Jan 27, 1990


GENEVA, JANUARY 25 (BY CHAKRAVARTHI RAGHAVAN) The GATT Council Thursday adopted by consensus the report of the panel that adjudicated the dispute between the U.S. and European Community over what is known as the soyabean subsidy dispute, but after the EC reserved its rights over the interpretations of the GATT articles by the panel.

A Communication from the EEC, circulated as a GATT document set out its objections and reservations over several of the panel's interpretations, and made clear that what the EC was accepting was the three-part recommendation of the panel that the EC would engage in the process for complying with the recommendations "and will adopt the Community regulations in question in the context of the implementation of the results of the Uruguay Round".

The EC's differences with the panel were shared by several of the Europeans who, according to the GATT spokesman, made similar statements questioning the interpretations of the relevant GATT articles by the Panel.

While these reservations and differences would be reflected in the GATT Council records, with the adoption of the report and its being made public, it would be published in the GATT Basic Documents series and thus is part of GATT law, and would be taken into account by future panels in future disputes, though it would not necessarily bind them to take the same view.

The U.S. dispute with the EC arose over the latter's subsidies to producers of some oilseeds and related animal feed proteins. The U.S. complaints though raised in the content of soyabean imports, covered EC payments and subsidies to processors and producers of oilseeds (soyabeans, rape-seed, sunflower-seed) and related animal-feed proteins.

The Subsidies in question are in effect paid to processors.

The EC's scheme involves a target price payment of subsidies to processors who purchase domestic oilseeds and other animal feed protein inputs. with the subsidy calculated on the basis of the target price and the world market prices calculated by the EC from time to time, and with the EC announcing a domestic intervention price with guarantee of purchases if the EC market prices for the oilseeds fell below this. The insulation of the EC internal market prices from the world prices has meant that in practice there has been no need to exercise the option.

The panel found this scheme in effect is a subsidy to processors to purchase domestic rather than imported raw materials and violated the "national treatment" principle and rules in Article III: 4.

The panel also found that the EC's subsidy scheme to producers, insulating them completely from the movement of prices of imports, prevented the EC's bound zero tariff on such imports from having any impact on the competitive relationship between domestic and imported oilseeds, and had thus impaired benefits accruing to the U.S.

The panel had recommended that the Contracting Parties request the EC to bring its regulations for subsidy to producers via the processors into conformity with GATT and that the EC consider ways and means of eliminating the impairment of its tariff concession on oilseeds. The CPs were also recommended to take no further action (such as allowing the U.S. to retaliate by withdrawing equivalent concessions) "until the Community has had a reasonable opportunity to adjust its regulations to conform to Article III: 4".

In allowing the panel report and its recommendations to be adopted by consensus, EC representative Amb. Tran Van-Thinh, made clear that in turn the U.S. should likewise comply with the recommendations in full, and thus would have no option to undertake any unilateral retaliation measures.

Much of the discussion in the Council on the issue would appear to have centered on the panel's interpretations of the Article III: 4 and the payment of subsidies to producers.

A GATT spokesman however suggested that the panel's views on this were narrower than the view of the EC and its supporters, namely, that the panel had ruled the producer subsidies themselves to be illegal per se, if not paid "directly" to producers. He also noted the differences of opinion, in relation to the U.S. claims of impairment accepted by the panel, as to the legitimate U.S. expectations of benefits arising out of tariff concessions in 1962 in the Dillon round, and how long these expectations could be said to continue in the light of successive extensions of the EC's external tariff after successive renegotiations.

. The EC's views on both the issue of interpretation by the panel relating to payment of subsidies to producers through the processors, and the issue of U.S. expectations, reportedly found support from Switzerland, Austria, and Finland on behalf of the Nordics.

Australia, Argentina, Hungary and the U.S. were among those who argued that no problems of interpretation were involved.

While Canada appeared to agree that implementation of the panel's recommendation could be done as part of the package of negotiated agreements under the Uruguay Round, Australia did not agree while Japan felt that the adoption of the report could not prejudge the position of CPs in the context of the Uruguay Round.

The EC's Communication, dated January 25 and circulated at the meeting, did not appear to have been read and at least was not commented upon by many delegates.

The EC contested the panel view that subsidies not paid "directly" to producers would not attract the exceptions in Article III: 8 (b) permitting subsidies "exclusively" to domestic producers, and said nothing in the text of the article nor in the preparatory work (for the Havana Charter and the GATT) allowed such an assumption and the shifting of the burden of proof away from the complainant.

An annex, to the communication listed various countries which, the EC noted, had notified GATT about similar practices of theirs - of providing domestic support to producers through processors and other intermediaries - and in terms of the panel's ruling could be said to be acting in violation of Article III: 4.

The Countries listed are Canada (freight assistance to processors of oilseeds and products), Finland (meat and dairy product producer support through processors), Switzerland (dairy products, rapeseed, beet-sugar, fruits and wine), U.S. (peanuts, dairy products and sugar), Austria (grains), Sweden (field beans) and Australia (support paid to farmers for certified seed and to feed industry for use of field beans and peas; bounties on some soft, edible and stoneless berry fruits paid to producers when delivered to processors for processing and specifically identified as intended to help domestic berry fruit growing against import competition).

The EC also charged the panel with making not findings on facts but on the basis of assumptions, ignoring the requirement of various written texts and decisions that the effects of challenged measures had to be duly established by the complainant.

Another annex to the EC communication also contested the panel's view that the U.S. could not be assumed to have reasonably expected, when EC's concessions were repeatedly renegotiated since 1973-74, in relation to enlargement of the EC, that the EC would be putting in place domestic producer support that would insulate EC oilseed producers from the world market prices.

The EC has argued in the annex using some curious language though, that given the EC's internal support programme, replacing the arrangements in force in individual EC member-states, had been adopted in 1974 and the adoption of the regulation "will have been preceded" by a long preparatory discussion within the Community, it "can be assumed" that the U.S. and other CPs "would have known" of the evolution of support arrangements and hence their expectations about conditions of competition would have had to be qualified by this knowledge, prior to the renegotiations of the tariffs in mid-1974.

"If this is true for the 1973-74 renegotiations, it is also true a fortiori for the subsequent negotiations in 1981 and 1996-87", the EC has contended.