TWN
Info Service on WTO and Trade Issues (May16/02)
3 May 2016
Third World Network
US request to study its own measures on tuna blocked by Mexico
Published in SUNS #8229 dated 26 April 2016
Geneva, 25 Apr (Kanaga Raja) -- A request for the establishment of
a compliance panel by the United States to examine its own measures
adopted earlier in March to bring itself into compliance with the
rulings and recommendations of the Dispute Settlement Body (DSB) in
its dispute with Mexico over the US ‘dolphin-safe' labelling regime
for tuna products was blocked by Mexico at a meeting of the DSB on
Friday (22 April).
This was a first-time request and panel establishment will be automatic
when the request comes up again before the DSB.
The US move has come even as the issue has been referred to arbitration
over the level of authorization to be given to Mexico against the
US over non-compliance, long after the expiry of the reasonable period
of time given to the US to comply with the rulings and recommendations
of the DSB in this ‘dolphin-safe' labelling dispute.
The arbitration panel is to rule on the level of retaliation to be
allowed over a request by Mexico for authorisation to retaliate to
the tune of $472.3 million annually in its dispute with the United
States on its ‘dolphin-safe' labelling regime for tuna products.
The US move for a new compliance panel in the dispute, when the level
of authorization to be given is before an arbitrator, is unprecedented,
and some trade observers see it as part of a delaying tactic, in the
US presidential election year, when all candidates, currently engaged
in primaries, have adopted an anti-trade (plurilateral or multilateral)
posture, and US-Mexico relations have also become an issue (see SUNS
#8221 dated 14 April 2016).
In its communication to the DSB, the US said that on 22 March 2016,
it revised the amended tuna measure and brought the dolphin-safe labelling
measure subject to the recommendations of the DSB into compliance
with the Technical Barriers to Trade (TBT) Agreement and the GATT
1994.
Specifically, the US National Oceanic and Atmospheric Administration's
National Marine Fisheries Service (NMFS) issued an interim final rule
(2016 IFR) that revised the amended tuna measure.
According to the US, the 2016 IFR rectifies the inconsistencies of
the amended tuna measure with the TBT Agreement and the GATT 1994
as found by the DSB in the proceeding under Article 21.5 of the DSU.
The US communication said the 2016 IFR amends the dolphin-safe labelling
regulations and brings the dolphin- safe labelling measure subject
to the DSB recommendations into compliance with the TBT Agreement
and the GATT 1994 by rectifying the inconsistencies of the amended
tuna measure with those agreements as found by the DSB in the proceeding
under Article 21.5 of the DSU.
The 2016 IFR, among other changes, revises the design of the determination
provisions and certification, tracking, and verification requirements
such that any detrimental impact stems exclusively from legitimate
regulatory distinctions, for purposes of the second step of an analysis
under Article 2.1 of the TBT Agreement, and that the measure meets
the requirements of the chapeau of Article XX of the GATT 1994, said
the US.
The US and Mexico have consulted on this matter and on the 2016 IFR
extensively, and the US continues to be open to discussing the matter
with Mexico, it added.
The US however understands that Mexico disagrees that the 2016 IFR
revising the amended tuna measure is consistent with the covered agreements
and brings the dolphin-safe labelling measure into compliance with
the TBT Agreement and the GATT 1994.
Noting that Mexico has not sought the establishment of a compliance
panel in the light of this disagreement, the US said that it accordingly
considers it appropriate to seek recourse to Article 21.5 of the DSU,
including wherever possible resort to the original panel, to resolve
the disagreement as to compliance.
The US communication noted that Mexico has requested authorization
from the DSB to suspend concessions in the amount of US$472.3 million
annually.
The US however maintained that the DSB cannot grant authorization
to suspend concessions in any amount where the Member concerned has
come into compliance.
Therefore, it said, as the US has brought the dolphin-safe labelling
measure subject to the recommendations of the DSB into compliance
with the TBT Agreement and the GATT 1994, prompt findings by the DSB
will assist the parties in securing a positive solution to the dispute.
In its statement at the DSB, the US acknowledged that it finds itself
in "a rather unusual position" today. As was discussed at
the last DSB meeting in March, the US National Oceanic and Atmospheric
Administration (NOAA) issued a new rule modifying the dolphin-safe
labelling measure at issue in the dispute.
According to the US, the new rule directly addresses the DSB's findings
on the US dolphin-safe labelling measure, and brings the US into compliance
with its WTO obligations.
However, Mexico has indicated that it is not prepared to refer the
matter of compliance back to a compliance panel at this point. Mexico
has insisted that the arbitration under Article 22.6 of the DSU to
review Mexico's request for authorization to suspend concessions must
move forward immediately and at the DSB meeting on March 23, said
that it considered that the US compliance action was not "legally
pertinent" for the arbitration.
Thus, said the US, Mexico appears to be seeking to avoid the fact
that the US has now changed its measure to come into compliance with
its WTO obligations and instead proceed as though the measure at issue
is unchanged.
As a result, the US said that today it is taking the "unusual
step" of requesting that the DSB establish a compliance panel
pursuant to Article 21.5 of the DSU to confirm that the US has brought
its measure into compliance with the DSB's recommendations and rulings.
The US said it is aware of only one prior instance in which the Member
concerned requested the establishment of a panel pursuant to Article
21.5. At the same time, this is a course of action specifically endorsed
in an Appellate Body report for a Member concerned (the EC Hormones
dispute - WT/DS320/AB/R adopted in November 2008).
According to trade officials, Mexico said that for more than 30 years,
it has been prevented from entering the US market for tuna, despite
the fact that Mexico has demonstrated many times that the US measures
on dolphin-safe tuna are discriminatory.
It noted that other methods that cause the same problem are not challenged
by the US. Eight years ago, Mexico started these procedures against
the measures taken by the US, and until today its exports are still
suffering from discrimination.
This time the US is requesting an Article 21.5 compliance panel without
even informing Mexico ahead with enough time, and without even notifying
any WTO committee, said Mexico.
It added that the US has also not requested formal consultations with
Mexico and now wants to start an Article 21.5 panel.
Mexico said that it might consider asking for its own compliance panel
against the measures taken by the US that were amended in March, independently
of the arbitration and independent of the panel that is being requested
by the US.
Mexico asked the US to follow the formalities for the establishment
of panels, i. e. request for consultations first followed by two panel
requests (if the first request is objected to).
According to trade officials, the US said that it would ask for a
special meeting of the DSB in order to submit its second request for
the establishment of the compliance panel.
In an intervention, the European Union took note of the US request
for a second compliance panel and the fact that there is a pending
arbitration panel.
This appears to raise a "novel procedural situation", with
which a number of complex issues may be associated, it said.
The EU recalled that in EC-Bananas III, reference was made to the
fact that the compliance panel and the arbitration panel would coordinate
their work, but that since they would be the same individuals, the
reality would be that they would find a "logical way forward",
which would allow the DSU to be used to resolve all the remaining
disputes, whilst respecting the rights of both parties (as well as
third parties) and the integrity of the DSU.
The EU expected that in the circumstances of the present case, the
adjudicators will similarly seek to find a "logical way forward",
and will in this respect be supported by the parties and third parties.
It considered that what exactly that "logical way forward"
might be could depend, in some measure, on the information that will
now come to light during the ensuing proceedings, particularly the
compliance proceedings.
Specifically, if the second compliance effort overwhelmingly appears
to be complete, then "we believe that could have consequences
for what the ‘logical way forward' might be when it comes to coordinating
the two proceedings."
The same would be true if, conversely, the second compliance effort
would appear to be minimalist. "We would therefore prefer to
wait for such further information before expressing a view on what
the ‘logical way forward' might be in the particular factual circumstances
of this case."
Given the systemic importance of this issue, the EU said it trusts
that the adjudicators will ensure that, during the proceedings, the
rights and interests of third parties and of the Members more generally
will be fully taken into consideration, and that this will include
the opportunity to comment both in writing and orally once the full
set of facts and arguments are known.
Japan said that the US has made its request at a critical stage in
the dispute, noting that there will be parallel proceedings both under
Article 21.5 and Article 22.6.
According to Japan, this raises questions: what is the relationship
between these two proceedings; what are their respective jurisdictions,
including the issue of whether the Article 22.6 arbitration can review
the issue of compliance; what should be the proper procedural sequence
between these two proceedings; what if these proceedings produce different
conclusions.
According to Japan, the US' action could possibly delay and defer
the DSB's consideration of the request for authorization properly
made by Mexico at this very critical stage in the dispute. This may
potentially set a precedent which could leave room for abuse in the
future, Japan warned.
In order to avoid any procedural difficulties, Japan urged the parties
to the dispute to discuss how the two proceedings could be treated
as orderly as possible, taking care of appropriate due process for
both parties.
As this case would involve difficult issues which the current DSU
does not stipulate clearly, the parties may need "some creative
solutions" which are consistent with the DSU, it said.
According to trade officials, Brazil said it is really astonishing
that issues of interpretation keep popping up in a body like this
(DSB) which is supposed to be the guardian of the rules.
[In a comment, Chakravarthi Raghavan, Editor-Emeritus of the SUNS,
says that whatever be the outcome of this compliance panel move, when
the non-compliance by the US over the rulings and recommendations
of the DSB is before an arbitrator (whose sole remit is to arbitrate
on the level of retaliation to be authorized, and hand down a non-appealable
ruling, within 60 days, for an automatic DSB sanction to retaliate
up to the level of the ruling), it raises the spectre of an endless
loop of rulings, appeals, DSB recommendations, compliance panel and
appeals, arbitration and new compliance panels. It will be another
blow to the credibility of the WTO and its enforceable, rules-based
multilateral trading system of rights and obligations of members,
when one of the parties is a dominant trading partner.
[When the DSU was agreed upon almost at the very end of the final
stages of the negotiations on the single undertaking of the Uruguay
Round negotiations, and made into an integral part of the Marrakesh
Agreements, the Ministers were aware that they were venturing into
uncharted territory including of decisions by negative consensus.
[Hence, they mandated the WTO Ministerial Conference to undertake
and complete a review of the rules and procedures of the DSU "within
four years" of entry into force of the WTO "and to take
a decision on the occasion of its first meeting after the completion
of the review, whether to continue, modify or terminate such dispute
settlement rules and procedures."
[Twenty-one years after entry into force of the WTO, it is still a
work in progress with no end in sight. - SUNS]
OTHER ACTIONS
In other actions, the DSB agreed to establish a panel, at the request
of the Russian Federation, to examine anti-dumping measures imposed
by Ukraine on ammonium nitrate imported from Russia. This was a second-time
request and panel establishment was automatic.
The European Union, the United States, Australia, Korea, Canada, China,
Norway, Japan and Colombia reserved their third party rights to the
dispute.
SURVEILLANCE OF IMPLEMENTATION OF DSB RECOMMENDATIONS
Under the agenda item of US countervailing measures on certain hot-rolled
carbon steel flat products from India, the US recalled that on 9 March
2016, both India and the US agreed to extend the reasonable period
of time (RPT) for implementation by 30 days, so as to expire on 18
April 2016.
The US said with respect to the US International Trade Commission
(USITC) determination, on 7 March 2016, the USITC issued a new determination
rendering the findings with respect to injury in the underlying proceeding
on the product from India consistent with the DSB recommendations
and rulings in this dispute.
With respect to the US Department of Commerce (USDOC) determination,
on 14 April 2016, the USDOC issued a new final determination rendering
its determination with respect to subsidization and the calculation
of countervailing duty rates consistent with the DSB recommendations
and rulings in this dispute.
Accordingly, the US maintained that it has completed implementation
with respect to the DSB recommendations and rulings concerning the
countervailing duty measures on hot-rolled carbon steel flat products
from India.
Under another agenda item on US countervailing duty measures on certain
products from China, the US recalled that the findings in this dispute
involves fifteen separate countervailing duty (CVD) determinations
by the USDOC.
The US said it has completed the implementation process with respect
to nine separate investigations, as well as with respect to the one
"as such" finding in this dispute.
With respect to the remaining "as applied" findings in six
investigations, the US said that the USDOC made a series of preliminary
determinations in December 2015 through March 2016.
The USDOC then sought and accepted comments from interested parties
on those preliminary determinations. On 31 March 2016, Commerce held
a hearing requested by interested parties, and it is currently reviewing
comments received from interested parties and will address those in
its final determination.
The US said that it is working to complete the ongoing administrative
process in the remaining six CVD proceedings as soon as possible.
In its statement on this issue, China voiced concern that the US has
failed to comply with the recommendations and rulings of the DSB in
the dispute.
It said that the reasonable period of time for the US to implement
those recommendations and rulings expired on 1 April. Notwithstanding
the fact that it is now 22 April, the USDOC has yet to complete the
so-called "Section 129" proceedings by which it issues revised
determinations.
China noted that the USDOC did not even begin its compliance proceedings
until nearly three and a half months after the DSB had adopted the
panel and Appellate Body reports. The USDOC then conducted the Section
129 proceedings in "an entirely desultory fashion", it added.
After issuing burdensome questionnaires with inadequate amounts of
time for interested parties to respond, the USDOC then sat on the
parties' responses for over six months, making no apparent progress
towards compliance.
China said that it was not until 7 March that the USDOC had issued
all of its preliminary determinations, less than four weeks prior
to the expiration of the RPT.
China further noted that on 30 March - two days before the expiration
of the RPT - the US approached China and requested a two-month extension
orally.
China said that it refused this request not only because it considered
an extension of the RPT to be unnecessary and unwarranted, but also
because the US request ignored the fact that the RPT in this matter
had been established through binding arbitration.
According to China, this is not the first time that the US has failed
to adhere to the RPT in a dispute relating to trade remedies.
China said it witnessed similar conduct by the USDOC in DS379, another
dispute relating to unlawful AD/CVD measures.
The USDOC appears to have a pattern and practice of dragging its heels
and ignoring deadlines when it comes to complying with the recommendations
and rulings of the DSB, China charged.
It called upon the US to bring itself into compliance immediately
with the recommendations and rulings of the DSB in this matter.
REPORT BY DSB CHAIR
The Chair of the DSB, Ambassador Xavier Carim of South Africa provided
an update on the Appellate Body's workload, the number of disputes
before panels, in the panel queue, and at the panel composition stage,
and the ability of the Secretariat to meet expected demand over the
coming period.
The Chair said that the Appellate Body is currently dealing with three
appeals. In addition, one panel report has been recently circulated
and two more panel reports are expected to be circulated in the next
three months, all three of which may also be appealed.
According to the Chair, these will be followed soon by the report
of the Panel in the complex compliance proceedings in the "EC
and Certain Member States - Large Civil Aircraft" (Airbus/Boeing)
dispute, which was issued to the parties in March and is expected
to be circulated to Members by early September.
Given the limited number of staff available in the Appellate Body
Secretariat, as of the second half of 2016 there is likely to be a
waiting period until all these appeals can be staffed and Appellate
Body Members can turn to dealing with them.
On panels and arbitrations, the Chair reported that currently, there
are 19 active panels that have not yet issued a final report to the
parties.
As of today, there are two composed panels awaiting staff to assist
them, both of which were composed after 31 October 2015 when the Director-General
undertook to staff all panels in the queue at that time.
As of today, there are four panels at the composition stage. In addition,
one matter has been referred to arbitration, said the Chair. +