RESTRICTED
WORLD TRADE WT/DSB/M/30
28April 1997
ORGANIZATION(97-1823)
DISPUTE SETTLEMENT BODY
20March 1997
MINUTES OFMEETING
Held intheCentre William Rappard
on20March 1997
Chairman: Mr.Wade Armstrong (New Zealand)
Priortotheadoption oftheproposed Agenda, attherequest oftheUnited States, item4entitled:
"European Communities -Duties onImports ofGrains -Request bytheUnited States forthe
Establishment ofaPanel"(WT/DS13/5) wasremoved from theAgenda.
Subjects discussed: Page
1. Surveillance ofimplementation ofrecommendations adopted bytheDSB 2
- United States -Standards forreformulated andconventional gasoline:
status report bytheUnited States 2
2. United States -Restrictions onimports ofcotton andman-made fibreunderwear 2
- Implementation oftherecommendations oftheDSB 2
3. Guatemala -Anti-dumping investigation regarding portland cement from Mexico 3
- Request byMexico fortheestablishment ofapanel 3
4. United States -Import prohibition ofcertain shrimp andshrimp products 4
- Request byIndia fortheestablishment ofapanel 4
5. Australia -Measures affecting importation ofsalmon 5
- Request byCanada fortheestablishment ofapanel 5
6. United Kingdom -Customs classification ofcertain computer equipment 6
- Request bytheUnited States fortheestablishment ofapanel 6
7. Ireland -Customs classification ofcertain computer equipment 6
- Request bytheUnited States fortheestablishment ofapanel 6
8. Brazil -Measures affecting desiccated coconut 7
- Report oftheAppellate Body andreport ofthePanel 7WT/DSB/M/30
Page2
1. Surveillance ofimplementation ofrecommendations adopted bytheDSB
- United States -Standards forreformulated andconventional gasoline:
status report bytheUnited States (WT/DS2/10/Add.2)
TheChairman saidthatthisitemwasontheAgenda pursuant toArticle 21.6oftheDSUwhich
stated that:"Unless theDSBdecides otherwise, theissue ofimplementation oftherecommendations
orrulings shallbeplaced ontheagenda oftheDSBmeeting aftersixmonths following thedateof
establishment ofthereasonable period oftimepursuant toparagraph 3andshallremain ontheDSB's
agenda untiltheissue isresolved". Herecalled thatattheDSBmeetings inJanuary andFebruary
1997, theUnited States hadreported onthismatter inaccordance withtheabove-mentioned requirement.
Hedrewattention todocument WT/DS2/10/Add.2, which contained afurther status report bytheUnited
States.
Therepresentative oftheUnited States saidthatasprovided forinArticle 21.6oftheDSU,
hiscountry hadsubmitted itsthirdreport ontheimplementation oftheDSB'srecommendations. As
noted inthatreport itwastheexpectation oftheUnited States thattheUSEnvironmental Protection
Agency (EPA) would beissuing inthenearfuture aproposed revised regulation1forpublic comment.
Consistent withtheUSregulatory procedures, theEPAwould invite interested parties tocomment
onthespecifics ofitsproposal. Suchcomments would betaken intoconsideration priortothefinalization
oftheregulation.
Therepresentative ofBrazil reminded Members thathiscountry stillawaited thepublication
ofproposed amendments totheGasoline Rulethatwould bring theUnited States intocompliance with
itsWTO obligations. Brazil expected thattheEPA'sthorough evaluation ofthecompliance options
would beconcluded intheverynearfuture.
Therepresentative ofVenezuela thanked theUnited States forthestatement made. Thiswas
thethirdtimethattheUnited States hadprovided assurances thatitsdomestic process wasontrack
andthatnodelays wereforeseen regarding theimplementation oftheamendments totheGasoline Rule
within therequired 15-month period scheduled toexpire inAugust 1997. HisGovernment considered
thatitwasimportant fortheproposed amendments tobemade available assoonaspossible inorder
toenable anin-depth examination oftheircompatibility withtheDSB'srecommendations.
TheDSBtooknoteofthestatements andagreed torevert tothismatter atitsnextregular
meeting.
2. United States -Restrictions onimports ofcotton andman-made fibreunderwear (WT/DS24/8)
- Implementation oftherecommendations oftheDSB
TheChairman saidthatinaccordance withtheDSUprovisions, theDSBwasrequired tokeep
under surveillance theimplementation ofrecommendations andrulings oftheDSBinorder toensure
effective resolution ofdisputes tothebenefit ofallMembers. Inthisrespect, Article 21.3oftheDSU
provided thattheMember concerned shallinform theDSB, within 30daysafterthedateofadoption
ofthepanel orAppellate Body report, ofitsintentions inrespect ofimplementation ofthe
recommendations andrulings oftheDSB. Herecalled thatatitsmeeting on25February 1997, the
DSBhadadopted theAppellate Body report andthePanel report onthismatter.
1"RegulationofFuelsandFuelAdditives-StandardsforReformulatedandConventionalGasoline"(Gasoline
Rule).WT/DSB/M/30
Page3
Therepresentative oftheUnited States saidthathiscountry 'sintention wastomeetitsWTO
obligations withrespect tothismatter bywithdrawing thesafeguard measure inquestion bytheend
ofApril of1997. Thismeant thattheimplementation would takeplace about 60daysafterthedate
ofadoption oftheDSB'srecommendations.
Therepresentative ofCosta Ricasaidthathisdelegation welcomed theintention oftheUnited
States tocomply withitsWTO obligations withregard tothismatter. Hiscountry hadhoped that
theUnitedStateswouldcomplywiththeDSB'srecommendationsimmediatelyandwithdrawtherestraint
earlier astheCosta Rican exporters continued tobeadversely affected bythemeasure. Herecalled
thatthesafeguard measure would expire on27March 1997, andhisGovernment believed thatthe
most appropriate course ofaction would betoallow themeasure toexpire bythatdaterather than
torenew itforthethirdquota year. Hisdelegation wastherefore surprised thattheUnited States had
announced itsintention towithdraw themeasure atthelaterdate. Thiswould imply therenewal of
themeasure forthethird quota yearwhich hadbeenconsidered tobeinconsistent withtheATC.
Therefore, heurged theUnited States tocomply immediately withtheDSB'srecommendations.
TheChairman saidthatsince therewasnoagreement between theparties ontheperiod oftime
within which theimplementation oftheDSB'srecommendations should takeplace, aperiod oftime
mutually agreed bytheparties tothedispute should beindicated within 45daysafterthedateofadoption
oftherecommendations asprovided forArticle 21.3(b)oftheDSU.
TheDSBtooknoteofthestatements.
3. Guatemala -Anti-dumping investigation regarding portland cement from Mexico
- Request byMexico fortheestablishment ofapanel (WT/DS60/2)
TheChairman recalled thattheDSBhadconsidered thismatter atitsmeeting on25February
1997, andhadagreed torevert toit.HesaidthatthisitemwasontheAgenda ofthepresent meeting
attherequest ofMexico. Hedrew attention tothecommunication from Mexico contained in
WT/DS60/2.
Therepresentative ofMexico recalled thatattheprevious meeting oftheDSB, hisdelegation
hadrequested theestablishment ofapanel forthefirsttime. Onthatoccasion hehadoutlined different
elements which substantiated Mexico 'srequest contained inWT/DS60/2. Since Guatemala hadnot
beeninaposition toaccept theestablishment ofapanel atthatmeeting, hisdelegation hoped thatthe
panel could beestablished atthepresent meeting inaccordance withtheDSU provisions.
Therepresentative ofGuatemala saidthaton9January 1997, hiscountry hadheldconsultations
withMexico onthismatter. Although apanel would beestablished atthepresent meeting, hisauthorities
regretted thatithadnotbeenpossible tofurther continue theconsultations. Nevertheless, efforts to
findasatisfactory solution forbothparties would continue.
TheDSBtooknoteofthestatements andagreed toestablish apanel inaccordance withthe
provisions ofArticle 6oftheDSU withstandard terms ofreference.
TherepresentativesofCanadaandtheUnitedStatesreservedtheirthird-partyrightstoparticipate
inthepanel proceedings.2
2After themeeting ElSalvador andHonduras reserved their third-party rights.WT/DSB/M/30
Page4
4. United States -Import prohibition ofcertain shrimp andshrimp products
- Request byIndia fortheestablishment ofapanel (WT/DS58/8)
TheChairman recalled thaton8October 1996, India together withMalaysia, Thailand, and
Pakistan hadrequested consultations withtheUnited States concerning thelatter'simport prohibition
ofcertain shrimp andshrimp products. Subsequently, attherequest ofMalaysia, Thailand andPakistan,
theDSBatitsmeeting on25February 1997, hadestablished asingle panel pursuant toArticle 9.1
oftheDSU. Hedrew attention tothecommunication from India indocument WT/DS58/8 which
contained itsrequest forapanel onthesame matter.
TherepresentativeofIndiasaidthathiscountryrequestedtheestablishmentofapaneltoexamine
theUSmeasure which hadresulted inarestriction onimports ofcertain shrimp andshrimp products
from India. Thismeasure wasinconsistent withtheUSobligations under theWTO, including the
GATT 1994, andhadtherefore nullified andimpaired India'srights andbenefits under theWTO
Agreement.Malaysia,ThailandandPakistanasco-complainantsinthisdisputehadprovidedtherelevant
details regarding thismatter totheDSBatitsmeeting on25February 1997.
India hadnoobjection ifanyMember tookameasure aimed atprotecting theenvironment
within itsterritory. Indeed India hadaverystrong commitment, steeped initsculture andtradition,
regarding theprotection oftheenvironment, including seaturtles. However, when thescope ofthe
measure would became extra-territorial witharbitrary anddiscriminatory application, suchameasure
could notbeconsistent withtherules oftheWTO Agreement.
On8October 1996, India hadjoined Malaysia, Thailand andPakistan inaneffort toresolve
thismatter andhadrequested consultations withtheUnited States.3These consultations hadbeenheld
on19November 1996, andsubsequently letters hadbeenexchanged regarding points which required
further clarification. Unfortunately, nomutually acceptable solution hadbeenfound. InIndia'sview,
theUSmeasure violated, interalia,Articles I,IXandXIIIofGATT 1994, nullified andimpaired
benefits accruing toIndia under theWTO Agreement. Consequently, hisdelegation requested that
apanel beestablished inaccordance withArticle 6oftheDSU withthesame terms ofreference as
those thathadbeenagreed forthepanel established attherequests ofMalaysia, Thailand andPakistan.
Therepresentative oftheUnited States saidthathisdelegation wasnotyetinaposition to
agree totheestablishment ofapanel atthepresent meeting. AttheDSBmeeting on25February 1997,
India hadindicated itsinterest toparticipate asathird party inthepanel established attherequests
ofMalaysia, Thailand andPakistan. Since theissues inIndia'srequest werethesame asthose ofthe
above-mentioned countries, hisdelegation requested India, intheinterest ofpreserving theresources
ofallinvolved, toconsider whether itsthird-party participation inthisdispute could adequately protect
itsinterest. Ifthiswasnotthecase, theUnited States would agree totheestablishment ofapanel
atthenextDSBmeeting.
Therepresentative ofIndiasaidthatitwasnecessary toclarify thatanyparty thathadreserved
itsthird-party rights inadispute, ifsodesired, could become acomplainant inthesame dispute at
alaterstage. Inother words, being athirdparty inadispute didnotimply thatIndiahadlostitsrights
tobecome acomplaining partyinthesamedispute asprovided forinArticle 10.4oftheDSU. Although
theUnited States hadnotquestioned this,ithadasked India toconsider whether itcould participate
inthisdispute onlyasathirdparty without becoming acomplainant intheinterest ofpreserving the
resources ofalldelegations concerned. Despite thefactthattheresources ofhisdelegation werevery
limited ascompared tothatoftheUnited States, India'srequest forapanel hadbeenmade because
3WT/DS58/1WT/DSB/M/30
Page5
hisdelegation hadconsidered thethird-party option andhadconcluded thatitdidnotadequately protect
India'sinterest. However, hisdelegation recognized therightoftheUnited States todelay thisprocess.
Hewould notrequest aspecial meeting oftheDSBtoconsider India'scomplaint butwished toinclude
thisitemontheagenda ofthenextmeeting oftheDSB.
TheDSBtooknoteofthestatements andagreed torevert tothismatter atitsnextregular
meeting.
5. Australia -Measures affecting importation ofsalmon
- Request byCanada fortheestablishment ofapanel (WT/DS18/2)
TheChairman drew attention tothecommunication from Canada contained indocument
WT/DS18/2.
Therepresentative ofCanada recalled thatinOctober 1995, hisGovernment hadrequested
consultations withAustralia regarding thelatter'smeasures affecting theimportation ofsalmon. Canada
wasdisappointed thatthese consultations hadnotresolved thisdispute. Themeasures which were
unjustified andinconsistent withAustralia 'sobligations under theWTO werestillinforce atpresent.
Consequently, Canada requested theestablishment ofapanel toexamine thismatter.
Therepresentative ofAustralia saidthathisdelegation could notagree toCanada 'srequest
forapanel atthepresent meeting. Canada hadnotprovided Australia theopportunity toconsult on
thesalmon import riskanalysis of20December 1996. Thiswasadetailed document which hadset
outthescientificbasisforthedecisiontomaintainquarantinerestrictionsonuncookedsalmon,consistent
withtheAgreement ontheApplication ofSanitary andPhytosanitary Measures (SPS). Itwaswell
known thatAustralia hadaconservative approach toquarantine. Thiswasperfectly inaccord with
hisGovernment 'srights under theSPSAgreement. Consultations withCanada onthisissuehadbeen
lastheldinDecember 1995. Since then, Canada hadnotsought further consultations. Intheabsence
ofconsultations ontheDecember 1996 salmon import riskanalysis, which formed thebasis ofthe
decision tomaintain quarantine restrictions onuncooked salmon, Australia believed thatCanada 'saction
inseeking apanel wasnotinthespirit ortheletter ofthedispute settlement system.
Therepresentative ofCanada saidthathisGovernment hadintended torequest theestablishment
ofapanel much earlier. However, attherequest ofAustralia, hiscountry hadagreed togivetime
totheAustralian authorities toconduct thisriskassessment inthehopethatthiswould leadtoaremoval
ofthemeasures. Since therestrictive measures remained inforce, Canada therefore decided toproceed
withitsrequest forapanel.
Therepresentative oftheUnited States saidthathiscountry shared Canada 'sconcerns with
respect toAustralia 'sbanonimports ofsalmon. TheUnited States hadalsoheldconsultations with
Australia onthismatter4andwascurrently reviewing thesalmon import riskanalysis of20December
1996.
TheDSBtooknoteofthestatements andagreed torevert tothismatter.
4WT/DS21/1WT/DSB/M/30
Page6
6. United Kingdom -Customs classification ofcertain computer equipment
- Request bytheUnited States fortheestablishment ofapanel (WT/DS67/3)
7. Ireland -Customs classification ofcertain computer equipment
- Request bytheUnited States fortheestablishment ofapanel (WT/DS68/2)
TheChairman proposed totakeupitems 6and7oftheAgenda together since theypertained
tothesamematter. These items wereontheAgenda ofthepresent meeting attherequest oftheUnited
States.
Therepresentative oftheUnited States saidthatasaresult ofactions bycustoms authorities
inIrelandandtheUnitedKingdomofreclassifyingcertaincomputerequipment,importsoftheseproducts
fromtheUnited States hadbecome subject toduties inexcess ofthose bound bytheUnited Kingdom
andIreland under theECSchedules oftariff concessions. TheUSunderstanding wasthatmember
States were notresponsible forclassification issues. Because theUnited Kingdom andIreland had
notmettheircommitments, theUnited States hadnoother recourse thantoreferthismatter toapanel.
Consequently, theUnited States hadrecognized thattoresolve thismatter allrelevant claims hadto
beaddressed totheCommunities aswellastotheresponsible member States tomeettheircommitments
under Article IIofGATT 1994. TheUnited States hadagreed withtheCommunities, acting onits
ownbehalf andonbehalf oftheUnited Kingdom andIreland, torequest theDSBtoincorporate the
matters raised intheUSrequests ascontained inWT/DS67/3 andWT/DS68/2, intotheterms of
reference contained inthemandate forthepanel established attherequest oftheUnited States
(WT/DS/62/4) on25February 1997.
Therepresentative oftheEuropean Communities saidthattheissues raised intherequest for
apanel hadtobeproperly addressed totheCommunities asawhole. Application oftheCommon
Customs Tariff withtheCommunities andtheimplementation oftheECSchedules werematters on
which theCommunities 'hadsoleresponsibility. Therefore, on25February 1997, theCommunities
hadagreed totheestablishment ofapanel. Toavoid alldoubts heconfirmed thatinaddressing the
issues raised bytheUnited States before thepanel, theCommunities would beacting onbehalf ofthe
member States, including inparticular Ireland andtheUnited Kingdom.
TheChairman proposed that,attherequest oftheparties tothedispute, theDSBagree tomodify
theterms ofreference ofthepanel established atitsmeeting on25February 1997, pursuant tothe
USrequest contained inWT/DS62/4, sothatthepanel requests submitted forconsideration atthepresent
meeting might beincorporated intothemandate oftheexisting panel. Theterms ofreference, as
modified, would readasfollows: "Toexamine, inlightoftherelevant provisions intheGATT 1994,
thematters referred totheDSBbytheUnited States indocuments WT/DS62/4, WT/DS67/3, and
WT/DS68/2, andtomake suchfindings aswillassist theDSBinmaking therecommendations orin
giving therulings provided forinthatagreement."
Heproposed thatinlightofthisdecision, theDSBagree nottoestablish separate panels pursuant
totheUSrequests contained indocuments WT/DS67/3 andWT/DS68/2. Furthermore, theDSBshould
takenotethattheparties hadagreed thatthepanel established on25February 1997, withtheterms
ofreference asmodified atthepresent meeting, would beabletoconsider, andruleupon, anymatter
thatmight havebeenconsidered ifseparate panels hadbeenestablished inresponse tothose panel
requests. TheDSB should takenotethatthemodification oftheterms ofreference ofthepanel
established on25February 1997 waswithout prejudice totheinterpretation oftheCommunities and
theirmember States oftheprovisions ofArticle 4,paragraph 3,oftheDSU withregard tothe30-day
period referred tointhesecond sentence ofthatparagraph.
TheDSBsoagreed.WT/DSB/M/30
Page7
8. Brazil -Measures affecting desiccated coconut
- Report oftheAppellate Body (WT/DS22/AB/R)
andreport ofthePanel (WT/DS22/R)
TheChairman saidthatthisitemwasontheagenda ofthepresent meeting attherequest of
Brazil. Hedrew attention totheAppellate Body report contained inWT/DS22/AB/R. Hereminded
delegations thatinaccordance withtheDecision onProcedures fortheCirculation andDerestriction
ofWTO Documents (WT/L/160/Rev.1), theAppellate Body report andthePanel report hadbeenissued
asunrestricted documents. Hedrew attention toArticle 17.14 oftheDSU which stipulated that: "an
Appellate Body report shallbeadopted bytheDSBandunconditionally accepted bytheparties tothe
dispute unless theDSBdecides byconsensus nottoadopt theAppellate Body report within 30days
following itscirculation totheMembers. Theadoption procedure iswithout prejudice totheright
ofMembers toexpress theirviews onanAppellate Body report."
Therepresentative ofBrazil expressed appreciation forthework donebythemembers ofthe
Panel andtheAppellate Body aswellastheSecretariat oftheWTO andtheAppellate Body. Brazil
believed thatthiscasewasveryimportant forthefunctioning ofthedispute settlement mechanism since
ithaddealtwithakey-issue ofapplicable lawwithin anintegrated multilateral trading system. Ithad
provided anopportunity tofurther discuss theimportance ofterms ofreference ofpanels. Itshould
behighlighted thatinthiscasethePhilippines hadnotbeendeprived oflegaloptions toredress alleged
violations oftheirrights. Itsrecourse tolegaloptions thatwere notavailable hadbeenamatter of
deliberate choice. Inviewofthefindings andconclusions reached bythePanel which hadbeenupheld
bytheAppellate Body, Brazil requested thattheDSBadopt thereports ascontained inWT/DS22/AB/R
andWT/DS22/R.
Therepresentative ofthePhilippines expressed disappointment withtherecommendations of
thePanel andtheAppellate Body. More importantly, however, thePhilippines wasconcerned with
thedenial ofjustice toaMember under thesystem which hadbeenestablished precisely touphold
andpreserve therights ofMembers. Thismight haveserious systemic implications forthecredibility
ofthedispute settlement mechanism. Therefore, thePhilippines believed thatitwasimportant toexpress
views onthese reports pursuant toArticles 16.4and17.14 oftheDSU. InthePhilippines 'viewthe
Panel andtheAppellate Body hadcommitted several basic errors.
First, there hadbeenafailure toappreciate thefundamental distinction between thecause of
action ofthePhilippines andthepotential grounds uponwhich Brazil could haverelied foritsdefense.
Asof1January 1995, pursuant toArticles IandIIofGATT 1994, Brazil hadassumed theobligation
toaccord m.f.n. treatment infavour ofallMembers, including thePhilippines, andtomaintain tariffs
within thelevels bound under itsSchedule ofConcessions. InAugust 1995, Brazil, inbreach ofsuch
obligation, hadimposed acountervailing dutyof121.5 percent onimports ofdesiccated coconut from
thePhilippines ongrounds which itbelieved were unjustified.
Inplainlegalese, thecause ofaction ofthePhilippines wasthebreach byBrazil ofitsobligations
under Articles IandIIofGATT 1994. Inthiscase,Article VIofGATT 1994wasthebasisofdefence
forBrazil. Theapplicability ofArticle VIofGATT 1994tothisdispute wastherefore crucial toBrazil,
nottothePhilippines. Article VIofGATT 1994 hadbeendeclared asnon-applicable and,byvirtue
thereof, Articles IandIIofGATT 1994hadlikewise beennotapplicable. Asaresult, thePhilippines
hadbeeneffectively deprived ofitsrights under Articles IandIIofGATT 1994, andBrazil hadbeen
absolved fromitsobligations thereunder. Theflawed logicinbothreports wasthatifaparty challenged
withanalleged offense could notinvoke adefence available toit,theaggrieved party could notlikewise
enforce itsrights. Ineffect, theenforceability ofthecause ofaction ofanaggrieved party depended
ontheavailability ofadefence totheoffending party. Thiswasbothnovel andincomprehensible.WT/DSB/M/30
Page8
Second, notwithstanding thatArticle VIofGATT 1994 wasamatter ofdefence forBrazil,
herdelegationbelievedthatthereasonsalludedtoindeclaringArticleVIofGATT1994asnotapplicable
tothisdispute werewithout firmlegalfoundations. Thelegalbasiswasasfollows: (i)theAgreement
onSubsidies andCountervailing Measures (SCM) wasnotapplicable tothedispute because Article
32.3thereof stated thatsuchagreement applied toinvestigations initiated pursuant toapplications for
investigations filedaftertheentry intoforce oftheWTO Agreement foraMember; (ii)pursuant to
Article 10oftheSCM Agreement, Article VIofGATT 1994 could notbeapplied independently of
theSCM Agreement; and(iii)sincetheSCM Agreement wasnotapplicable, Article VIofGATT 1994
waslikewise notapplicable. Aprovision ofanagreement which hadbeendeclared asnon-applicable
hadthusbeengiven force andeffect. Furthermore, thephrase "thisagreement" inArticle 32.3had
beenexpanded tomean "this[Subsidies] [A]greement andGATT 1994". Tojustify thisconclusion,
allusion hadbeenmade totheWTO Agreement asonenegotiated package andanintegrated system.
But,ifonewereindeed tobeconsistent withthisconcept, theconclusion should havebeenthatfrom
andafter1January 1995, noMember could haveimposed acountervailing dutyexcept pursuant to
aninvestigation conducted inaccordance withtheSCM Agreement inrelation toArticle VIofGATT
1994. More so,thePanel report hadacknowledged thatArticle 32.1oftheSCM Agreement stated
thatnospecific action against asubsidy ofanother Member could betaken except inaccordance with
theprovisions ofGATT 1994, asinterpreted bytheSCM Agreement. When Brazil hadthusimposed
themeasure inAugust 1995, ithadbeeninviolation ofthatspecific interdiction.
InthePhilippines 'viewanintegrated system could notundermine thesame rights which it
wassupposed touphold andprotect. Ithadbeenanerror toeffectively uphold Brazil 'sdefence that
itsinvestigation could notbesubject toscrutiny under theWTO norms, especially inthelightofArticle
32.1oftheSCM Agreement. Ineffect, whathadbeenupheld wasthattheactofviolation constituted
thedefence. What wasatissue wasnottheinvestigation buttheimposition ofthemeasure. Since
theinitiation oftheinvestigation wasordinarily non-actionable, noMember could claim impairment
ofitsrights atthatstage. However, theinitiation ofaninvestigation inaccordance withapplicable
procedural lawatthetimetheinvestigation wasinitiated didnotaccord avested right toimpose a
measure contrary tosubstantive lawapplicable atthetimesuchameasure wasimposed.
Itwashercountry 'sunderstanding thatsubstantive lawandprocedural lawwereseparate and
distinct concepts. ThePhilippines hadtherefore expected thatdueregard should begiven tothis
distinction.However,inamannerwhichmightberegardedas"cavalier",thePanelreporthaddismissed
alleffort todistinguish between substantive lawandprocedural lawontheground thatitwould "generate
considerable confusion anddispute, asthedistinction between thetwotypes ofobligations inpractice
could prove extremely difficult". Hercountry believed that"difficulty" wasneither anexcuse nor
ajustification forthefailure todischarge one'sresponsibility.
Third, therehadbeenafailure toappreciate thatunder customary international law,eachtreaty
hadanintegrity andexistence ofitsown,independent ofother treaties. Thisprinciple wasencapsulated
inthecustomary international lawprinciple ofpacta suntservanda .Pursuant tothisprinciple, ifthe
pre-WTO agreements andtheWTO Agreement hadbeenrepresented bytwostraight lines, thesewould
beparallel linesandnever meet. Since theyhadco-existed during thetransition period, aparty toboth
separate anddistinct treaties could choose which treaty toinvoke. Theessence ofthistransitory period
wastoenable allrights tobepreserved, butdefinitely, nottohinder ordelay theenforceability of
aright, inparticular arightunder alatertreaty.
Brazil 'sobligations under Articles IandIIofGATT 1947wereseparate anddistinct fromthose
under Articles IandIIofGATT 1994. Inthesame manner, thePhilippines 'substantive rights under
Article IandIIofGATT 1947wereseparate anddistinct fromthose under Articles IandIIofGATT
1994. Thecountervailing dutyof121.5 percent hadbeeninviolation ofboth, andthePhilippines
hadarighttoinvoke either orboth. Onedidnotpreclude theother. While ithadbeendeclared thatWT/DSB/M/30
Page9
thePhilippines hadnoimmediate remedies under theGATT 1994, consolation wasgiven thatthe
Philippines hadaremedy against Brazil under theTokyo Round SCM Code. Itwasnevertheless no
consolation tothePhilippines thatitsco-existent rights under GATT 1994 hadbeennullified inthe
process.
Underlying allthese, thatthere hadbeenundue pre-occupation withwhat hadbeenviewed
assystemic policy considerations. Ifthecontracting parties, signatories totheTokyo Round SCM Code,
andtheWTO Members hadbeenidentical, theycould haveestablished atransition intherealsense
oftheterm-asdistinguished fromco-existence. Under thesecircumstances, itwould havebeenpossible
foronesetofrights tocome intoforce ataprecise moment when theother setofrights hadbecome
unenforceable ornon-existent. Butthiswasnotthecase, andthiscould havenever beenthecase,
because thepre-WTO agreements hadbeenbinding onlyupon those contracting parties subscribing
tothem. Inthesame manner, theWTO agreements were binding onlybetween Members.
ThePanel report conjured aso-called transitional regime from thepre-WTO agreements to
theWTOAgreement.InaccordancewiththePanelreport'sreasoningonatransitionalregime,measures
imposed afterentryintoforceoftheWTO Agreement pursuant toinvestigations which hadbeeninitiated
prior tothatdatewere notimmediately subject toscrutiny under theWTO Agreement; rather, they
werewassubject tosuchscrutiny onlyinaso-called "phased-in" manner. While thePhilippines had
recognized thatthere could bedifferent opinions onthemostappropriate rulesforsuchatransitional
regime, itbelieved thatforpurposes ofthisdispute, whatshould haveprevailed wassolely thecollective
willofMembers, asexpressed intheWTO Agreement. Anyattempt togobeyond suchanexpression
ofcollective willwasanencroachment onthesovereign rights ofeachMember. Anysuchattempt
wasultra vires,beyond thelimits ofthejurisdiction conferred byMembers. Asifinjustification,
thePanel report haddeclared thattheimportance oftheissues raised bythePhilippines would abate
since thetransitional problems would disappear withthecoming intoforce oftheWTO Agreement.
Shebelieved thattheeffects ofthecountervailing dutyof121.5 percent would notabate, much less
disappear, overtime.
Fourth, there hadbeenafailure toappreciate thefundamental distinction between thedispute
settlement mechanism under theGATT andtheWTO. Inbothmechanisms, panel reports weremerely
recommendatory; theCONTRACTING PARTIES thenandMembers oftheWTO now, having the
soleauthority tointerpret theGATT orWTO law,andtoadopt suchreports. Butthat,perhaps, was
where thesimilarity ended. Insofarasithadbeenpossible toblock recommendations ofpanels under
theGATT, dispute settlement inthaterahadbeenessentially apolitical-diplomatic forum. Ontheother
hand, theWTO Agreement hadestablished ajudicial or,attheveryleast, aquasi-judicial system,
under which panel ortheAppellate Body recommendations would bedeemed adopted unless there
wasaconsensus nottodoso.Under theprevious system, panel members therefore hadmore leeway
andcould bearinmindnon-legal considerations, including policy considerations oreventhose affecting
thecollective willoftheCONTRACTING PARTIES: afterall,theCONTRACTING PARTIES had
afinalsay. Under thepresent system, panel andtheAppellate Body members hadthepower and
responsibility ofjudges. Thenature ofsuchpower andresponsibility contained itsinherent andcogent
limitations. Judges interpreted thelaw,buthadnopower tomake thelaw. Ininterpreting thelaw,
judges could notimpute theirownviews onwhatthelawought tohavebeen. Panels andtheAppellate
Body under theWTO, hadtouphold thecollective willofMembers, asclearly andunequivocally
expressed intheagreements presented tothemfortheirinterpretation. ThePhilippines hadexpected
thattheprerogatives ofjudges inajudicial system would havebeendischarged judiciously. Theresults
seemed toindicate thateveninthis,hercountry hadgreat expectations. InthePhilippines 'view,
deliberately ornot,internal andnon-legal institutional considerations hadprevailed overthecollective
willofMembers asexpressed intheWTO Agreement.WT/DSB/M/30
Page10
Finally, ithadbeensuggested thatarightavailable tothePhilippines wastoseekareview
ofthedisputed measure fromtheBrazilian authorities. Without going intohercountry 'sposition on
Article 21.2 oftheSCM Agreement, such areview wasprobably anon-remedy. Under the
circumstances, herGovernment doubted thatredress could beobtained fromthesameauthorities which
hadimposed thedisputed measure. More importantly, however, thisrecommendation wascontrary
totheessence ofthemultilateral trading system anditsneutral dispute settlement mechanism. Itwas
aset-back sincepriority hadbeenaccorded tobilateralism onnon-neutral grounds, outside theprotective
ambit ofthemultilateral system.
Herdelegation could notoveremphasize theimportance ofthisissue. Thecoconut industry
wasoneofthemostneglected sectors ofthePhilippine economy, which hadnoquantitative restrictions
orexcessive tariffs toprotect it.Furthermore, subsidies werenotgranted tothissector. Onthecontrary,
ashercountryhadrepeatedlystatedtotheBrazilianauthorities,thissectorwassubjecttodisproportionate
taxes. Shewasproud thathercountry 'scoconut industry competed andsucceeded purely onthebasis
ofcomparative advantage. Theindifference thatbureaucrats tended toshow toasector which did
wellonitsownwasperhaps endemic tomany Members. Butsuchindifference turned toindignation
when suchasector wasunjustly accused ofsomething itcould notevenafford. Likeother responsible
Members thePhilippines would abide bytheDSB'sdecision tobetaken atthepresent meeting.
Therepresentative oftheUnited States saidthatwhile hiscountry didnotagree withallaspects
ofthereports, itrecognized thatthiscaseinvolved asetofcircumstances thatwerequite unique. As
aresult, theUnited States could joinintheconsensus toadopt these reports.
Therepresentative ofIndonesia recalled thathercountry hadparticipated inthisdispute as
athirdparty and,likethePhilippines, hadserious concerns withregard tothePanel report. Inthis
light, sheexpressed herdelegation 'sviews inaccordance withArticles 16.4and17.14 oftheDSU.
ThePhilippines hadpresented fivereasons whythePanel report hadnotsatisfactorily resolved this
dispute andthatthishadraised systemic issues which notonlytheDSBbuttheGeneral Council might
berequired toaddress. Shedrew attention tothefollowing concerns. First, inIndonesia 'sviewthe
Panel hadcommitted anerror ofjudgement when ithaddeprived thePhilippines andallMembers
affected bytheBrazilian measure oftheirrights under theGATT 1994. Hercountry being aWTO
Member hadrights under theGATT 1994 andtheWTO. Itwould therefore raiseserious concerns
ifanyone claimed thatthiswasnotthecase. Second, thePanel andtheAppellate Body had
recommended thattheremedy currently available tothePhilippines wastoseekareview ofthemeasure
under theBrazilian lawpursuant toArticle 21oftheSCM Agreement. Byimplication, thiswasalso
aremedy available toIndonesia andother Members affected bythismeasure. Shewasconcerned that
resort toArticle 21.2implied thattheWTO hadfound thatBrazilian countervailing dutywasconsistent
withtheSCM Agreement. Indonesia asathirdparty inthisdispute hadchallenged theconsistency
ofthismeasure withtheSCM Agreement butthePanel hadnoteventested theconsistency oftheduty
withtheSCM Agreement. Furthermore, itwasdifficult tounderstand whyArticle 21.1oftheSCM
Agreement should beinvoked when thePanel hadstated thattheSCM Agreement wasnotapplicable.
ThePanel report onlyraised more questions thanitanswered. Indonesia believed thatthePanel report
hadnotprovided aremedy inamultilateral context. Inadopting thereports, Indonesia hoped that
Members would beaware oftheserious flaws inlawanderror ofjudgement contained therein. To
adopt them without aclear understanding ofthesystemic implications would beadisservice tothe
multilateral trading system.
Therepresentative ofMexico saidthatthereasoning behind theAppellate Body report had
beendetermined bythecasewhich haditsinherent particular characteristics. Hisdelegation didnot
agree withcertain points oftheAppellate Body andshared some arguments made bythePhilippines.
However, having stated thisposition fortherecord hisdelegation would notoppose theadoption of
thereports.WT/DSB/M/30
Page11
Therepresentative ofMalaysia saidthathiscountry hadnotbeenasignatory totheTokyo
Round SCM Code. ThePanel hadstated thattheprovisions ofGATT 1994didnotapply tothisdispute
butbythetimethatithadbegun itswork in1996, theGATT 1947nolonger applied. Heasked what
weretherights ofMalaysia atpresent andwhether itcould invoke theSCM Agreement inthiscase.
Since thePanel report haddetermined thattheSCM Agreement didnotapply inthiscase,hisdelegation
shared thePhilippines 'viewthatareview ofthemeasure byBrazil washardly aremedy. Anypanel
report thatplaced aMember insuchanawkward situation was,atbest,"puzzling". Hesupported
thestatement made byIndonesia thatinadopting thereports Members would dosowithfullknowledge
ofthefundamental andinstitutional inconsistencies contained therein.
Therepresentative ofSriLanka saidthathisdelegation hadfollowed with interest the
developments ofthisdispute asathirdparty. Hisdelegation shared some oftheconcerns expressed
bythePhilippines. SriLanka wasoneofthecountries thathadbeenadversely affected bytheBrazilian
measure. Hisdelegation believed thatthePanel'sfindings wereprejudicial tocountries likeSriLanka
thatstillwished topursue action tosafeguard theirrights under theWTO system. Hisdelegation wished
tobeassociated withthestatements made bytheprevious speakers.
TheDSBtooknoteofthestatements andadopted theAppellate Body report inWT/DS22/AB/R
andthePanel report inWT/DS22/R asmodified bytheAppellate Body report.