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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. +

 


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