SUNS  4366 Wednesday 3 February 1999

Geneva, 2 Feb (Chakravarthi Raghavan) -- If anyone in the international trading community had been under any illusions about the US-EC (banana) "truce" at the World Trade Organization, they ought to have been removed by US-EC exchanges on the new fights ahead.

The US and EC "positioned" themselves for new fights (and possible US retaliation threats) over the EC intentions and implementation, by 13 May deadline, of the WTO ruling on imports of beef from hormone-treated cattle.

The DSB set up panels to hear complaints over the Canadian patents law on pharmaceutical (that enables others to be ready to launch on the market generic name products when patents expire), a US trade law provision of 1916 on anti-dumping that enables private parties (which the US Steel industry has been using) to start harassment litigation against importers, and the Canadian automotive industry (where performance requirements are a condition for imports of new cars).

The DSB, under other business, was also advised that India (Malaysia, Pakistan and Thailand) have reached an agreement with the US, giving the US 13 months (from 6 Nov 1998, when the ruling was adopted) to implement the DSB recommendations over the US restrictions on shrimp
imports (caught without the US turtle exclusion devices).

On the India's implementation of the WTO ruling on patents (mail-box), where India is required to enact by law what is popularly called a "mail-box" mechanism to receive product patent applications in the pharmaceutical and agro-chemical sectors and  provision for issuance of single marketing rights, the US took a slightly less strident posture, but complained that India had not "developed" its implementation measures in consultation with the US, and that in the US view certain provisions of the ordinance issued by the President of India did not comply with the TRIPs Agreement.

Over these last few weeks, as the banana dispute and US retaliation threats had occupied the WTO attention, US officials have made clear their intentions to exercise their "rights" under the Dispute
Settlement Understanding (DSU) on other disputes.

They have made known that the beef hormone and the Indian "mail-box" issues were next in the queue (for US retaliatory threats), and that the US would have similar recourse to Art. 22.6 (without a WTO a prior panel judgement under 21.5 on implementation) -- unilaterally determine, under its S. 301 law, whether the other partner had implemented the ruling and, announce retaliatory sanctions, before asking the other side to "negotiate" a compromise.

The beef hormone and patent issues came up under the DSB agenda item about "surveillance" of implementation of DSB recommendations.

The DSB was advised by Indian ambassador S. Narayanan, about the issuance of an ordinance on 8 January, to implement the ruling over India's obligations under Art. 70.8 and 70.9 of TRIPs, by amending the Patents act, and that a bill to replace the ordinance would be introduced in the Budget session of Parliament, beginning the 4th week of February.

Amb. Rita Hayes for the United States, while appreciating the Indian status report, expressed the US disappointment at India not consulting with the US (while developing the implementation measure), but was pleased the two sides would be sitting down to discuss the issue in the coming week. The US, she added, had "serious concerns" over the new ordinance, and believed that some of aspects of it did not comply with TRIPs. She however hoped that with the consultations, the US concerns could be addressed when Parliament enacts the ordinance into law.

Narayanan however insisted that the ordinance provisions were fully compatible with the conclusions and recommendations of the DSB.

On imports of hormone treated beef and beef products, the EC in its report on status of implementation, noted that the Appellate body ruling adopted by the DSB, had held that the EC ban was not based on a risk assessment, and that while the EC evidence for five of the hormones were relevant and showed existence of risk of cancer, there was not sufficient evidence on the sixth.

In accepting the ruling (and getting a 15 month period, ending 13 May for implementation), the EC had launched a complementary risk assessment to assess implications for the EC's import ban. Scientific studies on this were under way.

The EC complained that it had requested US, Canada, New Zealand and Australia on the risk assessment done by them, on the basis of which they had permitted use of these hormones for growth purposes. The US and Canadian authorities had declined to provide the data, which they
said had been provided to them in confidence. Australia and New Zealand had not replied at all.

The EC, in the light of its own risk assessment, expected to be in a position to draw conclusions on the relevant EC legislation and fully implement the DSB recommendation. The inter-institutional consultations within the EC (with the EU parliament etc) were continuing and the EC intended to implement by 13 May.

In sharp exchanges, the US spoke of the "long-history" of the beef hormone dispute, and said the EC had blocked all attempts to resolve the dispute between 1989-93. While the 15-month time-limit for the EC was to bring its measures into compliance with WTO obligations, the US had heard that the EC would not comply by 13 May. Seeking details of the actions the EC proposed to take, the US Ambassador Rita Hayes said: "We would like to avoid another difficult situation with the EC over
compliance with DSB rulings", but for this both parties must be willing to sit down and work out a mutually acceptable solution.

Hayes said the EC had waited six months, from June 1998 (when the ruling was adopted) to seek the additional data from the US. The US would provide with the additional information which would be "more than adequate for the EC's needs," she added.

Canada, which also won a ruling against the EC ban, also expressed disappointment.

But neither Canada nor anyone else appear to have made any reference to recent Canadian assessment of risks of use of these hormones.

[Recently, the Canadian public health authorities, on the basis of an assessment by a panel of veterinary experts, have refused approval to the Monsanto TNC to sell bovine hormone, rbST, on ground of health risk to the cattle. A second panel of physicians and surgeons have however said that rbST posed no carcinogenic risk or antibiotic resistance in humans, but a small potential for allergic reactions.]

The EC however insisted that it would comply with the DSB recommendation, and that it hoped to complete its intra-institutional consultations before the 13 May deadline.

The EC complaint against the Canadian patents act, on which a panel was established, relates to the provisions of the Canadian law under which third parties, without the consent of the patent holder, to carry out experiments and tests required (proof of safety and bio-equivalency) to obtain marketing approval of the copy of an innovative medicine before the expiry of the relevant patent, and manufacture and stockpile the products for a period of unto six months before patent expiry.

Canadian generic pharmaceutical manufacturers use this provision to be ready with generic name drugs for products whose patents are due to expire and launch on the market as soon as the patents expire.

The EC complained that this violated the TRIPs, while Canada expressed disappointment with the EC complaint, arguing that this was a public interest measure to bring down pharmaceutical prices. Canada accused the EC of seeking through the panel process to achieve something beyond what was negotiated at the WTO on TRIPs.

Australia, Brazil, Cuba, India, Israel, Japan, the US and Switzerland expressed their third party interest in the dispute, and thus will have the right to present their views before the panel.

The DSB also set up a panel to rule on the US 1916 trade law provisions about anti-dumping (which is still on the US statute book), and which the US Steel industry has been using to threaten private parties (importers) with litigation for damages caused by their cheap imports.

The US expressed disappointment over the EC bringing up this dispute over a law that had an obsolete status, but claimed it was consistent with the US obligations.

Japan, Mexico and India reserved their third party rights.

On Canada's automotive industry measures, panels (sought by Japan and separately by the EC) were established. The Canadian measures in effect provide for "performance requirements" by auto-manufacturers to enable them to import motor vehicles duty-free.

The Canadian measures, by legislation and regulations to implement the US-Canada Auto Pact, including the Motor vehicles tariff order 1998, provides for remission of customs duties by specific manufacturers, based on their letters of undertaking. Under these measures, only a limited number of auto manufacturers are entitled to import motor vehicles duty-free into canada and then distribute them at whole-sale and retail distribution levels. The duty free treatment, Japan complained was contingent on a Canadian Value Added (CVA) content requirement and a manufacturing and sales requirement.

These provisions, Japan said, violated Canada's obligations under TRIMs and under the GATS.

On another complaint, brought by the EC, over countervailing duties on certain hot-rolled lead and bismuth carbon steel imports (from UK), the US withheld consensus for reference - the panel request having come up for the first time. Reference would be automatic when the request comes
up a second time at the next DSB meeting (tentatively set for 17 Feb).