RESTRICTED
WORLD TRADE WT/DSB/M/33
25June1997
ORGANIZATION(97-2616)
Dispute Settlement Body
23May1997
MINUTES OFMEETING
Held intheCentre William Rappard
on23May1997
Chairman: Mr.Wade Armstrong (New Zealand)
Subjects discussed: Page
1. Surveillance ofimplementation ofrecommendations adopted bytheDSB ........1
- United States -standards forreformulated andconventional gasoline:
Status report bytheUnited States ............................1
2. Indonesia -Certain measures affecting theautomobile industry ..............4
- Request fortheestablishment ofapanel bytheEuropean Communities ....4
3. United States -Measure affecting imports ofwoven wool shirts andblouses
from India ...............................................5
- Report oftheAppellate Body andReport ofthePanel ...............5
4. Proposed nominations fortheindicative listofgovernmental andnon-governmental
panelists .................................................13
1. Surveillance ofimplementation ofrecommendations adopted bytheDSB
- United States -standards forreformulated andconventional gasoline:
Status report bytheUnited States (WT/DS2/10/Add.4)
TheChairman recalled thatthisitemwasontheagenda pursuant toArticle 21.6oftheDSU
which required that: "Unless theDSB decides otherwise, theissue ofimplementation ofthe
recommendations orrulings shallbeplaced ontheagenda oftheDSBmeeting aftersixmonths following
thedateofestablishment ofthereasonable period oftimepursuant toparagraph 3andshallremain
ontheDSB'sagenda untiltheissueisresolved." Hedrew attention todocument WT/DS2/10/Add.4
which contained afurther status report bytheUnited States withregard toitsprogress inthe
implementation oftheDSB'srecommendations onthismatter.
Therepresentative oftheUnited States saidthatasprovided forinArticle 21.6oftheDSU,
hiscountry hadsubmitted itsfifthreport ontheimplementation oftheDSB'srecommendations. At
theprevious DSBmeeting, theUnited States hadstated thaton29April 1997, theAdministrator of
theUSEnvironmental Protection Agency (EPA) hadissued aproposed ruleforcomment which had
subsequently beenpublished intheUSFederal Register on6May1997. Inaccordance withnormal
USregulatory procedures, theEPAhadinvited allinterested parties tocomment onthespecifics ofWT/DSB/M/33
Page2
itsproposal. On20May1997, theEPAhadheldapublic hearing ontheproposal. Written comments
wererequired tobesubmitted by19June1997, which would beconsidered prior tothefinalization
oftheregulation. TheUnited States reiterated itshopethatMembers would asktheirgovernments
toreview theproposal andprovide comments prior totheclosure ofthecomment period. Timely
comments would ensure thattheUnited States would takethem fullyintoaccount informulating a
finalrule.Attheprevious DSBmeeting, Brazil hadasked anumber ofquestions concerning time-limits
forthecompletion ofwork ontheproposed rule. HesaidthattheUnited States tookitscommitment
tothetimely implementation ofitsobligations seriously, andwasonschedule towards meeting these
obligations.
Therepresentative ofBrazil thanked theUnited States fortheinformation justprovided. His
Government andBrazil 'soilcompany Petrobrás were carefully considering theproposed rule. The
representativesofPetrobráshadparticipatedinthepublichearingheldon20May1997.Thepublication
oftheproposed rulehadbeenapositive sign. However, inviewoftheapproaching deadline of20
August1997fortheimplementationoftheDSB'srecommendations,Brazil,atthepreviousDSBmeeting,
hadrequested theUnited States toprovide information withregard to:(a)theadditional stepsrequired
under theUSlawtoimplement theDSB'srecommendations; (b)thetimerequired foreachstep;
and(c)aschedule orchronology oftheevents between nowandthe20August deadline. Hisdelegation
would appreciate iftheUnited States could provide thisinformation.
Therepresentative oftheEuropean Communities welcomed thedetailed report which theUnited
States hadsubmitted attheDSBmeeting on30April 1997, ontheEPA'sintentions regarding the
implementation oftheDSB'srecommendations which would bring theGasoline Ruleintoconformity
withtheGATT 1994. TheCommunities appreciated theamount ofwork involved inthepreparation
ofthisproposal. They, likeBrazil, assumed thatwithrespect tothetiming, theUnited States was
stillfirmly committed tomaking thenecessary changes within the15-month period ending on20August
1997; inother words, thatitwascommitted notonlytopropose thechanges buttoactually implement
them within thatperiod.
Withregardtothesubstanceoftheproposal,theCommunitiesacceptedthebasicoptionproposed
bytheUnited States which would permit foreign refiners tochoose either anindividual orthestatutory
baseline. However, theywereconcerned inparticular withregard tooneaspect oftheproposal which
stilldidnotseem tocomply withthelegalrequirements oftheAppellate Body andthePanel. This
related totheproposed requirement ofmaking imported conventional gasoline subject toaquality
benchmark, toamonitoring mechanism andtoanincrease inthestatutory baseline ifthebenchmark
would beexceeded. TheUSauthorities sought tojustify thisproposal, applicable onlytoimported
conventional gasoline, toavoid thedeterioration oftheoverall quality ofsuch gasoline. Such
deteriorationwouldoccurifforeignrefinerswithabelow-averagequalityofgasolinesoughtanindividual
baseline while thosewithanabove-average quality didnotandthenwould subsequently lower thequality
oftheirgasoline tothatofthestatutory baseline. ThePanel hadreferred tothisas"gaming". The
proposal toincrease thestatutory baseline insuchasituation would result instricter requirements for
imported gasoline thanforidentical domestic gasoline. Theendresult would betorevert tothesituation
when thepanel hadbeenrequested. Thissamesituation would certainly apply interms ofcompetition
between domestic refiners which applied theindividual baselines andwhich could leadtoadegrading
inquality. However, forsuchsituations there wasnoproposed quality benchmark, nomonitoring
mechanism and,most importantly, noincrease inbaselines wasforeseen.
TheCommunities believed thattheUSauthorities again showed themselves particularly strict
withregard tomonitoring imported gasoline andrelatively unconcerned withregard tomonitoring
similar potential problems arising from competition amongst domestic gasoline producers. The
Communities therefore suggested thatthisdifference intreatment bedeleted from theproposal. AsWT/DSB/M/33
Page3
stated intheGasoline Panel Report1"...slightly stricter overall requirements applied tobothdomestic
andimported gasoline could offset anypossibility ofanadverse environmental effect fromthesecauses
andallow theUnited States toachieve itsdesired level ofclean airwithout discriminating against
imported gasoline." Heinvited theUSauthorities toconsider this.
Thesecond concern related tooverly complex andexcessively strict implementing rules for
foreign refiners andimporters, which might haveadverse effects onimports. TheUSauthorities, while
extremely concerned about anypossible riskofrule-avoidance onthepartofimports, weremuch less
concerned about thebehaviour ofdomestic producers. Many requirements intheimplementing rule
onimported gasoline didnotapply todomestic gasoline. TheCommunities believed thatthese
requirements merited careful scrutiny inthisrespect. Inbrief, thecurrently proposed implementing
rules were much stricter forimported gasoline thanfordomestic gasoline. While some difference
inapproach might bejustified bythefactthatmostdomestically produced gasoline could bechecked
atthefactory gate,beyond acertain pointadditional requirements forimported gasoline would constitute
adefactoimport barrier or,atleast, would upset competitive opportunities. TheCommunities therefore
proposed thatadditional requirements forimports should bestrictly limited tothose thatwereabsolutely
necessary. TheCommunities preferred iftheywereexactly thesame asthose applicable todomestic
producers.
Finally, thedeadline of1January 2002forsubmitting baseline petitions didnotseemnecessary.
Itwasnotclear whythere should beacut-off point intimeatall.TheCommunities believed that
foreign refiners should beallowed toapply ifandwhen theybecame interested inacquiring anindividual
baseline, i.e.iftheyweretoexperience anincreased levelofexports totheUnited States andwanted
tochange thebasisoftheirimports. TheCommunities requested theUnited States torespond inwriting
towhatextent itintended totakethese comments intoaccount.
Therepresentative ofVenezuela noted thestatement made bytheUnited States anditsinsistent
assurances regarding theimplementation oftheDSB'srecommendations. Currently, hisGovernment
wasintheprocess ofexamining theproposed amendments totheGasoline Rule. Hisdelegation also
noted thecomments made bytheCommunities. HisGovernment would submit itswritten comments
totheEPAinduetimeinorder toensure scrupulous compliance bytheUnited States withtheDSB's
recommendations.
Therepresentative oftheUnited States saidthathisdelegation appreciated thattheCommunities
hadstudied theproposed ruleandhewould forward theircomments totheUSauthorities. Herecalled
thatinaccordance withtheofficial procedures, comments should bereceived before 19June1997.
Hehoped thattheCommunities would alsosubmit theircomments inaccordance withtheseprocedures.
Withregard toBrazil 'squeries herecalled thatattheprevious DSBmeeting hisdelegation hadmade
some comments onstepsandtiming. Theperiods thathadbeenreferred towerethemaximum periods
oftimenottheminimum. Forexample, the90-day period wasnolonger relevant asitrelated tothe
process ofissuance oftheproposed rulewhich hadalready beenissued. Hisdelegation wasconfident
thattheUnited States would beabletoimplement theDSB'srecommendations intime.
TheDSB tooknoteofthestatements andagreed torevert tothismatter atitsnextregular
meeting.
1Panel Report on"United States -Standards forReformulated andConventional Gasoline", para. 6.27.WT/DSB/M/33
Page4
2. Indonesia -Certain measures affecting theautomobile industry
- Request fortheestablishment ofapanel bytheEuropean Communities (WT/DS54/6)
TheChairman drewattention tothecommunication fromtheEuropean Communities contained
indocument WT/DS54/6.
Therepresentative oftheEuropean Communities saidthattheCommunities 'request forapanel
wasfullysetoutindocumentWT/DS54/6.TheCommunitieshadrequestedconsultationswithIndonesia
onthismatter on3October 1996. These consultations heldinNovember andDecember 1996aswell
asotherbilateralcontactsincapitalshadfailedtofindamutuallysatisfactorysolution.TheCommunities
hadnoalternative buttoseekasolution through panel procedures. Though there hadbeensome
indicationsthattheremightbeamodificationintheIndonesianCarProgramme,thishadnotmaterialized.
TheCommunities found thattheProgramme contained anumber ofelements which hadbeeninviolation
oftheWTO Agreement. Thereasons fortheCommunities 'concerns were outlined intheabove-
mentioned document butingeneral theCommunities considered thattheprogramme wasnotconsistent
withIndonesia 'sobligations under theGATT 1994aswellasunder theAgreement onTrade Related
Investment Measures (TRIMs) andalsoraised some questions inrelation totheAgreement onSubsidies
andCountervailing Measures (SCM). Themeasures inquestion included inparticular thegranting
ofimport dutyreliefs forparts andcomponents formotor vehicles contingent onlocal content
requirements, luxury taxexemptions forcertain motor vehicles alsocontingent onlocal content
requirements, andexemptions from import duties andluxury taxes formotor vehicles produced by
certain companies. These various reliefs orexemptions were notavailable toallsuppliers oreven
toallproducers inthemarket. TheCommunities wereparticularly concerned withthefactthatthis
wasnottheonlycasewhere measures hadbeentaken intheautomotive sector which were difficult
toreconcile withtheTRIMs Agreement.
With regard totheprocedures, thiswasthefirstcasewhere apanel request hadbeenmade
under more thanonesetofprocedures, i.e.theDSU procedures andthespecific procedures under
theSCM Agreement. Inaddition insofarastheprocedure ofAnnex VoftheSCM Agreement was
concerned hisdelegation requested theChairman toholdconsultations withtheparties tothedispute
inorder toexamine thequestion oftheprocedures andtimetable. These consultations should take
place assoonaspossible sothatwhen theDSBestablished apanel itwould bepossible totakethe
necessary appropriate decision ontheprocedures which entailed thedesignation ofarepresentative
whowould facilitate theinformation-gathering process.
Therepresentative ofIndonesia saidthathercountry didnotsupport theestablishment ofa
panel atthepresent meeting. HerGovernment wasexploring withthecomplaining parties, including
theCommunities, whether itwaspossible tosettle thematter without resorting tothedispute settlement
procedures. Indonesia believed thatthese efforts should continue andtherefore considered thatthe
request forapanel waspremature.
Therepresentative ofJapan recalled thatattheDSBmeeting on30April 1997, hiscountry
hadrequested theestablishment ofapanel onthesame matter. Atthepresent meeting, hewished
tostateJapan'sposition withregard tothismatter. First, Japan supported theCommunities 'request
fortheestablishment ofapanel onIndonesia 'sautomobile measures. Second, afterJapan hadmade
itsfirstrequest fortheestablishment ofapanel onthismatter, ithadmade itclearthatitwasprepared
tocontinue theconsultations ifIndonesia could submit ameaningful proposal. Japan hadnotrequested
theinclusion ofthisitemontheagenda forthesecond timeatthepresent meeting because there had
notbeensufficient timeforholding suchconsultations during theperiod between thedateoftheprevious
DSBmeeting andthedeadline forthesubmission ofitems fortheagenda ofthepresent meeting. This
decision reflected theimportance thatJapan attached toamutually agreed solution through bilateralWT/DSB/M/33
Page5
consultations, which wasinaccordance withthespirit oftheDSU. Japan hadalsodone soin
consideration tothepresent domestic situation inIndonesia.
However, ifIndonesia didnotmake aproposal within ashort period oftime, which could
provide abasisforamutually satisfactory solution tothismatter, Japan hadnochoice buttoconsider
further stepstowards theestablishment ofapanel. Inparticular withthecontinuance oftheexemption
ofcustoms tariffs andluxury sales taxes onimports ofautomobiles from aparticular country. He
therefore reserved therighttorequest forasecond timetheestablishment ofapanel onthismatter
atasubsequent meeting oftheDSB.
TheChairman noted thatasindicated inWT/DS54/6, theCommunities hadnotonlyrequested
theDSBtoestablish apanel buthadalsorequested thattheDSBinitiate theprocedure provided under
Annex VoftheSCM Agreement. That Annex setforth procedures fordeveloping information
concerning serious prejudice, andcalled, interalia,ontheDSBtodesignate arepresentative toserve
thefunction offacilitating theinformation-gathering process. Because thisprocedure wasintended
topromptly gather theinformation needed bytheparties andbythepanel, itwould seem thattheDSB
should beprepared todesignate sucharepresentative atthesamemeeting where itdecided toestablish
apanel. Heproposed toconsult withtheparties tothedispute inorder toidentify arepresentative
fordesignation bytheDSBatthatparticular time.
Therepresentative ofKorea expressed hisdelegation 'sinterest toparticipate intheconsultations
tobeheldbytheChairman.
TheDSBtooknoteofthestatements andagreed torevert tothismatter.
3. United States -Measure affecting imports ofwoven wool shirts andblouses
from India
- Report oftheAppellate Body (WT/DS33/AB/R) andReport ofthePanel (WT/DS33/R)
TheChairman saidthatthisitemwasontheagenda attherequest oftheUnited States. He
drew attention tothecommunication from theAppellate Body contained indocument WT/DS33/4
transmitting theAppellate Body Report inUnited States -Measure Affecting Imports ofWoven Wool
Shirts andBlouses fromIndia, which hadbeencirculated asdocument WT/DS33/AB/R inaccordance
withArticle 17.5 oftheDSU. Pursuant totheDecision onProcedures fortheCirculation and
Derestriction ofWTO Documents contained inWT/L/160/Rev.1, bothReports hadbeenissued as
unrestricted documents. Herecalled thatArticle 17.14 oftheDSUrequired that,"AnAppellate Body
report shallbeadopted bytheDSBandunconditionally accepted bytheparties tothedispute unless
theDSBdecides byconsensus nottoadopt theAppellate Body report within 30daysfollowing its
circulation totheMembers. Thisadoption procedure iswithout prejudice totheright ofMembers
toexpress theirviews onanAppellate Body report."
Therepresentative ofIndia saidthathisdelegation wassatisfied withtheoverall combined
results ofthePanel Report andtheAppellate Body Report. ThePanel hadconcluded thattheUSrestraint
onimports ofwoven woolshirts andblouses, category 440,fromIndia anditsextensions hadviolated
theprovisions ofArticles 2and6oftheAgreement onTextiles andClothing (ATC). Subsequently,
theconclusions ofthePanel hadbeenupheld bytheAppellate Body. Thus, India'sfundamental stand
taken throughout thelongandarduous process ofbilateral consultations andtworeviews bytheTextiles
Monitoring Body (TMB) thattheUSsafeguard action wasunjustified hadbeenupheld bythePanel
andtheAppellate Body.WT/DSB/M/33
Page6
Atthepresent meeting, hewished toexpress India'sviews ontheReports inaccordance with
Articles 16.3and17.14 oftheDSUinthelightofwhathisdelegation perceived aslegitimate concerns
arising from certain observations contained intheReports. Hebelieved thatitwasimportant for
delegations toexpress theirviews when theDSBadopts panel andappellate bodyreports intheinterest
ofthelong-term viability andhealth ofthedispute settlement system, sovitalforthepreservation
oftherule-based multilateral trading system.
First, India believed thatboththePanel andtheAppellate Body haderred when dealing with
theissue oftheburden ofproof. TheUnited States boretheburden ofproving thatithadcomplied
withtherequirements ofArticle 6oftheATC. Since safeguard actions were exceptional, theyhad
tobeinterpreted narrowly andtheUnited States wasrequired toprove thatithadrespected allthe
conditions enumerated inArticle 6oftheATC. Iftheparty challenging theinvocation ofasafeguard
action hadtobeartheburden ofproof, itwould havetoprove thecontrary which wasoftenimpossible.
InIndia'sview thePanel Report hadnotbeenveryclear onthispoint. Insection VIofitsReport
(Interim Review), thePanel hadstated thatIndia hadtosubmit aprima faciecaseofviolation ofthe
ATC, namely, thattheUSrestriction hadnotrespected theprovisions ofArticles 2.4and6ofthe
ATC, andthattheUnited States would thenhave toconvince thePanel that, atthetimeofits
determination, ithadrespected therequirements ofArticle 6oftheATC. However, insection VII
ofitsReport(Findings),thePanelhadcommentedthatthepartiesseemedtohaveaddressedtwodifferent
aspects oftheburden ofproof issue andhadproceeded todifferentiate between theburden ofproof
before thePanel fromwhattheimporting Member hadtodemonstrate atthetimeofitsdetermination.
India haddrawn theattention oftheAppellate Body totheinconsistency intheapproach ofthePanel
asdelineated inparagraphs 6.7and7.12oftheReport. Besides, thePanel'sfinding ontheso-called
distribution oftheburden ofproof wasinconsistent withthefinding onthesame issue bythePanel
Report onUnited States -Restrictions onImports ofCotton andMan-made Fibre Underwear.2
InIndia'sview Article 6oftheATC wasanexception andtheGATT 1947 practice well-
established thatitwastheparty invoking anexception which carried theburden ofproof. India had
alsosubmitted before theAppellate Body thatthefunction oftheruleontheburden ofproof wasto
ensure thatadispute could besettled evenifthelegalclaims andfactual information before apanel
were incomplete andthisfunction could notbefulfilled onthebasis ofapanel'sapproach onthe
distribution oftheburden ofproof. Inresponse toIndia'ssubmission, theAppellate Body hadstated
that"...thePanel'sfindings atparagraph 7.12andcomments oninterim review atparagraph 6.7of
thePanel Report arenotamodel ofclarity ...",which had"side-stepped" India'spoint regarding the
inconsistency between these twoparagraphs.
TheAppellate Body hadacknowledged India'spoint thataspercustomary GATT practice the
party invoking aprovision which wasidentified asanexception hadtoofferproof thattheconditions
setoutinthatprovision weremet. However, theAppellate Body hadconsidered thatprevious GATT
1947panel reports werenotrelevant inthiscasebecause thiscaseinvolved Article 6oftheATCwhich
wasafundamental partofacarefully drawn balance oftherights andobligations ofMembers. The
Appellate Body'scomments onpage16ofitsReport seemed tosuggest thattheAppellate Body did
notconsider Article 6oftheATC asanexception. Hisdelegation wasconcerned about theAppellate
Body'sapproach withregard toArticle 6.Itwaswellknown thatArticle 6oftheATC wastheonly
provision intheWTO legalframework thatpermitted Members toimpose discriminatory trademeasures
toprotectdomesticproducersagainstlegitimatetrade.Therefore,theprinciplesappliedtotheexceptions
intheGATT should apply withevengreater force toArticle 6oftheATC. Theonlyargument that
theAppellate Body hadprovided tojustify itsconclusions wasthatArticle 6oftheATCwasanintegral
partofthetransitional arrangement intheATC. Hiscountry could notunderstand theAppellate Body's
2WT/DS24/R.WT/DSB/M/33
Page7
lineofreasoning. Anyprovision, whether anexception ornot,would necessarily havetobeanintegral
partofanagreement. Therefore, itcould notbeargued thataprovision wasnotanexception because
itwasanintegralpartofanagreement.Forexample,exceptionstothegeneralprohibitionofquantitative
restrictions under Article XI:2ofGATT 1994 wereanintegral partofGATT. Whether aparticular
provision ofanagreement wasanexception orarule,depended ontheterms ofthatprovision, and
onwhether itsapplication furthered, ordetracted from, thefundamental objectives oftheagreement.
TheAppellate Body hadquoted from itsprevious report onUnited States -Restrictions on
Imports ofCotton andMan-made Fibre Underwear. Inthese twocases theAppellate Body hadused
theargument ofthebalance ofrights andobligations foropposite ends: inonecasetojustify anarrow
interpretation andintheother toarrive atanexpansive interpretation ofthesameprovision oftheATC.
Inthereport onUnited States -Restrictions onImports ofCotton andMan-made Fibre Underwear ,
theAppellate Body hadobserved asfollows: "Itappears totheAppellate Body thattoinject intoArticle
6.10anauthorization forbackdating theeffectivity ofarestraint measure would encourage return to
thepractice ofbackdating restraint measures which appears tohavebeenwidespread under theregime
oftheMFA, aregime which hasnowended, asdiscussed below, withtheadvent oftheATC. Such
anintrojection would moreover loosen upthecarefully negotiated language ofArticle 6.10which reflects
anequally carefully drawn balance ofrights andobligations ofMembers, byallowing theimporting
Member anenhanced ability torestrict theentry intoitsterritory ofgoods intheexportation ofwhich
nounfair trade practice suchasdumping orfraud ordeception astoorigin, isalleged orproven".3
Inthepresentcase,theAppellateBodyhadusedthesamethoughtregardingcarefullynegotiatedlanguage
andcarefullydrawnbalanceofrightsandobligationsasanargumentagainstIndia'spositionthatArticle6
wasanexception andshould beinterpreted accordingly. Thisclearly illustrated thatthemere fact
thataprovision formed partofanegotiated compromise provided noindication astowhether itwas
aruleoranexception. India believed thattheAppellate Body hadfailed toappreciate thecontext
inwhich theATChadbeennegotiated intheUruguay Round andtheobjectives thereof. Ifanagreement
withthedeclared purpose toeliminate along-standing derogation from GATT andtoputanendto
adiscriminatory quota regime contained aprovision forimposing newquota restrictions, thatprovision
could notbutbetreated asanexception.
Notwithstanding itsdisappointment overthefactthattheAppellate Body could notentirely
agree withIndiaonthesubject ofburden ofproof, Indiarecognized thattheAppellate Body hadremoved
theconfusion created bycontrary statements inthePanel Report bydescribing them asnotbeing "a
model ofclarity." Onpage13ofitsReport, theAppellate Body hadstated that"Weagree withthe
Panel thatitwasuptoIndia topresent evidence andargument sufficient toestablish apresumption
thatthetransitional safeguard determination made bytheUSwasinconsistent withitsobligations under
Article 6oftheATC. Withthispresumption thusestablished, itwasthenuptotheUStobring evidence
andarguments torebut thepresumption."
India'ssecondconcernrelatedtotheobservationcontainedinparagraph7.20ofthePanelReport
that"During thereview process, theTMB isnotlimited totheinitial information submitted bythe
importing Member asparties maysubmit additional orother information insupport oftheirpositions,
which, weunderstand, mayrelate tosubsequent events." Itwaspointed outthateventheUnited States
hadnever argued thatthereference toother relevant information hadimplied theright toex-post
justification oftheoriginal safeguard action. Initssubmission before thePanel, India hadpointed
outthattheATC andtheDSU hadestablished atwo-stage procedure under which thesame measure
wasfirstsubmitted totheTMB andifitsrecommendations were notacceptable, totheDSB. The
Panel hadobviously erred inviewing thetwo-stage procedure asatwo-track approach. Thenetresult
ofthePanel'sobservation wasequivalent totheTMB andthePanel reviewing twodifferent measures:
3WT/DS24/AB/R, page 15.WT/DSB/M/33
Page8
theTMB would examine whether asafeguard action would beappropriate atthetimeofitsexamination
andthePanel would examine whether theoriginal safeguard action hadbeenjustified. Itwasnot
meaningful torequire apriorreview bytheTMB, iftheTMB andthePanel would beconcerned with
different matters. Besides, thePanel seemed tohavecompletely ignored thefactthattheTMB review
wasasubstitute forconsultations under theDSUbefore arequest fortheestablishment ofapanel could
bemade. IftheTMB didnotexamine thesafeguard action actually taken butinstead analyzed whether
onthebasisofnewinformation, asafeguard action might beappropriate, itwould effectively eliminate
animportant stepinthedispute settlement procedures. Therefore, Indiawassurprised thattheAppellate
Body haddismissed thePanel'spronouncements asnotconstituting legalfindings reviewable bythe
Appellate Body merely byquoting onesentence inalengthy discussion ontheroleoftheTMB inwhich
thePanel usedtheword "weunderstand". TheAppellate Body hadobserved thatthestatement by
thePanel waspurely adescriptive andgratuitous comment providing background concerning thePanel's
understanding ofhowtheTMB functions.
TheAppellate Body hadfurther stated "Wedonotconsider thiscomment bythePanel tobe
alegalfinding orconclusion which theAppellate Body mayuphold, modify orreverse." India was
notcompletely convinced thattheAppellate Body hadbeenright inviewing thewhole issue asa
"gratuitous observation bythePanel". Inparagraphs 7.20and7.21ofitsReport, thePanel hadmade
certain observations onthesubject which wentfarbeyond whatonemight call"gratuitous observation".
Forexample, inparagraph 7.21thePanel hadstated that"...suchDSU panels, contrary totheTMB,
donotconsider developments subsequent totheinitial determination.", implying thereby thattheTMB
could consider subsequent developments tojustify initial determination. India would havepreferred
theAppellate Body toruleclearly andexplicitly thatthePanel'sobservations onthissubject hadnot
beencorrectandnotmerelystatethattheyhadbeenwithoutlegalconsequences.However,hisdelegation
wasgladthattheeffectoftheAppellateBody'srulingwasthatthePanel'sobservations,whichaccording
toIndia were wrong, could notdoanydamage tothesystem.
India'sthirdconcern related tothesubject ofjudicial economy. Outofthefourlegalclaims
submitted byIndia, thePanel hadpresented findings ononlytwolegalclaims andhadnotconsidered
theother two. ThePanel hadobserved inparagraph 6.6ofitsReport, "Concerning India'sargument
thatArticle 11oftheDSU entitles India toafinding oneachoftheissues itraised, wedisagree and
refertotheconsistent GATT panel practice ofjudicial economy. India isentitled tohavethedispute
overthecontested 'measure 'resolved bythePanel, andifwejudge thatthespecific matter indispute
canberesolved byaddressing onlysome ofthearguments raised bythecomplaining party, wecan
doso.We,therefore, decide toaddress onlythelegalissues wethink areneeded inorder tomake
suchfindings aswillassist theDSBinmaking recommendations oringiving rulings inrespect ofthe
dispute."
India'sposition wasthatunder theATC, aMember 'srequest forconsultations, itsdetermination
ofdamage andcausalities aswellasitsretroactive application ofmeasures were separate steps in
safeguard proceedings, eachsubject todistinct legalobligations. Afinding limited todetermination
alone didnotprovide India withanyassurance thattheother party would cease violating theATC
inrespect oftherequest forconsultations andtheretroactive application ofrestraint. India, therefore,
believed thattoresolve thedispute onthesematters thePanel hadtomake findings onthem. Hiscountry
hadsubmitted totheAppellate Body itsviews onthismatter. However, theAppellate Body inquoting
Article 11oftheDSU andonthebasis ofthephrase "...makes suchother findings aswillassist the
DSB..."hadconcluded thatthere wasnothing inArticle 11oftheDSU which required apanel to
examine alllegalclaims made bythecomplaining party. India'sunderstanding ofArticle 11ofthe
DSUwasslightly different. Anydispute brought byaMember under Article XXIII:1(a) oftheGATT
1994concernedanactoromissionofanotherMemberandwasameasure.Disputesettlementprocedures
started withconsultations onaspecific measure andended withrecommendations onthatmeasure.
However, thematter thatapanel hadtoexamine inaccordance withArticles 6,7.1and11oftheDSUWT/DSB/M/33
Page9
wasthelegalclaim made inrespect ofthemeasure. Thisfollowed from Articles 6.2and7.1ofthe
DSUaccording towhich apanel wastoexamine "...thematter referred totheDSB..."intherequest
fortheestablishment ofapanel, which inturnhadto"...identify thespecific measures atissue and
provide asummary ofthelegalbasis ofthecomplaint ...."Thematter referred toapanel wasthus
alegal claim made inrespect ofaspecific measure. TheAppellate Body hadconfirmed thiswhen
ithadpointed outinitsreport onBrazil -Measures Affecting Desiccated Coconut4that,"...thematter
referred toapanel forconsideration consisted ofthespecific claims stated bytheparties tothedispute
intherelevant documents specified intheterms ofreference."
Thefunction assigned toapanel under Article 11oftheDSU wasthustoexamine alllegal
claims made inrespect ofallmeasures atissue. Itwasunderstandable iftheAppellate Body had
interpreted Article 11oftheDSU tomean thatpanels didnotneedtoaddress inallinstances alllegal
claims made bytheparties inasmuch asthere might beinstances inwhich afinding ononematter
would resolve thedispute onanother matter. Butitwasnotunderstandable when theAppellate Body
hadargued thatarequirement regarding rulings byapanel onalltheclaims made wasnotconsistent
withtheaimofthedispute settlement system. Article 3.4and3.7oftheDSU, quoted bytheAppellate
Body, contained references to"apositive solution toadispute" and"satisfactory solution ofthematter".
Bynotruling ontwoofIndia'simportant legalclaims, thePanel hadinadvertently provided scope
forthepossibility oftwofurther disputes withregard toclaims already submitted toapanel. Therefore,
India wasconfused when theAppellate Body hadsuggested thataruling byapanel onalllegalclaims
made bythecomplaining party wasnotconsistent withtheaimofthedispute settlement system. The
Appellate Body hadalsoargued onthebasis ofArticle 3.2oftheDSU andArticle IXoftheWTO
Agreement thatpanels andtheAppellate Body could notbeencouraged to"make law"ortointerpret
theWTO Agreement andthemultilateral trade agreements. Article 3.2oftheDSU contemplated the
roleofclarifying theexisting provisions inthevarious agreements forthedispute settlement system.
Indiahadsought thePanel'srulings within thefourcorners oftheprovisions oftheATCandtheDSU.
Ithadnever requested either thePanel ortheAppellate Body tomake laworprovide authoritative
interpretations oftheWTO Agreement oramultilateral trade agreement.
ItwasIndia'sunderstanding thatsometimes parties toadispute made specific legalclaims while
inother situations thepanel alone drewupthelistofissues forconsideration based onthesubmissions
oftheparties. Itwaswellknown thatGATT 1947 andrecently WTO panels hadmade rulings on
allissues raised before them. Thishadbeenacknowledged intheAppellate Body Report. Besides,
theAppellate Body hadaddressed theissueofretroactivity initsreport onUnited States -Restrictions
onImports ofCotton andMan-made Fibre Underwear eventhough theUSsafeguard action onimports
ofunderwear fromCosta Ricahadalready beenfound tobeinconsistent withtheATC. Inthelight
ofthesecircumstances, theAppellate Body'sobservations regarding theinconsistency thatmight arise
ifapanel weretoruleonallthelegalclaims wereunclear. While Indiacould understand theAppellate
Body'sposition thatthere wasnothing intheDSU thatcompelled panels toexamine alllegalclaims
made before them, itwasconcerned bythefurther elaboration bytheAppellate Body thatbyruling
onalltheclaims made bythecomplaining party, apanel ortheAppellate Body might notbeacting
consistently withtheaimofdispute settlement system, ortheymight be"making law"orproviding
"interpretations" which theywerenotauthorized todo.India hoped thattheAppellate Body would
atanopportune moment, giveafresh consideration tothismatter.
India alsodrew Members 'attention topage20oftheAppellate Body Report andpointed out
thatinthelastparagraph dealing withjudicial economy, thereference toparagraph 7.20ofthePanel
Report appeared tobeanobvious mistake forparagraph 6.6thereof. There wasanother procedural
point worth mentioning inthiscontext. India appreciated thattheAppellate Body hadworked under
4WT/DS22/AB/R.WT/DSB/M/33
Page10
atremendous timeconstraint andtherefore thesection which summarized thearguments ofthe
participants might notbeaselaborate orasperfect astheparticipants might likeittobe.India had
found thatatleastoneimportant point ithadmade hadnotbeenreferred tointhissection. Thisdid
notcause anyprejudice tohiscountry, however, ithadtobeappreciated thattheAppellate Body Report
wasanimportant document ofinterest andrelevance toallDSBmembers. InIndia'sviewitmight
benecessary topresent boththearguments oftheparticipants aswellastheAppellate Body'sreasoning
forreaching itsconclusions inasgreat adetail aspossible, sothatMembers whowerenotinvolved
inthedispute could fullyunderstand theposition oftheparties andalsothethinking oftheAppellate
Body. AlltheDSBmembers should beabletofollow theissues involved inadispute without difficulty.
Finally, hethanked themembers ofthePanel andtheAppellate Body whohaddevoted so
much timeandenergy indealing withthisdispute. Hewasaware thatadispute intheareaoftextiles
wasnoteasytohandle andhewasgrateful tothePanel andtheAppellate Body fortheirefforts and
contribution. Healsothanked theUnited States fordealing withthisdispute inaprofessional and
friendly manner notwithstanding strong differences withregard tothevarious elements inthedispute.
Hespecifically thanked theUnited States foritsassertion before theAppellate Body thatIndia had
obtained aPanel Report thatsustained allitsallegations regarding theviolation ofArticle 6oftheATC.
Withthisassertion oftheUnited States, Indiawasveryhappy tojointheconsensus infavour ofadopting
thePanel Report andtheAppellate Body Report.
Therepresentative oftheUnited States supported theadoption oftheAppellate Body andthe
Panel Reports andwished toexpressed itsviews onthese Reports. TheAppellate Body Report had
made averyimportant contribution tothebodyofjurisprudence under thedispute settlement system.
Onthe"burden ofproof" issue, theReport hadprovided anextremely helpful clarification ofthe
evidentiary burdens borne bytheparties toadispute. TheAppellate Body hadreaffirmed ageneral
principle ofGATT andWTO jurisprudence thataparty claiming aviolation ofaprovision oftheWTO
Agreement mustassert andprove itsclaim. Once thecomplaining party hadsatisfied thisobligation,
theburden thenshifted totheresponding party tobring forward evidence andargument todisprove
theclaim. TheAppellate Body alsohadnotaccepted arguments thatthere wereonlyahandful ofso-
called coreGATT 1994 rules andthatallother provisions were exceptions. Norhaditaccepted
arguments thatinthecaseofaWTO provision thatallegedly constituted an"exception", theparty
invoking theprovision was"presumed guilty" andthatthecomplaining party borenoburden ofproof
whatsoever.
Inthiscase, which hadinvolved theapplication ofArticle 6oftheATC, theAppellate Body
hadwisely refrained fromusing thesimplistic, mechanical approach totreaty interpretation advocated
byIndia. Instead, applying theprinciples ofArticle 31oftheVienna Convention, theAppellate Body
hadruled thatArticle 6wasanintegral partoftheATC, which reflected a"...carefully drawn balance
ofrights andobligations ..."andthatthis"...balance mustberespected". Accordingly, theAppellate
Body hadaffirmed thePanel'sfinding thatasthecomplaining party, Indiahadtobeartheinitial burden
ofpresenting aprima faciecasethattheUnited States hadfailed torespect therequirements ofArticle
6oftheATC.
Inaddition totheruling ontheburden ofproof issue, theAppellate Body Report hadalso
constitutedanimportantreaffirmationoftheprinciplethatpanelsandtheAppellateBodyshouldexercise
"judicial restraint" incarrying outtheirresponsibilities under theDSU. Thisprinciple wasreflected
intwoportions oftheReport. First, thePanel, indicta,hadopined ontheroleoftheTMB. India
hadappealed thePanel'sdicta,buttheAppellate Body haddeclined toaddress thisissue andtoadd
itsowndicta. Instead, theAppellate Body hadcorrectly found thatthePanel'scomment hadnotbeen
"...alegalfinding orconclusion which theAppellate Body mayuphold, modify orrevers."WT/DSB/M/33
Page11
Second, theAppellate Body hadcorrectly found thatthePanel hadnotcommitted alegalerror
when ithadrefrained from ruling oncertain claims made byIndia afteragreeing withitthattheUS
safeguard measure inquestion wasnotconsistent withArticle 6oftheATC. Inrejecting India's
arguments, theAppellate Body hadmade averysignificant statement regarding thepurpose ofthe
dispute settlement system andthefunction ofpanels andtheAppellate Body within thatsystem. The
Appellate Body hadstated: "...wedonotconsider thatArticle 3.2oftheDSU ismeant toencourage
either panels ortheAppellate Body to'make law'byclarifying existing provisions oftheWTO
Agreement outside thecontext ofresolving aparticular dispute. Apanel needonlyaddress those claims
which must beaddressed inorder toresolve thematter inissue inthedispute." Intheviewofthe
United States, thisstatement constituted animportant reminder thatthedispute settlement process should
beusedtoresolve disputes, andnotasavehicle forbypassing theappropriate negotiation anddecision-
making procedures setoutintheWTO Agreement.
Turning tothePanel report, theUnited States stated thatthisPanel, likethepanel onUnited
States -Restrictions onImports ofCotton andMan-made Fibre Underwear hadrecognized the
fundamentalprinciplethat,inreviewingfactualdeterminationmadebydomesticinvestigatingauthorities,
itwasnotthefunction ofdispute settlement panels toengage inadenovoreview ofthefactsorto
second-guess thefactual judgments ofdomestic authorities when those authorities hadconsidered all
ofthefactors required tobeconsidered byaparticular agreement. Instead, panels weretomake an
objective assessment ofwhether, inmaking adetermination, thedomestic authorities hadrespected
therequirements oftheparticular agreement. Inthisregard hisdelegation wished tocomment onthe
Panel'sposition thatallofthefactors listed inArticle 6.3oftheATC hadtobediscussed. Because
thelistoffactors inArticle 6.3wasclearly illustrative, theUnited States didnotagree withthePanel's
interpretation onthisparticular point. However, hiscountry agreed withthemore important points
made bythePanel that:(i)anyofthefactors inArticle 6.3might subsequently bediscarded once
explained (para. 7.25); and(ii)thattheATC didnotimpose onMembers "...anyspecific method
either forcollecting dataorforconsidering andweighing allrelevant economic factors ..."(para.7.52).
Insummary, notwithstanding thefactthatthePanel hadfound aUSsafeguard action tobe
inconsistent withtheATC, andeveninlightoftheTMB finding supporting theUSaction, there was
much intheAppellate Body andthePanel Reports thatmade themacceptable foradoption. Therefore,
theUnited States could joinaconsensus toadopt these Reports. Asnoted inbothReports, theUnited
States hadrescinded therestraint onimports ofwoven woolshirts andblouses fromIndiaon3December
1996, priortothecirculation ofthePanel Report. Therefore, ithadmetitsobligations under theWTO
Agreement withrespect tothismatter, anditwastheunderstanding oftheUnited States -an
understanding thattheUnited States trusted wasshared byIndia-thatwiththeadoption oftheAppellate
Body andthePanel Reports, thematter before theDSBwould beconcluded, andthatitnolonger needed
toappear ontheDSB'sagenda.
Therepresentative ofHong Kong saidthattheReports before theDSBconcerned thesecond
dispute related totheoperation oftheATCandindeed theregime which hadpreceded it,theMultifibre
Arrangement. Together withtheprevious reports onUnited States -Restrictions onImports ofCotton
andMan-made Fibre Underwear, theyprovided valuable guidance fortheimplementation ofArticle
6oftheATC.
Hong Kong supported theadoption ofthePanel andtheAppellate Body Reports anddrew
attention totwopoints which hisdelegation considered wereofparticular importance. First, thePanel
ReporthaddealtcomprehensivelywiththeproperapplicationofArticle6.2and6.3oftheATC,whereby
aMember wishing toimplement atransitional safeguard had,asafirststep,tomake adetermination
ofserious damage oractual threat thereof totheparticular domestic industry inquestion. ThePanel
hadstated thatatthetimeofitsdetermination, theimporting Member hadanobligation under Article
6.3toexamine atleastallofthe11relevant economic factors listed inthatArticle, andthatsomeWT/DSB/M/33
Page12
consideration andarelevant andadequate explanation hadtobeprovided onhowthefactsasawhole
supported thedetermination (para. 7.25-27). Furthermore, thePanel hadpointed outthatinformation
which wasnotspecific totheparticular industry inquestion wasnottheinformation required bythat
Article (para. 7.39).
Thesecond point related totheburden ofproof, which hadbeenaddressed bytheAppellate
Body. TheAppellate Body hadnotquestioned thataMember applying atransitional safeguard had
tobeabletodemonstrate thatthesafeguard action wasconsistent withArticle 6oftheATC. Ithad
underlined theonusaMember wishing tobring acomplaint hadtobear. TheAppellate Body had
notshifted theburden ofproof indispute cases. Rather ithadconfirmed thatcomplaining parties had
toprovide sufficient evidence toraiseapresumption thatthecomplaint wastrue,i.e.apresumption
thattheaction taken wasnotinconformity withArticle 6oftheATC. Apresumption was,ofcourse,
alesser standard thanthefullproof required fromtheMember applying thesafeguard measure. Once
thecomplaining party haddonethat,theburden ofproof thenshifted totheother party torebut the
presumption.
Therepresentative ofCosta Ricasaidthathisdelegation agreed withIndia thatthecomments
andconcernsexpressedbyMemberswithregardtopanelsandtheAppellateBodyreportshadcontributed
topreserving therule-based multilateral trading system. Hewished torefertooneoftheissues, namely
theburden ofproof. Hisdelegation wassurprised bysome observations ofthePanel andtheAppellate
Body which haddiverged from GATT practice inthisareaandhadconstituted serious legalerrors.
Thiswasanunexpected outcome because, apart from contradicting theprecedents established bythe
GATT,itwasalsoincontradictionwiththeconclusionsofthepanelreportonUnitedStates-Restrictions
onImports ofCotton andMan-made Fibre Underwear .Inthatcase, thepanel hadreasoned that"...
Article 6oftheATC isanexception totheruleofArticle 2.4oftheATC. Itisageneral principle
oflaw,well-established bypanels inprior GATT practice, thattheparty which invokes anexception
inorder tojustify itsaction carries theburden ofproof thatithasfulfilled theconditions forinvoking
theexception." Consequently, theUnited States hadtobeartheburden ofproof.
TheUnited States hadnotappealed thisposition taken bytheabove-mentioned panel which
suggested thateventhedefendant hadrecognized thevalidity ofthatpanel'slegalreasoning. Curiously,
thePanel andtheAppellate Body hadnotfollowed those criteria andhaddonesowithout giving any
convincing legalreasoning. Hisdelegation hadnotfound anyargument thatwould warrant aconclusion
thatbecause Article 6oftheATC wasanintegral partoftheATC, changed inanywaytheexceptional
nature ofthemeasure. Even inlegalsystems notbased oncommon law,precedents hadanundeniable
value. They clarified theinterpretation oftherules andprovided security andpredictability tothe
relations governed bythose rules. InCosta Rica'sviewanydivergence from theGATT andWTO
precedents hadtobesupported bysound andconvincing legalreasoning. Thishadnotbeensointhis
case. Theobservations ofthePanel andtheAppellate Body haddiverged frompastpractice andhad
modified thebalance ofrights andobligations which theyclaimed tobeseeking toprotect.
TheDSBtooknoteofthestatements andadopted theAppellate Body Report inWT/DS33/AB/R
andthePanel Report inWT/DS33/R asupheld bytheAppellate Body Report.
TheChairman drew attention toRule23oftheRules ofProcedure forMeetings oftheDSB.5
Thiswaswithout specific reference toanyofthestatements made intheDSBthusfaranditwasreally
important tobeabletohearfullytheimportant arguments thatwould bemade inthisBody. Hesimply
5Rule23:"Representatives shallendeavour, totheextent thatasituation permits, tokeeptheiroralstatements
brief. Representatives wishing todevelop their position onaparticular matter infuller detail maycirculate a
written statement fordistribution toMembers, thesummary ofwhich, attherepresentative 'srequest, maybe
reflected intherecords ofthe[DSB]" (WT/L/161).WT/DSB/M/33
Page13
wished todraw attention tothisRuletoencourage Members todosointhefuture. Hebelieved that
thiswould bequite helpful toalarge number ofMembers notdirectly involved inadispute.
4. Proposed nominations fortheindicative listofgovernmental andnon-governmental panelists
(WT/DSB/W/53)
TheChairman drew attention todocument WT/DSB/W/53 which contained additional names
proposed forinclusion ontheindicative listinaccordance withArticle 8.4oftheDSU. Heproposed
thattheDSBapprove thenames contained therein.
TheDSBsoagreed.