8:53 AM Oct 19, 1994


Geneva 18 Oct (Chakravarthi Raghavan) -- A three-member GATT panel under the Tokyo Round subsidies code, which has been hearing complaints by the EU against US levy of countervailing duties on steel imports from UK, France and Germany has partially ruled against the US, according to GATT sources.

The dispute was over some $19 million worth of imports of some special steels into the US -- of hot-rolled lead and bismuth carbon steel -- on which the US found subsidisation involved and levied counter-vailing duties.

While the US Steel industry, soon after the end of the special steel voluntary restraint agreements, initiated cases against large number of steel imports, ultimately only a few went to the final stage, and then was brought by the EU to the GATT panel.

The panel completed its work last Friday, and called in the two parties to give them its findings, which are due to be circulated to the members of the Subsidies Code only towards end of the month.

The Tokyo Round Subsidies Committee is due to meet next week, but it is not clear whether the ruling will come before it. The ruling will become GATT law only when it is adopted by the Subsidies Committee, but its findings and arguments would weigh in future disputes.

Though the panel's ruling is not available even to the other members of the Committee, in line with the practices now followed by the US and EU, with each side which wins a case leaking out the panel findings in advance of its circulation to the GATT CPs, the findings in the steel subsidy ruling has also become known.

The same panellists are also looking into another dispute between US and EU on steel, and has reportedly given both sides time to digest its current ruling to make their pleadings.

GATT sources noted that the Tokyo Round code on subsidies will be replaced, when the WTO comes into force by the subsidies agreement under the Uruguay Round Marrakesh accords.

In several respects, the WTO subsidies agreement is an improvement on both the GATT provisions and the Tokyo Round code -- for the first time there is a definition of subsidy and sets out what would be 'specific' -- with some specific subsidies being prohibited, some made actionable (that is enabling a complaining country to countervail or withdraw equivalent concessions), and some permitted subsidies. It also lays down in more detail, rules on how calculations are to be made, the nature of evidence, the application of injury test etc.

But the new subsidies agreement has left vague several areas where the US and EU could not agree.

The latest steel subsidy ruling, to the extent that it has dealt with some of these problems and has given a finding would be useful. However, the sources said, the panel has not been able to provide answers and provide a finding to create new law.

The publication of the report and detailed study alone would show the gaps in the subsidy rules, current and the ones in the WTO.

The panel has reportedly upheld, on facts, that the US methods of calculation of the subsidy, and levy of countervailing duty to offset the subsidy, raise the duty beyond the levels permitted under the rules -- which require that there should be countervail only to the extent of the actual subsidy advantage.

However, GATT sources said that the entire case was very complicated, and some of the US methods of calculation and basis were found wrong, but others were not.

The panel also reportedly upheld the complaint that the in the US hearings the steel exporters did not get sufficient opportunity to present their evidence and case (and in effect the US went ahead on the basis of the 'best available evidence', which often is no more than the allegations of subsidy or dumping presented by the complainants.

This last, about hearings and evidence, would have a bearing in the future in relation to the WTO anti-dumping agreement which has got a separate 'standard of review' provision -- making domestic rulings more difficult to challenge -- and whose extension to the subsidies agreement and others are to be considered by the WTO in a review after three years.