Apr 25, 1986


GENEVE, APRIL 23 (IFDA/CHAKRAVARTHI RAGHAVAN) – The United States has blocked the adoption of a panel report over an EEC complaint against the U.S., where the panel has found parts of the 1984 U.S. trade and tariff act to be contrary to U.S. obligations under GATT.

The panel report was over the provisions of the U.S. law that enables grape-growers in the U.S. to initiate complaints about subsidised imports of wine into the U.S.

Under GATT provisions, and the subsidies code agreement of 1979, any complaint over subsidised exports of a country may be initiated in an importing country only by the "industry" of the same or similar domestic product which suffers "injury" as a result of the imports of the subsidised products.

While the producers of U.S. wines themselves have found no reason to complain over imports of wine from the EEC countries, the California grape growers have been enabled to do this by a provision in the 1984 U.S. law.

An earlier complaint of the grape growers had been thrown out by the U.S. ITC, on the ground that grape growers had no locus standi.

The U.S. Congress, in its 1984 law, acted to reverse this ruling.

The EEC challenged the U.S. provisions before the Subsidies Code Committee in 1985, and a panel that went into the dispute ruled against the U.S. and called for changes in the U.S. law.

In blocking adoption of the panel report, at the meetings of the Subsidies Committee this week, the U.S. is reported to have taken the position that the legal provisions in question had not been in fact invoked against the EEC wine imports, and was due to lapse in September this year.

However the EEC argues that whether the provision has been invoked or not, it is one on the statute book and creates uncertainty to its exporters.

The U.S. also objected to adoption of the panel report, on the ground that two other panel reports in its disputes with the EEC going back to 1983, those relating to pasta and wheat flour, have not been adopted by the Committee, and adoption of all three reports should be linked.

The EEC has however argued that such linkage was contrary to GATT provisions and practice.

The reports of the pasta and wheat panels have been before the Committee since 1983, but action on them has been mired by disputes between the U.S. and EEC as to what the reports mean and what recommendations the Committee should make to the parties on the two reports.

In the case of the wheat flour panel, where the U.S. has complained over EEC subsidies, the Community has claimed that the panel exonerates the EEC since it does not condemn any EEC subsidy.

The U.S. however agues that the panel has not correctly addressed the U.S. complaint.

In the case of paste dispute, again involving subsidies given by the EEC to pasta producers using EEC-grown wheat, to compensate for the difference between the higher domestic price of EEC wheat in comparison to world prices, the panel gave a ruling by a majority of four to one in favour of the U.S.

At this week’s meeting, the EEC offered to agree to adoption of the wheat flour panel’s report, but the U.S. made clear this was not agreeable, presumably unless changes sought by the U.S. are also accepted.

All three disputes are part of the wider and growingly bitter U.S.-EEC disputes over agricultural trade.

The U.S. has recently enacted an export entitlement programme for subsidising U.S. wheat and other agricultural exports as a counter to EEC subsidies, and has notified GATT about this.

In a reference to this, the EEC has raised the issue of possible "trade distortion".

GATT, and the subsidies code, while outlawing of subsidies on manufactured exports, only requires in case of primary product exports that it should not result in "more than an equitable share of world export trade".

However, there is no agreed definition of "equitable share".

According to participants at the Committee meeting, the U.S.-EEC exchanges ranged not only over the wine, wheat flour and pasta reports, but almost the entire gamut of disputes over agriculture.

A related issue before the Committee has been a two-year long effort to agree on some clarifications of the provisions of the code to resolve growing disputes, and also help third world countries, few of whom are now members, to accede to the code.

One of these touches upon the question of exports subsidies for agricultural products.

The EEC has been blocking progress on this, arguing that the entire issues of trade in agriculture should be treated together, and as part of a package in the new round, and the issue of subsidies on agricultural exports alone could not be dealt with separately in the Subsidies Committee.

The U.S. itself has been expressing growing disenchantment with the subsidies code and the Committee, and complaining that the way the code has been administered, the U.S. has not gained the benefits expected when it agreed to the code during the Tokyo round, and these should be addressed.

There are those within the Subsidies Code Committee who feel that the question of interpretation of the provisions of the code is a matter for the Committee itself, and the differences should be resolved through political decisions, and before a new round is launched or the agriculture trade problems tackled.

There are others who refuse to look at any of these problems except in the context of, and as part of a new GATT round.

The Committee found itself unable to act on the panel reports this week, and put off actions on them till its next meeting.

But the EEC has reserved its right to seek a special session of the Committee if warranted, presumably in case the U.S. grape-growers invoke the law to raise a complaint over EEC wine exports.