TWN Info Service on WTO and Trade Issues (Nov09/13)
25 November 2009
Third World Network

DSB grants Brazil permission to retaliate on cotton; sets two additional panels
Published in SUNS #6819 dated 20 November 2009

Geneva, 19 Nov (Kanaga Raja) -- The WTO Dispute Settlement Body (DSB) on Thursday agreed to establish panels to rule on certain country-of-origin labeling (COOL) requirements imposed by the United States and certain measures imposed by the European Communities affecting poultry meat and poultry meat products from the United States.

The DSB also granted Brazil's request for authorization to suspend the application to the United States of concessions and other obligations in the upland cotton dispute.

(On 31 August 2009, in two separate reports concerning arbitration proceedings in the US-Brazil upland cotton dispute, the Arbitrator ruled that Brazil may request authorization from the DSB to suspend concessions or other obligations totaling some $294.7 million annually.

(In the first report, the Arbitrator determined that the annual level of appropriate countermeasures in relation to GSM 102 payments - prohibited subsidies - amounts to $147.4 million based on Fiscal Year 2006 data. In its second report, the Arbitrator determined that the annual level of countermeasures in relation to the marketing loan and counter-cyclical payments - actionable subsidies - amounts to $147.3 million. See SUNS #6764 dated 1 September 2009 for full details on the Arbitrator's ruling.)

In a statement at the DSB, the US reiterated that it intends to comply with the DSB's recommendations and rulings in this dispute. It said that suspending concessions or obligations could present economic and other challenges for both Brazil and the US.

It further said that last week, Brazil published a list of goods for possible increased tariffs as part of countermeasures. This list includes a wide range of goods that are important for both economies.

In fact, added the US, the range of goods "demonstrates the extensive, positive trade relationship that we have developed. We value our economic relationship with Brazil. We hope to build upon this relationship and not have this dispute detract from that effort."

The US said that it would welcome Brazil's ideas on identifying a solution to these issues.

Meanwhile, the country-of-origin labeling requirements disputes against the United States were brought by Canada and Mexico. Both were second-time requests and panel establishment was automatic.

It was agreed that a single panel will rule on the dispute.

China, Australia, Argentina, the EC, Japan, Colombia, India, Korea, New Zealand, Peru, Mexico and Canada reserved their third party rights to the dispute.

Canada's complaint is in relation to the US measure requiring country of origin labeling (COOL measure) in respect of certain products.

The COOL measure covered in Canada's request consists of the following provisions: the Agricultural Marketing Act of 1946, as amended by the Farm, Security and Rural Investment Act of 2002 and the Food, Conservation, and Energy Act of 2008; the Interim Final Rule on Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts, and on Mandatory Country of Origin Labeling of Muscle Cuts of Beef (including Veal), Lamb, Chicken, Goat and Pork, Ground Beef, Ground Lamb, Ground Chicken, Ground Goat, and Ground Pork.

Also covered in its request are the Final Rule on Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts; and the letter to "Industry Representative" from the United States Secretary of Agriculture, Thomas J. Vilsack, of 20 February 2009.

Canada considered that the COOL measure is inconsistent with the obligations of the United States under the provisions of the Technical Barriers to Trade Agreement (TBT), the Agreement on the Application of the Sanitary and Phytosanitary Measures (SPS), the GATT 1994, and the Agreement on Rules of Origin.

In respect of the TBT Agreement, Canada considered amongst others that the COOL measure is inconsistent with Article 2.1 because the measure as applied results in less favourable treatment accorded to beef and pork produced from livestock from Canada than for beef and pork produced from livestock born, raised and slaughtered in the US.

The COOL measure is also inconsistent amongst others with Article III: 4 of the GATT 1994 because the measure as applied results in less favourable treatment accorded to beef and pork produced from livestock from Canada than for beef and pork produced from livestock born, raised and slaughtered in the US.

In its complaint against the United States, Mexico said that the measures at issue relating to the COOL provisions adopted by the US include: The Agricultural Marketing Act of 1946, as amended by the Farm, Security and Rural Investment Act of 2002, and the Food, Conservation and Energy Act of 2008; Interim Final Rule - Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts.

Also included in Mexico's complaint are Final Rule - Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts; Interim Final Rule - Mandatory Country of Origin Labeling of Muscle Cuts of Beef (including Veal), Lamb, Chicken, Goat and Pork, Ground Beef, Ground Lamb, Ground Chicken, Ground Goat, and Ground Pork; and Letter from Thomas Vilsack, Secretary of Agriculture (United States Department of Agriculture, USDA), to Industry Representatives (20 February 2009).

Mexico said that cuts of beef and ground beef are among the commodities subject to the COOL measures. Mexico exports live cattle to the United States, where it is subsequently fed and processed into cuts of beef and ground beef.

It added that various aspects of the COOL measures, including the labeling requirements, the rules of origin, the record-keeping requirements and the mechanisms for implementing the measures have in several ways adversely affected trade in Mexican cattle and cattle products, for example, by (I) discriminating against Mexican cattle and cattle products; (ii) increasing costs for exporters, importers and processors; (iii) reducing prices of Mexican cattle; and (iv) generally speaking, restricting trade.

In a statement at the DSB, Canada said that since 2002, when the COOL measure was first proposed, it had raised concerns with regard to the impacts of the measure on the Canadian livestock and meat industries and on the highly integrated supply chains of these industries.

Expressing disappointment that Canada and Mexico had chosen to pursue their requests for a panel in this matter, the US said that WTO Members have long recognized that country-of-origin labeling is a legitimate policy. Indeed, that recognition predates the entry into force of the WTO Agreement. It is common for WTO Members to require that goods be labeled as to their origin.

The DSB also established a panel, at the request of the United States, to rule on certain EC measures affecting poultry meat and poultry meat products from the United States.

This was a second-time request and panel establishment was automatic.

Australia, China, Norway and Korea reserved their third party rights to the dispute.

According to the US complaint, the EC prohibits the import of poultry treated with any substance other than water unless that substance has been approved by the EC. The EC has not approved any other substance.

Consequently, the EC prohibits the import of poultry that has been processed with chemical treatments (pathogen reduction treatments or PRTs) designed to reduce the amount of microbes on the meat, effectively prohibiting the shipment of virtually all US poultry to the EC.

The US further said that the EC has not published or otherwise made available the process for approving a substance. The EC also maintains a measure regarding the marketing standards for poultry meat, which defines "poultry meat" as only "poultry meat suitable for human consumption, which has not undergone any treatment other than cold treatment."

In 2002, said the US communication, the United States requested the European Commission to approve the use of four PRTs in the production of poultry intended for export to the EC: acidified sodium chlorite, trisodium phosphate, peroxyacids, and chlorine dioxide. However, after more than six years, including unexplained delays, the EC has not approved any of these four PRTs and instead has rejected the approval of their use.

The EC's failure to approve is despite the fact that various EC agencies have issued scientific reports regarding a number of different aspects related to the processing of poultry with these four PRTs. Those reports did not find any scientific basis for banning the use of these PRTs. To the contrary, the conclusion of these reports is that the importation and consumption of poultry processed with these four PRTs does not pose a risk to human health, said the US.

In its statement at the DSB, the US expressed concern over restrictions that the EC imposes on the import and marketing of poultry meat and poultry meat products from the US. It also expressed regret that significant US engagement over many years has not resulted in the lifting of the EC's ban on the import and marketing of poultry.

In other actions, China blocked requests for the establishment of dispute panels by the United States, the EC and Mexico concerning Chinese measures related to the exportation of various raw materials.

This was a first-time request and panel establishment will be automatic when the requests come up again before the DSB.

In a statement at the DSB, the US expressed concern about Chinese measures that restrain the exportation of certain raw materials that are critical to US manufacturing industries. These restraints not only limit the availability of these raw materials, but also increase the cost of these raw materials to US and other producers outside of China, while providing an artificial cost advantage to downstream industries within China.

The US added that the materials at issue are either raw or initially processed materials that are essential inputs in the production of steel, aluminum, and industrial chemicals with far-ranging applications.

The EC noted that the Chinese export restraints on raw materials are by no means a recent phenomenon. The restraints were a problem at the time of China's accession to the WTO, and they remain so today.

China said that it was disappointed that the US, the EC and Mexico have chosen to move forward with requests for the establishment of panels.

China said that during the consultations, it clarified relevant Chinese administrative measures and specified that its policy objectives were to conserve the environment and exhaustible natural resources, which were recognized by the US, the EC and Mexico.

China further said that during the consultations, it also expressed its willingness to further communicate with the complainants on the implementation of the specific measures so as to address their concerns.

China stressed that it has made clear to the three complainants that relevant administrative measures on subject products are under review at present and China is open to hear the opinion of other WTO Members, including the US, the EC and Mexico through further constructive communications. +