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No happy mix ever for extra-judiciality and pragmatism

by Chakravarthi Raghavan

Geneva, 26 Sep 2000 - The Dispute Settlement Body (DSB) of the World Trade Organization adopted Tuesday the reports of the panel and Appellate Body (AB) declaring WTO-illegal some of the provisions of the United States anti-dumping law of 1916, that enable anti-dumping actions, in civil or criminal litigation, other than of counter-vailing duties or anti-dumping procedures of the WTO.

But the way the ‘exceptional’ problems of this case was handled in an ‘exceptional’ way “without prejudice to the DSU provisions”, and the pragmatism shown by the EC, Japan, Mexico and India, in their desire to ensure early adoption and give no room for delaying tactics by the United States in changing the law or its current enforcement, has perhaps made the WTO secretariat and the Appellate Body of the “rules-based” trading system even more ‘extra-judicial’ and unaccountable to any one. [The ruling and some aspects of its implications were analysed in a report in SUNS #4730 of 31 August, “Trade: The Limits of challenges at WTO to anti-dumping”)

Both the European Union and Japan brought two separate cases against the US on this issue, with Japan in its complaint having added a few more provisions of the WTO’s anti-dumping act as having been violated by the US in continuing on its statute books, the 1916 law. They were both heard by technically different panels, but with the same panellists, and handed down their rulings.

The panel in the case of the EC against the US was established on 1 February 1999 - with India, Japan and Mexico reserving third party rights, but only India and Japan in fact becoming third parties before this panel. The report of the panel was circulated to the membership (including third parties) on 31 March 2000, though the two parties would have received the report earlier.

In Japan’s case against the US on the same US law, the panel was established on 26 July 1999, but the panellists were the same. India, Mexico and the EC were third parties in this case. The panel’s ruling, findings and conclusions, were circulated to all members on 29 May 2000, but its Sections III and IV, the arguments of the parties and of third parties, were not included. The report circulated had two blank pages, with the titles about Section III and IV—ala GATT Dunkel draft text to the 1990 Brussels Ministerial meeting of the Uruguay Round, and nothing else.

A communication dated 6 July 2000 (WT/DS162/7) -- it is not clear when it was actually circulated—which was made available to the media only on 26 September (along with a communication from Mexico, dated 26 July) said that the report on the Japan complaint circulated on 29 May did not include the missing sections. But it had the following:

“It is the understanding of the Panel that the parties to the circulation of a report in that form so as to allow the Appellate Body to hear concurrently the appeals filed by the United States in the two cases. Due to a lack of translation capacity in the WTO secretariat, such a concurrent appeal would not have been possible if the parties had not agreed to this arrangement."

“It is the panel’s understanding that sections III and IV of its report in WT/DSW162 will be circulated to Members in August 2000."

In its communication (WT/DS/162/8), Mexico expressed its “deep concern” over the handling of the panel report in the complaint by Japan against the US. Mexico, the communication said, considered that the omitting of the descriptive sections of the Panel report and circulating only part of it was “contrary” to the DSU.

In setting out its reasons for this view, Mexico said:

(a) Art.15.2 of the DSU clearly established that reports include both descriptive sections and also its findings and conclusions, and not only the latter. This idea is again set out in Appendix III of the DSU.

(b) Art 17 of the DSU made clear that Appellate proceedings concern “a panel report.” In this particular case, only the findings and conclusions section of the Panel report was appealed. This will in turn affect the rights of third parties in the event of an appeal.

(c) Various provisions of the DSU will be seriously affected if reports are allowed to be divided up and circulated in parts, particularly Articles 15.1, 15.2, 17.4 and 17.6.

(d) Separating out the descriptive sections of a panel report is contrary to GATT practice as well as the practice followed in the WTO itself, thus infringing Article XVI:1 of the WTO agreement.

These are “substantive” provisions and “cannot be modified by Members that are parties to a specific procedure nor by panels.”

Furthermore, said Mexico in its communication, the publication of the findings and conclusions section of the report before the final report was ready “is contrary to the ‘procedures for the circulatiion and derestriction of documents,’ under which panel reports remain restricted until they have been circulated to Members. In this case, since the final report of the Panel has not yet been issued, there is no reason to publish only the findings and conclusions section.”

There is no indication in any of the communications, nor was it clear from the WTO briefings of the closed door meetings, whether the views of any of the third parties, who had an automatic right to argue before the AB, had been sought and they had agreed. But as Mexico had pointed out, even if this had been done, the procedure would still be illegal.

The only reason that the US could not take advantage of this to delay matters further was that its own hands were not clean, in the sense that it was the party that was violating the rules.

The missing sections and pages were made available to third parties and the members only on 25 September, a day before the DSB meeting.

No doubt the full report, including the missing sections, must have been available in English to Japan and the US (in this case); but none of the third parties, and certainly not India or Mexico appear to have had the missing portions of the report until the previous day. Their interventions before the Appellate Body were thus based purely on the findings and the conclusions, and to the extent of their participation and presence during the hearings before the panel.

While most persons looking at the panel rulings and AB reports look only at the findings and conclusions (and media reporting these don’t even do that, but take the unofficial guidance provided by the WTO press office, and are indifferent to such problems or report on them), it is apparent that without the missing sections, the third parties would have been handicapped in their presentations to the AB - though perhaps they could have had, at a practical level, access to them from one of the parties.

According to participants at the DSB, except for US, EC, Japan, India and Mexico, and Australia (which was not a third party at any stage), most of the DSB members were either unaware of the problem nor forewarned that it would come up, and so were indifferent or silent.

There is some reason to believe that the chair of the DSB, Mr. Stuart Harbinson of Hong Kong China, perhaps had prior informal consultations with Mexico and India on what they would raise, and how he would respond.

[But even if the secretariat and AB create a new infirmity, so long as the negative consensus rule operates, the members can’t do anything in the rules-based system].

At the DSB, on the substance of the case, the US reiterated its views (that its 1916 anti-dumping law was an anti-trust law and thus not affected) and would not join the consensus for adoption. The EC, Japan, India and Mexico welcomed the ruling and supported the adoption. The EC wanted the US to apply the rulings against pending cases under the US law now declared illegal.

The US has 30 days from 26 Sep to notify how it would implement, and if there is no agreement among the parties, seek arbitration and a ruling within 45 days from 26 September on the reasonable period of time needed to implement the ruling.

Hong Kong-China, in an intervention, welcomed the AB’s conclusion “to reject a narrow, and in fact, wrong interpretation” of Art 17.4 of the Anti-Dumping Agreement which suggests “that Members cannot bring a claim of inconsistency with the AD agreement against legislation as such independently from a claim of inconsistency of one of the three AD measures specified in Art 17.4.”

HKC was glad the AB had clarified its findings in the Guatemala cement case.

HKC was also glad to be reassured that no WTO member could ever circumvent its WTO obligations under Art.18.4 of the AD agreement, requiring them to bring their legislation into conformity with the provisions of the AD. HKC welcomed the AB’s clear-cut interpretation on the scope of application of GATT Art VI and the AD agreement. “This should help forestall similar attempts to circumvent the rules and disciplines provided for in GATT Art.VI and the AD agreement when measures are introduced to counteract dumping,” HKC added.

In other comments, India and Mexico repeated their concerns over the procedural violations of the DSU, and their concerns over the systemic implications.

For the record, as reported to the media, Harbinson took note of the two communications, reiterated the full applicability of the relevant DSU rules and the need to respect fully Articles 15, 16 and 17 of the DSU (respectively covering interim review stage, adoption of panel reports and the Appellate review provisions) and that it was an exceptional situation and an exceptional way to resolve it, but without creating any precedent.

And India said it should be a “one-time exception”.

The official secretariat explanation is that they need more budget allocations to beef up the translation capacity, and that this was being denied to them, by the members insisting on using ‘existing resources’—a not too unfamiliar a situation in the UN system too.

The official daily media clippings file of 26/9, circulated to members and others, had a Moore interview to a WTO favourite journalist, where he has made a new pitch for more resources.

But all in all, added to the (perhaps more serious) “outrage on law and justice” being committed continuously by the panel and Appellate Body system, the present case shows a serious state of affairs at the WTO.

And if these and other ills are not quickly cured, giving priority to these aspects at the WTO, the legitimacy of the system will everyday be more and more eroded - until the system collapses, to the advantage of nobody, not even the US and majors who are manipulating the system.-SUNS4749

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

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