11:54 AM Feb 25, 1997

FIVE PANELS NAMED IN DISPUTES

Geneva 25 Feb (Chakravarthi Raghavan) -- The Dispute Settlement Body of the WTO established five panels in disputes that have been brought before it, while deferring actions in one case to the next meeting.

Amb. Wade Armstrong of New Zealand, named to succeed Amb. Celso Lafer of Brazil as Chairman, was formally elected and took over.

The disputes referred to panels involve complaints against Hungary (over subsidies agricultural exports), against Turkey for municipal taxes on foreign, but not domestic films, on Argentine specific duties and a statistical tax on imports of footwear, textiles, apparel and other items, on US import restrictions on certain shrimp and shrimp products on environmental grounds (of protection of sea turtles), on Guatemala's anti-dumping investigations on imports of cement from Mexico, and the EC's customs classification of certain computer equipments.

A US request for panel against the EC's levy of duties on grain imports, through a reference price system, was however deferred to the next meeting.

The DSB also adopted the report of its Appellate body, and of the panel, on the dispute raised by Costa Rica against the US over imports of cotton and man-made fibre underwear involving transitionary safeguards under the Agreement on Textiles and Clothing.

In another dispute involving India and the United States, over woven wool shirts and blouses, where the panel has decided in favour of India, the latter has notified the DSB that it was appealing on a legal issue to the Appellate body.

On the dispute against Hungary by Australia, New Zealand, USA and Argentina on export subsidies on agricultural products, Hungary has been arguing that it was a case of correcting an "erroneous" schedule, and it was a unique situation.

Consultations are to be held among the parties on the terms of reference. All the parties expressed the view that though a panel has been established, consultations could still continue to find a solution.

In the dispute against Turkey brought up by the US, the latter complained that Hungary has imposed a 25% municipality tax on box office receipts generated by showing of foreign films, but there was no such tax on showing of domestic origin films. This was inconsistent with Article III of the GATT (for national treatment for imported products).

In the case against Argentina, the US has complained against the specific duties imposed by Argentina on imports of textiles, apparel and footwear items and these were in excess of Argentina bound tariff rate of 35% ad valorem. There was also a statistical tax of three percent, effective March 1995, imposed on imports from all sources other than Mercosur countries.

The US had also complained against some labelling requirements, but the DSB was informed that this problem has been settled in consultations.

Hungary expressed its concern over the Argentine specific duties and said that as a result, all of its textiles and clothing exports to Argentina had practically ceased.

The US shrimp restrictions have been imposed as a measure to protest sea-turtles, and affected all shrimp harvested by methods that did not protect sea turtles through an extruder device and shrimp products out of such shrimp.

Malaysia and Thailand had challenged the US restrictions, as Thailand explained it, on the grounds of the extra-territoriality of the US law.

A number of countries reserved their third party rights in this case -- the EC, India, Guatemala, Japan, Sri Lanka, Nigeria, the Philippines, Singapore, Australia, Colombia, Hungary and Mexico.

A similar complaint by Pakistan was also referred to the same panel.

In agreeing to the Pakistan request (the first time it has come up before the panel), the US said that its acceptance was subject to the dispute being consolidated and referred to the same panel. The US however said that its law, and the restrictions on imports, had only a small effect on the trade between Pakistan and the US.

The Mexican complaint against Guatemala was over its view that the Guatemalan anti-dumping investigation of cement imports from Mexico were contrary to the WTO's agreement on anti-dumping.

In agreeing to the panel on the computer import duties, the EC said that the original US complaint on which consultations had been held related to some computer parts -- some Local Area Network (LAN) equipment. But the US request for a panel dealt with a number of other items too. The EC wanted to point out its view that panels should be established on the specific complaint that had been the subject of consultations, and not expanded at the panel stage.

On the grain dispute, and the duties levied by the EC on the basis of a reference price, a request for panel last year was not pursued by the US because of bilateral consultations for a settlement.

At the January meeting of the DSB, the US had said that since no settlement was reached, it was reviving its panel request, and implied that when it came up at the February meeting it would be the second time, and thus automatically referred.

The EC challenged this view. It also noted that bilateral discussions were still continuing, and an EC delegation was in Washington for this purpose.

On the adoption of the Appellate body ruling, interpreting the ATC, in the Costa Rica-US dispute, India and Hong Kong made statements stressing the findings of the panel and of the appellate body on the limitations of the transitionary safeguards that importing countries could take.

The US drew comfort from the panel's, and appellate body findings which, it said, agreed that it was not the function of a dispute settlement panel to engage in de novo review of the facts or second-guess factual judgements. The US was however concerned with particular aspects of the panel report on the Costa Rican underwear case, particularly the view that Article 6 of the ATC was an "exception" to the ATC.

The panel had relied on the fact that the ATC used the words "as sparingly as possible" in respect of invoking the transitionary safeguards, and that this phrase had not been used in the MFA. This interpretation, the US said, would add an obligation to the ATC and thus would violate the DSU. The right to take transitionary safeguards was an integral provision of the ATC and not an exception.

The US viewed the observations of the panel on these matters as obiter dicta and hoped that other panels would not follow this reasoning, but follow the appellate body's views.

India (which had been a third party before the Underwear panel) noted that the panel had correctly held that a policy of total deference to the findings of national authorities could not ensure an objective assessment of a dispute referred to a panel and that the panel's job was to examine the consistency of US actions with the international obligations of the US and not its domestic law.

India was also glad that the panel had vindicated its view that Art. 6 of the ATC was an exception, and that the party invoking an exception must justify its action and carried the burden of proof.

Another important finding that India commended was that information not available to an exporting member (when consultations were sought) could not be used before a panel to justify a restriction.

India also commended the panel for making a clear distinction between serious damage and actual threat of serious damage.

India also commended the Appellate Body ruling against retroactive application of the safeguards by the US.

Hong Kong in a separate statement welcomed the emphasis placed on Art. 6 transitionary safeguards being applied "as sparingly as possible". And while Hong Kong was aware that some importing countries might experience difficulties in producing data required to satisfy a determination of serious damage or actual threat thereof, and while not seeking to be overly rigid, "the bottom line is justification".

If data was not available, "we seriously question whether a proper determination can be made by an importing member to justify restraint."

The panel had correctly recognized the differing, but complimentary roles, of a dispute panel and the Textile Monitoring Body's fact-intensive review of cases. How to maximise these complementarities, Hong Kong said, was a matter for further reflection, in the TMB itself, or if considered appropriate by the WTO while conducting its major review under Art. 8.11 by January 1999.