May 31, 1991

EC TO COMPLY WITH GATT PANEL RULING ON OIL-SEEDS.

GENEVA, 29 (CHAKRAVARTHI RAGHAVAN) Ė The European Community indicated Wednesday that it was taking steps to bring its oil-seed regime under the common agricultural policy in line with a GATT panel ruling against EC subsidies to its processing industry to buy soyabean and other oilseeds from EC farmers.

The EC's indication was provided in the GATT Council.

GATT Contracting Parties have been increasingly concerned over the tendency of major trading partners either to block panel rulings that go against them or to tie up implementation to the completion of the Uruguay Round and agreements there for change of GATT rules that invalidate their policies.

This paralysis of the dispute panel mechanism of GATT is apart from the total deadlock in dispute settlement in the Tokyo Round subsidies code with its own dispute settlement mechanism.

The U.S., EC, Japan and Canada, the world's four leading industrial nations, in one form or another are guilty of this.

The EC representative indicated in the GATT Council that as part of its package of agricultural measures approved by the Council of Ministers in Brussels last week, the Ministers have agreed that the Commission should table by July 31 its proposals for compliance with the GATT panel ruling and that the Minister would give a decision on this by October 31. .

Earlier, on another pending dispute and panel ruling, the ruling against the U.S. in a case brought by Canada over levy of countervailing duties on imports from Canada of pork products, the U.S. blocked adoption of the panel ruling.

The panel ruling has been before the GATT Council for now nearly eight months and has repeatedly come up at every Council meeting since then, with the U.S. blocking adoption.

The U.S. first contended that the issue was also a subject of a bilateral dispute settlement mechanism under the U.S.-Canada Free Trade Arrangement and the GATT panel ruling and its adoption must wait for the bilateral mechanism.

The Canadians have said the issues raised in the two are different and have been urging adoption of the GATT panel ruling with its implications and precedent it would set for GATT law.

Later, when the bilateral panel also gave a ruling against the U.S., the U.S. blocked adoption on the ground that issue has been taken up in appeal under the bilateral agreement and pending decision in the appeal the GATT panel ruling should not be adopted.

The U.S. delegate, Amb. Rufus Yerxa told the Council Wednesday that the panel appeals procedures would end by mid-June and at that point the U.S. would consider, if the GATT panel ruling was still relevant and should be adopted.

Canada's Robert Wright expressed deep disappointment.

A number of other members - including the EC, Japan, Argentina, Uruguay, Australia, Mexico and Colombia also spoke expressing concern over the difficulties being experienced by the GATT settlement system with parties either refusing to allow the adoption of the panel rulings or holding up implementation until the conclusion of the Uruguay Round.

Speaking for the Nordic countries, Kjill Lillerud of Norway expressed particular disappointment with the state of affairs and the impression that the possibility of blocking a panel ruling to be adopted or implemented was a prerogative of the larger trading nations while smaller trading nations would need to comply. In the longer run this impression would have disastrous consequences.

On another long pending matter, namely Japan's implementation of a panel ruling against it on imports of agricultural products where the U.S. and a large number of other interested CPs have complained of Japanese non-implementation in respect of dairy products and starch - the Japanese delegate reported of a second round of plurilateral consultations held by it on 24 May but that the consultations had not yet led to a mutually satisfactory solution. Japan intended to be in contact with the interested CPs for another round of consultations.

New Zealand reportedly said that in the consultations Japan had been unable to answering of the questions about implementation that were raised. Australia said that it was evident that Japan had not even begun to restructure its affected sectors to comply with the panel ruling. The U.S. also expressed its "extreme disappointment" that Japan had been unable in the consultations to outline any plan to bring its policies in line with the current GATT rules. The U.S. would be prepared to participate in additional consultations if Japan was ready to make such consultations meaningful.The EC, Chile, Uruguay and Thailand also expressed their concern over the Japanese position.In the U.S.-EC dispute over EC subsidies to domestic processors and producers of oil-seeds and related animal-feed proteins to purchase costlier EC inputs of Soyabeans and other oilseeds, a panel had ruled against the EC in November 1989.

But the EC has held up adoption questioning the legal and other arguments of the panel.

When it again came up before the Council this time, the EC indicated that as a result of the decision of the Council of Ministers last week the issue may be nearing a solution.

In the package of agriculture reform measures of the Commission tabled last week, and accepted by the EC Ministers, the prices for domestic oil seeds are to be cut this year by 1.5 percent.

Also, the Commission is to put forward proposals by 31 July for reform of its oil-seeds regime so as to bring it in compliance with the GATT ruling, and the Council of Ministers are to take a decision before 31 October.

The U.S., Australia, Canada and Argentina all were happy to see the Commission's proposals had been accepted by the Ministers and said they were looking forward to see the details.

In a new dispute brought by Canada over U.S. Federal and State taxations on alcohol beverages which reportedly discriminate as between domestic and imported beverages, the U.S. agreed to the establishment of a panel.

The issue had come up at the last Council meeting when the U.S. had blocked appointment on the ground that Canada had not provided adequate details of its complaint, particularly in relation to the taxes and levies by the States. The U.S. repeated this complaint this time too, but nevertheless allowed the panel to be established.

Earlier, under "other business", Japan complained of new measures announced by the U.S. under its Marine Mammal Protection Act. The U.S. has notified Japan that the U.S. Customs would now require all importers of yellow fin tuna fish and products from intermediary nations to certify that they have not been fished by using purse seine nets in the Eastern Pacific. Japan was concerned over these measures, viewing them as contrary to GATT obligations.

India reportedly raised the question of what purported to be a ruling at the last meeting by the Chairman of the GATT Council in interpreting the position about appointment of panels in terms of the 1989 Montreal mid-term accord, which was now in force.

The purported ruling reportedly had been made over the Brazil-U.S. dispute on subsidies and countervailing measures where Brazil had raised a dispute about U.S. violation of the GATT MFN clause.

The U.S. had then raised the issue whether it was Brazilís contention that under the new procedures the establishment of a panel was automatic. Brazil had replied that unless the Council decided otherwise, the panel had to be established. At the U.S. request, the Chairman of the Council, Lars Anell of Sweden, had ruled that a panelís appointment was automatic unless the Council by consensus decided not to establish a panel.

India raised the issue Wednesday and said the interpretation of the GATT rules was not a matter for the Council chair to rule and that interpretation was an area reserved for the GATT CPs.

Anell had reportedly sought to explain that he had not interpreted the GATT rules and provisions and had no precedential value and that he had only made clear the procedural issues arising out of the Montreal agreement. The U.S. also suggested that the statement of the Chair at the last meeting was an interpretation of the GATT council procedures, which the Chair was entitled to do.

The EC agreed that only the CPs could interpret through joint action the rules and provisions of the General Agreement but that the Council Chair should have the authority to interpret procedures and be able to conduct the Council works in an effective way.

India however rejected this and the U.S. view that Chair could provide rulings on procedure, noting that it was not a matter of procedure but one of substantive law. Issues involving GATT rights and obligations could not left for interpretations by any office-bearer or Chairman. The issue should be put on the Councilís agenda or legal opinion sought.

Another issue that came up was the secretariat reorganisation. The Council was due, Wednesday afternoon and Thursday, to hold a "structured debate" on Trade and Environment issues.