RESTRICTEDWORLD TRADE
ORGANIZATIONWT/DSB/M/68
20 October 1999
(99-4547)
Dispute Settlement Body
22 and 24 September 1999
MINUTES OF MEETING
Held in the Centre William Rappard
on 22 and 24 September 19991
Chairman:  Mr. Nobutoshi Akao (Japan)
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 Communities...............................................................2
(b) United States – Import prohibition of cert ain shrimp and shrimp products:  Status
report by the United States.................................................................................................... ......5
2. Guatemala – Definitive anti-dumping measure on grey portland cement from
Mexico......................................................................................................................... ...............7
(a) Request for the establishm ent of a panel by Mexico ..................................................................7
3. Canada – Term of patent protection.......................................................................................8
(a) Request for the establishment of  a panel by the United States ...................................................8
4. European Communities – Anti-Dumping duties on imports of cotton-type bed-
linen from  India ............................................................................................................... .........8
(a) Request for the establishm ent of a panel by India ......................................................................8
5. Colombia – Safeguard measure on imports of plain polyester filaments from
Thailand....................................................................................................................... ..............9
(a) Request for the establishmen t of a panel by  Thailand ................................................................9
6. India – Quantitative restrictions on imports of agricultural, textile and industrial
products ....................................................................................................................... ............12
(a) Report of the Appellate Body and Report of the Panel.............................................................12
7. Adoption of the 1999 Draft Annual Report of the DSB.......................................................24
8. Proposed nominations for the indicative list of governmental and non-
governmental panelists ......................................................................................................... ..24
9. Review of the DSU ............................................................................................................ ......24
10. Appointment of Appellate Body members ...........................................................................25
(a) Statement by  the Chairman................................................................................................... ....25
                                                     
1 This meeting of the DSB was adjourned.WT/DSB/M/68
Page 2
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.1)
(b) United States – Import prohibition of certain shri mp and shrimp products:  Status report by
the United States (WT/DS58/15/Add.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 reasonable
period 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
The Chairman drew attention to document WT/DS27/51/Add.1 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.
The representative of the European Communities said that in accordance with Article 21.6 of
the DSU, the EC had circulated a status report on its implementation in the Bananas case.  Due to the
holiday period, the report, which was short, had indicated that an update of the situation would be
provided in the statement at the present meeting.   At the 26 July DSB meeting, the EC had been
criticized for not putting in place a new system, spending instead too much time consulting with all
the interested parties.  He recalled that in January 1999, when the EC had amended its banana regime,
and during the discussion at the end of 1998 on th e proper application of the Article 21.5 procedure,
the EC had been criticized for not consulting with all the parties concerned.  The EC intended to
develop a new WTO-consistent system based on the recommendations of the Article 21.5 Panel and
the Arbitrators, which would also be accepted by the main parties concerned, in particular Ecuador.
For this reason, the EC had held intensive consultations with Ecuador, the other major Central and
Latin American suppliers, the United States, the ACP countries and the main trade operators.  In an
effort to make a proposal which would not be subject  to further challenges, the EC had made contacts
and had held consultations with delegations at the end of July.  Further meetings had been held in
Brussels in the month of August.  The consultations had demonstrated that there continued to be a
wide divergence of views not only as to what solution would best suit the interests of the variousparties, but also as to the WTO-consistency of th e options proposed by the EC.  The majority of the
parties had a strong preference for a tariff quota system.  However, no agreement had been found on
the management of such a system, including the distribution of import licenses.  The United States
had, for example, suggested that the distribution of licenses should be based on a historical reference
period prior to 1993 while Ecuador had insisted on a recent period.
The EC's priority was to ensure that such a system would meet its international commitments
and would enable the parties to avoid a new dispute.  This had become more important now than
earlier when the EC had thought that it would be able to resolve this matter.  At this stage, there was
no agreement on a system which would meet internationally acceptable objectives and enable theparties to avoid further disputes.  If this diverg ence of views continued, the EC would have no other
option, but to adopt a system based on tariffs only.  However, this would imply negotiations under
Article XXVIII of GATT 1994.  As he had pointed out earlier, this was not the option preferred by the
majority of the parties.  A report on this matter had been submitted to the Council of Ministers under
the previous Commission.  The Council of Minist ers had urged the new Commission to continue
efforts to find an acceptable solution.  There was no fixed date for the final decision.  The newWT/DSB/M/68
Page 3
Commission would now have to take up this matter in  the light of the current situation, and would try
to find a solution as soon as possible.  The sanctions applied on its exports put the EC under great
pressure to move forward rapidly.  The existing differences amongst the parties made the EC's task
very difficult.  The new Commission would try to take a decision as soon as possible, but it might be
obliged to move to a tariff solution.  He urged all the parties concerned to work closely andintensively in the next few weeks in order to find an acceptable solution.
The representative of Ecuador noted the status report and the statement by the EC indicating
the actions taken by the Commission to reform its banana import regime.  It was clear that the EC had
not yet complied with the DSB's recommendations and wished to prolong the dispute beyond a time-
period not provided for in the DSU.  This proble m should be examined by the DSB since the EC had
already prolonged the period for implementation by additional nine months beyond the reasonableperiod of time.  Ecuador believed that the purpose of this additional time was to maintain in force the
measure, which continued to penalize exports of bananas from Ecuador and the other Latin American
countries.  The EC continued to justify its delay by  stating that the other Members involved in the
matter were not in agreement or that they were not putting forward a joint solution.  It was normal to
have some disagreements in the positions since the parties to the dispute were pursuing theirrespective interests. This however should not be an  excuse for the EC not to comply with its WTO
obligations.  A proposal by the EC should form the basis for negotiations during which the interests
and rights of the parties concerned could be recognized and discussed.
The representative of Colombia said that her delegations wished to make two comments with
regard to the status report and the statement by the EC.  First, the EC had indicated that the parties
would prefer a tariff quota system.  She underlined that such a system should reflect market access
opportunities.  Second, Colombia would be willing to consider a tariff system provided that the level
of tariffs was commercially viable.  It was not appropriate to create another trade restriction by the
imposition of prohibitive tariffs .
The representative of Panama wished to echo the comments made by Colombia.  He recalled
that the EC had stated that it was not possible to find a solution because the parties concerned were
not in a position to reach an agreement.  He did not believe that it was not possible to find a WTO-
consistent solution.  In the past, the parties to the dispute had indicated to the Commission that they
wished a WTO-consistent solution, which would allow fair market participation.  Specific examples
had been provided as to how this could be achieved in a manner consistent with the WTO provisions.The differences among the parties should not prevent the EC from finding a solution.  If a WTO-
consistent solution was proposed, such a solution could not be challenged.  The problem was that the
EC was trying to find a solution which would not be WTO-consistent.  If the EC maintained this
approach, it would continue to prompt divergent positions.  He hoped that internal consultations in the
Commission would be concluded shortly and that th is would result in a WTO-consistent solution .
The representative of Guatemala said that his delegation wished to make comments on the
status report and the statement by the EC, and in particular on the proposal submitted by the
Commission to the Council of Ministers on 8 September 1999.  Guatemala believed that the
Commission's proposal did no more than to transfer on the complainants a responsibility which restedwith the EC.  The task of finding a suitable way of ensuring that the EC's banana import regime
complied with the Panel's rulings and recommendations  did not lie with the complainants.  Guatemala
had used every opportunity to convey its concerns to the Commission.  He regretted that the EC had
not adequately reflected these concerns.  He wished to draw attention to some important issues.
Every Member which had made recourse to the dispute settlement system was entitled to expect thatits rights would be restored.  It was unacceptable that there should be any attempt to reproduce or
replicate the situation which had given rise to the claim, either through solutions which would make it
necessary to extend the Lomé waiver or through renegotiation of bound tariffs.  With regard to the
Lomé waiver, account should be taken of the fact that the Appellate Body had condemned theWT/DSB/M/68
Page 4
extensive use made by the EC of the exemption in place.  To continue speaking of an exemption or
derogation from WTO obligations was a total negation of the binding effects of the system.
Furthermore, the objectives of the dispute settlement system would not be met by means of tariff
quota options which would be administered in a discriminatory manner or any other option, which
would pass on to the complainants the cost of maintaining or improving access for preferentialsuppliers by means of a new tariff.  As indicated in press reports, a new tariff could be three or four
times higher than the bound tariff.  Guatemala wished that due account would be taken of the interests
of all the countries which had made the claim, collectively and individually.  He believed that
Members should consider whether, in the light of  the proposed solutions put forward in the banana
dispute, their countries would be prepared to continue their participation in the WTO dispute
settlement proceedings.  It was now up to the EC to restore Members' confidence in the system.
The representative of Honduras said that her country wished to express concerns about the
status report and the statement by the EC which reflected the report recently submitted to the EC
Council of Ministers.  The reasonable period of time granted to the EC to comply with the rulings and
recommendations of the Panel and the Appellate Body had expired nine months ago.  However,
instead of proposing an acceptable solution, an attempt was being made to put in place a new regimewhich would produce the same adverse effects as t hose under the previous system.  Latin American
suppliers had to bear the cost of the EC preference system.  Her country's decision to participate in the
Bananas case had been considered as a possible way to halt the negative effects on its economy.  It
was not expected that the ruling in this case would be evaded by means of a new exemption.  Given
that the complaint had been lodged four years ago and that the EC import regime had been challengedseven years ago, a solution which would involve an exemption could undermine the credibility of the
system.  The Commission was suggesting that its member States should disregard the legitimate
objective of the dispute settlement system.  For its part, Honduras had since urged not to accept any
initiative which would prejudice the binding nature of past rulings by means of an exemption.  At the
time the complaint was lodged, Honduras had not expected that this process might lead torenegotiation of the bound tariff.  Penalizing Honduras, an efficient supplier, by applying a tariff level
at which its bananas were no longer competitive could not be justified.  This could upset the balance
of commitments and concessions frustrating the legitimate expectations of Honduras.
As long as the EC continued to seek ways of maintaining the effects of its illegal regime it
would not be in a position to find a solution compatible with the letter and the spirit of the WTO
Agreement.  With regard to a tariff-only regime, Honduras considered that if a new tariff was fixed ata prohibitive level that would be contrary to its interests.  There should be no increase in the bound
tariff which was already higher than the average tariff imposed after the national regimes of the EC
member States had been eliminated.  With regard to the various tariff quota options, Honduras
preferred a global tariff quota based on the bound tariff with increases in the quota size in line with
increased consumption and the accession of new me mber States.  There would be no need for a
discriminatory licensing system.  Honduras wished  to reiterate its steadfast conviction that the
interests of the WTO would be undermined, if a Member was able to evade compliance with the
DSB's recommendations.  Honduras hoped that the EC member States would be able to make a
positive contribution to the credibility of the multilateral trading system.
The representative of the United States said that her delegation appreciated the status report
and the statement by the EC on its efforts to comply with the WTO rulings in the bananas case.  It
also appreciated that the EC had been working hard  in its consultations with the various interested
parties. The United States had consulted closely with the EC and had presented several
WTO-consistent ways for the implementation of a tariff-rate quota.  The United States had suggestedtwo types of WTO-consistent licensing systems, and was willing to consider other licensing systems
that would completely remove the discrimination inherent in the EC's past and current licensing
systems.  The United States had suggested a tariff only solution and had provided a detailed analysis
of an appropriate level for a single tariff, which would be consistent with WTO provisions.  DrawnWT/DSB/M/68
Page 5
from the EC's regulations on imports of maize, the United States had also offered a solution to restore
to Latin American bananas the growing non-discriminatory access available before the introduction of
the single market.  At the same time, the ACP countries would be afforded the access they long
experienced in their traditional markets.  While the United States recognized the EC's difficulties in
developing a WTO-consistent solution, it believed that the EC did not have to satisfy all the Membersinvolved in the dispute, nor all of the EC's domestic interests protected by the banana regime.  The
EC's obligation was to comply with WTO rulings.  The United States remained open to discuss other
WTO-consistent solutions to be put forward by the EC .  However, it was up to the EC to find a way to
comply with its WTO obligations.  The United States noted the Commission's report of
8 September 1999 to the EC member States, which highlighted the main problems of the tariff quota
system raised by the United States.  Her country welcomed the Commission's recognition of this
problem.  However, the report had only highlighted problems and did not resolve the dispute whichwas the goal of the United States.  It was noted in the Commission's report that a tariff only solution
appeared to be the only means of resolving this di spute.  The United States considered that a tariff
only system was one possible solution provided that the level was consistent with the WTO
provisions.
The representative of Mexico said that his country believed there was no need to ensure an
agreement among the parties for a WTO-consistent solution.  The Commission's report to the EC
member States of 8 September 1999 had indicated that all Latin American countries and the operators
wished to maintain a tariff quota system in order to protect their export earnings.  He clarified that
Mexico would prefer a single tariff solution provided that an appropriate level of tariffs wasdetermined.  From the technical and legal point of view, this would be the simplest solution.  Mexico
noted that the EC had stated that it had an interest  in finding a solution to the Bananas dispute as soon
as possible.  He noted that this matter had been under discussion for a number of years and thus far no
improvements had been made.
The DSB took note of the statements and agreed
 to revert to this matter at its next regular
meeting.
(b) United States – Import prohibition of certain sh rimp and shrimp products:  Status report by
the United States
The Chairman drew attention to document WT/DS58/15/Add.1 which contained the second
status report by the United States on its progress in the implementation of the DSB's
recommendations with regard to the import prohibition of certain shrimp and shrimp products.
The representative of the United States said that in accordance with Article 21.6 of the DSU,
her country had submitted its second status report on the implementation in this case.  She wished to
reiterate that, as the report made clear, the US process was open and provided opportunities for inputfrom all interested parties.  As noted in the repo rt, the US implementation in this case had several
distinct elements.  In its first report, the United States had advised the DSB that on 8 July 1999, the
US Department of State had issued revisions to its guidelines implementing the Shrimp/Turtle law.
The revised guidelines, in accordance with the recommendations and rulings of the DSB were
intended to:  (i) introduce greater flexibility in considering the comparability of foreign programmes
and US programme;  and (ii) elaborate a timetable and procedures for certification decisions,
including an expedited timetable to apply in 1999 only.  These changes would increase the
transparency and predictability of the certification process and would afford foreign governments
seeking certification a greater degree of due process.  Following the issuance of the revised
guidelines, Pakistan had asked the United States to send a team of technical experts to Pakistan for thepurpose of reassessing the operations of its shrimp fl eet for possible certification and to assist with the
development of a comprehensive turtle excluder devices (TEDs) programme.  The United StatesWT/DSB/M/68
Page 6
welcomed this development and had informed Pakistan that it had assembled such a team and that the
team was ready to visit Pakistan at the first mutually convenient time.  To date, the US State
Department had not received any further requests from other governments for action under the revised
guidelines, but stood ready to consider all requests.  The United States was also continuing its efforts
to launch the negotiation of an agreement with the governments of the Indian Ocean region on theprotection of sea turtles in that region.  To that end, the US Government had actively participated in
the Second ASEAN Symposium and Work Shop on Sea Turtle Conservation and Biology, held in
Malaysia on 15-17 July 1999.  The United States was pleased to report that the Symposium had
concluded with the adoption of the Sabah Declaration, which called for "the negotiation and
implementation of a wider regional agreement for the conservation and management of marine turtle
populations and their habitats throughout the Indo-P acific and Indian Ocean region."  In what the
United States hoped would be the next step towards such negotiations, Australia had offered to host afollow-up meeting in October.  She recalled that the United States was ready to offered technical
training in the design, construction, installation and operation of TEDs to any country upon request.
Any government wishing to receive such training could request so in writing, through diplomatic
channels.  The United States would make every effort to meet such requests.  In this connection the
United States welcomed the request for technical assistance from Pakistan.  She noted that Thailandhad also sought further technical assistance concerning the design, construction, installation and use
of TEDs and had asked to send a team to the US National Marine Fisheries Services laboratory in
Mississippi.  The United States was actively working to arrange this visit.  Her country was making
continuing progress in meeting its implementation commitment and appreciated the constructive input
it had received from the parties to the dispute.
The representative of Thailand wished to express her country's appreciation for the efforts
made so far by the United States to implement the DSB's recommendations and rulings in this case.
In accordance with the Appellate Body's report adopted by the DSB on 6 November 1998, the US
shrimp embargo violated Article XI of the GATT 1994 and was not justified under Article XX ofGATT 1994.  The Appellate Body had recommended that the DSB request the United States to bring
its measure into conformity with its obligations under GATT 1994.  It still remained to be seen
whether the United States would comply with these rulings and recommendations.  Thailand would
continue to follow closely the implementation a nd, should the need arise, would take appropriate
action.
The representative of Australia said that his country continued to have two immediate access
concerns - products from Spencer Gulf and the Northern prawn fishery – which Australia was seeking
to address.  Australia was keen to clarify the potenti al for these fisheries to export to the United States
at the earliest possible opportunity.  More broadly, Australia would continue to work with the four
complainants – Thailand, Malaysia, India and Pakistan – in attempts to resolve aspects of the US
implementation that continued to be of concern.  In particular, the intention of the United States tomaintain an import ban that enforced a unilaterally  determined environmental standard.  Australia
remained convinced that, if real progress was to be achieved, cooperation and dialogue would be more
appropriate avenues to pursue than trade-restrictive measures.  The US status report referred to a
meeting to be held in Australia in October to be hosted by the Australian Government.  He wished to
clarify that this meeting had no formal connection to any previous seminars, workshops or meetingson marine turtle conservation.  It was an attempt, for the first time, to draw the existing body of
scientific knowledge on marine turtles into a conservation policy and management context for the
entire Indian Ocean region.  To this end, the Australian Government had invited marine turtle policy
and management practitioners from the region to come to Perth, Western Australia, in October to
share experiences and examine the potential for region wide action to identify, address and reducethreats to marine turtle populations, particularly  those species already known to be endangered.
The representative of Malaysia wished to reiterate his country's position expressed at the
26 July DSB meeting, namely, that in order to give effect to the Appellate Body's decision, the importWT/DSB/M/68
Page 7
prohibition should be lifted immediately.  Malaysia urged the United States to do so in order to be
able to comply with the rulings and recommendations  of the Appellate Body.  Malaysia also wished to
reserve its right to revert to this matter at the appropriate time and forum.
The representative of India said that his country continued to believe that the United States
should lift its import prohibition immediately in order to bring its measures into full compliance with
the rulings and recommendations of the Appellate B ody.  India would closely watch the situation and
wished to reserve its rights to revert to this issue, if necessary.
The representative of Pakistan said that, like Thailand, Malaysia and India, his country also
wished to reserve its right to revert to this issue at a later date.
The DSB took note of the statements and agreed  to revert to this matter at its next regular
meeting.
2. Guatemala – Definitive anti-dumping measure on grey portland cement from Mexico
(a) Request for the establishment of a panel by Mexico (WT/DS156/2)
The Chairman recalled that at its meeting on 26 July, the DSB had considered this matter and
had agreed to revert to it.  He drew attention to the communication from Mexico contained in
document WT/DS156/2 and to the corrigendum to the English version contained in
WT/DS156/2/Corr.1.
The representative of Mexico said that his country was submitting its second request for the
establishment of a panel to examine this matter.  It was therefore expected that such a panel would be
established at the present meeting.  He recalled that an earlier panel2, which had considered
Guatemala's anti-dumping investigation, had determined that Guatemala violated several provisions ofGATT and the Anti-Dumping Agreement.  However, the Appellate Body without examining the merit
of the case had reversed the Panel's conclusions and had stated that Mexico's request did not comply
with the conditions required for the establishment of  a panel.  Mexico hoped that this time the matter
would be resolved as soon as possible.
The representative of Guatemala said that his delegation noted the statement by Mexico at the
present meeting as well as the statement made the 26 July DSB meeting.  As stated at the 26 July
meeting, in conducting the anti-dumping investigation, Guatemala had adhered to the provisions of
the Anti-Dumping Agreement and the GATT 1994.  However, considering the conciliatory spirit of
the WTO Agreement and the fact that the consultation phase was aimed at resolving disputes, and
should not be used to emphasize the contentious nature of the relationship between the parties on a
subject that could be resolved without recourse to  the dispute settlement system, Guatemala, during
the consultations held on 23 February 1999, had clearly informed Mexico of its readiness to bring this
dispute to an end on a basis which would provide legal certainty for both parties.  Guatemala regretted
that Mexico had not examined its proposal and that, contrary to the offer made, it had not given a
reply to the compromise proposed in the consultations.  Guatemala considered that Mexico's request
for the establishment of a panel was invalid since the definitive anti-dumping measure that was thesubject of the request was also under examination by a Guatemalan tribunal.  As stated by Guatemala
at the 26 July meeting, this element should be carefully considered by the DSB.  One could not ensure
legal certainty if the same dispute was being examined simultaneously by two fora as the risk of
contradictory rulings would make compliance impossible.  He reiterated that Guatemala opposed the
establishment of the panel requested by Mexico since there were no legal grounds for the request.
                                                     
2 WT/DS60.WT/DSB/M/68
Page 8
The representative of the Dominican Republic said that her delegation supported the
statement made by Guatemala.  Whatever the details of this case, her country believed that dispute
settlement cases should not be conducted in parallel.  A case should not be heard in the WTO if it was
before the domestic court.
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.
The representatives of the European Communities, Honduras  and the United States  reserved
their third-party rights to par ticipate in the Panel's proceeding.
3. Canada – Term of patent protection
(a) Request for the establishment of a panel by the United States (WT/DS170/2)
The Chairman recalled that the DSB had considered this matter at its 26 July meeting and had
agreed to revert to it.  He drew attention to the communication from the United States contained in
document WT/DS170/2.
The representative of the United States recalled that at the 26 July DSB meeting, her
delegation had stated that her country was confident that the results of a panel proceeding in this case
were not in doubt.  Canada's Patent Act was inconsistent with its obligations under the TRIPSAgreement.  The Patent Act provided a protection term of 17 years while under the TRIPS Agreement
Members were required to grant a term of protection of 20 years.  There was no alternative
interpretation of the TRIPS Agreement.  The United States regretted that Canada had refused to settle
this matter promptly and had decided to prolong this dispute unnecessarily.  The United States
welcomed the establishment of a panel and would seek to resolve this dispute promptly.
The representative of Canada expressed his c ountry's disappointment that the United States
had decided to proceed with its second request for a panel.  Canada's patent regime created a healthy
environment for innovation, investment and research and development.  Canada believed that its
patent regime was consistent with its international obligations, and would therefore defend it before
the Panel.  Nevertheless, Canada was carefully looking into the allegation made by the United States.
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.
4. European Communities – Anti-Dumping duties on imports of cotton-type bed-linen
from India
(a) Request for the establishment of a panel by India (WT/DS141/3)
The Chairman drew attention to the communication from India contained in document
WT/DS141/3.
The representative of India said that his country was requesting the establishment of a panel
to examine anti-dumping duties imposed by the EC on imports of cotton-type bed-linen from India.
As indicated in India's request, in September 1996, the EC had initiated anti-dumping proceedings
against imports of cotton-type bed-linen from India.  On 12 June 1997 the EC had imposed
provisional anti-dumping duties, and subsequently on 28 November 1997, definitive anti-dumpingWT/DSB/M/68
Page 9
duties had been imposed.  In accordance with relevant documents which had been made available by
the investigating authorities, the EC had not made a proper determination of the standing of the
complainant as required by the Agreement on the Implementation of Article VI of the GATT 1994
(ADA).  In determining whether material injury had been caused to its domestic industry, the EC had
failed to consider all the relevant factors re quired under Article 3.4 of the ADA.  It had wrongly
assumed that all imports of bed-linen from India, during the period of investigation, had been
dumped.  As a result, the causality finding between imports from India and the alleged injury caused
to the EC's domestic industry was tainted and was inconsistent with Article 3.5 of the ADA.
Although the EC authorities had chosen a sample from the domestic industry, they had not based their
determination of injury on that sample.  The EC had explicitly determined that the domestic industry
consisted of 35 companies, but had relied on its injury determination on companies outside this group.
In the course of its investigation, the EC had not only used an incorrect method of calculation
of the dumping margin, but had also applied it in a wrong manner by, inter alia,  applying
administrative, selling and general costs and profits to the whole Indian bed-linen industry on the
basis of the data of only one company.  This misapplication had led to unreasonably higher dumping
margins, which in turn had resulted in the imposition of unreasonably high anti-dumping duties on thebed-linen from India.  In addition, the EC had not taken into consideration India's special situation as
a developing country as required under Article 15 of the ADA, and had failed to provide the requisite
information or evidence on which it had based its various decisions and the reasons thereof, as
required under Article 12 of the ADA.
India considered that the EC authorities had violated several provisions of the ADA and the
GATT 1994 by wrongly initiating the investigations and by imposing first provisional and then
definitive anti-dumping duties.  These measures had had a significant impact on India's exports of
cotton-type bed-linen and had nullified and/or impaired the benefits accruing to India under both the
GATT 1994 and the ADA.  On 18 September 1998 and 15 April 1999, consultations had been heldwith the EC on the measures in question.  Howeve r, these consultations had failed to settle the
dispute.  Therefore, at the present meeting India was requesting the establishment of a panel with
standard terms of reference.
The representative of the European Communities said that two rounds of extensive
consultations had been held with India on this matter.  In addition written replies had been submitted
to no less than 117 questions, either individually or in logical groupings.  Since many questions hadbeen raised, the EC recognized that some of its replies might not have provided sufficient
clarification.  Should India still have some problems or questions with regard to the proceedings, the
EC was prepared to hold further consultations.  This was be the most constructive and fruitful way
forward.  He noted that India had made its preliminary request for consultations almost one year after
the investigation had been terminated.  Since then  the EC had made every effort to explain all its
actions which, it believed, were in line with the WTO anti-dumping rules and procedures.  He also
noted that no Indian party had requested the judici al or administrative review of the measures, as
provided by the EC legislation and the WTO rules.  Therefore, the EC could not accept the
establishment of a panel at the present meeting.
The DSB took note of the statements and agreed
 to revert to this matter.
5. Colombia – Safeguard measure on imports of plain polyester filaments from Thailand
(a) Request for the establishment of a panel by Thailand (WT/DS181/1)
The Chairman drew attention to the communication from Thailand contained in document
WT/DS181/1.  He recalled that in cases of disputes initiated pursuant to the Agreement on TextilesWT/DSB/M/68
Page 10
and Clothing (ATC) which had been examined by the Textiles Monitoring Body (TMB) and which
remained unresolved:  "Either Member may bring th e matter before the Dispute Settlement Body and
invoke paragraph 2 of Article XXIII of GATT 19 94 and the relevant provisions of the DSU".
The representative of Thailand said that her country was requesting the establishment of a
panel to examine Colombia's safeguard measure on imports of plain polyester filaments from
Thailand.  Her country considered that this measure was inconsistent with, at least, the following:
(i) the requirements of Article 6 of the ATC concerning a transitional safeguard mechanism;  and
(ii) the provisions of Article 2 of the ATC with regard to the introduction and application of
restrictions.  On 28 and 29 September 1998, consultations had been held with Colombia pursuant to
Article 6.7 of the ATC.  However, these consultations had not resulted in a mutual understanding as to
whether the situation called for restraint on the imports in question.  In October 1998, Colombia hadunilaterally decided to apply, through the Resolution of the Higher Council of Foreign Trade,
No. 0009/98, a safeguard measure on imports of plai n polyester filaments from Thailand, effective
from 26 October 1998.  This measure had subsequently been examined by the TMB, pursuant to
Article 6.10 of the ATC.  In November 1998, the TMB had recommended that the measure be
rescinded.  Following Colombia's notification of its inability to conform with the recommendations,
the TMB had further recommended, pursuant to Article 8.10 of the ATC, that Colombia reconsider its
position and that the measure should be rescinded.  In June 1999, Colombia had formally informed
the TMB that it would maintain its safeguard measure.  Since the matter remained unresolved,
Thailand considered that all the requirements of Article 8.10 of the ATC had been met, and was
therefore requesting the establishment of a panel with standard terms of reference.
The representative of Colombia expressed her country's surprise at Thailand's request for a
panel.  She noted that her delegation had been informed of it only 24 hours before the closure of the
agenda of the present meeting.  She first wished to comment on the opening statement made by the
Chairman.  Colombia believed that it was not appropriate for the Chairman to make a statement withregard to the application of the WTO Agreements, an d in particular with regard to the application of
the DSU provisions.  Since there were different interpretations of Article 8.10 of the ATC, such a
statement should not have been made by the Chairman.
Colombia was surprised at the panel request because it appeared to be inappropriate from the
procedural point of view and was inconsistent with the proper use of the dispute settlement system.
She pointed out that Colombia had informed the TMB of its reasons as to why it did not agree withthe TMB's recommendations (G/TMB/17).  However, since these reasons had no bearing on
Colombia's position with regard to the panel request, she would not revert to them in the course of the
meeting.
She noted that Thailand had submitted its request for a panel without fulfilling the
requirements of Article 4 of the DSU.  She recalled that two situations had arisen in the past in
connection with the measure covered by the ATC.  In one case
3, after the TMB process had been
completed, Costa Rica had requested consultations under Article 4 of the DSU.  Since these
consultations had not led to a satisfactory outcome, Costa Rica had requested the establishment of a
panel.  In two other cases4, India had submitted two requests for a panel without prior consultations
pursuant to Article 4 of the DSU.  In those cases, the defendant had accepted or, at least, had not
objected to the fact that consultations had not been held.  She recalled that since then, the Appellate
Body in the case on "Guatemala - Anti-Dumping Investigation regarding Portland Cement from
Mexico"5, had pointed out that the provisions under the DSU constituted a coherent body of rules and
                                                     
3 United States - Restrictions on  Imports of Cotton and Man-Made Fibre Underwear (WT/DS24).
4 United States – Measures Affecting Imports of Women's and Girls' Wool Coats (WT/DS32);  and
United States – Measures Affecting Imports of Woven Wool Shirts and Blouses (WT/DS33).
5 WT/DS60/AB/R .WT/DSB/M/68
Page 11
procedures to be applied together with the special or additional provisions contained in Appendix 2 of
the DSU, except when there was a conflict in the application of these provisions.  The Appellate Body
had clearly indicated that the general provisions of  the DSU only ceased to be applicable when they
could not be read together so as to complement the provisions of another Agreement.  The Appellate
Body had expressly stated that the DSU provisions were only inapplicable in the event of conflict.  Inthe case at hand, it appeared that no conflict between the provisions had arisen.  Article 8.10 of the
ATC provided that if a dispute persisted after completion of the TMB procedures, either of the parties
might invoke Article XXIII:2.  This provision made it clear that seeking a TMB ruling did not
preclude Members from seeking a DSB ruling.  Colombia believed that this was not a source of
conflict.
From an economic point of view, it was difficult to justify Thailand's request for a panel since
as of June 1999, i.e. after three quarters of the time allowed for the measure to be in place had already
elapsed, Thailand had only used 25 per cent of the quota allocated to it.  Moreover, Thailand's request
appeared to be inappropriate since it had been made one year after the adoption of the measure, more
than six months after the conclusion of the TMB's proceedings and four weeks before the expiration
of the safeguard measure.  Although, Members had the sovereign right to bring any matter to theDSB, Article 3.7 of the DSU provided that "Befor e bringing a case, a Member shall exercise its
judgement as to whether action under these procedures would be fruitful".  When, on 6 September
1999, Colombia had been informed of Thailand's intentions to request a panel, it had reminded
Thailand that the safeguard measure had only been adopted for one year.  Furthermore, if Thailand
had held consultations with Colombia, or had verified through its embassy in Bogota, it would havebeen informed that the private sector which had requested the application of the measure had not
requested INCOMEX, the authority for safeguard investigation, that the measure be extended.
Therefore, the measure in question would expire as foreseen.
 In the light of this development, Colombia questioned Thailand's intention with regard to its
request for a panel.  Colombia could not accept the establishment of a panel since Thailand had
requested a panel without prior consultations under Article 4 of the DSU, and the measure in question
would expire before such a panel could be established. Furthermore, given the scarce human
resources of developing countries, in particular at the time when they had to face intense preparatory
work for the Ministerial Conference, Colombia questioned Thailand's intentions in invoking a dispute
settlement procedure one year after the adoption of the measure and one month before its expiry.
The Chairman clarified that he had only quoted the relevant provisions of Article 8.10 of the
ATC.  It was his understanding that this procedure had been followed by India in 1996 with regard to
its complaint on the US measures affecting imports of woven wool shirts and blouses (WT/DS33).
The representative of Korea said that his country was one of the major exporters of polyester
fibers to Colombia and, together with Thailand, a target of Colombia's contested safeguard measure.
Korea had substantial interests in this case, and if a panel was established at the present meeting it
would reserve its third-party rights.  Korea was concerned about Colombia's measure not only because
its commercial interests had been affected, but, more importantly, because the credibility of the
dispute settlement system was at  stake.  Colombia had been given every opportunity to defend its
safeguard measure.  The TMB's rulings and recommendations had been made after a thorough and
careful examination of the case, including its second review in January 1999 conducted at Colombia's
request.  As a result of its decision of 22 June 1999 to maintain the safeguard measure solely on the
ground that it was unable to conform with the TMB's recommendations, Colombia had not acted in
good faith.  If left unchecked, this decision might invite similar actions by other Members therebyundermining the TMB's authority and its effective functioning.  He recalled that Article 8.9 of the
ATC provided that:  "The Members shall endeavour to accept in full the recommendations of the
TMB".  Korea once again urged Colombia to comply with the TMB's recommendations and toWT/DSB/M/68
Page 12
immediately rescind its safeguard measure.  Otherwise, it would set a bad precedent for the rule-based
trading system.
The representative of India wished to present his country's position with regard to one point
raised by Colombia.  He said that Colombia had asked whether under Article 8.10 of the ATC, a
Member could directly request a panel without prior consultations under Article 4 of the DSU.  It was
India's understanding that the TMB process was an elaborated consultation mechanism.  For that
reason, Article 8.10 of the ATC stipulated that if the matter remained unresolved, after the TMB
process had been completed, a Member could bring that matter before the DSB.  For this reason
Article 8.1 through 8.12 of the ATC was included in Appendix 2 to the DSU, which referred to
special or additional rules and procedures contained in the covered Agreements.  Therefore, once the
matter remained unresolved, the complaining party was entitled to request the establishment of apanel and there was no need to hold consultation under Article 4 of the DSU.
The representative of Thailand said that, as India had pointed out, in accordance with
Article 8.10 of the ATC there was no need to consult under the DSU since Thailand had met all the
requirements under that Article.  In addition, there was a solid WTO practice supporting Thailand'sposition.
The representative of Colombia wished to rais e objection with regard to Korea's statement to
the effect that Colombia had not acted in good faith.  She believed that Korea's statement was
inappropriate.  In the course of the TMB proceeding, Colombia had made detailed writtensubmissions concerning its views on how the TMB had reached its conclusions.  At the present
meeting she only wished to refer to two elements.  First, since the ATC did not provide a definition of
national industry, Colombia had therefore used the definition contained in the Anti-Dumping
Agreement and the Agreement on Safeguards.  While the TMB had not agreed to Colombia's
definition, it had not indicated what would be the appropriate definition.  Second, with regard to theproduct definition, Colombia's investigating authorit ies had referred to one product in the Annex to
the ATC which contained the list of products covered by the ATC.  The TMB had concluded that such
product definition was not appropriate without specifying what products had to be considered.  On
several occasions, Colombia had sought clarification on this matter, but without success.  Despite
these inconsistencies, the TMB had made its analysis and had reached its conclusions.  Her country
had once more asked the TMB to indicate how it should proceed in this case, but had not received any
reply.  This demonstrated that Colombia had cooperated with the TMB and explained why it had notbeen able to accept the TMB's interpretations, which were not mandatory.  This did not mean that
Colombia had not acted in good faith.  It was important to ensure the balance of rights and obligations
under the WTO Agreement.  Colombia had complied with its obligations and was now requesting that
its rights be respected.  With regard to the statement made by India, she recognized that India had its
own views on this matter.  However, contrary to what Thailand had stated, there was no solid WTOpractice in this area.  In one case consultations under Article 4 had been held while no such
consultation had taken place in two other cases.
The DSB took note of the statements and agreed
 to revert to this matter.
6. India – Quantitative restrictions on imports of agricultural, textile and industrial
products
(a) Report of the Appellate Body (WT/DS90/AB/ R) and Report of the Panel (WT/DS90/R)
The Chairman drew attention to the communi cation from the Appellate Body contained in
document WT/DS90/13 transmitting the Appellate Body Report in "India – Quantitative Restrictions
on Imports of Agricultural, Textile and Industrial Products", which had been circulated in documentWT/DSB/M/68
Page 13
WT/DS90/AB/R in accordance with Article 17.5 of the DSU.  He recalled that 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 said 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 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".
The representative of the United States said that the Reports before the DSB were of very
high quality and showed that the Panel and the Ap pellate Body had considered the issues seriously
and thoughtfully. The United States thanked the members of the Panel and the Appellate Body as wellas the Secretariat for their work.  The United States supported adoption of these Reports, which for
the first time had addressed the balance-of-payments provisions of the WTO Agreement.  While the
Reports build upon the work of GATT 1947 in this area, including the Panel on Korea's beef regime
6
they were a milestone in the WTO with regard to th is very important topic.  At the present meeting,
she wished to underline a few significant aspects of the Reports.  First, the Appellate Body and thePanel had confirmed that the DSU provisions could be invoked with respect to any matter relating to
balance-of-payments measures, and in particular that panels could decide whether a Member's
invocation of the balance-of-payments provisions  of the WTO Agreement was justified.  Although
this conclusion followed naturally from the text of the WTO Agreement, and was confirmed by past
GATT practice, the United States considered that the reaffirmation of this point was an extremelyimportant result of the proceedings.  As this case demonstrated, the balance-of-payments restrictions
could bring trade in products affected to a complete halt.  In accordance with the statistics cited by the
Panel, in one recent year there had been zero  imports into India under 29 HS chapters -- including
such items as meat;  fish;  cereals;  malt and starches;  cocoa;  chocolate and cocoa preparations; nuts;
canned and pickled vegetables and fruits and fruit juices;  leather articles;  matting and baskets;carpets;  headgear;  and furniture.  Those statistics also showed that for other items, in particular
clothing, there had been zero  imports into India over a period of more than 15 years.  Moreover, these
figures confirmed that balance-of-payments restrictions involved products of export interest to all
Members, developed and developing.  The ability of panels to review, when necessary, whether such
measures were justified by a Member's balance-of-payments situation was therefore a crucial
safeguard in the trading system.  At the same time, the Appellate Body and the Panel had recognized,
and the United States agreed, that this dispute did not by any means call into question the work of theCommittee on Balance-of-Payments Restrictions (the BOP Committee).  The BOP Committee was
extremely effective under the WTO and had been able to take into account individual Members'
circumstances and achieve solutions satisfactory to all concerned in virtually every case, except the
one at hand.  The United States agreed with the Appellate Body and the Panel that there was no
conflict between the DSU review of balance-of -payments measures and the work of the BOP
Committee and the General Council, and that dispute settlement and the BOP Committee surveillance
each fulfilled important functions.  The United States was therefore pleased that the Appellate Body
and the Panel had finally laid to rest for good the suggestion that BOP measures were beyond the
scope of the DSU.
With regard to the substantive aspects of the dispute, the United States was pleased that the
Panel had found that India's extensive import licensing system and its "canalization" system operated
as import restrictions in violation of Article Xl:1 of GATT 1994.  The same finding had been made by
the Panel with regard to India's prohibition on imports by anyone other than the "actual user" of a
good, which was a prohibition that systematically banned imports by wholesalers or other importintermediaries for resale.  The Panel had also found that India's reserves were not inadequate and that
                                                     
6 Panel Reports on "Republic of Korea - Restrictions on Imports of Beef", complaints by Australia ,
New Zealand and the United States, adopted on 7 November 1989, BISD 36S.WT/DSB/M/68
Page 14
India was not facing a serious decline or a threat of serious decline, and that its balance-of-payments
restrictions therefore exceeded what was "necessary" within the meaning of Article XVIII:B.  The
United States noted that these findings which constituted the core factual and legal issues before the
Panel, had not been appealed by India.
The United States considered that the Appellate Body and the Panel had correctly decided on
the subsidiary points made by India.  In this contex t, the United States agreed with the Appellate Body
that the Panel's decision had not implicitly required India to change its development policy.  The
United States had also agreed with the Appellate Body that the Panel had conducted an objective
assessment of the facts, and that its application of the rules on burden of proof did not constitute an
error.  The United States had also supported the Appellate Body's analysis of the Note Ad
Article XVIII:11.  That Ad Note made clear that a Member might maintain balance-of-paymentsmeasures even after its balance-of-payments difficulties had ended, but only in those very limited
circumstances that had been defined by the Appellate Body.
Overall these reports amounted to a recognition that Article XVIII:B provided a balance
between rights and obligations.  That meant that any Member that actually met the criteria specified inthe balance-of-payments provisions of the WTO Agreement might invoke those provisions, subject to
the requirement to use price-based measures where possible, and these Reports had not changed that
right.  However, a Member invoking those provisions had to adhere to the obligations that
accompanied those provisions, including the obligation to eliminate those measures when conditions
no longer justified them, and other obligations set out in the relevant provisions.  Only in this waycould the rights of that Member's trading part ners be preserved.  The Panel and Appellate Body
Reports had reached the right result on these issues in general and on India's restrictions in particular.
In so doing the Reports had made a valuable contribution to the multilateral trading system.
However, the United States had one concern with regard to the Panel Report.  The Panel had made
correct analysis of the legal issues presented by the parties.  However, it had addressed an issue thathad neither been raised nor briefed by either party:  it had made non-binding "suggestions for
implementation" under Article 19 with regard to the reasonable period of time referred to in
Article 21.3(c) of the DSU.  During the interim review of the Panel Report, the United States had
objected to the Panel's making suggestions concerning the "reasonable  period of time" as
inappropriate under Articles 19 and 21.  The United States had also commented on the
inappropriateness of the considerations cited by the Panel in paragraphs 7.5 and 7.6 of its Report,
noting in particular the Panel's finding that, as of November 1997, India had lacked a justificationunder Article XVIII:B for its measures.  As stipulated in Article 19 of the DSU, a panel might make
non-binding suggestions about the ways in which to  implement, not about how long a party should
take to do so.  In contrast, Article 21 set out a clear process for establishing a reasonable period of
time, beginning with a statement by the defending Member of its intentions in regard of
implementation, to be followed by negotiations among the Members concerned.  That process did notinclude a recommendation on the Panel's point before those discussions had begun.  The United States
regretted that the Panel had chosen to include these unwarranted suggestions.  The United States
expected to be informed by India of its intentions in respect of the recommendations of the Panel and
Appellate Body Reports, and looked forward to en gaging in constructive discussions with India on
prompt implementation.
The representative of India said that the Reports of the Panel and the Appellate Body submitted
for adoption at the present concerned India's quantitative restrictions which had been maintained for
balance-of-payments reasons pursuant to Article XVIII:B of GATT 1994.  Article XVIII:B permitted a
Member in the process of development to restrict imports in order to safeguard its external financialposition and to ensure a level of reserves adequate for the implementation of its programme of economic
development.  India had been regularly consulting with the BOP Committee as required under
Article XVIII:B, paragraph 12(b).  During the consultations held in January 1997, the BOP Committee,
on the basis of consensus, had invited India to present a phase-out plan in respect of the BOP relatedWT/DSB/M/68
Page 15
quantitative restrictions still in force.  In terms of the phase-out plan submitted to the BOP Committee by
India in May 1997 and subsequent consultations in the BOP Committee in June and July 1997, India had
agreed to phase out the remaining restrictions during a period of six years starting from 1 April 1997.  All
members of the BOP Committee, except one, had accepted the six-year phase out period commencing
from 1 April 1997.  Thus, the main element of disagreement in the BOP Committee was with regard tothe length of the phase-out plan: i.e, while all Members could agree to a six-year phase out plan
commencing from 1 April 1997, one Member had not agreed.  In view of the importance of the two
Reports and their significant implications for the interpretation of the WTO provisions, including those
not covered by this dispute, and for the benefit of those Members who were not parties to the dispute, he
believed that it was his duty to express India's concerns on the Panel and the Appellate Body Reports.  He
requested that these views be fully recorded in accordance with Articles 16.3 and 17.14 of the DSU.  The
Appellate Body had made important rulings on the relationship between the judicial and political organsof the WTO in the area of balance-of-payments measures and, by implication, also in the area of regional
trade agreements.  The Appellate Body had also made some other important rulings which, India
believed, had curtailed the scope of the developing country Members' substantive rights under Article
XVIII:B.  In particular, the Appellate Body had ruled that the DSU could be invoked with respect to any
matter relating to balance-of-payments restrictions; i.e. not only with regard to matters arising from theapplication of individual BOP measures, but also with regard to overall justification of the BOP
measures.  The provisions of Article XVIII:12 and 13 of the BOP Understanding that permitted the
General Council to decide that balance-of-payments restrictions found to be inconsistent be removed
within a "specified period", and to formally approve a time-schedule for the removal of restrictions, did
not need to be taken into account in the dispute settlement proceedings.  The right to gradually phase outbalance-of-payments restrictions in accordance with the Note Ad Article XVIII:11 was limited to cases in
which renewed balance-of-payments difficulties would arise "immediately" from the removal of the
restrictions.  Consequently, this provision could not be invoked in cases in which the adverse balance-of-
payments impact of the removal of the restrictions, though direct and foreseeable, had taken place after
some time.  The proviso to Article XVIII:11, according to which no Member "shall be required towithdraw or modify restrictions on the ground that a change in its development policy would render
unnecessary the restrictions which was applying" did not relate to macroeconomic policy instruments.
Consequently, developing country Members could be required to change their macroeconomic policies to
render their balance-of-payments restrictions unnecessary.  India had argued both before the Panel and
the Appellate Body that, with regard to the balance-of-payments justification under Article XVIII:B and
consistency of regional trade agreements with Article XXIV, there were strong grounds to rule, on the
basis of the relevant texts and GATT practice, that the judicial organ would consider the matters arisingfrom the application of restrictive import measures taken for balance-of-payments purposes or matters
arising from the application of provisions of Article XXIV, and that they would not go into the overall
justification of BOP measures or consistency of a regional trade agreement with Article XXIV.
7
                                                     
7 India presented the following overview of the provisions in the WTO Agreements giving access to the
DSU:
Understanding on BOP Provisions Understanding on Article XXIV
The provisions of Articles XXII and XXIII of
GATT 1994 as elaborated and applied by the
Dispute Settlement Understanding may be
invoked with respect to any matters arising from
the application of restrictive import measures
taken for balance-of-payments purposes.The provisions of Articles XXII and XXIII of GATT 1994 as
elaborated and applied by the Dispute Settlement
Understanding may be invoked with respect to any matters
arising from the application of those provisions of
Article XXIV relating to customs unions, free-trade areas or
interim agreements leading to the formation of a customsunion or free-trade area.
Other WTO agreements and understandi ngs: example of the TBT Agreement
Consultations and settlement with respect to any matter affecting the operation of this Agreement shall take place
under the auspices of the Dispute Settlement Body and shall follow, mutatis mutandis, the provisions of
Articles XXII and XXIII of the GATT 1994, as elaborated and applied by the Dispute Settlement Understanding.WT/DSB/M/68
Page 16
India had also placed before the Panel and the Appellate Body details regarding the legal
background on the question of the competence of the panel to examine balance-of-payments measures
and regional trade agreements.  The panel on "European Community - Tariff Treatment on Imports of
Citrus Products from Certain Countries in the Mediterranean Region"8 had opined that examination or re-
examination of Article XXIV Agreements was the responsibility of the Contracting Parties and hadclearly expressed the view that it would not be appropriate to determine the conformity of an Agreement
with the requirements of Article XXIV on the basis of a complaint by a contracting party under
Article XXIII:1(a).  The approach adopted by the Panel on "EEC − Member States' Import Regimes for
Bananas"
9 had demonstrated that the question of the institutional balance between the panel and the
Committee on Regional Trade Agreements (CRTA) was not necessarily whether or not panels mightreview agreements under Article XXIV:7, but rather to what extent they should review them.  The three
panels on Korea's beef  regime  had ruled as follows:  "The latest full consultation concerning Korea's
balance-of-payments situation in the Balance-of-Payments Committee had taken place in November
1987, the report of which had been adopted by the CONTRACTING PARTIES in February 1988 . . . The
Panel considered that it should take into account the conclusions reached by the Balance-of-PaymentsCommittee." (BISD, 36S p. 303-4)  The panels which had then examined the conclusions in the BOP
Committee, had noted that the prevailing view was "that the current situation and outlook for the balance
of payments was such that import restrictions could no longer be justified under Article XVIII:B."  The
panels had noted that this conclusion was still valid because the balance-of-payments situation had
improved since the consultations and had found on that basis that the restrictions were not justified by
Article XVIII:B.  In this connection the panels had made the following observation:  "in GATT practice
there were differences with respect to the procedures of Article XXIII and Article XVIII:B.  The formerprovided for the detailed examination of individual measures by a panel of independent experts whereas
the latter provided for a general review of the country's balance-of-payments situation by a committee of
government representatives." (BISD, 36S, p. 303-4)
However, the appreciation of the Panel and the Appellate Body of the reports of Korea's beef
panels was different.  India believed that the Panel and the Appellate Body had erred by taking into
consideration only some elements of the Korea's beef regime reports and had ignored the context in
which these remarks had been made and the overall thrust of these reports.  In the only case in which
GATT panels were asked to review the balance-of-payments justification of a measure, the panels had not
assessed the external financial position of the country concerned but had based their analysis on thedecision that the CONTRACTING PARTIES had already taken on this matter on the basis of a
determination by the IMF.  The panels had limited their examination to the GATT-consistency of the
individual measures imposed for balance-of-payments reasons.  Furthermore, the two panels that had
been asked to review the consistency of agreements notified under Article XXIV had both refused to do
so.  Throughout the history of the GATT 1947, not a single panel had thus decided to determine thebalance-of-payments justification of measures notified under Article XII and XVIII:B or the consistency
of a regional trade agreement with Article XXIV.  The consistent practice of the CONTRACTING
PARTIES was thus to assign these matters to bodies composed of the representatives of the Contracting
Parties.
During the Uruguay Round negotiations, the United States had presented a broad proposal for a
reform of the provisions relating to surveillance of balance-of-payments measures which included, inter
alia, provisions explicitly providing for resolution by panels of the question of consistency of the BOP
measures under review in the BOP Committee (MTN.GNG/NG7/W72; 15 June 1990, paragraph 19).
This particular portion was strongly opposed by the developing countries and it was India's firm belief
that a compromise had been found after lengthy negotiations in the form of a footnote to the BOP
Understanding with the following text:  "Nothing in this Understanding is intended to modify the rightsand obligations of Members under Articles XII or XVIII:B of GATT 1994.  The provisions of
                                                     
8 GATT document, L/5776 circulated on 7 February 1985, not adopted.
9 Bananas I, GATT document DS32/R, circulated on 3 June 1993, not adopted.WT/DSB/M/68
Page 17
Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement
Understanding may be invoked with respect to any matters arising from the application of restrictive
import measures taken for balance-of-payments purposes."  The footnote made three matters clear: (i) the
dispute settlement procedures might be invoked in respect of restrictions notified under Article XVIII:B
(which had been in dispute until the panels on Korea's restriction confirmed that such restrictions mightbe examined by panels); (ii) the invocation had to relate to "matters arising from the application of
restrictive import measures taken for balance-of-payments purposes" (which was the only matter that the
panels on Korea's restrictions had examined); and (iii) the invocation could not entail a modification of
the rights and obligations under Article XVIII:B.
The reference to the application of measures in the footnote to the BOP Understanding was
identical to that in the text of paragraph 12 of the Understanding on the Interpretation of Article XXIV ofthe GATT 1994.  None of the other clauses in the WTO Agreements and Understandings that defined the
causes of action under the DSU contained a similar reference to the application of measures.  While the
proceedings on India balance-of-payments restrictions were underway, another panel had examined, at
the request of India, Turkey's restrictions on imports of textile and clothing products.
10 These restrictions
had been introduced by Turkey under a trade arrangement with the European Communities that Turkeyhad described as an agreement towards the completion of a customs union.  Turkey had claimed that only
the CRTA was competent to examine the matter:  "…it was not the Panel's task to substitute itself for the
CRTA and that the Panel could not rule on the legality of the measures forming the object of the
complaint in the absence of agreed conclusions on the consistency of the Turkey-EC Agreements with
Article XXIV." ( WT/DS34/R para. 6.133).  The response of the panel to this argument was as follows:"We understand from the wording of paragraph 12 of the WTO Understanding on Article XXIV that
panels have jurisdiction to examine 'any matters arising from  the application of those provisions of those
provisions of Article XXIV.'  For us this confirms that a panel can examine the WTO compatibility of
one or several measures 'arising from' Article XXIV types of agreement, as also argued by the United
States in its third-party submission.  …  Thus we consider that a panel can assess the WTO compatibilityof any specific measure adopted by WTO Members ... on the occasion of the formation of a customs
union.  As to the  ... question of how far-reaching a panel's examination should be of the regional trade
agreement underlying the challenged measure, we note that the  ... CTRA has been established, inter alia ,
to assess the GATT/WTO compatibility of regional trade agreements entered into by Members, a very
complex undertaking which involves consideration by the CTRA, from the economic, legal and political
perspectives of different Members, of the numerous facets of a regional trade agreement in relation to the
provisions of the WTO.  It appears to us that the issue regarding the GATT/WTO compatibility of acustoms union, as such, is generally a matter for the CRTA since, as noted above, it involves a broad
multilateral assessment of any such custom union, i.e. a matter which concerns the WTO membership as
a whole." (paragraphs 9.50-52).  That panel had thus interpreted the terms "any matters arising from" to
refer to specific measures taken in connection with the formation of an Article XXIV agreement and had
ruled that the overall justification of that agreement was a matter to be generally left by panels to theCTRA.  However, the Panel that had examined India's BOP related quantitative restrictions, had
specifically rejected the contention that the terms "any matters arising from" in the Understanding on
Article XXIV had this implication.  It had ruled:  "The phrase 'the application of those provisions of
Article XXIV' plainly means 'the implementation of the provisions of Article XXIV ...' and does not
allow for a distinction such as the one proposed by India." (paragraph 5.70)  Two concurrent panels hadthus arrived on the same fundamental issue at opposite conclusions.  He recalled that the panel on "Brazil
– Export  Financing Programme for Aircraft" (WT/DS46/R) had observed in paragraph 7.89 of its report:
"In considering this issue, we note that this element of Article 27.4 is troubling from the perspective of a
panel.  Article 27.4 provides in relevant part that a developing country Member 'shall eliminate [its export
subsidies] within a period shorter than that provided for in this paragraph when the use of such exportsubsidies is inconsistent with its development needs.' We recognise that as written this clause is
mandatory, and a conclusion that this clause was not susceptible of application by a panel would be
                                                     
10 WT/DS34/RWT/DSB/M/68
Page 18
inconsistent with the principle of effective treaty interpretation.  On the other hand, an examination as to
whether export subsidies are inconsistent with a developing country Member's development needs is an
inquiry of a peculiarly economic and political nature, and notably ill-suited to review by a panel whose
function is fundamentally legal.  Further, the SCM Agreement provides panels with no guidance with
respect to the criteria to be applied in performing this examination.  We consider that it is the developingcountry Member itself which is best positioned to identify its development needs and to assess whether its
export subsidies are consistent with those needs.  Thus, in applying this provision we consider that panels
should give substantial deference to the views of the developing country member in question."  In the
footnote attached to this paragraph the panel had stat ed that in its view, a body such as the Subsidies
Committee was far better equipped to perform this type of examination than a panel.
The Panel Report in this case provided the following meaning to the terms:  "The 'application' of
a measure would thus refer to the fact that a measure is in use.  The terms ... therefore simply refer to the
fact that a measure is applied for balance-of-payments purposes." India had argued before the Appellate
Body that, if the Panel's interpretation were correct, the terms to which the Panel claimed to give meaning
would have no meaning at all.  If the footnote read: "The DSU may invoke with respect to any [matters
arising from the application of] restrictive import measures taken for balance-of-payments purposes" thetext would indicate that the measure at issue must have been taken for balance-of-payments purposes.  In
other words they had to be "in use", as stated by the Panel.  The text would also clearly indicate that the
measures at issue must be taken for balance-of-payments purposes, in other words that they have been
"applied for balance-of-payments purposes", as stated by the Panel.  This demonstrated that the Panel had
interpreted the terms "matters arising from the application of" out of existence: they could be struck fromthe text of the footnote without any legal consequence.  Such an interpretation was inconsistent with the
principle of interpretation which the Appellate Body recalled in its report on "Japan-Taxes on Alcoholic
Beverages".
11  The Appellate Body had rejected India's argument on the following grounds:  "We do not
agree with India that, under the Panel's interpretation, the words "matters arising from the application of"
would have no meaning at all and would be read out of existence.  These words reflected the traditionalGATT doctrine that, with the exception of mandatory rules, only measures that are effectively applied
could be the subject of dispute settlement proceedings." (paragraph 93 of the AB Report).  The Appellate
Body had not indicated any reasons why the drafters of the Understandings on BOP measures and on
Article XXIV would have wanted to establish the requirement that balance-of-payments measures must
be "effectively applied" to be subject to dispute settlement proceedings.  In none of the other
Understandings and WTO agreements, the provision establishing the right to invoke the DSU was
qualified by the requirement that the measure at issue was effectively applied.  There was simply noreason to distinguish between balance-of-payments measures and measures taken under regional trade
agreement from other measures in this respect.  In any case, under Article XVI:4 of the WTO Agreement,
a Member had to ensure the conformity of its domestic laws with the provisions on balance-of-payments
measures and regional trade agreements.  This provision made clear that laws on balance-of-payments
measures as such - before being effectively applied - could be subject to dispute settlement proceedings.Article XVI:3 of the WTO Agreement made clear that the general requirement of Article XVI:4
overrided any conflicting requirement in the provisions of the Understandings on BOP measures and
Article XXIV.  Thus, the explanation provided by the Appellate Body had failed to give any function to
the requirement that the matters in respect of which the DSU was invoked had to "arise from the
application of" balance-of-payments measures.  The Appellate Body, contrary to its own jurisprudence,had thus interpreted the terms "matters arising from the application of" in a manner that deprived them of
any practical or legal relevance.
India had raised before the Appellate Body the issue of institutional balance or judicial restraint
by which it was meant that each organ of the WTO had to, in determining the scope of its own powers,proceed with due regard for the powers of other WTO organs and for the rights and obligations of
                                                     
11 Appellate Body Reports contained in documents WT/DS8/AB/R,  WT/DS10/AB/R, and
WT/DS11/AB/R.WT/DSB/M/68
Page 19
Members.  The basic ruling of the Panel on the distribution of decision-making power between the
judicial and the political organs of the WTO was the following:  "The role of panels is defined in
Article 3.2 of the DSU which provides that the dispute settlement system 'serves to preserve the rights
and obligations of Members under the covered agreements, and to clarify the existing provisions of those
agreements in accordance with customary rules of interpretation of public international law.' Panels werein all instances required to make an objective assessment of the facts of the case and apply the relevant
WTO provisions to those facts''.
This ruling, in India's view, had failed to address the following question: What was the
relationship between the general provisions of the DSU that defined the competence of panels and the
specific provisions of other WTO Agreements allocating the competence to make legal determinations to
political organs of the WTO, in particular the BOP Committee and the CRTA? There were three possibleanswers to this question:  First, the provisions allocating competence to the judicial organs of the WTO
(and, consequently the rights of the complainant under the DSU) prevailed completely over the
provisions assigning competence to the political organs (and hence the rights of the defendant under other
WTO Agreements).  Second, the competence of the political organs was exclusive.  Third, a balance
between the competence of the judicial organs of the WTO and that of its political organs must be found(and, with it, a balance between the rights of the complainant under the DSU and the rights of the
defendant under other WTO Agreements).
India had argued before the Appellate Body that the recognized principles of interpretation and
the provisions of the DSU called for the adoption of the third approach.  When an organ of the WTOdetermined its own jurisdictions, it interpreted the provision of the WTO Agreement conferring the
jurisdiction upon it.  As the Appellate Body had emphasised on numerous occasions, the provisions of the
WTO Agreement, including the provisions conferring powers on WTO organs, must be interpreted "in
good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context
and in the light of its object and purpose".  When an WTO organ determined its jurisdiction, it must takeinto account not only the terms of the provision attributing powers to it but also the context in which this
provision appears.  That context comprised those provisions of the WTO Agreement that attributed
related powers to other bodies.  An analysis of the terms of those jurisdictional provisions might lead a
particular WTO organ to the conclusion that not only that particular organ but also another organ could
claim jurisdiction over the matter at issue.  Such a conflict must be resolved in good faith in the light of
the institutional structure that the framers of the WTO Agreement had set up to realise the purpose of the
WTO.  In practice this would mean that panels would normally refrain from performing the central tasksassigned to the political bodies of the WTO, or at least exercise judicial restraint in this respect.  In the
case of balance-of-payments measures, the overall objective of a panel's examination should not be to
make, de novo  or in anticipation, an assessment equivalent to the assessments the BOP Committee and
the IMF were to make, but to determine whether the measure at issue, given the margin of appreciation of
the BOP Committee and the IMF, was capable of approval.
This approach would protect Members against invocations of the balance-of-payments
provisions that were made in bad faith.  At the same time, it would avoid modifying the balance of rights
and obligations under those provisions.  India had pointed out many examples wherein judicial organs
take into consideration competence assigned to other bodies forming part of that structure.  India had alsopointed out that, if panels were to use their interpretative powers to confer upon themselves the authority
to make precisely the same legal determinations that the BOP Committee and the CRTA were to make, a
legal situation would arise in the WTO that was without parallel in any other legal system.  The Appellate
Body, in India's view, had not examined any of these arguments.  It had declared at the beginning of its
brief discussion of the issue:  "We are of the opinion that the competence of the Panel to review allaspects of balance-of-payments restrictions should be determined in the light of Article XXIII of the
GATT, as elaborated and applied by the DSU, and of footnote 1 to the BOP Understanding."
(paragraph 83)  It further ruled that:  "If panels refrained from reviewing the justification of the balance-
of-payments restrictions, they would diminish the explicit procedural rights of Members underWT/DSB/M/68
Page 20
Article XXIII and footnote 1 to the BOP Understanding, as well as their substantive rights under
Article XVIII:11." (paragraph 102).  These brief rulings did not address the fundamental issue that India
had submitted to the Appellate Body.  There were provisions creating and defining the competence of
panels that the Appellate Body had invoked to justify its ruling.  However, there were equally valid
provisions that created and defined the competence of the BOP Committee and the General Council.  Theinterpretative task of the Appellate Body was to determine the relationship between those provisions that
conferred powers with overlapping scope.  This task was not accomplished by a simple reference to the
provisions defining the competence of panels alone.  India regretted that the Appellate Body had ignored
the fundamental impact of the creation of panel track on the decision-making process in the BOP
Committee. India had pointed out that, according to Article 3.2 of the DSU, the dispute settlement
process "cannot add to or diminish the rights and obligations" of Members.  This implied that a panel
could not determine its jurisdiction in a manner that entailed a change in the procedural or substantiverights and obligations of Members.  This provision left no doubt that the procedural rights of Members
under the DSU were subsidiary to those conferred by the WTO Agreements because the rights under the
DSU might only be used to enforce the balance of rights and obligations under other WTO Agreements,
not to change that balance.
As India's experience demonstrated, the panel track, once open to Members affected by balance-
of-payments measures, would replace in effect  the BOP Committee process and the implementation
provisions applied by the BOP Committee by the compliance provisions of the DSU.  Giving unlimited
access to this track would therefore no doubt change the balance-of-rights and obligations under the
balance-of-payments provisions.  The decision-making in a WTO body inevitably took place in theshadow of the alternative available in other bodies.  The legal alternatives formally available in one forum
could therefore be reduced to inutility by the creation of new procedural opportunities in another forum.
The circumstances surrounding this appeal provided a perfect example.  There was another important
aspect of the Panel ruling which deserved to be highlighted.  The Panel and the Appellate Body had
concluded that the Panel was competent to look into the overall justification of India's BOP restrictionswhich was normally a responsibility of the BOP Committee.  The Panel had assessed just as the BOP
Committee would on the basis of an IMF opinion, the monetary reserves of India.  However, having
found them adequate, it did not, as the BOP Committee would have in that situation, apply
Article XVIII:12 of the GATT or paragraph 13 of the Understanding on the ground that these provisions
did not apply in a panel proceeding.  By performing some but not all of the functions of the BOP
Committee, the Panel had modified the balance of rights and obligations of India under the WTO rules
governing balance-of-payments consultations.
He also wished to refer to a few other aspects.  According to Note Ad Article XVIII:11
developing country Members shall not be:  "... required to relax or remove restrictions if such relaxation
or removal would thereupon produce conditions justifying the intensification or institution, respectively,
of restrictions under paragraph 9 of Article XVIII."  The Note Ad  Article XVIII:11 was intended as
acknowledged by the Panel, to "make it possible for a developing country having validly instituted
measures for balance-of-payments purposes and whose situation had sufficiently improved so that the
conditions of Article XVIII:9 were no longer fulfilled, not to eliminate the remaining measures if this
would result in the reoccurrence of the conditions which had justified their institution in the first place."
(paragraph 5.189)  The Panel had interpreted the term "thereupon" in this provision to mean"immediately" and had ruled on this basis that restrictions might be phased out gradually only in those
situations in which the balance-of-payments impact occurs "immediately on lifting of the current balance-
of-payments measures".  The Appellate Body had endorsed this interpretation, essentially on the ground
that "immediately" was one of the dictionary meanings of "thereupon".  In India's view, it was reasonable
to interpret the term "thereupon" to require a direct (and therefore clear and foreseeable) causal linkbetween the removal of the restrictions and the recurrence of balance-of-payments difficulties because the
indirect consequences of a removal of restrictions on the external financial position were difficult to trace
and quantify.  This interpretation would also conform to one of the dictionary meanings of "thereupon".
In India's view, it was not appropriate to distinguish in the context of the Note Ad  Article XVIII:11WT/DSB/M/68
Page 21
between an impact that occurs "immediately" and an impact that occurs after a lapse of time.   The
consequence of the interpretation given to the word "thereupon" by the Panel and the Appellate Body was
that the Note  Ad Article XVIII:11  lost its practicability in situations where there was a time lag between
removal of restrictions and its impact on the level of reserves.
With regard to the proviso to Article XVIII:11 of GATT 1994 , the requirement set out in
Article XVIII:11 of the GATT 1994 that restrictions no longer necessary for balance-of-payments
purposes shall be eliminated was subject to the proviso that:  "no Member shall be required to withdraw
or modify restrictions on the ground that a change in its development policy would render unnecessary
the restrictions which it is applying under this section."  There was a corresponding provision in
Article XII:3(d) which provided in relevant part that a Member:  "shall not be required to withdraw or
modify restrictions on the ground that a change in policies [directed towards the achievement andmaintenance of full and productive employment or towards the development of economic resources]
would render unnecessary restrictions which it is applying under this Article."  These provisions made it
clear that a developing country Member would not be asked to change its development policies on the
ground that if such a change was made, the BOP related quantitative restrictions would be rendered
unnecessary.  Similarly, in the case of developed country Members there was no requirement to changethe policies directed towards the achievement and maintenance of full and productive employment or
towards the development of economic resources.
At the meeting of the BOP Committee in June 1997, the representative of the IMF had made the
following comment on India's balance-of-payments situation:  "It remains the Fund's view that theexternal situation can be well managed using macroeconomic policy instruments alone; QRs are not
needed for balance-of-payments adjustment." (Paragraph 126)  India had argued that macroeconomic
policies have an interface with development policies and that it was not possible to view them as
watertight compartments.  However, the Appellate Body had rejected this argument.  It had ruled that:
"We are of the opinion that the use of macroeconomic policy instruments is not related to anyparticular development policy, but is resorted to by all Members regardless of the type of
development policy they pursue.  The IMF statement that India could manage its balance-of-payments
situation using macroeconomic policy instruments alone  did not, therefore, imply a change in India's
development policy.  ...We believe structural measures are different from macroeconomic instruments
with respect to their relationship to development policy." (Paragraph 128)  The IMF while replying to
a question prepared by the Panel had stated, inter alia , that "the macroeconomic policy instruments
would need to be complemented by structural measures such as scaling back reservations on certainproducts for small scale units and pushing ahead with agricultural reforms" (paragraph 3.367 of the
Panel)  India had argued before the Appellate Body that the IMF was referring to the need for
complementing macroeconomic measures with changes in its development policy.  To assume that
changes in macroeconomic policies of a developing country would have no implications for its
development policies does not appear to be realistic.  The Appellate Body's interpretation had theconsequence that stricter requirements were imposed on developing countries than on developed
countries.  As he had pointed out, Article XII:3(d) provided that a Member shall not be required to
change its "policies directed towards the achievement and maintenance of full employment".
Macroeconomic policies were commonly pursued for this purpose and were covered by this language.
By excluding macroeconomic policies from the scope of the proviso in Article XVIII:11, the AppellateBody had imposed constraints perhaps inadvertently on developing country Members invoking this
provision that were not imposed on developed countries resorting to Article XII.
He regretted that he was not in a position in his statement to capture all the arguments
presented by India before the Panel or the Appellate Body.  It was also not possible to adequatelycover the response of the Panel and the Appellate Body to its arguments.  He therefore urged
Members to consider these Reports carefully, since their rulings constituted a fundamental change from
the practices under the GATT 1947 and modified significantly the balance of rights and obligations under
Article XVIII:B.  The Appellate Body's rulings raised fundamental questions: should a judicial processWT/DSB/M/68
Page 22
determine the adequacy of the monetary reserves of a sovereign State and of the length of the phase-out
period for restrictions that cease to have a balance-of-payments justification?  Should panels have the
authority to establish legal standards for evaluating the adequacy of the reserves of WTO Members,
assess the macroeconomic and other developmental policy alternatives available to Members and
developmental situation and prospects of the Member concerned? What was the proper relationshipbetween the judicial and the political organs of the WTO?  Was not Article XVIII:B progressively getting
diluted in such a way that it could no longer serve the developmental interests of developing countries?
He wished to make three observations.  First, in making his statement regarding the concerns arising
out of the two Reports, it was his intention to promote a debate with a view to find meaningful
solutions to these concerns so that the political bodies of the WTO, in particular the BOP Committee
and the General Council could continue to play the role that had been assigned to them and that
Article XVIII:B continued to be a relevant provision for the developing countries.  Second, heexpressed his delegation's gratitude to the Chairman and the two members of the Panel as well as the
three Appellate Body members who had dealt with this case.  He also thanked the WTO Secretariat
and the Appellate Body Secretariat.  Third, notwithstanding its serious reservations about the rulings
given by the Panel and the Appellate Body, India would join in a consensus in deference to the
institutions of the Panel, the Appellate Body and the DSB.
The representative of the European Communities said that his delegation noted with
satisfaction that the Appellate Body's conclusions had confirmed the strengthening of the rules of
GATT 1994 and the BOP Understanding.  In particul ar, the EC welcomed that the Appellate Body
had recalled that the dispute settlement mechanism could be used in the case of disputes relating to allissues involving restrictions applied for balance-of-payments purposes.  Furthermore, the EC
supported the interpretation whereby the second sentence of Article XVIII:11 placed upon the party
that had adopted restrictions for balance-of-payments purposes, an obligation to remove these
restrictions in a situation where it was no longer in a position to establish a direct causal link between
the removal of the restrictions and reoccurrence of the conditions defined in Article XVIII:9.
The representative of the Dominican Republic said that her delegation supported the
statement made by India.  Regardless of India's measures and their compatibility with the WTO
Agreements, her country was concerned about the respective roles of the BOP Committee, the
General Council and the DSB.  In this regard, her country wished to draw attention to the case on
"Brazil - Export Financing Programme for Aircraft" (WT/DS46), in which the Panel had concluded
that it was for a developing country Member to identify its development needs and that panels shouldgive particular attention to the views of developing countries.  The BOP Committee and the General
Council should continue to play their respecti ve roles, and Article XVIII:B should remain an
important and effective provision in favour of developing countries.   
The representative of Malaysia said that his country shared the concern expressed by India.
The Appellate Body's decision had serious systemic implications for the WTO and in particular for
the rights of developing countries.  Malaysia supported all the systemic issues raised by India with
regard to the Appellate Body's decision, but at the pr esent meeting, he only wished to refer to one
aspect.  In Malaysia's view, the Appellate Body had gone beyond its jurisdiction in interpreting the
word "application" in footnote 1 to the BOP Understa nding.  It had gone into the justification of the
measures implemented by India, which was within the realm of Members not the Panel.  In doing so,
the Appellate Body had modified significantly the rights and obligations of Members contrary to
Article 3.2 of the DSU.  It had taken away the rights of developing country Members with regard to
the provisions of the BOP Understanding.  The A ppellate Body's decision had thus seriously affected
the delicate balance of rights and obligations pr ovided not only in the BOP Understanding but also
within the entire package of the WTO Agreements, which had been agreed as a single undertaking.
This was not acceptable to Malaysia.WT/DSB/M/68
Page 23
The representative of Cuba said that his delegation shared the concerns raised by India and
supported the statements made by the Dominican Republic and Malaysia.  Cuba believed that the
rulings of the Panel and the Appellate Body were not in line with the trade policy issues as stipulated
in Article XVIII:B.  Developing countries should have the possibility of imposing restrictions for
balance-of-payments reasons.  In this regard, the General Council and the BOP Committee hadpermitted India to take certain measures in order to defend its economy.  It was not appropriate for the
Panel or the Appellate Body to rule against it.  Developing countries should have every opportunity to
identify their development needs.  He therefore appealed that the DSB should take into consideration
the development needs of developing countries and ensure that their interests were not further affected
in the future.
The representative of Egypt said that, like previous speakers, her country as a developing
country shared India's concerns.  In particular Egypt was concerned that the Appellate Body had
based its interpretations on certain terms without full examination of all the arguments made by India,
and had excluded the macroeconomic policies and instruments from the scope of Article XVIII:11.
Furthermore the Appellate Body had ruled that such policies were not related to any particular
development policy, thereby imposing constraints on developing country Members invoking theprovisions of that Article.
The representative of the Philippines wished to draw attention to paragraph 128 of the
Appellate Body Report concerning macroeconomic in struments and their relationship to development
policy. The IMF used specific terminology to distinguish between macroeconomic policy,development policy and structural measures.  However, countries were not bound by such a
distinction.  Contracting parties had agreed to development policies under the relevant provisions of
Article XVIII not in a limited technical sense.  Development was an objective with macroeconomic
policies as means towards that objective.  In the Ph ilippines' view, the Appellate Body did not need to
state that development policies should be construed in a very narrow context.
The representative of Sri Lanka said that his delegation noted the statement made by India
with regard to the decision of the Appellate Body and the Panel.  His delegation also noted that India
had stated that it would abide by the Appellate Body's decisions and would take actions to implement
these decisions.  India had also raised some systemic issues related to the balance of rights and
obligations of Members, in particular developing country Members.  India had pointed out two sets of
broad issues arising from the conclusions and findings  of the Panel and the Appellate Body.  First, the
relationship between the judicial and political organs of the WTO.  Second, the prospect that
substantive rights of developing countries under Article XVIII:B would be undermined.  India had
provided substantial evidence supporting its position.  Sri Lanka welcomed India's statement which
raised some important questions with regard to the findings and conclusions of the Panel and the
Appellate Body.  His delegation thanked India for its  contribution and shared the concerns expressed
by other delegations that some findings and conclusions of the Panel and the Appellate Body seemed
to erode confidence and the credibility of the system.
The representative of Indonesia said that his delegation noted the statement made by India.
Indonesia shared the concerns expressed by India on the decisions of the Panel and the Appellate
Body, and was concerned about the systemic issues resulting from these decisions, in particular with
regard to the relationship between the judicial and political organs of the WTO in the area of balance-
of-payments measures.  Indonesia regretted that the Panel and the Appellate Body, in exercising their
powers, had not paid due regard to the powers attributed to other organs of the WTO.
The representative of Jamaica wished to register his delegation's concerns with regard to the
rulings that had upset the balance of rights and obligations negotiated within the WTO.  His
delegation was also concerned that the rulings had not fully appreciated development concerns and
imperatives of developing countries.WT/DSB/M/68
Page 24
The DSB took note of the statements and adopted  the Appellate Body Report in
WT/DS90/AB/R and the Panel Re port in WT/DS90/R as upheld by the Appellate Body Report.
7. Adoption of the 1999 Draft Annual Report of the DSB (WT/DSB/W/111 and Add.1)
The Chairman said that in pursuance of th e Procedures for an Annual Overview of WTO
Activities and for Reporting under the WTO contained in document WT/L/105, he was submitting for
adoption a draft text of the 1999 Annual Report of the DSB contained in document WT/DSB/W/111
and Add.1.  This Report covered the work of the DSB since January 1999.  It had been prepared in
accordance with the structure of the 1998 Report.  For practical purposes, the overview of the state of
play of WTO disputes, covering the period from 1 January 1995 to 31 August 1999, prepared by theSecretariat on its own responsibility, was included in the addendum to this report.  He proposed that,
following the adoption of the Annual Report at the present meeting, the Secretariat be authorized to
update this Report under its own responsibility in or der to include the actions taken by the DSB at the
present meeting.  The updated Annual Report of the DSB would be circulated on 22 October and
would be submitted for consideration by the General Council at its meeting on 4 November 1999.
The DSB adopted the Draft Annual Report contained in WT/DSB/W/111 and Add.1 on the
understanding that it would be further updated by the Secretariat, as proposed by the Chairman.
8. Proposed nominations for the indicative list of governmental and non-governmental
panelists (WT/DSB/W/110)
The Chairman drew attention to document WT/DSB/W/110 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 therein.
The DSB so agreed.
The Chairman recalled that in accordance with the proposals for the administration of the
indicative list of panelists approved by the DSB on 31 May 1995, the list should be completely
updated every two years.  To this effect, within the first month of each two-year period, Members
would be required to forward updated curricula vitae of persons appearing on the indicative list.  He
also informed delegations that a new consolidated  indicative list, containing the names included in
document WT/DSB/13 as well as the names ap proved by the DSB in the period between
1 October 1998 and 27 October 1999, would be circulated by the Secretariat at the end of October.
He therefore asked Members to forward to the Secretariat any modifications they would wish to make
in order to update curricula vitae of the persons contained in the indicative list as circulated in
October 1999.  He proposed that this be done by the end of December 1999 in order to enable theSecretariat to circulate an updated indicative list in January 2000.
The DSB took note of this information.
9. Review of the DSU
The Chairman said that some delegations had expressed their preference to adjourn the formal
meeting in order to continue with informal consultations on the subject of the DSU Review.  He
therefore proposed to adjourn the proceedings of the meeting and resume the consideration of the item
on "Review of the DSU" at a later stage.WT/DSB/M/68
Page 25
The DSB so agreed.
Upon resumption of the meeting on 24 September, the Chairman  said that intensive
consultations had been held on the DSU Review, including on the possibility to extend the 31 July
deadline for completion of the Review.  However no agreement had been reached thereon.  Whetherconsultations should be resumed needed to be further discussed.  He proposed to adjourn the meeting.
The DSB took note of the statement and agreed
 to adjourn the meeting until further notice.
10. Appointment of Appellate Body members
(a) Statement by the Chairman
The Chairman, speaking under "Other Business", said that Article 17.2 of the DSU provided
for the DSB to appoint persons to serve on the Appe llate Body for a four-year term.  Each Appellate
Body member might be reappointed once for a final four-year term.  After a lengthy and difficult
process, the first seven Appellate Body members had been appointed in late 1995.  Pursuant to Article
17.2 of the DSU, the terms of office of three of the original Appellate Body members had expiredafter two years, and on 25 June 1997, as a result of the intensive consultations carried out by the
Chairman, the DSB had reappointed these three Appellate Body members – Messrs. Claus-Dieter
Ehlermann, Florentino Feliciano, and Julio Lacarte-Muró – to a final four-year term of office, which
would expire in December 2001.  The terms of four of the original Appellate Body members would
expire on 11 December 1999.  They were:  Messrs. James Bacchus, Christopher Beeby, Said El-Naggar and Mitsuo Matsushita.
On 15 September 1999, he had met with the Chairman of the Appellate Body, Mr. Said El-
Naggar, and two other members of the Appellate Body, Messrs. Julio Lacarte-Muró and Mitsuo
Matsushita.  They had informed him that two Appe llate Body members did not intend to seek renewal
of their terms.  These two Appellate Body member s, Messrs. Said El-Naggar and Mitsuo Matsushita,
had cited personal reasons for their decisions to leave at the end of their terms of office, i.e.
by 11 December 1999.  The two other Appellate Body members whose terms would expire on
11 December 1999, Messrs. James Bacchus and Christopher Beeby had expressed their willingness
and interest in being reappointed for a second four-year term.
These developments presented the DSB with two very important matters that required
immediate consideration.  He believed that it was important to treat these matters as
two separate decisions to be taken by the DSB.  The first was to extend, as soon as possible, the terms
of office of the two Appellate Body members who were available for re-appointment for a second
four-year term.  The second was to decide on a selection process to replace the two departing
Appellate Body members.  He recalled the last time the DSB had to face this issue was in 1995, whenthe original seven Appellate Body members had been first selected.
He emphasized the tremendous importance of the work of the Appellate Body for the dispute
settlement system as a whole.  Currently, the Appellate Body was hearing five appeals and there were
21 additional cases before panels.  The Appellate Body was facing a very heavy caseload, which hadto be managed within very strict timeframes.  For example, a "worst-case scenario" would be one in
which only three members of the Appellate Body were left to rule on the ever-increasing number of
appeals and other cases, such as arbitrations pursuant to Article 21 of the DSU.  Therefore, it was
imperative that there be no vacancies in the membership of the Appellate Body at the end of the year.
For these reasons, he considered it to be of the utmost importance that Members develop a processthat would allow the DSB to deal with this situation as quickly and effectively as possible.  As thereWT/DSB/M/68
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was no time to lose, he had already begun consultations with some Members and these consultations
would continue over the next few days.
He underlined that it was important to agre e on the reappointment of two Appellate Body
members as soon as possible and then to decide on a selection process to replace the two departingmembers.  This was important because if all four members whose terms of office would expire on
11 December had to be selected, the Appellate Body would be left with only three members by the
end of the year to deal with the ever-increasing number of appeals.  If one of them had a conflict of
interest, he would not be able to serve on an appeal proceeding.  During his consultations with some
delegations different views had been expressed on this matter.  Some delegations were willing to
reappoint the two members.  Other delegations had stated that the selection process should be open to
any applicants, including the two members whose terms of office would expire on 11 December 1999.Some Members had informally suggested the possibi lity of increasing the number of Appellate Body
members.  This issue had also been discussed in the DSU review but no consensus had been reached
thereon.  He proposed that delegations further reflect on this issue and that informal consultations be
held in the next few days.
The DSB took note of the statement.
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