RESTRICTED
WORLD TRADE WT/DSB/M/32
3June1997
ORGANIZATION(97-2320)
Dispute Settlement Body
30April 1997
MINUTES OFMEETING
Held intheCentre William Rappard
on30April 1997
Chairman: Mr.Wade Armstrong (New Zealand)
Subjects discussed: Page
1. Surveillance ofimplementation ofrecommendations adopted bytheDSB ........1
- United States -Standards forreformulated andconventional gasoline: Status
report bytheUnited States ................................1
2. Indonesia -Certain measures affecting theautomobile industry ..............3
- Request fortheestablishment ofapanel byJapan .............3
3. Brazil -Measures affecting imports oftextiles from Hong Kong ..............3
- Statement byHong Kong .................................3
4. United States -Measures affecting imports ofwoven woolshirts andblouses fromIndia:
Appellate Body Report ........................................5
- Statement bytheChairman ................................5
Prior totheadoption oftheagenda, theUnited States requested thatitem2entitled "European
Communities -Duties onImports ofGrains -Request fortheEstablishment ofaPanel bytheUnited
States (WT/DS13/6)", beremoved from theproposed agenda. Item4entitled "Canada -Certain
Measures Concerning Periodicals -Request bytheUnited States fortheAdoption ofthePanel Report
(WT/DS31/R andCorr.1)", wasalsoremoved from theagenda since Canada notified itsdecision to
appeal thisreport on29April 1997.1
1. Surveillance ofimplementation ofrecommendations adopted bytheDSB
- United States -Standards forreformulated andconventional gasoline: Status report
bytheUnited States (WT/DS2/10/Add.3)
TheChairman recalled thatthisitemwasontheagenda pursuant toArticle 21.6oftheDSU
whichstatedthat,"unlesstheDSBdecidesotherwise,theissueofimplementationoftherecommendations
orrulings shallbeplaced ontheagenda oftheDSBmeeting aftersixmonths following thedateof
establishment ofthereasonable period oftimepursuant toparagraph 3andshallremain ontheDSB's
agenda untiltheissue isresolved". Herecalled thatattheDSBmeetings inJanuary, February and
1TheNotice ofAppeal wascirculated inWT/DS31/5.WT/DSB/M/32
Page2
March 1997, theUnited States hadsubmitted status reports onthismatter inaccordance withtheabove-
mentioned requirement. Hedrewattention todocument WT/DS2/10/Add.3 containing afurther status
report bytheUnited States.
Therepresentative oftheUnited States saidthat,asprovided forinArticle 21.6oftheDSU,
hiscountry hadsubmitted itsfourth report ontheimplementation oftheDSB'srecommendations with
regard tothismatter. Asnoted inthatreport, theexpectation oftheUnited States hadbeenthatthe
USEnvironmental Protection Agency (EPA) would beissuing aproposed revised ruleforcomments
inthenearfuture. Hewaspleased toreport thaton29April, theEPA'sadministrator hadissued the
proposed ruleforcomment which would bepublished intheUSFederal Register within thenextfew
days. Consistent withnormal USregulatory procedures, theEPAhadinvited allinterested parties
tocomment onthespecifics ofitsproposal. These comments would berequired tobereceived by
theEPAwithin 30daysafterthepublication oftheproposal intheFederal Register or,should apublic
hearing berequested, 44daysafterthedateofsuchpublication. Allcomments would beconsidered
prior tothefinalization oftherevised rule.
Indeveloping thisproposal, theUnited States hadcarefully considered andclosely analyzed
theissues involved inthishighly technical areainorder toimplement theDSB'srecommendations.
TheUnited States believed thatalthough itwasstillonlyaproposal, ifimplemented itwould meet
theconcerns thatBrazil andVenezuela hadexpressed during thedispute settlement proceedings and,
atthesametime, permit theUnited States tomeetitsenvironmental objectives. Thetextoftherevised
rulewould besenttoallgasoline exporting Members. Itwashoped thatgovernments would review
theproposal during thecomment period andsubmit comments totheUnited States prior totheclose
oftherequired time-period. Thiswould ensure thattheUnited States would takethemfullyintoaccount
informulating afinalrule.
Therepresentative ofVenezuela thanked theUnited States forproviding information withregard
tothepublication oftheproposed amendment totheGasoline Rule. HisGovernment would thoroughly
examine andsubmit itscomments totheUnited States onthisproposal. Venezuela expected thatthis
proposed amendment would beinconformity withtheDSB'srecommendations, andthatitwould enter
intoforce within thetime-period negotiated ingood faithbytheparties. Hehoped thattheUnited
States would inform theDSBofitsdomestic procedures withregard tothismatter.
Therepresentative ofBrazil thanked theUnited States fortheinformation withregard tothe
issuance oftheproposed rulebytheEPA. Henevertheless wished tocomment onthe15-month
implementation period. ItwasBrazil 'sunderstanding that112daysremained fortheimplementation
oftheDSB'srecommendations within theagreed reasonable period oftime. Henoted thatthe15-month
period which hadstarted on20May1996 would expire on20August 1997. There might beother
procedures required under USlawandadministrative practices thatwould require timeinaddition
tothe44daysmentioned bytheUnited States. Forexample, theseadditional procedures could include
a90-day review ofanyproposed rulebytheOffice ofManagement andBudget andanother 44-day
review ofthefinalrulebythatOffice. Brazil wasconcerned thatwithout anyapparent action bythe
United States, until29April, theUSdomestic legalrequirements would make compliance within the
agreed time-period impossible. Inorder toclarify this,herequested thattheUnited States inform the
DSB, inchronological order, ofanyadditional steps thatmight berequired under itsdomestic law
fortheimplementation oftheDSB'srecommendations, andthetimerequired foreachstep. Thiswould
helptoappreciate thesituation between thepublication oftheproposed ruleintheFederal Register
andthe20August deadline.
TheDSBtooknoteofthestatements andagreed torevert tothismatter atitsnextregular
meeting.WT/DSB/M/32
Page3
2. Indonesia -Certain measures affecting theautomobile industry
- Request fortheestablishment ofapanel byJapan (WT/DS55/6 -WT/DS64/4)
TheChairman drew attention tothecommunication from Japan indocument WT/DS55/6 -
WT/DS64/4 which contained itsrequest forapanel.
Therepresentative ofJapan saidthaton4October 1996, hiscountry hadrequested consultations
withIndonesia pursuant toArticle XXII:1 ofGATT 1994, withregard totheso-called "National Car
Programme" ofIndonesia 'sGovernment. On29November 1996, Japan hadrequested additional
consultations onthesame matter pursuant totherelevant provisions oftheAgreement onSubsidies
andCountervailing Measures (SCM Agreement). Japan hadclaimed thatthemeasures inquestions
were inconsistent withtheWTO Agreement, inparticular Articles I:1,III:2and4,X:1andX:3(a)
ofGATT 1994, Article 2oftheAgreement onTrade-Related Investment Measures (TRIMs Agreement)
andArticles 3.1(b) and28.2oftheSCM Agreement. Ithadstrongly requested Indonesia tobring
thesaidmeasures intoconformity withtheWTO Agreement.
Since these requests forconsultations hadbeen made thetwoparties hadheldseveral
consultations, inaddition toanumber ofintensive bilateral contacts aimed atfinding amutually
satisfactory solution tothismatter. However, todate, Japan hadfound thatthese efforts had
unfortunately failed tosettle thisdispute. Consequently, hisdelegation requested theestablishment
ofapanel withstandard terms ofreference toexamine thismatter.
JapanunderstoodperfectlythatIndonesiadesiredtobuilditsownautomotiveindustry.However,
suchapolicy should becarried outinaccordance withIndonesia 'srights andobligations under the
WTO Agreement. ItwasJapan'sunderstanding thatarequest fortheestablishment ofapanel did
notpreclude further consultations onthismatter. IfIndonesia sowished, Japan wasprepared tocontinue
efforts towards asatisfactory solution tothematter.
Therepresentative ofIndonesia saidthathercountry didnotagree totheestablishment ofa
panel atthepresent meeting. Indonesia regretted thatJapan haddecided nottocontinue thesincere
efforts toresolve thematter through consultations. Indonesia wasconvinced thatits"National Car
Programme" wasconsistent withitsWTO obligations and,ifnecessary, itwould prove thisinthepanel
proceedings.
Therepresentative oftheEuropean Communities saidthattheCommunities alsohadserious
concerns withregard towhether themeasures taken byIndonesia were compatible withtheWTO
Agreement. TheCommunities, which hadheldconsultations onthismatter withIndonesia2,supported
Japan'srequest forapanel.
TheDSBtooknoteofthestatements andagreed torevert tothismatter.
3. Brazil -Measures affecting imports oftextiles from Hong Kong
- Statement byHong Kong
Therepresentative ofHong Kong, speaking under "Other Business" saidthatArticle 3.6of
theDSUprovided thatmutually agreed solutions tomatters formally raised under thedispute settlement
provisions ofthecovered agreements benotified totheDSB. Atthepresent meeting, Hong Kong
wished toreport onthestatus ofitsdispute withBrazil which hadbeentaken upbytheTextiles
Monitoring Body (TMB) under theAgreement onTextiles andClothing (ATC). Todate,nomutually
2WT/DS54/1.WT/DSB/M/32
Page4
agreed solution hademerged fromtheTMB'srecommendations. Amutually agreed solution depended
onBrazil 'sresponse.
Herecalled thatinJune1996, Brazil hadimposed unilateral restrictions oncertain textile fabrics
fromHong Kong pursuant toArticle 6.11oftheATC. Hong Kong hadnotagreed withthejustification
oftherestrictions andconsequently thematter wasreferred totheTMB forexamination. Initsreport,
issued inNovember 1996, theTMB hadfound thatserious damage totheBrazilian industry inquestion
could bedemonstrated andthatthisdamage could beattributed inparttoimports from Hong Kong.
TheTMB, however, hadnotfound thatBrazil 'saction wasjustified under Article 6.11oftheATC,
which provided forprovisional measures inhighly unusual andcritical circumstances.
TheTMB hadrecommended thatBrazil rescind themeasure atthelatest by31December 1997,
i.e.19months afteritsimposition rather thatthethree-year period envisaged under Article 6.12of
theATC. Brazil hadinformed theTMB thatitwould endeavour toaccept infulltherecommendations
oftheTMB, buthadreserved itsrights under Article 6.12oftheATC, i.e.topreserve theoption
ofmaintaining themeasure forthree years rather thanthemaximum of19months recommended by
theTMB.
Hong Kong hadinformed theTMB thatithadbeenunable toaccept therecommendations and
theTMB hadconsidered thematter further inaccordance withArticle 8.10oftheATC. ThisArticle
alsoprovidedforinvocationofparagraph2ofArticleXXIIIofGATT1994ifsuchfurtherconsiderations
didnotresolve thematter. IthadbeenHong Kong'smaincontention thatthedataprovided byBrazil
tojustify therestrictions hadbeenmostly related toabroad industry, some hundred times bigger than
theparticular industry producing theproducts inquestion. Thisrancontrary totherequirements of
theATC.
Following itsfurther consideration inFebruary andMarch 1997, theTMB hadagreed with
Hong Kong'smaincontention thatadetermination ofserious damage could notbemade almost entirely
byreference toinferences drawn from thedatathatwere notspecific totheparticular industry in
question, apoint ofprinciple towhich Hong Kong attached great importance. TheTMB hadnot
conductedafreshexaminationwithaviewtoestablishingwhetherseriousdamagecouldbedemonstrated
based onthelimited amount ofproduct-specific information provided byBrazil. However, ithad
observed thatthere hadbeenindications thattheBrazilian industry producing fabrics ofcategory 618
hadalready undertaken important restructuring andadjustment. Inthiscontext, theTMB hadrecalled
thatithadrecommended toBrazil thatthemeasure taken against imports from Hong Kong should
berescinded atthelatest by31December 1997. ItwasHong Kong'sunderstanding thatthespirit
oftheTMB'sreport wasthatBrazil wasexpected torescind themeasure earlier thanthatdate. Hong
Kong hadanticipated thatBrazil would rescind themeasure ingood time. Thestatus ofthedispute
between Brazil andHong Kong wasthathisauthorities were stillawaiting aresponse from Brazil.
Hong Kong might needtorevert tothisdispute atafuture meeting oftheDSB. Ifso,hehoped that
thiswould beanotification under Article 3.6oftheDSU.
Therepresentative ofBrazil provided abriefsummary ofthebackground oftheissue raised
byHong Kong inorder tohelpMembers tohaveabetter understanding ofBrazil 'sposition. Asstated
indocument G/TMB/9, dated 8November 1996, which contained anexamination ofthetransitional
safeguard applied byBrazil on1June1996withregard toimports ofproducts ofcategory 618(woven
artificial filament fabric) fromHong Kong, theTMB hadreached thefollowing conclusions: "(a)serious
damage totheindustry producing products ofcategory 618,caused byincreased quantities intotal
imports oftheseproducts, could bedemonstrated; (b)theserious damage experienced bytheBrazilian
industry could beattributed inparttoimports from Hong Kong inaccordance withparagraph 4of
Article 6"oftheATC.WT/DSB/M/32
Page5
However, inlightofwhattheTMB hadseenasindications of"restructuring andadjustment"
onthepartoftheBrazilian industry thatproduced products ofcategory 618,theTMB hadrecommended
thatBrazil rescind thetransitional safeguard atthelatest by31December 1997, ayearandahalfafter
themeasure hadcome intoeffect. Inthesame report, theTMB hadalsorecommended thatBrazil
rescind atransitional safeguard applied toimports ofproducts ofcategory 838(men'sandboy'sshirts,
knitted orcrocheted, ofother textile materials) from Hong Kong.
On28November 1996, inaletter addressed totheChairman oftheTMB, Brazil hadinformed
theTMB thatitwould endeavour toaccept infulltherecommendations concerning thetransitional
safeguards applied toimports ofproducts ofcategories 618and838from Hong Kong. Brazil had
alsoreserved itsrights under Article 6.12oftheATC inrelation tosuchrecommendations. On2
December 1996, Hong Kong hadinformed theTMB thatithadbeenunable toconform withthe
recommendations concerning products ofcategory 618andhadasked theTMB, inaccordance with
Article 8.10oftheATC, forfurther recommendations. InMarch 1997, theTMB hadconcluded a
newreview ofthematter and"didnotconsider itappropriate torevise itsrecommendations adopted
inNovember 1996ortoissuefurther recommendations", asstated indocument G/TMB/R/26. Brazil
hadalready rescinded thetransitional safeguard onimports ofproducts ofcategory 838from Hong
Kong. Withregard toproducts ofcategory 618,taking intoconsideration theTMB'srecommendations,
andinlightofitsrightsandobligationsundertheATC,hiscountrywascarefullyfollowingdevelopments
intheindustry producing these products.
TheDSBtooknoteofthestatements.
4. United States -Measures affecting imports ofwoven wool shirts andblouses from India:
Appellate Body Report
- Statement bytheChairman
TheChairman,speakingunder"OtherBusiness",saidthattheAppellateBodyReporton"United
States -Measure Affecting Imports ofWoven Wool Shirts andBlouses fromIndia" hadbeencirculated
on25April 1997indocument WT/DS33/AB/R. Pursuant toArticle 17.14 oftheDSU "anAppellate
Body report shallbeadopted bytheDSBandunconditionally accepted bytheparties tothedispute
unless theDSBdecides byconsensus nottoadopt theAppellate Body report within 30daysfollowing
itscirculation toMembers". Henoted thatthe30-day period inthiscasewould expire on24May.
However, thenextregular meeting oftheDSBwasscheduled for28May. Inaccordance withfootnote
8ofArticle 17.14 oftheDSU, ifameeting oftheDSBwasnotscheduled during the30-day period,
suchameeting oftheDSBshallbeheldforthispurpose. Therefore, heproposed thattheDSBagree
toholditsnextregular meeting on23Mayinstead of28Mayinorder toconsider theadoption of
theAppellate Body Report andthePanel Report within thetime-period required under Article 17.14
oftheDSU, andthusavoid convening twoDSBmeetings within afive-day period. Ifagreed, the
deadline forinscription ofitems ontheagenda would beMonday, 12Mayat6p.m.andtheairgram
convening themeeting would beissued onTuesday, 13May.
TheDSBtooknoteofthestatement andagreed totheChairman 'sproposal.