Jan 23, 1998

US, LATINS CRITICISE EC'S PROPOSED NEW BANANA REGIME

Geneva, 22 Jan (Chakravarthi Raghavan) -- The Dispute Settlement Body of the World Trade Organization established a panel Thursday to look into a US complaint that Australia was providing subsidies to producers of leather for car upholstery. 

Though it was the first time the dispute came before the DSB, the US complaint, involving a purported Australian violation of the rules of the Subsidies Agreement, was referred to the panel, which is to report within three months, in terms of the 'fast-track' provision for such disputes under the subsidies agreement.  

But under Art. 4.4 of the subsidies agreement, when a request by a Member for consultation with another about a 'prohibited subsidy' is not reached within 30 days of consultations, the Member may refer the matter to the DSB for immediate establishment of a panel "unless the DSB decides by consensus not to establish the panel".

Otherwise, reference to a panel at the DSB is automatic only when the request comes up for the second time.  

The rules of the subsidies agreement envisage, the panel circulating a final report on the dispute to all WTO members within 90 days of the date of composition and establishment of the panel's terms of reference.

In its complaint the US has contended that the Australian subsidy both to producers and exporters of the leather sold to foreign car manufacturers (mainly in the US) is a prohibited subsidy.  

In the scheme of the subsidies agreement, there is no need for a complainant to show injury to its own producers in respect of a prohibited subsidy.  

The US had first raised this dispute with Australia early in 1996, but did not proceed further with the complaint at the WTO, presumably because Washington thought that it had reached an understanding to resolve the problem.

But last November, the US re-introduced the complaint at the WTO, after what it considered were new subsidies to the industry provided by Australia.  

The US complaint said the subsidies provided to included a subsidy of A$25 million loan on preferential and non-commercial terms to a firm and grants amounting potentially to another A$30 million.  

Australia however told the DSB Thursday that it thought the problem had been resolved, and that no US interest had been affected. Also, Australia complained, the US panel request included issues broader than those raised in the consultations.  

Some trade diplomats later said that the amounts involved seemed to be small, and were puzzled over the US pursuing the matter for a panel, when there was no serious injury to any US producer.  

In other actions, the DSB was informed that Argentina has filed an appeal against a panel ruling (in disputes brought up by the US and the EC) over its imposing special taxes on imports of clothing and shoes.

The report of the panel, listed on the DSB agenda, was taken off the agenda as a result of the notice of filing of the appeal. 

The WTO appellate body has three months to give its rulings on the appeal. 

In other matters, the EC blocked the US request for a panel over alleged violations by Ireland in respect of copyright and

neighbouring rights. The US request came up before the DSB for the first time. Reference to a panel will be automatic if it is brought up before another meeting of the DSB.  

The US complained that the Ireland's IPR regime for copyright and neighbouring rights was inconsistent with various provisions of the Berne Convention. For e.g. it did not cover translations of official works, protection of architectural works, anonymous and pseudonymous works, ownership rights in film, and recognition of bodies established to protect rights of "unknown authors of unpublished works".

Also, complained the US, under TRIPs, limitations and exceptions to exclusive rights under Sec 1 of Part II of TRIPS has to be confined to "certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder. Under the Irish regime, exceptions to right holders' exclusive rights exceed those permissible under Art. 13 of TRIPs. 

Other complaints of the US related to non-compliance, with Art. 14, on grant of rental rights to producers of phonogram and other rights holders, lack of civil remedies in this regard, lack of provisions for criminal procedures against copyright piracy, lack of adequate protection to pre-existing works.  

The EC opposed reference at this time, arguing it needed more time for consultations with the US over its complaint.

The EC, which had inscribed a request for panel against South Korea over safeguards on dairy products, asked for the request to be put off, noting that since it inscribed the request (on 9 January), it was having bilateral consultations and a solution might be possible. Failing that it would bring forward the complaint again (when it would be a first request at the DSB).  

Korea regretted that the EC was merely seeking a postponement rather than withdrawing the request.

Under other business, the EC also complained about "breach of confidentiality" in panel proceedings. No clarification was provided, but it was understood to refer to a dispute over poultry imports.

The United States and the Latin American banana exporters, who won a panel ruling against the EC over its banana regime, told the DSB that the changes to the regime to comply with the ruling, proposed by the EC Commission, was not acceptable to them.  

The Commission's proposals have to be approved by the EU Council of Ministers, where France and Spain are reported to be opposing any further concessions to meet the US viewpoint.  

The EU has been given 15 months time to comply with the ruling. This kicks in on 1 January 1999.  

Guatamala, on behalf of the complainants in the dispute against the EC, raised the issue and referred to a EC Commission proposal on how it would implement the banana panel request and said the new regime proposed would still be discriminatory and restrictive. The proposed level of tariffs would still be in violation of the rules. 

Mexico said it had not formally received the proposals for compliance but had informally detected some elements and was seriously concerned that the new regime would not comply with the rulings.

Honduras said that the distribution of quotas proposed by the new EC proposals would violate Art. XIII of the GATT. It was also concerned over the proposals for administration of the licensing system.

The US supported these comments, and was disappointed with the EC's proposals which distinguished between two groups of developing countries -- a quota regime that would benefit the ACP, and another more restrictive regime for Latin American bananas. 

Such a discrimination, the US said, would violate the ruling and the Lome waiver. The majority of the panel rulings (adopted by the DSB) were against the licensing system, the US claimed, and hoped the EC's internal procedures before adoption would resolve the problems and make the regime WTO-consistent.  

Panama voiced the same concerns as other Latin Americans. Ecuador also expressed concern over the lack of information and said the new regime should be WTO-consistent.  

The European Communities said the issue had been raised under 'other business', and the EC had not had sufficient notice to respond. But the EC added, amidst derisive laughter from the members, that it viewed the various statements as implicit recognition of the speed with which the EC was trying to implement the ruling.

The EC suggested however that while the DSB had the responsibility to monitor implementation, the "centre of gravity" for implementation had shifted to Brussels, and though concerned with the details should address them to Brussels.

The DSB chair however noted that six months after the implementation decision, i.e. six months after 7 January when the arbitration was given on the period for implementation, the item would appear at every meeting of the DSB. In the meantime, it was the right of any member to bring the issue before the DSB.  

Earlier, the DSB was advised about the agreement between Japan, the US, EC and Canada over the implementation by Japan of the panel rulings on Japanese taxes on imported alcoholic beverages.  

Japan had been given a 15-month period to implement the rulings, and bring local consumption/excise taxes on domestic and foreign liquors on level, and that period expires on 1 Feb.  

But the accord notified to the DSB would take the period beyond this 1 February, but with Japan agreeing to accelerate its changes for some of the imported products.  

Japan is to undertake new legislation to amend the liquor tax scheme it had amended in March 1997, as well as tariff reductions and eliminations on certain items on the applied rate basis. Japan is also to accelerate the liquor tax rate adjustment for whiskies/Brandy and Schochu A (domestic spirit) by 5 months, to be completed on 1 May 1998, while that for Shochu B by one year (to be completed on 1 October 2000).  

As a compensation for this longer implementation period, from 1 April this year, Japan will apply reduced tariff rates on brandy, bourbon whisky, rye whisky, other whisky, rum and tafia, gin, voda and liquors and cordials -- eliminating the tariffs on 1 April 2002.

In comments, the US and Canada noted their positions about the rulings to be implemented within 15 months as per the arbitral award, but nevertheless noted that the new schedule agreed to would enable full implementation.

Mexico however complained that the Japanese scheme did not seem to cover imports of tequila (a Mexican liquor).