Apr 26, 1991


GENEVA, APRIL 24 (BY CHAKRAVARTHI RAGHAVAN) – The Chairman of the GATT Council, Amb. Lars Anell of Sweden, is to hold consultations with the major trading partners, and others involved, over the blocking and/or non-implementation of panel rulings which overall is threatening the credibility of the GATT system.

Anell announced his intention at the Council Wednesday when it went through an agenda of past panel rulings, all involving the four major trading partners (U.S., EC, Japan and Canada) which have either not been implemented or only partially, with the parties against whom the ruling had been given taking the stance that implementation would be done at the conclusion of the Uruguay Round.

So far, five panel rulings, whose recommendations for settling the disputes have been accepted and adopted by the GATT Council, but remain unimplemented. The five cases are:

* A panel ruling against Japan over its GATT illegal restrictions on agricultural imports,

In all the cases the party against whom the ruling was given has allowed adoption but made clear it would implement it only in the overall context of the Uruguay Round agreements.

All of them hope that either the agreements would result in new rules or understandings supportive of their own position in the dispute or that in the overall context of benefits to them, implementation of the adverse ruling would be easier.

Interestingly, the same party which is holding up on this ground a ruling against itself, brings up complaints of non-implementation of rulings favourable it and press for action, arguing that the outcome of the Uruguay Round had no relevance to panel rulings based on the existing state of GATT obligations and rights.

But the major trading partners have never been noted for their consistency in the positions they take in GATT or elsewhere.

With the decision to "extend" the Uruguay Round without any time-limitation for conclusion, the issue of non-implementation of the panel reports has raised new concerns.

In the discussions in the Council Wednesday, either on the particular panel report and its non-implementation or in the general comments, a number of participants expressed their concern over the situation and its likely result in terms of the GATT system and the credibility of its dispute settlement mechanisms.

Apart from these five cases, which have been related to the Uruguay Round, there has been the even more notorious instance of the panel ruling against the U.S. in its dispute with Nicaragua, under the Sandinista regime, over the ban on sugar imports from Nicaragua. The U.S. allowed the ruling to be adopted, refused to implement it, and blandly told Nicaragua it could retaliate against the U.S., and then re-imposed the ban on imports, using the National security exception clause of GATT.

Since the GATT system depends on enforcement through the jungle-law of retaliation, after the GATT authorises it, the credibility of the system vis-à-vis the smaller and weaker trading partners has been pointed out by outsiders, but has led to no moves for collective actions to enforce rulings.

Earlier, the Council considered the Korean programme of trade liberalisation for 1992-1994 (involving the phasing out of import restrictions on 133 products) arising from its disinvocation of its GATT BOP rights -and the conditions under which this was done, the U.S. expressed its "deep disappointment" over the substance and scope of the liberalisation.

The U.S. complained that it represented less than half of the value of trade covered by the bop restrictions, and 75 percent of the phased-out products were of little or no trade interest to Korea’s major trade partners. The U.S. was also concerned that the de-restricted measures could be replaced by others of similar effect (through health and other restrictions).

Canada and Australia made similar points- while the EC saw the Korean action as the first step in liberalisation but one lacking in clarity.

Korea however said that the products remaining to be liberalised were those providing a major source of income for its farmers and thus sensitive. When the programme was fully implemented by 1997, the liberalisation of imports of its agricultural products would be over ninety percent.

On the panel finding against the U.S. over the Canadian complaint on levy of CV duties on imports of fresh, chilled and frozen pork from Canada, the U.S. again blocked adoption.

The panel report had come up before the GATT CPs at their annual session in December last, and at subsequent Council meetings, with U.S. blocking adoption on the ground that the issue was being considered by the U.S.-Canadian dispute settlement mechanism under their Free Trade Agreement.

The U.S.-Canadian panel has since given a ruling against the U.S., but the U.S. Wednesday again blocked adoption of the GATT panel ruling, on the ground that the ruling in the bilateral panel was now being appealed against over the issue of "injury determination".

Canada viewed the U.S. position as "extremely disturbing", while the EC supported adoption of the panel report complaining of "lack of coherence" in U.S. views on dispute settlement. Argentina and Japan also spoke in favour of adoption, noting the powerlessness of the GATT dispute settlement mechanism.

When the Council took up the non-implementation by Japan of a panel ruling against it on imports of some agricultural products where Japan has held up implementation on some of what it considers sensitive products pending the outcome of the Uruguay Round - the EC expressed its concern over the number of cases where implementation has been held up on the outcome of the Round.

The EC (which itself is holding up implementation of some other reports on the same ground) suggested need for differentiation of approach in these matters - those where GATT rules were clear and were not being renegotiated in the Round, those involving GATT rules under renegotiations and those involving new or related issues under negotiations.

The U.S. suggested that the EC's categorisation was "self-serving" while Japan said it could suggest another categorisation with somewhat different results.

Japan then raised the question of U.S. non-implementation of the panel ruling against it in a case brought by the EC involving S. 337 of the U.S. trade law on patent and trade mark violation disputes on imported products. The U.S. in allowing the panel report to be adopted had told the Council that U.S. implementation would have to be part of an overall Uruguay Round package.

Japan complained that the U.S. had not only not implemented the ruling, but had started new investigations under the same law, about infringement of industrial property protection laws in respect of imports from Japan. Hong Kong supported this, noting that the U.S. had also started investigations against imports from Hong Kong. Australia, Canada and the EC all called for early implementation of the panel ruling by the U.S. which however argued that in the U.S. administration's view the implementing legislation would obtain easier passage through Congress if it were part of the Uruguay Round package.

The U.S. then raised the issue of EC's non-implementation of the panel ruling over its subsidisation of EC oil-crushers for use of domestic sources of oilseeds rather than imports. The EC Commission, the U.S. said, had proposed some minor changes in this regard in respect of soyabeans, but this would not cover sunflower seeds or rapeseeds, nor would it remove the GATT inconsistency of EC regulations and subsidies. The EC had tied up implementation to the Uruguay Round outcome and its own internal reform of the CAP.

The U.S. said that since the last two were now delayed, the EC must implement the panel ruling, failing which the U.S. would seek Council sanction for retaliation by withdrawal of equivalent concessions to imports from EC.

The EC expressed surprise over the U.S. bringing up the issue in the Council now, noting that bilateral consultations were in progress and hence would not comment on the substance.