TWN Info Service on WTO and Trade Issues (May17/19)
26 May 2017
Third World Network
Mexico gets go-ahead to retaliate against US in tuna dispute
Published in SUNS #8469 dated 24 May 2017
Geneva, 23 May (Kanaga Raja) - The Dispute Settlement Body (DSB) of the World
Trade Organisation (WTO) on Monday approved the request by Mexico for
authorisation to suspend the application to the United States of tariff
concessions and other related obligations in the amount of US$163.23 million
This is in relation to its dispute with the United States over the US
"dolphin-safe" labelling regime for tuna products.
In its communication to the DSB, Mexico said that it will implement the
suspension of tariff concessions and other related obligations by increasing
import tariffs on goods from the United States, and that it will submit the
details of this measure at the earliest possible date.
In a ruling issued on 25 April, an Arbitrator at the WTO had determined that
Mexico may request authorisation from the DSB to suspend concessions or other
obligations to the United States at a level not exceeding US$163.23 million per
annum (see SUNS #8451 dated 27 April 2017).
On 13 June 2012, the DSB adopted the original Appellate Body report in this
dispute, together with the report of the original panel as modified by the
In so doing, the DSB adopted the Appellate Body's finding that the US Tuna
Measure at issue in the original proceedings (the original Tuna Measure) was
inconsistent with Article 2.1 of the Agreement on Technical Barriers to Trade
On 9 July 2013, the United States published in its Federal Register a legal
instrument entitled "Enhanced Document Requirements to Support Use of the
Dolphin Safe Label on Tuna Products" (the 2013 Final Rule).
According to the United States, the 2013 Final Rule constituted the measure
taken to comply with the DSB recommendations and rulings pursuant to Article
21.5 of the Understanding on Rules and Procedures Governing the Settlement of
Mexico considered that the 2013 Final Rule failed to bring the United States
into compliance with the DSB recommendations and rulings.
Subsequently, on 14 November 2013, the DSB, at Mexico's request, established a
panel under Articles 6 and 21.5 of the DSU, Article 14 of the TBT Agreement,
and Article XXIII of the General Agreement on Tariffs and Trade 1994 (GATT
On 14 April 2015, that panel found that the United States had not brought its
measure into compliance, and that the "amended tuna measure" was
inconsistent with Article 2.1 of the TBT Agreement and Articles I:1 and III:4
of the GATT 1994. The Appellate Body upheld those findings, albeit largely on
the basis of different reasoning.
In response, the US adopted a second modified tuna measure in 2016, which was
not the subject of the arbitration proceedings.
The Arbitrator determined in the proceedings, that the measure to which this
interpretation directs the Arbitrator is the 2013 Tuna Measure, and not the
2016 Tuna Measure.
A compliance panel is currently examining the 2016 tuna measure and is expected
to issue its final report to the parties by mid-July.
Mexico on 10 March 2016 had requested authorization from the DSB to suspend
concessions to the United States in the amount of US$472.3 million annually.
On 22 March 2016, the US objected to this amount and at a meeting of the DSB on
23 March 2016, the matter was automatically referred to arbitration.
Following the award of the Arbitrator on 25 April, at the DSB meeting on
Monday, Mexico sought authorisation from the DSB to retaliate against the US.
According to trade officials, at the DSB meeting, Mexico pointed out that the
Arbitrator had agreed with the model proposed by Mexico for calculating trade
losses resulting from the illegal US measure, which produces estimated losses 7
to 19 times higher than that of the US model.
In its statement at the DSB, the US expressed regret over the request for
authorisation put forward by Mexico.
The US said that in March 2016, the US National Oceanic and Atmospheric
Administration (NOAA) had issued a rule modifying the US dolphin-safe labelling
That rule directly addressed the DSB's findings and brought the US into
compliance with its WTO obligations, it maintained.
As a result, if the compliance panel confirms that the current dolphin-safe
labelling measure is no longer WTO-inconsistent, there would be no basis under
WTO rules to apply any countermeasures, it added.
The US also raised some concerns over the award by the Arbitrator. Firstly, it
said that the Arbitrator based its report on a measure that no longer exists.
This choice was inconsistent with the purpose and proper operation of an
Article 22.6 proceeding, as made clear by the text of the DSU.
The level of suspension of concessions determined in any arbitration under
Article 22.6 of the DSU must be equivalent to the current level of
nullification and impairment.
According to the US, the text of DSU Article 22.4 is clear that the appropriate
level of suspension of concessions may not exceed "the level of
nullification or impairment" currently caused by the measure found to be
Article 22.7 also makes it clear that the relevant inquiry is focused on the
present level of nullification and impairment, and Article 22.8 of the DSU is
explicit that there can be no suspension of concessions where there is
Therefore, as the US tuna measure has been brought into compliance, there is no
basis for a suspension of concessions in this dispute, it said.
With respect to the trade effects analysis in the award, the US said the
Arbitrator's analysis erroneously over-estimates the trade impact of this
More importantly, the Arbitrator used Mexico's model as a basis for
calculation, even though the model was based on three major assumptions that
were unproven and, in fact, were contrary to the evidence on US consumer
preferences and the global supply of canned tuna.
First, the Arbitrator accepted Mexico's claim that the US measure restricted
the supply of canned yellowfin to the US market, despite significant evidence
to the contrary.
The Arbitrator claimed that the adoption of the US tuna measure in 1990 was
"the main reason" for declining yellowfin imports and purchases by US
canneries. But the Arbitrator ignored the fact that all tuna purchases by US
canneries declined in the 1990s, the US said.
The Arbitrator also asserted that yellowfin prices "generally
increas[ed]" after 1990. But the Arbitrator relied on evidence related to
fresh yellowfin for sale in the direct consumption/sashimi markets, not
cannery-grade frozen yellowfin.
According to the US, they are two different markets - as any lover of sushi
would appreciate - and cannot be confused.
Second, the Arbitrator found that, on average, US consumers prefer canned
yellowfin over other types of canned tuna. But no evidence suggested more than
a tiny fraction of US consumers have such a preference.
To the contrary, said the US, the evidence established that US consumers have a
strong preference for canned albacore and skipjack-based light-meat tuna, as
skipjack is the least expensive type of tuna and is low in mercury.
Multiple surveys confirmed that only a tiny percentage of consumers buying
canned tuna (2-6%) look for yellowfin.
Additionally, US consumers, for decades, have been deeply concerned about the
harmful effects of dolphin "sets" and have wanted to purchase tuna
caught by other methods.
In response to this concern, all major US retailers have, for decades, decided
not to purchase canned tuna produced by setting on dolphins.
The US said that it presented statements by all of the largest US retailers
showing that their purchasing policies regarding canned tuna would not be
affected by removal of the tuna measure.
Some of the retailers declared explicitly that they would never purchase tuna
caught by setting on dolphins, while others explained that their purchasing
decisions were not affected by the official label and would not be changed by
The US maintained that the Arbitrator had ignored the evidence about US
consumer preferences and how they have shaped the decisions of all major US
Instead, the Arbitrator assumed that any retailer in the United States that had
not explicitly vowed to never purchase tuna caught by setting on dolphins would
start purchasing Mexican tuna if the measure were withdrawn.
This included retailers that had confirmed that removal of the measure would
have no effect on their purchasing decisions.
Third, said the US, the Arbitrator agreed that Mexico would be the only
supplier of canned yellowfin in the US market. "Let me repeat: no other
WTO Member would successfully compete to sell canned yellowfin tuna in the US
This is unrealistic, and the assumption was made without any evidence as to the
cost structure of the Mexican tuna industry compared to other industries or any
evidence of the Mexican industry's ability to compete successfully in any
market outside Mexico.
In combination, these findings resulted in a large over-estimation of the trade
effects from the previous version of the dolphin-safe labelling measure. But as
noted at the outset, the Arbitrator's analysis was of a measure that no longer
The US said if the compliance panel confirms that the current 2016 dolphin-safe
labelling measure is no longer WTO-inconsistent, there would be no basis under
WTO rules to apply any countermeasures in relation to the award that is being
According to trade officials, Mexico, Japan, Canada and Brazil voiced systemic
concerns about creating an endless "loop" of litigation whereby a
member continuously proposes changes in measures deemed to be inconsistent with
WTO rules in order to prevent a complainant from applying retaliatory measures.
In its intervention, Canada commended the Arbitrator for its cogent analysis
and for taking due account of the systemic considerations at issue.
In particular, it welcomed and supported the finding that, under DSU Article
22.6, an Arbitrator is mandated "to assess the level of nullification or
impairment caused by the WTO-inconsistent original measure (where no compliance
measure was subsequently taken), or a subsequent WTO-inconsistent compliance
measure, that was in existence at the time of expiry of the RPT [reasonable
period of time]."
Like the Arbitrator, Canada said that it shared the concern expressed by Mexico
regarding an interpretation of DSU Article 22.6 according to which a new
assessment of compliance would be necessary before the DSB can authorise the
suspension of concessions whenever:
(i) a compliance measure subject to adverse DSB recommendations and rulings is
(ii) the responding party claims to have come into compliance as a result of
that modification; and
(iii) an Article 22.6 arbitration is subsequently conducted.
As the Arbitrator rightly notes, such an interpretation "could very
substantially delay and ... effectively thwart, a complaining party's efforts
towards obtaining DSB authorisation to suspend concessions."
Canada said this is consistent with the view that it has expressed in this
forum, most recently at the DSB meeting on 20 February 2017, that it would be
appropriate for the complaining party to be able to exercise its rights under
DSU Article 22 in all circumstances where the DSB has ruled that a measure
taken to comply in fact does not comply.
The adoption of successive modifications to a compliance measure must not
undermine the ability of a complaining party to seek to suspend concessions,
which is the remedy provided for in DSU Article 22 in cases of non-compliance.
According to Canada, that remedy effectively contributes to preserving the
rights and obligations of Members under the covered agreements.
Canada therefore congratulated the Arbitrator for this well-reasoned and important
section of the decision.
Mexico, Brazil and India also voiced concerns over the WTO Arbitrator allowing
a delayed broadcast of the US opening statement at the arbitration hearing
despite Mexico's opposition to the opening of the hearing.
In other actions, the DSB agreed to establish a panel, at the request of India,
to examine whether its revised measures relating to the importation of poultry
and other agricultural products are in compliance with the rulings and
recommendations of the DSB (see SUNS #8447 dated 21 April 2017).
This was a second-time request and panel establishment was automatic.
Japan, the European Union, Australia, Singapore, the Russian Federation,
Kazakhstan, Korea, Brazil, Vietnam, China and Guatemala reserved their third
party rights to the dispute.
According to trade officials, India reiterated its concerns over the US
decision to seek authorization from the DSB to retaliate against India for not
complying with the ruling without first seeking a compliance panel review of
India's implementation efforts.
India also pointed out that the US has refused to enter into a sequencing
agreement with India which would have allowed a compliance panel to rule while
safeguarding US rights to retaliate in the event of a finding of
The US said that India has no basis for asserting compliance with the DSB
recommendations in this dispute.
It recalled that the DSB found that India's measures blocking the importation
of US poultry and other agricultural products were not based on science and
breached several obligations of India under the SPS Agreement.
The DSB adopted these rulings in June 2015, nearly two years ago. Despite that,
India continues to maintain a complete ban on US poultry and other agricultural
products, the US maintained.
The US said that it has made concrete proposals to India and has yet to receive
a substantive reply from India to those proposals.
It is regrettable that India remains focused on litigation instead of on
actually achieving compliance in this dispute, said the US.
According to trade officials, Japan, the EU, Canada, Australia, Colombia, and
Brazil reiterated concerns first expressed at the April meeting of the DSB
regarding the issue of sequencing. Most of them argued that compliance
proceedings should precede any request for the right to retaliate.
On the other items before the DSB, a request for the establishment of a panel
by Turkey over countervailing measures imposed by the US on certain pipe and
tube products from Turkey was blocked by the US.
Also at the meeting, Colombia blocked a panel request by Panama to examine
whether Colombia had complied with an earlier panel ruling over Colombian
measures related to the importation of textiles, apparel and footwear from
Both the Turkey request and that by Panama were first-time requests, and panel
establishment will be automatic when the requests come up again before the DSB.
The DSB also adopted the panel report in the dispute over Chinese anti-dumping
measures on imports of cellulose pulp from Canada, as well as the panel and
Appellate Body reports in the dispute over certain US methodologies and their
application to anti-dumping proceedings involving China.
Meanwhile, under "other business", the Russian Federation informed
the DSB that it has successfully met the 11 May deadline for fully implementing
the DSB rulings and recommendations in the dispute with the EU over Russia's
tariff treatment of certain agricultural and manufacturing products (DS485).
Russia said for certain measures, such as palm oil, certain types of paper
(measures 6, 7 and 8) and refrigerators (measures 10 and 11 challenged in the
dispute), it had amended its applied rates prior to, or in the course of, these
As of 1 September 2016, the duty applied by Russia in relation to the 9th
measure at issue was also brought into conformity with Russia's WTO tariff
Further, with respect to duties on paper and paperboard products (measures
1-5), the Common Customs Union Tariff was amended in accordance with the
recommendations of the Panel with the Decision of the Board of the Eurasian
Economic Union adopted on 31 January 2017. This Decision came into force on 3
March 2017, it said.
APPELLATE BODY APPOINTMENTS
According to trade officials, the DSB again failed to reach agreement on the
procedures for selecting two new Appellate Body members. The second four-year
term of Mr. Ricardo Ramirez Hernandez will expire on 30 June 2017, and the
second four-year term of Mr. Peter Van den Bossche will expire on 11 December
Two proposals were tabled at the meeting. One was put forth by Argentina,
Brazil, Colombia, Chile, Guatemala, Mexico and Peru, and called for commencing
the selection process of Mr. Ramirez's replacement immediately and to agree on
his successor by 24 October.
The other proposal was tabled by the EU, calling for commencing both selection
processes immediately and completing both of them by 24 October.
According to trade officials, the US said it was not in a position to agree to
the EU proposal, given the ongoing transition in the new US administration and
the recent appointment of the new US Trade Representative.
It would however agree to launching the process for Mr. Ramirez's replacement
given that he will leave at the end of June.
The EU said it saw no reason why both selection processes could not begin
immediately and why one selection process was being singled out. It called upon
the Chair of the DSB to continue consultations to find a solution.
According to trade officials, China, India, Japan, Australia, New Zealand,
Norway, Hong Kong (China), Korea, Switzerland, Canada, Chinese Taipei, Ecuador,
Vietnam, and Russia expressed concerns over the continued delay.
Several Members pointed out that even if members could agree to launch the
selection process for Ramirez's replacement today, there would still be a gap
of several months before he leaves and before his successor arrives, putting
further strains on the WTO's Appellate Body and dispute settlement system.