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MOST KOREAN MEASURES AGAINST BEEF IMPORTS HELD ILLEGAL

A WTO dispute panel, on a complaint by the US and Australia, has held that most of the trade measures of Korea affecting imports of fresh, chilled and frozen beef were illegal.

by Chakravarthi Raghavan


Geneva, 2 Aug 2000 -- A WTO dispute panel, on a complaint by the US and Australia, has held that most of the trade measures of Korea affecting imports of fresh, chilled and frozen beef were illegal, while a few others could benefit from a transition period and either be phased out by 1 January 2001 or brought into conformity.

The panel ruling was issued on 31 July. Korea has said it would appeal and, thus in practical terms, all the measures complained against it would be there till end of this year.

The Korea beef import regime and restrictions have a long history, having been put in place in the 1980s, with Korea invoking balance-of-payments (BOP) problems to justify it. After a balance-of-payment committee consultations and recommendations for removal and a phase-out, and a separate panel process and ruling, both adopted at the same time by the GATT Council in 1989, Korea entered into a phase-out plan (with US, Australia and New Zealand), and incorporated it in its Agriculture schedule.

In the two separate disputes, but both heard by the same panel (Chairman Mr. Lars Anell, Mr. Paul Demaret and Mr. Alan Mathews, as members) Australia and the US complained about the Korean dual retail system for sale of beef (one for domestic and another for imported beef). There were also complaints that Korea’s domestic support for beef for 1997 and 1998 were not correctly calculated and exceeded the de minimis level set by Art.6.2 of the Agreement on Agriculture (AoA), and not included in Korea’s current total Aggregate Measure of Support (AMS). Also, Korea’s domestic support (current total AMS) for 1997 and 1998 exceeded its commitment levels set in its schedules to the AoA.

The panel held that some of the measures were covered by the terms “the remaining restrictions” which under its Note 6 (e) of its WTO schedule had a transitional period until 1 January 2001, by which date they are to be eliminated or brought into conformity.

These measures were: (1) the price markup applied to imports through the SBS system (of super-groups of users), additional to the tariffs; (2) limitations on participation in this system including super-group membership, restrictions on range of end users, prohibition of cross-trading between end users and super-groups, quotas and sub-quotas allocated to super-groups according to annual plans (rather than demand) and recording requirements; (3) requirement for beef imported through the LPMO, the notified beef state trading agency, be distributed only through the whole-sale market; (4) the LPMO’s minimum wholesale price; and (5) existence of a discretionary licensing system relating to any of the remaining restrictions.

A number of other Korean measures were found contrary to Korea’s obligations under Art.III.4 of GATT 1994 (for equal treatment of imported and domestic like products) and not justified as XX (d) exceptions. Among them were:

*        the dual retail system for beef - separate retail shops or separate display of imported and domestic beef and labelling in department stores;

*        similarly, requirement to supply beef from LPMO’s wholesale market to specialized beef import stores;

*        more stringent record keeping requirements on those purchasing foreign beef for sale;

*        prohibition of cross trading between end users of the SBS system;

*        additional labelling requirements on foreign beef;

*        delays by the LPMO in calling for tenders and discharge of imported beef stocks between Nov 1997 and end May 1998 were import restrictions inconsistent with Art XI, XII, XIII and XVIII of GATT

*        Korea’s domestic support for beef for 1997 and 1998 were not correctly calculated and exceeded the de minimis levels contrary to Art. 6 of the AoA, and not included in Korea’s current total AMS, contrary to Art.7.2 (a) of the AoA; and

*        Korea’s total domestic support, current total AMS for 1997 and 1998 exceeded its commitment levels, and contrary to Art.3.2 of the AoA. – SUNS4722

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

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