Feb 19, 1985

U.S. WINE LAW DISPUTE FOR PANEL ADJUDICATION.

GENEVA, FEBRUARY 15 (IFDA/CHAKRAVARTHI RAGHAVAN) – The Subsidies Code Committee in the General Agreement on Tariffs and Trade agreed Friday to constitute a panel to look into the U.S. trade law provisions enabling U.S. grape growers to initiate subsidies and anti-dumping investigations.

The European Community had sought the setting up of the panel to adjudicate its dispute with the U.S., following failure of the committee’s conciliation efforts to settle the dispute.

The Subsidies Code Committee agreed to the request, after hearing U.S. objections, and concerns from some other members of the Committee, over the precedent of GATT looking into the provisions of a domestic legislation, even though there was no actual trade effect.

The Subsidies Committee in GATT administers the subsidies code, negotiated during the 1979 Tokyo Round multilateral trade negotiations.

The code is an agreement among its signatories on the interpretation and application of the relevant GATT articles relating to subsidies, anti-dumping and counter-vailing duty investigations and levy of duties, and settlement of disputes.

Under the code, proceedings about "subsidised exports", for the purpose of levy of counter-vailing or anti-dumping duties in respect of purported subsidised exports, can be initiated normally only at the request of the domestic industry.

The term "domestic industry" has also been defined in the code as referring to domestic producers of "like products".

However, the U.S. trade and tariff act of 1984 has amended the U.S. domestic law to provide that in the case of the "wine and grape products industry", the term "industry" would also include also "domestic producers of the raw agricultural product".

As a result, the U.S. grape growers have been enabled to initiate proceedings and file complaints against wine producers/exporters of other countries exporting to the U.S. market, on the ground that the wine exports or the grapes used in the production of those wines are subsidised and that this causes material injury to the U.S. grape producers.

The European Community had raised the dispute before the Subsidies Code Committee in December last, and the Committee had initiated conciliation between the two parties under the code.

The conciliation efforts having failed, the EEC moved the Subsidies Code Committee for setting up a panel under article 18 (2) of the code, which provides for the panel to be set up within 30 days of a request, and for the panel to report within 60 days of its establishment.

The U.S. delegate, Ms. Jane Bradley, has opposed any panel being named, on the ground that no actual proceedings under the U.S. law had been initiated by the U.S. grape growers, and there was no trade dispute or trade effect that the panel could rule on.

The U.S. had taken a similar position in December before the committee when it was first seized of the EEC complaint.

The European Community Representative, Jack Bourgeois, underlined that under the U.S. law in this matter, once an investigation had been requested, it was automatic and would lead to imposition of duties if there was a finding of "injury".

There was a built-in process of automaticity, and neither the U.S. Commerce Department nor the President would have the power to stay the action at any time.

The trade involved was not a minor affair, but would affect some 600 million dollars worth of EEC wine exports to the U.S., he noted.

"There is no use of bolting the stable doors after the horse has bolted out", bourgeois argued in pressing for a panel to go into the conformity of the U.S. law with the provisions of the code, even in the absence of an actual initiation of proceedings.

According to a GATT spokesman, while all the Code Committee members went along with the Community request, some of them, including the representatives of Sweden (on behalf of the Nordics), Switzerland, Spain and Brazil, were "worried" about the precedent being set of GATT investigating and passing judgement on a law when no concrete trade measure was involved.