RESTRICTEDWORLD TRADE
ORGANIZATIONWT/DSB/M/113
17 December 2001
(01-6361)
Dispute Settlement Body
21 November 2001
MINUTES OF MEETING
Held in the Centre William Rappard
on 21 November 2001
Chairman:  Mr. R. Farrell (New Zealand)
Subjects discussed: Page
1. United States – Transitional safeguar d measure on combed cotton yarn from
Pakistan....................................................................................................................... ...............1
(a) Implementation of the reco mmendations of the DSB.................................................................1
2. United States – Import prohibition of certain shrimp and shrimp products:
Recourse to Article 21.5 of the DSU by Malaysia ..................................................................2
(a) Report of the Appellate Body ................................................................................................ .....2
3. Mexico – Anti-dumping investigation of high fructose corn syrup (HFCS) from
the United States:  Recourse to Article 21.5 of the DSU by the United States ....................6
(a) Report of the Appellate Body and Report of the Panel...............................................................6
4. Safeguard measures on imports of fresh, chilled or frozen lamb meat from New
Zealand and Australia .......................................................................................................... ....9
(a) Statement by the United States .............................................................................................. .....9
5. United States – Section 110(5) of the US Copyright Act .......................................................9
(a) Statement by the Eu ropean Comm unities...................................................................................9
1. United States – Transitional safeguard meas ure on combed cotton yarn from Pakistan
(a) Implementation of the recommendations of the DSB
1. The Chairman recalled that in accordance with the DSU provisions, the DSB was required to
keep under surveillance the implementation of recommendations and rulings of the DSB in order to
ensure effective resolution of disputes to the benefit of all Members.  In this respect, Article 21.3 of
the DSU provided that the Member concerned shall inform the DSB, within 30 days after the date of
adoption of the panel or Appellate Body report, of its intentions in respect of implementation of the
recommendations and rulings of the DSB.  He recalled that at its meeting on 5 November 2001, theDSB had adopted the Appellate Body Report in the case of "United States – Transitional Safeguard
Measure on Combed Cotton Yarn from Pakistan" and the Panel Report on the same matter, as
modified by the Appellate Body Report.WT/DSB/M/113
Page 2
2. The representative of the United States said that her country had already implemented the
DSB's recommendations and rulings in the case under consideration.  Specifically, on
8 November 2001, the Committee for the Implementation of Textile Agreements, chaired by the
Department of Commerce, had directed the US Customs Service to eliminate the limit on imports of
combed cotton yarn from Pakistan.  This action was effective from 9 November 2001.  Just as theUnited States had responded quickly to the DSB's recommendations in this case, so it expected its
trading partners to respond promptly to rulings that affected them.
3. The DSB took note of the statement and of the information provided by the United States
regarding its implementation of the DSB's recommendations.
2. United States – Import prohibition of certain shrimp and shrimp products:   Recourse
to Article 21.5 of the DSU by Malaysia
(a) Report of the Appellate Body (WT/DS58/AB/ RW) and Report of the Panel (WT/DS58/RW)
4. The Chairman recalled that at its meeting on 23 October 2000, the DSB had decided, in
accordance with Article 21.5 of the DSU, to refer to the original Panel the matter raised by Malaysia
concerning the US implementation of the DSB's recommendations in this case.  The Report of the
Panel contained in document WT/DS58/RW had been circulated on 15 June 2001.  On 23 July 2001,
Malaysia had notified the DSB of its intentions to appeal certain issues of law covered in the PanelReport and certain legal interpretations developed by the Panel.  The Report of the Appellate Body
contained in document WT/DS58/AB/RW had been circulated on 22 October 2001.  In accordance
with the Decision on Procedures for the Circulation and Derestriction of WTO Documents contained
in WT/L/160/Rev.1, the Appellate Body Report and the Panel Report had been circulated as
unrestricted documents.  He said that the Reports were before the DSB for adoption at the request ofthe United States.  This adoption procedure was without prejudice to the right of Members to express
their views on the Reports.
5. The representative of the United States said that her country was pleased that both the
Article 21.5 Panel and the Appellate Body had f ound that the United States had implemented the
DSB's recommendations and rulings, and that the US compliance measure was justified as aconservation measure under Article XX(g) of GATT 1994.  The United States supported the adoption
of both Reports and thanked the Appellate Body, the Panel, and the Secretariat for their hard work.
As had been reported to the DSB during the implementation period, the United States had taken great
care to address and rectify the prior measure's discriminatory aspects identified in the 1998 Appellate
Body Report pertaining to the Shrimp case.  It had done so in a manner that complied with its WTO
obligations, increased international cooperation, and advanced sea turtle conservation.  The United
States was pleased that the Article 21.5 Panel and the Appellate Body had noted US complianceefforts, and had found that the United States had remedied the aspects of unfair discrimination
previously identified by the Appellate Body. For these reasons, the Panel and Appellate Body had
properly concluded that the application of the US measure no longer resulted in arbitrary or
unjustifiable discrimination under the introductory clause of Article XX, and that the measure was
justified under Article XX(g).  In the view of the Un ited States, some of the Panel's lengthy discourse
on multilateral negotiations was somewhat far afield of both the text of GATT 1994 and the findings
of the 1998 Appellate Body Report.  The US view was confirmed by the most recent Appellate Body
Report, which had not adopted the Panel's reasoning on this issue, and in fact had explicitly noted
disagreement. Throughout this proceeding, Malaysia and other interested third parties had emphasized
the importance they attached to the protection of endangered sea turtles.  The United Statesappreciated this sentiment and hoped that it could build upon it to work together in addressing this
critical conservation issue effectively and comprehensively.
6. The representative of Malaysia said that Article 19.1 of the DSU provided that in addition to
making recommendations, the Appellate Body might suggest ways in which the Member concernedWT/DSB/M/113
Page 3
could implement the recommendations.  He noted that in paragraph 154 of its Report, the Appellate
Body indicated that since it had upheld the Panel' s finding that the US measure was applied in a
manner that met the requirement of Article XX of GATT 1994, it had not made any recommendation
to the DSB pursuant to Article 19.1 of the DSU.  The Appellate Body had not suggested ways in
which the United States could implement the recommendations.  Similarly the Appellate Body in its1998 Shrimp Report had recommended "that the DSB request the United States to bring its measure
found in the Panel Report to be inconsistent with Article XI of the GATT 1994, and found in this
Report to be not justified under Article XX of the GATT 1994, into conformity with the obligations of
the United States under that Agreement".  However,  it had not made any suggestions as to how the
United States could implement the recommendations under Article 19.1 of the DSU.  Notwithstanding
the usage of the word "may" which implied that the Panel or Appellate Body were not mandated to
suggest ways to implement recommendations, Malays ia believed that it was pertinent for a panel or
the Appellate Body to explicitly state the manner in which a Member should implement their
recommendations.  If a Member knew what course of action should be taken in implementing the
recommendations of the Panel or the Appellate Body, it could decide not to pursue further litigation
under Article 21.5 of the DSU.  This would ensure predictability and speedier settlement of disputes.
It would also be in line with the spirit of Arti cle 3.2 of the DSU which stated that "The dispute
settlement system of the WTO is a central element in providing security and predictability to the
multilateral trading system", and Article 3.3 of the DSU which provided that "The prompt settlement
of situations in which a Member considers that any benefits accruing to it directly or indirectly under
the covered agreements are being impaired by measures taken by another Member is essential to the
effective functioning of the WTO and the maintenance of a proper balance between the rights andobligations of Members".  Finally, he underlined that Malaysia would not stand in the way of
consensus for the adoption of the Reports.
7. The representative of Canada said that his delegation wished to make some systemic
observations on the Appellate Body Report.  He recalled that the Appellate Body had upheld the
Panel's determination that the US measure was justified under the chapeau of Article XX as long asthe conditions set out in the report remained satisfied.  The key condition was the "ongoing, serious,
good faith efforts" of the United States to reach a multilateral agreement.  The Appellate Body had not
accepted Malaysia's argument that the chapeau of Article XX required the United States not merely to
negotiate, but to conclude an international agreemen t.  In principle, Canada supported the Appellate
Body's findings on this issue.  In Canada's view, if an exception set out in Article XX could only be
successfully invoked when a multilateral environmental agreement had been concluded, it would
significantly narrow the scope of Article XX.  It would mean that the ability of Members to adopt
otherwise GATT-inconsistent trade measures to promote valid and possibly urgent environmental
objectives would be entirely dependent on the emergence of a multilateral consensus.  However, at the
same time, Canada recognized that it could be a difficult task for panels in future disputes to
determine whether a country had met the requirement of "ongoing, serious, good faith efforts".
Canada further stated that perhaps more importantly, it might be difficult for Members themselves todetermine when they had met the criteria.  In Canada's view interpretive transparency and
predictability were important factors in enabling Members to observe their obligations and minimize
the burden on the dispute settlement system.  For these reasons, Canada remained somewhat
concerned that future determinations in these types of cases were essentially left to a case-by-case
approach.  He added that Canada continued to hold the view, as articulated in Agenda 21 of the RioDeclaration, that the most effective way to coordinate policy action to deal with global environmental
problems was through MEAs, based on international consensus.  Where trade measures were deemed
necessary in such MEAs, Canada believed that care had to be taken to ensure that they were crafted in
a manner consistent with WTO rules.
8. The representative of Hong Kong, China said that, as a third party in this case, his delegation,
having some legal and systemic concerns, had made submissions to the Article 21.5 Panel and the
Appellate Body.  Hong Kong, China had also participated as a third party in the earlier proceedings of
the Appellate Body.  His delegation fully shared the objectives of sustainable development and theWT/DSB/M/113
Page 4
protection of endangered species.  Like other parties, Hong Kong, China did not question the need for
conservation of sea turtles.  Indeed Hong Kong , China was making considerable efforts towards
achieving this goal, on its own and jointly with ot her economies.  The case at hand concerned specific
measures taken by the United States to comply with the DSB's recommendations and whether these
measures constituted arbitrary or unjustifiable discrimination among Members where the sameconditions prevailed.  At the present meeting, Hong Kong, China wished to make some comments and
observations on the Reports.
9. With regard to an appropriate legal fram ework for assessment, Hong Kong, China had
proposed, in its submission, a legal framework to consider the question of whether the United States
had implemented the Appellate Body's earlier recomm endations.  In the view of Hong Kong, China, a
panel under Article 21.5 of the DSU should consider whether a new measure – in comparison with the
original disputed one – was consistent with the WTO Agreement, and in particular with respect to the
specific provisions with which the Panel or the A ppellate Body had found the original measure to be
WTO-inconsistent.  Hong Kong, China also considered that the implementation actions had to be
assessed with reference to the recommendations and rulings of the original Panel and the Appellate
Body.  Hong Kong, China was pleased that the Panel's deliberations, which had been endorsed by the
Appellate Body, were in line with the framework it had proposed.  In particular, the Panel had
examined the WTO-consistency of actions taken by the United States in addressing each of the
defects identified in the earlier Appellate Body Report.
10. With respect to the implication of domestic court decision, Hong Kong, China noted that,
with reference to Article 27 of the Vienna Convention, it had stated that the United States could not
invoke a decision of its domestic court on the interpretation of its internal law as grounds fordisregarding its international/WTO obligations.  Hong Kong, China observed that the Panel had
chosen not to address the question of whether the United States would still be in compliance with the
Appellate Body's recommendation in the eventuality that the ruling of the US Court of International
Trade in the Turtle Island  case was upheld after appeal.  While Hong Kong, China agreed with the
Appellate Body that the Panel should not indulge in  speculation, this was clearly an outstanding and
developing issue that merited continuous attention.
11. With regard to an assessment with reference to "cumulative effect", the United States in its
panel submission had claimed that it "need not necessarily address each, one of those aspects in order
to comply with the Appellate Body 's findings".  Hong Kong, China disagreed with the claim made on
the basis that the term "cumulative effect" had been used in the Appellate Body's earlier Report.  It did
not consider that by the employment of such words the Appellate Body had, expressly or by
implication, permitted the United States to continue with some of its previous measures that had beenfound to be WTO-inconsistent.  In this regard, Hong Kong, China noted that the Panel had concluded,
among other things, that the implementation actions taken by the United States thus far were "justified
under Article XX of the GATT 1994 as long as the conditions stated in the findings of this Report
remain satisfied".  The Panel had further noted that "should any one of these conditions cease to be
met in the future, the recommendations of the DSB may no longer be complied with".  Similarly, theAppellate Body had upheld the Panel's findings that the US measure was applied in a manner that met
the requirements of Article XX of GATT 1994.  However, it was clear that should any of the
conditions not be met in the future, the present co nclusion of the Panel and Appellate Body would
have to be revisited.
12. With regard to a review of measures after expiry of the reasonable period of time, Hong
Kong, China noted that the Panel had raised a number of issues which had not been appealed but
warranted attention from the systemic point of view.  In this respect, Hong Kong, China wished to
highlight one particular issue.  That issue was whether a compliance panel should examine the facts
and developments which had occurred between the end of the reasonable period of time and the
establishment of the panel.  Hong Kong, China did not take a position on this issue, but noted that thePanel had taken an affirmative view in the present case on the grounds that such an approach wouldWT/DSB/M/113
Page 5
help "prompt settlement of the dispute".  The question was whether and to what extent this prompt
settlement objective in Article 3.3 of the DSU should affect the scope of the mandate of a panel.  A
related question was whether alternatively a more restrictive approach would provide additional
incentive to Members to take the required implementation measure within the reasonable period of
time.  With these observations and comments, Hong  Kong, China was prepared join other Members in
adopting the Panel and the Appellate Body Reports.
13. The representative of Australia said that his country's participation in this dispute as a third
party reflected both systemic and substantive trade interests.  Australia had appreciated the positive
US response to the issue of certification of sh rimp exports from two Australian shrimp fisheries.
Australia welcomed the efforts of the United States and other countries, including Malaysia, to
address sea turtle conservation.  This dispute had highlighted that genuine, multilateral cooperative
efforts were preferable when transboundary or global environmental problems were at issue.  Whileunilateral measures were not ruled out in all instances, as demonstrated by the outcome of this
dispute, Australia had some concerns about the legal reasoning that had led to the conclusion that the
US measure in this instance was justified by the chapeau of Article XX of GATT 1994.  These
concerns were described in Australia's submission to the Appellate Body.  In particular, Australia
believed that the Panel had incorrectly relied on whether or not the United States had engaged inongoing serious good faith efforts to reach a multilateral agreement as a determining factor for the
measure's consistency with the chapeau of Article XX of GATT 1994.  The key issue should have
been whether the measure itself, following the conclusion of the reasonable period of time, was
justified by the chapeau.  This would have required an examination of the steps taken by the United
States to obviate or eliminate the unjustifiably discriminatory nature of the trade restriction –including in the design, extent and implementation of the measure.  The progress of the Indian Ocean
initiative on sea turtle conservation had demonstrated the existence of a viable, non-discriminatory
alternative to the unilateral import restriction.  The initiative provided for a wide and comprehensive
range of actions to address turtle conservation, including the provision of technical expertise and
genuine capacity building in country.  If the United  States believed that, in addition to these actions,
trade restrictive measures were needed to promote sea turtle conservation, it could pursue these
proposals through the Indian Ocean initiative – rather than through a unilaterally determined import
restriction.  This would reaffirm the importance of multilateral solutions to transboundary
environmental problems.
14. The representative of the European Communities said that the EC welcomed the Appellate
Body Report and considered that the Appellate Body had clarified important procedural issues
regarding the scope of Article 21.5 proceedings as well as the precedential effect of the AppellateBody's rulings.  The EC welcomed that the Appellat e Body had further clarified the conditions set by
the chapeau of Article XX of GATT 1994 on unilateral measures aiming at the protection of
transboundary and global environmental problems.  The EC noted that while confirming that the
conclusion of a multilateral agreement was not an indispensable condition of avoiding "arbitrary and
unjustifiable discrimination", the Appellate Body had recognized that a multilateral approach wasstrongly preferred in environmental matters.  The EC considered that, in the case at issue, the
Appellate Body had properly upheld the Panel's findings that the continuous and serious efforts of the
United States to negotiate in good faith an international agreement provisionally and exceptionally
entitled it to apply the implementing measure.  Th e EC also supported the Appellate Body's decision
to confirm the Panel's view that the compliance of the United States with the chapeau of Article XXof GATT 1994 might be reassessed at any time by an implementation panel, without having to
commence new dispute settlement proceedings.  Finally, the EC considered that this ruling of the
Appellate Body illustrated how WTO rules could be interpreted in a manner which was supportive of
Member's actions to protect the environment, while avoiding arbitrary or unjustified discrimination.
The EC continued to consider that it would be appropriate for Members to build upon the rulings of
the Appellate Body through a clarification of WTO rules, which further entrenched guarantees against
protectionist abuse.WT/DSB/M/113
Page 6
15. The representative of India said that his country had participated in this dispute as a third
party.  India noted the Appellate Body's clarificat ion that a panel under Article 21.5 of the DSU had to
examine all arguments, claims and factual circumstances relating to the new measure taken to comply
with the DSB's recommendations and rulings, beyond those raised in relation to the original measure
and examined by the original panel.  It had also clarified that the Panel could examine even thoseaspects of a new measure that were part of the or iginal measure and found to be WTO-consistent and
remained unchanged (paragraphs 86-89 of the AB Report).  However, an Article 21.5 panel could not
address a claim that had not been made by the complaining party when requesting that the matter be
referred by the DSB for an Article 21.5 proceeding (paragraph 88 of the AB Report).  India was,
however, disappointed at the Appellate Body's upholding  of the panel's conditional ruling that as long
as the conditions, in particular the ongoing serious good faith efforts to reach a multilateral agreement
remained satisfied, the US measure at issue was justified.
16. The DSB took note of the statements and adopted
 the Appellate Body Report contained in
WT/DS58/AB/RW and the Panel Report contained in WT/DS58/RW, as upheld by the Appellate
Body Report.
3. Mexico – Anti-dumping investigation of high fructose corn syrup (HFCS) from the
United States:  Recourse to Article 21.5 of the DSU by the United States
(a) Report of the Appellate Body (WT/DS 132/AB/RW) and Report of the Panel
(WT/DS132/RW)
17. The Chairman recalled that at its meeting on 23 October 2000, the DSB had decided, in
accordance with Article 21.5 of the DSU, to refer to the original Panel the matter raised by the United
States concerning Mexico's implementation of the DSB's recommendations in this case.  The Reportof the Panel contained in document WT/DS132/RW had been circulated on 22 June 2001.  On
24 July 2001, Mexico had notified the DSB of its intentions to appeal certain issues of law covered in
the Panel Report and certain legal interpretations developed by the Panel.  The Report of the
Appellate Body contained in documents WT/DS 132/AB/RW had been circulated on 22 October 2001.
In accordance with the Decision on Procedures for the Circulation and Derestriction of WTODocuments contained in WT/L/160/Rev.1, the Appellate Body Report and the Panel Report had been
circulated as unrestricted documents.  The Reports were before the DSB for adoption at the request of
the United States.  This adoption procedure was without prejudice to the right of Members to express
their views on the Reports.
18. The representative of the United States said that his country was pleased that these Reports
were before the DSB for adoption at the present meeting.  The Reports showed that the Appellate
Body and the Panel had considered the issues with care and precision.  The United States wished tothank the Members of the Appellate Body, the Panel and the Secretariat for their hard work and fine
product.  The United States supported the adoption of these Reports, which had concluded that
Mexico's revised determination imposing definitive anti-dumping duties on imports of HFCS from the
United States was inconsistent with the Anti-Dumping  Agreement.  In the view of the United States,
the Appellate Body and the Panel had appropriately found that Mexico had failed to implement therecommendation of the original Panel and the DSB to bring its measure into conformity with its
obligations under the Anti-Dumping Agreement.
19. The representative of Mexico said that his country recognized that the Reports before the
DSB at the present meeting would have to be adopted, and that it had no alternative, but to accept
them unconditionally.  However, Mexico believed that some findings of the Reports deservedcomments due to systemic implications.  He recalled that the Appellate Body had considered three
main issues in this case:  (i) the lack of consultations;  (ii) the existence of an alleged "restraint
agreement";  and (iii) the lack of analysis and explanation regarding Articles 3.1 and 3.4 of the
Anti-Dumping Agreement.  With regard to the lack  of consultations, he noted that the importance ofWT/DSB/M/113
Page 7
consultations had always been recognized under the GATT system and preference had consistently
been given to consensus  over iuris dictio .  This was reflected in the wording of Article XXIII of
GATT 1994 which specified that efforts had to be made to ensure a satisfactory adjustment before a
matter was referred to the Contracting Parties.  He also noted that the objective of the DSU, as
stipulated in Article 3.7 of the DSU, was to "secure a positive solution to a dispute" and to givepreference to a solution mutually acceptable to the pa rties to the dispute.  Furthermore, Article 4.1 of
the DSU referred to Members' "resolve to strengthen and improve the effectiveness of the consultation
procedures".  However,  the Appellate Body had ruled that this was not the case.  It had made clear
that consultations were not a prerequisite for the establishment of a panel, and that the procedure to
hold consultations was voluntary.  In order to reach that conclusion, the Appellate Body had examined
some exceptions and had treated them as a general rule.  These exceptions included the following:
(i) Article 4.3 of the DSU, which provided that a panel might be established if the Member to whichthe request was made declined to enter into consultations within a period of 10 days;  and
(ii) Article 4.7 of the DSU, which provided that a panel might be established before the 60-day period
elapsed, if both parties agreed that consultations had fa iled to settle the dispute.  In the view of the
Appellate Body, such exceptions constituted evid ence that the responding party had the right to
consult, and that if it did not object to the lack of consultations "the responding party may be deemedto have consented to the lack of consultations and, thereby, to have relinquished whatever right to
consult it may have had" (paragraph 63 of the AB Report).  Mexico contended that such an
affirmation was not only erroneous but also highly dangerous.  Article 4.7 of the DSU did not permit
Members to discard consultations but specified that such consultations should take place within 60
days.  The only exception in this regard was stipulated in Article 4.3 of the DSU.  However, neitherthis exception nor Article 4.7 of the DSU were applicable in the case at issue since the United States
had never requested consultations.
20. Furthermore, the Appellate Body's findings we re not restricted to Article 21.5 panels, but
would apply to any dispute settlement procedure.  Therefore, such reasoning might create an incentive
for a complaining party to adopt an aggressive stance and to pressure a responding Member intoconsenting to dispense with consultations, to the detriment of the right to due process.  Moreover, as a
result of the Appellate Body's reasoning, DSB meetings could become a new forum for litigation
since Members would have an incentive to present their procedural objections during such meetings
in order to protect their interests.  As a result, panels would never be established upon the first
consideration of panel requests by the DSB.  This demonstrated an absence of logic, in particular
since panels were established in accordance with the principle of reverse consensus, and any
statement in this respect would only serve to prolong DSB meetings.
21. Mexico was also concerned about the Appellate Body's discussion with regard to Article 6.2
of the DSU.  Although the Appellate Body had recognized the obligation to indicate "whether
consultations were held", it considered that since the lack of consultations did not deprive the panel of
its authority, failure to indicate "whether consultations were held" did not invalidate its authority
either.  In other words, non-compliance with that obligation entailed no legal consequences.  Mexicowondered whether such reasoning would apply in cases where no "specific measure at issue" had been
identified or where the request was not made in writing.  Under the standard interpretation of
Article 6.2 of the DSU there was no distinction between these obligations, so it would be reasonable
to assume that the requirements of Article 6.2 were not mandatory.  Furthermore, such reasoning
contradicted what the Appellate Body had established in the Banana case.  Mexico noted that theAppellate Body had underscored the need for panel requests to be sufficiently clear and recognized
that, since the requests were not analysed in deta il by the DSB, it was for panels to examine them
closely in order to determine their consistency with the letter and the spirit of Article 6.2 of the DSU.
22. He also wished to refer to the question of the "alleged restraint agreement".  According to
importers of HFCS from the United States, soft drink and sugar producers had signed an agreementunder which the former would only use a limited quantity of HFCS.  Although the fact had never been
demonstrated during the investigation and was not included in the administrative record, the MexicanWT/DSB/M/113
Page 8
authority had twice fulfilled its obligation to determine the likelihood of increased importation.  Its
first analysis had been based on the facts before it, and the second was an alternative analysis
assuming that the "alleged restraint agreement" did exist.  In both cases, the likelihood of increased
importation had been determined.  Both the Panel and the Appellate Body had proceeded on the basis
that the agreement existed and had completely ignored the Mexican authority's main analysis.  Inother words, the Panel and the Appellate Body had invalidated an analysis based on the facts before
the investigating authority and had ruled exclusively on the alternative analysis.
23. He drew attention to the issue of the lack of analysis and explanation regarding Articles 3.1
and 3.4 of the Anti-Dumping Agreement.  This issue involved a serious violation of Mexico's
procedural guarantees, and possibly those of other Member.  Article 12.7 of the DSU stipulated that
"the report of a panel should set out the findings of fact, the applicability of relevant provisions and
the basic rationale behind any findings and recommendations that it makes".  In spite of this, theAppellate Body had interpreted the terms "the report of a panel" in such a broad sense that it had
ended up contradicting itself.  Thus, in paragraph 79 of its Report, the Appellate Body had made a
distinction between the original Panel Report and the Article 21.5 Panel Report pointing out that these
had dealt with two different measures and that there was no reason to mix the two Reports.
Nevertheless, in paragraph 124, the Appellate Body had suggested that the Article 21.5  Panel Reporthad to be "read together with the original panel report" in order to establish that Mexico had acted
inconsistently with Article 3.1 of the Anti-Dumping Agreement.  He noted with concern that the
Appellate Body had recognized that the Article 21.5 Panel Report did not even contain a direct
quotation from, or an explicit reference to, the reasoning set out in the original Panel Report.  The
reasoning with regard to Article 3.4 of the Anti-Dumping Agreement was equally weak.  Although theclaims by the United States were very different from those it had made initially, the Appellate Body
had not hesitated to make an implicit reference to the original Panel Report or to use expressions such
as "without expressly saying so, the Panel considered" (paragraph 112), "[w]hile the Panel did not
itself discuss the relationship between those two provisions" (paragraph 114), and "might not reflect
an exemplary degree of clarity in all respects" (paragraph 117).
24. The Appellate Body had taken this opportunit y to develop interpretations of fundamental
provisions of the DSU.  Mexico regretted that th e Appellate Body considered the rights under the
DSU to be of lesser importance or substance than the rights and obligations under other covered
agreements.  Should the interpretation of the Appellat e Body be followed in future cases, complaining
parties could find it easier to secure the establishment of a panel, while responding parties would have
to defend their procedural interests and engage in litigation even before a panel was established.  In
addition, Members who were required to bring their measures into conformity with WTO rules wouldbe compelled to refer to other documents or to "read between the lines" in order to find out what a
panel intended to say when it did not "set out the findings of fact, the applicability of relevant
provisions and the basic rationale behind any findings and recommendations".
25. The representative of the European Communitie s said that the EC was concerned with the
finding of the Appellate Body that panels were no t required to ascertain, of their own motion, whether
consultations had been held before requesting a panel.  The EC noted that the Appellate Body had not
ruled on the question of whether or not consultations were a prerequisite for an Article 21.5
proceeding.  However, the Appellate Body had reasoned that consultations were not a necessary
prerequisite for the establishment of a panel, and that Members might agree to dispense with them as
they saw fit.  The Appellate Body had derived this interpretation from the last sentence of Article 4.3of the DSU.  However, the obvious purpose of that provision was to avoid that Members could
prevent the establishment of a panel by refusing to hold consultations.  It could not be inferred from
that provision that Members were free to agree not to hold consultations.  In fact, the first sentence of
Article 4.3 made it clear that Members had a duty to enter into consultatio ns.  The Appellate Body
also cited Article 4.7 of the DSU in support of its interpretation.  But that provision rather supportedthe opposite view.  If Members were free to agree to dispense with consultations, it would have been
unnecessary to provide in Article 4.7 that the 60-day period might be shortened if both parties agreed,WT/DSB/M/113
Page 9
after holding consultations, that consultations had failed to settle the dispute.  The view of the
Appellate Body that Members were free to agree not to hold consultations was difficult to reconcile
with Article 4.1 of the DSU, which stated the object ive to strengthen and improve the effectiveness of
the consultations, as well as with Article 4.5 of the DSU, which stipulated that before resorting to
further action under this Understanding, Members should attempt to obtain satisfactory adjustment ofthe matter.  Furthermore, it undermined the overal l objective of the DSU to promote mutually agreed
solutions, as contained in Article 3.7 of the DSU.
26. The DSB took note of the statements and adopted
 the Appellate Body Report contained in
WT/DS132/AB/RW and the Panel Report contained in WT/DS132/RW, as uph eld by the Appellate
Body Report.
4. Safeguard measures on imports of fresh, chilled or frozen lamb meat from New Zealand
and Australia
(a) Statement by the United States
27. The representative of the United States, speaking under "Other Business", stated that as had
been previously announced, her country had reached a decision on 31 August 2001 to end the
safeguard measure on imports of lamb meat, effective from 15 November 2001.  On
14 November 2001, the United States had completed the necessary legal steps to implement thisdecision.  By these actions, the United States considered that it had implemented the DSB's
recommendations and rulings.
28. The representative of Australia said that his country welcomed the withdrawal of the
WTO-inconsistent safeguard measure on lamb imports.  He noted that the withdrawal had taken place
almost two and a half years after the measure had been imposed and six months after the DSB hadadopted the Panel and the Appellate Body Reports pertaining to this dispute.  Notwithstanding this
positive development, Australia continued to have concerns about the approach taken by the United
States in the application of its safeguard legislation, as had been reflected in ongoing DSU cases.
Australia urged the United States to apply its legislation in the future in a way that would be
consistent with its WTO obligations, as clarified through this and other disputes.
29. The representative of New Zealand said that it was well-known that his country shared a
number of the concerns that had been identified by Australia in respect of the present case and
safeguard practice more generally.  Nevertheless, New Zealand thanked the United States for its
statement advising the DSB that the United States had implemented the recommendations and rulings
in this case.  New Zealand welcomed the US action in this regard.
30. The DSB took note of the statements.
5. United States – Section 110(5) of the US Copyright Act
(a) Statement by the European Communities
31. The representative of the European Communities, speaking under "Other Business", recalled
that on 9 November 2001, the Arbitrators entrusted under Article 25 of the DSU with the task of
determining the level of EC benefits that were being  nullified or impaired as a result of
Section 110(5)(B) of the  US Copyright Act, had circulated their award to Members
(WT/DS160/ARB25/1).  At the present meeting, the EC and its member States  wished to raise some
points relating to the Arbitrators' award, in accordance with Article 25.3 of the DSU.  The EC
considered that the protection of intellectual property rights, as foreseen in the TRIPS Agreement, had
given rise, in and of itself, to benefits for Members.  Accordingly, the deficient protection of one of
those rights entailed an impairment of TRIPS benefits.  The level of nullification and impairmentWT/DSB/M/113
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stemming from a violation of substantive TRIPS obligations should not depend upon the level of
piracy prevailing in one country.  The EC and its member States were therefore disappointed with the
Arbitrators' reasoning, in so far as the Arbitrators ultimately determined the level of TRIPS benefits
on the basis of the rates of illegal copyright use in the United States.  The Arbitrators considered that,
"the European Communities could not reasonably expect that, in the United States, all users ofcopyright works of EC right holders would be licensed and would pay licensing royalties".  This
implied that, with regard to the US businesses which illegally used music for commercial purposes;
i.e. engaged in acts of copyright piracy, the breach of the TRIPS Agreement had no consequences
from the viewpoint of nullification or impairment .  The EC believed that this conclusion was
especially troublesome given the high levels of illegal use of copyright prevailing in the United States.
According to some estimates presented by the United States, at least 55 per cent of all restaurants in
the United States had played  music without a licence before the enactment of Section 110(5)(B).Moreover, if one were to believe the United States, only a small fraction of those establishments had
been actually covered by pre-existing copyright exemptions.
32. In the view of the EC and its member States  the exceedingly high rates of copyright piracy in
the United States were due to a long history of de ficient copyright protection, not to the passivity of
right holders.  In this regard, the EC and its member States were especially surprised by theArbitrators' reasoning regarding copyright enforcement.   The possibility for rightholders to effectively
enforce their rights depended on the substantive content of the rights as much as on administrative and
judicial remedies.  In any event, the EC and its member States respected the Arbitrators' decision and
would honour its bilateral agreement with the United States, which had been notified to the DSB on
24 July 2001.  The EC and its member States  hoped that the negotiations with the United Stateswould have a successful outcome before the end of the extended reasonable period of time.  On the
other hand, the EC trusted that the authorities of the United States would take all necessary steps to
bring the US Copyright Act into conformity with the TRIPS Agreement in the near future.  In this
regard, the EC and its member States drew attention to the absence of any status report on
implementation thus far, although almost sixteen months had passed after the adoption of the PanelReport and twelve months after the establishment of the reasonable period of time.  The EC wished to
be informed by the United States of the status of implementation of the DSB's recommendations in
this case.
33. The representative of the United States said that her delegation did not intend to respond at
length to the comments made by the European Communities or to discuss the Arbitrators' report.  In
the view of the United States that report, which had been well done, spoke for itself.  However, her
country took exception to the EC's accusation of "piracy" or "deficient copyright protection" in theUnited States.  As fully discussed during the arbitration, there were sound commercial reasons for a
copyright holder's choice of level and means of enforcement of these rights.  The business
considerations were reflected in the evidence that had been discussed by  the Arbitrators.  The United
States had already anticipated updating Members on the status of implementation of the underlying
DSB's recommendations and rulings at the DSB meeting scheduled for 18 December 2001.
34. The DSB took note of the statements.
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