Conference to continue the DSU.

The Philippines joined Malaysia in opposing any extension of the review process.

But Thailand said the ASEAN was split on this issue, and said the work should continue as it showed the prospect of concrete results emerging, and this work should be completed by Seattle.

Hong Kong China was agreeable to continue the work until 15 October, and thought there was a good prospect of reaching an agreement on the sequencing of Art. 21.5 (for a reconvened panel in the event of a dispute over implementation) and Art. 22 which enables authorization for retaliation. The opportunity for resolving this issue should not be missed, Hong Kong China said. The US gave support to  keeping the issue pending, and Canada supported this.

Hungary was in favour of extending the review deadline to 15 October, while the EC came out in favour of continuing the review.

Egypt however said that the review had ended on 31 July, and continuing the review any further had no legal basis. The General Council should just provide a factual report to the Seattle Conference.

India agreed there was no legal basis to continue the DSU review process, but was prepared for a final deadline of 15 October to conclude an understanding.

Brazil was prepared to continue the review, while New Zealand wanted the efforts to continue.

Indonesia said it was willing to allow consultations to continue till 15 October, but was opposed to any moves to throw open the DSU to the public.

Venezuela too was willing to continue the process till 15 October, while Ecuador doubted whether any consensus could be found even then.

Australia did not think legal points should stop work on the  review, Uruguay urged all efforts to reach an accord, and Singapore thought it would be 'irresponsible' not to continue.

The Philippines noted the sharp division of views in two groups and said it was opposed to any further extension. Even if the work was continued till 15 October, they would then be asked to again continue the review, and the process would continue till Seattle.

Mexico again took the floor to propose that the Council recommend to the Ministers to continue the DSU without any changes.

Korea underscored the need to agree on the sequencing of Art. 21.5 and 22, and for the review to continue on a de facto basis, but with a clear and workable deadline. Costa Rica also supported continuing the review.

Malaysia proposed on behalf of the Philippines and Malaysia that the General Council recommend to the Ministers to continue the DSU without change.

When Mchumo proposed, and gavelled, that the General Council take note of the statements and for the DSB to hold further consultations, Mexico and Malaysia questioned this and said there was no mandate to continue the review and the DSB could not be asked by the Chair to continue this work.

Mchumo finally said the Council take note of all the statements and revert to the matter later.

At the end of the meeting, the Chair announced that the DSB chairmanship, which had been vacated by Amb. Akao of Japan in leaving Geneva (on reassignment) should be filled for the rest of the term (until year end, but technically till the January meeting in 2000) by Norway's Amb. Kare Bryn.

Earlier, after a two-hour discussion, the General Council of the WTO appears to have agreed to the 'status quo' of four deputy Directors-General for the WTO, but the decision is subject to Morocco and Mexico not conveying their negative views on the Chairman's proposal.

Earlier, in outlining the outcome of consultations he had been carrying out, Chairman, Amb. Ali Mchumo of Tanzania had suggested that the present 'status quo' of four deputy Directors-General posts at the WTO be maintained, and Moore get clearance for consulting and naming individuals.

Under the decision appointing Moore as DG, he is to name the deputies after consultations with the members and his successor Dr.Supachai Panitchpakdi. The Mchumo proposal also involves continuing the Council discussions on the number of DDG posts, as part of its review of the senior management positions, and complete it within three years.

Chairman Mchumo had reported that his wide consultations had shown there was still a broad divergence of views about whether there should be one, two, three, four or five DDGs and, in the absence of a clear consensus, a majority of delegations were willing to settle for the status quo of four to be continued, but on the understanding that this would be reviewed "at the appropriate time" in the context of the review of the WTO Secretariat and Senior Management structure in the General Council. Mchumo also reported that this majority felt that a long and divisive debate on this issue would have serious implications for the WTO and would dangerously hamper the preparatory process for the Seattle Ministerial Conference.

Moore reportedly said that he was anxious to name the deputies quickly to help in the preparations and the various consultations they could chair and conduct.

Mexico, on behalf of the informal developing country group, read out a statement that in making the appointments (and continuing the status quo), at least three DDGs should come from the developing world, as now - one each from Africa, Asia and Latin America.

India and Pakistan and several others also took the floor to call for maintaining the present situation of developed and developing country representation in the top management.

Hong Kong China on the other hand complained that each DDG would cost a minimum of $400,000 a year, and the amounts could be more usefully spent on technical assistance.

Australia and a few others argued that the hands of the DG should not be tied in whom he should appoint.

Others said that appointments and terms for DDGs should not tie the hands of Moore's successor Dr Supachai.

Morocco wanted to know what exactly each DDG would do, a point to which Moore responded that it was his intention to slot them into various jobs according to the WTO rules and structures. After Seattle, he would go through the situation and any fresh mandate to the secretariat, and reshape the secretariat accordingly.

Several developing country delegates noted privately that except for 2 or 3, all the Directors were from the industrialized world, and even with 4 DDGs (as now) under Ruggiero, directors from the North running key divisions reported directly to the Director-General, so that effectively the secretariat was run by them.

Apart from the disputes and questions about DDGs and what they would be doing, other key posts in the secretariat are also coming up for appointments. There is the post of Director of the Legal Division - a post which under Ruggiero was occupied by a US national - and naming a US national to that post, over and above a US DDG was a price that the US extracted from Ruggiero before agreeing to his appointment by consensus. Even the expansion of DDG posts from the two under the old GATT to four was at the US instance.

And before the end of the year, the terms of four of the six members of the Appellate Body are also falling vacant. Two of them (from Egypt and Japan) have reportedly said they don't want to continue, while two others whose terms are also up (Bacchus from US and Beeby from New Zealand) both want to get another term.

WTO officials implied Wednesday that when the four DDGs are named, the consultations process to select candidates for these and other posts could also be entrusted to DDGs.

In other actions on the agenda, the General Council put off to a future meeting, the review of the waiver to the US, under paragraph 3 of GATT 1994, for continued 'grand-fathering' of its maritime law and regulations (under the Jones Act) reserving shipping, mainly in coastal trade and inner waterways, to ships built in the US. In terms of the GATT 1994 provision, the waiver and grand-fathering is to be reviewed by the Ministerial Conference. A US report on the review is before the Council.

Under the WTO and annexed agreements, the members are committed to bring their laws and trade measures into compliance with the WTO. Para 3 of GATT 1994 was an exceptional provision, negotiated and put into the GATT, to accommodate the US view that without such a provision, the US administration would be unable to get the implementing legislation through Congress.

Some negotiators at that time claimed the US was informally committed to persuade Congress in due course to change the law, and perhaps this could be achieved as part of sectoral negotiations on maritime services under GATS. But the US excluded itself from any maritime services negotiations in the services negotiations that were continued after Marrakech.

Under the protocol of provisional application of GATT 1947, all pre-existing legislation of GATT signatories were 'grand- fathered' i.e. the members were not required to change the laws. The US Jones Act was one of the pre-GATT laws saved.

A US communication said the waiver and reserving such maritime traffic by use of vessels built in the US was essential for maintaining US national ship-building capacity for its national security.

Japan has asked for US answers to several questions to enable the Council to consider and take a decision.

In July last, when the issue came before the General Council, the only explanation the US gave for continuing this prerogative was that there had been no amendments, legislative changes or measures to alter the position of the US of conforming or not (of its laws).

Japan has contended that the US position could not be accepted. At the time of the Marrakech agreement, all the WTO members, except the US, had accepted that the 'grandfathering' privileges allowed by the protocol of provisional application under GATT 1947 could not be continued under GATT 1994. The exemption for the US under para 3 of 1994 was admitted only for the US, after negotiations, and the introduction of a review of this was decided at that time.

There was thus no automatic 'grand-fathering'. The US should hence provide comments and provide statistical data as to how relevant the concerned US domestic laws were in terms of national defense, and whether this was sufficiently important compared to the GATT principles.

The General Council had to engage in serious discussion as to whether such a fundamental deviation from the GATT disciplines was necessary, and the US should provide explanations about the US industry capability to produce ships and how the US legislation serves any national defense purpose.

Among the questions posed by Japan, seeking clarifications and answers from the US, has pointed out that 70% of the ships built in the US, and 20% in terms of gross tonnage, cover the small-scale fishery ships. The US should point out and explain how this was relevant to national defense. (SUNS4525)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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