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Info Service on WTO and Trade Issues (Aug25/14) A WTO dispute settlement panel issued a mixed but largely favourable ruling for Indonesia, finding that the EU violated key provisions of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement). The 145-page report was issued by a panel composed of three former members of the WTO Appellate Body: Mr. David Unterhalter (Chairperson), Mr. Ricardo Ramírez-Hernández, and Mr. Peter Van den Bossche. The panel upheld several of Indonesia’s central claims regarding the European Commission’s imposition of countervailing duties on Indonesian biodiesel exports since 2019. Indonesia had challenged the European Commission’s determination that the Government of Indonesia (GOI) provided subsidies to its biodiesel industry through various policy measures. Jakarta also contested the Commission’s determination that subsidized Indonesian biodiesel imports posed a threat of material injury to EU biodiesel producers. Indonesia also raised concerns about procedural inconsistencies in how the EU applied its CVD measures. The WTO Dispute Settlement Body authorized the establishment of the panel on 27 November 2023, paving the way for this ruling. Key findings: EU found in violation of SCM Agreement The panel concluded that the European Commission acted inconsistently with Article 1.1(a)(1)(iv) of the SCM Agreement by determining that the GOI, through measures including export taxes and levies—and by effectively acting as a price setter in the domestic crude palm oil (CPO) market—induced domestic CPO producers to sell locally and thereby entrusted or directed private CPO suppliers to provide CPO to Indonesian biodiesel producers at less than adequate remuneration. Given this finding, the panel declined to rule on Indonesia’s additional claim under the same provision—that the provision of CPO to biodiesel producers constitutes a governmental function normally vested in the state and, in practice, does not differ from typical government conduct, as specified in Article 1.1(a)(1)(iv). The panel also found that the European Commission violated Articles 1.1(a)(2) and 32.1 of the SCM Agreement by concluding that the GOI provided income or price support to the biodiesel industry through the same set of measures affecting the CPO market. In light of these findings, the panel refrained from examining Indonesia’s further claims that the Commission acted inconsistently with Articles 1.1(b) and 14(d) of the SCM Agreement by determining that CPO suppliers conferred a benefit on biodiesel producers by selling below market value. Similarly, given the above conclusions, the panel did not assess Indonesia’s claims that the Commission violated Articles 1.2, 2.1, and 2.4 by deeming the CPO supply and income support measures as specific subsidies. Partial relief for the European Commission The panel granted some relief to the European Commission, ruling that Indonesia failed to prove that the Commission acted inconsistently with Article 12.7 of the SCM Agreement by relying on “facts available” regarding information related to PTPN (PT Perkebunan Nusantara), a state-owned enterprise under Indonesian government control. Additionally, the panel found that Indonesia did not establish a violation of Article 12.7 when the Commission disregarded information submitted by independent CPO suppliers in assessing whether PTPN had depressed domestic CPO prices. However, the panel did find that the Commission acted inconsistently with Article 12.7 by resorting to “facts available” concerning independent CPO suppliers, on the grounds that the GOI allegedly failed to ensure the submission of their Appendix B responses. Material injury and threat determination On the issue of material injury, the panel ruled that Indonesia did not demonstrate that the Commission violated Articles 15.1 and 15.2 of the SCM Agreement by failing to ensure price comparability or by not assessing significant price undercutting across the product as a whole. However, the panel found that the Commission did act inconsistently with Articles 15.1 and 15.2 by failing to conduct an objective examination, based on positive evidence, of the impact of Indonesian biodiesel imports on the prices of like domestic products. The Commission was also deemed to have improperly concluded that there was significant price depression, breaching the same provisions. Furthermore, the Commission violated Articles 15.1 and 15.4 by failing to objectively assess, based on concrete evidence, other factors affecting the condition of the EU biodiesel industry. The panel also held that the Commission—positioned as a defender of multilateral trade rules—acted inconsistently with Articles 15.1 and 15.7 by concluding that the totality of threat factors indicated the EU industry’s fragile economic condition would likely worsen due to imminent and ongoing subsidized Indonesian imports. Additionally, the panel found that Brussels violated Article 15.7 by failing to properly consider changes in circumstances within its threat-of-injury analysis. Price undertaking rejection Regarding the rejection of a price undertaking offer during the investigation, the panel concluded that Indonesia did not prove that the Commission violated Article I:1 of GATT 1994 or Articles 15.8 and 18.3 of the SCM Agreement by declining Wilmar’s price undertaking offer, even after accepting a similar offer from Argentine exporters. On the issue of non-disclosure of information, the panel found that Indonesia failed to establish that the Commission breached Articles 12.1, 12.3, 12.4, and 12.4.1 of the SCM Agreement by not requiring EU producers to submit non-confidential summaries of their information. Conclusion: Nullification or impairment of benefits In its final assessment, the panel invoked Article 3.8 of the WTO’s Dispute Settlement Understanding (DSU), which states that a violation of obligations under a covered agreement prima facie constitutes nullification or impairment of benefits. The panel concluded: “We find that, to the extent that the measures at issue are inconsistent with the SCM Agreement, they have nullified or impaired benefits accruing to Indonesia under that agreement.” This landmark ruling strengthens Indonesia’s position in the global trade arena and underscores the importance of adherence to WTO rules, even among major trading blocs like the European Union. The decision now sets the stage for potential compliance measures or appeals, depending on the next steps taken by both parties.
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