RESTRICTEDWORLD TRADE
ORGANIZATIONWT/DSB/M/77
17 April 2000
(00-1532)
Dispute Settlement Body
20 March 2000
MINUTES OF MEETING
Held in the Centre William Rappard
on 20 March 2000
Chairman:  Mr. Stuart Harbinson (Hong Kong, China)
Prior to the adoption of the Agenda, the Chairman  drew attention to a press release issued by
the Director-General, which noted with great sadness the unfortunate passing away of one of the
Appellate Body members, Mr. Christopher Beeby of  New Zealand.  This was a great loss to all
Members, and his colleagues on the Appellate Body would also miss his wisdom.  He was a very
distinguished public international lawyer.  As a result of the loss of Mr. Beeby, the task of
adjudicating between Members would be made even more difficult.  He asked delegations to join him
in a minute of silence as a mark of respect and tribute to Mr. Beeby.
Also prior to the adoption of the Agenda, the Chairman  said that with respect to the item
concerning Korea's request under Article 21.5 of the DSU on "United States - Anti-Dumping Duty on
Dynamic Random Access Memory Semiconductors (DRAMS) of One Megabit or Above from
Korea", he had been informed that the parties wished to have some further contacts and accordingly it
would not be useful to retain this item on the Agenda of the present meeting.
Subjects discussed: Page
1. Surveillance of  implementation of  recommendations adopted by the DSB...................2
(a) European Communities - Regime for the importation, sale and distribution of bananas:
Status report by the European Co mmunities ..........................................................................2
(b) Japan - Measures affecting agricultural products:  Status report by Japan.............................6
2. Mexico - Anti-dumping investigation of high fructose corn syrup (HFCS) from the
United States.................................................................................................................. ........6
(a) Implementation of the reco mmendations of the DSB.............................................................6
3. Argentina - Transitional safeguard measures on certain imports of woven fabrics of
cotton and cotton mixtures  originating in Brazil ...............................................................7
(a) Request for the establishm ent of a panel by Brazil.................................................................7
4. United States - Anti-dumping measures on certain hot-rolled steel products from
Japan.......................................................................................................................... ............8
(a) Request for the establishm ent of a panel by Japan .................................................................8
5. Australia - Measures affecting importation of Salmon - Recourse to Article 21.5 of the
DSU by Canada.................................................................................................................. ...9
(a) Report of the Panel ......................................................................................................... ........9
6. United States - Tax Treatment for "Foreign Sales Corporations" ................................10
(a) Report of the Appellate Body and Report of the Panel.........................................................10
7. Proposed nominations for the indicative list of governmental and non-governmental
panelists...................................................................................................................... ..........13WT/DSB/M/77
Page 2
8. Indonesia – Certain Measures Affecting the Automobile Industry................................13
(a) Statement by the Eu ropean Comm unities.............................................................................13
9. Argentina – Safeguard Measures on Imports of Footwear.............................................13
(a) Statement by the Eu ropean Comm unities.............................................................................13
10. Appointment of Appellate Body members .......................................................................14
(a) Statement by  the Chairman................................................................................................... 14
1. Surveillance of  implementation of  recommendations adopted by the DSB
(a) European Communities - Regime for the importation, sale and distribution of bananas: Status
report by the European Communities (WT/DS27/51/Add.6)
(b) Japan - Measures affecting agricultural products:  Status report by Japan
(WT/DS76/11/Add.2)
1. The Chairman recalled that Article 21.6 of the DSU required that "unless the DSB
decides otherwise, the issue of implementation of the recommendations or rulings shall be placed on
the agenda of the DSB meeting after six months following the date of establishment of the reasonableperiod of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is
resolved".  He proposed that the two sub-items be considered separately.
(a) European Communities - Regime for the importation, sale and distribution of bananas: Status
report by the European Communities
2. The Chairman drew attention to document WT/DS27/51/Add.6 which contained the status
report by the European Communities on its progress in the implementation of the DSB's
recommendations concerning its banana import regime.
3. The representative of the European Communities said that at the 24 February DSB meeting
his delegation had reported on the on-going consultations.  Since then the consultations with the most
concerned third country partners continued.  A meeting had been held in Brussels with eight Latin
American countries which enabled the EC to have an in-depth discussion on various aspects,
including the technical issue with regard to different options.  At that meeting the EC had also
provided information on the ongoing discussion wi th other partners.  Further consultations were
envisaged.
4. The representative of Panama said that, as indicated in the press, the Arbitrators had just
given their ruling concerning the arbitration procedure in relation to the Bananas case.  Although the
Arbitrator's decision had not yet been officially circulated, Panama was aware that that decision
upheld the view that the EC's banana regime was causing serious injury to developing countries.  As
Panama had stated previously, this case was about multinationals trying to undermine the economies
of developing countries.  Panama, together with other banana exporting countries, had provided
detailed reasons as to why the EC's proposal of November 1999 was WTO-incompatible and why itshould be rejected.  Furthermore, the proposal had not been supported by the EC member States.
Panama believed that the proposal would neither brin g a definitive solution to this dispute, nor would
it enable the EC to come into compliance with its WTO obligations.
5. The EC had reported that the consultations with interested parties were ongoing.  However,
the EC's status report did not reflect the real situat ion with regard to its contacts with those parties.
Panama, on several occasions, had expressed its willingness to enter into a constructive dialogue with
the EC on the implementation of a new regime.  In this constructive spirit, Panama together with other
Latin American countries, had submitted proposals which had been supported by many countries,WT/DSB/M/77
Page 3
including some ACP countries.  The EC had not responded to any counter proposal and had rejected
the proposals made by the Latin American countries.
6. He said that at the meeting held in Brussels on 15 March 2000, the EC had reported to several
Latin American countries on its discussions with the United States and Ecuador.  However, no details
had been provided.  As a result, it had not been possible to evaluate the scope of those discussions andit was not clear what efforts were being made by the EC.  Furthermore, the EC had ignored repeated
appeals made during that meeting to discuss the Latin American proposal, in spite of the fact that the
proposal had been made in October 1999.  This was not a real dialogue but a series of meetings during
which the EC continued to inform the parties how it intended to proceed.  The attitude of the EC
showed that it did not have much interest in finding an acceptable solution to this dispute.  Panama
urged the EC and its member States to respect  their WTO obligations.
7. The representative of Guatemala said that his delegation noted the status report submitted by
the EC.  It was clear that the obligation to implement the DSB's rulings and recommendations was
with the respondent and the respondent alone.  At the end of 1999 the Latin American
banana-producing countries had put a number of pr oposals to the EC.  However, the months had
passed and their contributions continued to be ignored.
8. He said that on 15 March 2000, a meeting had been held at the request of the EC in Brussels
to discuss the Bananas case.  The Latin American countries had not been given clear and precise
information or a specific proposal to settle the dispute.  On the contrary, the EC had resorted to the
tactic of putting forward a list of the difficulti es it had encountered in bringing its regime into
conformity, and of the failed efforts to negotiate a solution with two of the five complainants.  This
was the reason why none of the countries present at that meeting had accepted any solution formula.
9. He drew attention to the fact that on 17 Ma rch 2000 a report had been issued concerning
arbitration in the Bananas case in relation to Ecuador's request.  Even though the report had not yet
been circulated officially, the  press had reported that Ecuador's request to take retaliatory action
against the EC was accepted by the Arbitrators.  His delegation wished to stress what this decision
represented.  Although Guatemala was sure that all Members attached the greatest importance to thismatter  in order to appreciate it fully a Member had to have experienced − or be able to imagine that
one day it might experience − what the complainants in the Bananas case had undergone.  Any
Member whose expectations were frustrated wh en a ruling was not implemented, particularly
developing countries, should welcome the fact that this decision contributed in some way to restoring
the credibility of the dispute settlement system.  It was clear, however, that this was not enough.
Guatemala considered that after two rulings under the GATT, one ruling under the WTO pursuant to
Article 21.5 and two arbitrations establishing that the EC regime was causing injury, the system'scredibility would only be restored when the EC brought its banana import regime into conformity.
10. The representative of Honduras said that his delegation noted the status report but did not
wish to point out again the lack of progress, frustration or the damage to the dispute settlement system
resulting from this prolonged case.  At the present meeting, Honduras wished to refer to two specific
developments.  First, an information meeting with the EC had been held in Brussels on15 March 2000.  At that meeting, the EC had not made any proposal, but had merely provided
information on the alternatives which were being considered and discussed with some countries.
Although Honduras was a party to this dispute it had not received any response to the joint proposal
which had been put forward to the EC in October 1999 together with many other Latin American
countries.
11. Second, he wished to raise one matter of the greatest importance for all Members and in
particular for developing country Members.  In accordance with information disclosed in the press,
the report authorizing Ecuador to take retaliatory action against the EC had just been issued.  HeWT/DSB/M/77
Page 4
recalled that Honduras had supported the request made by Ecuador under Article 22 of the DSU.
Therefore, as one of the countries which had brought this historic case forward and as a developing
country, Honduras welcomed the result of the arbitration in Ecuador’s case.  Together with the
arbitration decision in the case brought by the United States, this was clear proof of the injury that the
EC's banana import regime caused to those countries.
12. The report represented the first encouraging sign in many months in relation to this case.
Honduras hoped that as a result of the Arbitrat ors’ decision even those Members whose weak
economies made it difficult for them to withdraw tariff concessions would be able to obtain the
implementation of rulings and recommendations adopted by the DSB by taking measures in other
sectors.  The system would be strengthened if no other complainant was obliged to make its own
request under Article 22.
13. The representative of St. Lucia, speaking also on behalf of Dominica and Saint Vincent and
the Grenadines, noted that following the present di scussion, one could be misled into assuming that
there was no serious attempt to devise a new WTO-consistent banana import regime.  If any party had
an interest in the matter remaining unresolved, it evidently could not be the EC which remained
subject to substantial and damaging trade sanctions.  In the view of the above-mentioned countries,
progress was being impeded by a basic contradiction;  i.e. many companies and countries wanted thenew system to permit them increased sales of bananas, but should they all succeed, there would be an
over-supply of bananas, leading to a collapse in prices.  This would hurt all suppliers and would be a
disaster for the weakest and most vulnerable.  Particular suppliers might argue that stability of the
market could be maintained despite their own share being increased if there was a simultaneous
reduction of the shares of others.
14. The above countries categorically rejected this approach which regrettably was implicit in
some of the proposals being made:  the legitimate trading rights of traditional suppliers had to be
respected in the new regime.  She assured that the above countries had no designs on the shares of
anyone else.  They had only a minuscule share of the EC's banana market but their ability to continue
selling even that limited volume at remunerative prices was essential for their well-being.  They hadneither the intention nor the ability to encroach upon the shares of others.  They were aware that their
survival rested on continued stability.  They urged the parties to put an end to acrimonious, unhelpful
bickering and accusations which, like the continuing trade sanctions, spoiled the atmosphere and
undermined the prospects for an amicable and constructive approach essential for working out a
compromise which could be reasonably acceptable to various parties.
15. The representative of the United States noted that there had been no new recent developments
in the long saga of this dispute.  In the interest of resolving this dispute, the United States had
demonstrated considerable flexibility in its bilateral discussions with the EC;  the EC had not.  As a
result, there had been no movement toward a resolution.  At the end of 1999, the United States, as
well as most of the Latin American banana exporting countries, had endorsed a proposal put forward
by Prime Minister Edison James of Dominica on behalf of Caribbean exporters.  The EC had not
accepted this proposal.
16. In its status report, the EC continued to cite differences among the complaining parties, but
that was not where the real differences lay.  The United States asked that the EC refrain from yet
again blaming the complaining parties for its failure  to implement a WTO-consistent banana regime.
The EC was aware that its obligation was to come into compliance with WTO rulings and
recommendations.  It was also aware that the reason it could not come into compliance was thedivergent views among its 15 member States.  The EC knew that the reason for this divergence among
its member States was because some of them insisted on maintaining provisions that discriminated in
their favor and that benefited their interests.  The next time the EC intervened on bananas, the UnitedWT/DSB/M/77
Page 5
States would ask that it assumed responsibility fo r its own failure to comply with its WTO obligations
and not try to shift it to others.
17. The representative of the European Communities said that the report of the Arbitrators to
which some delegations had referred was confidential until 24 March 2000.  It was unfortunate that
some delegations had referred to press reports.  The EC did not wish to comment on this subject inorder to preserve confidentiality of the report.  He asked the Chairman to exercise his authority in this
respect.  He regretted that on the basis of some comments from the press, conclusions were being
drawn on the meeting held in Brussels.  That meeting which had lasted for several hours enabled the
parties to discuss in depth technical issues.  The participants had been asked specific questions and
some had provided positive replies.  Others, who had refused to enter into discussion at that meeting,
had stated at the present meeting that it had not been possible to make progress.  He underlined that it
was necessary to be open and to hear other views in order to find a solution which, as stated by SaintLucia, would satisfy all partners, including the parties to the dispute.
18. The Chairman said that at the present meeting, he did not expect delegations to make
statements in relation to the arbitration procedure between the EC and Ecuador since this was a
separate matter.
19. The representative of Ecuador said that his delegation noted the EC's status report and the
statements made by previous speakers.  At the present meeting, Ecuador wished to reiterate a number
of considerations which should be taken into account by the EC when amending its current regime.
He did not only wish to refer to market access conditions in the EC market, but also to the issues
arising from the DSB's recommendations and rulings.  Ecuador's position and its interests were based
on fully justified legal considerations in relation to different stages in the Bananas dispute.
20. He noted that the following elements should be considered by the EC in amending its current
banana import regime:  (i) a tariff-rate quota system could not be implemented through the allocation
of country quotas unless there was an agreement with the substantial suppliers on this matter.
Ecuador, as the main supplier, considered that such a distribution was unacceptable and reiterated that
the EC had to eliminate the system immediately;  (ii) the EC had to implement a regime for the
distribution of licences that would conform to WTO rules.  A method for implementation should be
based on recent licence distribution, and not on an illegal reference period.  There should be no
system or reference period that would preserve a highly distorted situation such as the one which
existed prior to 1993.  The EC might avoid the difficult decision of choosing an appropriate system of
licence distribution by adopting the most recent reference period and by using a definition of
operators which reflected those importers who took the risk of transporting bananas to Europe;
(iii) the quota system had to reflect the recent growth in the demand for bananas by increasing thequantity of fruit entering the EC;  (iv) the EC had to respect the tariff levels bound in its Uruguay
Round Schedule;  (v) the tariff quotas had to be applied according to the most-favoured-nation
principle;  all Members had to have access to all tariff rate quotas;  (vi) the allocation of a tariff
preference to ACP countries had to go hand in hand with a new waiver.  Under no circumstances
could such a waiver exceed the conditions of the waiver which had expired.  The EC could not,therefore, make a collective allocation to ACP suppliers, neither could these countries have access to
individual bilateral preferences which would exceed their exports prior to 1991.  The preference that
the EC was currently granting to ACP countries exceeded the real scope of the waiver which had
expired and which had been granted by the WTO solely to implement the access conditions laid down
by Protocol No. 5 of the Lomé Convention with respect to Article I of GATT 1994, as specified bythe Panel and the Appellate Body;  (vii) the tariff rate quota system should be applied during a
relatively short transition period.  A transition period could not be considered as such if it was longer
than the duration of the banana regime which had caused considerable injury to Ecuador and various
other developing countries.  The EC's illegal regime had been in force for seven years, and a transition
regime to put an end to this system had to be relatively short.WT/DSB/M/77
Page 6
21. The representative of Panama said that he wish ed to make some comments with regard to the
second statement made by the EC.  Panama maintained its view with regard to the meeting held on
15 March 2000 in Brussels.  The fact that some delegations had stated that they would convey
information to their capitals was different from accepting or supporting the EC's proposal.
22. The DSB took note of the statements and agreed  to revert to this matter at its next regular
meeting.
(b) Japan - Measures affecting agricultural products:  Status report by Japan
(WT/DS76/11/Add.2)
23. The Chairman drew attention to document WT/DS76/11/Add.2 which contained the status
report by Japan on its progress in the implementation of the DSB's recommendations concerning its
measures affecting agricultural products.
24. The representative of Japan said that, as indicated in the status report, consultations had been
held with the United States in a constructive and friendly manner.  Some technical issues still
remained to be resolved, but the parties expected to reach a mutually satisfactory solution in the very
near future.  Japan would notify the DSB of its agreement with the United States once such an
agreement had been reached.
25. The representative of the United States thanked Japan for its status report and its continued
cooperation on implementation issues.  The United States also hoped to resolve the remaining
technical issues in the very near future.
26. The representative of Australia said that given his country's interest in this case, he was
pleased that Australia had been able to hold technical discussions recently in Tokyo with the Japanese
Ministry of Agriculture, Forestry and Fisheries.  Australia looked forward to continued detaileddiscussions with Japan in the near future.
27. The DSB took note of the statements and agreed
 to revert to this matter at its next regular
meeting.
2. Mexico - Anti-dumping investigation of high fructose corn syrup (HFCS) from the
United States
(a) Implementation of the recommendations of the DSB
28. The Chairman recalled that in accordance with the DSU provisions, the DSB kept 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 on 24 February 2000, the DSB hadadopted the Panel Report on "Mexico - Anti-Dumping Investigation of High Fructose Corn Syrup
(HFCS) from the United States".  He invited Mexico  to inform the DSB of its intentions in respect of
implementation of  the DSB's recommendations.
29. The representative of Mexico said that his delegation had requested the inclusion of this item
on the agenda of the present meeting in order to info rm the DSB of its intentions with regard to the
implementation of the DSB's recommendations in this case, in accordance with Article 21.3 of the
DSU.  He recalled that the Panel had concluded that the anti-dumping investigation initiated by
Mexico on imports of high fructose corn syrup from the United States was consistent with theWT/DSB/M/77
Page 7
requirements of Articles 5.2, 5.3, 5.8, 12.1 and 12.1(iv) of the Anti-Dumping Agreement.  On the
other hand the same Panel had concluded that in the course of the investigation there had been some
inconsistencies with specific provisions of Articles 3, 7, 10 and 12 of the Anti-Dumping Agreement,
and had therefore recommended that the DSB request Mexico to bring its measure into conformity
with its obligations under the Anti-Dumping Agreement.
30. Mexico intended to implement the DSB's rulings and recommendations in accordance with its
WTO rights and obligations.  Following the adoption of the Panel Report on 24 February 2000, the
competent Mexican authorities had begun an assessment of the most appropriate means to remedy the
inconsistencies which, according to the Panel, had taken place in the course of this arduous and
complex investigation.  In accordance with the DSU provisions, Mexico would require a reasonable
period of time to be able to comply with the DSB's rulings and recommendations in this case.
31. The representative of the United States said that the Panel had confirmed what the United
States had alleged in this case, namely, that Mexico's imposition of antidumping duties on imports of
high fructose corn syrup from the United States was inconsistent with the Anti-Dumping Agreement.
The Panel had established a number of violations of the Anti-Dumping Agreement.  It had found
Mexico's threat of injury determination to be inconsistent with the Agreement.  Mexico had given
inadequate consideration to the impact of dumped imports on its domestic industry;  it had consideredonly part of the domestic industry's production;  and it had given inadequate consideration to the
effect of an anti-competitive arrangement between sugar producers and bottlers of soft drinks in
determining whether there was a likelihood of substantially increased imports.
32. The Panel had also found that Mexico had improperly imposed antidumping duties for the
period of its provisional antidumping measure, and had failed to release the bonds or return the cashdeposits securing liability for duties on entries during the same period.  Mexico had also failed to set
forth findings or conclusions regarding its application of duties for that period in its determination.
Furthermore, the Panel had found that Mexico had applied its provisional measure beyond the
applicable six-month limit.
33. In the United States' view these were serious violations of the Anti-Dumping Agreement.
Members were not to impose antidumping duties without properly examining and determining injury.
Mexico's threat of injury determination was not just flawed - it had been found to be fundamentally
inconsistent with the bedrock principles set out in the Anti-Dumping Agreement pertinent to
determinations of injury.  The United States believed that Mexico could comply with the Panel's
findings in a very short period of time since no changes in Mexico's laws or regulations were needed
for compliance.  The United States stood prepared to work immediately and constructively with
Mexico on the substance and the timing for its im plementation of the DSB's recommendations and
rulings.  The United States believed that discussions now could avert problems and misunderstandings
and had made this known to Mexico.  The United States looked forward to reaching a prompt
resolution to this dispute.
34. The DSB took note of the statements, and of the information provided by Mexico regarding
its intentions in respect to the implementation of the DSB's recommendations.
3. Argentina - Transitional safeguard measures on certain imports of woven fabrics of
cotton and cotton mixtures originating in Brazil
(a) Request for the establishment of a panel by Brazil (WT/DS190/1)
35. The Chairman recalled that the DSB had considered this matter at its meeting on
24 February 2000 and had agreed to revert to it.  He drew attention to the communication from Brazil
contained in document WT/DS190/1.WT/DSB/M/77
Page 8
36. The representative of Brazil said that at the 24 February DSB meeting, Brazil had requested
the establishment of a panel pursuant to Article XXIII of the GATT 1994, Article 6 of the DSU and
Article 8 of  the Agreement on Textiles and Clothing (ATC) with respect to transitional safeguard
measures established by Argentina under Article 6 of the ATC on certain imports of woven fabrics of
cotton and cotton mixtures originating in Brazil.  The full basis of Brazil's complaint was contained indocument WT/DS190/1.  On 10 March 2000 an arbitral tribunal established under the Brasilia
Protocol - which was the dispute settlement mechanism for MERCOSUR - had made findings and
recommendations that met Brazil's concerns with regard to this matter.  However, the deadlines under
the Brasilia Protocol had not yet expired.  Therefore, due to the legal requirements under the WTO
dispute settlement mechanism, Brazil was compelled to reiterate its request for a panel.  At the same
time, Brazil was confident that, before the composition of the panel, the matter would be settled in a
manner satisfactory to his country following the conclusion of the Brasilia Protocol process.
37. The representative of Argentina said that his country recognized that Brazil had a right under
Article 6.1 of the DSU to request a panel.  He pointed out that the arbitral tribunal under the Brasilia
Protocol was a distinct legal framework.  That arbitral tribunal had ruled on the compatibility of
Argentina's safeguard measures with MERCOSUR not with the WTO Agreement, including the ATC.
The case with regard to the consistency of Argentina's safeguards measures with the WTO rules hadnot yet been considered by any jurisdictional body.  He recalled that at the DSB meeting on
24 February 2000, his delegation had already expressed its views with regard to Brazil's allegations
contained in WT/DS190/1.
38. The DSB took note of the statements and agreed
 to establish a panel in accordance with the
provisions of Article 6 of the DSU, with standard terms of reference.
39. The representatives of Pakistan, Paraguay  and the United States  reserved their third-party
rights to participate in the Panel's proceeding.
4. United States - Anti-dumping measures on certain hot-rolled steel products from Japan
(a) Request for the establishment of a panel by Japan (WT/DS184/2)
40. The Chairman recalled that the DSB had considered this matter at its meeting on
24 February 2000 and had agreed to revert to it.  He drew attention to the communication from Japan
contained in document WT/DS184/2.
41. The representative of Japan said that it was for the second time that his delegation was
requesting the establishment of a panel to examine this matter.  As outlined in document
WT/DS184/2, Japan considered that the determination made by the United States in its investigations
of dumping and injury of hot-rolled, flat-rolled carbon-quality steel products originating in Japan, aswell as the underlying laws and regulations policies and procedures, were inconsistent with the WTO
Agreement.  As indicated at the 24 February meeting, the consultations had not resulted in a
resolution of the dispute.  Therefore, Japan wished to reiterate its request for the establishment of a
panel with standard terms of reference.
42. The representative of the United States said that his country accepted the establishment of a
panel at the present meeting.  However, the United St ates believed that the determinations referred to
by Japan fully complied with the US obligations under the GATT 1994 and the Anti-Dumping
Agreement.  The United States would be making that case before the Panel.
43. The representative of Brazil said that his country attached importance to this case and had a
substantial interest in this matter.  The anti-dumping measures in question raised a number ofWT/DSB/M/77
Page 9
systemic issues in relation to the implementation of the Anti-Dumping Agreement and the
interpretation of certain provisions of that Agreement.  Brazil's interest in this dispute was not only
limited to systemic issues.  It was also related to the way the US authorities applied the Anti-Dumping
Agreement in general and, in particular, with regard to steel products.
44. The DSB took note of the statements and agreed  to establish a panel in accordance with the
provisions of Article 6 of the DSU, with standard terms of reference.
45. The representatives of Canada, Chile , the EC , and Korea  reserved their third-party rights to
participate in the Panel's proceeding.
5. Australia - Measures affecting importation of  Salmon - Recourse to Article 21.5 of the
DSU by Canada
(a) Report of the Panel (WT/DS18/RW)
46. The Chairman recalled that at its meeting on 27 and 28 July 1999, the DSB had agreed to
refer to the original Panel the Article 21.5 request by Canada for determination of consistency of
implementation measures in this dispute.  The Report of the Panel which had been circulated on
18 February 2000 in document WT/DS18/RW was now before the DSB for adoption at the request of
Canada.
47. The representative of Canada recalled that in July 1999 his country had sought a
determination on the consistency of the measures taken by Australia to comply with the
6 November 1998 rulings and recommendations of the DSB with respect to the importation by
Australia of fresh, chilled and frozen salmon.  At that time, Canada had asserted that the measures
announced by Australia on 19 July 1999 were not consistent with the SPS Agreement.  Canada was
pleased to note that the Article 21.5 Panel had supported its position.  The Panel had found that, notonly were there significant delays in the entry into force of several of the measures announced by
Australia on 19 July, but that some of the measures were more trade restrictive than required to
achieve Australia's appropriate level of protection.  The Panel had also found that measures enacted
by the Government of Tasmania, for which Australia was responsible, were contrary to Australia's
obligations under the SPS Agreement.  Canada and Australia had initiated discussions onimplementation with a view to arriving at a mutually satisfactory solution.  The discussions were
continuing and Canada would keep the DSB informed of any new developments.
48. The representative of Australia said that the findings against Australia's measures were very
narrowly cast, in particular in regard to salmon that was "consumer-ready" as specifically defined.
There were many findings in Australia's favour:  (i) the consistency of Australia's risk assessment
with the provisions of Article 5.1 of the SPS Agreement;  the first risk assessment to have been
validated through WTO dispute settlement processes;   (ii) ten out of 11 of Australia's measures
applying to Canadian salmon in excess of the international standards had been found not to be
WTO-inconsistent;  and (iii) consistency with the provisions of Articles 5.5 and 2.3 of the
SPS Agreement, which clarify that equivalence of measures should not be the legal determinant of
conformity with those provisions.  Australia had some reservations about the Report.  First, because
there had been no interim review, Australia had not had the opportunity to rectify certain errors of factor errors in factual conclusions.  Second, the mandate assumed by the Panel in relation to measures
"taken to comply", in particular in regard to a measure on which Canada had not specifically sought a
ruling.  Third, the observations in paragraph 7.129 of the Report.  Australia had had discussions with
Canada on options for reaching a mutually satisfactory solution and those discussions were
continuing.  Australia wished to draw to the attention of other interested Members that any suchsolution which might be found as a result of those discussions would be fully in accordance with the
provisions of Article 3.7 of the DSU, in particular the third sentence of that provision.WT/DSB/M/77
Page 10
49. The representative of the United States said that it should not come as a surprise that his
country had an abiding interest in removal of all WTO-inconsistent barriers to trade in salmon with
Australia.  He recalled that a panel had been established in a parallel complaint brought by the United
States concerning the same measure, and the work of that panel had been suspended, as the panelists
were not available due to their involvement in the Article 21.5 review.  The United States did not wishto litigate this case again;  it was already clear what the outcome would be and his country trusted that
those interested in this issue in Australia also understood that.  The United States would much prefer
to negotiate a constructive, market-opening solution to this long-standing problem.  The United States
looked forward to Australia's prompt compliance with the DSB's recommendations.  His country
hoped to continue a dialogue with Australia on its response to the Panel Report.
50. The representative of the European Communities said that the Panel Report under
consideration was one of the first reports under Article 21.5 of the DSU.  The EC believed that as a
whole the approach taken by the Panel to resolve this matter in accordance with the accelerated
procedures was balanced.  However, the EC noted that in some respects, and in particular with regard
to the determination of the existence of the implementing measures, the Panel had chosen to ignore
certain legally relevant criteria in favour of practical and highly subjective considerations.  The EC
hoped that any future procedures under Article 21.5 would enable it to establish an approach whichwould be more in conformity with the WTO Agreement and with general principles of law.
51. The representative of Norway said that his country, which had participated in this dispute as a
third party, noted the outcome in this case.  Norway believed that the Panel Report was balanced and
welcomed its adoption.  His country looked forward to the implementation of the recommendations
by Australia as soon as possible.
52. The DSB took note of the statements and  adopted  the Panel Report contained in document
WT/DS18/RW.
6. United States - Tax Treatment for "Foreign Sales Corporations"
(a) Report of the Appellate Body (WT/DS108/AB/ R) and Report of the Panel (WT/DS108/R)
53. The Chairman drew attention to the communi cation from the Appellate Body contained in
document WT/DS108/9 transmitting th e Appellate Body Report on United States - Tax Treatment for
"Foreign Sales Corporations", which had be en circulated in document WT/DS108/AB/R in
accordance with Article 17.5 of the DSU.  He reminded delegations that in accordance with the
Decision on Procedures for the Circulation and Derestriction of WTO Documents contained in
WT/L/160/Rev., both Reports had been circulated as  unrestricted documents.  He drew attention to
Article 17.14 of the DSU which required that "An Appe llate Body report shall be adopted by the DSB
and unconditionally accepted by the parties to the dispute unless the DSB decides by consensus not toadopt the Appellate 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."
54. The representative of the European Communitie s said that the EC was satisfied with the
outcome of this case as both the Panel and the Appellate Body had clearly ruled that the FSC scheme
constituted a prohibited export subsidy incompatible with the disciplines of the Subsidies Agreement.
He underlined that, as the Appellate Body had clearly recognised, this was not a ruling on the relative
merits of "world-wide" and "territorial" systems of  taxation, but simply a ruling on an export subsidy
granted through a tax measure.  This ruling had re cognised that Members had the sovereign authority
to tax or not to tax any particular category of revenue they wished.  But in doing so they had torespect their WTO obligations.  The economic importance of this case for the EC was considerable as
the amount of subsidies granted through the FSC and its impact on US exports was substantial.  TheWT/DSB/M/77
Page 11
FSC had worked for many years to the detriment of  EC companies both in the EC and third markets.
Therefore, the EC expected now the United States to comply with this ruling by 1 October 2000, as
established by the Panel.  He underlined that, in fixing this date, the Panel had followed the US
proposal and had taken into account that the FSC, being a tax measure, could not be withdrawn
without delay, as required by Article 4.7 of the Subsidies Agreement, earlier than at the beginning ofthe next US fiscal year;  i.e. 1 October 2000.  Therefore, the EC was expecting a proposal from the
US on the implementation of the recommendations and was ready to work on this with the United
States.
55. The representative of the United States said that his country was disappointed with the
Appellate Body Report, and disagreed with its content.  The United States view remained that the
FSC provisions of the US Internal Revenue Code had been designed to comply with the principles set
forth in the Understanding adopted by the GATT Council in 1981, and that those principles had beenincorporated into the Subsidies Agreement and were  meant to apply generally.  Nevertheless, the
Appellate Body had spoken, and the United States w ould not engage in a detailed critique of the
Appellate Body's reasoning.  It would leave that  to scholars, who undoubtedly would find much to
write about the Appellate Body's treatment of certain arguments and its failure to address other
arguments at all.  At the present meeting, the United  States simply wished to highlight certain aspects
of the Appellate Body Report that should give other Members cause for concern.
56. The first aspect of the Report related to the Appellate Body's rejection of the 1981
Understanding of the GATT Council as an "oth er decision" of the CONTRACTING PARTIES within
the meaning of paragraph 1(b)(iv) of the language incorporating GATT 1947 into the WTO
Agreement.  The United States had argued that the 1981 Understanding constituted an authoritativeinterpretation of GATT Article XVI:4, as confirmed by the statement of the Council Chairman that
the Understanding did "not affect the rights and obligations of contracting parties".  The United States
distinguished between an interpretation of a provision − which clarified, but did not change, rights and
obligations - and an amendment of a provision − which did change rights and obligations.  According
to the Appellate Body, however, an authoritative interpretation was something that did affect rightsand obligations.  In so ruling, the Appellate Body appeared to have unjustifiably expanded the scope
of action that might be taken under Article IX:2 of the WTO Agreement with respect to authoritative
interpretations by the Ministerial Conference or the General Council.  The United States had been of
the view that the last sentence of Article IX:2 - which provided that Article IX:2 shall not be used in a
manner that would undermine the amendment provisions in Article X - prevented the use of the
authoritative interpretation process in a manner that would change (or "amend") rights and
obligations.  However, the Appellate Body had now d eclared that an authoritative interpretation, by its
very nature, was something affecting rights and obligations.  At a minimum, the Appellate Body had
managed to confuse the distinction between an authoritative interpretation under Article IX and an
amendment under Article X in a manner that was not helpful to the WTO system.
57. The second aspect related to the Report's discriminatory outcome.  A GATT panel had
established 24 years ago that the territorial tax systems of certain European countries subsidizeexports by taxing exports more favorably than comparable domestic transactions.  Although that
panel's legal conclusions had been overturned - at  least at the time - by the 1981 Understanding, the
Panel's economic conclusions remained as valid today as they were then.  The record of the FSC
dispute made clear that the US Congress designed the FSC system so as to emulate the tax treatment
afforded exports under a territorial system.  The Appellate Body and the Panel effectively had statedthat a Member could not level the playing field by limiting territorial-type tax treatment to exporters.
In the view of the United States, this outcome unjustifiably discriminated between Members on the
basis of their tax systems.  It was sufficiently troubling that the WTO subsidy rules discriminated
between direct and indirect taxes on the basis of what increasingly appeared to be outmoded economic
assumptions.  It was intolerable to find that those rules also discriminate between direct tax systems,treating territorial tax systems more favorably than others.  Of course, both the Appellate Body andWT/DSB/M/77
Page 12
the Panel had gone to great lengths to try and convince the reader that WTO Members were free to
adopt whatever type of tax system they wished.  However, any such "freedom" was manifestly a false
one when the consequences of choosing one tax system over another might be to place one's exporters
at a disadvantage vis-à-vis  their foreign competitors.
58. The third aspect was the Appellate Body's decision that it would not examine whether the
EC's consultation request had failed to comply with the obligations of Article 4.2 of the SCM
Agreement.  The Appellate Body had declined to make this examination because the Appellate Body
had claimed that the United States had breached its obligations under Article 3.10 of the DSU.  Of
course, the United States did not agree with that finding, but that was not even the most troubling
aspect of the finding.  The Appellate Body's finding was remarkable in a number of respects.  The EC
had not even made this claim in its appeal to  the Appellate Body.  Instead, the Appellate Body
appeared to have taken on itself the task of claiming and finding a breach of the DSU by a Member.This appeared at odds with the mandate of the Appellate Body, particularly in light of the Appellate
Body's statements in the Japan Varietals  case
1 to the effect that panels should not make findings in
favor of a party based on claims that the party had not even made.  Furthermore, there was nothing in
the SCM Agreement or the DSU that imposed a tim e limit on claims under Article 4.2 of the SCM
Agreement or that excused a breach of that Agr eement due to a claim of a breach of Article 3.10.
There was simply nothing in the text of the DSU that would permit the Appellate Body to overlook or
ignore an express requirement in the SCM Agreement.  The Appellate Body seemed to have departed
here from the textual approach that it had legitimately and successfully advocated in so many other
areas.  Finally, Article 3.10 of the DSU, the very same provision cited by the Appellate Body in its
Report, stated that complaints and counter-complai nts in regard to distinct matters should not be
linked.  If the EC had felt the United States was in breach of Article 3.1 it could have brought its own
complaint which would have been heard in a separate proceeding.  The outcome of that proceeding
would not, and could not, have affected the exam ination of the EC's compliance with Article 4.2 of
the SCM Agreement.  This portion of the Appella te Body's report presented a very troubling
precedent indeed, and one the United States hoped was not extended to other disputes or otherMembers.  While the United States was pleased that the Appellate Body had reversed the Panel's
reasoning with respect to the EC's claims under the Agriculture Agreement, this aspect of the report
could not offset the Appellate Body's erroneous conclusion on other issues.  Thus, the United States
could not support the adoption of the Appellate Body and the Panel reports in the FSC dispute.
59. The representative of Canada said that hi s country had long been concerned with the
trade-distorting effects of the FSC programme, particularly in third markets.  It was for this reason
that Canada had participated in the proceedings as a third party, at both the panel and appeal stage.Canada was broadly supportive of the EC position.  In particular, it had stated its view that the FSC
measure constituted a prohibited export subsidy under Article 3 of the SCM Agreement, and had
noted with satisfaction the determinations of both  the Panel and the Appellate Body on this issue.
Canada urged the United States to take the necessary steps to brings its measure into conformity with
its WTO obligations.  Finally, Canada noted that Article 3.5 of the DSU provided that any solution tothis dispute had to be consistent with covered agreements, and should not nullify or impair benefits
accruing to any Member under those agreements.
60. The representative of Australia said that his country would follow the implementation of the
recommendations in this case very closely.  In this respect he wished to note, in particular, Australia's
trading interest in agricultural products which have received export subsidies.  He recalled that theUnited States had supported the adoption of the Panel Report under Article 21.5 in the case of
Automotive Leather which called for the withdrawal of past payments.  He noted that the United
States had argued before the Panel for the repayment of any benefit received after the date of the
adoption of the Panel Report rather than after the date for implementation.  In this light, Australia
                                                     
1 WT/DS76.WT/DSB/M/77
Page 13
looked forward to hearing from the United States exac tly what it intended to do in order to bring itself
into conformity and the basis for whatever action that was proposed.
61. The DSB took note of the statements and adopted  the Appellate Body Report in
WT/DS108/AB/R and the Panel Report in WT/DS108/ R, as modified by the Appellate Body Report.
7. Proposed nominations for the indicative list of governmental and non-governmental
panelists
62. The Chairman drew attention to document WT/DSB/W/126 and Corr.1 which contained
additional names proposed for inclusion on the indicative list in accordance with Article 8.4 of the
DSU.  He proposed that the DSB approve the names contained in document WT/DSB/W/126 and
Corr.1.
63. The DSB so agreed.
8. Indonesia – Certain Measures Affecting the Automobile Industry
(a) Statement by the European Communities
64. The representative of the European Communities, speaking under "Other Business", said that
his delegation wished to raise again the issue of implementation of the DSB's recommendations in the
case "Indonesia – Certain Measures Affecting the Automobile Industry".  The EC continued to be
very concerned by the new luxury tax introduced by Indonesia in July 1999 as part of the new policyto implement the DSB's recommendations.  In February 2000, the EC had raised this matter with
Indonesia, but had not yet received any reply.  The EC hoped to settle this matter bilaterally.
However, should this not be the case the EC would not hesitate to exert its WTO rights.
65. The representative of Indonesia regretted that due to the fact that his delegation had received
its response from the capital in the Indonesian language and needed time to translate it, his delegation
was not in a position to provide that response to the EC.  However, due to the importance of this issue,
Indonesia would provide the EC with the response in the Indonesian language.  Indonesia looked
forward to discussing the matter once the EC had examined its response.
66. The DSB took note of the statements.
9. Argentina – Safeguard Measures on Imports of Footwear
(a) Statement by the European Communities
67. The representative of the European Communities, speaking under "Other Business", said that
EC was very concerned with the implementation, or a lack thereof, undertaken by Argentina in the
case on "Argentina – Safeguard Measures on Imports of Footwear".  In particular, he wished to refer
to Resolutions 122/2000 and 123/2000 introduced by Argentina at the end of February 2000.  Instead
of allowing the safeguard measures, which had been found to be inconsistent  with Argentina's
obligations under the Agreement on Safeguards, to expire on 23 February 2000, Argentina hadadopted Resolution 122/2000.  That Resolution had extended the illegal safeguard measures for sport
footwear for an additional period of  five months (150 days).
68. With respect to resolution 123/2000 which had imposed minimum specific duties on non-
sport shoes, the EC wished to know how Argentina intended to keep the minimum specific duties
under the bound rates.  The EC considered that these measures, in particular Resolution 122/2000, didnot constitute proper implementation of the DSB's recommendations.  On the contrary, the ECWT/DSB/M/77
Page 14
believed that in this case, in which the investigation and thus the very basis of Argentina's measures
had been condemned by both the Panel and the Appellate Body, an extension of such measures was
an outright breach of the WTO basic rules.  The EC reserved its WTO rights to take further action
against Argentina.
69. The representative of Indonesia said his country had noted Ministry of Economy's
Resolutions 122/2000 and 123/2000 of 23 February 2000 through which Argentina had extended its
safeguard measures on imports of athletic footw ear.  Indonesia had also noted that Argentina had
neither notified the Committee on Safeguards immediately upon taking its decision to extend its
safeguards measures, pursuant to Article 12.1(c) of the Agreement on Safeguards, nor had it provided
the adequate opportunities for prior consultations with Members with a substantial interest as
exporters, in accordance with Article 12.3.
70. Without prejudice to the position of Indonesia, as to whether the action taken by Argentina
was consistent with its obligations under the GATT 1994 and the Agreement on Safeguards,
Indonesia wished to reserve its WTO rights on this matter, including its rights under Article XIX of
the GATT 1994 and Article 8 of the Agreement on Safeguards.  Furthermore, it was Indonesia's
understanding that in the absence of Argentina's notification and to the extent that consultations
provisions under Article 8.2 of the Agreement on Safeguards applied to these measures, theconsultation period had begun on 24 February 2000, the date on which the extension of the safeguard
measures had entered into effect.  He underlined that Indonesia had a substantial trade interest as an
exporter in the product concerned.
71. The representative of Argentina said that his delegation noted the statements made by the
European Communities and Indonesia.  He said that the issues related to bound rates and the
imposition of specific duties were outlined in Article 3 of Resolution 123/2000.  Argentina did not
agree with Indonesia's interpretation that no prior consultations had been held with regard to the
measures in question.
72. The DSB took note of the statements.
10. Appointment of Appellate Body members
(a) Statement by the Chairman
73. The Chairman, speaking under "Other Business", said that he had prepared his statement prior
to being informed that Mr. Christopher Beeby had passed away.  Therefore, in his statement he would
only refer to the two vacancies arising as a result of the fact that the terms of office of the two
members of the Appellate Body were expiring at the end of March 2000.  As a mark of respect for the
late Mr. Beeby, he proposed not to raise at the present meeting the question of how to fill the
additional vacancy in the Appellate Body which had rather tragically and suddenly just arisen.
74. He recalled that the DSB had set in train a process to identify replacements for the two
Appellate Body members whose terms expired at th e end of March 2000.  This process involved a
Selection Committee drawing up recommendations to the DSB on these appointments.  The Selection
Committee ("the Committee") was comprised of  the 1999 Chairs of the DSB, the General Council,
and the Councils for Trade in Goods, Trade in Services and TRIPS as well as the Director-General.The Committee was being chaired by Mr. K. Bryn, the 1999 DSB Chairman.  The Committee had
conducted thorough interviews with each of the seven candidates for appointment.  It now had a very
sound basis on which to continue its deliberations.  The Committee had also made itself available to
hear delegations wishing to express views and advice on the appointments.  A number of delegations
had so far taken advantage of this opportunity and the Committee was grateful for the additionalperspectives it had thus obtained.  He was pleased to say that, based on the views the Committee hadWT/DSB/M/77
Page 15
heard, delegations had clearly approached this exercise in an appropriate spirit.  There seemed to be
an acknowledgement that this should not involve what one might call "political style campaigning",
but simply helping the Committee to identify the best all round candidates for the WTO highest
judicial body, taking into account all the criteria set out in the DSU.  Some delegations indeed had
concentrated mainly on expressing views on those criteria, leaving the Committee with reasonableflexibility as to its precise recommendations.  It was the intention of the Committee to proceed shortly
to its in-depth deliberations on those recommendations.  The Committee hoped that the matter could
be taken up for decision by the DSB at its regular meeting scheduled for 7 April 2000, or at a special
meeting to be convened for this purpose at the earliest possible date thereafter.
75. The DSB took note of the statement.
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