RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/166 
22 April 2004 
 (04-1815) 
Dispute Settlement Body 
19 March 2004  
 
 
 
MINUTES OF MEETING 
 
Held in the Centre William Rappard  
on 19 March 2004  
 
Chairperson:  Ms Amina Mohamed (Kenya) 
 
 Subjects discussed
: Page  
1. Surveillance of implementation of recommendations adopted by the DSB.........................2  
(a) United States – Anti-Dumping Act of 1916:  Status report by the United States.......................2  
(b) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by 
the United States .............................................................................................................. ...........3  
(c) United States – Anti-dumping measures on certain hot-rolled steel products from 
Japan:  Status report by  the United States...................................................................................4  
(d) Chile – Price band system and safeguard measures relating to certain agricultural 
products:  Status report by Chile.............................................................................................. ...4 
(e) United States – Continued Dumping and Subsidy Offset Act of 2000:  Status report 
by the Unite d States ........................................................................................................... .........5  
2. United States – Final countervailing duty determination with respect to certain 
softwood lumber from Canada................................................................................................6  
(a) Statement by Canada regarding implem entation by the United States of the 
recommendations and rulings of the DSB ..................................................................................6  
3. United States – Laws, regulations and methodology for calculating dumping margins ("zeroing")............................................................................................................ ......7
 
(a) Request for the establishment of a pa nel by the European Communities...................................7  
4. European Communities – Measures affecting trade in commercial vessels........................7  
(a) Request for the establishment of a panel by Korea.....................................................................7  
5. United States – Anti-Dumping Act of 1916.............................................................................8  
(a) Statement by the United States rega rding the Arbitrator's award ...............................................8  
 WT/DSB/M/166 
Page 2  
 
 1. Surveillance of implementation of recommendations adopted by the DSB 
(a) United States – Anti-Dumping Act of 1916:   Status report by the United States 
(WT/DS136/14/Add.24 – WT/DS162/17/Add.24) 
 (b) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.17) 
 (c) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.17) 
 
(d) Chile – Price band system and safeguard measu res relating to certain agricultural products:  
Status report by Chile (WT/DS207/15/Add.5) 
 (e) United States – Continued Dumping and Subsid y Offset Act of 2000:  Status report by the 
United States (WT/DS217/16/Add.2 – WT/DS234/24/Add.2) 
 
1. The Chairperson
 recalled that Article 21.6 of the DSU required that "unless the DSB decides 
otherwise, the issue of implementation of the re commendations or rulings shall be placed on the 
agenda of the DSB meeting after six months follo wing 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".  She proposed that the five sub-items  to which she had just referred be considered 
separately. 
(a) United States – Anti-Dumping Act of 1916:  Status report by the United States 
(WT/DS136/14/Add.24 – WT/DS162/17/Add.24) 
2. The Chairperson  drew attention to document WT/DS136/14/Add.24 – WT/DS162/17/Add.24 
which contained the status report by the United St ates on progress in the implementation of the DSB's 
recommendations in the case concerning the US Anti-Dumping Act of 1916. 
3. The representative of the United States  said that before addressing US implementation in 
specific disputes, he wished to note that in hi s appearances this month before Congressional trade 
committees, Ambassador Zoellick had reiterate d the importance of implementing all DSB 
recommendations and rulings in WTO disputes, and had urged Congress to work on necessary 
legislation to bring the United States into complia nce with its obligations.  The US administration 
would continue to work with Congress to achieve further progress in resolving all disputes.  With 
respect to 1916 Act implementation, as noted in the US status report, dated 8 March 2004, legislation 
repealing the 1916 Act was pending in both the US Se nate and US House of Representatives.  On 
29 January 2004, HR 1073, which would repeal the 1916 Act, had been reported favourably out of the 
Committee on the Judiciary of the US House of Representatives. 
4. The representative of the European Communities  said that one year ago a repealing bill had 
been introduced in the House of Representatives.  On e month ago, this bill had been eventually voted 
out of the House Committee for consideration by th e whole House.  The EC expected that the next 
steps would be undertaken in a more expedite  manner and without further delay. The WTO 
Arbitrators had recognized the EC's right to suspend concessions to the United States under the 
GATT 1994 and the Anti-Dumping Agreement.  The EC strongly hoped that prompt full 
implementation would make it unnecessary to use such right. 
5. The representative of Japan  said that his country was extremely concerned that the United 
States had missed another month, yet again, to implement the DSB's recommendations and rulings in this proceeding.  Such a lengthy period of n on-compliance made a mockery of the WTO dispute  WT/DSB/M/166 
 Page 3 
 
 
 settlement system and cast doubt on the commitment of the United States.  Under the WTO-
inconsistent 1916 Act, Japanese companies were s till being forced to incur substantial damages 
including significant legal costs.  In this regard , Japan had taken note of the US status report and 
reiterated its position that any repealing legislation of the 1916 Act must have retroactive effect so 
that the pending cases would also be terminated properly.  Japan urged the US administration to 
endeavour to secure the passage of bills repealing th e 1916 Act with proper retroactive effect at the 
earliest juncture during the second session of the 108th Congress.  Japan had not yet made a final decision on the reactivation of the DSU Article 22 ar bitration.  Nevertheless, Japan would like to 
remind the United States of its right to suspend concessions or other obligations. 
6. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(b) United States – Section 211 Omnibus Appropria tions Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.17) 
7. The Chairperson  drew attention to document WT/D S176/11/Add.17 which contained the 
status report by the United States on progress in th e implementation of the DSB's recommendations in 
the case concerning US Section 211 Om nibus Appropriations Act of 1998. 
8. The representative of the United States  said that his country had provided a status report in 
this dispute on 8 March 2004, in accordance with Article 21.6 of the DSU.  The US administration 
continued to work with the US Congress with resp ect to appropriate statutory measures that would 
resolve this matter. 
9. The representative of the European Communities  said that the two bills pending in the House 
of Representatives and in the Senate would ensure  an effective protection of intellectual property 
rights both in Cuba and in the United States and, in this context, they would repeal Section 211.  The "US-Cuba Trademark Protection Act" would resolve th is dispute to the benefit of all and in a way 
consistent with the US commitment to effectiv e and non-discriminatory protection of intellectual 
property rights.  The EC expected that the US  administration would support these bills as an 
appropriate solution to this dispute. 
10. The representative of Cuba
 said that her delegation, once again, deplored the lack of progress 
by the United States in implementing the recommenda tions and rulings of the DSB in respect of 
Section 211 of the Omnibus Appropria tions Act of 1998. Cuba repeated that it stood by the statements 
it had made during previous DSB meetings, especially during the most recent ones on 23 January and 17 February 2004.  Cuba insisted that Section 211 of the Omnibus Appropr iations Act of 1998 should 
be repealed since it violated basic principles of  the WTO such as national treatment and most-
favoured-nation treatment, as confirmed by the Appella te Body in its examination of the matter.  The 
adoption of Section 211 had led to an extension of th e international blockade an d an intensification of 
the aggressive policies targeting Cuba in the area of intellectual property.  Since the DSB had concluded that the United States must comply with the DSB's rulings and findings, the United States 
had requested repeated extensions to the deadlines  set for bringing its legislation into conformity, 
giving the most incredible excuses, all of whic h were both unconvincing and inconsistent.  Her 
delegation noted with concern that the progress re ports submitted by the United States were becoming 
repetitive in the sense that they re iterated that the Government was still working with Congress with a 
view to complying with the DSB's recommendations, when in fact, there had been no results in the 
two years since the decision was adopted.  Cuba, once again, condemned the total indifference and 
lack of willingness with which the Un ited States reacted to the DSB's ru lings.  Cuba drew attention to 
the concept of the "reasonable period of time" and ob served that the three extensions granted to the 
United States by the EC meant that  the initial reasonable period of si x months had been prolonged to 
two years.  Cuba noted that promptness in impl ementing rulings was one of the objectives of the WT/DSB/M/166 
Page 4  
 
 dispute settlement process, especially when the ap propriate balance between rights and obligations 
was affected.  Moreover, the systematic failure of the United States to comply with the DSB's rulings 
cast doubt not only on the country's true political will  to move forward in the negotiations and honour 
its WTO commitments, but also on the credibility of the institution itself.  Finally, her delegation 
wished to emphasize that it maintained its convic tion that Section 211 should be repealed, since the 
Appellate Body's review demonstrated that it was inconsistent with commitments undertaken by the 
United States in the area of intellectual property.  Finally, she requested that the statement made by 
Cuba at the present meeting be circulated as an official WTO document.
1 
11. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(c) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.17) 
12. The Chairperson  drew attention to document WT/D S184/15/Add.17 which contained the 
status report by the United States on progress in th e implementation of the DSB's recommendations in 
the case concerning US anti-dumping measures on certain hot-rolled steel products from Japan. 
13. The representative of the United States  said that his country had provided a status report in 
this dispute on 8 March 2004, in accordance with Article 21.6 of the DSU.  The US administration 
continued to work with the US Congress to address the recommendations and rulings of the DSB that 
had not been addressed by 23 November 2002. 
14. The representative of Japan  recalled that, in December 2003, the reasonable period of time for 
implementation in this proceeding had been exte nded for the second time until 31 July 2004.  He 
noted that before the first session of the 108th Co ngress ended in December 2003, to Japan's great 
regret, no "specific legislative amendments" had been  introduced to the Congress.  Since then to this 
date, again, no positive move forward has been re ported by the United States.  Japan urged the United 
States to secure the introduction and passage of the necessary bills during the second session of the 
108th Congress and thereby promptly implemen t the DSB's recommendations and rulings. 
15. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(d) Chile – Price band system and safeguard measure s relating to certain agricultural products:  
Status report by Chile (WT/DS207/15/Add.5) 
16. The Chairperson  drew attention to document WT/DS207/15/Add.5, which contained the 
status report by Chile on progress in the implem entation of the DSB's recommendations in the case 
concerning price band system and safeguard measu res relating to certain agricultural products. 
17. The representative of Chile  said that, given that his country had adopted the measures which 
it deemed to be consistent with the DSB's recommend ations and rulings in this dispute, there was no 
progress to report within the meaning of Article 21.6 of the DSU. 
18. The representative of Argentina  said that, as his country had previously indicated, the 
disagreement within the meaning of Article 21.5 of  the DSU between the two countries continued to 
exist since the measures adopted and put into effect by Chile at the end of 2003 did not comply with 
the DSB's recommendations and rulings. Accordingl y, Argentina would, in due course, request 
consultations with Chile within  the framework of the Understa nding of 24 December 2003 regarding 
                                                      
1 The statement was subsequently ci rculated in document WT/DSB/COM/6.  WT/DSB/M/166 
 Page 5 
 
 
 procedures under Articles 21 and 22 of the DSU(WT/D S207/16).  In view of the foregoing, Argentina 
was looking into all procedural options set forth in  the Understanding, with a view to resolving the 
disagreement. 
19. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(e) United States – Continued Dumping and Subsidy Offset Act of 2000:  Status report by the 
United States (WT/DS217/16/Add.2 – WT/DS234/24/Add.2) 
20. The Chairperson  drew attention to document WT/D S217/16/Add.2 – WT/DS234/24/Add.2 
which contained the status report by the United St ates on progress in the implementation of the DSB's 
recommendations in the case concerning the US Conti nued Dumping and Subsidy Offset Act of 2000. 
21. The representative of the United States  said that his country had provided a status report in 
these disputes on 8 March 2004, in accordance with Article  21.6 of the DSU.  As noted in the report, 
on 19 June 2003, legislation to bring the Continue d Dumping and Subsidy Offset Act (the CDSOA) 
into conformity with the WTO obligations of the Un ited States had been introd uced in the US Senate 
(S. 1299).  In addition, on 2 Februa ry 2004, the US administration had, once again, proposed repeal of 
this Act, in its budget proposal for fiscal year 2005.  After the US st atus report had b een submitted, on 
10 March 2004, legislation repealing the CDSOA was introduced in the US House of Representatives 
(H.R. 3933).  The US administration was continui ng to work with Congress to achieve further 
progress in resolving these disputes. 
22. The representative of the European Communities  said that after the United States had reported 
on implementation prior to the present meeting, the EC  had learned that a bill had been introduced in 
the House of Representatives to re peal the Byrd Amendment.  Th e EC hoped that this showed a 
renewed determination of Congress to comply with  the DSB's recommendations.  Up to now, there 
had not been convincing signs that Congress was eagerly working or even considering 
implementation.  Since June 2003 and the introduction of the Senate bill mentioned in the US status 
report, nothing had happened.  This was all the mo re disturbing that the EC had heard repeated 
statements that there would be no need to impl ement or that negotiations  should be conducted to 
modify WTO rules.  The EC hoped that reason woul d now prevail and urged the US administration to 
actively work with Congressional leaders to en sure prompt implementation of the DSB's 
recommendations. 
23. The representative of Chile  thanked the United States for its  written and oral report, but 
regretted that three months after the expiration of the reasonable period, there was still no sign of 
progress in compliance. Chile had taken note of the recent bill introduced in the House of 
Representatives proposing the repeal of the CDSOA.  This proposal was a reaction to the recent 
Congressional Budget Office report, which had found the Byrd Amendment to be affecting the US 
economy adversely.  More specifically, it increased costs which, in terms of reduced overall economic 
performance and lower economi c well-being of the population,  generated anti-dumping and 
countervailing measures.  Chile hoped that the admi nistration would work with Congress to ensure 
that the bill was passed at the earliest possible date, thus obviating the need for Chile to implement the 
measures of last resort for which it had sought authorization from the DSB. 
24. The representative of Canada  said that his country noted the US status report and continued to 
be disappointed that the United States had not made progress to comply with the DSB's rulings and recommendations.  Nonetheless, Canada was encourag ed with the findings contained in a recently 
published report by the Congressional Budget Office.  This report had found that the distributions 
mandated by the Byrd Amendment encouraged the fili ng of more trade remedy cases;  subsidized the 
firms receiving the payments;  increased the cost of operating the trade laws and discouraged the WT/DSB/M/166 
Page 6  
 
 settlement of cases by US firms.  In the past week , the US Trade Representative had stated that the 
law amounted to a "double hit" on foreign producers a nd that the United States must comply with the 
WTO rulings.  Canada hoped these pronouncements woul d serve as added impetus to repeal the Byrd 
Amendment. 
25. The representative of Japan
 said that his country had taken note of the status report and the 
statement made by the United States at the present m eeting, which added little to the status report  
submitted by the United States at the 17 February DS B meeting.  Japan sincerely hoped that this was 
not a sign of inertia and outright disregard of the dispute settlement system on the part of the United 
States.  While the issue was pendi ng before arbitration under Article 22.6 of the DSU, Japan strongly 
urged that the United States secure the implementa tion of the DSB's recommendations and rulings, by 
promptly repealing the CDSOA. 
26. The representative of Korea  said that his country wished to express thanks to the United 
States for its status report, but the fact remained that compliance had not occurred and now, as Members were aware, the arbitration process on Article 22.6 of the DSB was on its way.  Korea hoped that swift implementation by the US Congress would make eventual suspension of concessions 
or other obligations unnecessary. 
27. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
2. United States – Final countervailing duty de termination with respect to certain softwood 
lumber from Canada 
(a) Statement by Canada regarding implementati on by the United States of the recommendations 
and rulings of the DSB 
28. The Chairperson  said that this item was on the agenda of the present meeting at the request of 
Canada and invited the representative of Canada to make a statement. 
29. The representative of Canada  said that at its meeting on 17 February 2004, the DSB had 
adopted the Panel and Appellate Body Reports in  the case on "United States – Final Countervailing 
Duty Determination with Respect to Certain Softw ood Lumber from Canada".  The DSB had held that 
the United States had not fulfilled its WTO obligati ons in relation to the alleged "pass-through" of 
subsidies and had recommended that the United Stat es bring its measures into conformity with its 
obligations under the SCM Agreement.  Pursuant to  the DSU, the United States was required to state 
its intentions in respect of implementing the DS B's rulings and recommendations within 30 days from 
the adoption of the Reports.  He said that in orde r to avoid holding a special DSB meeting, Canada 
and the United States had agreed that the United St ates could state its intentions in writing.  The 
United States had notified its intentions in a le tter, dated 5 March 2004 (WT/DS257/12), in which it 
expressed willingness to discuss implementation procedures with Canada.  His country looked forward to these discussions with a view to agreeing on a reasonable period of time. 
30. The representative of the United States
 said that as his country had stated at the 17 February 
DSB meeting, the United States was pleased by the results of this dispute.  The Panel and the 
Appellate Body Reports had rejected, in all major r espects, Canada's claims that the United States had 
acted inconsistently with the Subsidies Agreem ent and the GATT 1994 in finding that Canada had 
provided countervailable subsidies to its softwood lumber industry. The United States did acknowledge the finding that the United States should  have investigated whether the subsidies had 
been passed from one company to another through the sell of logs and it was currently examining 
approaches to implement this finding.  In th at regard, on 5 March 2004, the United States had 
informed the DSB by letter that it intended to implement the DSB's recommendations and rulings in  WT/DSB/M/166 
 Page 7 
 
 
 this dispute in a manner that respected the WTO obligations of the United States, and that it had 
begun to evaluate options for doing so.  The United States had also informed the DSB that it would 
require a reasonable period of time to implement these recommendations and rulings.  The United States looked forward to meeting with Canada in th e near future in order to reach agreement on a 
reasonable period of time. 
31. The DSB took note
 of the statements. 
3. United States – Laws, regulations and methodology for calculating dumping margins 
("zeroing") 
(a) Request for the establishment of a panel by the European Communities (WT/DS294/7/Rev.1) 
32. The Chairperson  recalled that the DSB had consider ed this matter at its meeting on 
17 February 2004 and had agreed to revert to it.  She drew attention to the communication from the 
European Communities containing its revised panel request, which had been circulated in document 
WT/DS294/7/Rev.1. 
33. The representative of th e European Communities  said that in the panel request initially sent 
by the EC, the numbering of paragraphs had been in advertently deleted.  The United States considered 
that this made the request unclear.  The EC regre tted this, but understood with satisfaction that the 
United States would accept the establishment of a pa nel at the present meeting.  The EC had sent a 
corrected version of the request on 16 February 2004 .  For the reasons detailed in its request, the EC 
was requesting that a panel be established to exam ine the WTO-compatibility of the US legislation, 
methodologies and specific determinations in a numbe r of original investigations and administrative 
reviews as result of the use of zeroing when establishing the dumping margin. 
34. The representative of the United States  said that with respect to the substance of the EC's 
panel request, the United States would not repeat th e points it made at the 17 February DSB meeting, 
other than to say that it disagreed with the no tion that the Anti-Dumping Agreement required that 
authorities offset calculated dumping margins with so- called "negative margins".  With respect to the 
procedural issues raised by the EC's filing of a se cond panel request, the United States appreciated the 
fact that the EC in this request had corrected minor deficiencies contained in its initial request.  
Therefore, notwithstanding that the DSB was consider ing this new panel request for the first time, the 
United States did not oppose the establishment of a panel at the present meeting. 
35. The DSB took note  of the statements and agreed  to establish a panel in accordance with the 
provisions of Article 6 of the DSU w ith standard terms of reference. 
36. The representatives of Argentina , Brazil , China , India , Japan , Korea , Mexico , Norway  and 
Chinese Taipei  reserved their third-party rights to pa rticipate in the Panel's proceedings. 
4. European Communities – Measures aff ecting trade in commercial vessels 
(a) Request for the establishment of a panel by Korea (WT/DS301/3) 
37. The Chairperson  recalled that the DSB had consider ed this matter at its meeting on 
17 February 2004 and had agreed to revert to it.  She drew attention to the communication from Korea 
contained in document WT/DS301/3. 
38. The representative of Korea  said that his country had requested, on 5 February  2004, in 
document WT/DS301/3 the establishment of a panel with respect to the EC's Temporary Defense 
Mechanism (TDM), which was based on the EC Regulation 1177/2002, dated 27 June 2002, as well WT/DSB/M/166 
Page 8  
 
 as the member State measures implementing it. This issue had been discussed at the 17 February DSB 
meeting.  As pointed out at that meeting, in Kore a's view, these measures raised systemic concern as 
they were, inter alia, in violation of the basic principle of the WTO dispute settlement system, that 
was the prohibition of unilateral action.  Korea con tinued to believe that the EC measures specified in 
Korea's panel request constituted a clear violation of its obligati on under the WTO regime by the EC 
and its member States.  Korea was requesting that a panel be established at the present meeting with 
standard terms of reference. 
39. The representative of the European Communities
 said that at the 17 February DSB meeting 
the EC had expressed its disapproval of this pro cedural manoeuvring by Korea, which involved the 
request for a panel on some of the issues covered by the consultations, and the continuation of the 
consultations under a different DS number (DS307).  This dichotomy of the consultation process was 
difficult to understand considering that the sa me measure (Council Regulation 1177/2002) seemed to 
be at the centre of the present request and the future consultations.  In that respect, the EC had already 
signalled its willingness to enter into consultations on the issues specified by Korea in the request 
under DS/307;  it would, therefore, seem more logical first to complete the discussion of these 
measures before considering further steps.  Neverthe less, if Korea insisted on this double approach, 
the EC would, in any event, vigorously defend its  measures in the course of  a panel procedure. 
40. The DSB took note  of the statements and agreed  to establish a panel in accordance with the 
provisions of Article 6 of the DSU w ith standard terms of reference. 
41. The representatives of China , Japan  and the United States  reserved their third-party rights to 
participate in the Panel's proceedings. 
5. United States – Anti-Dumping Act of 1916 
(a) Statement by the United States regarding the Arbitrator's award 
42. The representative of the United States , speaking under "Other Business", said that the United 
States was pleased that the Arbitrator in "United States – Anti-Dumping Act of 1916"2 had correctly 
concluded that the EC had no current  right to suspend concessions agai nst the United States.  He also 
wished to make clear that the US administrati on remained committed to full compliance with the 
WTO obligations of the United States in this disp ute.  Having said that, the recent award of the 
Arbitrator in the Article 22.6 proceeding on the 1 916 Act raised a number of significant issues 
concerning the operation of Articles 22.6 and 22.7 of  the DSU which merited serious reflection.  The 
United States appreciated that the Arbitrator strove  for a balanced result in this award.  However, 
Article 22.7 of the DSU did not mandate a balan ced result, but a balance between the level of 
suspension proposed and the level of nullification or impairment.  And when the latter level was zero, 
the correct result was that the award must also e qual zero.  Arbitrators must apply the rules.  
Unfortunately, while correctly articulating a numbe r of rules and principles governing Article 22.6 
proceedings, the Arbitrator in some instances had a pplied those principles only up to a point.  For 
example, the Arbitrator had correctly enunciated the important principle that, in determining the level 
of nullification or impairment, it was necessary to  rely on "credible, factual, and verifiable 
information".  Claims that were "too remote", "t oo speculative", or "not meaningfully quantified" 
were to be rejected.  Nevertheless, the Arbitrator had then gone on to conclu de that final judgments 
under the 1916 Act "clearly nullify or impair" EC be nefits, without analysis beyond the fact that the 
dollar figures were final, public and verifiable.  Likewise, it had concluded that public settlements 
could be used to measure nullification or impairme nt for the same reason.  It was true that the 
Arbitrator's analysis ensured that an examination of nullification or impairment began from credible 
figures.  Unfortunately, the Arbitrator's analysis  ended where it began.  There was no reason to 
                                                      
2 WT/DS136/ARB.  WT/DSB/M/166 
 Page 9 
 
 
 assume, to speculate, that a 1916 Act judgement or settlement in itself nullified or impaired any 
benefits.  For example, what if the parent compan ies of both the plaintiff and the defendant were EC 
companies, or if both the plaintiff and defendant  produced goods only in EC member States?  How 
could the transfer of funds between these two companies be said to affect the trade of, or harm the economic interests of, the EC?  The Arbitrator 's approach left these questions unaddressed, and 
simply assumed that the amount of judgement s and settlements would equal the amount of 
nullification or impairment.  There was no legal basis for making such a prediction, nor had the 
Arbitrator offered any economic or other evidence  that would justify such an assumption.  The 
Arbitrator had also disregarded the fact that no specific judgements or settlements under the 1916 Act – not past, current, or certainly future – were within the terms of reference of the original dispute, nor 
were they the subject of DSB rulings.  The Arbitrator 's task was to determine the level of nullification 
or impairment attributable to the breaches found with respect to the existence of the 1916 Act, not its 
applications. 
43. Another way in which the Arbitrator had correc tly enunciated a principle then failed to apply 
it related to limits on the level of nullification or im pairment.  The Arbitrator had correctly concluded 
that the EC's proposed suspension measure would in no way have limited the level of suspension, and 
was, therefore, not equivalent to the level of nullif ication or impairment.  Nevertheless, the Arbitrator 
had then defined the level of nullification or im pairment as a formula to be applied by the 
complaining party based on future events – in othe r words, it set no limit.  Here, the Arbitrator had 
explicitly abdicated its responsibilit y to determine a fixed level of nullification or impairment, as 
every previous arbitrator understood the DSU to requi re.  It was no excuse to argue that this level 
would vary from year to year, and therefore that the level of nullification or impairment should be 
expressed as a formula.  That could be said of every pr evious arbitration, and every future arbitration.  
Of course, the Arbitrator might have been led to th is result because of its reluctance to conclude that, 
with no current judgements, public settlements or pending cases against EC companies, the level of nullification or impairment could only be zero.  He re, the Arbitrator had a pplied very questionable 
logic, with very uncertain consequences for future disputes.  It referred to the standard finding of the 
panel directed by Article 3.8 of the DS U, that the WTO breach was considered prima facie to 
constitute a case of nullification or impairment.  From  that alone, the Arbitrator had concluded that 
the level "must be something greater than zero".  Th e Arbitrator stated that it was a contradiction to 
suggest otherwise.  However, in drawing this conc lusion, the Arbitrator itself had contradicted the 
Arbitrator in the Bananas dispute.  The  Arbitrator in Bananas concluded that, with respect to trade in 
goods, the nullification or impairment of US benefits in that dispute was equal to zero.  And the 1916 
Act Arbitrator itself had recognized, together with th e Arbitrator in the Bananas dispute that there was 
no more than a presumption that a breach constitute d nullification or impairment.  That presumption 
could be rebutted, and in this case had been rebutted.  Even by the Arbitrator's own measurement, i.e., 
current judgements and public settlements, it ha d found the current level of nullification or 
impairment to be zero. 
44. The Arbitrator's finding on the significance of the standard report language on nullification or 
impairment could have unfortunate c onsequences, if it were read to suggest that one could only rebut 
the presumption of nullification or impairment durin g panel proceedings, and not in an Article 22.6 
arbitration.  The DSU drew no such limitation.  Indeed, it had been well-understood that the purpose 
of panel proceedings was to establish whether ther e was an inconsistency with a WTO obligation.  
Only when there was an inconsistency was there a po ssible need to reach Article 22 of the DSU, and a 
central purpose of Article 22.6 proceedings was to de termine the level of nullification or impairment – 
even if that level was zero.  Only one set of rules could govern Article 22.6 proceedings. The United 
States believed that Article 22 required arbitrators to  award a fixed, multilaterally determined level of 
nullification or impairment that was based on an analysis of the trade or economic effects of a 
measure.  Every previous Arbitrator had agreed  that Article 22 required this.  Yet the 1916 Act 
Arbitrator had not agreed, concluding that a compla ining party might decide, and change, the level of 
nullification or impairment well after completion of  the arbitration, based upon its own evaluation of WT/DSB/M/166 
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 the criteria established by the Arbitrator.  This pr ospective, unpredictable approach to determining 
nullification or impairment was not going to contribute  to the security and predictability of the trading 
system.  It would create rather than resolve disput es – indeed, the Arbitrator recognized this when it 
indicated several times in the award that the Un ited States could initiate further dispute settlement 
proceedings should it disagree with the EC's applied le vels of retaliation in the future.  Moreover, it 
was important to recognize that if the Arbitrator 's reasoning was correct, every past arbitration was 
wrong, and every future arbitration should apply th at reasoning.  There was no basis for applying 
different standards in different disputes.  Member s should reflect on this fact.  The United States 
hoped they would conclude that the approach of the 1916 Act Arbitrator should not be repeated.  The United States would be happy to discuss further with Members these serious, systemic concerns.  
45. The representative of th e European Communities
 said that, in light of the US intervention, the 
EC would like to highlight particularly three point s.  First, the award was a welcome reaffirmation 
that a Member might not violate its obligations with impunity.  The non-implementation of the DSB's 
recommendations necessarily led to nullification or impairment and created the right to suspend 
obligations or concessions at an equivalent level.   Second, the Arbitrators had confirmed that the 
benefits accruing under the GATT a nd the multilateral agreements on trade were, in no way, limited 
to trade benefits.  Third, the decision had recogni zed that a level of suspension of concessions or 
obligations might be variable in order to reflect th e variability of the nullification or impairment that a 
Member might cause by failing to implement the DSB's recommendations.  The three particular findings were extremely valuable for the effectiv eness of the dispute settle ment mechanism and the 
EC commended the work of the Arbitrators.  Howeve r, the EC also wished to signal its disagreement 
with the failure of the Arbitrators to include "litig ation costs" in the calculation of nullification or 
impairment.  EC companies had incurred major costs as
 a result of the need to defend their interests in 
connection with a WTO-incompatible legislation.  Such costs represented, in the EC's view, a clear 
instance of nullification or impairment of WTO benef its, regardless of whether or not a settlement had 
been concluded or a final award had been issued.  Finally, the EC would correct the US assertion that 
the EC had no current right to suspend its obligations under the GATT and the Anti-Dumping 
Agreement.  In truth, EC companies had paid to settle claims and these amounts created the right to a 
corresponding level of suspension.  The EC also  wondered what was the purpose of making such a 
statement and recalled that the United States had the responsibility to ensure compliance with the 
DSB's rulings and recommendations. 
46. The representative of Canada  said that his delegation had had a chance to review the US 
statement this morning, and had listened carefully to the critique of the award of the Arbitrator in the 
1916 Act case.  Frankly, the critique was at once puzzling, wrong and dangerous.  It was puzzling 
because was it not clear how the violation of a treaty obligation in international law could be said to 
result in "zero" nullification and impairment.  To th e extent that a treaty obligation meant anything, it 
implied the conferring of benefits to the rest of  Members.  When an obligation was violated, the 
corresponding benefits were nullifie d or impaired.  The US critique was also wrong in the scheme of 
the WTO Agreement.  One should not forget that wh en the DSB had adopted the Reports of the Panel 
and the Appellate Body, it had also found that bene fits accruing to complaining parties had been 
nullified or impaired.  As the Arbitrator found in the 1916 Act award, where there was  a finding of nullification or impairment by the DSB, it was absurd to suggest that the level of such nullification or 
impairment could be zero.  But above all, by th is statement the United States had launched a frontal 
assault on the edifice of dispute settlement in the WTO.  It was not enough, the United States had 
suggested, to challenge a measure as such .  Rather, to have effective redress, a complaining Member 
might only challenge a measure as applied.  One sh ould reflect on this.  The United States proposed, 
for example, that where an import ban had be en found to violate the WTO Agreement, the 
complaining party must also challenge each and every application of that measure to be able to obtain 
appropriate retaliation rights.  Each  and every application, after the fact.  After the damage had been 
done.  The United States proposed that in the WTO, "the barn doors might be closed only after the 
horses had flown".  It was difficult – it would beggar  the imagination – to over-estimate the gravity of  WT/DSB/M/166 
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 the challenge the US position posed, if it were to prevail, to WTO dispute settlement.  Canada was 
confident that, were the United States to raise these ar guments in the context of a future arbitration, 
they would be seen for what they were and reject ed forthwith.  Above all, Canada noted that the 
United States could easily avoid all these concerns, if  it were to comply promptly and in good faith 
with the DSB's rulings and recommendations. 
47. The representative of India  said that he did not have the award with him at the present 
meeting and that he had received the US statement on  this subject only a while ago.  The statement of 
the United States made certain assertions.  For example,  it stated that that EC had no current right to 
suspend concessions and that the Arbitrator had stri ven for a balanced result, but Article 22.7 of the 
DSU mandated a balance between the level of suspen sion proposed and the level of nullification or 
impairment.  Without having the award, commenting on it through the prism of the US interpretation 
would be unjust not only to India's right of adequate opportunity to respond, but also to the Arbitrator.  
He also failed to recognize anything in the DSU meriting the US comment that the level of 
nullification or impairment was, in this case, zero, or indeed could be zero, when the DSB had already 
decided that there had been nullification or impairme nt due to a violation complaint.  To adequately 
respond to the US statement made like this under "O ther Business" was further complicated by the 
fact that the United States had entered into intricate legal analysis of the award.  For instance, it again 
used the US prism to comment on the Arbitrator's  conclusion that the final judgements under the 1916 
Act "clearly nullify or impair" EC  benefits, and then had gone on to circumscribe, again through the 
US prism, the mandate of the arbitrator.  It had igno red the fact that by using the term "clearly", the 
Arbitrator in fact envisioned many other actions as nullifying or impairing EC benefits, while the final 
judgements clearly doing so.  There were other comments made, like clubbing the Banana Arbitrator's 
determination of the nullification and impairment of US benefits as zero in respect to a particular 
claim with the mandate under Article 3.8 of the DS U, and comments on whether the level, in certain 
circumstances, could change from year to year.  India did not agree with these comments.  It was not possible to comment on a statement like this in the gi ven time.  Finally, he underlined that Members 
should focus on meeting their obligations under the WTO Agreements. 
48. The representative of Japan
 said that, as his delegation had stated at the present meeting under 
agenda item 1(a), Japan had no yet made a final d ecision on the reactivation of the DSU Article 22 
arbitration and firmly retained its right to suspend concessions or other obligations on this issue.  In 
light of this, Japan's authorities in Tokyo would scrut inize all the points raised by the United States at 
the present meeting.  Japan would not be able to go along with some of the points made and noted the 
comments made by Canada, the EC and India. 
49. The DSB took note  of the statements. 
__________