RESTRICTEDWORLD TRADE
ORGANIZATIONWT/DSB/M/73
4 February 2000
(00-0430)
Dispute Settlement Body
12 January 2000
MINUTES OF MEETING
Held in the Centre William Rappard
on 12 January 2000
Chairman:  Mr. Kåre Bryn (Norway)
Subjects discussed: Page
1. Chile - Taxes on alcoholic beverages.......................................................................................1
(a) Report of the Appellate Body and Report of the Panel...............................................................1
2. Korea - Definitive safeguard measure on imports of certain dairy products......................3
(a) Report of the Appellate Body  and Report of the Panel ..............................................................3
3. Argentina - Safeguard measures on imports of footwear .....................................................5
(a) Report of the Appellate Body and Report of the Panel...............................................................5
1. Chile - Taxes on alcoholic beverages
(a) Report of the Appellate Body (WT/DS87/AB/R - WT/DS110/AB/R) and Report of the Panel
(WT/DS87/R - WT/DS110/R)
The Chairman drew attention to the communi cation from the Appellate Body contained in
document WT/DS87/10 - WT/DS110/9 transmitting the Appellate Body Report on "Chile - Taxes on
Alcoholic Beverages", which had been circulated  in document WT/DS87/AB/R - WT/DS110/AB/R in
accordance with Article 17.5 of the DSU.  In accordance with the Decision on Procedures for the
Circulation and Derestriction of WTO documents contained in WT/L/160/Rev.1, both Reports had
been circulated as unrestricted documents.  He recalled that Article 17.14 of the DSU required that:"An Appellate Body report shall be adopted by the DSB and unconditionally accepted by the parties
to the dispute unless the DSB decides by consensu s not to adopt the Appellate Body report within
30 days following its circulation to Members.  Th is adoption procedure is without prejudice to the
right of Members to express their views on an Appellate Body report".
The representative of the European Communities expressed the EC's satisfaction with the
findings of the Reports and thanked the Panel and the Appellate Body for their work.  He noted that,
from an economic point of view, this case was extremely important for the European operators.  The
EC was satisfied that the jurisprudence on taxation issues pursuant to Article III:2 of GATT 1994 had
now been confirmed unequivocally.  On the basis of its contacts with the Chilean authorities, the ECexpected that Chile would rapidly implement the Panel's and the Appellate Body's recommendations.
The representative of Chile said that her country agreed with the adoption of the Panel and the
Appellate Body Reports.  However, Chile did not share the findings and conclusions contained
therein.  The Panel's and the Appellate Body's interpretations had gone beyond the meaning, scopeWT/DSB/M/73
Page 2
and spirit of Article III:2 of GATT 1994.  In particular since this case concerned an ad valorem  tax
system used by many countries, which was based on two objective characteristics of the product:
alcohol content and price.  Although Chile did not agree with the Panel's and the Appellate Body's
findings, it recognized that the Reports provided clear guidelines on the interpretation of the meaning
and scope of Article III:2 as well as the reasons why the Chilean system was not in conformity withthe WTO rules.  Those guidelines, and in particul ar those provided by the Appellate Body, would be
taken into account by Chile in the process of modifying its legislation.
In paragraph 60 of its Report, the Appellate Body had reiterated the important principle,
namely, that "Members of the WTO have sovereign authority to determine the basis or bases on
which they will tax goods, such as, for example, distilled alcoholic beverages, and to classify such
goods accordingly, provided of course that the Members respect their WTO commitments".  In the
same paragraph, the Appellate Body had even been more explicit by stating that:  "Members of the
WTO are free to tax distilled alcoholic beverages on the basis of their alcohol content and price, as
long as the tax classification is not applied so as to protect the domestic production over imports".  On
the basis of the above, one could conclude that either an ad valorem  or a mixed system based on
alcoholic content was permitted under the WTO Agreement.  Chile was satisfied that the AppellateBody had confirmed that its regulation establishing a minimum alcohol content for various alcoholic
beverages fully reflected similar standards in other markets.  The Appellate Body had reversed the
Panel's reasoning which had assumed that there was a linkage between that regulation and the tax
classification under the Chilean tax system.  Chile appreciated that the Appellate Body had
understood Chile's objective in modifying its legislation on its own initiative and without beingcompelled by any dispute settlement procedure.  Consequently, the Appellate Body had not upheld
the Panel's view that the new legislation could result in similar protection of domestic beverages like
that under the old legislation, which was no longer in place.  Therefore, Chile was satisfied that the
Appellate Body had affirmed that "Members of th e WTO should not be assumed, in any way, to have
continued previous protection or discrimination through the adoption of a new measure.  This would
come close to a presumption of bad faith" (paragraph 74).  Her authorities were now carefully
examining the implications of the Reports in order to be able to comply with the Panel's and the
Appellate Body's recommendations, within a reasonable period of time.
The representative of the United States said that his country, as a major exporter of distilled
spirits, had participated in this dispute as a third party.  The United States welcomed the findings of
the Appellate Body and Panel that Chile's tax regime was inconsistent with Article III:2 ofGATT 1994.  In particular, the United States was pl eased that the Appellate Body Report had clearly
laid out the relevant factors in its analysis of Article III:2.  The Appellate Body had confirmed that the
purpose of a measure, to the extent reflected in its structure, was "intensely pertinent" to the task of
evaluating whether a measure was applied so as to afford protection to domestic production.  At the
same time, the Panel was correct in finding that the aim of Chile's measure was to protect its domesticpisco industry.  It was now up to Chile to comply promptly with its obligations.  For a long time, the
Chilean Government had been on notice that its measures raised serious GATT questions.  The legal
changes required in this case were relatively simple.  Given the harm that the new system would cause
to US exports as of the beginning of the year, the United States hoped that the new Chilean
Government would give careful consideration to the elimination of its discrimination before it wasallowed to create new adverse effects.
The DSB took note of the statements, and adopted
 the Appellate Body Report in
WT/DS87/AB/R - WT/DS110/AB/R and the Panel Report in WT/DS87/R - WT/DS110/R, as
modified by the Appellate Body Report.WT/DSB/M/73
Page 3
2. Korea - Definitive safeguard measure on imports of certain dairy products
(a) Report of the Appellate Body (WT/DS98/AB/R)  and Report of the Panel (WT/DS98/R and
Corr.1)
The Chairman drew attention to the communi cation from the Appellate Body contained in
document WT/DS98/9 transmitting the Appellate Body Report on "Korea - Definitive Safeguard
Measure on Imports of Certain Dairy Products", which had been circulated in document
WT/DS98/AB/R in accordance with Article 17.5 of the DSU.  In accordance with the Decision on
Procedures for the Circulation and Derestricti on of WTO documents contained in WT/L/160/Rev.1
both Reports had been circulated as unrestricted documents.  He recalled that in accordance with
Article 17.14 of the DSU:  "An Appellate Body  report shall be adopted by the DSB and
unconditionally accepted by the parties to the dispute unless the DSB decides by consensus not to
adopt the Appellate Body report within 30 days following its circulation to Members.  This adoptionprocedure is without prejudice to the right of Members to express their views on an Appellate Body
report".
The representative of the European Communities expressed his delegation's satisfaction with
the Reports.  The EC wished to know, as so on as possible, how Korea would implement the
recommendations, and looked forward to the immediat e lifting of the safeguard measure in question.
The representative of Korea thanked the Panel and the Appellate Body for their Reports.  He
said that the EC's action concerning Korea's safe guard measure on skimmed milk powder preparations
was significant since it constituted the first WTO case with regard to the application of the Agreementon Safeguards and raised a number of important procedural issues.  At the present meeting, he wished
to make a few comments with regard to the Panel and the Appellate Body Reports.  First, the Panel
had held that a Member wishing to impose a safeguard measure had to evaluate and report on each
and every "relevant factor" of injury set out in Article 4.2 of the Agreement on Safeguards.  While
Korea recognized that all the relevant injury fact ors should be considered, it did not believe that the
completeness of the investigation report (the "OAI report") should be a prerequisite to finding a
Member's safeguard measure adequate.  The Panel had pointed out defects in Korea's reasoning with
regard to its determination of serious injury based on the OAI report on which the EC had not based
its claims.  Korea provided the OAI report not as evidence support ing its arguments but rather as
background information.  It was for this reason that an English translation of the OAI report was only
submitted after the Panel had requested it.  Korea did not expect the Panel to assess its actions solely
on the basis of the OAI report.  During the appellate review, Korea had argued that the submission ofthe OAI report did not justify the Panel's reliance on that report in order to establish arguments not
made by the EC.  Korea noted that it would be difficult for a panel to seek information and then use it
against the Member providing such information, in particular where the other party had not made
claims on specific points regarding that information.  The Panel had also pointed out the inadequacy
of Korea's data to prove its case and had considered that a reasonable estimate should be made in theabsence of data available.  It would be ideal to use a set of data the scope of which matched exactly
the question presented.  However, it was often difficult to obtain such data and, therefore, minor
discrepancies should be tolerated given such practical difficulty.  The Panel should have provided a
standard on the acceptability of the discrepancies and should have examined Korea's data in
accordance with such standard before dismissing its reasoning.  As to the estimation of data, thePanel's demand to make such estimation, notwiths tanding its reliability, would be tantamount to
directing Members as to how they should conduct th eir own investigations and thereby taking on the
role which it had repeatedly declared not to assume.
Second, the Panel had held that Korea violated Article 5 of the Agreement on Safeguards by
failing to justify its safeguard measure.  It had also held that Article 5 required a complete analysis of
why a specific measure was necessary, even where the level of quota was equivalent to or not lessWT/DSB/M/73
Page 4
than the average of the import levels for the three most recent representative years for which statistics
were available.  The Appellate Body had reversed th is view and had stated that it did not see anything
in Article 5.1 that established an obligation to provide such reasoning for a safeguard measure other
than a quantitative restriction, which reduced the quantity of imports below the average of imports in
the last three representative years.  As a result of the Appellate Body's ruling, a Member was notobliged to justify, in its recommendations or determ inations, a measure in the form of a quantitative
restriction, which was consistent with the average of imports in the last three representative years for
which statistics were available.
Third, with respect to the specificity requirement under Article 6.2 of the DSU with regard to
the request for the establishment of a panel, Kore a welcomed that the Appellate Body had upheld its
argument.  Korea had appealed that the Panel had ignored the additional requirement laid down by theAppellate Body in the Bananas case to the effect that the Panel had to undertake a careful review of a
request for the establishment of a panel.  The A ppellate Body had reversed the Panel's position that
the simple listing of Articles of an agreement, asserted to be violated, met the standard of specificity
requirement under Article 6.2 of the DSU.  However, the Appellate Body had added an additional
layer of analysis, and had held that Korea had to establish why the mere listing of the Articles assertedto be violated had prejudiced its ability to defend itself in the course of the Panel proceedings.  In
Korea's view, the Appellate Body's approach was incorrect for the following reasons.  Korea had
argued that the EC's case was fundamentally flawe d.  If the Appellate Body had concluded that the
Panel had failed to properly address the most basic issue concerning the EC's case: i.e. the specificity
of the EC's claims, then it should have concluded that the basis for the EC's case and the Panel'sanalysis thereof were irremediably flawed.  Furthermore, this argument was also supported by the
principle of burden of proof, namely it was for the EC to make its case not for Korea to establish why
arguments made by the EC could not be accepte d.  Since the Appellate Body was, in effect,
introducing a new element of jurisprudence, it should have asked Korea to provide specific evidence
of detriment.  During the hearing, it was clear that the Appellate Body was prepared to considerarguments and analysis not raised by the parties in their written submissions.  However, the Appellate
Body had appeared to use this "technicality" to av oid the fundamental issue of whether or not the EC's
case was properly before the Panel.  Korea noted that even if the Appellate Body was correct in
requesting specific evidence of detriment, then it  should have considered all the arguments made in
respect of Article 6.2 of the DSU in the written submission and oral hearing as such evidence.
Fourth, with regard to the so-called "unforeseen developments" issue, the Appellate Body had
considered that Members wishing to apply a safeguard measure were required to demonstrate the
"unforeseen developments" under Article XIX:1  of GATT 1994, and had reversed the Panel's
conclusion that the "unforeseen developments" clause did not add a condition to rules on safeguards.
Therefore, the Appellate Body's interpretation of Article XIX of GATT 1994 seemed to place an
obligation on a Member, wishing to apply a safeguard measure, to comply with both the provisions ofArticle XIX of GATT 1994 and the Agreement on Safeguards, at least in the absence of conflict
between the two.  In Korea's view, whether certain developments were foreseen by a Member was a
question of perception and as such it was difficult to ascertain and could lead to a wide spectrum of
possible interpretations.  Hence, due to the Appell ate Body's reasoning, Members were now left with
an ambiguous requirement to demonstrate the existence of "unforeseen developments".  This was notin line with the drafters' intention.  During the Uruguay Round, the negotiators had carefully
examined the terms of Article XIX of GATT 1994 and had developed a new set of rules on
safeguards, namely the Agreement on Safeguards.  That Agreement, which modified and revised
Article XIX of GATT 1994, contained all the substantive and procedural requirements for the
invocation of safeguards.  Therefore, it would be unreasonable to conclude that the negotiators hadleft an essential requirement in Article XIX  of GATT 1994 and had not included it in the new
Agreement, which  was meant to be the final embodiment of the rules on safeguards.WT/DSB/M/73
Page 5
Finally, Korea maintained that the EC had failed to discharge its burden of proof.  Korea
believed that the Panel and the Appellate Body had failed to adequately allocate the burden of proof
on the parties by examining arguments and evidence provided by both parties without first
establishing whether the EC had proved its case.  However, in spite of the above-mentioned as well as
other significant systemic concerns with regard to the Panel's findings and the Appellate Body'srulings, Korea accepted the adoption of the Reports in order to uphold the integrity of the dispute
settlement process.  In accordance with Article 21.3 of the DSU, Korea would inform the DSB of its
intention with respect to implementation of the recommendations and rulings of the Panel and the
Appellate Body.
The DSB took note of the statements and adopted
 the Appellate Body Report in
WT/DS98/AB/R and the Panel Repo rt in WT/DS98/R and Corr.1, as modified by the Appellate Body
Report.
3. Argentina - Safeguard measures on imports of footwear
(a) Report of the Appellate Body (WT/DS121/AB/ R) and Report of the Panel (WT/DS121/R)
The Chairman drew attention to the communi cation from the Appellate Body contained in
document WT/DS121/8 transmitting the Appellate Body Report on "Argentina – Safeguard Measures
on Imports of Footwear", which had been circul ated in document WT/DS121/AB/R in accordance
with Article 17.5 of the DSU.  In accordance with the Decision on Procedures for the Circulation and
Derestriction of WTO Documents contained in WT/L/160/Rev.1, both Reports had been circulated asunrestricted documents.  He recalled that Article 17.14 of the DSU required that:  "An Appellate Body
report shall be adopted by the DSB and unconditionally accepted by the parties to the dispute unless
the DSB decides by consensus not to adopt the Appe llate Body report within 30 days following its
circulation to Members.  This adoption procedure is without prejudice to the right of Members to
express their views on an Appellate Body report".
The representative of the European Communities expressed the EC's satisfaction with the
Reports and thanked the Panel and the Appellate B ody for their work.  The EC hoped to be informed
shortly of Argentina's intentions in regard to implementation of the recommendations in this case. The
EC also looked forward to the immediate remo val of the safeguard measures by Argentina.
The representative of Argentina said that in accordance with Articles 16.4 and 17.14 of the
DSU, his country wished to make comments with regard to certain legal interpretations developed by
the Panel and the Appellate Body.  Although Argentina accepted the Reports, it wished to highlight
certain points which, it believed, would affect the ability of Members to apply safeguard measures.  In
Argentina's view, by imposing additional obligatio ns, the interpretations of the Panel and the
Appellate Body would have an impact on the att itude of Members, in particular developing-country
Members.  During the Uruguay Round, a package of rights and obligations had been agreed by
Members and the new dispute settlement mechanism had been put in place.  However, it had not been
envisaged that the aim of solving disputes could re sult in additional obligations nor that the outcome
of a dispute settlement procedure could make it impossible for Members to comply with the WTO
requirements, in this case the Agreement on Safeguards.
At the present meeting, he wished to refer to some interpretations which, in Argentina's view,
were in contradiction of or had modified the Appe llate Body's previous findings, and which would not
be without serious implications for Members in fu ture.  He recalled that in the Appellate Body's
proceedings, Argentina had raised a procedural issue with regard to the mandate of the Panel.  Hiscountry considered that by invoking Article 3.1 of the Agreement on Safeguards to justify its
reasoning, the Panel had exceeded its terms of reference set out in Article 7.2 of the DSU.  In otherWT/DSB/M/73
Page 6
words, the Panel had made findings on the matter that had not been raised by the EC in its request for
a panel.  Subsequently, the Appellate Body had confirmed that extension of authority and the errors
committed by the Panel.  As a result, the Appellate Body did not assume its role of reviewing the
Panel Report in order to determine whether or not that Report was legally correct.
In paragraph 73 of its Report, the Appellate Body had simply referred to paragraphs which
dealt with the findings of non-compliance by Argentina with its obligations on the basis of Article 3
of the Agreement on Safeguards.  As pointed out by the Appellate Body in footnote 59, Argentina had
referred to the Panel's reasoning in paragraphs 8.126 and 8.127 of its Report and to the arguments
referred to in its submission to the Appellate Body.  The Panel had not made specific findings that
Argentina had acted inconsistently with Article 3 of the Agreement on Subsidies.  The Panel had only
provided its reasoning thereon which had subsequently been endorsed by the Appellate Body.Argentina considered that the Panel had departed from its terms of reference as set out in Article 7 of
the DSU.  It believed that the Appellate Body should have upheld its jurisprudence in the Bananas
case (paragraph 143), which had also been upheld in the case on "India - Patent Protection for
Pharmaceutical and Agricultural Chemical Products".  In paragraph 88 of the above Report, the
Appellate Body had stated  that: "Article 6.2 of the DSU requires that the claims , but not the
arguments , must all be specified sufficiently in the request for the establishment of a panel in order to
allow the defending party and any third party to know the legal basis of the complaint.  If a claim is
not specified in the request for the establishment of a panel, then a faulty request cannot be
subsequently "cured" by a complaining party's argumentation in its first written submission to the
panel or in any other submission or statement made later in the panel proceedings."  AlthoughArgentina, hypothetically, had accepted that, by reference, Article 3.1 was expressly incorporated into
the proceeding, as indicated in paragraph 74, the Appellate Body had confirmed that it did fail to see
how a panel could ignore the publication requiremen ts set out in Article 3.1 when examining the
publication requirement in Article 4.2(c) of the Agreement on Safeguards.  It was surprising that in
the last sentence of paragraph 74, the Appellate Body had stated that it could not make an "objectiveassessment" of the matter, as required by Article 11 of the DSU, if a panel only referred in its
reasoning to the specific provisions cited by the parties in their claims.  This was not only in
contradiction with the Appellate Body's jurisprudence in the Bananas case, but would seem to grant
panels a kind of inquisitorial power or a prosecuting role whereby they could rely on other provisions
of the WTO Agreements to justify their reasoning.  He questioned whether any Member when
negotiating the DSU had envisaged a situation in which panels would be invested with such power or
whether it was in the interest of any Member, curre ntly involved in a dispute proceeding, to allow
panels to introduce claims of non-compliance which had not been raised.  Such expansive jurisdiction
of panels, which had been endorsed by the Appellate Body, looked more like a "police power" and
had never been provided for in the negotiations.  If the system continued to evolve in that direction,
panels could start making recommendations to Members to initiate dispute settlement procedures in
cases of non-compliance that would go beyond those duly alleged in specific disputes.
In referring to the "unforeseen developments" clause, he first wished to provide some
background.  For more than 40 years, Article XIX was inapplicable as a result of that clause.  Thus,
among other reasons, the GATT contracting parties had frequently used the so-called "grey-area
measures" in the 1970s and the 1980s.  The objective of renegotiating safeguards in the UruguayRound was two-fold: (i) to eliminate grey-area measures in order to make Article XIX more
operational;  and (ii) to provide an "escape valve" beyond Article XXVIII and waiver requests.  It was
precisely in order to attain those objectives that the clause "unforeseen developments" had been
omitted by the Uruguay Round negotiators.  That was also the understanding of the United States and
Korea in relation to item 2 of the Agenda where the panel on "Korea - Definitive Safeguard Measureon Imports of Certain Dairy Products" had cons idered that the requirement of "unforeseen
developments" did not add any specific elements to the conditions in which measures under
Article XIX could be applied.  If that clause had been part of the Uruguay Round Agreement, the
United States would have had to modify its Section 201 which did not refer to "unforeseenWT/DSB/M/73
Page 7
developments". The same applied to the EC legislation (EC Regulation 3285/94), the text of which
did not contain such a requirement.
The Appellate Body's interpretation, in impos ing the requirement to demonstrate that an
increase in imports was due to "unforeseen developments" prior to the determination of the threeelements contained in Article 2.1 of the Agreement on Safeguards (increase in imports, causal relation
and injury) had altered the balance of rights and obligations resulting from the Uruguay Round
Agreement.  It had gone beyond the political agreement reached in this area during the Uruguay
Round negotiations.  In that regard, the Appellate Body had exceeded the scope of Article 3.5 of the
DSU by "impeding the attainment of the objectiv es" of the Agreement on Safeguards, which was
meant as an escape clause to allow a structural readjustment.  In other words, the Appellate Body
would seem to be legislating rather than verifying the application of law in the case at hand.  Todefine the content of this obligation, the Appellate Body, which had considered that the clause was
not covered by Article 2.1 of the Agreement on Safeguards, had characterized that measure as an
extraordinary one.  This interpretation of the Appellate Body would influence other interpretations of
all the requirements under the Agreement.
He noted that it was not appropriate to refer to the cumulative application of the provisions of
Article XIX and the Agreement on Safeguards in the same sense as in the case of GATT 1994
provisions vis-à-vis  Annex 1A ( dura lex sed lex ).  From now on, Members would have to verify as a
necessary precondition before confirming the existence of the three conditions required under
Article XIX and the Agreement on Safeguards that these conditions were the results of "unforeseendevelopments" and stem from obligations, including tariff concessions.  The Appellate Body had
clearly stated that such "unforeseen developments" were a precondition and were distinct from the
conditions contained in Article 2.1 of the Agreement on Safeguards.  However, it was more difficult
to accept the description of the use of the measure as extraordinary and as an exception to the normal
exercise of one's rights.  As interpreted by the Appellate Body, a safeguard was an exception to thegeneral GATT rules.  That interpretation of the Appellate Body in the context of the purpose and
object of the treaty had contradicted the outcome of the Uruguay Round negotiations, which was to
render Article XIX more flexible and operational and to eliminate grey-area measures.
He noted that the treaty should be interpreted in accordance with the Vienna Convention on
the Law of Treaties and the preparatory work involved was only of secondary value for the purposes
of defining the scope of obligations.  Argentina was surprised that the Appellate Body had applied themost restrictive interpretation in this case.  Th at interpretation was not in line with the WTO's
objective to promote free trade and had eliminated the only escape clause provided for by the
Agreement.  Furthermore, it had contradicted the definition of an extraordinary use of safeguard
measures under Article XIX.  He noted that the words:  "extraordinary" and "exceptional" did not
have the same meaning.  He wondered whether this extraordinary character made it possible tointerpret the provisions of the Agreement on Safeguards on the basis of more restrictive standards as
compared to other Agreements.  If so that should not be the case.  The Appellate Body had imposed a
strict standard which could ensure the trade flow but would not encourage Argentina or other
developing countries which had made generous market access concessions to continue to do so with
regard to, at least, industrial goods.  In accordance with this excessively restrictive definition ofsafeguards as contained in paragraph 131 of the Appellate Body Report:  "Article 2.1 of the
Agreement on Safeguards  and Article XIX:1 of the GATT 1994 … requires that the increase in
imports must have been recent enough, sudden enough, sharp enough, and significant enough, both
quantitatively and qualitatively, to cause or threaten  to cause serious injury".  He wondered how many
cases in the history of GATT and the WTO could have met all such requirements.  That interpretationwould not strengthen the WTO Agreement.
In the context of customs unions, he wished to draw attention to two issues which had
systemic implications.  First, Argentina considered that all the provisions of the Agreement onWT/DSB/M/73
Page 8
Safeguards were applicable to all Members, independently of their legal nature or their differences in
the international legal personality.  This issue was also related to the question of whether Members
that could avail themselves of their rights and obligations under the WTO Agreement included, in
addition to sovereign states, other international legal persons: i.e. customs unions.  This was not a
minor issue nor was it a matter that only affected Argentina and MERCOSUR in this specific case.He noted that footnote 95 of the Appellate Body Report implied that in referring to a Member,
footnote 1 to Article 2.1 of the Agreement on Safeguards indicated only a WTO Member, which
would be tantamount to stating that it applied onl y to a customs union which was a Member of the
WTO, namely the EC.  Such interpretation would have implications for all 119 regional agreements
notified to the WTO under the provisions of GATT 1994.  If this restrictive interpretation were to
imply that only the EC could use the exceptions under Article XXIV to depart from other GATT 1994
provisions, then one would accept an interpretation that was not envisaged in the Uruguay Roundnegotiations.
Second, even if the Appellate Body had considered that Article XXIV was not applicable in
this case due to the characteristics of the notification of the safeguard measure, it was factually
incorrect for the Appellate Body to ignore Arge ntina's defence of the MERCOSUR exception based
on Article XXIV on the pretext that the issue had never been raised.  Argentina had invoked
Article XXIV in the Panel's proceedings as contained in paragraphs 5.101, 5102 and 5.103 of the
Panel Report.  Furthermore, Argentina noted that the Panel had avoided making a statement on the
usual practice of customs unions and free-trade areas of excluding their members from safeguard
measures.  Argentina's arguments, which were contained in paragraphs 5.296 to 5.298 of the PanelReport, had never been contested by the Panel.  Consequently, Argentina had decided to appeal this
issue following the same line of defence and arguing the existence of a discrepancy with regard to the
interpretation of the relationship between Articles XIX and XXIV.
In particular, Argentina was surprised that the Appellate Body had avoided taking any
position in this case, reserving its dictum  probably for other cases presently under consideration.  He
therefore wondered how in future the Appellate Body would reconcile the potential exception that it
had recognized could exist under Article XXIV, as indicated in paragraph 109 of the Appellate Body
Report, with the above-mentioned statement in footnote 95 according to which only WTO Members
could benefit from such an exception.  Furthermore, if one were to follow the Appellate Body's
position in the case on "Turkey - Import Restrictions on Textiles and Clothing Products", the
exception to Article XXIV would not be applicable in a transitional period for the establishment of acustoms union or free-trade areas, which could extend for a period of 10 years.  He wondered whether
it would be reasonable to impose on Members an obligation resulting from such interpretation of the
Agreement.  He questioned whether footnote 1 to the Agreement on Safeguards had only been
designed to benefit the EC but not other free-trade areas and customs unions.
This difficult and complex dispute settlement procedure concerned a dispute with a
commercial value of 0.4 per cent of the EC exports to Argentina.  The procedure had a much higher
cost for the WTO system and for other regional groups which had been notified to the WTO.  Finally,
if trade liberalization was not encouraged in the form of a reasonable escape clause under the
Safeguards Agreement, countries would adopt a more restrictive position in negotiating theirconcessions.  That in turn would encourage more protectionist attitudes since the only remedy under
the WTO, recourse to Article XXVIII or a waiver were even more restrictive.  He noted that
Argentina would inform the DSB of its intent ions in regard of implementation of the
recommendations in accordance with Article 21.3 of the DSU.
The representative of Indonesia said that his delegation supported the findings and
conclusions of the Appellate Body Report, which had clearly determined that Argentina's restrictions
on imports of footwear from Indonesia as well as fr om other sources were in violation of Argentina's
WTO obligations.  Indonesia, as a third party with substantial interest in this matter, supported theWT/DSB/M/73
Page 9
adoption of the Appellate Body Report and the Pane l Report, as modified by the Appellate Body.
Bearing that in mind and the significant commercial consequences of Argentina's restrictions for
Indonesia's exporters, his authorities expected Ar gentina to comply fully  with the rulings and
recommendations by immediately eliminating its import restrictions.  Indonesia noted that in
accordance with the terms of Resolution 987/97, Argentina's safeguard measures would expire on25 February 2000.  The subsequent decisions by the Argentinian authorities (Resolutions 512/98 and
1506/98) to modify its safeguard measures had not altered that date.  Notwithstanding this, the
Appellate Body had found that the measures at issue:  i.e. special tariffs and quotas on footwear, were
inconsistent with Argentina's obligations under the GATT 1994 and the Agreement on Safeguards.
Indonesia therefore urged Argentina to inform the DSB that it would fully and promptly implement
the recommendations to be made by the DSB.
The representative of Brazil said that, at the present meeting, his delegation did not wish to
comment on the substance of Argentina's safeguard investigation.  Brazil would address the question
of the Appellate Body's comments on the standards contained in the Agreement on Safeguards at a
later date.  At the present meeting, he wished to refer to two issues which might have some
implications for his country's rights.  These issues related to the Southern Common Market(MERCOSUR):  i.e. a customs union which consisted of four countries, including Brazil.  The first
issue related to the Appellate Body's analysis concerning the imposition of safeguard measures by a
member of a customs union (Section VI of the Appell ate Body Report).  Brazil recognized that the
Appellate Body had carefully dealt with the issue of the relationship between Articles XIX and XXIV
of GATT 1994, and had reversed the Panel's findings which had gone beyond its mandate.  TheAppellate Body had indicated that it did not make any generalisations on this subject.  To this end, in
several paragraphs of its Report, the Appellate Body had used the wording such as "on the facts of
this case".  In paragraph 114, of its Report, the Appellate Body had also stated: "… we make no ruling
on whether, as a general principle, a member of a customs union can exclude other members of that
customs union from the application of a safeguard measure".  However, the Appellate Body had madesome findings with regard to what constitute d a measure applied by MERCOSUR on behalf of a
member of a customs union.  The Appellate Body had also indicated that as a result of its
investigation, Argentina had to apply safeguards on imports from all sources.  Brazil did not intend to
reiterate its position stated before the Panel which was contained in Section VI of the Report.  It only
wished to stress that it did not agree with the Appellate Body's view that Argentina was obliged to
apply safeguards on other members of MERCOSUR.  Argentina had the right under Article XXIV of
GATT 1994 - which had not been questioned by the Appellate Body - and its international contractualobligations under the Treaty of Asuncion not to impose safeguards on other members of
MERCOSUR.  Brazil wished to reserve its position on the interpretations and findings with regard to
the question of what constituted a measure taken by MERCOSUR and its status.  Brazil supported
Argentina's view that all Members had rights and obligations under Article XXIV of GATT 1994 and
not only those customs unions that were Members of the WTO, as implied by the Appellate Body.
He also wished to refer to the statement made by the United States before the Panel.  That
statement, which concerned MERCOSUR and Article XXIV, was related to the issue to which he had
just referred.  He drew attention to paragraph 65 of the Appellate Body Report which contained the
following summary of the US position on MERCOSUR and Article XXIV:  "The United States also
notes that Argentina and the Panel have wrongly referred to Article XXIV of the GATT 1994.  In the
view of the United States, MERCOSUR has never been notified under Article XXIV.  The parties to
MERCOSUR have chosen to notify it instead exclusively under the Decision on Differential and
More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries (the
Enabling Clause).  The United States contends that, having made this legal choice, Argentina is nowprecluded from basing its arguments on the assumption that MERCOSUR is an Article XXIV
Agreement, and that, therefore, the fourth sentence of footnote 1 to Article 2.1 of the Agreement on
Safeguards  is legally irrelevant in this case".  If the United States' argument was correct, he
questioned why MERCOSUR was being examined by the Committee on Regional Trade AgreementsWT/DSB/M/73
Page 10
and why should Brazil enter into Article XXIV:6 negotiations.  If the United States changed its
position and was willing to accept that MERCOSUR was fully covered by the Enabling Clause, that
would simplify matters and would preserve Brazil's  rights under MERCOSUR.  Brazil hoped that the
United States did not imply that MERCOSUR had ob ligations under Article XXIV but no rights either
under Article XXIV or the Enabling Clause.  He noted that neither the Appellate Body nor the Panelhad commented on the US position.
The representative of the United States said that his country had been an active third-party
participant in both the Panel and the Appellate Body proceedings.  He recalled that the United States
had brought an earlier proceeding1 on the specific duties that Argentina had replaced with the
safeguard measures now found to be inherently illegal.  At the request of the United States, the DSB
had established a panel to examine Argentina's modification of the original safeguard measure.  TheUnited States believed that Argentina could easily comply with the findings of the Panel and the
Appellate Body.  In fact, the measures were set to expire on 24 February 2000.  In view of the
findings, Argentina should ensure the expeditious elimination of this problematic measure.  It was
high time that Argentina implement it s Uruguay Round commitments on footwear.
With regard to the substance of the Reports, th e United States was pleased that both the Panel
and the Appellate Body had reaffirmed the long-standing trend to discount de novo reviews of the
investigations of competent authorities.  The findings of both Reports on this critical issue had
confirmed that the WTO was not the forum in which it was possible to re-litigate factual issues that
had been fully and effectively examined by domestic competent authorities.  The United States wasastonished that some Members continued to question this fundamental, well-established principle, and
hoped that the current Reports would lay to rest any questions on this issue.  The United States was
equally pleased that the Appellate Body had corrected the Panel's erroneous conclusions on the
question of Article XXIV of GATT 1994 and the Safeguards Agreement.  The Safeguards Agreement
left open the very important question of the treatment customs unions and free-trade areas mightaccord to their partners when they exercised their right to impose temporary safeguard measures.  It
was in the interest of all Members to respect the terms of that Agreement.
The United States also wished to raise one point of concern with regard to the Appellate
Body's Report.  His country considered it unfortunate that the Appellate Body had decided to resurrect
language in Article XIX that had been determined to be no longer relevant.  During the Uruguay
Round negotiations, there was a clear consensus that the Safeguards Agreement should impose no
requirements regarding "unforeseen developments."  This understanding was evidenced by the fact
that few Members even used that term in their national safeguards legislation.  However, the
Appellate Body had agreed in substance with the US position that "unforeseen developments" was not
a condition a Member had to satisfy before imposing a safeguard measure.  In this context, it was
important to note the clear distinction drawn by the Appellate Body between "unforeseeable" and
"unforeseen" developments.  Article XIX of GATT 1994 referred to "unforeseen" developments as to
"unexpected" events.  Some Members had argued that the language in Article XIX should be
interpreted as "unforeseeable", thereby creating an unduly restrictive standard that would force
Members to demonstrate that the developments in question could not be "foreseen, foretold or
anticipated."  The Appellate Body had quite correctly and decisively rejected that position.
The representative of Uruguay said that his country had participated as a third party in this
dispute.  At the present meeting he did not wish to comment on all issues related to this case.  He only
wished to highlight one aspect concerning this dispute, namely the imposition and application of
safeguard measures by a member of a customs union.  In this context, he drew attention to footnote 1to Article 2.1 of the Agreement on Safeguards.  His delegation noted the statements made by some
Members at the present meeting as well as the reasonings of the Panel and the Appellate Body with
                                                     
1 WT/DS56.WT/DSB/M/73
Page 11
regard to that footnote.  Uruguay considered that the conclusions of the Panel and the Appellate Body
should only apply to the case at hand.  His country did not agree with all the positions expressed by
delegations at the present meeting nor with all the conclusions of the Reports.  Uruguay believed that
no general conclusions should be drawn from this case nor should its results apply as a precedent with
regard to other cases.
The DSB took note of the statements, and adopted  the Appellate Body Report in
WT/DS121/AB/R and the Panel Repo rt in WT/DS121/R, as modified by the Appellate Body Report.
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