Mar 24, 1988


GENEVA MAR 22 (IFDA)— The GATT Council Tuesday adopted two panel reports involving complaints against Canada, and referred two other disputes, one against Norway and the other against Japan, to separate panels for adjudication.

The complaint against Norway was by the United States which contended that Norway operated an import licensing system for the imports of apples and pears, and that during the Norwegian harvesting season for these fruits no licenses were issued, and this was a protection that violated the GATT provisions against quantitative restrictions.

In agreeing to the establishment of a panel, the Norwegian delegate, Martin Huslid, however said that there was no violation of GATT by Norway in this regard. The Norwegian legislation authorising such restrictions, he noted, dated back to 1934 and pre-dated Norway’s accession to GATT.

It was thus protected under the terms of the general agreement and Norway’s accession protocol, as well as the protocol of provisional application of GATT.

In the dispute against Japan, Canada had complained that Japan levied an eight- percent import tariff on spruce-pine-fir (SPF) dimension lumber imported into Japan from Canada.

However, the Canada claimed, "like" products of lumber were allowed duty-free, and the Japanese tariff on Canadian lumber thus violated the article one most-favoured-nation requirement.

Japan did not accept the "like product" argument but agreed to the panel.

The panel reports against Canada involved a European Community complaint against the practices of Canadian provincial liquor boards, and an U.S. complaint against Canadian restrictions on exports of unprocessed herring and salmon.

In both instances the panels had ruled against Canada.

The dispute regarding Canadian provincial liquor boards was raised by the EEC in June 1984, and the GATT council agreed to name a panel in March 1985. But the panel was actually set up in December 1986. The two sides took all that time to agree on terms of reference and the composition of the panel.

The panel reports were given to the two parties in October 1987, and brought up before the council for the first time now.

The Canadian federal statutes give monopoly on import of alcoholic beverages into Canada to provincial liquor boards, who also have monopoly on distribution, mainly through government liquor stores. In their activities, the boards have both a fiscal objective (of raising revenues), and social objectives of discouraging alcohol use.

The EEC had complained that the boards frequently had higher mark-ups on imported beer, wines and spirits compared to domestic products.

Also, suppliers had to obtain from a provincial board for "listing" or permission to sell, and this is subject to conditions. The conditions for imported alcoholic beverages, according to the EEC, were more onerous.

The EEC contended that the Canadian practices violated article two (tariff bindings) and article three (national treatment), article XI (general prohibition of quantitative restrictions), and article XVII (obligations of state-trading enterprises).

The main Canadian defence was that the EEC had previously accepted the use of differential mark-ups, which reflected commercial considerations and not in excess of the tariff schedules, and that the actions were in accord with the "provincial statement of intentions" negotiated in the Tokyo round.

The panel ruled against Canada, and said Canada should be asked to take such reasonable measures as might be available to it to ensure observance of the provisions of the general agreement by the provincial liquor boards.

Canada, the panel said, should also be requested to report on the action taken before end of 1988, to enable the Contracting Parties to decide on any further action.

In agreeing to the adoption of the report, the Canadian delegate, J. M. Weekes, said his government had some difficulties over the interpretations in the panel report, particularly on the question of obligations of a CP (of a federal state) to ensure compliance by regional and local governments.

The Canadian contention was that the Canadian constitution precluded the federal government from imposing its views on the provinces.

Weekes said the Canadian government would work with the provinces during 1988 to secure compliance, and would report on the action taken before the end of the year.

In the herrings and salmon dispute, where Canada had banned exports of unprocessed fish as a nature conservation measure, the panel had found this to be violative of article XI.

In agreeing to the adoption of the report, Weekes complained of "a double standard" in such cases.

There should be a fair balance, he said, between obligations of resource-exporting countries not to impose trade "restrictions and of the imparting consumer countries not to impose escalating tariffs at every stage of processing.

Canada before the panel had only justified its restrictions on grounds of environment and conservation.

Weekes said that Canada would implement the panel report, but the law would be changed to require all such fish to be landed in Canada prior to export and sale.

On another complaint, by the U.S. against South Korea, over restrictions on imparts of beef, South Korea did not agree to a panel, arguing that the GATT procedures for consultation had not been exhausted.

The U.S. complaint, subject of bilateral consultations for some time, and more formally in GATT over the last few months, was that South Korea operated an import licensing system on beef.

Since 1984, the U.S. complained, South Korea had not granted any import licences except for imports in tourist hotels, and even that had been stopped since 1985 - with the exception of a 49-ton import for the October 1986 meeting of the international monetary fund in Seoul.

South Korea noted that other contracting parties too were interested in the issue, and South Korea was having consultations with them, including later this week with some of them.

At the suggestion of the chairman, Amir Jamal of Tanzania, the Council agreed to revert to this matter at its next meeting in May.

On the U.S. super-fund levy on imported petroleum and petroleum products, where a panel ruled against the us and the report had been adopted, the EEC complained of delay by the U.S. in implementing the report, and served notice that it would be seeking GATT permission to retaliate against the U.S. by withdrawing concessions equivalent to trade damage suffered by it.

The U.S. superfund tax levied an 11.7 cents tax per barrels on imported oil and 8.4 on domestic oil. The panel had held this to be violative of article III of GATT.

The EEC move for permission to retaliate is something unusual, and was seen by others as part of its efforts to exercise pressure on the U.S.

GATT sources said the last time a party which won a panel ruling had come to GATT for permission to retaliate was in 1952, when Netherlands won a dispute against the U.S. over levies on imported cheese. A working party had looked into the request, and ultimately authorised Netherlands to withdraw some concessions.

In opposing the EEC request, the U.S. delegate, Amb. Michael Samules, contended that this was premature, that the Administration had already proposed changes in law to be effective from fiscal 1989 (year commencing from October 1) so that the levy would be at a revenue neutral point of 9.65 cents a barrel on both imported and domestic petroleum.

On another panel report against the U.S., and which has also been accepted by the Council last year and relates to the levy of customs-user fee on imports, the U.S. sought "de-restriction" of the panel report to enable it to use it before Congress in order to get the law changed.

Most GATT documents and papers are never published, and GATT bodies themselves meet only in privates. Panel reports are published several months after they are adopted by the GATT Council.

A GATT spokesman said that the GATT director-general has now proposed that all panel reports should be de-restricted and published as soon as the reports are adopted. The GATT Council is expected to decide on this at its next meeting.

Under any other business, the U.S. complained about restrictions imposed by Greece an imports of almonds since last November, and sought consultations with the EEC on the issue. The Greek restrictions, the U.S. claimed, had meant a 19-million dollars worth of lost exports, since Greece has had a bad almond harvest, while California had had a good one.

The EEC agreed to the consultation request.

On the dispute with India over almonds, where the GATT Council has agreed to a panel, the U.S. delegate Amb. Michael Samuels reportedly remarked that the U.S. had raised the dispute in July last and was glad that at least a panel was being named with agreed terms of reference.

India and the U.S. have been discussing both the terms of reference and the panellists, and reportedly both sides have reached agreement this week.

But the Samuels statement implied delay by India, which the Indian delegate, P. S. Randhawa repudiated.

Randhawa reportedly noted that the standard terms of reference for a panel was never the issue. The only issue had been that when the U.S. had sought a panel, a number of Contracting Parties had made statements in the Council referring to the wider issues raised and the question of interpretation of article XVIII.

This article deals with government assistance to economic development, and has special provisions relating to the restrictions that third world countries could impose for balance-of-payments considerations, and the autonomy they enjoyed in choosing the import they would permit and those they would restrict.

India, Randhawa reportedly clarified, had hence sought a "neutral wording" in terms of reference to enable the panel to go into these questions. India had not delayed the setting up of the panel, and like the U.S. hoped for expeditious settlement, now that such a neutral formulation had been agreed upon.

Brazil, Yugoslavia, Mexico and Egypt were among third world countries who reportedly spoke underscoring their interest in the matter. These countries stressed their view that the issues raised by the U.S. in this dispute were of fundamental importance to them, and went beyond a bilateral dispute about imports. They therefore reserved their right to make submissions to the panel.

Chile complained about the EEC’s new licensing system for apples, and said the system was in effect being used to restrict and damage import of apples from the Southern Hemisphere.

The EEC claims it is merely operating import surveillance, but the system, Chile pointed out requires prior deposits before licenses are granted.

Chile’s complaint was supported by U.S., New Zealand, Australia, Argentina, South Africa and Canada.

No action was taken, but the reference implied that Chile intends to bring it up at a future meeting.

Without mentioning the subject of its complaint against Japan, import of beef and citrus fruits, the U.S. delegate, Amb. Samuels, advised the council of the U.S. intention to seek an additional meeting of the council "as early as possible" in April to discuss the serious issue of import restrictions by Japan on certain agricultural products, and commented on that basis.

Though the U.S. did not specify the products, others assumed the reference was to beef and citrus fruits.

Australia said it was prepared to support actions on beef restrictions by Japan.

Japan itself noted that the GATT dispute settlement procedures placed emphasis, at least in initial stages, on Contracting Parties settling disputes through official consultations. Japan was trying to settle the issue through consultations, and it was premature to talk of establishment of a panel, leave aside doing it through a special council meeting.

The U.S. however said that it was talking about a bilateral agreement due to expire in March, and hence the urgent need to look into the restrictions.

Argentina supported the U.S. right to call for a council meeting, while Nicaragua said that if there was one all pending issues should be put on the agenda.

One of the pending issues is a panel ruling that held against the United States for its sanctions against Nicaragua, where the adoption of the report has been blocked so far by the United States.