World Trade
Organization
WT/DS217/ARB/EEC (31 August 2004)
UNITED STATES –
CONTINUED DUMPING
AND SUBSIDY OFFSET
ACT OF 2000
(ORIGINAL
COMPLAINT
BY
THE EUROPEAN COMMUNITIES)
under
Article 22.6 of the DSU.
On 27 January 2003, the Dispute
Settlement Body (DSB) adopted the report of the Panel in this dispute, as
modified by the report of the Appellate Body.
The findings adopted by the DSB were that the measure at issue in
this case – the Continued Dumping and Subsidies Offset Act of 2000 (hereafter
"CDSOA"):
(a)
is a
non-permissible specific action against dumping or a subsidy, contrary to
Articles VI:2 and VI:3 of the GATT 1994, Article 18.1 of the
Agreement on Implementation of Article VI of the General Agreement on
Tariffs and Trade 1994 (hereafter the "Anti-Dumping Agreement") and
Article 32.1 of the Agreement on Subsidies and Countervailing Measures
(hereafter the "SCM Agreement");
is inconsistent with certain provisions of the
Anti-Dumping Agreement and SCM Agreement, so that the United States has failed
to comply with Article 18.4 of the Anti-Dumping Agreement,
Article 32.5 of the SCM Agreement and Article XVI:4 of the Marrakesh
Agreement Establishing the World Trade Organization (hereafter the "WTO
Agreement");
pursuant to Article 3.8 of the DSU, to the
extent that it is inconsistent with provisions of the Anti-Dumping Agreement
and the SCM Agreement, nullifies or impairs benefits accruing to the
complaining parties under those Agreements;
On 13 June 2003, an arbitrator
established under Article 21.3(c) of the DSU ruled that the
"reasonable period of time" for the United States to implement the
recommendations and rulings of the DSB in this case was 11 months from the date
of adoption of the Panel and Appellate Body Reports by the DSB. The United States was consequently awarded
until 27 December 2003 to bring the CDSOA into conformity with its obligations
under GATT 1994, the Anti-Dumping Agreement, the SCM Agreement and the WTO
Agreement.
On 16 January 2004, the European
Communities requested authorization from the DSB, under Article 22.2 of
the DSU, to suspend the application to the United States of tariff concessions
and related obligations under GATT 1994 in an amount to be determined every
year by reference to the amount of the offset payments made to affected
domestic producers in the latest annual distribution under the CDSOA.
The amount would be established by adding:
(b)
the amount of
offset payments attributed to duties collected on products from the European
Communities; and
(c)
a proportionate
amount of the balance of total offset payments less the offset payments
attributed to duties collected on products of other Members that are authorized
by the DSB to suspend concessions or other obligations in this dispute.
Every year, prior to the adjustment of
the duties, the European Communities will notify to the DSB a detailed list
indicating the level of the additional duty on the selected products in the
light of the changes in the level of the disbursements made under the
CDSOA. The list of products subject to
increased import duties will not be changed.
On 26 January 2004, the United States
submitted a communication to the DSB objecting to the level of suspension of
tariff concessions and related obligations under GATT 1994 proposed by the
European Communities, on the grounds, inter
alia, that the European Communities' request failed to specify the level of
suspension it proposed to implement, and was therefore an inadequate basis for
an arbitrator to make the determinations provided for in Article 22.7 of
the DSU.
At the DSB meeting of 26 January 2004,
the European Communities' request under Article 22.2 of the DSU and the
United States objection were referred to arbitration in accordance with
Article 22.6 of the DSU.
As mentioned in the previous section, on
19 February 2004, the United States filed a request for a preliminary ruling
from the Arbitrator that:
(d)
a Requesting
Party cannot suspend concessions or other obligations based on the
nullification or impairment suffered by other WTO Members; and consequently
offset payments for products other than the Requesting Parties' products that
are subject to anti-dumping or countervailing duty orders are outside the scope
of the arbitration proceeding with respect to that Requesting Party;
(e)
the Requesting
Parties failed to specify the level of suspension and the level of
nullification or impairment in such a way that allows the Arbitrator to
determine equivalence; and consequently each party must provide the information
necessary to enable the Arbitrator to make the determinations called for under
the DSU in relation to that party; and
(f)
the proposition
that a Requesting Party may establish a new level of suspension each year is
inconsistent with Article 22 of the DSU;
and is consequently outside the scope of the arbitration proceeding for
any party requesting to proceed in that manner.
The United States claims that the
Requesting Parties have failed to specify the level of suspension of
concessions and the level of nullification or impairment, both in their
requests under Article 22.2 of the DSU and subsequently in the course of
this arbitration, in a way that enables the Arbitrator to determine
equivalence. The United States presents this issue as one of specificity of the
request under Article 22.2 of the DSU and, more generally as a question of
duty to cooperate with the Arbitrator by providing information on the level of
nullification or impairment.
The United States contends that the
Requesting Parties have failed to quantify either the level of suspension or
the level of nullification or impairment.
The Requesting Parties replace specific values with general concepts and
ask the Arbitrator to determine that two amounts are equivalent to one another
without knowing what those amounts are.
The United States adds that the Requesting Parties decline to provide
any information on the level of suspension requested or to base their request
on trade effect.
The United States notes that the
Requesting Parties intend to impose a yet unidentified duty to an unspecified
value of imports, thus failing to identify the amount of trade that would be
covered by their request. Without more
information, it is impossible to "determine" the level of suspension
proposed and the actual impact of the duty on imports from the United States.
According to the European Communities,
the argument of the United States that the Requesting Parties failed to
identify a level of suspension or a level of nullification or impairment, thus
making it impossible for the Arbitrator to fulfil its mandate, is based on the
assumption that these levels can only be determined in terms of trade effect.
The European Communities considers that Article 22 of the DSU does not
require a "trade effect" test.
In any event, the European Communities' request for retaliation clearly
sets out a quantifiable level of suspension of concessions and related
obligations. The Requesting Parties
specified that the amount of the annual offset payments constitutes the level
of nullification or impairment up to which each Requesting Party may suspend
concessions or other obligations. As
the amount of disbursement is published each year by the United States'
authorities, the corresponding levels are clearly defined. The European Communities adds that the
arbitrator in US – 1916 Act (EC)
(Article 22.6 – US) acknowledged that the fact that the requested
suspension had not been stated in quantitative terms did not, in and of itself,
render a request for suspension of concessions or other obligations
inconsistent with Article 22. A fortiori, in this case, the level of
nullification or impairment and the level of suspension are quantifiable and
identified at each moment, thus allowing the Arbitrator to determine their
equivalence.
Regarding the allegation according to
which the Requesting Parties failed to identify an amount of trade that would
be covered by their request, the European Communities argues that nothing in
Article 22 of the DSU requires a "trade effect" test for
determining the level of suspension.
The European Communities further argues that it is hardly possible to
predict the particular "trade effect" of a tariff increase. In addition, arbitrators have never
previously considered the trade effect of a requested suspension.
[W]e determine that, in the matter United States – Continued Dumping and Subsidy
Offset Act of 2000 (Original Complaint by the European Communities), the
level of nullification or impairment suffered by the European Communities in a
particular year can be deemed to be equal to the total of disbursements made
under the CDSOA for the preceding year relating to anti-dumping or
countervailing duties paid on imports from the European Communities, multiplied
by the coefficient identified in Section III.D above.
Accordingly, we decide that
the suspension by the European Communities of concessions or other obligations
in the form of the imposition of an additional import duty above bound custom
duties on a list of products originating in the United States covering, on a
yearly basis, a total value of trade
not exceeding, in US dollars, the amount resulting from the following equation
….. would be consistent with Article 22.4 of the DSU.
In this respect, we note that the
European Communities will notify the DSB every year, prior to the entry into
force of a new level of suspension of concessions or other obligations on the
basis of the above-mentioned formula, the list of products that will be subject
to this measure.
In that context, we suggest that the
European Communities also notify to the DSB, every year, the amount of trade
that will be subject to the above-mentioned measure.
Finally, we remind that Article 22.8
of the DSU provides that:
"The suspension of
concessions or other obligations shall be temporary and shall only be applied
until such time as the measure found to be inconsistent with a covered
agreement has been removed, or the Member that must implement recommendations
or rulings provides a solution to the nullification or impairment of benefits,
or a mutually satisfactory solution is reached. …"
Some of the issues raised in these
proceedings lead us to make the following remarks for wider consideration.
As mentioned above, the DSU does not
expressly explain the purpose behind the authorization of the suspension of
concessions or other obligations. On
the one hand, the general obligation to comply with DSB recommendations and
rulings seems to imply that suspension of concessions or other obligations is
intended to induce compliance, as has been acknowledged by previous
arbitrators. However, exactly what may induce compliance is likely to vary in
each case, in the light of a number of factors including, but not limited to,
the level of suspension of obligations authorized.
On the other hand, the requirement that
the level of such suspensions remain equivalent to the level of nullification
or impairment suffered by the complaining party seems to imply that suspension
of concessions or other obligations is only a means of obtaining some form of
temporary compensation, even when the negotiation of compensations has failed.
In other words, it is not completely
clear what role is to be played by the suspension of obligations in the DSU and
a large part of the conceptual debate that took place in these proceedings
could have been avoided if a clear "object and purpose" were
identified.
The WTO dispute settlement system
authorizes Members to challenge a law as such, i.e. irrespective of whether it
has been applied or not. The "classical"
approach based on an assessment of the trade effect of a given measure may not
always contribute to the identification of the actual level of nullification or
impairment, in particular if no instances of application had arisen at the time. This may be because the trade effect of a
measure may be difficult to assess due to the lack of verifiable figures. We are of the view that, while parties share
a duty to cooperate with the Arbitrator in the establishment of the facts,
there is no reason a priori to
sanction the requesting party or the respondent if supporting figures are
difficult or impossible to find. We
believe that this is a situation that has to be addressed in order to reach a
decision on what may be achievable through recourse to suspension of
obligations in such cases.
In this arbitration, we have interpreted
the concept of nullification or impairment, inter
alia, from the terms of Article XXIII of GATT 1994 and
Article 3.8 of the DSU. We
believe, however, from the extensive discussion of this concept by the parties,
that the actual meaning of this provision is disputed and needs to be addressed
in the appropriate forum.
Finally, we note that an issue that arose
as a consequence of following the approach whereby each party would be granted
the right to suspend obligations exclusively in relation to its own exports is
that there will remain disbursements under the CDSOA in respect of goods from
other Members and non-WTO Members for which no suspension of concessions or
other obligations have been authorized.