WT/DS381/ARB/Add.1  
 
25 April 2017 
(17-2219) Page: 1/33 
  Original: English  
 
  UNITED STATES – MEASURES CONCERNING THE IMPORTATION, 
MARKETING AND SALE O F TUNA AND TUNA PROD UCTS  
RECOURSE TO ARTICLE  22.6 OF THE DSU BY T HE UNITED STATES  
DECISION BY THE ARBI TRATOR  
Addendum  
This addendum  contains Annexes A to B to the Decision by the  Arbitrator  to be found in document  
WT/DS381/A RB. 
 
 
_______________  
 
 WT/DS381/ARB/Add.1  
 
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  LIST OF ANNEXES  
ANNEX  A 
WORKING PROCEDURES O F THE ARBITRATOR  
Contents  Page  
Annex  A-1 Working Procedures of the Arbitrator  A-2 
Annex  A-2 Procedures of the Arbitrator Concerning Business Conf idential Information  A-5 
Annex  A-3 Additional Working Procedures of the Arbitrator on Partially Open Meetings  A-6 
ANNEX B  
ARGUMENTS OF THE PAR TIES 
Contents  Page  
Annex  B-1 Executive summary of the arguments of Mexico  B-2 
Annex  B-2 Executive summary of t he arguments of the United States  B-10 
 
 WT/DS381/ARB/Add.1  
 
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  ANNEX  A 
WORKING PROCEDURES O F THE ARBITRATOR  
Contents  Page  
Annex  A-1 Working Procedures of the Arbitrator  A-2 
Annex  A-2 Procedures of the Arbitrator Concerning Business Confidential Information  A-5 
Annex  A-3 Additional Working Procedures of the Arbitrator on Partially Open Meetings  A-6 
 
 WT/DS381/ARB/Add.1  
 
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  ANNEX  A-1 
WORKING PROCEDURES O F THE ARBITRATOR  
Adopted on 7 June 2016  
 
Modified on 3 August 2016  
 
1.  In its proceedings, the Arbitrator shall follow the relevant provisions of  the Understanding on 
Rules and Procedures Governing the Settlement of Disputes (DSU). In addition, the following 
Working Procedures shall apply.  
General  
 
2.  The deliberations of the Arbitrator and the documents submitted to it shall be kept confidential.  
Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute (hereafter 
"party") from disclosing statements of its own positions to the public. Business Confidential 
Information (BCI), as defined in the Arbitrator's Additional P rocedures Concerning Business 
Confidential Information, shall be submitted and treated in accordance with those Additional 
Procedures.  
3.  The Arbitrator shall conduct its internal deliberations in closed session. The parties shall be 
present at meetings only when invited by the Arbitrator to appear before it. The Arbitrator may, 
upon request by a party, authorize that party to lift the confidentiality, by way of delayed viewing, 
of its own statements made during the Arbitrator's meeting with the parties. Such lifting of 
confidentiality will be authorized only where it does not impair or otherwise interfere with either 
the rights of the other party or the integrity and promptness of the dispute settlement process. 
Moreover, such lifting of confidentiality s hall be in accordance with additional working procedures, 
to be adopted by the Arbitrator after consulting with the parties. A request that the Arbitrator 
adopt additional working procedures to facilitate this lifting of confidentiality shall be made to th e 
Arbitrator no fewer than six weeks before the meeting where the statements in question will be 
delivered.  
4.  Each party has the right to determine the composition of its own delegation when meeting with 
the Arbitrator. Each party shall have responsibili ty for all members of its own delegation and shall 
ensure that each member of such delegation acts in accordance with the DSU and these Working 
Procedures, particularly with regard to the confidentiality of the proceedings.  
Submissions  
 
5.  Mexico shall t ransmit to the Arbitrator and to the United States a communication explaining the 
basis for its request, including the methodology and data supporting it, in accordance with the 
timetable adopted by the Arbitrator.   
6.  Each party to the dispute shall als o transmit to the Arbitrator a written submission in which it 
presents the facts of the case and its arguments, in accordance with the timetable adopted by the 
Arbitrator.  
7.  A party shall submit any request for a preliminary ruling at the earliest possib le opportunity 
and in any event no later than in its written submission to the Arbitrator. If the United States 
requests such a ruling in its written submission to the Arbitrator, Mexico shall submit its response 
to the request in its written submission. I f Mexico requests such a ruling in its written submission 
to the Arbitrator, the United States shall submit its response to the request prior to the substantive 
meeting, at a time to be determined by the Arbitrator in light of the request. Exceptions to th is 
procedure shall be granted upon a showing of good cause.  
8.  Each party shall submit all factual evidence to the Arbitrator no later than in its written 
submission, except with respect to evidence necessary for purposes of rebuttal, answers to WT/DS381/ARB/Add.1  
 
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  questions  or comments on answers provided by the other party. Exceptions to this procedure shall 
be granted upon a showing of good cause. Where such exception has been granted, the Arbitrator 
shall accord the other party a period of time for comment, as appropriate , on any new factual 
evidence submitted after the substantive meeting.  
9.  Where the original language of exhibits is not a WTO working language, the submitting party 
shall submit a translation into the WTO working language of the submission at the same t ime. The 
Arbitrator may grant reasonable extensions of time for the translation of such exhibits upon a 
showing of good cause. Any objection as to the accuracy of a translation should be raised promptly 
in writing, preferably no later than the next filing or meeting (whichever occurs earlier) following 
the submission which contains the translation in question. The Arbitrator may grant reasonable 
extensions of time for the filing of such objection upon a showing of good cause. Any objection 
shall be accompan ied by a detailed explanation of the grounds of objection and an alternative 
translation.  
10.  In order to facilitate the work of the Arbitrator, each party is invited to make its submissions 
in accordance with the WTO Editorial Guide for Submissions, as relevant and to the extent that it is 
practical to do so.  
11.  To facilitate the maintenance of the record of the dispute and maximize the clarity of 
submissions, each party shall sequentially number its exhibits throughout the course of the 
proceedings. For example, exhibits submitted by Mexico could be numbered MEX -1, MEX -2, etc. If 
the last exhibit in connection with the first submission was numbered MEX -5, the first exhibit of 
the next submission thus would be numbered MEX -6. 
Questions  
 
12.  The Arbitr ator may at any time pose questions to the parties, orally or in writing, including 
prior to the substantive meeting.   
Substantive meeting  
 
13.  Each party shall provide to the Arbitrator the list of members of its delegation in advance of 
each meeting w ith the Arbitrator and no later than 5.00  p.m. the previous working day.  
14.  The substantive meeting of the Arbitrator with the parties shall be conducted as follows:  
a. The Arbitrator shall invite the United States to make an opening statement to presen t its case 
first. Subsequently, the Arbitrator shall invite Mexico to present its point of view. Before each 
party takes the floor, it shall provide the Arbitrator and other participants at the meeting with a 
provisional written version of its statement. E ach party shall make available to the Arbitrator 
and the other party the final version of its statement, preferably at the end of the meeting, and 
in any event no later than 5.00  p.m. on the first working day following the meeting.  
b. After the conclusion of the statements, the Arbitrator shall give each party the opportunity to 
ask each other questions or make comments, through the Arbitrator. Each party shall then 
have an opportunity to answer these questions orally. Each party shall send in writing, with in a 
timeframe to be determined by the Arbitrator, any questions to the other party to which it 
wishes to receive a response in writing. Each party shall be invited to respond in writing to the 
other party's written questions within a deadline to be determ ined by the Arbitrator.  
c. The Arbitrator may subsequently pose questions to the parties. Each party shall then have an 
opportunity to answer these questions orally. The Arbitrator shall send in writing, within a 
timeframe to be determined by it, any quest ions to the parties to which it wishes to receive a 
response in writing. Each party shall be invited to respond in writing to such questions within a 
deadline to be determined by the Arbitrator.  
d. Once the questioning has concluded, the Arbitrator shall a fford each party an opportunity to 
present a brief closing statement, with the United States presenting its statement first.  WT/DS381/ARB/Add.1  
 
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  Executive summaries  
 
15.  The description of the arguments of the parties in the Decision of the Arbitrator shall consist 
of execu tive summaries provided by the parties, which shall be annexed as addenda to the 
decision. These executive summaries shall not in any way serve as a substitute for the 
submissions of the parties in the Arbitrator's examination of the case.  
16.  Each party  shall submit an executive summary of the facts and arguments as presented to the 
Arbitrator in its written submissions and oral statements, in accordance with the timetable adopted 
by the Arbitrator.  Each such executive summary shall not exceed 15 pages.  The Arbitrator will not 
summarize in a descriptive part, or annex to its decision, the parties' responses to questions.  
Service of documents  
 
17.  The following procedures regarding service of documents shall apply:  
a. Each party shall submit all document s to the Arbitrator by filing them with the DS  Registry 
(office No. 2047).  
b. Each party shall file five (5) paper copies of all documents it submits to the Arbitrator. 
However, when exhibits are provided on CD -ROMS/DVDs, four (4) CD -ROMS/DVDs and two (2)  
paper copies of those exhibits shall be filed. The DS  Registrar shall stamp the documents with 
the date and time of the filing. The paper version shall constitute the official version for the 
purposes of the record of the dispute.  
c. Each party shall also  provide an electronic copy of all documents it submits to the Arbitrator at 
the same time as the paper versions, preferably in Microsoft Word format, either on a CD -
ROM, a DVD or as an e -mail attachment. If the electronic copy is provided by e -mail, it sh ould 
be addressed to DSRegistry@wto.org, with a copy to ***.***@wto.org, ***.***@wto.org, 
***.***@wto.org , ***.***@wto.org , and ***.***@wto.org. If a CD -ROM or DVD is provided, 
it shall be filed with the DS Registry.  
d. Each party shall serve any document submitted to the Arbitrator directly on the other party. 
Each party shall confirm, in writing, that copies have been served as required at the time it 
provides each document to the Arbitrator.  
e. Each party shall file its documents with the DS Registry and serve copies on the other party by 
5.00 p.m. (Geneva time) on the due dates established by the Arbitrator. A party may submit 
its documents to another par ty in electronic format only, subject to the recipient party's prior 
written approval and provided that the Arbitrator's Secretary is notified.  
f. The Arbitrator shall provide the parties with an electronic version of its decision, as well as of 
other docu ments as appropriate. When the Arbitrator transmits to the parties both paper and 
electronic versions of a document, the paper version shall constitute the official version for the 
purposes of the record of the dispute.  
Modification of Working Procedures  
18.  The Arbitrator reserves the right to modify these procedures as necessary, after consultation 
with the parties.  
 WT/DS381/ARB/Add.1  
 
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  ANNEX A -2 
PROCEDURES OF THE AR BITRATOR CONCERNING BUSINESS CONFIDENTIA L INFORMATION1 
(DS381)  
Adopted on 7 June 2016  
 
1. These procedures a pply to any business confidential information (BCI) that a party submits 
to the Arbitrator.  
2. For the purposes of these procedures, BCI is defined as any information that has been 
designated as such by the party submitting the information and that is not  available in the public 
domain and the release of which could reasonably be considered to cause or threaten to cause 
harm to an interest of the person or entity that supplied the business information to the party.  
3. No person may have access to BCI excep t a member of the Secretariat or the Arbitrator, a 
party's employee participating in the dispute, and a party's outside advisor for purposes of this 
dispute. However, an outside advisor is not permitted access to BCI if that advisor is an officer or 
employ ee of an enterprise engaged in the production, export, or import of tuna or tuna products. 
When a party provides BCI to an outside advisor who is an employee or officer of an industry 
association of such enterprises, that party shall obtain written assuran ces from such advisor that 
he or she has read and understands these procedures and will not disclose any BCI in 
contravention of these procedures.  
4. A party obtaining access to BCI as a result of the BCI being submitted in this dispute shall 
treat it as c onfidential, i.e. shall not disclose that information other than to those persons 
authorized to receive it pursuant to these procedures. Each party shall have responsibility in this 
regard for its employees as well as any outside advisors for the purposes of this dispute. BCI 
obtained under these procedures may be used only for the purpose of providing information and 
argumentation in this dispute.  
5. A party submitting or referring to BCI in a document shall mark the cover and each page of 
the document to indicate the presence of BCI in the document as follows: BCI  shall be placed 
between double brackets (for example, [[xx,xxx.xx]]). The cover and the top of each page of the 
document shall contain the notice "Contains Business Confidential Information". Any BCI that is 
submitted in electronic form shall be clearly marked with the phrase "Contains BCI" on a label on 
the storage medium, and clearly marked with the phrase "Contains BCI" in the electronic file 
name.  
6. The parties and the Arbitrator shall store all documents containing BCI so as to prevent 
unauthorized access to such information.  
7. The Arbitrator shall not disclose BCI, in its decision or in any other way, to persons not 
authorized under these procedures to have access to BCI. The Arbitrator may , however, make 
statements of conclusion drawn from such information. Before the Arbitrator makes its decision 
publicly available, the Arbitrator shall give each party an opportunity to ensure that the decision 
does not contain any information that it has designated as BCI.  
                                               
1 These procedures are adopted according to, and are an integral part of, the Arbitrator 's Working 
Procedures of 7 June  2016.  WT/DS381/ARB/Add.1  
 
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  ANNEX A -3 
ADDITIONAL WORKING P ROCEDURES OF THE ARB ITRATOR ON PARTIALLY  OPEN MEETINGS  
Adopted on 18 October 2016  
 
 Having regard to paragraph 3 of the Arbitrator's Working Procedures, and having received a 
request from the United States for the adoption of additional working procedures to facilitate the 
lifting of the confidentiality of its statements at the Arbitrator's meeting with the parties, the 
Arbitrator has, after consulting with the parties, adopted the following Additional Worki ng 
Procedures:  
1   DEFINITIONS  
1.1.  For the purposes of these Additional Working Procedures:  
a. "Disclosing party" means any party that wishes to lift the confidentiality of its statements 
at the Arbitrator's meeting with the parties;  
b. "Non-disclosing p arty" means any party that wishes to maintain the confidentiality of its 
statements at the Arbitrator's meeting with the parties;  
c. "Statement" means:  
i. A party's opening oral statement;  
ii. A party's closing oral statement;  
iii. A party's oral respons es to questions from the Arbitrator concerning (a) issues of 
law; and (b) the disclosing party's own exhibits, arguments, or positions (referred to 
in these Working Procedures as a "paragraph 1.1(c)(iii) question");  
excluding, however, any part or section of those items that discloses, directly or 
indirectly, the exhibits, arguments, or positions of a non -disclosing party. Any part or 
section of the items that discloses, directly or indirectly, the exhibits, arguments, or 
positions of a non -disclosing party  shall, prior to the delayed viewing, be redacted in 
accordance with the procedures provided for in Section 4 of these Additional Working 
Procedures.  
d. "Delayed viewing" means the broadcasting by the WTO Secretariat, after the conclusion 
of the Arbitrator 's meeting with the parties, of the statements of disclosing parties that 
have been recorded and redacted in accordance with Sections 3 and 4 of these 
Additional Working Procedures.  
2  GENERAL  
2.1.  Disclosure by a disclosing party of its statements at th e Arbitrator's meeting with the parties 
shall be by way of delayed viewing. The viewing shall be in a room inside the WTO Secretariat 
building. It will be open to officials of WTO Members and Observers, and, upon registration with 
the Secretariat, to accre dited journalists, accredited representatives of non -governmental 
organizations, and other interested persons, including members of the public. The names of all 
persons registered to attend the delayed viewing will be shared with the parties. To this effec t, the 
Secretariat will place a notice on the WTO website, informing the public of the delayed viewing and 
including a link through which members of the public can register to attend. The notice shall 
specify: (a) that the names of all persons registered t o attend the delayed viewing will be shared 
with the parties; and (b) that no person attending the delayed viewing is allowed to use electronic 
devices to record any portion of the broadcast.  
2.2.  The date of the delayed viewing will be decided by the Arb itrator after consulting with the 
parties. The redacted recording will be broadcast once, simultaneously in English and Spanish.  WT/DS381/ARB/Add.1  
 
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  3  RECORDING OF STATEME NTS 
3.1.  In accordance with the usual practice of the WTO, the audio of the entirety of the Arbitrator 's 
meeting with the parties (including the floor recording and interpretation) shall be recorded and 
entered into the dispute record.  
3.2.  The entirety of a disclosing party's opening and closing oral statements shall be video 
recorded, except as provided  for in paragraph 3.7.  
3.3.  A disclosing party's oral responses to paragraph 1.1(c)(iii) questions shall also be video 
recorded, except as provided for in paragraph 3.4. A disclosing party shall advise the Arbitrator, 
prior to responding to a paragraph 1. 1(c)(iii) question, if its response to that question discloses, 
directly or indirectly, the exhibits, arguments, or positions of a non -disclosing party.  
3.4.   To facilitate the implementation of paragraph 3.3:  
a. The Arbitrator shall, when it sends advanc e questions to the parties, indicate which 
questions it considers meet the definition in paragraph 1.1(c)(iii) of these Additional 
Working Procedures.  
b. Either disputing party shall promptly inform the Arbitrator if it considers (a) that a 
question indica ted by the Arbitrator as meeting the definition in paragraph 1.1(c)(iii) 
does not meet that definition; or (b) that a question not indicated by the Arbitrator as 
meeting the definition in paragraph 1.1(c)(iii) meets that definition. The Arbitrator, after 
hearing the views of the other disputing party, will decide whether the question meets 
the definition in paragraph 1.1(c)(iii).  
c. Spontaneous questions asked by the Arbitrator during the course of the meeting shall 
not be recorded.  
3.5.  The video recordin g foreseen under paragraphs 3.2 and 3.3 shall be entered into the dispute 
record.  
3.6.  The video recording foreseen under paragraphs 3.2 and 3.3 shall be made from a single 
camera. The camera shall be set at the same position, zoom, and focus throughout t he meeting.  
3.7.  In addition to the video recording foreseen under paragraphs 3.2 and 3.3, a secondary video 
recording, using a separate video recording channel but captured from the video camera 
referenced in paragraph 3.6 will be made of the entirety of  the Arbitrator's meeting with the 
parties for back -up purposes. Except where the primary video recording is technically defective, 
this secondary video will not be used when the Secretariat compiles the video for the delayed 
viewing, and will be deleted o nce the procedures provided for in Section 4 of these Additional 
Working Procedures have been completed.   
3.8.  A disclosing party shall advise the Arbitrator prior to addressing its own or another party's 
BCI in its statements. When a disclosing party so  advises, both video recordings will be 
discontinued for the relevant portion of the statement, after which the video recordings will be 
resumed. At the conclusion of a disclosing party's statement, the Arbitrator will ask the non -
disclosing party to confi rm that none of its own BCI was disclosed during the video recorded 
portion of the statement. In the interests of ensuring an efficient meeting, a disclosing party is 
invited to structure its statements so as to first deliver a non -BCI portion before deliv ering a 
portion that contains BCI.  
4  REDACTION OF RECORDE D STATEMENTS  
4.1.  In order to ensure, pursuant to paragraph 3 of the Arbitrator's Working Procedures, that 
disclosure by a disclosing party of its statements at the Arbitrator's meeting with the p arties does 
not impair or otherwise interfere with either the rights of a non -disclosing party or the integrity 
and promptness of the dispute settlement process, statements recorded pursuant to Section 3 of 
these Additional Working Procedures shall be reda cted as described in this Section prior to delayed 
viewing.  WT/DS381/ARB/Add.1  
 
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  4.2.  A disclosing party shall indicate, in the final written version of its opening and closing oral 
statements, which paragraphs disclose, directly or indirectly, the exhibits, arguments, or pos itions 
of a non -disclosing party. For example, a disclosing party could use the following phrases in the 
final written version of its opening and closing oral statements: *Beginning of discussion of [non -
disclosing party]'s submissions* and *End of discuss ion of [non -disclosing party]'s submissions*. 
Paragraphs that disclose, directly or indirectly, the exhibits, arguments, or positions of a non -
disclosing party shall be redacted from the video recording. In order to avoid unnecessary 
discontinuity in the d elayed viewing, a disclosing party is invited to structure its statements in such 
a way as to separate those statements that disclose, directly or indirectly, the exhibits, arguments, 
or positions of a non -disclosing party.  
4.3.  Pursuant to paragraph 3.3  of these Additional Working Procedures, where a response to a 
paragraph 1.1(c)(iii) question discloses, directly or indirectly, the exhibits, arguments, or positions 
of a non -disclosing party, that response shall be redacted from the video recording.  
4.4.  Following the conclusion of the Arbitrator's meeting with the parties, the Arbitrator will review 
the recorded statements and the final written versions of a disclosing party's opening and closing 
oral statements. Using the paragraph numbers contained i n the final written version of a disclosing 
party's opening and closing oral statements, the Arbitrator will identify to the disputing parties any 
paragraphs additional to those identified by the disclosing party pursuant to paragraph 4.2 that, in 
the Arbi trator's view, disclose, directly or indirectly, the exhibits, arguments, or positions of a non -
disclosing party. These paragraphs will be redacted from the video recording, except as provided 
for in paragraph 4.7.   
4.5.  Following the conclusion of the A rbitrator's meeting with the parties, the Arbitrator will review 
the video recording of a disclosing party's oral responses to paragraph 1.1(c)(iii) questions. The 
Arbitrator will identify to the disputing parties, by reference to the question number, any 
responses additional to the responses identified by the disclosing party pursuant to paragraph 3.3 
of these Additional Working Procedures that, in the Arbitrator's view, disclose, directly or 
indirectly, the exhibits, arguments, or positions of a non -disclosing party. These responses will also 
be redacted from the video recording, except as provided for in paragraph 4.7.  
4.6.   If a non -disclosing party considers that any part of the video -recorded statements not 
identified by a disclosing party (pursuant to paragraphs 4.2 and 4.3 of these Additional Working 
Procedures) or redacted by the Arbitrator (pursuant to paragraph 4.4 or 4.5 of these Additional 
Working Procedures) discloses, directly or indirectly, the exhibits, arguments, or positions of a 
non-disclosing party, that party may bring such part of the video -recorded statements to the 
attention of the Arbitrator (through the Secretariat) and the disclosing party. Such notification 
should be made within a deadline to be specified by the Arbitrator, and s hould identify the 
particular paragraph of the relevant opening or closing statement (or, where relevant, third party 
statement), or the particular response by question number, and indicate how, in the view of the 
notifying party, it discloses, directly or  indirectly, the exhibits, arguments, or positions of a non -
disclosing party. Before the Arbitrator makes a decision regarding any identified issue, the 
disclosing party will be afforded an opportunity to explain where appropriate why, in its view, the 
identified part of the video -recorded statements does not disclose, directly or indirectly, the 
exhibits, arguments, or positions of a non -disclosing party.  
4.7.  If a disclosing party considers that any part of the video -recorded statements redacted by the 
Arbitrator (pursuant to paragraph 4.4 or 4.5 of these Additional Working Procedures) does not 
disclose, directly or indirectly, the exhibits, arguments, or positions of a non -disclosing party, that 
party may bring such part of the video -recorded statements  to the attention of the Arbitrator 
(through the Secretariat) and the non -disclosing party. Such notification should be made within a 
deadline to be specified by the Arbitrator, and should identify the particular paragraph of the 
relevant opening or closin g statement (or, where relevant, third party statement), or the particular 
response by question number, and indicate how, in the view of the notifying party, it does not 
disclose, directly or indirectly, the exhibits, arguments, or positions of a non -disclosing party. 
Before the Arbitrator makes a decision regarding any identified issue, the non -disclosing party will 
be afforded an opportunity to explain where appropriate why, in its view, the identified part of the 
video -recorded statements does disclose, directly or indirectly, the exhibits, arguments, or 
positions of a non -disclosing party.  WT/DS381/ARB/Add.1  
 
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  4.8.  The Arbitrator is mindful of the need to ensure the promptness of the dispute settlement 
process. Therefore, in the interests of ensuring the workability and ef ficiency of these Additional 
Working Procedures, where a paragraph of a disclosing party's opening or closing oral statements, 
or a disclosing party's response to a paragraph 1.1(c)(iii) question, is found to disclose, directly or 
indirectly, the exhibits,  arguments, or positions of a non -disclosing party, the entire paragraph or 
response will be redacted, even if the paragraph or response also contains content that does not 
disclose, directly or indirectly, the exhibits, arguments, or positions of a non -disclosing party.  
4.9.  If either party requests to view the redacted video recording prior to the delayed viewing, the 
Arbitrator will invite both parties to attend a preview session, accompanied by a representative of 
the Secretariat, on the premises of t he WTO. The preview session will be held on a date to be 
determined by the Arbitrator in consultation with the parties.  
4.10.  The Arbitrator retains the right to modify these procedures after consulting with the parties.  
 
_______________  
 
 
 WT/DS381/ARB/Add.1  
 
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  ANNEX  B 
ARGUM ENTS OF THE PARTIES  
Contents  Page  
Annex  B-1 Executive summary of the arguments of Mexico  B-2 
Annex  B-2 Executive summary of the arguments of  the United States  B-10 
 
 WT/DS381/ARB/Add.1  
 
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  ANNEX  B-1 
EXECUTIVE SUMMARY OF  THE ARGUMENTS OF MEX ICO 
1. Mexico's methodology paper de monstrates that the amended 2013 Tuna Measure (Tuna 
Measure) in place at the expiration of the reasonable period of time (RPT) on 13 July 2013 has 
caused significant monetary losses to the Mexican tuna industry from reduced export revenues. 
Because the Uni ted States has not brought the Tuna Measure into conformity with its obligations, 
Mexico is seeking authorization to suspend concessions in the amount of USD $472.3 million.  
2. Under Article 22.4 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes  (DSU), the level of suspension must be "equivalent to the level of the 
nullification or impairment". In the present case, the Arbitrator's mandate under Articles 22.6 and 
22.7 of the DSU is to determine whether the proposed level of t he suspension of concessions 
requested by Mexico is equivalent to the level of the nullification or impairment of benefits 
accruing to Mexico as a result of the United States' failure to bring its WTO -inconsistent Tuna 
Measure into compliance. To determine  the level of benefits to suspend, Mexico has compared the 
actual circumstances of the U.S. market for Mexican tuna products during 2014 (first calendar year 
after the expiration of the RPT on 13 July 2013) to a counterfactual in which the WTO -inconsistent  
discriminatory aspects of the original and amended Tuna Measure were eliminated. The difference 
between those circumstances is the amount of the nullification or impairment caused by the 
amended Tuna Measure.1 
3. Mexico's methodology and calculations are based on a calibrated partial equilibrium model 
of the American and Mexican canned tuna markets. The calculations assume a counterfactual for 
2014 where there is no measure for the labeling of tuna as "dolphin -safe" that discriminates in a 
WTO-inconsistent  manner between Mexican tuna products and tuna products from the United 
States and other countries.  
4. The structure of Mexico's model to calculate the level of nullification or impairment is as 
follows. First, demand equations for tuna products in the Uni ted States and Mexico are derived 
based on consumers' preference for yellowfin tuna and generic tuna (all other tuna) and 
consumption values in 2014. Second, supply equations for canned yellowfin tuna and canned 
generic tuna to the United States and Mexico  are derived based on observed supply in 2014. Third, 
the model finds the market equilibrium under the counterfactual where the Tuna Measure is 
removed.  The model's solution yields increased exports of Mexican canned yellowfin tuna products 
to the United States. Under this counterfactual, based on values observed for 2014, Mexico 
exports a total of USD $495 million (63,568 metric tonnes x USD $7.79/kg) of canned tuna to the 
United States. Trade loss for Mexico is calculated by deducting from the aforementi oned figure the 
actual value of exports of Mexican canned tuna to the United States in 2014 (USD $22.65 million), 
which gives rise to an amount of USD $472.3 million annually.  
5. In response, the United States proposes a "market -based approach" that builds  on the 
comparison, on a prospective basis, of the U.S. imports from Mexico of tuna product with the 
measure in place to the level of imports that would occur if the measure were withdrawn. The 
approach used by the United States is flawed in many ways. For  example, the U.S. calculations are 
based on data from the late 1980s. The amount of time elapsed is too long to make the late 1980s 
a proper counterfactual for 2014 as markets for canned tuna have very much changed since then. 
Further, the U.S. methodolog y assumes that retailers accounting for 46.4 percent of the U.S. 
market for tuna products will not purchase and offer for sale Mexican tuna products because the 
tuna was caught using the AIDCP -certified dolphin encirclement fishing method.2 In addition, th e 
United States assumes that 100 percent of tuna products from all other sources will be able to use 
the dolphin -safe label.3 All of these assumptions are incorrect.  
                                               
1 The relevant data is more readily available on a calendar year basis and 2014 is the most immediate 
calendar year following the end of the RPT.  This approach is consistent with Mexico 's approach in the 
Article  22.6 arbitration in US – COOL  where the RPT expired on 23 May 2013 and the baseline year for Mexico 's 
and the arbitrator 's analysis was calendar year 2014.  
2 U.S. written submission, paras. 135 -136. 
3 U.S. written submission, paras. 71, 76 and 123.  WT/DS381/ARB/Add.1  
 
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  6. Mexico's methodology paper need only present a counterfactual that is "plausible" or 
"reasonable". It is not for an arbitrator to speculate on what might have been the "most likely" 
scenario of compliance by the Member concerned;4 rather, a counterfactual should reflect at least 
a "plausible" or "reasonable" compliance scenario.5 For the Uni ted States to merely present an 
alternative methodology, scenario or period (i.e., 2015) is insufficient to rebut the level of 
nullification or impairment in Mexico's methodology paper. In US – COOL , the Arbitrator stated 
that "[i]n the absence of a demons tration that the proposing party's methodology is incorrect, the 
mere submission of an alternative methodology would not meet the objecting party's burden of 
proof".6 This standard is consistent with the burden of proof applied in other arbitrations, inclu ding 
EC – Hormones (US) (Article 22.6 – EC), EC – Bananas III (Ecuador) (Article 22.6 – EC) and US – 
1916 Act (EC) (Article 22.6 – US). 
7. Thus, the United States bears the initial burden of establishing a prima facie  case that the 
level of suspension of b enefits requested by Mexico is not in accordance with the requirements of 
the DSU. The United States has failed to discharge its burden. There are significant 
mischaracterizations and misinterpretations of economic concepts in the United States' criticisms  
of Mexico's methodology, and also legal errors in the alternative methodology that the United 
States proposes. Mexico's comprehensive analysis is the appropriate approach under the 
circumstances, and it has been properly applied to accurately estimate the  level of nullification and 
impairment caused by the amended Tuna Measure. The United States' incorrect criticisms and 
flawed alternative "market -based approach" that relies on historical levels of U.S. imports of 
Mexican tuna and tuna products prior to 19 90 (1987 -1989)  are therefore insufficient to establish a 
prima facie  case that Mexico's methodology is inconsistent with DSU Article 22.4. Thus, there is no 
basis to reject the use of 2014 as the period of reference in Mexico's methodology paper or to use 
the United States' projections.  
8. In the event that the Arbitrator disagrees and finds instead that the United States has 
established a prima facie  case, in whole or in part, then Mexico submits that even if the alternative 
counterfactual proposed by the United States is used, the level of nullification or impairment will 
not change, provided that reasonable assumptions are made under that counterfactual. That 
counterfactual assumes a scenario whereby Mexican tuna products can use the AIDCP -certified 
dolph in-safe label, and all other tuna products can use a dolphin -safe label provided that it is 
accurate and does not deceive U.S. consumers. The level of the nullification or impairment 
estimated by Mexico will be no lower, and possibly higher, under the U.S.  counterfactual.7 
The measure to be analyzed is the 2013 Tuna Measure  
9. As the Arbitrator confirmed, its sole mandate in this arbitration is to either confirm or 
determine the appropriate level of suspension for the purposes of Article 22 of the DSU with 
respect to the 2013 Tuna Measure. This is consistent with the provisions of the DSU and the 
Understanding between the United States and Mexico regarding Procedures under Articles 21 and 
22 of the DSU ,8 since the arbitration is based on the DSB's recommenda tions and rulings pursuant 
to Article 21.5 in the first compliance proceeding, specifically with regard to the nullification and 
impairment sustained by Mexico as a result of the United States' failure to bring the tuna measure, 
                                               
4 US - Gambling (Article  22.6 - US), paras. 3.26 ( "We do not consider that the proposed counterfactual 
must necessarily reflect the 'most likely ' scenario of compliance by the Member concerned. … It is not for us to 
speculate on what might have been the 'most likely ' such scenari o") and 3.56 ( "whether the scenario at issue 
is the 'most likely ' … is not pertinent as such in our determination "). 
5 US - Gambling (Article 22.6 - US), paras. 3.26 -3.27 and 3.56.  
6 Decisions by the Arbitrators, US – COOL , para. 4.12.  
7 In its description  of the history in paragraph 11 of its written submission, the United States omits to 
mention that the United States maintained a complete embargo  on imports of Mexican yellowfin tuna products 
from 1999 until 2000, although the embargo had been found incon sistent with the United States ' 
GATT  obligations in 1991. US – Tuna (Mexico) (GATT) .  The United States also omits that, in connection with 
the creation of the AIDCP, in the 1995 Panama Declaration the United States committed to revise the definition 
of "dolphin -safe" in the tuna measure to match that of the AIDCP.  See Panel Report, US – Tuna II (Mexico) , 
paras. 2.35 –2.39.  Moreover, the United States sought to implement that commitment until the Hogarth court 
ruling in 2007.  See Panel Report, US – Tuna I I (Mexico) , paras. 4.23 –4.24 and 7.332. Mexico reaffirms that its 
tuna industry has been improperly blocked from the U.S. market for over 25 years.  Mexico also notes that the 
United States incorrectly states that Mexico initiated the WTO proceedings in 20 09; Mexico initiated the 
proceedings in 2008, shortly after the United States indicated it was giving up on implementing its 
commitment. WT/DS381/1 (28 Oct. 2008).  
8 Understanding between the United States and Mexico regarding Procedures under Articles 21 and 22 
of the DSU, US – Tuna II (Mexico) , WT/DS381/19 (7 Aug. 2013).  WT/DS381/ARB/Add.1  
 
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  as amended by the 2013 Fina l Rule, into compliance before the expiry of the RPT on 13 July 2013.9 
Thus, Mexico's  model is based on the 2013 Tuna Measure.  
Appropriateness of Mexico's Partial Equilibrium Model  
10. The partial equilibrium model presented by Mexico is fully consistent with the proposed 
counterfactual for the calculation of the export losses to Mexico. A simulation using a partial 
equilibrium model is the proper method to employ given the data available and the amount of time 
since the adoption of the tuna measure. Mexic o follows a state -of-the-art approach in its 
simulation.10 Simulations in partial equilibrium models have been used in previous disputes at the 
WTO (e.g.,  US – Upland cotton , US – COOL ). The partial equilibrium model of Mexico focuses very 
precisely on the  issue at hand, which is the modification of the Tuna Measure in a manner that is 
consistent with WTO obligations.  
11. Mexico's partial equilibrium model captures the essential features of the canned tuna 
market in the United States and Mexico. The product ion of canned tuna in Mexico is mostly 
specialized in the production of canned yellowfin tuna, which is of higher quality than the average 
tuna quality consumed in the United States.  
12. The partial equilibrium model is calibrated to data observed for 2014 . As such, it captures 
the state of the market in 2014 and incorporates in the demand curves relative preferences and 
substitution between generic tuna and yellowfin tuna and income, and it incorporates in the supply 
curves input prices, production technol ogy and expectations. Equilibrium prices and quantities are 
found at the intersection of demand and supply curves.  
Supply and demand equations for the U.S. Market  
13. Mexico's  model is based on the total supply of canned tuna to the United States observe d 
in 2014. At the margin, the price of canned tuna in the U.S. market is determined by the world 
supply of canned tuna to the United States. The world supply of canned tuna to the United States 
is assumed perfectly elastic in Mexico's model because the Uni ted States is a relatively small 
market for canned tuna but this can be adjusted.11  
14. The total U.S. import cost of canned tuna products (which is the sum of the import value, 
the duties and the charges, divided by the import quantities) in 2014 was on average 
USD $5.00/kg, significantly more than the import cost of tuna from Mexico, which was 
USD $4.06/kg. The supply of canned tuna to the United States under the Tuna Measure is for what 
is labeled as "generic" tuna in Mexico's methodology paper. Generic  tuna is a composite category 
that includes all canned tuna currently offered in the United States. This is mostly skipjack, but it 
also includes albacore and tongol. This generic tuna is of an overall lower quality than Mexican 
canned yellowfin tuna.  
15. With regard to the demand for tuna products, the total consumption of canned tuna in the 
United States in 2014 was 330,264 metric tonnes. As mentioned before, most of that canned tuna 
is generic tuna, with marginal volumes of canned yellowfin tuna products . However, this does not 
mean that there is no demand for canned yellowfin tuna in the United States.  
16. Yellowfin tuna products are superior in quality to generic tuna products because they offer 
a more desirable solid pack for canning with a firm and m ild tasting meat. The model recognizes 
the quality difference between generic and yellowfin tuna. The model assumes that consumers can 
purchase two types of canned tuna: generic and yellowfin. The results of an econometric analysis 
show that U.S. consumers  have been paying a significant premium for canned yellowfin tuna. If 
generic tuna and yellowfin tuna are offered at the same price, almost all consumers will purchase 
yellowfin tuna over generic tuna. Consumers' preferences are modeled using a choice mode l that is 
standard in economics. Demand equations for canned generic tuna and canned yellowfin tuna are 
                                               
9 Recourse to Article 22.2 of the DSU by Mexico, Tuna II (Article 22.2 – Mexico) , p. 2 ( "As required by 
Article 22.4 of the DSU, the level of suspension of concessions proposed by Mexico is equivalent on an annual 
basis to the level of the nullification or impairment of benefits accruing to Mexico under the covered 
agreements due to the United States' failure to bring its Tuna measure into compliance by 13 July 2013 or to 
otherwise comply with the recommendations and rulings of the DSB in United States – Measures Concernin the 
Importation, Marketing and Sale of Tuna and Tuna Products "); Dispute Settlement Body, Minutes of Meeting 
(13 May 2016), WT/DSB/M/376, para. 7.6 ( "Mexico's request for  the suspension of concessions complied with 
all of the requirements under Article 22.2 of the DSU, in particular the failure by the United States to comply 
with the DSB's recommendations and rulings within the reasonable period of time "). 
10 See Exhibit U S-57 p. 139.  
11 The R code in Exhibits MEX -100-f and MEX -100-g allows for adjusting the world supply of canned 
generic tuna to the United States.  WT/DS381/ARB/Add.1  
 
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  derived by aggregating individual consumers' demand for yellowfin and generic tuna. The demand 
model is calibrated using a conservative approach in whic h it is assumed that the mean willingness 
to pay for yellowfin tuna is lower than the premium currently observed.  
17. Contrary to the United States' explanation that the weak consumption of yellowfin tuna in 
the United States is a consequence of a weak dem and, there is strong demand for canned 
yellowfin tuna in the United States. Observed small consumption volumes of canned yellowfin tuna 
reflect the intersection of the demand and the supply for that product. Because, under the Tuna 
Measure, canned yellowfi n tuna is supplied at a high cost to the United States, the U.S. demand 
for canned yellowfin tuna meets the supply to the United States of canned yellowfin tuna at a 
small volume. Mexico has put forward evidence of an increase in the price of raw yellowfin  tuna 
paid by U.S. canneries. The decline in U.S. cannery receipts for yellowfin tuna is a consequence of 
the Tuna Measure, was not caused by U.S. consumers valuing yellowfin tuna less, and reflects 
world market conditions for yellowfin tuna products.12 
18. Although the United States argues that consumers are not willing to pay a premium for 
canned yellowfin tuna, Mexico's methodology paper provides significant evidence that U.S. 
consumers are willing to pay such a premium. This premium is reflected in the data. If consumers 
were not willing to pay a premium for canned yellowfin tuna, as it is currently selling for a high 
price, there would be no consumption of yellowfin tuna in the United States. In Mexico's model, 
albacore tuna is bundled together with all  other canned tuna. The regression model provides 
evidence that U.S. consumers are willing to pay a premium for canned yellowfin tuna versus the 
average (generic) canned tuna consumed in the United States. This is the appropriate way to 
provide evidence of  willingness to pay for canned yellowfin tuna because it is consistent with the 
construction of the model. The regression model provides the necessary information to support 
that there is a premium for yellowfin tuna.13 
19. Another argument that the United  States claims as evidence that there is little demand for 
yellowfin tuna is that some yellowfin tuna is mixed with skipjack in light tuna. However, for the 
model in Mexico's methodology paper, the mixing of yellowfin tuna or albacore tuna in light meat 
tuna is not problematic. 100 percent canned yellowfin tuna is the product that Mexico would export 
to the United States and is of higher quality than the yellowfin tuna mixed into light tuna. The 
model is calibrated for canned yellowfin tuna that is marketed  as such, versus all other (generic) 
canned tuna. Whether the generic canned tuna contains some yellowfin or not is captured in the 
value of the mean premium.  
20. The United States has also raised the issue that yellowfin contains more mercury than 
skipjac k tuna, hence depressing the demand for yellowfin tuna. However, according to the U.S. 
government itself, the mercury content in albacore tuna is essentially the same as in yellowfin 
tuna.14 With increased U.S. consumption of canned albacore tuna since the  adoption of the Tuna 
Measure and with its consumption occupying nearly a third of the U.S. canned tuna market by 
volume, it is clear that mercury is not a primary concern of a large segment of U.S. consumers. 
Thus, mercury issues do not have a material im pact on purchases of yellowfin tuna products in the 
U.S. market.  
21. Mexico's methodology model does not assume any shift in demand. The increased 
consumption for canned yellowfin tuna in the United States comes from a decline in the price that 
comes from an increase in supply from the introduction of supplies of canned yellowfin tuna from 
Mexico. In this regard, an elastic demand for yellowfin tuna products explains why the 
consumption of yellowfin increases substantially with the decline of the price of y ellowfin tuna in 
the United States. An elastic demand means that consumption is sensitive to changes in the price 
of a good. The modification of the Tuna Measure under the counterfactual yields a decline in the 
price of yellowfin tuna products in the Unite d States. Because the demand for yellowfin tuna 
products is elastic, even a small decline in the price of canned yellowfin tuna yields a large 
increase in the consumption of canned yellowfin tuna. Thus, as the price of yellowfin canned tuna 
declines, many consumers naturally switch from the consumption of canned generic tuna to the 
                                               
12 The shift of the U.S. fleet out of the ETP/away from yellowfin and to the Western and Central 
Pacific/to sk ipjack in the late 1980 's and early 1990 's closely mirrors the decline in consumer consumption of 
canned tuna in the U.S. market.  It is reflective of the declining quality of generic tuna with the removal of 
yellowfin from the supply chain.  
13 See Tables 5, 6 and 7 of Mexico 's methodology paper (Exhibit MEX -2). 
14 See U.S. Food and Drug Administration, "Mercury Levels in Comm ercial Fish and Shellfish 
(1990 -2010) ", available online at http://www.fda.gov/Food/FoodborneIllnessContaminants/  
Metals/ucm115644.ht m (Exhibit MEX -64). WT/DS381/ARB/Add.1  
 
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  consumption of canned yellowfin tuna, namely, the modification of the Tuna Measure would bring 
about a significant decline in the price of canned yellowfin tuna in the United Sta tes and hence a 
very large increase in consumption because the demand is elastic.  
22. U.S. consumer preferences for the "dolphin safe" label today, and at the time of the expiry 
of the RPT, are shown in a September 2016 consumer survey submitted by Mexico.15 According to 
this survey, a majority of Americans believe that "dolphin safe" means that no dolphins were 
injured or killed in the course of capturing tuna, and that the definition of "dolphin safe" should be 
that no dolphins were injured or killed in t he course of capturing tuna.16 Moreover, an 
overwhelming number of adults believe that it is important to have environmentally -sustainable 
seafood products that ensure the health of the whole ecosystem, including dolphins, and not just 
the health of dolphi ns in particular.17 Thus, if the tuna measure permitted U.S. consumers to be 
fully informed of the dolphin protection and environmental virtues of AIDCP -compliant fishing and 
the disadvantages of alternative fishing methods, they would prefer tuna products  containing tuna 
caught in the manner used by the Mexican tuna fleet.  
23. Contrary to the argument of the United States, the model in Mexico's methodology paper 
captures the necessary market realities of the U.S. canned tuna market to properly calculate th e 
level of nullification or impairment. These market realities include differentiation in the canned 
tuna market and U.S. consumers' willingness to pay a premium for canned yellowfin tuna over 
canned generic tuna.  
Supply and demand equations for the Mexica n Market  
24. Regarding Mexican supply, the counterfactual considers that the Mexican tuna industry 
produces canned tuna using domestically caught yellowfin and skipjack, as well as yellowfin tuna 
imported for canning. That is, Mexican production capacity is not limited by domestic catch under 
the counterfactual and allows for imports of unprocessed yellowfin tuna from other ETP countries. 
Mexican canneries operated in 2014 with a single day shift. This means that production could 
easily be expanded using i mported yellowfin tuna. The export volume to the United States is 
limited to yellowfin tuna caught by the Mexican fleet and canned yellowfin tuna made from 
imported tuna is consumed in Mexico.  
25. The United States incorrectly describes Mexico's model when  stating that "Mexico has a 
completely elastic supply curve (i.e., Mexican industry could supply an unlimited quantity of 
canned yellowfin at no increasing marginal cost)."18 As Mexico has explained, the supply curve of 
canned yellowfin tuna by Mexican can neries is initially perfectly elastic, but for a quantity equal to 
the Mexican production of yellowfin tuna in 2014 it becomes perfectly inelastic. The model 
assumes that Mexican canneries could increase production by importing yellowfin tuna from other 
countries. Furthermore, the model assumes a constant marginal cost (perfectly elastic supply) for 
the Mexican production of canned yellowfin tuna up to the assumed production capacity where it 
increases to infinity (perfectly inelastic supply).  
26. The deman d for canned tuna in Mexico is modeled in the same way as the demand for 
canned tuna in the United States. It is calibrated based on consumption observed in 2014.  
Model Solution  
27. Imports from Mexico are cost competitive compared to other imports becaus e of 
geographic proximity to the U.S. market and lower customs duties. Thus, modifications of the tuna 
measure would bring new inexpensive supplies of canned yellowfin tuna from Mexico into the U.S. 
market. Accordingly, the removal of the tuna measure is a ppropriately modeled as a shift to the 
right of the supply of canned yellowfin tuna on the United States market.  
28. The broad geographic scope of the sources of supply for U.S. production and imported 
products encompasses the many regions in which dolphi ns are killed and seriously injured during 
tuna fishing operations. Other than Mexico, there are a few Central and South American countries 
that harvest tuna in the ETP. However, these countries have small production capacities and could 
not compete with M exico's canned yellowfin tuna products because they are located further from 
the United States and these countries have chosen not to seek an "affirmative finding" from the 
                                               
15 Public Opinion Strategies, Dolphin Safe National Survey (Exhibit MEX -71). 
16 Ibid., pp. 6 and 8.  
17 Ibid., p. 14.  
18 U.S. written submission, para. 88.  WT/DS381/ARB/Add.1  
 
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  Department of Commerce that they are in compliance with the AIDCP.19 This means tha t an export 
response by other countries to modifications to the Tuna Measure would be small and that only 
Mexico's exports to the United States would be significantly impacted by the removal of the tuna 
measure.  Similarly, because imports from all other o cean regions have been permitted to use the 
dolphin -safe label without independent observer monitoring or comprehensive tracking and 
verification systems, no tuna products from those other regions have been affected by the Tuna 
Measure, and therefore they would also not be affected by the withdrawal of the Tuna Measure.  
29. The model shows that because transportation costs between Mexico and the United States 
are small, the removal of the tuna measure would yield large exports of Mexican canned yellowfin 
tuna to the United States.  
30. Arbitrage between Mexico and the United States causes the price of canned yellowfin tuna 
to equalize between the two countries once transportation costs are accounted for. The model is 
solved assuming that Mexico imports yellow fin tuna products that are canned domestically for 
domestic consumption to replace some of the canned yellowfin tuna exported to the United States. 
Other Central and South American countries harvest tuna in the ETP. The proximity of these 
countries to Mexi co means a low cost of transporting tuna to Mexico. Many vessels would directly 
unload their catch in Mexico.  
31. Under the counterfactual considered in Mexico's methodology paper, tuna products made 
from tuna caught by other fleets can be sold on the Mexi can domestic market. The scenario 
considered assumes that Mexico would import from other ETP countries the equivalent of tuna for 
producing 20,000 metric tonnes of canned yellowfin tuna. With this Mexican import volume of 
yellowfin tuna, nearly all of the yellowfin tuna harvested and canned by Mexican firms to be 
exported to the United States. Other ETP countries are not in a position to compete with Mexico in 
the U.S. market for canned yellowfin tuna. This is because of Mexico's competitive advantage from 
its nearby location, its large production capacity, its low marginal cost and its access to the U.S. 
market free of import tariffs. It is also because most of the tuna products from other ETP countries 
are completely banned by other U.S. measures from expo rting yellowfin tuna products to the 
United States. Mexican imports of yellowfin tuna from other ETP countries are a natural outcome of 
economic forces operating under the removal of the Tuna Measure.  
32. The model finds that with the removal of the tuna m easure, 21.5 percent of U.S. 
consumption of canned tuna would be from canned yellowfin tuna imported from Mexico. This is a 
reasonable market share given the low production costs for canned tuna in Mexico, the absence of 
duties for U.S. imports of canned t una from Mexico and the small transportation cost for canned 
yellowfin tuna given the proximity of Mexico to the United States. Moreover, in 1987, canned 
yellowfin tuna occupied at a minimum 22 percent of the consumption of canned tuna in the United 
States .20 With the removal of the tuna measure, a similar market share would be observed with 
the difference that canned yellowfin tuna would be produced in Mexico rather than in the 
United  States before the adoption of the tuna measure.  
33. Under Mexico's count erfactual, Mexico exports a total of USD $495 million (63,568 metric 
tonnes x USD $7.79/kg) of canned tuna to the United States. Therefore, deducting from this figure 
the actual value of exports of Mexican canned tuna to the United States in 2014 
(USD  $22.65 million) yields a trade loss to Mexico of USD $472.3 million annually.  
The United States' Market -Based Approach is unreliable  
34. Apart from employing a counterfactual that is not correctly defined, the "market -based 
approach" proposed by the United Sta tes is flawed and underestimates losses from the tuna 
measure to Mexico.  
35. The calculation of the United States is based on the historical import volumes of canned 
tuna from Mexico before the adoption of the tuna measure. However, these historical figure s are 
not instructive of the levels of imports if the Tuna Measure were withdrawn. A proper 
counterfactual keeps everything but the measure of interest constant. It is obviously not the case 
that market conditions when the original tuna measure was enacted  in 1990 are the same as in 
2014. For instance, the United States maintained a trade embargo on imports of Mexican tuna 
from 1980 to 1986, which arose from a dispute over the scope of territorial waters and fishing 
                                               
19 NOAA Fisheries, Tuna/Dolphin Embargo Status Update, available at 
http://www.nm fs.noaa.gov/pr/dolphinsafe/embargo2.htm  (Exhibit MEX -72). 
20 Mexico's Response to Arbitrator's question 119.  WT/DS381/ARB/Add.1  
 
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  rights. Therefore, the period immediately  following the termination of the embargo is not 
representative of open market conditions.  
36. In addition, the reference of the United States concerning Mexico's share of U.S. imports of 
tuna products of 3.9 percent on a weight basis for the 1987 -89 peri od21 does not correspond to 
what would be observed with the removal of the Tuna Measure in 2014. Indeed, Mexican firms 
now have a much better access to the U.S. market than in the period between 1987 and 1989 
because Mexico is a signatory of North American  Free Trade Agreement  (NAFTA). Therefore, 
Mexico can export canned tuna to the United States free of duties. Moreover, the Mexican canned 
tuna industry has developed since the adoption of the tuna measure to increase its production and 
become much more cos t competitive, including by building canneries devoted exclusively to 
producing tuna products. In addition, unlike the 1987 to 1989 period, the market conditions for 
canned yellowfin tuna observed in 2014 have left the U.S. market almost empty of canned 
yellowfin tuna.  
37. The United States' assumption that retailers accounting for 46.4 percent of the 
U.S. market for tuna products will not purchase and offer for sale Mexican tuna products because 
the tuna was caught using the AIDCP -certified dolphin encircl ement fishing method22 is incorrect.  
The United States' assumption is incorrectly based on the premise that the dolphin -safe label itself 
has no value because the market is only concerned with the narrow question of whether or not 
dolphins were encircled in the process of harvesting the tuna.  This is contradicted by the findings 
of the Panels and Appellate Body in the prior proceedings. Besides, the United States' premise 
depends almost exclusively on information and activities related to Earth Island Ins titute (EII) 
which refers to historic "unregulated" dolphin encirclement and ignores the AIDCP dolphin -safe 
requirements and the success of the Mexican fleet in protecting dolphins for over twenty years. 
Furthermore, the letters submitted by the United Sta tes as "evidence" to demonstrate that U.S. 
retailers would not carry Mexican tuna products are unreliable since they rather demonstrate that 
the United States is "shaping" consumer expectations in the market to comport with its outdated 
perspective on dolp hin mortalities in the ETP large purse seine fishery.  In fact, the United States 
has mischaracterized the content of most of the letters, and the current policies of the great 
majority of the retailers as published on their websites actually suggest that they would carry 
Mexican products.  The published policies of the retailers are much more compelling evidence of 
the retailers' policies that the letters submitted by the United States.  
38. As part of its counterfactual, the United States endorses EII's pu rported dolphin -safe 
program, arguing in effect that if the United States were to withdraw the Tuna Measure, EII should 
be viewed as controlling use of the dolphin -safe label. However, the Arbitrator should not base the 
counterfactual on the United States'  speculation about whether a new label might be created by a 
non-governmental entity and whether it could convince retailers that such a label would be more 
meaningful than the AIDCP dolphin -safe label. Indeed, if the United States were to withdraw the 
measure entirely, the AIDCP dolphin -safe label would become the only official dolphin -safe label in 
the U.S. market, and, in particular, the only label endorsed by the U.S. government through its 
role in the AIDCP.  Mexico also submitted evidence demonstratin g that major suppliers and 
retailers use tuna sources that are not authorized by EII, showing that EII does not have the 
market power attributed to it by the United States.  
39. The United States also bases its counterfactual on the assumption that 100 perc ent of tuna 
products from all other sources will be able to use the dolphin -safe label.23 Under the United 
States' proposed counterfactual, the U.S. Federal Trade Commission (FTC) consumer labelling 
rules apply generally and all tuna products would be able  to use a dolphin -safe label provided that 
such label is accurate so that consumers are not deceived. Thus, tuna products from the United 
States and other countries would be able to use a dolphin -safe label provided that such a label is 
accurate so that U. S. consumers are not deceived. However, it would not be reasonable to assume 
that consumers and retailers, let alone the FTC, would accept that a "dolphin -safe" label could be 
used on tuna products containing tuna that was caught in a fishing set or gear d eployment in 
which dolphins were killed or seriously injured, and/or in circumstances where it is impossible to 
verify that the product contains only tuna that was caught in a dolphin -safe manner. Thus, some 
form of mechanism will have to be put in place b y tuna product suppliers so that dolphin -safe 
claims can be verified. The implementation of such procedures will take time and will involve costs. 
                                               
21 U.S. written submission, para. 130.  
22 U.S. written submission, paras. 135 -136. 
23 U.S. written submission, paras. 71, 76 ( "all tuna product tha t currently qualifies as dolphin safe would 
continue to qualify for the label ") and 123.  WT/DS381/ARB/Add.1  
 
- B-9 - 
 
  Some suppliers will invest the time and money to adopt and implement, others will not.  
Accordingly, it is un reasonable for the United States to assume that 100 percent of the tuna 
products containing tuna caught outside the ETP will immediately be eligible to use a dolphin -safe 
label.  
Conclusion  
40. For the reasons  explained in Mexico's methodology paper (based on the detailed 
econometric analysis) and in its submission, Mexico reaffirms its requested authorization to 
suspend concessions equal to USD $472.3 million annually, which is the level  of the nullification  
or impairment  resulting from the  failure  of the United States  to comply  with the 
recommendations  and rulings  of the DSB and bring the Tuna Measure into consistency with 
the covered agreements after the expiry of the RPT . If the Arbitrator disagrees with some of the 
assumptions of Mexico's model, Mexico i nvites the Arbitrator to use the R code submitted by 
Mexico to calculate the amount of nullification or impairment under the assumptions it considers 
reasonable.  
 
 
 WT/DS381/ARB/Add.1  
 
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  ANNEX B -2 
EXECUTIVE SUMMARY OF  THE ARGUMENTS OF THE  UNITED STATES  
SUMMARY OF U.S. WRITTEN STATEMENT  
1. Mexico's Methodology Paper dramatically overestimates the level of nullification or 
impairment attributable to the U.S. dolphin safe labeling measure. In lieu of Mexico's fatally flawed 
model, the United States puts forward an approach based o n levels of U.S. imports from Mexico 
prior to the adoption in 1990 of the original Dolphin Protection Consumer Information Act (DPCIA).  
Such a historical, market -based approach is the most appropriate in the light of the available data 
and is consistent w ith the approach taken by past Article 22.6 arbitrators.  
I. THE  U.S.  TUNA  PRODUCT  MARKET  
2. The measure at issue is the U.S. dolphin safe labeling measure for tuna products.1 The 
measure sets out the minimum conditions under which tuna product may be marke ted as "dolphin 
safe." The U.S. canned tuna product market is an approximately $1.5 billion market. Eighty 
percent of the market is served by three companies: Bumblebee, Chicken of the Sea, and StarKist 
("the big three"), which produce tuna product from U. S. and foreign canneries. About half the U.S. 
market is supplied by canneries located in the United States and its territories.  
A. U.S. Consumer Preferences for Tuna Product  
3. U.S. consumers of canned tuna have definite preferences with respect to price, taste, 
texture, and whether the tuna product was produced in a dolphin safe manner, in particular that it 
was not produced from the intentional encirclement of dolphins. There is no overriding demand for 
tuna product produced from yellowfin tuna as Mexico claims, and U.S. consumers are disinclined to 
purchase tuna product produced by setting on dolphins. Therefore, demand for Mexican canned 
tuna is low, irrespective of the U.S. dolphin safe labeling requirements.  
1. U.S. Consumer Preference for Less Expensi ve Tuna Product  
4. The U.S. canned tuna market is "characterized by high volume and low margins." Since the 
advent of canned tuna in the 1900s, it has been considered a low cost and practical source of 
protein for the U.S. consumer. The literature indicate s that there is a "psychological limit" for U.S. 
consumers against paying more than $1 for a can of tuna. Consistent with that proposition is the 
fact that as the per can cost approaches $1, U.S. demand for canned tuna weakens.  
2. U.S. Consumers Preference  for Canned Albacore  
5. Although the U.S. market is generally characterized by high volume, low value products, 
some tuna products are sold at a premium. In the canned market, that differentiation occurs 
largely between premium canned albacore, which is so ld as "white" tuna, and discount canned 
tuna, which is sold as "light" tuna and generally contains skipjack tuna, alone or in combination 
with other species.  Under U.S. Food and Drug Administration (FDA) regulations, canned tuna can 
be labeled "white meat " if it is 100 percent albacore, while tuna product produced from other 
species generally qualifies for the "light meat" label.  Canned tuna can also be labeled by species – 
albacore, skipjack, yellowfin, etc. – if it is 100 percent composed of that specie s. 
6. U.S. consumers have a preference for canned albacore over tuna product containing other 
tuna species due to albacore's mild flavor, firm texture, and light color. Many U.S. consumers are 
                                               
1  "Tuna product " refers to a "food item which contains tuna and which has been processed for retail 
sale, except perishable sandwiches, salads, or other products with  a shelf life of less than 3 days. "  In other 
words, "tuna product " is tuna that has undergone some processing and is not sold as "fresh" tuna.  In light of 
the fact that much of the other processed products are ultimately processed into canned tuna, much of the 
data in the literature regarding "tuna product " focuses on canned tuna rather than the other smaller -volume 
tuna products.  WT/DS381/ARB/Add.1  
 
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  willing to pay a price premium for albacore, as shown by the fa ct that the average retail price for 
canned albacore is $5.32 a pound, while the average retail price for skipjack is $3.17 a pound.  
Exhibit MEX -15 shows that sales of canned albacore accounted for 29 percent of canned tuna sales 
during the covered period  by weight but 40 percent by value. This preference for albacore is 
distinct from consumer preferences in other countries, as the U.S. market consumes 19 percent of 
global production of canned tuna overall but 55 -60 percent of world consumption of albacore . 
3. Weak U.S. Consumer Demand for Canned Yellowfin  
7. Dolphin safe tuna product sold in the United States can be, and is, produced from yellowfin. 
Such tuna product is either sold as "yellowfin" or as "light tuna." Canned yellowfin can command a 
higher pr ice within the gourmet market, but demand is limited, and so much of the canned 
yellowfin produced for the U.S. market is labeled as "light tuna" – often canned with skipjack – 
rather than as "yellowfin." A 2005 investigation found that only about half the  cans of yellowfin are 
labeled as such, and industry officials explained that vessels producing for the U.S. market catch 
more yellowfin than can be sold as a gourmet product. Canned yellowfin has long been marketed 
to U.S. consumers as "light meat," and t hat practice continues today.  
8. Another factor dampening demand for yellowfin tuna product is consumer concerns 
regarding mercury in canned tuna. Mercury is present in marine creatures, particularly in the 
larger predators, such as albacore and yellowfin,  and to a lesser extent in smaller fish, such as 
skipjack.  One of the reasons that producers process yellowfin and skipjack together and sell it as 
"light tuna," rather than selling cans of 100 percent yellowfin, is to lower the per can mercury level 
of canned yellowfin and produce a safer product that is consistent with FDA regulations.  
9. U.S. cannery receipts tell a consistent story of weak demand for canned yellowfin. In 1987, 
when the U.S. fleet was still operating in the ETP, 46.1 percent of U.S. can nery receipts were 
yellowfin. But the next year, yellowfin's share dropped to 31.6 percent. Between 1991 and 1999, 
the percentage was between 17.3 -24.3 percent (with albacore increasing to 33.8 percent by 1999 
and skipjack constituting about half of the to tal). In the 2000s, the share of yellowfin continued to 
drop. Since 2009, the share of yellowfin has been below 7 percent, while the share of albacore has 
been above 35 percent and the share of skipjack has been above 46 percent.  
10. These low percentages of yellowfin being processed by U.S. canneries do not indicate lack of 
availability of dolphin safe yellowfin. Market data show that about 40 percent of the yellowfin -
labeled canned tuna was produced by the big three brands, all of which sell only dolphin safe 
products. This suggests that if there were greater demand for canned yellowfin, the market would 
have met that demand. The fact that the tuna industry has instead produced less and less canned 
yellowfin over the last few decades indicates how weak U.S . consumer demand for canned 
yellowfin is, even where that tuna product is marketed as "dolphin safe."   
4. Weak Demand for Canned Tuna Produced from Setting on Dolphins  
11. It is established that U.S. consumers prefer dolphin safe tuna product and that th is 
"sensitiv[ity]" is driven by a desire not to purchase tuna produced from setting on dolphins. As the 
original panel discussed, in the 1980s, in reaction to purse seine vessels killing tens to hundreds of 
thousands of dolphins in the ETP every year, one NGO, Earth Island Institute (EII), led a media 
campaign to raise consumer awareness of the issue. This campaign produced significant results, as 
the big three and other companies changed their purchasing policies in April 1990 to not purchase 
tuna from ves sels that set on dolphins. These policies remain in place today because canned tuna 
produced from the intentional harassment and capture of dolphins remains an important issue for 
consumers.  As the original panel noted, these policies "suggest[] that the producers themselves 
assume that they would not be able to sell tuna products that do not meet dolphin -safe 
requirements, or at least not at a price sufficient to warrant their purchase."  
12. The most engaged actor on the dolphin safe issue is EII. EII has  its own standard for 
"dolphin safe," which includes a prohibition on setting on dolphins. Companies that agree to 
adhere to the EII dolphin safe standard, pay a licensing fee, and otherwise promise to comply with 
EII requirements, can use the EII label. E II reportedly has commitments from 90 percent of all 
tuna companies to, inter alia , not produce, hold, or sell tuna product produced from setting on 
dolphins. In general, EII has certified compliance of upstream companies, such as producers and WT/DS381/ARB/Add.1  
 
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  distributor s. EII has agreements with 159 processing and fishing companies in 51 countries and 
territories. All major exporting and importing countries are represented. For the United States, 
53 companies have agreements with EII, including many of the largest player s in the U.S. market.  
The vast majority of tuna product sold at retail in the United States passes through at least one of 
these companies, the major exception being Mexican tuna product.  
13. In light of the fact that EII's focus is primarily on upstream companies, the United States 
contracted a leading market research firm to provide specific data as to the retail market, which 
accounts for about 70 percent of all sales of canned tuna. Based on that list, the United States 
reviewed the evidence as to dolp hin safe policies of the companies that have the largest share of 
the U.S. market. This evidence confirms the thrust of the EII data, i.e., that major U.S. retailers 
are sensitive to the demands of their consumers, and, as such are committed to selling onl y 
"dolphin safe" tuna product and will not carry tuna product produced from setting on dolphins. In 
addition, the United States is aware of a statement by Walmart, the leading seller of tuna product 
in the United States, stating that all major brands it se lls are not produced from setting on 
dolphins and that purchasing decisions are governed by Walmart's sustainability policy, rather than 
whether the tuna product qualifies for the dolphin safe label under the U.S. measure.  
14. As demonstrated and reinforce d by these policies, there is no demand for Mexican tuna 
product in this segment of the market.  Further, this lack of demand relates to the substance of 
Mexico's fishing practices not the measure at issue.  Including Walmart, the retailers covered by 
statements account for 66 percent of retail market share, 46.4 percent of total consumption.  
2. The Supply of Tuna to the U.S. Tuna Product Market  
15. The United States is the largest consumer of canned tuna, with an estimated 19 percent 
share of the global m arket.  Approximately 50 -55 percent of the canned tuna supplying the U.S. 
market is produced by U.S. processors, using U.S. -caught tuna and imported tuna for canning.  
The other 45 -50 percent of the market is supplied by canned tuna imports. The top export ers of 
canned tuna product to the United States are Thailand, Ecuador, Vietnam, the Philippines, and 
Indonesia, which together account for 93 percent of canned tuna imports into the United States.  
II. THE  LEVEL  OF SUSPENSION  OF CONCESSIONS  PROPOSED  BY MEXI CO IS NOT  
EQUIVALENT  TO THE  LEVEL  OF NULLIFICATION  OR IMPAIRMENT   
16. Pursuant to Article 22.6 of the DSU, the United States objected to Mexico's proposed level of 
suspension of concessions because that proposed level is not equivalen t to the level of nullification 
or impairment attributable to the measure. Article 22.4 of the DSU is explicit and requires that the 
"level of suspension of concessions or other obligations authorized by the DSB shall be equivalent 
to the level of nullific ation or impairment." Mexico's calculations suffer from conceptual flaws and 
methodological errors that result in estimates of the level of nullification or impairment that are 
not accurate and inconsistent with Article 22.4 of the DSU.  
A. Mexico Has Propo sed Incorrect Counterfactuals  
17. Mexico describes its proposed counterfactual as one where "the WTO -inconsistent 
discriminatory aspects of the original and amended Tuna Measure were eliminated." However, a 
Member has discretion as to how to implement DSB recommendations and rulings. Further, past 
WTO arbitrators have indicated that the normal counterfactual for calculating nullification or 
impairment is withdrawal of the measure. There is no precedent for an arbitrator choosing a 
counterfactual that based on a complainant's theory of compliance that is not related to the 
DSB recommendations and rulings. Withdrawal of the measure is thus the appropriate 
counterfactual.  
B. Mexico's Model Is Fundamentally Flawed and Overstates of the Level of 
Nullification or  Impairment  
18. Mexico's proposed level of $472.3 million dramatically overstates the level of nullification or 
impairment because it is calculated using a deeply flawed economic model.   WT/DS381/ARB/Add.1  
 
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  1. Mexico's Model Is Not Appropriate in Light of Available Data  
19. In this context, the generally accepted way to use partial equilibrium analysis would be to 
determine the value of the U.S. dolphin safe label and model the effect of its removal on the 
equilibrium price and quantity of Mexican tuna product sold in the Uni ted States. To determine the 
value of the dolphin safe label would require detailed data on U.S. purchases of tuna product with 
and without the dolphin safe label, including store -by-store sales of tuna by type, accounting for 
product characteristics, and including information on the timing of sales and whether sales were 
made at promotional values. It appears to be undisputed  that this level of data concerning the 
U.S. tuna product market is not available. Mexico's dataset does not include retailer -level d ata that 
would allow the comparison between particular types of labeled and unlabeled tuna product that 
would be necessary to estimate the value of the dolphin safe label.  
20. Mexico's partial equilibrium model thus does not seek to measure the value of th e U.S. 
dolphin safe label and the effect of its removal. Rather, Mexico's model asks a wholly different 
question, namely what is the demand for canned yellowfin tuna in the U.S. market if one assumes: 
1) canned yellowfin's access to the U.S. market is so s everely restricted that current consumption 
is not indicative of demand; 2) U.S. consumers have a strong preference for canned yellowfin tuna 
(including produced by setting on dolphins) over all other canned tuna; and 3) Mexico is the only 
possible supplie r of canned yellowfin tuna to the U.S. market. Mexico's model is simply not an 
appropriate model to use for this case given the available data and also because Mexico's 
assumptions have no basis in the real world.  
2. Mexico's Model Is Based on Incorrect As sumptions and Is 
Fundamentally Flawed as a Result  
21. Mexico's model is defined by a series of demand equations and that are specified almost 
entirely based on assumptions. Specifically, the model is bas ed on the assumptions that: 
(1) yellowfin tuna produc t has been so restricted in its entry into the U.S. market that current 
consumption levels have no relationship to demand; (2) the Mexican and U.S. tuna product 
markets constitute a single market with an identical consumer preference for yellowfin tuna 
product; (3) Mexico is the only possible supplier of yellowfin tuna product to the U.S. market; and 
(4) Mexico has a completely elastic supply curve.  Each of the four key assumptions is incorrect, 
and Mexico's model results in an inflated level of nullificat ion or impairment.  
a. There Is No Pent -Up Demand for Canned Yellowfin  
22. Mexico's model is premised on the assumption that canned yellowfin tuna has been almost 
entirely barred from the U.S. market such that the current U.S. consumption of canned yellowfi n 
does not reflect demand. The model then disregards all evidence of U.S. consumer preferences, as 
reflected in actual consumption, and derives demand based on assumptions. But the underlying 
assumption is incorrect: dolphin safe yellowfin canned tuna is sold in the U.S. market but it is sold 
in small quantities because demand is weak.  
23. Contrary to Mexico's assumptions, there are numerous other sources of canned yellowfin in 
the U.S. market that are not adversely affected by the U.S. dolphin safe labelin g measure and thus 
are available on an unrestricted basis. For example, all of the "big three" companies sell all -
yellowfin dolphin safe tuna products in the United States. Other tuna processors also sell canned 
yellowfin on the U.S. market. Indeed, from 2 010-2015, dolphin safe yellowfin accounted for 
between 4.3 and 6.7 percent of the tuna processed by U.S. canneries.  U.S. canneries sourced this 
dolphin safe yellowfin from both U.S. vessels and foreign vessels.   
24. If demand for canned yellowfin tuna we re strong, dolphin safe canned yellowfin would sell in 
higher quantities given the available supply of yellowfin caught in a dolphin safe manner, but that 
is not the case.  Sales of tuna products containing 100 percent yellowfin are dwarfed by sales of 
albacore and lightmeat tuna. Further, much of the dolphin safe yellowfin produced for the U.S. 
market is not marketed as "yellowfin" at all, but sold (often combined with skipjack) as 
"lightmeat". There is simply not sufficient demand for even the amount of d olphin safe yellowfin 
currently available. In this regard, Mexico's evidence suggests the same is true for non-dolphin 
safe canned yellowfin, since Exhibit MEX -15 indicates that both leading Mexican brands, Tuny and 
Dolores, market "chunk light" products i n the United States.  WT/DS381/ARB/Add.1  
 
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  25. The absence of demand for yellowfin tuna product is further confirmed by the fact that the 
decline in the quantity and share of the yellowfin processed by U.S. canneries continued after the 
measure went into effect. The share of tu na processed by U.S. canneries made up by yellowfin 
was already falling before the DPCIA was enacted – from 46.1 percent in 1987 to 33.2 percent in 
1990 – and fell to 23.0 percent in 1991. Instead of stabilizing at that level, however, (or rising 
back to t he earlier level), the share of tuna processed by U.S. canneries represented by yellowfin 
has steadily fallen. Mexico's story of the measure operating as a supply restriction does not explain 
this continued decline in yellowfin's share of the U.S. cannery receipts.  
26. Thus, Mexico's model is based on the assumption of an unsatisfied demand for canned 
yellowfin that is contradicted by the evidence.  U.S. consumers have access to canned yellowfin, 
both dolphin safe and non -dolphin safe, but the data prove th at they do not demand the product 
enough for canneries to increase supply or even to market all of the yellowfin they have as such.  
There is, therefore, no reason to think that U.S. consumption of yellowfin would increase if the 
U.S. measure were removed and Mexican producers could market their canned yellowfin as 
"dolphin safe."  Thus, the assumption upon which Mexico's model is premised is false.  
b. The U.S. and Mexican Markets Are Not One Market with a 
Strong Preference for Canned Yellowfin  
27. Another factor driving the outcome of Mexico's model is its assumption that the United 
States and Mexico constitute a single market with a strong preference for canned yellowfin. The 
model sets the willingness to pay for yellowfin, distribution of willingness to p ay, and the elasticity 
of demand for tuna equal across the two countries. This leads to a result that is almost entirely 
driven by the percentage of consumption between the two countries, because the "intensity of 
demand" parameter is the only variable tha t differs between the U.S. and Mexican demand 
equations. However, Mexico's assumption is incorrect, and, consequently, the parameters of 
Mexico's model relating to U.S. demand are all inaccurate.  
28. First, there is no reason to believe that Mexican and U. S. consumers have the same 
preferences concerning canned tuna. Mexican and U.S. consumer preferences for food products 
often differ. For example, Mexican and U.S. consumers have different preferences concerning 
chicken meat, with U.S. consumers preferring white meat and Mexican consumers preferring dark 
meat.  Preferences are also different with respect to cheeses and fruits and vegetables.     
29. Mexico submits no evidence substantiating its assertion that "[t]here is no reason for U.S. 
consumers to have a different appreciation for canned yellowfin tuna than Mexican consumers."  
The fact that 17 percent of Americans are Hispanic suggests that some part of that 17 percent of 
the U.S. population may have preferences similar to Mexican consumers but does not  support the 
idea that U.S. consumers generally  have the same preferences as Mexican consumers. Indeed, the 
fact that Hispanic Americans are regarded as a subgroup with distinct preferences suggests that 
the opposite is true. Further, the evidence indicate s that U.S. and Mexican consumers differ in 
their willingness to purchase tuna product produced from setting on dolphins.  
30. Second , the assumption that U.S. consumers have a strong preference for canned yellowfin 
vis-à-vis canned "generic" tuna is also r efuted by the available evidence. The U.S. tuna product 
market is made up of a variety of products – not "yellowfin" and "generic." The low -end portion of 
the market is composed of light tuna and is heavily influenced by cost. The high -end portion of the 
market is dominated by albacore. Some products labeled yellowfin also fall into the high -end 
portion of the market, although demand for such products is low because U.S. consumers do not 
prefer it to canned albacore.  
31. Mexico has provided no evidence in s upport of its assumption that U.S. consumers have a 
preference for yellowfin tuna over all other types of canned tuna. Indeed, Mexico's model does not 
even acknowledge the existence of albacore and its popularity with U.S. consumers, despite the 
fact that Exhibit MEX -9 states that albacore is an important premium tuna product on the 
U.S. market. Further, Exhibit MEX -29 relates to Mexican consumer preferences rather than to U.S. 
consumer preferences.  Pinsa and Marindustrias, the two leading Mexican tuna pro duct companies 
mentioned in the exhibit, may market only yellowfin as a premium product, but many companies 
focused on the U.S. tuna product market, including the "big three" companies, have one or more 
premium albacore products, as well as sometimes premi um yellowfin products.  WT/DS381/ARB/Add.1  
 
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  32. Further, the $2 per kg value assigned to the mean willingness to pay for canned yellowfin 
over "generic" tuna is divorced from the reality of the U.S. market. Mexico suggests that this 
figure is conservative in light of a regress ion analysis that suggested an estimated premium on 
yellowfin tuna of $1.13 -$4.67 per kg, yet Mexico acknowledges that the data is not available "to 
calibrate the distribution of preference for canned yellowfin tuna versus canned generic tuna."  
Mexico als o asserts, in contradiction to its price premium assumption, that "canned yellowfin tuna 
is priced to compete with other canned tuna products." Further, the regression does not properly 
represent the price premium for yellowfin, as, inter alia , the data is  not detailed enough to do a 
proper analysis and the regression does not account for albacore.  
33. The assumption of a logistic distribution of willingness to pay, for which Mexico provides no 
justification, is also inconsistent with the reality of the U.S . market. A logistic distribution means 
that half of consumers are willing to pay more than the mean premium and half are willing to pay 
less. This does not describe the U.S. distribution of willingness to pay for tuna, where many 
consumers show a high sen sitivity to price, as shown by the fact that nearly half of all sales of 
canned tuna are at discounted (sale) prices, suggesting that consumers are unwilling to pay full 
price, let alone a premium. A recent study found that yellowfin and skipjack have part icularly 
elastic demand such that consumers will decrease consumption of these types of canned tuna by 
more than a proportional amount as prices rise.  
34. Thus, the key assumptions underlying the demand side of Mexico's model are not supported 
by the evide nce. The demand parameters set based on those assumptions are, therefore, also 
incorrect. Specifically: (i) Equations 1 and 2 are wrong in assuming a market in which all premium 
product is yellowfin; (ii) Equation 3 is wrong in establishing a mean willingn ess to pay of $2 per 
kg. for yellowfin over all other tuna products; (iii) the intensity of demand parameter introduced in 
Equation 5 wrongly assumes that the only difference between the U.S. and Mexican markets is the 
quantity of tuna consumed; and (iv) t he logistic distribution assumed in Equation 8 is 
inappropriate because it ignores the fact that tuna sales are highly sensitive to price and, 
therefore, willingness to pay is not distributed in this manner. These equations are central to 
Mexico's model an d, consequently, Mexico's model is critically flawed.  
c. Mexico Is Not the Only Supplier of Canned Yellowfin  
35. Another key assumption underlying Mexico's model is that Mexico is the only potential 
supplier of yellowfin tuna product to the U.S. market.  M exico assumes that, once the alleged 
latent demand for yellowfin has been awakened, only Mexican producers will be able to respond to 
it.  Mexico asserts that U.S. canneries could not increase production and that Mexico is the only 
supplier of yellowfin tu na product to the U.S. market.  These assumptions are incorrect.  
36. First, yellowfin tuna is caught and processed throughout the world; Mexico is not the sole 
supplier. The data presented in Exhibit MEX -15 shows that at least 30 different brands from Nort h 
America, Europe, Asia, and South America marketed all -yellowfin tuna products in the U.S. 
market. Similarly, U.S. cannery receipts show that U.S. canneries purchase from U.S. vessels and 
import yellowfin each year for processing. Data from regional fishe ries management organizations 
(RFMOs) similarly show that many countries' vessels harvest yellowfin.  
37. Second , if there were a sudden increase in U.S. demand for canned yellowfin, the Mexican 
industry would not be the only one to respond.  U.S. canneries  are not operating at full capacity, 
and there is no reason to think that other tuna industries in other countries could not also increase 
production. In particular, canneries in Thailand and Ecuador – the two largest exporters of canned 
tuna to the United  States – are operating at about 80 and 70 percent capacity. Consequently, 
there is every reason to believe that the tuna processing industries in these countries would 
increase production to meet any increased U.S. demand for canned yellowfin.  
38. Thus, M exico's assumption that only the Mexican tuna industry could respond to any change 
in U.S. demand for yellowfin is incorrect. In reality, both U.S. canneries and the foreign canneries 
that currently supply the U.S. market with yellowfin and other tuna prod uct would compete to 
satisfy any new U.S. demand. Consequently, Equation 20, the parameter imposing that 
assumption on the U.S. market, and Mexico's model as a whole are fundamentally flawed.  WT/DS381/ARB/Add.1  
 
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  d. Mexican Canneries Do Not Have the Ability to Increase 
Product ion Without Any Impact on Marginal Cost  
39. Mexico's model assumes that Mexico has the ability to increase production of canned 
yellowfin without increasing marginal cost. This assumption is incorrect because (1) the United 
States is a sufficiently importa nt consumer of canned tuna that a shift in demand of the size 
Mexico envisions would affect world prices of cannery grade yellowfin; and (2) Mexico could not 
import large quantities of yellowfin from other ETP fishing nations at no increased cost.  
40. On the second point, the supply of yellowfin in the ETP is not unlimited and an increase of 
the kind Mexico assumes would encounter hard supply constraints.  Catches of tuna in the ETP are 
regulated by the IATTC, and the latest IATTC report found that recent f ishing mortality rates are 
slightly below the MSY level, suggesting that yellowfin tuna was in an overfished state.  This 
suggests that the IATTC would take action if catches of yellowfin in the ETP increased 
substantially.  Indeed, at the 2016 meeting of the IATTC, the Commission adopted interim harvest 
control rules for yellowfin tuna that would trigger measures to reduce catch.  
41. Mexico's assumption that it could import additional yellowfin for canning without any 
increased cost is particularly flawed.  Mexico claims that it would import from other ETP fishing 
countries the 20,000 additional mt. of yellowfin that its processors would need to serve the 
Mexican market, given the increased exports to the United States. Ecuador is the only country that 
could  supply that volume, but Ecuador has its own tuna processing industry. It was the second 
largest producer of canned tuna as of 2008 and is the second largest exporter (by value) of 
canned tuna to the United States. Yet Mexico's model assumes that if the U. S. measure were 
changed so as to unleash a latent demand for canned yellowfin, the Ecuadorian industry would not 
try meet this demand itself, but instead would sell the less valuable raw/frozen input to Mexico so 
that the Mexican industry could reap the pr ofits of producing a processed product.  
42. Thus, Mexico's assumption of a perfectly elastic supply curve based on its ability to import 
yellowfin for canning without limit and without any effect on its price, reflected in Equations 20 and 
22, is not reaso nable. Relatedly, Mexico's assumption of a constant price of yellowfin supply and 
other tuna product, reflected throughout its model, is also incorrect. These assumptions are both 
central to Mexico's model and, therefore, the model itself is deeply flawed.    
III. THE  APPROPRIATE  CALCULATION  OF THE  LEVEL  OF NULLIFICATION  OR 
IMPAIRMENT   
A. The Appropriate Counterfactual Is Withdrawal of the Measure  
43. A Member has discretion as to how to implement DSB recommendations, and past 
WTO arbitrators have indicated that the normal counterfactual is withdrawal of the measure. The 
United States uses this counterfactual to calculate the level of nullification or impairment. Under 
this counterfactual, it is reasonable to conclude that all tuna product currently meeting t he dolphin 
safe labeling requirements, as well as tuna product produced from setting on dolphins consistent 
with the AIDCP, could be sold with some label suggesting it is "dolphin safe." It is also reasonable 
to conclude that producers and retailers of tun a product not produced from setting on dolphins will 
continue to seek to differentiate their product from tuna product produced from setting on 
dolphins. Finally, it is reasonable to conclude that the commitments made to EII or directly to 
customers by the  vast majority of producers, distributors, exporters, importers, and retailers that 
serve the U.S. tuna product market to not produce, hold, or sell tuna or tuna product produced 
from setting on dolphins would remain in place.  
B. A Market -Based Approach Is  the Appropriate Method of Calculating the 
Level of Nullification or Impairment  
44. In light of the evidence available, the most appropriate methodology to calculate the level of 
nullification or impairment would be to compare, on a prospective basis, the U.S. imports from 
Mexico of tuna product with the measure in place to the level of imports that would occur if the 
measure were withdrawn. This approach, which examines Mexico's historical market share of the 
U.S. tuna product market prior to the adoption of the DPCIA, is both consistent with the approach 
taken by past Article 22.6 arbitrators as well as the evidence on this record.  WT/DS381/ARB/Add.1  
 
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  45. Where relevant data were available, previous arbitrators have used historical trade data to 
determine the level of nullifi cation or impairment. Such an approach is appropriate here. Prior to 
1990, there was no dolphin safe labeling measure or other instrument addressing dolphin safety 
concerns. As such, levels of Mexican exports to the United States prior to 1990 during years  when 
there was no measure and market access was not limited are instructive as to the levels of imports 
from Mexico that might exist if the measure were withdrawn. The U.S. model, therefore, uses 
Mexican exports during the three years preceding 1990 (1987 -1989).  
46. The U.S. approach uses Mexico's share of U.S. tuna imports during the relevant period 
rather than absolute quantities of imports for two reasons. First, U.S. consumption of tuna product 
has declined since the period before the DPCIA was adopted , and a volume -based approach would 
not account for this decline.  Second, data on imports of "tuna product," as such, is only available 
beginning in 1989.  It is preferable not to base a historical analysis on data from a single year, as 
that year may not  be representative. The U.S. model therefore uses Mexico's share of imports of 
all tuna ( i.e., tuna products and fresh tuna) during the three years prior to 1990. This may 
overestimate the level of nullification and impairment, but is likely very close to Mexico's historical 
share of tuna product imports because: (1) tuna product is a substantial subset of the "all tuna" 
category, accounting for between 90.3 and 98.0 percent of U.S. imports of all tuna, by volume, 
since 1989; and, (2) Mexico's share of U.S.  imports of tuna product in 1989 (3.8 percent) was 
very close to Mexico's share of U.S. imports of all tuna (3.4 percent).  
47. On this basis, the United States identified U.S. imports of tuna from Mexico in the three 
years prior to 1990 and calculated Mexi co's market share, by volume, which was 3.9 percent. The 
United States also notes that in 1987 Mexico's import share reached its high of 5.8 percent. Thus, 
3.9 percent is a reasonable estimate of what Mexico's annual share of U.S. imports of tuna product 
would be in the absence of the U.S. measure, and 5.8 percent represents the highest possible level 
of potential imports that could be affected by the U.S. measure (without taking into account U.S. 
consumer preferences for tuna product not produced from sett ing on dolphins).  
48. Next, to establish a range of U.S. imports of Mexican tuna product that could be expected 
under the counterfactual, the United States applied both percentages to current U.S. imports of 
tuna product based on average annual imports for  2013-2015.  Over this period, the United States 
imported, on average, 251,011 mt. of tuna product per year.  Assigning Mexican products a 3.9 
percent share of imports at this level suggests that U.S. imports of Mexican tuna product would be 
approximately 9,789 mt. per year.  At Mexico's historical high import share of 5.8 percent, 
U.S. imports of Mexican tuna product would be 14,559 mt. a year.  
49. To establish the value of U.S. imports of Mexican tuna product under the counterfactual, the 
United States mu ltiplied the projected quantity of Mexican tuna product imports by the average 
import price of tuna products from the world, excluding Mexico, for 2013 -2015. Excluding imports 
from Mexico from the calculation of the average price of tuna product accounts f or any price 
difference between Mexican tuna product and other tuna product due to the ineligibility of Mexican 
product for the label. Based on this calculation, the annual value of U.S. imports of Mexican tuna 
product under the counterfactual would be $51 .8 million, based on a 3.9 percent share of tuna 
product imports, and $77.1 million, based on a 5.8 percent share.  
50. From this projected value of U.S. imports of Mexican tuna product under the counterfactual, 
it is necessary to subtract the value of curr ent U.S. imports of Mexican tuna product to identify 
how much higher such imports would be if the U.S. measure were withdrawn.  Using the average 
actual value of U.S. imports of Mexican tuna product for 2013 -2015 produces a result of $32.9 
million, based o n a 3.9 percent import share, and an upward bound of $58.1 million, based on 
Mexico's historical high import share.  
C. Results of the Market -Based Approach Must Be Discounted to Account for 
U.S. Preferences to Arrive an Accurate Level of Nullification or I mpairment  
51. As noted above, this market -based approach does not take into account the current U.S. 
consumer preference for tuna product produced from fishing methods other than setting on 
dolphins. In light of this fact, and the fact that under the count erfactual producers and retailers 
would still be able differentiate products produced from fishing methods other than setting on WT/DS381/ARB/Add.1  
 
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  dolphins from products produced from setting on dolphins, the figures listed in the preceding 
section should be discounted to a rrive at an accurate level of nullification or impairment.   
52. The market impact of this consumer preference can be found in the commitments that the 
many companies serving the U.S. market have made to EII. These commitments do not depend on 
the content of U.S. law and likely would not change if the measure were withdrawn.  It is difficult 
to estimate how much of the U.S. market is covered by commitments to EII, although 90 percent  
is a reasonable estimate, since about 90 percent of tuna companies globall y have made 
commitments to EII.  At a minimum, the discount must reflect the policies of individual retailers on 
the record. Retailers accounting for 46.6 percent of total U.S. tuna product consumption have 
policies not to sell tuna product produced by set ting on dolphins or policies that are not affected by 
the dolphin safe labeling measure.  It is necessary, therefore, to reduce by that amount the 
projections of Mexican exports of tuna product to the United States under the counterfactual. To 
do so, the U .S. model, after calculating the estimated value of imports of Mexican tuna product, 
multiplied that figure by 0.53, to reflect the market share available to tuna product produced from 
setting on dolphins, before subtracting the value of Mexico's actual im ports.  
53. Thus, the level of nullification or impairment, adjusted for consumer preferences, would 
amount to $8.5 million , using the average actual value of U.S. imports of Mexican tuna product 
for 2013 -2015, and $21.9 million , using Mexico's historical h igh import share.  
V. CONCLUSION  
54. The United States requests that the Arbitrator find that the level of suspension of 
concessions requested by Mexico is in excess of the appropriate level of nullification or 
impairment.  The more ap propriate level would be about $8.5 to $21.9 million  per year.  
SUMMARY OF U.S. OPENING STATEMENT  
55. The question in this proceeding is whether Mexico's request for authorization to suspend 
concessions is "equivalent" to the level of nullification or impa irment caused by the measure, and if 
not, then what the equivalent level is. The United States has shown that Mexico's request is not 
consistent with the requirements of the DSU. As a result, it is appropriate to move to the second 
part of the question. Th e U.S. analysis and calculations show that the level of nullification or 
impairment should be no more than $8.5 to $21.9 million per year.   
I.  MEXICO'S MODEL IS FUNDAMENTALLY FLAWED AND IS NOT CAPABLE OF 
ACCURATELY ESTIMATING THE LEVEL OF NULLIFICATION A ND IMPAIRMENT  
56. The evidence shows that the three critical assumptions underlying Mexico's model are all 
incorrect and that Mexico's calculation of nullification or impairment is grossly inflated.  
A. The Measure Does Not Ban the Sale of Canned Yellowfin in the United 
States  
57. One of the key assumptions underlying Mexico's model is that the U.S. measure "effectively 
bans" sales of canned yellowfin in the United States. Based on this assumption, Mexico estimates 
the level of nullification or impairment by  modeling the introduction of a hypothetical new product 
in the U.S. market, instead of modeling the removal of the labelling standards. In doing so, Mexico 
ignores the data on actual U.S. imports and consumption of canned yellowfin and derives demand 
for the product based on incorrect assumptions.  
58. The U.S. measure is neither a de facto  nor a de jure  prohibition on the sale of canned 
yellowfin. Many countries around the world catch and process yellowfin. Yellowfin is the second 
most produced tuna specie s, by volume, in the global tuna industry. The majority of this catch is 
by purse seine vessels and destined for the global canned market. Exhibit MEX -15 shows that 
U.S.-produced and imported canned yellowfin products are sold in the U.S. market. Mexico al so 
exports canned tuna to the United States. Mexico was the sixth largest source of U.S. canned tuna 
imports in 2014 -2015, accounting for 3.6 percent of all canned tuna imports, by volume. Mexico's 
share of U.S. imports of canned tuna is consistent with Me xico's share of U.S. imports of other 
major seafood products, such as shrimp, crab, and sardines.  WT/DS381/ARB/Add.1  
 
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  59. Further, evidence proves that a lack of demand, not lack of supply, is responsible for the 
fact that canned yellowfin accounts for only 1 -2 percent of U.S . canned tuna consumption. 
First, yellowfin accounted for a larger share of U.S. cannery receipts in the 1980s than it does 
today, but during that time it largely was sold not as "yellowfin," but, combined with skipjack, as 
"light tuna."  Thus, the fact th at U.S. canneries used to purchase more yellowfin does not mean 
that there ever was strong demand for all -yellowfin products. Second , the steady decline in U.S. 
cannery purchases of yellowfin over the last three decades confirms the lack of U.S. consumer 
demand for canned yellowfin. Third, the behavior of tuna producers in the U.S. market, in 
supplying increasing quantities of albacore products while canning yellowfin with skipjack as light 
tuna, also confirms the lack of U.S. consumer demand for yellowfin.  Fourth , the rise of U.S. 
wholesale and retail tuna prices during the early 1990s refutes Mexico's claim that the decline in 
U.S. cannery yellowfin purchases was caused by the measure restricting supply.  
60. There are several factors that have driven down demand for canned yellowfin, including: (1) 
yellowfin is the only type of tuna caught in association with dolphins, which U.S. consumers 
strongly do not prefer; (2) growing preference for albacore; and, (3) a preference for light tuna 
containing exclusivel y or primarily skipjack, which has a lower mercury content than yellowfin and 
is less expensive.  Thus, the evidence refutes Mexico's claim that the U.S. measure effectively bars 
sales of canned yellowfin in the U.S. market. Consequently, the decision to d isregard existing 
consumer data and to derive a demand function based entirely on the assumption of a tremendous 
unobserved preference for canned yellowfin is wrong.  
B. Mexico Is Not the Only Possible Supplier of Canned Yellowfin  
61. Another major assumpt ion underlying Mexico's model is that Mexico is the only possible 
supplier of canned yellowfin to the U.S. market, or the only possible supplier of low cost canned 
yellowfin. Based on this assumption, Mexico's model equates "canned yellowfin" with Mexican 
canned tuna exports to the United States and ignores all other potential sources of canned 
yellowfin. In reality, however, Mexico is not the supplier of a unique product, either canned 
yellowfin or "low cost" canned yellowfin, and U.S. consumers do not  have a preference for Mexican 
canned yellowfin over all other types of canned tuna.  
62. As already explained, Mexico is far from the only source of cannery grade yellowfin, and the 
U.S. tuna product market is deeply integrated into the global tuna industry. A  significant amount 
of tuna purchased by U.S. canneries has been caught by foreign flagged vessels, and imports 
account for nearly half of all canned tuna on the U.S. market.  The sources of U.S. tuna product 
imports include Members whose fleets are among the top harvesters of yellowfin and Members 
that purchase tuna from the top harvesters of yellowfin. Not surprisingly, numerous tuna 
companies, both U.S. and foreign, market all - or partly -yellowfin products in the U.S. market.  
Thus there are many current  suppliers of canned yellowfin to the U.S. market that have the 
capacity to supply significantly more canned yellowfin if U.S. demand were greater.  
63. Mexico now acknowledges this is the case, but claims that only Mexican canned yellowfin 
would enter the U.S. market on the grounds that: 1) Mexico is a unique producer of low -cost 
yellowfin; and 2) there is "no reason" that if the scenario Mexico models comes to pass that the 
domestic and foreign competitors of Mexico would increase their production of canne d yellowfin for 
the U.S. market.  The evidence on the record proves otherwise.  
64. First, Mexico presents no evidence regarding the cost of production of its industry or the 
industries of other Members to prove that the Mexican industry is the lowest cost  producer of 
canned yellowfin. In fact, the available evidence indicates that this is not the case. Other countries 
have much greater advantages in terms of low -cost tuna processing.  Mexico's claim is also 
contradicted by the fact that its model assumes t hat Ecuadorian yellowfin is interchangeable with 
Mexican yellowfin and by the fact that Mexican products are not currently the least expensive 
canned yellowfin products on the U.S. market.  
65. Second , Mexico is wrong when it claims that there is "no reason " that, if the scenario Mexico 
models comes to pass, other domestic and foreign tuna industries would not increase sales canned 
yellowfin on the U.S. market. The basis of Mexico's claim is that other producers would not be 
affected by the removal of the U. S. measure, but this is not what Mexico modeled.  Mexico 
modeled the introduction of a new product for which there is significant, untapped consumer WT/DS381/ARB/Add.1  
 
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  demand, such that the product sells at a higher price and in much greater quantities than canned 
yellowfin does. The U.S. import price generated by Mexico's model is significantly higher than the 
current import price of Mexican canned tuna and of canned tuna from other countries that produce 
canned yellowfin.  It  is also significantly more than the current aver age EU import price for canned 
yellowfin. It is simply unreasonable to assume, as Mexico does, that all producers of canned 
yellowfin would not react to the dramatically increased demand assumed in Mexico's model by 
increasing production of that product fo r the U.S. market.  
66. In short, the available evidence contradicts Mexico's claim that it is the only possible 
supplier of canned yellowfin, low cost or otherwise, to the U.S. market. Thus, the decision to 
equate U.S. imports of canned yellowfin with Mexi can canned tuna exports is wrong and cannot be 
used to accurately calculate the level of nullification and impairment in this dispute.  
C. Mexico's Demand Equations Are Incorrect  
67. Mexico used a choice model to depict demand in the U.S. and Mexican market s but derived 
the demand equations based entirely on assumptions rather than on the highly disaggregated 
consumer -level data or academic studies that would normally be used to construct such a model.  
The evidence proves that the assumptions Mexico made ar e incorrect.  
68. First, Mexico's assumption that the United States and Mexico are a single market, in which 
consumers have the same preferences, is contradicted by the evidence. The evidence shows that 
U.S. and Mexican consumers have different preferences concerning many different food products, 
including canned tuna. For example, U.S. consumers have a distinct preference for canned 
albacore that Mexican consumers do not share, and Mexican consumers have a much stronger 
preference for canned yellowfin. Also , U.S. consumers have demonstrated a preference for tuna 
not caught by setting on dolphins that seems to be absent among Mexican consumers. Finally, 
Mexico's claim that Mexican canned tuna is a gourmet product that is "competitively -priced" with 
"generic" products and that, therefore, U.S. consumers could not possibly not prefer it, is 
incorrect.  In fact, the Mexican canned yellowfin products sold on the U.S. market are not gourmet 
products and are not priced competitively with bargain -end products.     
69. Second , Mexico's unsubstantiated assumption that U.S. demand for canned tuna is 
represented by a logistically distributed $2 per kg. mean willingness to pay for canned yellowfin 
over other types of canned tuna is inconsistent with a properly structured c onsumer choice model 
and refuted by the evidence on the record.  Mexico asserts that its assumption of a $2 per kg. 
mean willingness to pay a premium for yellowfin is conservative because it is less than the 
premium calculated using its weighted OLS regres sion.  But Mexico ignores the fact that the $2 per 
kg. is more than the premium calculated using the OLS regressions. Scaling the distribution 
function such that 6.6 percent of consumers are willing to pay a premium of $4.65 per kg. is 
wrong regardless bec ause only 1 -2 percent of consumers are paying the current premium.  Also, 
the fact that nearly half of all canned tuna in the United States is sold on sale confirms that the 
logistic distribution Mexico chose is not accurate for the U.S. market. Finally, t he import prices of 
yellowfin tuna products in the EU demonstrate that, if U.S. demand for yellowfin were such that 
the United States would import 63,568 metric tons of canned yellowfin if the U.S. import price rose 
to $7.84 per kg., many countries other t han Mexico would supply the product.  
70. Third, Mexico's "intensity of demand" parameter is inconsistent with the appropriate use of a 
consumer choice model and is contradicted by the evidence. In Mexico's model, all  consumer 
preferences other than the pre ference for yellowfin are represented by a single variable that 
reflects total consumption in the United States and Mexico. Because this is essentially the only 
variable that differs between U.S. and Mexican demand, it is the main factor driving the outcom e 
of the model. This is inconsistent with the appropriate use of a choice model, as a properly 
specified model would derive demand for products based on the product characteristics valued by 
consumers. Further, Mexico's use of the intensity of demand param eter is inconsistent with the 
evidence, since it is not correct that the entire U.S. canned tuna market represents the market for 
canned yellowfin. Only 1 -2 percent of all consumption of canned tuna is yellowfin, and at most 
only 6 percent of consumers, ac cording to Mexico's own consumer survey, even look for canned 
yellowfin.  But Mexico's use of the demand intensity parameter assumes that the U.S. market for 
canned yellowfin  is the same as the U.S. market for all canned tuna . In reality, the fact that the  
U.S. market for all canned tuna is larger than the Mexican one does not mean that the U.S. market WT/DS381/ARB/Add.1  
 
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  for canned yellowfin is proportionally as large. That is why, to accurately reflect demand, a model 
must be based on economic data, not unreasonable assumpti ons. 
II. THE U.S. MODEL PROVIDES A REASONABLE ESTIMATE OF THE LEVEL OF 
NULLIFICATION AND IMPAIRMENT  
71. The United States has presented a model that provide a reasonable estimate of the level of 
nullification and impairment, and Mexico has not shown that the period prior to 1990 is 
inappropriate to use to estimate Mexico's market share if the measure were withdrawn.   
72. First, the agreement between the United States and Mexico concerning U.S. imports of 
Mexican tuna between 1987 and 1989 did not restrict  imports during the period. In only one year, 
1987, did U.S. imports of Mexican tuna product come close to the agreed level. In 1988 and 1989, 
U.S. imports from Mexico were only 29.7 and 47.5 percent of the agreed levels.  Additionally, 
evidence of Mexico' s share of U.S. imports of all tuna product during the period prior to the 1980 
embargo confirms that Mexico's import share for 1987 -1989 was representative of Mexico's share 
in the absence of any measure affecting Mexican exports to the United States.  
73. Second , the available evidence suggests that NAFTA would not make a significant difference 
in Mexico's market share of U.S. imports of tuna product. Trends in Mexico's market share of the 
products most similar to tuna product reveal that NAFTA did not hav e a large or long -lasting effect 
on Mexico's import share. Mexico's share of U.S. crab, shrimp, and sardine imports all rose in the 
years following NAFTA (although noting close to the 2,056 percent  increase in Mexico's share of 
canned tuna imports predicte d by Mexico's model), but all later declined to pre -NAFTA levels (all 
except sardines within 5 years of NAFTA coming into force). Data on U.S. imports of canned tuna 
from other countries that have experienced a change in tariff treatment also suggests that  using 
Mexico's pre -NAFTA market share is not unreasonable.   
74. Third, the location and capacity of U.S. canneries and the capacity of Mexican canneries are 
controlled for by using Mexico's market share of all tuna as the baseline. In the 1980s, when the re 
were more U.S. canneries in the EPO region and Mexico's canning capacity was lower, Mexico 
exported tuna loins and frozen tuna to the U.S. market. As Mexico's canning industry developed, 
the balance of Mexico's exports shifted towards canned tuna. The U .S. model controls for shifts in 
the balance of Mexico's exports to the United States by using Mexico's historical share of imports 
of all tuna to estimate Mexico's share of tuna product imports in the absence of the measure, while 
multiplying the estimate d quantity of imports from Mexico by the higher price of all tuna product 
rather than the lower price of raw tuna for canning.  
75. In conclusion, the U.S. model is consistent with models used in previous arbitrations and 
generates a reasonable outcome. Me xico has not shown that this is not the case. Thus, the level of 
nullification and impairment of $8.5 to $21.9 million  per year is appropriate . 
 
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