8:31 AM Feb 21, 1996

US TO APPEAL GASOLINE RULING

Geneva 21 Feb (Chakravarthi Raghavan) -- The United States lodged an appeal Tuesday with the Standing Appellate Body of the WTO against the ruling of a WTO panel last month that the US gasoline restrictions under the US Clean Air Act was contrary to the GATT and that the US has not been able to justify its necessity (disregard of GATT obligations) to meet its environmental objectives.

In terms of the WTO and its Dispute Settlement Understanding, the appeal is to be heard by three of the seven members of the Standing Body and a ruling on the legal issues given within a 60-90 day period.

The panel recommendations asking the US to rescind its restrictions on imported gasoline by applying different standards from those on domestic refiners, as modified or upheld by the Appellate Body ruling, would be automatically binding.

But judged by the remarks of the US at the Dispute Settlement Body, and the statement of the US Trade Representative Mickey Kantor that the WTO or its panel could not change the US laws, the US might not implement the ruling during the two-year interregnum when under the gasoline rules, the same standards would become applicable to both domestic and foreign refined petroleum products.

In advising the DSB of its filing an appeal, Andrew Schoyer for the US expressed his delegation's "serious concern" on the panel's "significant and inappropriate deviation" from customary panel practice, namely, avoiding discussion of legal issues that were uncontested during the panel proceedings or unnecessary to its findings. The US had not contested before the panel that the measures openly treated imports differently from like domestic products and the panel had acknowledged this. Nevertheless, the panel had discussed at length the issue of "like products" with reference to hypothetical situations not presented and did so in a manner that appeared to offer opinions or arguments and issues that have arisen or may arise in the context of other disputes.

"Such a discussion," Schoyer said, "was wholly inappropriate and should serve as a model of what future panels should not do."

Under the old GATT, the panel process gained confidence of delegations by adopting a "conservative approach" and confining themselves strictly to issues presented for resolution. The departure from this principle by the present panel, and its foray into unnecessary obiter dicta, did not set a good example of the WTO system. The US hoped future panels would refrain from such wandering.

Venezuela in its intervention reiterated that the panel had explicitly recognized that the WTO agreements had not restricted the right of US to regulate the quality of its air and recognized that setting environmental objectives was the sovereign right of each WTO member who was however bound to implement the objectives by providing equal treatment to imported and domestic products. None of the parties to dispute had questioned the objectives of the Clean Air Act or the Gasoline rule. Venezuela in its claim had only sought to show that the achievement of the objectives was possible without discriminating against imported products and had only asked the US to guarantee no less favourable treatment for imported gasoline than that to domestic gasoline.

In other actions, the sought a panel to go into its dispute with Brazil over the latter's levy of a counter-veiling duty on imports of desiccated coconut and sought a panel to go into the dispute.

The Philippines has brought the complaint of Brazilian action as a violation of Art VI of the GATT 1995 of the WTO (and the Uruguay Round Agreement on Subsidies and Countervailing Duties) and, failing resolution of the dispute in consultations held in November last year, sought a panel to go into it.

Since this is the first time the panel request has come, Brazil was able to put off a decision.

Later, the Philippians sought a special meeting of the DSB so that the request can come up a second time, and a panel automatically established. The special meeting is to be held on 5 March.

In presenting its complaint, the Philippines said that the countervailing duty by Brazil amounted to 121.5% of the value and this was inconsistent with the agreement. Brazil argues that the action was in terms of the Tokyo Round codes on this subject, which run till end of the year - a view that Philippians questions.

Apart from the Philippines, Indonesia speaking also for Malaysia said the Brazilian definitive duty had amounted to 155.7% and 196.7% respectively desiccated coconut exported from Indonesia and Malaysia.

Sri Lanka said that the Brazilian action had brought to a halt its exports of all coconut products.

All of these countries reserved their rights and expressed an interest in the case. In other points, Hong Kong advised the DSB that it had sought consultations with Turkey over its unilateral restrictions on imports of textiles and clothing imposed after its customs union with the EU.

The restrictions on Hong Kong exports, while in terms of volume affected was relatively small, nevertheless involved an important point of principle. Noting the large number of countries involved or wanting to be included in the consultations, Hong Kong suggested these should be held in Geneva.

Several other delegations also spoke in support - the Philippines for the ASEAN and particularly Malaysia, the Philippines and Thailand and India which mentioned that 25 suppliers had been affected by the Turkish actions. Others who intervened and/or reserved their own positions included Korea, Peru, Argentina, Colombia, Brazil, and Pakistan.

The EU expressed its own interest in the consultations and said that the Turkish measures resulted from the implementation of the customs union and was covered by Art XXIV (8) of the GATT.

On another issue, Costa Rica advised the DSB of the failure of its consultations over the US restrictions on imports from Costa Rica of underwear and said its own request for a panel to be set up should be brought up before the 5 March special meeting of the DSB.