WT/DS381/ARB  
 
25 April 2017 
(17-2218) Page: 1/104 
 
 
 
  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  WT/DS381/ARB  
 
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  TABLE OF CONTENTS  
 
1   INTRODUCTION  ................................ ................................ ................................ ........  12 
1.1   Prior proceedings  ................................ ................................ ................................ ...... 12 
1.2   Request for arbitration and arbitration proceedings ................................ ........................  13 
2   PROCEDURAL MATTERS  ................................ ................................ .............................  14 
2.1   Treatment of BCI  ................................ ................................ ................................ ...... 14 
2.2   Partially open meeting  of the Arbitrator with the parties  ................................ .................  15 
2.2.1   Procedural background  ................................ ................................ ...........................  15 
2.2.2   Merits of the United States' request for a parti ally open meeting  ................................ ... 15 
3   UNITED STATES' REQUE ST FOR A PRELIMINARY  RULING CONCERNING TH E 
RELEVANT MEASURE  ................................ ................................ ................................ ...... 20 
3.1   Procedural bac kground  ................................ ................................ ..............................  20 
3.2   Issue  ................................ ................................ ................................ ......................  20 
3.3   Text and context of Article 22.6 of the DSU  ................................ ................................ .. 21 
3.4   Previous arbitration decisions  ................................ ................................ .....................  24 
3.5   Additional considerations  ................................ ................................ ...........................  28 
3.5.1   Possible systemic consequences  of granting the United States' request  ..........................  28 
3.5.2   Whether denying the United States' request for a preliminary ruling would result 
in the authorization of a retroactive or punitive suspension  of concessions  ...............................  30 
3.5.3   Relevance of the sequencing agreement between Mexico and the United States  ..............  31 
3.5.4   The date on whi ch the 2016 Tuna Measure entered into force, and the legal 
relevance of that fact  ................................ ................................ ................................ ....... 31 
3.6   Conclusion  ................................ ................................ ................................ ...............  32 
4   THE APPROPRIATE COU NTERFACTUAL AND TIME -FRAME  ................................ .........  32 
4.1   The appropriate counterfactual  ................................ ................................ ...................  32 
4.2   The appropriate time -frame  ................................ ................................ .......................  34 
5   PROPOSED MODELS FOR ASSESSING THE LEVEL OF NULLIFICATION OR 
IMPAIRMENT  ................................ ................................ ................................ .................  36 
5.1   Mexico's proposed model for determining the level of nullification  or impairment  ...............  36 
5.1.1   Description of Mexico's model  ................................ ................................ ..................  36 
5.1.2   United States' arguments regarding Mexico's model  ................................ ....................  37 
5.1.3   Arbitrator's analysis of Mexico's model  ................................ ................................ ...... 38 
5.1.3.1    The Tuna Measure has restricted the supply of canned yellowfin from Mexico 
into the US market  ................................ ................................ ................................ ...........  39 
5.1.3.1.1    Evolution of the volume of canned yellowfin exports from Mexico to the United 
States  ................................ ................................ ................................ ............................  40 
5.1.3. 1.2   Evolution of yellowfin prices in the US market  ................................ .......................  42 
5.1.3.1.3    Conclusion  ................................ ................................ ................................ ...... 48 
5.1.3.2    US Consumers have a preference for c anned yellowfin and US retailers would 
sell Mexican canned yellowfin after the withdrawal of the Tuna Measure ................................ ... 48 
5.1.3.2.1    US consumers' preferences  ................................ ................................ ................  48 
5.1.3.2.2    US retailers' willingness to sell Mexican canned yellowfin  ................................ ........  51 WT/DS381/ARB  
 
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  5.1.3.2.3    Conclusion  ................................ ................................ ................................ ...... 53 
5.1.3.3   Mexican producers would supply all of the increased consumption of canned 
yellowfin in the US market following the withdrawal of the Tuna Measure  ................................ . 53 
5.1.3.3.1    The Mexican canning ind ustry would be competitive in the US canned 
yellowfin market vis-à-vis US canneries and other countries exporting canned yellowfin to 
the United States  ................................ ................................ ................................ .............  55 
5.1.3.3.2    No other potential large supplying country is affected by the Tuna Measure, 
and unaffected supplying countries would not be incentivized to sell canned yellowfin 
after the withdrawal of the Tuna Measure  ................................ ................................ ............  57 
5.1.3.3.3    Mexico would import canned yellowfin from other countries in the region to 
meet its own domestic demand  ................................ ................................ ..........................  59 
5.1.3.3.4    Conclusion  ................................ ................................ ................................ ...... 60 
5.1.3.4    Conclusion on Mexico's proposed model  ................................ ................................ . 61 
5.2   United States' proposed model for determining the level of nullification or 
impairment  ................................ ................................ ................................ .....................  61 
5.2.1   Description of the model  ................................ ................................ .........................  61 
5.2.2   Mexico's arguments on the United States' model  ................................ ........................  63 
5.2.3   Arbitrator's analysis  ................................ ................................ ...............................  64 
5.2.3.1    US imports of tuna products from Mexico in the period 1987 -1989 provide a 
reasonable basis to estimate the quantity of US imports of tuna products from Mexico  in 
2014 ................................ ................................ ................................ ..............................  64 
5.2.3.2    Some of the retailers in the US market would still not carry Mexican canned 
yellowfin due to the fact that they have made commitments not to produce, hold, or sell 
tuna p roducts produced from setting on dolphins  ................................ ................................ .. 66 
5.2.3.3    Conclusion on the United States' proposed model  ................................ ....................  66 
5.3   Overall conclusi on ................................ ................................ ................................ .... 66 
6   THE ARBITRATOR'S OWN  DETERMINATION OF THE  LEVEL OF NULLIFICATI ON 
OR IMPAIRMENT  ................................ ................................ ................................ ............  68 
6.1   Demand for canned tuna  ................................ ................................ ...........................  68 
6.1.1   Modelling consumers' choices across different varieties of canned tuna  ..........................  68 
6.1.2   Aggregation across tuna species  ................................ ................................ ..............  69 
6.1.3   Distribution of preferences and its functional form  ................................ ......................  70 
6.1.3.1    Parameterization of the scale parameter of the logistic distri bution  .............................  71 
6.1.3.2    Parameterization of the mean willingness to pay  ................................ ......................  71 
6.1.3.2.1    Willingness to pay in the United States  ................................ ................................  71 
6.1.3.2.2    Willingness to pay in Mexico ................................ ................................ ...............  76 
6.1.4   Parameterization of the demand intensity  ................................ ................................ .. 76 
6.1.5   Parameterization of the elasticity of demand  ................................ ..............................  76 
6.1.6   Accounting for some US retailers not commercializing Mexican canned yellowfin  .............  77 
6.2   Supply of canned tuna  ................................ ................................ ...............................  77 
6.2.1   The counterfactual  ................................ ................................ ................................ . 77 
6.2.2   Export suppl y of canned yellowfin  ................................ ................................ ............  77 
6.2.2.1    Export supply elasticity for yellowfin  ................................ ................................ ...... 78 
6.2.2.2    Mexican production capacity of canned yel lowfin  ................................ ......................  79 
6.2.3   Export supply of generic tuna  ................................ ................................ ..................  81 WT/DS381/ARB  
 
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  6.2.3.1    Elasticity of export supply of canned generic tuna  ................................ ....................  81 
6.2.3.2    World price of canned generic tuna  ................................ ................................ ........  82 
6.3   Other parameters of the model: Duty rates, transport costs and charges  ..........................  83 
6.4   Calculation of the level of nullification or impairment  ................................ .....................  84 
7   CONCLUSION AND AWARD  ................................ ................................ ........................  85 
APPENDIX 1. Equations of the Arbitrator's model  ................................ ................................ .. 86 
APPENDIX 2. Stata do file for econometric estimation of price premium  ................................ ... 88 
APPENDIX 3. R files for solving the model  ................................ ................................ ............  97 
Model functions  ................................ ................................ ................................ ...............  97 
Model solutions  ................................ ................................ ................................ ..............  102 
 
 WT/DS381/ARB  
 
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  LIST OF APPENDIXES  
 
APPENDIX  1  
EQUATIONS OF THE ARB ITRATOR'S MODEL  
APPENDIX  2  
STATA DO FILE FOR EC ONOMETRIC ESTIMATION  OF PRICE PREMIUM  
APPENDIX  3  
R FILES FOR SOLVING THE MODEL  WT/DS381/ARB  
 
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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 Confidential Information  A-5 
Annex  A-3 Additional Working Procedures of the Arbitrator on Partially Open Meetings  A-6 
ANNEX B  
ARGUMENTS OF T HE 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  
 
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  CASES CITED IN THIS REPORT  
Short Title  Full Case Title and Citation  
Brazil – Aircraft (Article 
22.6 – Brazil)  Decision by the Arbitrators, Brazil – Export Financing Programme for Aircraft – 
Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 
of the SCM Agreement , WT/DS46/ARB , 28 August 2000, DSR 2002:I, p. 19  
Canada – Aircraft Credits 
and Guarantees (Article 
22.6 – Canada)  Decision by the Arbi trator, Canada – Export Credits and Loan Guarantees for 
Regional Aircraft – Recourse to Arbitration by Canada under Article 22.6 of the 
DSU and Article 4.11 of the SCM Agreement , WT/DS222/ARB , 17 February 
2003, DSR 2003:III, p. 1187  
Canada – Patent Term  Appellate Body Report, Canada – Term of Patent Protection , WT/DS170/AB/R , 
adopted 12 October 2000, DSR 2000:X, p. 5093  
Canada – Renewable Energy 
/ Canada – Feed-in Tariff 
Program  Panel Reports, Canada – Certain Measures Affecting the Renewable Energy 
Generation Sector / Canada – Measures Relating to the Feed -in Tariff Program , 
WT/DS412/R  and Add.1 / WT/DS426/R  and Add.1, adopted 24 May 2013, as 
modified by Appellate Body Reports WT/DS412/AB/R / WT/DS426/AB/R, DSR 
2013:I, p. 237  
EC – Bananas III (US)  
(Article  22.6 – EC) Decision by the Arbitrator s, European Communities – Regime for the 
Importation, Sale and Distribution of Bananas – Recourse to Arbitration by the 
European Communities under Article  22.6 of the DSU , WT/DS27/ARB , 9 April 
1999, DSR 1999:II, p.  725 
EU – Biodiesel (Argentina)  Appellate Body Report, European Union – Anti-Dumping Measures on Biodiesel 
from Arge ntina, WT/DS473/AB/R  and Add.1, adopted 26 October 2016  
EC – Hormones  Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R , WT/DS48/AB/R , adopted 13 February 1998, DSR 
1998:I, p.  135 
EC – Hormones (Canada) 
(Article 22.6 – EC) Decision by the Arbitrators, European Communities – Measures Concerning 
Meat and Meat Products (Hormones), Original Complaint by Canada – Recourse 
to Arbitration by the European Communities under Article 22. 6 of the DSU , 
WT/DS48/ARB , 12 July 1999, DSR 1999:III, p. 1135  
EC – Hormon es (US) 
(Article 22.6 – EC) Decision by the Arbitrators, European Communities – Measures Concerning 
Meat and Meat Products (Hormones), Original Complaint by the United States – 
Recourse to Arbitration by the European Communities under Article 22.6 of the 
DSU, WT/DS26/ARB , 12 July 1999, DSR 1999:III, p. 1105  
EC and certain member  
States – Large Civil Aircraft  Appellate Body Report, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft , WT/DS316/AB/R , adopted 1 
June 2011, DSR 2011:I, p. 7  
Japan – DRAMs (Korea)  Appellate Body Report, Japan – Countervailing Duties on Dynamic Random 
Access Memories from Korea , WT/DS336/AB/R  and Corr.1, adopted 17 
December 2007, DSR 2007:VII, p. 2703  
US – 1916 Act (EC) (Article 
22.6 – US) Decision by the Arbitrators, United States – Anti-Dumping Act of 1916, Original 
Complaint by the European Communities – Recourse to Arbitration by the 
United States under Article 22.6 of the DSU , WT/DS136/ARB , 24 February 
2004, DSR 2004:IX, p. 4269  
US – Continued Suspension  Panel Report,  United States – Continued Suspension of Obligations in the EC – 
Hormones Dispute , WT/DS320/R  and Add.1 to Add.7, adopted 14 November 
2008, as modified by Appellate Body Report  WT/DS320/AB/R, DSR 2008:XI, 
p. 3891 
US – Continued Suspension  Appellate Body Report, United States – Continued Suspension of Obligations in 
the EC – Horm ones Dispute , WT/DS320/AB/R , adopted 14 November 2008, 
DSR 2008:X, p. 350 7 
US – Continued Zeroing  Panel Report, United States – Continued Existence and Application of Zeroing 
Methodology , WT/DS350/R , adopted 19 February 2009, as modified as 
Appellate Body Report WT/DS350/AB/R, DSR 2009:III, p. 1481  
US – COOL (Article 21.5 – 
Canada and Mexico)  Panel Reports, United States – Certain Country of Origin L abelling (COOL) 
Requirements – Recourse to Article 21.5 of the DSU by Canada and Mexico , 
WT/DS384/RW  and Add.1 / WT/DS386/RW  and Add.1, adopted 29 M ay 2015, 
as modified by Appellate Body Reports WT/DS384/AB/RW / WT/DS386/AB/RW  
US – COOL (Article 22.6 – 
United States)  Decisions by the Arbitrator, United States – Certain Country of Origin Labelling 
(COOL) Requirements – Recourse to Article 22.6 of the DSU the United States , 
WT/DS384/ARB  and Add.1 / WT/DS386/ARB  and Add.1, circulated to WTO 
Members 7 December 2015  
US – FSC (Article 22.6 – 
US) Decision by the Arbitrator, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Arbitration by the United States under Article 22.6 
of the DSU and Article 4.11 of the SCM Agreement , WT/DS108/ARB , 30 August 
2002, DSR 2002:VI, p. 2517  WT/DS381/ARB  
 
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  Short Title  Full Case Title and Citation  
US – Gambling (Article 22.6 
– US) Decision by the Arbitrator, United Stat es – Measures Affecting the Cross -Border 
Supply of Gambling and Betting Services – Recourse to Arbitration by the 
United States under Article 22.6 of the DSU , WT/DS285/ARB , 21 December 
2007, DSR 2007:X, p. 4163  
US – Offset Act (Byrd 
Amendment) (Brazil) 
(Article 22.6 – US) Decision by the Arbitrator, United States – Continued Du mping and Subsidy 
Offset Act of 2000, Original Complaint by Brazil – Recourse to Arbitration by the 
United States under Article 22.6 of the DSU , WT/DS217/ARB/BRA , 31 August 
2004, DSR 2004:IX, p. 4341  
US – Oil Country Tubular 
Goods Sunset Reviews 
(Article 21.5 – Argentina)  Appellate Body Report, United States – Sunset Review s of Anti -Dumping 
Measures on Oil Country Tubular Goods from Argentina – Recourse to Article 
21.5 of the DSU by Argentina , WT/DS268/AB/RW , adopted 11 May 2007, DSR 
2007:IX, p. 3523  
US – Tax Incentives  Panel Report, United States – Conditional Tax Incentives for Large Civil Aircraft , 
WT/DS487/R  and Add.1, circulated to WTO Members 28 November 2016 
(appealed by the United States 16 Decemb er 2016)  
US – Tuna II (Mexico)  Panel Report, United States – Measures Concerning the Importation, Marketing 
and Sale of Tuna and Tuna Products , WT/DS381/R , adopted 13 June 2012, as 
modified by Appellate Body Report WT/DS381/AB/R, DSR 2012:IV, p. 2013  
US – Tuna II (Mexico)  Appellate Body Report, United States – Measures Concerning the Importa tion, 
Marketing and Sale of Tuna and Tuna Products , WT/DS381/AB/R , adopte d 
13 June 2012, DSR 2012:IV, p. 1837  
US – Tuna II (Mexico) 
(Article 21.5 – Mexico)  Panel Report, United States – Measures Concerning the Importation, Marketing 
and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the DSU by 
Mexico , WT/DS381/RW , Add.1 and Corr.1, adopted 3 December 2015, as 
modified by Appellate Body  Report WT/DS381/AB/RW  
US – Tuna II (Mexico) 
(Article 21.5 – Mexico)  Appellate Body Report, United States – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the 
DSU by Mexico , WT/DS381/AB/RW  and Add.1, adopted 3 December 2015  
US – Upland Cotton (Article 
21.5 – Brazil) Panel Report, United States – Subsidies on Upland Cotton – Recourse to Article 
21.5 of the DSU by Brazil , WT/DS267/RW  and Corr.1, adopted 20 June 2008, 
as modified by Appellate Body Report WT/DS267/AB/RW, DSR 2008:III, p. 997  
US – Upland Cotton (Article 
22.6 – US I)  Decision by the Arbitrator, United States – Subsidies o n Upland Cotton – 
Recourse to Arbitration by the United States under Article 22.6 of the DSU and 
Article 4.11 of the SCM Agreement , WT/DS267/ARB/1 , 31 August 2009, DSR 
2009:IX, p. 3871  
US – Upland Cotton (Article 
22.6 – US II)  Decision by the Arbitrator, United States – Subsidies on Upland Cotton – 
Recourse to Arbitration by the United States under Article 22.6 of the DSU and 
Article 7.10 of the SCM Agreement , WT/DS267/ARB/2  and Corr.1, 31 August 
2009, DSR 2009:IX, p. 4083  
 
 WT/DS381/ARB  
 
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  EXHIBITS REFERRED TO  IN THIS REPORT  
Panel Exhibit  Title 
MEX-02 Sebastien Pouliot, "Methodology and Measurement of Losses to the Mexican 
Tuna Industry from the U.S. Dolphin -Safe Labelling Measure" (06 July 2016)  
MEX-04 U.S. ITC, "Tuna: Customs Value by HTS Number and Customs Value for All 
Countries -  U.S. Imports for Consumption", Monthly data for 2002 -2015, 
available online at:  
https://dataweb.usitc.gov/  
MEX-06 Atuna, " Tuna Species Guide" (2016), available online at: 
http://www.atuna.com/index.php/en/tuna -info/tuna -species -guide  
MEX-15 Nielsen, "Item Rank Report – Seafood - Tuna – Shelf stable" (12 -week and 52 -
week reports ending 24 October 2015)  
MEX-21 USDA, FAS, "Ecu ador: Ecuador's Tuna Fish Industry Update" (26 August 2015), 
available online at: http://www.fas.usda.gov/data/ecuador -ecuadors -tuna-fish-
industry -update.  
MEX-24 Ley de los Impuestos Generales de Importacion y de Exportacion ( Tarifa ), 
Capitulo 16 (excerpt ) Mexican Official Gazette (18 June 2007)  
MEX-36 Business Confidential Information (BCI)   
MEX-45 (BCI)  
MEX-63 Public Opinion Strategies, National Survey Methodology (Oct. 16, 2010)  
MEX-68 Harmonized Tariff Schedule of the United States, Supplement 1, C h. 16 (July 
1989),  available online at:  
http://www.usitc.gov/tata/hts/archive/8910/1989_supplement_index.htm  
MEX-71 Public Opinion Strategies, Dolphin Safe National Survey  
MEX-72 NOAA Fisheries, Tuna/Dolphin Embargo Status Update, available online at:  
http://www.nmfs.noaa.gov/pr/dolphinsafe/embargo2.htm  
MEX-80 NMFS data supporting Figure 1 in the first written submission (pg. 43)  
MEX-100-f R code to calculate own -price elasticities of demand for canned yellowfin tuna 
and canned generic tuna  
MEX-106 BCI 
MEX-119 International Trade Commission, Tuna: Competitive Conditions Affecting the 
U.S. and European Tuna Industries in Domestic and Foreign Markets, USITC 
Publication 2339, December 1990  
USA-01 The Dolphin Protection Consumer Information Act (DPCIA) 16 U.S.C. §1385 
(2011)  
USA-02 Dolphin Safe Tuna Labelling Regulations, 50 C.F.R. § 216, Subpart H (2016)  
USA-07 Amanda Hamilton et al., Forum Fishery Agency (FFA), Market and Industry 
Dynamics in the Global Tuna Supply Chain  (2011)  
USA-08 Fu-Sung Chiang  et al. , "Will American Consumers Pay More for Eco -Friendly 
Canned Tuna? Estimating US Consumer Demand for Canned Tuna Varieties 
using Scanner Data", Elsevier Editorial systemTM for Ecological Economics 
(publication pending 2016)  
USA-10 BCI 
USA-17 "52-week Canned Tuna Sales, Summed by Type" (based on Exhibit MEX -15) 
USA-18 Sam Roe & Michael Hawthorne, "How Safe is Tuna?" Chicago Tribune, Dec. 13, 
2005 
USA-22 "U.S. Tuna Cannery Receipts" (data collected from NMFS TTVP database)  
USA-36 "Imports of Canned  Tuna from All Countries Individually – 2010 – 2015" (data 
drawn from NOAA U.S. Foreign Trade, http://st.nmfs.noaa.gov  
/commercial -fisheries/foreign -trade/)  
USA-38 BCI 
USA-40 "Dolphin Statements from Retailers" (2016)  
USA-41 BCI 
USA-43 IATTC, Doc. IAATTC-90-04a: Tunas, Billfishes and Other Pelagic Species in the 
Eastern Pacific Ocean in 2015 (June 2016)  
USA-52 IATTC, Resolution C -16-02: Harvest Control Rules for Tropical Tunas (July 
2016)  
USA-55 Simon Board, University of California, Los Angeles, "Par tial Equilibrium: Positive 
Analysis" (2009)  
USA-62 "U.S. Imports of Tuna Product from the World and Mexico" (data collected from 
U.S. Census Bureau, Economic Indicators Division, https://dataweb.usitc.gov/)  
USA-77 IATTC, Resolution C -13-01: Multiannual P rogram for the Conservation of Tuna 
in the Eastern Pacific Ocean During 2014 -2016 (June 2013)  
USA-81 U.S. Model  
USA-87 James Joseph, FAO, Managing Fishing Capacity of the World Tuna Fleet (2003)  WT/DS381/ARB  
 
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  USA-90 Crown Prince, Yellowfin Tuna, http://www.crownprince.com/cpn -yellowfin -
tuna.htm  (Sept. 18,2016)  
USA-93 Sustainable Seas, "Products and Online Shopping", http://onli ne-
store.sustainableseas.com/online -products.html  (accessed Sept. 18, 2016)  
USA-96 "U.S. Cannery Purchases of YF, Total and Share" (data drawn from NMFS 
database)  
USA-111 Roger L. Core et al., ITC, Competitive Conditions in the U.S. Tuna Industry  
(1986)  
USA-114 Liam Campling et al., Pacific Island Countries, The Global Tuna Industry and the 
International Trade Regime – A Guidebook (2007)  
USA-142 Wesley W. Parks et al., “U.S. Trade in Tuna for Canning, 1987,” 52 Marine 
Science 14 (1990)  
USA-144 Prices of EU Imports of Tuna Product in 2015  
USA-148 Remington Research Group, National Public Opinion Survey (2016)  
USA-150 "U.S. Calculation of Average Willingness to Pay"  
USA-175 "Share of Grocery Sales by the Top 20 Retailers" (data provided by USDA 
Econom ic Research Services)  
USA-199 "European Union Prices of Yellowfin Imports, by Type" (data drawn from 
EuroStat)  
 WT/DS381/ARB  
 
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  ABBREVIATIONS USED I N THIS REPORT  
Abbreviation  Description  
2013 Final Rule  Enhanced Document Requirements to Support Use of the Dolphin Safe  
Label on Tuna Products; Final Rule 78 Fed. Reg. 40997 (July 9, 2013)  
AIDCP  Agreement on the International Dolphin Conservation Program  
AIDS Almost ideal demand system  
BCI Business confidential information  
CFR Code of Federal Regulations  
DMLs  Dolphin Mortality Limits  
DPCIA  Dolphin Protection Consumer Information Act  
DSB Dispute Settlement Body  
DSU Understanding on Rules and Procedures Governing the Settlement of 
Disputes  
GATT 1994  General Agreement on Tariffs and Trade 1994  
EII Earth Island Instit ute 
ETP Eastern Tropical Pacific  
FAO United Nations Food and Agriculture Organization  
IATTC  Inter-American Tropical Tuna Commission  
NAFTA  North American Free Trade Agreement  
NMFS  National Marine Fisheries Service  
NOAA  National Oceanic and Atmospheric  Administration  
NTB Non-tariff barrier  
OLS Ordinary least squares  
RPT Reasonable Period of Time  
St Short tons  
TBT Agreement  Agreement on Technical Barriers to Trade  
UPC Universal Product Code  
USFDA  United States Food and Drug Administration  
USITC  United States International Trade Commission  
Vienna Convention  Vienna Convention on the Law of Treaties, Done at Vienna, 23 May 
1969, 1155 UNTS 331; 8 International Legal Materials 679  
WCPO  Western and Central Pacific Ocean  
WLS Weighted least squares  
WTO World Trade Organization  
 WT/DS381/ARB  
 
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  1  INTRODUCTION  
1.1  Prior proceedings  
1.1.  The present arbitration proceedings arise in the dispute initiated by Mexico concerning the 
United States' labelling regime for tuna products1 (referred to in this Decision as the Tuna 
Measure ). 
1.2.  On 13 June 2012, the D ispute Settlement Body (DSB) adopted the original Appellate Body 
report in this dispute, together with the report of the original panel as modified by the Appellate 
Body. In so doing, the DSB adopted the Appellate Body's finding  that the Tuna Measure at issue in  
the original proceedings (the original Tuna Measure )2 was inconsistent with Article 2.1 of the  
Agreement on Technical Barriers to Trade  (TBT Agreement ).3 
1.3.  On 2 August 2012, Mexico and the United States informed the DSB that addi tional time was 
required to discuss a mutually agreed reasonable period of time for the United States to implement 
the recommendations and rulings of the DSB.4 On 17 September 2012, Mexico and the United 
States informed the DSB that they had agreed on a re asonable period of time of 13 months from 
13 June 2012. The reasonable period of time expired on 13 July 2013.5 On 9 July 2013, the United 
States published in its Federal Register  a legal instrument entitled "Enhanced Document 
Requirements to Support Use o f the Dolphin Safe Label on Tun a Products" (the 2013 Final Rule). 
According to the United States,  the 2013 Final Rule constituted the measure taken to comply with 
the DSB recommendations and rulings pursuant to Article 21.5 of the  Understanding on Rules an d 
Procedures Governing the Settlement of Disputes  (DSU). The United States referred to the Tuna 
Measure as amended by the 2013 Final Rule as the "amended dolphin safe labelling measure" , the 
"amended tuna measure",  or the "amended measure".6 In this Decisi on, we refer to this measure 
as the 2013 Tuna Measure.  
1.4.  Mexico considered that the 2013 Final Rule failed to bring the United States into compliance 
with the DSB recommendations and rulings. On 2 August 2013, Mexico and the United States 
informed the DSB of  their Agreed Procedures under Articles 21 and 22 of the DSU .7 Subsequently , 
on 14 November 2013,  the DSB, at Mexico's request,  established a panel under Articles 6 and 21.5 
of the DSU, Article 14 of the TBT Agreement, and Article XXIII of the General Agre ement on Tariffs 
and Trade 1994  (GATT 1994 ). On 14 April 2015  , that panel found that the United States had not 
brought its measure into compliance, and that the "amended tuna measure" was inconsistent with 
Article 2.1 of the TBT Agreement  and Articles I:1  and III:4 of the GATT 1994 .8 The Appellate Body 
upheld those  finding s, albeit  largely  on the basis of different reasoning.9 The Appellate Body report 
                                               
1 The Dolphin Protection Consumer Information Act of 1990, Section 1385(c)(5), defines the term "tuna 
product" as a "food item which contains tuna and which has been processed for re tail sale, except perishable 
sandwiches, salads, or other products with a shelf life of less than 3 days"  (Exhibit USA -01). Additionally, for 
purposes of the United States Code of Federal Regulations , Title 50, Section 216, "tuna product" means "any 
food p roduct processed for retail sale and intended for human or animal consumption" containing one of the 
species of tuna listed in Section 216.24(f)(2)(i) and (ii) of the United States Code of Federal Regulations , Title 
50, but excluding "perishable items with  a shelf life of less than 3 days"  (Exhibit USA -02).  
2 The "original Tuna Measure" consisted of: the Dolphin Protection Consumer Information Act of 1990, 
codified in United States Code , Title 16, Section 1385 (DPCIA); United States Code of Federal Regulat ions 
(CFR) Title 50, Sections 216.91 and 216.92 (the original implementing regulations); and a ruling by a US 
Federal Appeals Court in Earth Island Institute v Hogarth , 494 F.3d 757 (9th Cir. 2007) ( Hogarth  Ruling).  
3 Appellate Body Report, US – Tuna II (M exico) , para. 407(b).  
4 Communication from Mexico and the United States concerning Article 21.3(c) of the DSU, 
WT/DS381/16).  
5 Agreement under Article 21.3(b) of the DSU, WT/DS381/17).  
6 Panel Report, US – Tuna II (Mexico) (Article 21.5 – Mexico) , para. 1. 13; Appellate Body Report, US – 
Tuna II (Mexico) (Article 21.5 – Mexico) , para. 6.8. 
7 WT/DS381/19. The parties agreed, inter alia , that, in the event that the DSB, following a proceeding 
under Article 21.5 of the DSU, ruled that a measure taken to comply either did not exist or was inconsistent 
with a WTO covered agreement, Mexico could request authorization to suspend the application of concessions 
or other obligations under the covered agreements to the United States pursuant to Article 22 of the DSU, an d 
the United States would not assert that Mexico was precluded from obtaining such authorization on the ground 
that the request was made outside the 30 -day time -period specified in Article 22.6 of the DSU.  
8 Panel Report, US – Tuna II (Mexico) (Article 21. 5 – Mexico) , paras. 8.2 -8.5. 
9 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico) , para. 8.1. WT/DS381/ARB  
 
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  and the panel report as modified by the Appellate Body were adopted by the DSB on 3 December 
2015.  
1.2  Reques t for arbitration and arbitration proceedings  
1.5.  On 10 March 2016, Mexico requested authorization from the DSB to suspend concessions to 
the United States in the amount of USD 472.3 million annually. On 22 March 2016, the United 
States objected to Mexico's pr oposed level of suspension. At the DSB meeting of 23 March 2016, 
the DSB took note that , the United States having objected to Mexico's proposed level of 
suspension on 22 March 2016,  the matter had been referred to arbitration as required by 
Article  22.6 of  the DSU.10 At the same meeting, the United Stat es informed the DSB that, on 
22 March 2016, the US National Oceanic and Atmospheric Administration (NOAA) had issued a new 
rule modifying the dolphin safe labelling measure (the 2016 Rule). According to the Un ited States, 
this Rule "directly addressed issues raised by both the Appellate Body and the compliance 
[p]anel".11 In this Decision, the Arbitrator refers to the Tuna Measure as modified by the 2016 Rule 
as the 2016 Tuna Measure.  
1.6.  The chairperson of the orig inal panel was not available for the arbitration proceedings. On 
22 April 2016, Mexico requested the Director -General to appoint a replacement. The Arbitrator was 
thus composed as follows:  
Chairperson:  Mr Stefán Haukur Jóhannesson  
Members:   Ms Mary Elizabe th Chelliah  
   Mr Franz Perrez  
 
1.7.  An organizational meeting was held on 25 May 2016 to discuss procedural aspects of the 
arbitration proceedings . After consulting with the parties, on 7 June 2016 , the Arbitrator adopted  
its Working Procedures together with  Additional Working Procedures concerning Business 
Confidential Information  (BCI) . For the reasons explained below12, after consulting with the 
parties , the Arbitrator modified its Working Procedures on 3 August 2016.  The Arbitrator adopted a 
timetable for th e proceedings on 14 June 2016. In response to a request by the United States for a 
preliminary ruling, the Arbitrator, after consulting with the parties, modified the timetable for the 
proceedings on 18 August 2016.  
1.8.  In accordance with the timetable and Wor king Procedures adopted by the Arbitrator, on 
6 July 2016, Mexico submitted a communication explaining its methodology for calculating the 
proposed level of suspension (Mexico's Methodology Paper). The United States filed its written 
submission , including a request for a preliminary ruling,  on 3 August 2016. Mexico filed its written 
submission , including a response to the United States' request for a preliminary ruling,  to the 
Arbitrator on 31 August 2016.  On 7 September 2016,  the Arbitrator sent  to the par ties written 
questions concerning the United States' request for a preliminary ruling.  The Arbitrator also sent 
written questions concerning the merits of the case to the parties on 14 September  2016. The 
parties responded to these questions in writing on 30 September 2016.  
1.9.  The Arbitrator issued its conclusion in respect of the United States' request for a preliminary 
ruling on 11 October 2016. That conclusion and the reasons underpinning it are set out in  Section  
3 below . 
1.10.  The Arbitrator held its substantive meeting with the parties on 25 and 26 October 2016. 
Prior to the meeting, o n 28 September 2016, the Arbitrator had sent additional written questions 
to the parties. The parties responded to these questions in writing on 9 November 2016. The 
parties submitted comments on each other's responses on 16 November 2016.  
1.11.  This Decisio n is structured as follows. In S ection 2 , we address two procedural issues , 
namely the treatment of BCI and the partially open meeting of the Arbitrato r with the parties . 
Section 3  deals with the United States' request for a preliminary ruling concerning the relevant 
measure , also outlining the Arbitrator's mandate in these proceedings . In S ection 4, we examine 
                                               
10 WT/DSB/M/376 , p. 10. 
11 WT/DSB/M/376 , p. 9.  
12 See below, Section 2. WT/DS381/ARB  
 
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  the appropriate counterfactual and time -period for our analysis . Then, in S ection 5, we move to 
the assessment of the  proposed level o f suspension, examining : (a) Mexico's proposed model for 
determining the level of nullification or impairment;  and (b) the United States' proposed model for 
determin ing the level of nullification or impairment . Based on this examination, we proceed to 
conduct our own assessment of the level of nullification or impairment  in Section 6. Our conclusion 
and decision on the level of suspension of concessions or oth er oblig ations is contained in 
Section  7. 
2  PROCEDURAL MATTERS  
2.1.  In this S ection of its Decision, the Arbitrator  deals with two procedural matters arising in 
these proceedings. First, we briefly explain our treatment of BCI. Second, we discuss the United 
States' reque st to partially open the Arbitrator's meeting with the parties.  
2.1  Treatment of BCI  
2.2.  At the  Arbitrator's  organizational meeting held on 25 May 2016, both parties requested that 
the Arbitrator adopt additional working procedures to protect the confidentiality o f BCI submitted 
in the course of the proceedings.  As indicated in the preceding S ection, the Arbitrator adopted 
such additional working procedures on 7 June 2016.  
2.3.  The Additional Working Procedures of the Arbitrator Concerning Business Confidential 
Informat ion (Additional Working Procedures ) are annexed to this Decision.13 They (a) define BCI 
for the purposes of these proceedings14; (b) provide that each party shall clearly indicate the 
presence of BCI in its submissions15; and (c) limit access to, and permissi ble use of, BCI submitted 
in the course of the proceedings.16 
2.4.  Additionally, paragraph 7 of the Additional Working Procedures provides that "[t]he 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". Importantly, the paragraph goes on to state that although the 
Arbitrator may "make statements of conclusion drawn from such information", the parties shall be 
provided with an opportunity to ensure that all BCI has been re dacted from the Decision prior to 
its circulation to the WTO membership. This paragraph forms the "legal basis"17 on which the 
Arbitrator has redacted statements of BCI from the public version of its Decision. In drafting and 
redacting this Decision, we hav e strived to "ensure that an appropriate balance is struck between 
the need to guard against the risk of harm that could result from the disclosure of particularly 
sensitive information, on the one hand, and the integrity of the adjudication process … and the 
rights of and systemic interests of the WTO membership at large, on the other hand".18 We have 
also tried to "ensure that the public version of [our Decision] circulated to all Members of the WTO 
is understandable".19 Having said that, it is also importa nt to note that the technical nature of 
these arbitration proceedings has meant that the Arbitrator has had to have reference to evidence 
classified as BCI more frequently than may be usual in panel proceedings.  
2.5.  Accordingly, the text of the version circula ted to Members is identical to the text of the 
confidential version issued to the parties, with the exception of passages that disclose BCI. Such 
passages were replaced by "[[ xxx ]]".  
                                               
13 Annex A -2. 
14 Paragraph 2 of the Additiona l Working Procedures defines BCI 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 cau se harm to an interest of the 
person or entity that supplied the business information to the party".  
15 Additional Working Procedures  Concerning Business Confidential Information , Annex A -2, paras. 3 
and 4.  
16 Additional Working Procedures  Concerning Busines s Confidential Information , Annex A -2, para. 5. 
17 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico) , para. 5.4.  
18 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico) , para. 5.3; Appellate Body 
Report, EC and certain memb er States – Large Civil Aircraft , Annex III, Procedural Ruling of 10 August 2010, 
para. 15.   
19 Appellate Body Report, Japan – DRAMS (Korea) , para. 279.  WT/DS381/ARB  
 
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  2.2  Partially open meeting of the Arbitrator with the parties  
2.2.1   Procedural ba ckground  
2.6.  At the Arbitrator's organizational meeting, the United States proposed a change to the 
working procedures to allow the Arbitrator's substantive meeting to be publicly observed. The 
United States noted that two prior Article 22.6 arbitrators  had already held such meetings, 
including in a dispute involving Mexico as a party. In the United States' view, meetings opened for 
public observation enhance understanding of the system and promote confidence in its objectivity 
and professionalism.  
2.7.  Mexico indic ated that it was not in a position to accept open meetings in this dispute. Mexico 
recalled that even in those disputes where it did not object to open meetings, it had indicated that 
this was without prejudice to its systemic position on public observatio n of meetings in dispute 
settlement proceedings. Mexico also noted that the meetings in the original and first round of 
compliance proceedings in this dispute were not open for public observation.  
2.8.  The United States then indicated that it was not asking the  Arbitrator to mandate the opening 
of the meeting over Mexico's objection. The United States asked instead that the Arbitrator make 
arrangements to allow the United States to make its statements in public. The United States 
argued that it was possible for it to disclose its own statements and at the same time to maintain 
the confidentiality of Mexico's statements.  
2.9.  Mexico responded that it could not accept that the United States would be allowed to lift the 
confidentiality of its own statements to the Arbitr ator, as the DSU was clear that meetings are 
confidential, except if all parties agree otherwise. In Mexico's view, the Arbitrator should therefore 
reject the United States' request.  
2.10.  Through a joint communication with the parallel compliance panels in this  dispute,  we 
informed the parties that we considered ourselves to have  the authority to authorize the United 
States to lift the confidentiality of its statements at the meeting with the parties. We further 
indicated that any public observation of the meeti ng would be through delayed viewing (delayed 
closed -circuit television broadcasting), to ensure that the confidentiality of Mexico's statements 
would not be breached. The parties were informed that the reasons supporting this determination 
would be elabora ted later by the Arbitrator in its Decision and by the Panels in their Reports.20 
2.11.  After consulting the parties, on 3 August 2016 we made appropriate adjustments to 
paragraph 3 of our Working Procedures.21 Invoking that paragraph, the United States requested us 
to adopt additional working procedures to facilitate the lifting of the confidentiality of the United 
States' statements at the Arbitrator's meeting. On 18 October 2016, after consulting the parties 
we adopted additional working procedures on partially open meetings.22 
2.12.  We held our substantive meeting with the parties on 25 and 26 October 2016. After 
completing the process of redacting the video -recording of the Arbitrator's meeting in accordance 
with the additional working procedures, at Mexico's request we held a preview screening of the 
redacted video -recording for the parties on 12 December 2016, which both parties attended. The 
public broadcast of the redacted  video -recording of the Arbitrator's meeting took place on 16 
December 2016.  
2.2.2   Merits of the Uni ted States' request for a partially open meeting  
2.13.  The Arbitrator notes that this is the first dispute in which a party has requested that a WTO 
adjudicator organize a partially open meeting with the parties. An identical request was made by 
the United State s in the parallel compliance panel proceedings in this dispute. Much of the 
exchange between the parties on the merits of the United States' request took place in the context 
of the compliance panel proceedings. Although the parties did not specifically re quest that their 
relevant communications to the compliance panels be incorporated into the arbitration record, it 
                                               
20 Panels' and Arbitrator's letter of 29 July 2016.  
21 See Annex A-1. 
22 See Annex A-3. WT/DS381/ARB  
 
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  was clear to the Arbitrator and was understood by the parties that their arguments to the 
compliance panels would and should be taken into acc ount also by the Arbitrator.23 For the better 
understanding of our decision on the United States' request, we therefore provide below a general 
summary of the parties' respective positions as developed for the most part in the compliance 
panel proceedings.  
2.14.  The United States observes that it seeks to exercise its right to disclose to the public its own 
statements at the Arbitrator's meeting, and that it requests the Arbitrator to facilitate this 
disclosure by adopting appropriate procedures. The United States  submits that its request is 
supported by the Appellate Body report in US – Continued Suspension . According to the United 
States, the Appellate Body in that dispute agreed that each party has the right to maintain the 
confidentiality of its own statements and therefore provided each party and third party a possibility 
to lift the confidentiality of their statements at the Appellate Body's hearing. The United States 
notes that it is possible to protect Mexico's right to maintain the confidentiality of its st atements 
while also protecting the United States' right to disclose its own statements to the public.  
2.15.  Mexico considers that Appendix 3 of the DSU applies mutatis mutandis  to arbitration 
proceedings and indicates that deliberations must be kept confidential . Mexico recalls in this 
connection that it was a third party in US – Continued Suspension , and that it was among the 
Members that criticized the approach taken in that dispute at the DSB meeting at which the panel 
and Appellate Body reports were adopted. Mexico notes that unlike in that dispute, in this dispute 
there has been no agreement by the parties on holding a public meeting. In Mexico's view, there is 
in the present dispute a relationship of confidentiality between the parties and the Arbitrator, no t 
between each party and the Arbitrator. Mexico is aware that the United States' request leaves it to 
each party to decide for itself whether to lift the confidentiality of its statements. Nevertheless, in 
Mexico's view, proceeding as the United States req uests would affect the rights of Mexico and 
those of other Members that have systemic concerns about open meetings. Mexico submits in this 
regard that acceding to the United States' request could force other Members to accept open 
meetings because otherwis e only one party's views are ventilated. Mexico suggests that the DSU 
already gives the United States the possibility to make its statements available on the USTR's 
website, as is its practice. Mexico considers that the United States' right to disclose its  own 
positions and statements to the public does not have to be exercised through an open meeting. 
Mexico submits, finally, that the Appellate Body in EU – Biodiesel  (Argentina)  declined the 
European Union's request to allow public observation of the oral hearing, noting that the other 
party expressed a preference against doing so.  
2.16.  Mexico is therefore of the view that the Arbitrator should deny the United States' request for 
a partially open meeting. Mexico also clarifies that it is not prepared to waive it s right to 
confidentiality and therefore designates all information submitted by it in this dispute as 
confidential. Mexico considers that all statements and documents are confidential until the 
Arbitrator's Decision is circulated.  
2.17.  The Arbitrator begins by  noting that numerous WTO adjudicators, including the Appellate 
Body, panels and Article 22.6 arbitrators, have on request opened meetings with parties for public 
observation in their entirety, except for any parts of meetings during which BCI was addresse d.24 
If a WTO adjudicator has the power to accede to a request to fully open a hearing or meeting with 
the parties, then a fortiori  it must in principle also have the power to go less far, including by 
opening only parts of a meeting with the parties.  
2.18.  The m eetings with parties  in previous WTO dispute settlement proceedings  that have been 
opened for public observation in their entirety have been opened with the agreement of all parties. 
At those fully open meetings, the parties were authorized to disclose not  only statements of their 
own positions, but also statements of the positions of the other party or parties. The situation in 
the present proceedings is different, however. The United States is seeking authorization to 
disclose statements of its own positi ons only.  
                                               
23 As indicated, the  Arbitrator and compliance panels informed the parties at the same time of their view 
that they had the power to authorize one party to lift the confidentiality of its statements.  
24 The United States in this dispute is not seeking authorization to disclose  BCI to the public. Indeed, the 
United States has requested the Arbitrator to adopt additional working procedures for the protection of BCI.  WT/DS381/ARB  
 
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  2.19.  We observe in this regard that, according to Article 18.2 of the DSU, nothing in the DSU 
precludes a party "from disclosing statements of its own positions to the public".25 According to the 
Appellate Body, this provision allows a party to forego confidentiality protection in respect of 
statements of its own positions.26 The Appellate Body has further confirmed that Article 18.2 of the 
DSU covers not just statements in written form, but also oral statements and responses to 
questions at Appellate Bo dy hearings.27 The same holds true, in our view, for oral statements and 
responses given at meetings of panels and Article 22.6 arbitrators . We further observe that Article 
18.2 of the DSU does not stipulate that a party may disclose its statements only onc e, or only 
after any meetings of a WTO adjudicator with the parties.28 
2.20.  Mexico nevertheless considers that we cannot authorize the United States to forego 
confidentiality protection in respect of its statements of its own positions, except with Mexico's 
agreement. Mexico bases this contention on the Appellate Body's procedural ruling in EU – 
Biodiesel  (Argentina) .29 In our view, Mexico's reliance on this procedural ruling is misplaced. In EU 
– Biodiesel  (Argentina) , the Appellate Body rejected a unilateral req uest by the European Union 
that the Appellate Body conduct a fully open hearing even though Argentina was not supportive of 
that request.30 As we have said, this is not the situation we are facing, since the United States in 
this dispute requests authorizat ion to disclose statements of its own positions, not those of 
Mexico.31 
2.21.  Mexico further seems to consider that in respect of meetings or hearings , the DSU protects 
the confidentiality of the relationship between the parties taken as a group and a WTO adjudic ator, 
rather than between each of the parties and a WTO adjudicator. We note, however, that Article 
18.2 of the DSU gives each party individually the right to disclose statements of its own positions. 
Where a fully open meeting is to be held, it is clear t hat all parties need to request authorization to 
disclose the statements of their own positions that they wish to make at the meeting. This does 
not imply, however, that one party can simply veto another party's request that it be authorized to 
disclose st atements of its own positions. Indeed, this is also the approach taken by the Appellate 
Body in respect of third parties participating in its hearings. Although the Appellate Body has 
referred to a relationship of confidentiality between "the third partici pants"32 and itself, it has 
authorized those third parties that so wished to lift the confidentiality of their statements at the 
hearing, despite objections by other third parties.33 Thus, the Appellate Body did not impose an 
inflexible "all-or-none" rule fo r the lifting of confidentiality. In our view, this approach is equally 
appropriate in respect of the relationship between the parties and a WTO adjudicator. Indeed, it 
would be incongruous to permit third parties to forego confidentiality protection in re spect of their 
statements (in those disputes where the parties have requested the same) even as other third 
parties wish to hold on to that protection, but to withhold that same opportunity from a party 
merely because another party objects to the granting of such an opportunity.  
2.22.  Mexico has also referred to Article 14.1 of the DSU and Paragraph 3 of Appendix 3 of the 
DSU, which provide that panel "deliberations" are to be confidential. Although we have no difficulty 
accepting that these provisions are releva nt, at least by analogy, to Article 22.6 of the DSU 
                                               
25 We note that the immediate context of Article 18.2 of the DSU suggests that it relates to statements 
of positions  made to panels or the Appellate Body. However, we consider that the provisions of Article 18.2 of 
the DSU are also applicable, at least by analogy, to the present proceedings under Article 22.6  of the DSU . 
26 Appellate Body Report, US – Continued Suspensio n, Annex IV, paras. 4 and 11.  
27 Appellate Body Report, US – Continued Suspension , Annex IV, para. 4.  
28 As we address below, Article 18.2 of the DSU does not mean that we must automatically authorize 
the United States to disclose to the public an oral stat ement of its own positions made during our meeting. 
Indeed, we recall in this respect that even if we were to deny the United States' request, the United States 
could still exercise its right to disclose statements of its own positions in a different form or on a different 
occasion.  
29 Mexico refers to Appellate Body Report, EU – Biodiesel (Argentina) , Annex D -2 (procedural ruling of 
11 July 2016).  
30 Appellate Body Report, EU – Biodiesel (Argentina) , Annex D -2, paras. 2 and 3.  
31 We emphasize that we are not suggesting that a fully open meeting could be conducted in the 
absence of an agreement between the parties. Nor is this the position of the United States in this dispute. 
Indeed, the United States initially sought Mexico's agreement to conduct a fully open  Arbitrator's meeting. 
When Mexico expressed its opposition, the United States did not pursue its proposal. The United States 
proceeded instead to request that we allow the United States to disclose statements of its own positions at our 
meeting.  
32 Appella te Body Report,  US – Continued Suspension , Annex IV, para. 6.  
33 Appellate Body Report,  US – Continued Suspension , Annex IV, paras. 1 and 11.  WT/DS381/ARB  
 
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  proceedings, we do not agree that they imply that the United States cannot be authorized to lift 
the confidentiality of its statements. These provisions relate to a panel's internal work, not the 
meetings  with the parties and third parties.34 Moreover, just like the Appellate Body, panels have 
authorized third parties that so wished to lift the confidentiality of their statements even as some 
third parties objected.35 This approach necessarily assumes that A rticle 14.1 of the DSU does not 
prescribe closed panel meetings with parties or third parties.  
2.23.  In our view, the confidentiality of panel meetings is covered by Paragraph 2 of Appendix 3  
of the DSU , which says that panels shall meet in closed session. Howev er, this paragraph forms 
part of those provisions from which panels may depart pursuant to Article 12.1 of the DSU, after 
consulting the parties and provided that such departure is not contrary to another provision of the 
DSU.36 In any event, Paragraph 2 in  our view does not preclude a party or third party from 
foregoing confidentiality protection for its statements at a meeting, provided that another party or 
other third parties can maintain confidentiality protection for their statements. Indeed, as alread y 
explained, this is the approach followed by those panels that held partially open third party 
sessions. We consider that Paragraph 2, when applied by analogy, permits the same approach in 
the present proceedings with regard to the parties.  
2.24.  In the light o f the foregoing, we consider that in principle we have the power to authorize 
the United States to disclose statements of its own positions (but not those of Mexico) to the 
public through a partially open Arbitrator's meeting, even if Mexico opposes the Un ited States' 
request. However, it does not follow that we must automatically grant the United States' request. 
We thus turn to set out below the main considerations that underpin our decision to grant the 
United States' request in these proceedings.  
2.25.  Althou gh the United States has an autonomous right to disclose statements of its own 
positions to the public, that right is not absolute. In the context of this dispute, it notably finds its 
limitation in Mexico's right not to have statements of its own position s disclosed by the United 
States during any public parts of the Arbitrator's meeting.37 Mexico indicated in this regard that it 
wished to maintain the confidentiality of its own positions and information submitted to the 
Arbitrator. It is therefore necessar y to provide for a review process prior to any public viewing of a 
partially open meeting, to allow the Arbitrator and the parties to ensure that any statements 
disclosed by the United States do not inadvertently disclose, directly or indirectly, statement s of 
Mexico's positions. It follows from these considerations that we can authorize the United States to 
disclose in a partially open meeting only those parts of its statements that do not disclose 
statements of Mexico's positions, and that we must therefo re reserve the right to appropriately 
redact the statements that the United States wishes to be open for public observation.38 
2.26.  A further limitation arises from the requirements of due process. These requirements mean 
that all parties must be given the oppor tunity to lift the confidentiality of statements of their own 
positions at partially open meetings. In these proceedings, Mexico chose not to avail itself of that 
opportunity. Further, the implementation of any additional working procedures for partially o pen 
meetings, including the associated redaction process, must not impair the ability of any party that 
opposes partially open meetings to present its case or defence effectively.  
2.27.  We note, in addition, Mexico's argument that if a partially open meeting is conducted, 
viewers will by definition be exposed to only one party's statements. In our view, however, this 
does not compromise due process. First, a party that does not wish its statements at a WTO 
adjudicator's meeting to be open for public observation i s not thereby deprived of the possibility to 
otherwise disclose statements of its positions to the public. More importantly, Article 18.2 of the 
                                               
34 We note that in US – Continued Suspension , the Appellate Body used the term "deliberations" in the 
same sense, in  relation to the internal work of the Appellate Body. Appellate Body Report,  US – Continued 
Suspension , Annex IV, para. 8. See also Panel Report, US – Continued Suspension , para. 7.49.  
35 See, for instance, US – Tax Incentives , para. 1.20; Canada — Feed-In Tariff Program/Canada – 
Renewable Energy , para. 1.9; US – COOL (Article 21.5 – Canada and Mexico) , para. 1.10; and US – Continued 
Zeroing , para. 1.9.  
36 Panel Report, US – Continued Suspension , paras. 7.46 -7.47.  
37 Consistent with paragraph 1.1(c) of our Add itional Working Procedures on Partially Open Meetings, we 
use the term "positions" in this Section of our Decision to encompass also the exhibits submitted and the 
arguments put forward by a party.  
38 We note that this type of redaction is already routinel y undertaken in open meetings whenever the 
statements made by the parties or third parties address BCI.  WT/DS381/ARB  
 
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  DSU already allows each party to disclose statements of its own positions to the public 
independently of whethe r another party does the same. A partially open meeting thus does not 
create a new situation. The media, for instance, can (and does) already report to the public based 
on statements of only one party's positions where only that party has made available it s 
statements on its government's website. Finally, we recall that in disputes where the meetings 
with the parties were opened for public observation, both the Appellate Body and panels have 
authorized third parties that so wished to lift the confidentialit y of their statements at the relevant 
hearing or third -party session. Under this practice, it is accepted that viewers of those meetings 
are exposed to the views of only some third parties, even though the Appellate Body and panels 
are required to take all  third parties' views into account.39 
2.28.  Another factor that in our view should be taken into account when assessing a request for a 
partially open meeting is the importance, articulated in Article 3.3 of the DSU, of the prompt 
settlement of disputes. This sug gests to us that the conduct of a partially open meeting should not 
significantly delay a WTO adjudicator's proceedings. In our view, one way to fulfil this objective is 
to devise additional working procedures governing partially open meetings that put app ropriate 
emphasis on workability and efficiency.  
2.29.  In addition, we must bear in mind our primary duty, which is to carefully assess the matter 
before us and resolve the dispute between the parties. Partially open meetings impose a greater 
burden on a WTO adj udicator than fully open meetings, owing to the need to make sure that there 
is no disclosure of statements of any party that wishes to maintain the confidentiality of its 
statements. In deciding whether to authorize a request for a partially open meeting,  it therefore 
appears appropriate that a WTO adjudicator assess at the outset whether it has access to the 
requisite resources, in technical, logistical and human terms, to conduct a partially open meeting 
and any associated redaction process. Otherwise, t he conduct of a partially open meeting could 
potentially have an adverse impact on the proper discharge of the adjudicative function and could 
thus also be detrimental to due process or the prompt settlement of disputes.  
2.30.  We note, finally, the Appellate Bod y's view that any authorization to forego the 
confidentiality protection for statements of a party's or third party's positions must not undermine 
the integrity of the adjudicative function. The Appellate Body has already clarified in this regard 
that the mere fact of permitting public observation of a meeting does not have an adverse impact 
on the integrity of the adjudicative function.40 
2.31.  In sum, it is in our view permissible for a WTO adjudicator to authorize a request for a 
partially open meeting if the c onduct of such a meeting does  not impair or interfere with (a ) a non -
disclosing party's right to confidentiality protection of sta tements of its own position, (b) due 
process, (c ) the promp t settlement of disputes, or (d ) the careful and efficient discharg e, or the 
integrity, of the adjudicative function. Beyond that, we consider that it falls within the sound 
discretion of each WTO adjudicator considering a request for a partially open meeting to decide 
whether it is appropriate in the particular circumsta nces of its case to accede to that request.41 We 
observe in this respect that the rejection of such a request by a WTO adjudicator would not in and 
of itself deprive the requesting party of its right to disclose statements of its own positions to the 
public , since it would still have available to it other ways of exercising that right.  
2.32.  Guided by the foregoing considerations, in the present proceedings we devised additional 
working procedures in consultation with the parties that we think fully protect Mexico 's right to 
confidentiality protection, satisfy the requirements of due process, and are sufficiently workable 
and efficient to safeguard the promptness of dispute settlement and the proper discharge and 
integrity of our adjudicative function.42 
2.33.  In granting  the United States' request we notably also took into account the following three 
circumstances. First, the present dispute concerns the protection of dolphins and thus a 
conservation -related measure. In this kind of dispute, even a partially open meeting is apt to 
                                               
39 See, for instance, Article 10.1 of the DSU.  
40 Appellate Body Report, US – Continued Suspension , Annex IV, paras. 7 and 10.  
41 See Appellate Body Report , EC – Hormones , para. 154.  
42 See Annex A -3, in particular paras 3.4, 4.1 -4.9. WT/DS381/ARB  
 
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  enhance understanding of, and confidence in, the WTO dispute settlement process.43 Second, 
there was in these proceedings only one relatively short substantive meeting with the Arbitrator 
that was requested to be partially opened for public observ ation. Third, the parallel conduct of a 
second round of compliance panel proceedings in this dispute required the assembly of a 
substantial Secretariat support team. We were thus in a position where we could conduct a 
partially open meeting and carry out t he associated redaction process without this compromising 
our substantive work.  
2.34.  On the basis of these considerations, we therefore concluded that in the particular 
circumstances of this case it was, on balance, appropriate for us to accept the United State s' 
request that it be permitted to disclose through public viewing the statements of its own positions 
made during the Arbitrator's meeting. Our authorization was subject to the dual condition that the 
public viewing take the form of delayed (rather than s imultaneous) viewing, and that any parts of 
the meeting opened for public observation not disclose statements of Mexico's positions and hence 
be subject to redaction  prior to the public viewing  as necessary.  
3  UNITED STATES' REQUE ST FOR A PRELIMINARY  RULING CONCERNING THE RELEV ANT 
MEASURE  
3.1  Procedural background  
3.1.  On 3 August 2016, the United States submitted , in its written submission to the Arbitrator , a 
request for a preliminary ruling. The request concerned Mexico's identification of the 2013 Tuna 
Measure as  the proper basis for the Arbitrator's assessment of the level of nullification or 
impairment.  
3.2.  Mexico responded to the United States' request for a preliminary ruling in its own written 
submission to the Arbitrator, which it filed on 31 August 2016. Additi onally, after consulting with 
the parties, the Arbitrator modified its timetable on 18 August 2016 to provide for additional 
submissions from the parties on the issues raised by the United States' request. Pursuant to this 
modification, the Arbitrator sent  questions to the parties concerning the United States' request on 
7 September 2016. The parties responded to these questions in writing on 14 September 2016. 
The parties submitted comments on each other's responses on 21 September 2016. Additionally, 
the United States and Mexico each provided additional comments on the request  for a preliminary 
ruling  on 21 and 28 September 2016 respectively.  
3.3.  On 11 October 2016, the Arbitrator issued its conclusion on the United States' request for a 
preliminary ruling. The Arbitrator indicated that it would provide the reasons supporting its 
conclusion at the end of the proceedings, in the Arbitrator's Decision. The Arbitrator also indicated 
that both the conclusion and the reasons supporting it would form an integral part  of the 
Arbitrator's Decision in this matter.44 
3.2  Issue  
3.4.  In its first written submission, the United States requested the Arbitrator to make a 
preliminary ruling that the relevant measure for the purposes of these arbitration proceedings is 
the Tuna Measure as  amended by the 2016 final rule (i.e. the 2016 Tuna Measure ), rather than 
the 2013 Tuna Measure. According to the United States, Mexico has effectively asked the 
Arbitrator to determine some past level of nullification or impairment, and therefore seeks 
authorization to suspend concessions regardless of whether there is currently (i.e. under the 2016 
Tuna Measure) any nullification or impairment. In the view of the United States, this approach has 
no legal basis, and indeed is contrary to the relevant provi sions of the DSU.45 
                                               
43 The United States indicated that it was pursuing these objectives in requesting the opening of our 
meeting. We also note in this connection that in our additional working proc edures, at paragraph 4.2, we have 
sought to avoid unnecessary discontinuity in the delayed viewing by inviting the United States to structure its 
statements in such a way as to separate those statements that disclose statements of positions of Mexico. See 
Annex A -3. 
44 Communication from the Arbitrator, para. 1.1.  
45 United States' written submission, paras. 42 and 50.  WT/DS381/ARB  
 
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  3.5.  Mexico requests the Arbitrator to reject the United States' request for a preliminary ruling. 
According to Mexico, the Arbitrator should use the 2013 Tuna Measure to calculate the level of 
nullification or impairment. In Mexico's view, i t would be neither legally permissible nor 
systematically desirable to use the 2016 Tuna Measure.46 Additionally, Mexico argues that the 
United States' request represents an effort to "improperly conflate the Arbitrator's mandate in this 
Article 22.6 arbitr ation with the claims at issue in the second round of Article 21.5 proceedings" 
that are being held in parallel.47 
3.6.  The Arbitrator notes that the question raised by the United States' request is whether, in 
these proceedings, the Arbitrator should assess the  level of nullification or impairment caused by 
the 2013 or the 2016 Tuna Measure. As this issue bears directly on our mandate, and as it  raises 
certain  issues about Article 22.6 of the DSU that has not been directly ruled on by any previous 
arbitrator, a detailed examination is in order.  
3.3  Text and context of Article 22.6 of the DSU  
3.7.  The Arbitrator begins its analysis by looking at the text and context of Article 22.6 of the 
DSU, which is the provision under which the United States has brought these arbitrati on 
proceedings.48 
3.8.  Article 22.6  of the DSU  relevantly provides as follows:  
When the situation described in paragraph 2 occurs, the DSB, upon request, shall 
grant authorization to suspend concessions or other obligations within 30 days of the 
expiry of the r easonable period of time unless the DSB decides by consensus to reject 
the request. However, if the Member concerned objects to the level of suspension 
proposed, or claims that the principles and procedures set forth in paragraph 3 have 
not been followed w here a complaining party has requested authorization to suspend 
concessions or other obligations pursuant to paragraph 3(b) or (c), the matter shall be 
referred to arbitration.  
3.9.  Other paragraphs of Article 22 of the DSU form part of the immediate context of  Article  22.6 
and are therefore also relevant to our analysis. Article 22.1 of the DSU relevantly provides that:  
Compensation and the suspension of concessions or other obligations are temporary 
measures available in the event that the recommendations and  rulings are not 
implemented within a reasonable period of time.  
3.10.  Article 22.2  of the DSU , to which explicit reference is made in the first sentence of 
Article  22.6, provides as follows:  
If the Member concerned fails to bring the measure found to be inconsi stent with a 
covered agreement into compliance therewith or otherwise comply with the 
recommendations and rulings within the reasonable period of time determined 
pursuant to paragraph 3 of Article 21  [of the DSU ], such Member shall, if so 
requested, and no  later than the expiry of the reasonable period of time, enter into 
negotiations with any party having invoked the dispute settlement procedures, with a 
view to developing mutually acceptable compensation. If no satisfactory compensation 
has been agreed wi thin 20 days after the date of expiry of the reasonable period of 
time, any party having invoked the dispute settlement procedures may request 
authorization from the DSB to suspend the application to the Member concerned of 
concessions or other obligations  under the covered agreements.  
3.11.  Article 22.4 of the DSU provides that:  
                                               
46 Mexico's written submission, para. 4.  
47 Mexico's written submission, para. 19.  
48 Pursuant to Article 3.2 of the DSU, we are required to appl y the customary rules of interpretation of 
public international law. We must therefore interpret DSU provisions in accordance with the ordinary meaning 
to be given to their terms in their context and in the light of the object and purpose of the relevant t reaty. See 
e.g. Appellate Body Report, Canada – Patent Term , para. 54 . WT/DS381/ARB  
 
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  The level of the suspension of concessions or other obligations authorized by the DSB 
shall be equivalent to the level of the nullification or impairment.  
3.12.  Article 22.7 of the DSU relevan tly provides that:  
The arbitrator acting pursuant to paragraph 6 shall not examine the nature of the 
concessions or other obligations to be suspended but shall determine whether the 
level of such suspension is equivalent to the level of nullification or i mpairment.  
3.13.  Finally, Article 22.8 of the DSU relevantly provides that:  
The suspension of concessions or other obligations shall be temporary and shall only 
be applied until such time as the measure found to be inconsistent with a covered 
agreement has been removed, or the Member that must implement recommendations 
or rulings provides a solution to the nullification or impairment of benefits, or a 
mutually satisfactory solution is reached.  
3.14.  According to the United States, Articles 22.4 and 22.7 of the DSU make  clear that an 
arbitrator is to determine whether there is equivalence between the proposed level of suspension 
and the level of nullification or impairment at the time the DSB authorizes the suspension of 
concessions, rather than whether the proposed leve l of suspension is equivalent to the level of 
nullification or impairment caused by a past measure or at some point in the past. In support of 
this view, the United States refers to the phrasing of Article 22.4  of the DSU , noting in particular 
the use of a n imperative command ("shall be") in relation to "the" level of nullification. The United 
States also emphasizes that neither Article 22.4 nor Article 22.7 of the DSU refers to a past period 
of time. In the view of the United States, if the Members of the WTO had intended the level of 
nullification or impairment to be fixed at a specific point in the past, such as the expiry of the 
reasonable period of time (RPT), the text would have specified the relevant point in time.49 
3.15.  The United States further submits t hat Article 22.8 of the DSU provides contextual support 
for its view that the relevant measure in an arbitration proceeding is that version of the measure 
that exists  at the time of the arbitration and the suspension of concessions, rather than the 
version  that existed at some earlier point in time. According to the United States, the issue under 
Article 22.8 is the measure as it currently exists, if indeed a measure does still exist, and not some 
measure that existed in the past.50 
3.16.  Mexico disagrees with the  United States' text -based arguments. According to Mexico, the 
United States interprets Articles 22.4 and 22.7 of the DSU in isolation from the other provisions of 
Article 22. In Mexico's view, a proper, holistic reading of Article 22 of the DSU makes clea r that the 
procedures provided for in that Article all flow from the same triggering event, that is, the failure 
of a Member to come into compliance with adverse DSB recommendations and rulings within the 
applicable deadline. In Mexico's view, this fact le ads to the conclusion that the measure at issue in 
arbitration proceedings is the measure that existed at the expiry of the applicable deadline, in this 
case, the expiry of the RPT on 13 June 2013.51  
3.17.  Additionally, in response to the United States' argument  that Article 22.7 of the DSU 
contains no reference to a past period of time, Mexico notes that Article 22.7 refers to the 
principles and procedures set forth in Article 22.3 that a complaining Member must apply in 
considering what concessions or other obl igations to suspend in case of the responding Member's 
non-compliance with adverse DSB recommendations and rulings. Mexico observes that Article 
22.3(a) sets forth the general principle that the complaining party should first seek to suspend 
concessions or  other obligations with respect to the same sector(s) as that in which the panel or 
Appellate Body has found a violation or other nullification or impairment. According to Mexico, this 
wording explicitly addresses a past situation, rather than a present on e, and clearly links the 
suspension of concessions to the nullification or impairment found by a panel or the Appellate Body 
sometime in the past, i.e. prior to the suspension.52 
                                               
49 United States' written submission, paras. 43 -45; response to Arbitrator question No. 2.  
50 United States' written submission, para. 45.  
51 Mexico's comments on the United States' respon se to Arbitrator question No. 6.  
52 Mexico's comments on the United States' response to Arbitrator question No. 6.  WT/DS381/ARB  
 
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  3.18.  The Arbitrator notes the text of Article 22.6  of the DSU , which states that "[ w]here the 
situation in paragraph 2 [of Article 22] occurs", the DSB shall, within 30 days of the expiry of the 
reasonable period of time, grant authorization to suspend concessions. Article 22.6 of the DSU 
further stipulates that if the Member against who m suspension of concessions is sought objects to 
the proposed level of suspension, the matter "shall be referred to arbitration". The text of Article 
22.6 does not specify which measure should form the basis of the request for, or authorization of, 
suspens ion of concessions. The text of Article 22.6, therefore, at least when read in isolation, does 
not clearly support either the United States' or Mexico's position.  
3.19.  Given that Article 22.6 of the DSU explicitly refers to "the situation" described in Article  
22.2, that latter provision clearly provides relevant context for the interpretation of Article 22.6. To 
recall, the text of Article 22.2 provides in relevant part that in a situation where a Member fails to 
bring a measure previously found by to be incon sistent with the covered agreements into 
compliance therewith, and where no satisfactory compensation is agreed within 20 days of the 
expiry of the applicable RPT, the complaining Member may request authorization from the DSB to 
suspend concessions or othe r obligations. The "situation" referred to in Article 22.6 thus occurs 
where (a) a Member has failed to bring a measure into compliance with the covered agreements 
before the expiry of the applicable RPT; and (b) the parties have failed to agree on satisfa ctory 
compensation.  
3.20.  Read together, Articles 22.2 and 22.6 of the DSU thus establish that a complaining Member 
may seek authorization to suspend concessions in situations where the responding Member has 
failed, within the RPT, to bring into conformity a mea sure that has previously been found to be 
inconsistent with the covered agreements. It is therefore the continued WTO -inconsistency of the 
original or a compliance measure (where a compliance measure was taken within the RPT) at the 
time the RPT expires th at forms the basis for any request for authorization to suspend 
concessions.53 In turn, a request for authorization to suspend concessions typically triggers a 
request for arbitration under Article 22.6. There  is thus  a close connection between an Article 2 2.6 
arbitration and the WTO -inconsistent original measure, or a WTO -inconsistent compliance 
measure, which existed at the time of expiry of the RPT. Or to put it another way, the origin of, 
and impetus for, arbitration proceedings under Article 22.6 can be  traced back to a WTO -
inconsistent measure that existed when the RPT expired, which is either the same original 
measure that has previously been found to be WTO -inconsistent or a WTO -inconsistent compliance 
measure taken subsequently (but prior to the expi ry of the RPT).  
3.21.  As noted above, Article 22.4 of the DSU provides that "[t]he level of the suspension of 
concessions or other obligations authorized by the DSB shall be equivalent to the level of the 
nullification or impairment". We do not read either the r eference to "the" level of the suspension of 
concessions or the use of the phrase "shall be" as indicating that an arbitrator's assessment must 
be based on the most recent version of the measure in question. Indeed, the unqualified reference 
to "the level of the nullification or impairment" must be interpreted taking into account the 
surrounding paragraphs of Article 22  of the DSU , and in particular Article 22.2, which by 
implication refers to the original or a compliance measure that existed at the time of  expiry of the 
RPT. Consequently, and bearing in mind the principle in Article 3.8 of the DSU that "[i]n cases 
where there is an infringement of the obligations assumed under a covered agreement, the action 
is considered prima facie  to constitute a case of  nullification or impairment", the reference in 
Article 22.4 to "the level of the nullification or impairment" must in our view be construed to mean 
the level of nullification or impairment caused by the WTO -inconsistent original or compliance 
measure54 that existed at the time of expiry of the RPT.55  
3.22.  Additionally, Article 22.3  of the DSU , and in particular Article 22.3(a), supports our 
interpretation of Article 22.6. As Mexico notes, Article 22.3(a), which concerns what concessions or 
other obligations may be suspended, provides that "the complaining party should first seek to 
                                               
53 This is also confirmed by Article 22.1, whose first sentence provides that "[c]ompensation and 
suspension of concessions or other obligation s are temporary measures available in the event that the 
recommendations and rulings [in respect of the relevant original or compliance measure] are not implemented 
within a reasonable period time".  
54 By "WTO -inconsistent original or compliance measure", w e mean a measure that is the subject to 
adverse DSB recommendations and rulings.  
55 In our view, the same interpretation must be given to Article 22.7. Thus, we consider that the "level 
of nullification or impairment" referred to in Article 22.7 is the lev el of nullification or impairment caused by the 
WTO-inconsistent original or compliance measure that existed at the time of expiry of the RPT.  WT/DS381/ARB  
 
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  suspend concessions or other obligations with respect to the same sector(s) as that in which the 
panel or Appellate Body has found a violation or other nullification or impairment". Th is provision 
closely links past findings concerning the inconsistency of a measure and a Member's right to 
suspend specific concessions or other obligations. It requires, as a default rule, identity between 
the sector(s) affected by the nullification or im pairment caused by a WTO -inconsistent measure 
and the sector(s) in which a Member requests to suspend concessions or other obligations. It is 
therefore clear to us that the measure that forms the basis of a Member's request to suspend 
concessions is the WT O-inconsistent original or compliance measure that existed at the time of 
expiry of the RPT.  
3.23.  The United States contends that Article 22.8 of the DSU provides support for its 
interpretation of Article 22.6. We note, however, that Article 22.8 refers to a s tage in the WTO 
dispute settlement process that is reached, if at all, after an Article 22.6 arbitrator has completed 
its task (if an arbitration has been requested). It is true that Article 22.8 sets out an ongoing 
obligation on a Member  that has suspende d  concessions to terminate the suspension  as soon as 
the measure found to be inconsistent has been removed or an alternative solution has been 
reached. In that sense, Article 22.8 is concerned with the "present"56 situation and hence with the 
most recent c ompliance measure that may be in place. But Article 22.8 does not suggest or imply 
that, in determining the permissible level of suspension of concessions, an arbitrator should look to 
the most recent version of the measure in question that exists at the t ime that an Article 22.6 
arbitration is initiated. Moreover, our interpretation of Article 22.6 sits comfortably with Article 
22.8 of the DSU . As we see it, Article 22.8 serves to ensure that if and when the WTO -inconsistent 
original or compliance measure that existed at the time of expiry of the RPT is removed – and the 
responding Member may do this, for instance, by adopting a new compliance measure – any 
suspension of concessions applied by the complaining Member will be terminated.  
3.24.  In sum, our view is that, when read in the light of its context, the text of Article 22.6 of the 
DSU mandates an arbitrator to assess the level of nullification or impairment caused by the WTO -
inconsistent original measure (where no compliance measure was subsequently taken),  or a 
subsequent WTO -inconsistent compliance measure, that was in existence at the time of expiry of 
the RPT. This measure may or may not be the most recent version of the relevant measure.  
3.25.  In the present proceedings, the measure to which this interpretat ion directs us is the 2013 
Tuna Measure, and not the 2016 Tuna Measure. The 2016 Tuna Measure is not yet subject to any 
panel or Appellate Body findings, and so it is not a measure that has been found to be WTO -
inconsistent. Moreover, the 2013 Tuna Measure , not the 2016 Tuna Measure, was the version of 
the Tuna Measure in force at the time the RPT expired. Accordingly, the 2016 Tuna Measure could 
not and did not bring the Tuna Measure into compliance by the time the RPT expired, and it 
therefore should not form the basis of the Arbitrator's assessment of the level of nullification or 
impairment in these proceedings.  
3.4  Previous arbitration decisions  
3.26.  The United States argues that its request for a preliminary ruling is supported also by the 
findings of previous  arbitrators.  
3.27.  Mexico argues that the decisions cited by the United States are "inapposite".57  
3.28.  The Arbitrator notes that the United States cited to three arbitration decisions in support of 
its position: EC – Bananas III , US – Upland Cotton , and Brazil – Aircraft . We will consider each of 
these cases to determine whether they support an interpretation of Article 22.6 that is different to 
the one we have outlined above.  
3.29.  We begin with the arbitrator's decision in EC – Bananas III . According to the United Stat es, 
this decision confirms that the task of an arbitrator acting under Article 22.6 is to look at the 
measure in question as it currently exists, and not the measure in some earlier form. In particular, 
the United States refers to the following passage fro m the arbitrator's decision:  
                                               
56 United States' written submission, para. 45.  
57 Mexico's written submission, Section II.C.  WT/DS381/ARB  
 
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  [W]e could resort to the option of measuring the level of nullification or impairment on 
the basis of our findings in the original dispute, as modified by the Appellate Body and 
adopted by the DSB. To do that would mean to igno re altogether the undisputed fact 
that the European Communities has taken measures to revise its banana import 
regime. That is certainly not the mandate that the DSB has entrusted to us.58 
3.30.  In the United States' view, this statement indicates that the arbitr ator assessed the level of 
nullification or impairment caused by the most recent version of the measure at issue, even 
though an earlier version of the measure had been ruled on by the panel and Appellate Body.59 
3.31.  Mexico rejects the United States' interpreta tion of the arbitration decision in EC – Bananas 
III. It argues that the particular dilemma faced by the arbitrator in that case does not arise in the 
present proceedings, and accordingly the Arbitrator in the present proceedings should not follow 
the appr oach in that case. In particular, Mexico notes that unlike in the present proceedings, in EC 
– Bananas III  the compliance panel proceedings on the amended version of the measure at issue60 
had not yet been resolved when the matter was referred to arbitratio n.61 This, in the view of the 
arbitrator in that case, raised a serious concern, because "authorization by the DSB of the 
suspension of concessions or other obligations presupposes the existence of a failure to comply 
with the recommendations or rulings con tained in panel and/or Appellate Body reports as adopted 
by the DSB".62 In the absence of such adverse DSB recommendations and rulings, the arbitrator 
decided to take upon itself the task of determining preliminarily the WTO -consistency of the 
amended measu re before calculating the level of nullification or impairment that it caused.63 In 
Mexico's view, such an approach is inappropriate where, as in the present dispute, adverse DSB 
recommendations and rulings concerning the United States' failure to comply al ready exist. 
According to Mexico, the Arbitrator should base its calculations on the measure that is the subject 
of those existing adverse DSB recommendations and rulings.64  
3.32.  We agree with Mexico that the circumstances in EC – Bananas III  were different to those we 
face in these proceedings. Most importantly, in EC – Bananas III  the arbitrator faced a situation 
where it might have had to determine the level of nullification or impairment in the absence of 
DSB recommendations and rulings that the European Com munities had failed to bring its measure 
into compliance within the applicable RPT. This, according to the arbitrator, would have put the 
arbitrator in a difficult position because "we cannot fulfil our task to assess the equivalence  
between the two levels  before we have reached a view on whether the revised EC regime is, in 
light of our and the Appellate Body's findings in the original dispute, fully WTO -consistent".65 In 
other words, the arbitrator considered that an analysis of the WTO -consistency of the measure 
taken to comply was a prerequisite to the assessment of the level of nullification or impairment, 
because if the measure taken to comply had in fact brought the European Communities into 
compliance within the RPT, there would, legally speaking, hav e been no nullification or impairment 
to assess. Accordingly, the arbitrator decided that it would analyse the WTO -consistency of the 
measure taken to comply, and only then, if it found that measure to be WTO -inconsistent, proceed 
to assess the level of nu llification or impairment caused by that measure.  
3.33.  In adopting this approach, the arbitrator emphasized that the DSB, when referring the 
matter to arbitration, noted that there "remains the problem of how the Panel and the Arbitrators 
would coordinate their  work", and charged the arbitrator with finding "a logical way forward".66 
                                               
58 Decision by the Arb itrator, EC – Bananas III (US) (Article 22.6 – EC), para. 4.7.  
59 United States' written submission, para. 46.  
60 In EC – Bananas , two compliance panels, one requested by the European Communities and one 
requested by Ecuador – were established on 12 January 1999. On 14 January 1999, the United States 
requested the DSB to authorize it to suspend concessions against the European Communities under Article 22 
of the DSU. At the DSB meeting held on 25 January -1 February 1999, the European Communities objected to 
the level of suspension proposed by the United States on the ground that it was not equivalent to the level of 
nullification or impairment of benefits suffered by the United States and claimed that the principles and 
procedures set out in Article 22.3 of th e DSU had not been followed. In response, the DSB decided on 29 
January 1999, prior to the conclusion of the compliance panel proceedings, to submit the matter to arbitration 
of the original panel in accordance with Article 22.6 of the DSU . 
61 Mexico's writ ten submission, para. 31.  
62 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 4.4.  
63 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 4.8.  
64 Mexico's written submission, para. 31.  
65 Decision by the Arb itrator, EC – Bananas III (US) (Article 22.6 – EC), para. 4.8.  
66 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 4.9.  WT/DS381/ARB  
 
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  The arbitrator stated that its decision to analyse the WTO -consistency of the measure taken to 
comply was, in its view, the most logical way forward.67 
3.34.  We are not faced with the "prob lem" identified by the DSB in EC – Bananas III , and 
accordingly do not consider it necessary or appropriate to follow the approach devised by the 
arbitrator in that case as a "logical" solution. Unlike in EC – Bananas III , the present arbitration 
takes pla ce in response to DSB recommendations and rulings that the 2013 Tuna Measure failed to 
bring the United States into compliance within the RPT. There is therefore no uncertainty in this 
case regarding whether the measure taken by the United States within th e RPT to comply with its 
WTO obligations – the 2013 Tuna Measure – is WTO -inconsistent. Consequently, we do not find 
ourselves in a situation where we must either analyse ourselves the WTO -consistency of the 2013 
Tuna Measure or else "ignore altogether"68 the fact that the United States revised its Tuna 
Measure in 2013.  
3.35.  The fact that the United States has since made further changes to the Tuna Measure (so 
that it now constitutes the 2016 Tuna Measure) does not place us in a situation comparable to that 
in EC – Bananas III . The mere fact that the United States has made additional changes to the 
Tuna Measure is not sufficient grounds for concluding that the United States has come into 
compliance.69 Rather, we agree with Mexico that the existing adverse DSB recom mendations and 
rulings remain in effect until such time as there are new, overriding panel and/or Appellate Body 
findings that have been adopted by the DSB or a mutually agreed solution has been notified to the 
DSB.70 Moreover, the decision in EC – Bananas III in our view does not stand for the proposition 
that every time a responding Member adopts a new compliance measure and asserts compliance 
while arbitration proceedings under Article 22.6 are underway, the arbitrator must analyse the 
WTO-consistency of the new measure. A careful review of the facts and circumstances surrounding 
that arbitration decision reveals that at most it can support the proposition that such an analysis 
may be warranted if there have been no prior DSB recommendations and rulings th at the 
responding Member has failed to bring itself into compliance within the RPT. As explained, in this 
case, there have been such adverse DSB recommendations and rulings.  
3.36.  In sum, unlike in EC – Bananas III , the DSB in this case has already determined th at the 
measure taken by the United States to comply (the 2013 Tuna Measure) is WTO -inconsistent. 
Because of these existing adverse DSB recommendations and rulings, the issue does not arise in 
this case whether as arbitrators acting under Article 22.6 we co uld and should undertake our own 
evaluation of the WTO -consistency of the 2013 Tuna Measure. Further, there are (as yet) no 
overriding panel and/or Appellate Body findings that have been adopted by the DSB, or a notified 
mutually agreed solution, concernin g the 2016 Tuna Measure that could have affected the 
continued validity of the adverse DSB recommendations and rulings concerning the 2013 Tuna 
Measure.  We therefore conclude that the arbitrator's decision in EC – Bananas III  does not support 
the United St ates' view that we should base our assessment on the 2016 Tuna Measure.  
3.37.  We now turn to the arbitrator's decision in US – Upland Cotton . According to the United 
States, the arbitrator in that case rejected a request by Brazil as the complaining party for 
authorization to take countermeasures in relation to a measure that had been withdrawn before 
the arbitration proceedings (but after the expiry of the RPT), reasoning that such an authorization 
would necessarily exceed the current level of nullification or i mpairment. In the United States' 
view, Mexico's position that the proper basis for the Arbitrator's assessment is the 2013 Tuna 
                                               
67 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 4.9.  
68 Decision by the Arbitra tor, EC – Bananas III (US) (Article 22.6 – EC), para. 4.7.  
69 Appellate Body Report, US – Continued Suspension , para. 317.  
70 In support of this position, Mexico relies on the Appellate Body's statement in US – Continued 
Suspension  that "until the removal of  the European Communities' inconsistent measure was determined 
through WTO dispute settlement, the United States' and Canada's authorization to suspend concessions did not 
lapse" (Appellate Body Report, US – Continued Suspension , para. 403). The United Sta tes argues that this 
statement is irrelevant, because the Appellate Body in that case was addressing the situation where the DSB 
had already authorized the suspension of concessions and the issue was at what point that DSB authorization 
would terminate. Al though the United States is correct that the Appellate Body in US – Continued Suspension  
did not address the specific issue before us, in our view similar considerations apply with respect to DSB 
recommendations and rulings concerning the WTO -inconsistency  of a measure taken to comply. Thus, just as a 
statement by a Member that it has come into compliance does not cause the expiry of an existing DSB 
authorization to suspend concessions (see Appellate Body Report, US – Continued Suspension , para. 317), so 
also such a statement would not affect the continued validity of DSB recommendations and rulings concerning 
the WTO -inconsistency of a measure taken to comply.  WT/DS381/ARB  
 
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  Measure "directly contravenes" the approach taken by the arbitrator in that case because the 2013 
Tuna Measure was withdrawn and  replaced by the 2016 Tuna Measure.71 
3.38.  Mexico argues that the decision in US – Upland Cotton  is not relevant to these arbitration 
proceedings. In particular, Mexico notes that, in that case, the United States withdrew the WTO -
inconsistent "Step 2 subsidy" af ter the expiry of the RPT but prior to the compliance panel 
proceedings and subsequent arbitration under Article 22.6  of the DSU . Mexico observes that the 
compliance panel declined to make a finding in respect of this withdrawn subsidy, and that  
accordingl y there were never any DSB recommendations or rulings pursuant to Article 21.5 that 
the United States had failed to bring the Step 2 subsidy into compliance. In Mexico's view, the 
situation in the present proceedings is completely different: here, there ex ist clear DSB 
recommendations and rulings pursuant to Article 21.5 that the United States failed to bring its 
Tuna Measure into compliance prior to the expiry of the RPT.  
3.39.  In our view, the situation facing the arbitrator in US – Upland Cotton  was markedly d ifferent 
to the one we face. In US – Upland Cotton , Brazil agreed that the Step 2 subsidy had been 
withdrawn by the United States, albeit after the expiry of the RPT.72 Accordingly, it was undisputed 
that, by the time of the compliance proceedings, which pr eceded the arbitration proceedings, the 
subsidy had been withdrawn. Brazil sought a finding from the compliance panel that the United 
States had acted inconsistently with the covered agreements by failing to withdraw the subsidy 
prior to the expiry of the RPT, but it did not argue that the subsidy continued to exist.73 
3.40.  In the present dispute, the United States argues that the 2013 Tuna Measure is no longer in 
existence.74 Mexico, however, has never conceded that the Tuna Measure has ceased to exist. To 
the co ntrary, it argues that the Tuna Measure continues to exist and , in its 2016 version,  remains 
inconsistent with the covered agreements. It is pursuing its claims in respect of the 2016 Tuna 
Measure  in compliance panel proceedings. Accordingly, a central cir cumstance that was present in 
US – Upland Cotton  – the agreement by the parties that the Step 2 subsidy had ceased to exist 
prior to the compliance panel proceedings, albeit after the expiry of the RPT – is not present in the 
dispute before us.  
3.41.  Further, as  Mexico notes, the compliance panel in US – Upland Cotton  decided not to make 
any findings concerning the period between the expiry of the RPT and the withdrawal of the Step 2 
subsidy.75 Brazil did not appeal that decision.76 Accordingly, there were no adver se DSB 
recommendations and rulings pursuant to Article 21.5 of the DSU with respect to the Step 2 
subsidy.77 In the absence of such recommendations and rulings, the arbitrator in US – Upland 
Cotton  found that there was no "legitimate basis" for the impositi on of countermeasures in respect 
of that measure. Additionally, the arbitrator found that, because it was undisputed that the Step 2 
subsidy had been withdrawn, it would be inappropriate to authorize the suspension of concessions 
given that the purpose of such suspension is precisely to induce compliance.78 
3.42.  In the present dispute, we are not faced with the same situation. There are adverse DSB 
recommendations and rulings in respect of the measure taken by the United States to comply, i.e. 
the 2013 Tuna Measu re. Additionally, there is no agreement between the parties that the Tuna 
Measure has subsequently been brought into compliance, nor are there any more recent panel 
and/or Appellate Body findings that have been adopted by the DSB. The adverse DSB 
recommend ations and rulings covering the 2013 Tuna Measure therefore continue to provide a 
valid basis for the suspension of concessions. Consequently, we do not find it appropriate to follow 
the approach taken by the arbitrator in US – Upland Cotton  in respect of the Step 2 Subsidy.  
3.43.  Finally, we turn to the arbitrator's decision in Brazil – Aircraft . The United States observes 
that in that case, the arbitrator found that it needed to take into account the results of the 
separate, ongoing compliance proceedings under  Article 21.5 of the DSU before it could reach a 
                                               
71 United States' written submission, para. 46.  
72 Panel Report, US – Upland Cotton (Article 21.5 – Brazil) , paras. 9.57 and 9.65.  
73 Panel Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 9.57.  
74 United States' written submission, para. 42; United States' response to Arbitrator question No. 1; 
United States' comments on Mexico's responses to Arb itrator questions.  
75 Panel Report, US – Upland Cotton (Article 21.5 – US I), para. 9.71.  
76 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US I), para. 3.20.  
77 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US I), para. 3.20.  
78 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US I), para. 4.62. WT/DS381/ARB  
 
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  conclusion under Article 22.6. According to the United States, the same approach should be 
adopted by the Arbitrator in the present proceedings.79 
3.44.  Mexico rejects the United States' reliance on Brazil – Aircra ft. According to Mexico, in that 
case, as in EC – Bananas III , there were no prior adverse DSB recommendations and rulings 
pursuant to Article 21.5 in respect of the measure taken to comply. Rather, Mexico observes, the 
arbitration and the first round of c ompliance proceedings ran in parallel. It is in that context that 
the arbitrator decided to take the outcome of the compliance panel proceedings into account in its 
assessment of the level of nullification or impairment.80  
3.45.  We agree with Mexico that the fac ts in Brazil – Aircraft  were similar to those in EC – 
Bananas III , inasmuch as there were no existing adverse DSB recommendations and rulings 
pursuant to Article 21.5 at the time the arbitrator began its work. There were therefore no existing 
recommendatio ns and rulings on whether the responding party had failed to bring its measure into 
compliance before the expiry of the RPT, which failure, as we have explained above, is the event 
that allows the complaining party to have recourse to the procedures in Art icle 22  of the DSU . 
3.46.  To recall, in the present dispute there are existing DSB recommendations and rulings that 
the United States failed to bring its measure into compliance prior to the end of the RPT. 
Moreover, as we mentioned above, given that Mexico cont ests the United States' claim that the 
2016 Tuna Measure brought the United States into compliance, the DSB recommendations and 
rulings that the 2013 Tuna Measure failed to bring the United States into compliance within the 
RPT continue to provide a valid basis for the suspension of concessions and hence remain relevant 
for purposes of these arbitration proceedings.  
3.47.  For the reasons given above, we consider that the arbitration decisions cited by the United 
States do not support the United States' position.  Those decisions dealt with circumstances that 
were different from those in this dispute. Notably, they dealt with circumstances in which there 
were no DSB recommendations and rulings that the responding party had failed to bring its 
measure into complianc e within the reasonable period of time. Consequently, we conclude that the 
decisions cited by the United States do not contradict our text -based interpretation of Article 22.6.  
3.5  Additional considerations  
3.48.  Both parties raise a number of additional issues conc erning the proper interpretation of 
Article 22.6 of the DSU and its application in this dispute. These issues are: (a) the possible 
systemic consequences of granting the United States' request for a preliminary ruling; (b) whether 
denying the United States ' request for a preliminary ruling would result in the authorization of a 
punitive or retro active suspension of concessions; (c) the relevance of the bilateral sequencing 
agreement agreed between Mexico and the United States; and (d) the date on which the 2016 
Tuna Measure entered into force, and the legal relevance of that fact. The Arbitrator will consider 
these issues in turn.  
3.5.1   Possible systemic consequences of granting the United States' request  
3.49.  Mexico argues that granting the United States' request for a preliminary ruling would render 
Article 22 of the DSU ineffective.81 According to Mexico, an Article 22.6 arbitration that is based on 
the DSB recommendations and rulings on a preceding round of Article 21.5 proceedings must not 
be influenced or delayed b y the claims and issues before a new Article 21.5 compliance panel 
established to determine the WTO -consistency of a new compliance measure . Otherwise,  the result 
would be an endless loop that could indefinitely preclude the right to suspend concessions or  other 
obligations pursuant to Article 22. In Mexico's view, a Member maintaining a WTO -inconsistent 
measure could then delay the resolution of a meritorious complaint by introducing amendments 
each time the complaining Member sought to enforce its rights under Article 22 following a round 
of Article 21.5 proceedings. This, in Mexico's view, would render Article 22 meaningless.82  
                                               
79 United States' written submission, paras. 52 -53. 
80 Mexico's written submission, para. 33.  
81 Mexico's written submission, para. 19.  
82 Mexico's written submission, para. 2 7; letter to the Arbitrator of 3 June 2016.  WT/DS381/ARB  
 
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  3.50.  The United States submits that, in a situation like the one envisaged by Mexico where there 
is an Article 22.6 arbitration and a new compliance measure, one option would be to allow the 
threshold issue of compliance to be resolved through compliance panel proceedings before any 
assessment of the level of nullification or impairment. The United States points out, however, that 
the is sue of compliance could also be resolved by an arbitrator acting under Article 22.6  of the 
DSU. Thus, modifications made to a measure could be taken into account by the arbitrator, and 
would not necessarily require that the arbitration be delayed until the  end of additional compliance 
proceedings under Article 21.5  of the DSU .83 
3.51.  Mexico responds that nothing in the DSU authorizes an arbitrator to deal with compliance 
issues, and that to allow an arbitrator to address such questions could affect the rights and  
obligations of WTO Members, because, for example, arbitrations are not subject to appeal.84 
3.52.  The Arbitrator notes that the existence of Article 21.5 as a separate provision suggests that 
generally, compliance issues should be dealt with separately from the assessment of the level of 
nullification or impairment, by a compliance panel. Nevertheless, in at least one previous dispute, 
an arbitrator acting under Article 22.6 has considered issues of compliance in the course of 
assessing the level of nullification  or impairment.85 As we have explained, however, the 
circumstances facing that arbitrator were unusual, and the arbitrator itself stated that it would 
consider issues of compliance in view of the DSB's specific request that it find a "logical way 
forward".86 We have already pointed out above that our circumstances are different. Notably, we 
are not in a situation where we either have to analyse the WTO -consistency of the 2016 Tuna 
Measure, or else be prepared to make an assessment of the level of nullificatio n or impairment in 
the absence of DSB recommendations and rulings that the United States had failed to bring its 
Tuna Measure into compliance within the applicable RPT. We therefore do not consider it 
appropriate in this dispute to follow the approach take n by that other arbitrator.  
3.53.  With respect to  the systemic concern expressed by Mexico, we think it  is valid. As Mexico 
notes, the interpretation of Article 22.6 of the DSU advocated by the United States seems to imply 
that whenever a compliance measure subj ect to adverse DSB recommendations and rulings is 
further modified and the responding  party claims to have come into compliance, and an Article 
22.6 arbitration is subsequently conducted, a new assessment of compliance becomes necessary 
before the DSB can authorize any suspension of concessions. If , in a situation such as ours where 
an Article 22.6 arbitration is conducted,  new compliance panel proceedings under Article 21.5 
needed to be undertaken  every time a measure already found to be inconsistent at th e expiry of 
the RPT were modified and compliance was claimed, this could very substantially delay, and in 
theory effectively thwart, a complaining party's efforts towards obtaining DSB authorization to 
suspend concessions. This is because it would then pre sumably be necessary to delay or suspend 
an Article 22.6 arbitration until after completion of compliance proceedings . If, following such 
proceedings, there were new adverse  panel and/or Appellate Body findings that were adopted by 
the DSB , the arbitration  would resume, subject to  possible further delay if yet another modification 
of the measure occurred in the meantime and compliance were claimed. Such an outcome would 
not, in our view, be consistent with the DSU's objectives of preserving the rights of Me mbers87, 
including complaining Members, and promoting the prompt settlement of disputes.88 
3.54.  Besides the general systemic concern about the United States' interpretation of Article 22.6, 
we note that Mexico has in any event firmly opposed any delay to the arbi tration proceedings or 
their suspension until the completion of the parallel compliance panel proceedings.  
3.55.  In the light of the foregoing, it is in our view appropriate in the circumstances of this dispute 
to undertake a prompt assessment of the level of nu llification or impairment on the basis of the 
2013 Tuna Measure and leave the analysis of the WTO -consistency of the 2016 Tuna Measure to 
the two compliance panels established to undertake that precise task.  
                                               
83 United States' response to Arbitrator question No. 3; letter to the Arbitrator of 3 June 2016, paras. 10 
and 19.  
84 Mexico's comments on the United States' response to Arbitrator question No. 3.  
85 Decision of th e Arbitrator, EC – Bananas III (US) (Article 22.6 – EC). 
86 See above, para. 3.33. 
87 Article 3.2 of the DSU.  
88 Article 3.3 of the DSU.  WT/DS381/ARB  
 
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  3.5.2   Whether denying the United States' request for a  preliminary ruling would result 
in the authorization of a retroactive or punitive suspension of concessions  
3.56.  The United States argues that denying its request for a preliminary ruling could result in the 
Arbitrator's Decision leading to the DSB authorizing  a suspension of concessions that is retroactive 
and/or punitive. The United States argues that this is so because, if the Arbitrator based its 
assessment on the 2013 Tuna Measure, it would be ignoring the fact that the 2016 Tuna Measure 
is, in the United States' view, WTO -consistent and therefore does not cause any nullification or 
impairment. According to the United States, nothing in the DSU allows such retroactive or punitive 
remedies.89 
3.57.  As the Arbitrator has noted, the WTO -consistency of the 2016 Tuna M easure is not an issue 
that will be analysed in these proceedings, and accordingly the Arbitrator takes no position on the 
United States' argument that the 2016 Tuna Measure causes no nullification or impairment. We 
would note, though, that even if the Uni ted States were correct on that point, this would not mean 
that, in assessing the nullification or impairment caused by the 2013 Tuna Measure, we would be 
inviting the DSB to authorize retroactive or punitive remedies.  
3.58.  What Mexico seeks in these arbitratio n proceedings is a prospective remedy, in response to 
the United States' failure to implement the adverse DSB recommendations and rulings regarding 
the 2013 Tuna Measure, that extends from the date of the expiry of the RPT. Mexico does not seek 
a retroacti ve remedy that extends from a date prior to the expiry of the RPT. The fact that Mexico 
is only now requesting authorization to suspend concessions, some three years after the expiry of 
the RPT, is due to the interference in the timeline of the first compl iance proceedings and Mexico's 
agreement, pursuant to the United States -Mexico Sequencing Agreement, not to request 
authorization to suspend concessions until after those compliance proceedings. That delay, 
however, does not turn Mexico's request into a re quest for retroactive remedies properly -so-called, 
since Mexico is still only seeking to retaliate as from the date when the United States should have 
come into compliance.  
3.59.  Nor do we  agree that Mexico is seeking authorization to suspend concessions in a pu nitive 
manner. As we understand the United States' argument, a punitive remedy would be one where, 
contrary to Article 22.4  of the DSU , a Member suspends concessions at a level higher than the 
level of nullification or impairment caused by the relevant mea sure. However, consistent with 
Article 22.4  of the DSU , Mexico in these proceedings is seeking to impose a level of suspension 
that it considers is "equivalent" to the level of nullification or impairment caused by the 2013 Tuna 
Measure. We have already ex plained the reasons why we believe that this Measure is the 
appropriate basis for our assessment of the level of nullification or impairment.  
3.60.  In this connection, we observe that, because of the existence of parallel compliance panel 
proceedings concerning the 2016 Tuna Measure, it is conceivable that, after Mexico has received 
DSB authorization to suspend concessions on the basis of this Decision , the compliance panels 
may find that the 2016 Tuna Measure brings the United States into compliance. If (followi ng any 
appeal) the DSB were to adopt that finding, Mexico pursuant to Article 22.8 of the DSU would need 
to promptly terminate any suspension of concessions that it might have applied after receiving the 
DSB's authorization  in these proceedings . Mexico its elf acknowledges this.90 A DSB finding that the 
2016 Tuna Measure brought the United States into compliance would not, however, render any 
preceding suspension of concessions retroactive, since the relevant point of reference is, as noted, 
the date of expir y of the RPT, and not the date on which the 2016 Tuna Measure was put in place. 
Nor would such a DSB finding render any preceding suspension of concessions punitive, because 
that DSB finding of WTO -consistency would itself have effect only from the date of  its own 
adoption.   
3.61.  Finally, we note the United States' observation that once the DSB has granted authorization 
for a particular level of suspension, there is no mechanism to modify that level to take account of 
the results of subsequent compliance procee dings.91 In making this point, the United States seems 
to envisage a situation where the outcome of the compliance proceedings is that the 2016 Tuna 
                                               
89 United States' comments on Mexico's responses to Arbitrator questions.  
90 Mexico's writte n submission, para. 42; response to Arbitrator question No. 11.  
91 United States' comments on Mexico's responses to Arbitrator questions.  WT/DS381/ARB  
 
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  Measure is WTO -inconsistent, but causes less nullification or impairment than the 2013 Tuna 
Measure.92 
3.62.  We not e that we do not face the situation envisaged by the United States. As we see it, our 
task in these proceedings is limited to assessing the level of nullification or impairment caused by 
the 2013 Tuna Measure, and we cannot speculate about the outcome of t he second round of 
compliance panel proceedings in this dispute. We therefore do not find it either necessary or 
appropriate to further address the issue identified by the United States.93 
3.5.3   Relevance of the sequencing agreement between Mexico and the United States  
3.63.  Both parties have made reference in their arguments to the bilateral sequencing agreement 
between Mexico and the United States.94 Neither party, however, has alleged a violation of that 
agreement. In particular, the United States has not suggested th at proceeding with these 
arbitration proceedings on the basis of the 2013 Tuna Measure would somehow breach the 
sequencing agreement.95 Accordingly, in the Arbitrator's view, it is not necessary in these 
proceedings either to interpret that agreement or to consider whether we would have jurisdiction 
over any claim thereunder.  
3.5.4   The date on which the 2016 Tuna Measure entered into force, and the legal 
relevance of that fact  
3.64.  Finally, we note that both parties have made arguments and responded to questions 
concer ning the date of entry into force of the 2016 Tuna Measure. The parties disagree about 
whether that Measure was in force at the time this dispute was referred to arbitration.96 
3.65.  In the Arbitrator's view, it is not necessary in these proceedings to determine whether the 
2016 Tuna Measure was in force when this dispute was referred to arbitration. Even if, as the 
United States contends, the 2016 Tuna Measure was in force when this dispute was referred to 
arbitration, that would not modify our conclusion that th e measure on which we should base our 
assessment of the level of nullification or impairment is the 2013 Tuna Measure. As we have 
explained above, it was through the 2013 Tuna Measure that the United States failed to come into 
compliance with its WTO oblig ations before the expiry of the RPT. That first compliance measure is 
the subject of still  valid adverse DSB recommendations and rulings. Moreover, there is no 
agreement between the parties that the 2016 Tuna Measure has brought the United States into 
comp liance.97 In these circumstances, the date of entry into force of the 2016 Tuna Measure does 
not affect the outcome of our assessment of the level of nullification or impairment.  
                                               
92 We observe that, at least in principle, the situation envisaged by the United States could also be 
inverted: Article 21.5 proceedings could result in a finding that a new compliance measure causes more 
nullification or impairment than a previous one. In such circumstances, the issue raised by the United States – 
whether and how it would be possible to adjust the authoriz ed level of suspension – could also arise.  
93 We note our agreement with the United States that the DSU does not explicitly address whether and 
how it would be possible to adjust the authorized level of suspension or the applied level of suspension. A 
detailed interpretative analysis would therefore be warranted. Any such analysis should in our view begin by 
examining whether it is correct to assume, as the United States appears to do, that a downward adjustment of 
the level of suspension would be required i f a second compliance panel proceeding confirmed that a new 
compliance measure taken by the responding Member presents fewer WTO -inconsistent aspects than a 
previous compliance measure and thus achieves partial (but still only partial) compliance, and ther efore 
presumably causes a lower level of nullification or impairment. We take no position on this issue.  
94 WT/DS381/19.  
95 The United States has noted that the sequencing agreement does not bind the Arbitrator. United 
States' letter to the Arbitrator of 3 J une 2016, fn. 6.  
96 United States' written submission, para. 48; response to Arbitrator question Nos. 14 and 15; Mexico's 
written submission, para. 26; response to Arbitrator question Nos. 14 and 15.  
97 In our view, if for instance a compliance measure subje ct to adverse DSB recommendations and 
rulings were subsequently withdrawn, and if such withdrawal were recognized by the complaining party as 
having brought the responding party into compliance and removed the nullification or impairment caused, then 
the date of that withdrawal, and particularly whether it was effected before or after an Article 22.6 arbitration, 
may be a factor for an Article 22.6 arbitrator to consider.  WT/DS381/ARB  
 
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  3.6  Conclusion  
3.66.  For all of the reasons given above, the Arbitrator concludes that t he relevant measure for 
the purposes of these arbitration proceedings is the 2013 Tuna Measure, which is the subject of 
specific adverse DSB recommendations and rulings. We therefore reject the United States' request 
for a preliminary ruling that we find t he relevant measure to be the 2016 Tuna Measure.  
3.67.  What we must and therefore will assess in the present Article 22.6 arbitration is the level of 
nullification or impairment caused by the 2013 Tuna Measure. As already noted, w e will not 
determine the WTO -consistency of the 2016 Tuna Measure  (even if we could do so) , nor will we 
assess the level of nullification or impairment (if any) caused by the 2016 Tuna Measure.  
4  THE APPROPRIATE COUN TERFACTUAL AND TIME -FRAME  
4.1.  Having dealt with a number of preliminary issues , the Arbitrator now turns to the merits of 
these arbitration proceedings. We recall that our task is to determine whether the level of 
suspension of concessions requested by Mexico is equivalent to the level of nullification or 
impairment caused by the 20 13 Tuna Measure. We begin our analysis by assessing the appropriate 
counterfactual on the basis of which we should base our calculation of the nullification or 
impairment.  
4.1  The appropriate counterfactual  
4.2.  As mentioned in Section 3 above , our mandate under Article 22.7 of the DSU is to determine 
whether the proposed level of suspension of concessions is equivalent to the level of nullification or 
impairment sustained by Mexico as a result of the United States' failure to bring t he Tuna Measure 
into compliance.98 To discharge this mandate, we will first have to determine the level of 
nullification or impairment caused by the 2013 Tuna Measure, which was the measure existing at 
the time of the expiry of the RPT, and then compare tha t to the level of suspension of concessions 
proposed by Mexico.  
4.3.  Neither Article 22.6 nor any other provision of the DSU prescribes a particular methodology 
for the determination of the level of nullification or impairment. Conceptually, the level of 
nullification or impairment caused by the United States' failure to comply with the DSB 
recommendations and rulings represents the difference between the value of trade (if any) in 
Mexican tuna products that occurred despite the WTO -inconsistent US measure, typi cally 
calculated for one year, and the value of trade that would have occurred, over the course of one 
year, had the United States complied with the DSB recommendations and rulings. The key issue, 
therefore, is how to determine what the value of Mexico's e xports of tuna products to the United 
States would have been, over the course of one year, had the United States complied with the 
DSB recommendations and rulings by the expiry of the RPT.  
4.4.  It is well established that it is for the responding party to choos e how to implement DSB 
recommendations and rulings.99 Consequently, there is no prescribed manner of complying; the 
responding party may choose to withdraw the measure at issue in its totality or appropriately 
modify its WTO -inconsistent aspects. The implic ation of this principle for Article 22.6 arbitration 
proceedings is that the arbitrator does not always know what form implementation would have 
taken had the responding party implemented the DSB recommendations and rulings. As a result, 
in past arbitratio n proceedings, arbitrators have found it necessary to base their decisions on a so -
called "counterfactual". In this context, a counterfactual refers to a hypothetical scenario that 
describes what would have happened in terms of trade flows had the respondi ng party 
implemented the DSB recommendations and rulings.100 
                                               
98 Decision by the Arbitrator,  US – 1916 Act (EC) (Article 22.6 – US), para. 4.5 ; Decision by the 
Arbitrator,  US – Gambling (Article  22.6 – US), para. 2.6.  
99 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina) , 
para. 184.  
100 A counterfactual approach was used in several past arbitration proceedings . In EC – Bananas III , the 
arbitrator compared the value of relevant EC imports from the United States under the actual banana import 
regime with their value under a hypothetical WTO -consistent regime (a "counterfactual" situation). (Decision 
by the Arbitr ator, EC – Bananas III (US) (Article 22.6 – EC), para. 7.1). In Canada – Aircraft (Article 22.6 – WT/DS381/ARB  
 
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  4.5.  Prior dispute settlement practice establishes that the legal standard that a scenario must 
meet for it to constitute an appropriate counterfactual for purposes of Article 22.6 proceedings is 
that o f plausibility  and reasonability . In US – Gambling , for instance, the arbitrator emphasized 
that it was important for the counterfactual to reflect accurately the nature and scope of the 
benefits that were being nullified or impaired by the measure at issu e.101 The arbitrator observed 
that a counterfactual does not necessarily need to reflect the most likely compliance scenario, as 
counterfactuals always involve an inherent degree of uncertainty because they represent a 
hypothetical scenario.102 The counterfact ual should, however, reflect at least a plausible or 
"reasonable" compliance scenario.103 
4.6.  In the present arbitration proceedings, Mexico initially proposed a counterfactual under which 
the WTO -inconsistent discrimination caused by the 2013 Tuna Measure would  be eliminated.104 In 
Mexico's view, this counterfactual could manifest itself in two ways (hereafter Mexico's "two 
scenarios").  
a. In one scenario, the United States would eliminate the disqualification of tuna caught by 
setting on dolphins from the dolphin -safe label such that Mexican tuna products would 
not be treated differently from tuna products of any other country.105 Under this 
scenario, Mexican tuna products would qualify for the US dolphin -safe label.  
b. In the other scenario, the United States would apply  the same eligibility criteria, 
certification requirements, and tracking and verification requirements to all tuna, 
regardless of where it is harvested. Mexico contends that, under this scenario, the 
majority of tuna products from all countries, including Mexico and the United States, 
would not be eligible for the dolphin -safe label.106 
4.7.  The United States proposed a different counterfactual. Its counterfactual assumes that the 
Tuna Measure would be withdrawn. The United States underlined in this regard that it  is up to the 
responding party to decide how to implement DSB recommendations and rulings. The United 
States further pointed out that past arbitrators have indicated that the normal counterfactual for 
calculating the level of nullification or impairment is  withdrawal of the measure.107 
4.8.  Although the parties initially proposed counterfactuals that were not the same, later in the 
proceedings, Mexico stated that "[t]he counterfactual proposed by the United States – withdrawal 
of the measure entirely – is consiste nt with removing the discrimination", and explained that 
"provided that reasonable assumptions and projections are used, Mexico would accept the U.S. 
counterfactual under which the [T]una [M]easure is withdrawn."108 
4.9.  We note that both parties agree that the w ithdrawal of the Tuna Measure would constitute an 
appropriate counterfactual. For our part, we also consider that withdrawal of the measure is an 
appropriate counterfactual in these proceedings, for two reasons. First, as mentioned, in most past 
Article  22.6 arbitrations, the counterfactual used was the withdrawal of the WTO -inconsistent 
measure.109 Second, the withdrawal of the Tuna Measure would indisputably be WTO -consistent.  
                                                                                                                                               
Canada) , the arbitrator noted how past arbitrators had used a "counterfactual approach", comparing the 
existing situation with that which would have occurred "had implementation taken place as of the expiration of 
the reasonable period of time". (Decision by the Arbitrator, Canada — Aircraft Credits and Guarantees (Article 
22.6 – Canada) , para. 3.21). In EC – Hormones , the arbitrator based its analysis on what the complaining 
party's exports of the relevant product to the responding party would have been had the latter withdrawn the 
measure at the end of the RPT. (Decision by the Arbitrator, EC – Hormones (Canada) (Article 22.6 – EC), 
para. 38). In the recent US – COOL arbitration, the arbitrator also decided to use a counterfactual that 
assumed that the COOL measure was withdrawn at the end of the RPT. (Decision by the Arbitrator, US – COOL 
(Article 22.6 – US), para. 6.32).  
101 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.25.  
102 Decision by the Arbitrator, US – Gambling  (Article 22.6 – US), paras. 3.26.  
103 Decision by the Arbitrator, US – Gambling  (Article 22.6 – US), paras. 3.27.  
104 Mexico's methodology paper, para. 19.  
105 Mexico's written s ubmission, para. 47.  
106 Mexico's written submission, para. 50.  
107 United States' written submission, para. 69.  
108 Mexico's opening statement at the substantive meeting with the parties, para. 8.  
109 In US – COOL , the arbitrator's counterfactual assumed that the  COOL measure was withdrawn at the 
end of the RPT. (Decision by the Arbitrator, US – COOL (Article 22.6 – US), para. 6.32). In US – Gambling , the WT/DS381/ARB  
 
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  4.10.  On the basis of these considerations, we decide to base our calculation of the le vel of 
nullification or impairment caused by the 2013 Tuna Measure on a counterfactual under which the 
2013 Tuna Measure has been withdrawn by the time of the expiry of the RPT. In other words, as 
part of our assessment of the level of nullification or imp airment, we will determine what the value 
of Mexico's exports of canned yellowfin to the United States would have been, over the course of 
one year, had the United States withdrawn the 2013 Tuna Measure at the expiry of the RPT.  
4.2  The appropriate time -frame  
4.11.  Having identified the appropriate counterfactual for the calculation of the level of the 
nullification or impairment, we now proceed to examine the time -frame that will form the basis of 
that calculation.  
4.12.  Mexico argues that the Arbitrator should look at th e short -term impact of the 
counterfactual.110 The United States also finds the short -term assessment to be appropriate111, 
although it argues that Mexico's model reflects a hybrid time -frame that is somewhere between 
short-term and long -term.112 
4.13.  We note that it is undisputed between the parties that it is appropriate to assess the 
counterfactual on a short -term basis. We also note that there seems to be no disagreement 
between the parties on what a short -term assessment entails. It is understood to be an 
assessme nt covering a time -period within which the process of adjustment by producers, 
consumers and owners of factors of production to the withdrawal of the 2013 Tuna Measure has 
not been fully completed. Accordingly, any investments that canneries could be assum ed to make 
in the long -term in response to the withdrawal of the 2013 Tuna Measure are not taken into 
account in a short -term assessment.113 
4.14.  There is no rule in the DSU prescribing the time -frame for the determination of the level of 
nullification or impairm ent. Past Article 22.6 arbitration decisions indicate that the period of time 
for the arbitrator's determination of the level of nullification or impairment is usually the period 
that follows the end of the RPT.114 In this regard, we also share the parties' view that a short -term 
assessment of the withdrawal of the 2013 Tuna Measure would be appropriate in these 
proceedings. In our view, the impact of the withdrawal of the Measure would be best captured in 
the period immediately following the withdrawal. Deve lopments in the long -run would be less likely 
to be linked to withdrawal.  
4.15.  However, the parties disagree on specific one -year period for which we should calculate the 
level of nullification or impairment. Mexico contends that the appropriate period would be  the first 
                                                                                                                                               
arbitrator did not find it unreasonable to assume that compliance might have been achieved through the 
removal  of the specific source of discrimination identified by the Appellate Body. (Decision by the Arbitrator, US 
– Gambling  (Article 22.6 – US), para. 3.58). In US – Offset Act (Byrd Amendment) , the arbitrator's core 
rationale was that the trade effect of the m easure could be estimated to be the nullification or impairment that 
the requesting parties have suffered as a result of the measure not having been withdrawn. (For instance, 
Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (Brazil) (Article 22 .6 – US), para. 3.147) . In 
Canada – Aircraft Credits and Guarantees , the arbitrator stated that the key issue was whether the withdrawal 
of subsidies by Canada by 20 May 2002, i.e. the date of the expiry of the reasonable period of time, would 
have resulte d in a change in Air Wisconsin's future purchases. ( Decision by the Arbitrator, Canada – Aircraft 
Credits and Guarantees (Article 22.6 – Canada) , para. 3.22). In US – FSC, the arbitrator decided to assess the 
proposed suspension of concessions at the time the United States should have withdrawn the prohibited 
subsidy at issue, in 2000. ( Decision by the Arbitrator, US – FSC (Article 22.6 – US), para. 2.15). In  EC – 
Hormones (US) , the arbitrator estimated what the annual prospective US exports of hormone -treated beef 
products to the European Communities would have been if the latter had withdrawn the ban . (Decision by the 
Arbitrator, EC – Hormones (US) (Article 22.6 – EC), para. 38).  
110 Mexico's written submission, para. 111.  
111 United States' response to Arbitr ator question No. 60.  
112 United States' response to Arbitrator question No. 60.  
113 Mexico's written submission, para. 111; United States' response to Arbitrator question No. 60 .. 
114 In US – COOL , the arbitrator decided  to follow a counterfactual under which t he COOL measure was 
withdrawn at the end of the RPT. (Decision by the Arbitrator, US – COOL (Article 22.6 – US), para. 6.32). Also, 
the arbitrator in US – Upland Cotton found that the choice of marketing year 2005, which represented the first 
moment at whi ch the United States should have removed the adverse effects of the subsidies or withdrawn the 
subsidies, was in principle appropriate.  (Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), 
para. 4.118).  WT/DS381/ARB  
 
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  full calendar year following the expiry of the RPT, i.e. 2014.115 The United States contends that it 
would be more appropriate to use the most recent data available, which is from calendar year 
2015.116 The United States argues that since there has been a consistent trend of declining tuna 
consumption in the United States over the past 15 years, any calculation based on 2014 data 
would overstate the level of nullification or impairment.117 In the United States' view, in 
determining the appropriate one -year period, the Arbitrator should also take into account for which 
period the available data would provide the most accurate determination of the level of nullification 
or impairment, and would best capture the state of the canned tuna market.118 According to the 
United States, the Arbitrator should therefore base its determination on calendar year 2015, 
because there is better data available for that year.119 
4.16.  Mexico responds that the trends described by the United States in consumption and 
production have no immediate relevance to the calculation of the level of nullification or 
impairment.120 Mexico also argues that the United States has not established that 2014 is an 
inappropriate period for assessing the level of nullification or impairment.121 
4.17.  In our view, gi ven that 2014 is the calendar year that immediately follows the expiry of the 
RPT, it is the most appropriate one -year period to assess the short -term impact of the withdrawal 
of the 2013 Tuna Measure. With regard to the United States' argument that data i s lacking for 
2014, we note that the parties have submitted a significant amount of data for both 2014 and 
2015. In particular, for 2014, there are many exhibits providing information on retail sales of tuna 
products in the US market.122 Moreover, overall, w e have received more data for 2014 than for 
2015.  
4.18.  As for the United States' argument that the year 2014 is "unrepresentative" because of the 
decline in the consumption of tuna products, we agree with Mexico that whether or not 2014 is 
representative agains t the background of a long -term trend is not necessarily relevant to our task 
in these proceedings. Our task is to assess the level of nullification or impairment caused by the 
United States' failure to bring the 2013 Tuna Measure into compliance by the ex piry of the RPT. 
Consistent with the views of the parties, we do this by assessing, inter alia , the impact in the 
short-term that the withdrawal of that Measure by the end of the RPT would have had. Seen in this 
light, 2014 is plainly the first full year t hat follows the expiry of the RPT and for which data is 
available. We also note that the United States should have been in compliance during all of 2014. 
We do not therefore agree that assessing the level of nullification or impairment caused over the 
course of that year could properly be said to overstate the level of nullification or impairment 
caused by the United States' failure to come into compliance by the expiry of the RPT.  
4.19.  The United States claims that no event occurred that made the year 2015 unre presentative 
of the level of nullification or impairment caused by the 2013 Tuna Measure.123 However, we 
consider that the evidence on the record does not point to any particular event that makes the 
year 2014 inappropriate for assessing the level of nullifi cation or impairment.  
4.20.  In the light of the foregoing, we conclude that it is appropriate in these proceedings to 
assess the level of nullification or impairment caused by the 2013 Tuna Measure for the year 2014, 
which is the year immediately following the e xpiry of the RPT given to the United States to comply 
with the DSB recommendations and rulings.  
                                               
115 Mexico's methodology paper, para . 16; Mexico's written submission, para. 136.  
116 United States' response to Arbitrator question No. 59; written submission, para. 5.  
117 Ibid. 
118 United States' response to Arbitrator question No. 135.  
119 According to the United States, the most detailed data o n prices on the record – Exhibit MEX -15, the 
US exhibits based on Exhibit MEX -15, Exhibit USA -144 (on import prices of canned yellowfin and other canned 
tuna in the EU), and Exhibit USA -10 (BCI)  cover 2015 (as well as 2014). See United States' response to 
Arbitrator question No. 135.  
120 Mexico's written submission, para. 138.  
121 Mexico's comments on United States' response to Arbitrator question No. 135.  
122 See, for example, Exhibits USA -175, USA -38 (BCI)  and USA -41 (BCI) .  
123 United States' response to Arbitr ator question No. 135.  WT/DS381/ARB  
 
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  5  PROPOSED MODELS FOR ASSESSING  THE LEVEL OF NULLIFICATION OR IMP AIRMENT  
5.1.  In the preceding Section, we determined that the counterfactual on which we should base o ur 
calculation of the level of nullification or impairment is the withdrawal of the Tuna Measure. We 
have also explained that the time -frame for our analysis should be the 2014 calendar year. We 
now turn to the economic model that we should use to calculat e the export value Mexico would 
have enjoyed in the counterfactual situation, that is, had the Tuna Measure been withdrawn prior 
to the expiry of the RPT. Precisely because the model will influence our calculation of how much 
tuna Mexico would  have exporte d had the Tuna Measure been brought into compliance by the 
expiry of the RPT, our choice of economic model is crucial.  
5.2.  In this Section, we will review the economic model proposed by Mexico. We will then consider 
the model proposed by the United States. In doing so, we will first describe the models proposed 
by each party. We will then critically consider the reasonableness of the assumptions underlying 
those models, based on the evidence before us. Once we have discussed and analysed both 
models, we will de termine whether we are able to use either of these models as the basis for our 
calculations, or whether we need to develop an alternative model of our own to calculate the 
nullification or impairment caused by the 2013 Tuna Measure.  
5.1  Mexico's proposed model  for determining the level of nullification or impairment  
5.1.1   Description of Mexico's model  
5.3.  Mexico maintains that the annual level of nullification or impairment caused by the  2013 
Tuna Measure, measured by the estimated amount of export losses to Mexico, is U SD 472.3 
million.124 This amount results from calculations based on a calibrated partial equilibrium model of 
the US and Mexican canned tuna markets.125 In short, Mexico's model consists of a set of 
equations purporting to describe the market for canned tuna i n the United S tates and Mexico by 
defining (a ) the demand for canned tuna in the United Stat es and Mexico, respectively, (b ) the 
supply of canned tuna in the United States an d Mexico, respectively, and (c ) the market 
equilibrium conditions in the US and Me xican markets for canned tuna.126 
5.4.  Mexico's model separates the canned tuna products into two groups, namely, "generic tuna" 
and "yellowfin". "Generic tuna" is considered to be a composite category that covers all canned 
tuna currently offered for sale in the  US market. This includes mainly skipjack, with albacore and 
tongol also being commonly offered for sale. The model assumes that generic tuna is of lower 
quality than yellowfin.127 The model therefore also assumes that if canned generic tuna and 
canned yello wfin were offered at the same price, a large majority of consumers would purchase 
canned yellowfin rather than canned generic tuna.128 
5.5.  In Mexico's model, the demand for canned tuna in the US market  is derived by aggregating 
individual consumer demand for yel lowfin and generic tuna. In the model, consumer preferences 
are modelled using a choice model, which, in Mexico's view, is standard in economics.129 When 
parameterizing the demand for yellowfin and gener ic tuna, Mexico assumes that (a ) half of all US 
consume rs are willing to pay more than a USD 2/kg premium for yellowfin over generic tuna and 
half are willing to pay less ; (b) Mexican and US consumers have the same preferences; and  (c) the 
intensity of demand is the same for yellowfin and generic tuna (that is , at a given price, 
consumers buy the same total amount of canned tuna independently of whether they prefer 
yellowfin or generic tuna). Mexico contends that the demand for canned tuna is calibrated using a 
"conservative approach"130 under which it is assumed  that the mean willingness to pay for 
yellowfin is lower than the premium currently observed.131 
                                               
124 Mexico's methodology paper, para. 17.  
125 Mexico's methodology paper, para. 27.  
126 Mexico's methodology paper, paras. 20 -40; Exhibit MEX -02, pp. 4 -27. 
127 Mexico's methodology paper, para. 32.  
128 Mexico's methodology paper, para. 35.  
129 Mexico's methodology paper, para. 35.  
130 Mexico's methodology paper, para. 36.  
131 Mexico's methodology paper, para. 36.  WT/DS381/ARB  
 
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  5.6.  With regard to the supply of generic tuna, in its baseline model, Mexico assumes that world 
supply of generic tuna is infinitely elastic.132 As for Mexico's supply  of canned yellowfin, it is 
perfectly elastic up to a certain quantity and then becomes perfectly inelastic, reflecting that 
Mexico's capacity to can yellowfin tuna is fixed in the short -run. In this regard, Mexico notes that 
in 2014 Mexican canneries oper ated with a single day shift, and that Mexico's production could 
therefore be easily expanded using imported yellowfin tuna. In the model, the maximum supply of 
exports of canned yellowfin is determined by the total production in Mexico, that is, productio n 
from Mexican as well as imported yellowfin tuna.133 The model is solved assuming that Mexico 
would import yellowfin to produce canned tuna for domestic consumption in order to replace some 
of the canned yellowfin that would be exported to the United States .134 
5.7.  Mexico's model assumes that because transportation costs between Mexico and the United 
States are small, and because of preferences  under the North American Free Trade Agreement 
(NAFTA) , the withdrawal of the Tuna Measure would give Mexico a significant  advantage in its 
exports of canned yellowfin to the United States.135 Therefore, Mexico assumes that it would be 
the only exporter of yellowfin tuna to the United States.  
5.8.   Mexico's model yields a calculated total of USD 495 million worth of canned yellowfin  exports 
from Mexico to the United States in 2014. The value of actual exports of Mexican canned tuna to 
the United States in 2014 was USD 22.65 million. The model deducts the value of actual exports 
from the value of total exports, and finds nullification  or impairment in the amount of USD 472.3 
million per year.136 
5.9.  Table 12 of Exhibit MEX -02 contains a summary of the most salient results of Mexico's model. 
They are reproduced below:  
Solutions of Mexico's model  
  United States  Mexico  
Consumption of yellowf in tuna (metric tonnes)  63,568  21,932  
Consumption of generic tuna (metric tonnes)  230,746  51,199  
Price of yellowfin tuna ($/kg)  7.84 7.79 
Price of generic tuna including tariff and charge 
($/kg)  5 5.32 
Exports of yellowfin tuna (metric tonnes)  0 63,568  
Imports of yellowfin tuna (metric tonnes)  63,568  20,000  
Exports of generic tuna to the U.S. (metric tonnes)  0 0 
Imports of generic tuna from other countries (metric 
tonnes)  53,340  28,199  
Note: Mexico assumes that the United States produces 177,350 met ric tonnes of canned 
tuna as observed in 2014.  
Source: Exhibit MEX -02 
 
5.1.2   United States' arguments regarding Mexico's model  
5.10.  The United States presents two sets of arguments regarding Mexico's model, one 
concerning the choice of the model, the other concernin g the assumptions made under the model. 
Specifically, the United States contends that Mexico's election to use a partial equilibrium model is 
inappropriate because sufficient data do not exist to construct a correctly  specified model. Further, 
the United S tates contends that Mexico's model is based on certain incorrect assumptions 
concerning US consumer demand and the potential supply of canned yellowfin from Mexico, the 
United States, and other WTO Members.137 In this S ection, we describe the United States' 
                                               
132 Mexico's methodology paper, para. 33.  
133 Mexico's methodology paper, para. 39.  
134 Mexico's methodology paper, para. 42.  
135 Mexico's methodol ogy paper, para. 41. 
136 Mexico's methodology paper, para. 43.  
137 United States' written submission, para. 80.  WT/DS381/ARB  
 
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  arguments on Mexico's choice of the model. We discuss the United States' arguments regarding 
the assumptions under Me xico's model, in the following S ection.  
5.11.  With regard to the choice of the model, the United States contends that partial equilibrium 
models are often used to calculate the impact of a policy change by generating a picture of a 
defined market through a series of simplifying assumptions. The United States submits that where 
a partial equilibrium analysis is used to model the removal of a particu lar non -tariff barrier (NTB), 
the generally -accepted method is to calculate a tariff equivalent, or "price wedge", of the NTB and 
then model its removal.138 For the United States, these types of models produce meaningful 
results when they are set up to solve  for the issue at hand, using relevant variables that are based 
on actual data or reasonable assumptions, something that the United States says Mexico's model 
does not do.139 
5.12.  The United States argues that the generally  accepted way to use a partial equilibri um 
analysis would be to determine the value of the US dolphin -safe label and model the effect of its 
removal on the equilibrium price and quantity of Mexican tuna products sold to the United States. 
The United States submits, however, that determining the value of the dolphin -safe label would 
require detailed data on US purchases of tuna products with and without the dolphin -safe label, 
including store -by-store sales of tuna by type, i.e. albacore, yellowfin, and light tuna, accounting 
for product character istics such as pouched versus canned, water versus oil, and flavoured, and 
including information on the timing of sales and whether sales were made at promotional 
values.140 
5.13.  For the United States, it appears to be undisputed  that this level of data concernin g the US 
tuna product market is not available.141 The United States argues that Mexico's dataset does not 
include retail  level data that would allow a comparison between particular types of labelled and 
unlabelled tuna products, necessary to estimate the val ue of the dolphin -safe label, and that 
Mexico's dataset does not have data on sales and purchases of the same type of tuna products (by 
species, form, and pack, at least) sold with and without the dolphin -safe label or on whether tuna 
was sold at a promoti onal value. Mexico's dataset, in the United States' view, does not allow for 
any comparison of labelled and unlabelled tuna product, or even store -by-store analysis of the 
price difference between comparable yellowfin and non -yellowfin tuna products. The U nited States 
contends that all of these issues result in Mexico being unable to calculate the price wedge 
necessary for an accurate partial equilibrium model.142 
5.1.3   Arbitrator's analysis  of Mexico's  model  
5.14.  Mexico's model is based on many assumptions regarding th e state of the market for tuna 
products in the world, in the United States, and in Mexico. For purposes of our assessment, we 
find it useful to group them into three main assumptions, namely, first, that the Tuna Measure has 
restricted the supply of canned  yellowfin from Mexico to the US market; second, that US 
consumers have a preference for canned yellowfin and US retailers would sell Mexican canned 
yellowfin after the withdrawal of the Tuna Measure ; and third, that Mexican producers would 
supply all of t he increased consumption of canned yellowfin in the US143 market following the 
withdrawal of the Tuna Measure.  
5.15.  In this Section, we address these assumptions in turn. In our assessment of a given 
assumption, we first describe the assumption, then highlight th e United States' arguments with 
respect to that assumption, and present our assessment of the assumption. The assumptions 
underlying Mexico's model can be found in Exhibit MEX -02. 
5.16.  With respect to the legal standard governing our assessment of the assumptio ns underlying 
Mexico's model, we note, and agree with, the statement of the arbitrator in US – Gambling  that if 
the estimation of the level of nullification or impairment requires certain assumptions to be made, 
                                               
138 United States' written submission, para. 83.  
139 United States' written submission, para. 81.  
140 United States' written submission, para. 84.  
141 United States' written submission, para. 85.  
142 United States' written submission, para. 85.  
143 The first and second assumptions, taken together, imply that when the Tuna Measure is withdrawn, 
there will be increased consumption of canned yellowfin in the US mark et. WT/DS381/ARB  
 
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  "such assumptions should be reasonable, taki ng into account the circumstances of the dispute".144 
We also find relevant the finding made in several arbitration proceedings that assumptions should 
be based on "credible, factual, and verifiable information".145 We will therefore be guided by these 
princip les in our assessment of the assumptions on which Mexico's model is based.  
5.1.3.1   The Tuna Measure has restricted the supply of canned yellowfin from Mexico 
into the US market  
5.17.  The first assumption underlying Mexico's model is that the Tuna Measure has restricted the 
supply of canned yellowfin from Mexico to the United States. Mexico acknowledges that there is 
currently some consumption of canned yellowfin in the US market.146 It contends, however, that 
such consumption is insignificant, and that Mexican exports of y ellowfin to the US market may be 
considered as de minimis .147 In Mexico's view, the Tuna Measure has caused a decline in the 
supply of canned yellowfin to the United States because the Measure excludes supply from an 
important region located close to the Uni ted States.148 
5.18.  The United States disagrees with Mexico, and contends that the Tuna Measure does not stop 
Mexican canned tuna from entering the US market. For the United States, the Tuna Measure "is 
neither a de facto  nor a de jure  prohibition on the sale of canned yellowfin in the United States".149 
In support of this assertion, the United States notes that dolphin -safe canned yellowfin is sold in 
the US market, but in relatively small quantities, because demand for yellowfin is weak.150 
Consequently, the United States argues that withdrawing the measure would not alter the supply 
of canned yellowfin. The United States also contends that the evidence on the record points to a 
lack of demand, not of supply, as the reason for the currently low levels of canned yello wfin 
consumption in the United States.151 
5.19.  The Arbitrator notes that the record shows, and both parties agree, that the current level of 
canned yellowfin  consumption  in the US market is low.152 The evidence on the record shows that 
"yellowfin products… make up only [[  xxx ]]% of volume sales"153, and canned yellowfin made up 
1.2% of all reported sales by weight and 1.5% by value, during the period from October 2014 to 
October 2015.154 The parties disagree, however, as to the reasons for this low level of 
consumption . In particular, they disagree on whether the Tuna Measure might have  resulted in  a 
decline in consumption.  
5.20.  In support of its argument that the Tuna Measure restricted the supply of canned yellowfin 
from Mexico to the United States, Mexico refers to the de cline in the volume of Mexican exports of 
canned yellowfin into the United States, and the increase in the price of that product in the US 
market, following the adoption of the Tuna Measure in 1990. With regard to import volumes, the 
parties agree that imp ort volumes have declined since the adoption of the Tuna Measure. 
However, they, disagree on the reasons for this decrease. With regard to the evolution of prices in 
the US market, the parties disagree significantly on how prices behaved after the introduc tion of 
the Tuna Measure, and in particular as to whether they increased.  
5.21.  In reviewing the assumption that the Tuna Measure has restricted the supply of canned 
yellowfin from Mexico into the US market, we will evaluate these two aspects in turn. In our vie w, 
a decline in the volume of US yellowfin imports, and an increase in their price, would tend to 
support the proposition that the Tuna Measure has had a restrictive effect on US imports of canned 
yellowfin from Mexico. With this in mind, we now turn to ou r assessment of the evolution of the 
                                               
144 Decision by the Arbitrator, US – Gambling  (Article 22.6 – US), para. 3.30.  
145 Decision by the Arbitrators, US – COOL (Article 22.6 – US), para. 4.5; US – 1916 Act (EC) 
(Article  22.6 – US), para. 5.54; see also Decision by the Arbitrators, EC – Hormone s (US)  (Article 22.6 – EC), 
para. 41.  
146 Mexico's written submission, para. 173 (referring to Exhibit USA -17). 
147 Mexico's response to Arbitrator question No. 87.  
148 Mexico's response to Arbitrator question No. 72.  
149 United States' opening statement at the me eting of the Arbitrator, para. 10.  
150 United States' response to Arbitrator question No. 65.  
151 United States' opening statement at the meeting of the Arbitrator, para. 12.  
152 Mexico's written submission, para. 173 (referring to Exhibit USA -17); United States ' written 
submission, para. 23 (referring to referring to Exhibits USA -10 (BCI) USA -17). 
153 Exhibit USA -10 (BCI).  
154 Exhibits MEX -15 and USA -17. WT/DS381/ARB  
 
- 40 - 
 
  volume of exports from Mexico to the United States and the price of canned yellowfin in the US 
market following the adoption of the original Tuna Measure.  
5.1.3.1.1   Evolution of the volume of canned yellowfin  exports  from Mexico to the United 
States  
5.22.  At the outset, we note that both parties agree that there has been a pronounced decrease in 
the volume of canned yellowfin into the United States from the late 1980s. The parties disagree, 
however, as to the reasons that caused that de crease.155 
5.23.  We note that, according to the data presented in Exhibit USA -79, the average volume of 
tuna product exports from Mexico to the United States for the period 1975 -1980 was 9,664,954 
kg; and in the period 1986 -1989, the volume was 9,646,266 kg. There  were no imports in the 
period 1981 -1985, presumably because of a US embargo on tuna products from Mexico. Following 
the adoption of the original Tuna Measure, the volume of exports from Mexico fell from 13,060,153 
kg in 1989 to 2,781,159 kg in 1990. The v olume of exports has never again reached pre -1990 
levels. The average volume of Mexico's exports in the period 1990 -2014 was 3,469,210 kg.  
5.24.  We are aware that these data pertain to tuna products in general156, and not only to canned 
yellowfin. We note, however , that, as indicated in a United States International Trade Commission  
(USITC) report presented as Exhibit MEX -119, Mexico's tuna harvest prior to the adoption of the 
Tuna Measure was predominantly composed of yellowfin.157 We therefore find the data present ed 
in Exhibit USA -79 to be relevant to our assessment.  
5.25.  Additionally, we note that (a) in the late 1980s, Mexico's exports to the United States were 
mainly fresh yellowfin, whereas the Mexican industry subsequently underwent an important 
transformation such  that it is now vertically integrated and able to export canned tuna products; 
(b) the Mexican industry has essentially abandoned the fresh tuna market158; and (c) the Mexican 
tuna production industry cans most of the yellowfin harvested by Mexican fishing v essels. As a 
result of these factors, the nature of the product exported from Mexico to the United States has 
changed significantly since the adoption of the Tuna Measure, from fresh to canned tuna. In other 
words, prior to the adoption of the Tuna Measure , Mexico primarily exported fresh rather than 
canned tuna. We recall that the question before us at this stage of our analysis is whether the 
Tuna Measure had the effect of restricting exports of canned tuna to the United States. However, 
in our assessment , we focus on the evolution of the volume of fresh and frozen yellowfin  exports  
from Mexico to the United States following the adoption of the Tuna Measure, and not on the 
volume of canned yellowfin  exports . This is so because we do not have data on the vo lume of 
canned yellowfin  exports  from Mexico to the United States in this period. Accordingly, and to the 
extent possible, we use the evolution of the volume of exported fresh and frozen Mexican tuna as 
a proxy for the evolution of the volume of exported c anned Mexican tuna.  
5.26.  We also note that, in parallel with the decreasing trend observed in the volume of  tuna 
exports from Mexico to the United States following the introduction of the original Tuna Measure, 
the volume of yellowfin purchases by US canneries also declined. We note that the United States 
recognizes that US canneries' receipts for yellowfin tuna have declined "dramatically" since the late 
1980s.159 The United States provides the following graphs (where "YF" indicates yellowfin), which 
illustrate t his decline:  
                                               
155 Mexico's response to Arbitrator question No. 158; Mexico's comments on United States' response to 
Arbitrator qu estion No. 158; United States' response to Arbitrator question No. 158; United States' comments 
on Mexico's response to Arbitrator question No. 158.  
156 Fresh, frozen, prepared and canned. Exhibit USA -79. 
157 The USITC report states that "[y]ellowfin was the l eading species of tuna caught by the Mexican tuna 
fleet in 1989, accounting for about 79 per cent of the catch that year." Exhibit MEX -119, p. 5 -20. We also note 
that the NMFS import data presented by Mexico, in Exhibit MEX -80, shows that the share of yell owfin in 
Mexico's overall exports of fresh tuna to the United States in the period 1986 -1989 was 81% in volume 
(31,341,390 kg out of a total of 38,585,064 kg).  
158 Mexico's written submission, para. 148.  
159 United States' response to Arbitrator question No. 5 1. WT/DS381/ARB  
 
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    Source: Exhibit USA -96. 
 
5.27.  These graphs, together with Exhibit USA -96160, show that US canneries' purchases of 
imported yellowfin declined from an average of 71,595 short tons (st) in the period 1985 -1989 to 
43,723 st in the period 1990 -1994, representing a decrease of 38.9%. Similarly, US canneries' 
purchases of domestic yellowfin declined from an average of 127,729 st in the period 1985 -1989 
to 55,981 st in the period 1990 -1994, representing a decrease of 56.17%. We note that this 
decline  in US canneries' receipts started in 1990, coinciding with the adoption of the original Tuna 
Measure, and continued to decline throughout the period 1990 -2014.  
5.28.  There is thus an important correlation between the adoption of the original Tuna Measure, 
on th e one hand, and the decline in volume of yellowfin purchases by US canneries and exports of 
tuna from Mexico, on the other hand . Having identified a decline in the volume of exports of tuna 
from Mexico to the United States and a parallel decline in the US canneries' receipts of yellowfin, 
we now turn to the parties' diverging arguments regarding the reasons for this decline.  
5.29.  The United States maintains that, in addition to the above -mentioned trends, consumption 
of canned yellowfin was also declining in the  same period. According to the United States, this 
decline in consumption of canned yellowfin in the US market shows that the decline in exports 
from Mexico and US cannery purchases of yellowfin was due to limited demand rather than limited 
supply. Additio nally, the United States notes that the decline in Mexican exports and US cannery 
purchases of yellowfin did not occur suddenly, as it would have had there been a severe supply 
restriction , but over a period of decades.161 The United States submits that rather than stemming 
from limitations in supply, the decreased exports and cannery purchases can be attributed to 
declining consumer demand as well as the decision by the "big three" US tuna companies not to 
process tuna caught by setting on dolphins.162 Additio nally, the United States claims that the 
                                               
160 This exhibit contains data on US cannery purchases of yellowfin, in short tons, for the period 1980 to 
2015.  
161 United States' response to Arbitrator question No. 51.  
162 United States' response to Arbitrator question No. 158.  WT/DS381/ARB  
 
- 42 - 
 
  decline in US cannery purchases of yellowfin in the early 1990s was due not to consumers 
substituting consumption of canned yellowfin for fresh yellowfin, but rather to developments in US 
consumer preferences and ot her factors, including (a) growing consumer preference in the late 
1980s and early 1990s (and continuing today) for tuna not caught by setting on dolphins; (b) 
growing consumer preference for albacore as a premium product; (c) consumer preference for the 
cheapest canned tuna; and, (d) health considerations.163  
5.30.  Mexico, for its part, argues that it is well established that the US tuna fishing fleet moved 
away from the ETP to the Western and Central Pacific in the late 1980s and early 1990s, and that 
this led t o the creation and growth of cannery operations in American Samoa. Mexico also 
contends that the price of yellowfin rose following the imposition of the tuna measure, and that 
this price increase made yellowfin uneconomical for use by US canneries for cann ing.164 Thus, in 
Mexico's view, the decline in cannery purchases of yellowfin does not reflect a shift in US consumer 
preference away from yellowfin towards albacore or skipjack. Rather, it reflects a shift in readily 
available supplies from ETP -caught yello wfin to WCPO -caught skipjack and the increasing cost of 
canned yellowfin.165 
5.31.  In the Arbitrator's view, the reasons for the decline in the volume of the United States' 
imports from Mexico and canneries' purchases of yellowfin are not fully clear. While the da ta and 
graphs discussed above clearly  show that there was a decline in the volume of United States' 
imports from Mexico and US canneries' purchases of yellowfin following the adoption of the original 
Tuna Measure, there is also evidence suggesting that par t of that decline may have been due to 
the dolphin -safe policies adopted by US tuna canning companies, rather than to the Tuna Measure 
itself. For example, a 1992 USICT report states that "the US canners, led by StarKist, announced 
in April 1990 that they would no longer buy tuna from domestic or foreign suppliers who refused to 
certify that the tuna was 'dolphin -safe'".166 Nevertheless, in our view, the sharpness of the decline 
in both imports of tuna from Mexico and purchases of yellowfin by US canneries fo llowing the 
adoption of the Tuna Measure in 1990 suggests that the adoption of the Tuna Measure was the 
main reason for the declining trend. This sharpness is very clear with respect to the United States' 
imports of tuna from Mexico. With regard to the US cannery purchases of yellowfin, we note that 
there was a decline from 1987 to 1988, prior to the adoption of the Tuna Measure, that this was 
followed by an increase from 1988 to 1989, and that the decline that started in 1990 has not 
changed course in any significant way.  
5.32.  Further, we are not persuaded by the United States' interpretation of this declining trend as 
being the result of a sharp change in consumer preferences, particularly given that the most 
substantial part of the decline came on the heels of  the adoption of the Tuna Measure. We do not 
find plausible the argument that such a sudden and sharp decline in imports can be explained by 
an equally sudden and sharp change in consumer preferences. In our view, it is unusual to observe 
consumer preferen ces undergoing an important discrete change, as suggested by the United 
States. Although we do not rule out that this might be possible, in our view the United States has 
not submitted evidence sufficient to establish the existence of such a change in this  case.  
5.33.  We therefore conclude that, following the adoption of the original Tuna Measure, there was 
an important decline in the volume of US imports of yellowfin tuna from Mexico and purchases of 
yellowfin by US canneries.  The Arbitrator now turns to consid er the evidence relating to the price 
of yellowfin on the US market following the adoption of the Tuna Measure.  
5.1.3.1.2   Evolution of yellowfin prices in the US market  
5.34.  The Arbitrator begins by noting the parties' agreement that if the Tuna Measure reduced the 
suppl y of canned yellowfin in the United States, the price in the US retail market for such products 
would be expected to increase.167 Unfortunately, there is no evidence on the record on historical 
prices of canned yellowfin in  the US market and, consequently,  we have to rely on the evidence 
presented by  the parties on import prices for fresh or frozen yellowfin to assess the possible 
                                               
163 United States' response t o Arbitrator question No. 158.  
164 Mexico's response to Arbitrator question No. 158.  
165 Mexico's comment on the United States response to Arbitrator question No. 158.  
166 Exhibit MEX -73, p. 3 -10. 
167 Mexico's response to Arbitrator questions No. 17 and 72; United  States' opening statement at the 
meeting of the Arbitrator, para. 17. WT/DS381/ARB  
 
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  effects that the Tuna Measure might have had on retail prices of canned yellowfin . In this regard, 
Mexico asserts that it is "near ly impossible to find a time series data for yellowfin tuna"168, and 
notes that it did not find price data for "canned yellowfin tuna at retail or wholesale"169. Mexico 
argues that the only source for price data regarding the United States concerns frozen tuna .170 
5.35.  Before proceeding to our analysis of the price data on the record, we note Mexico's 
reference to Exhibit USA -10 (BCI) in support of its argument that the Tuna Measure restricted the 
supply of canned yellowfin from Mexico to the United States. Mexico con tends that this Exhibit 
shows that  the price of canned yellowfin in the US market is high because raw yellowfin is 
expensive, and that it is due to these high prices that consumption is low.171 The United States 
disagrees with Mexico's interpretation of Exhi bit USA -10 (BCI) and argues that the excerp t cited by 
Mexico explains that  yellowfin generally sells at [[ xxx ]].172 For the United States, Exhibit USA -10 
(BCI) confirms that the main driver for the limited consumption of yellowfin in the United States is 
[[ xxx ]].173 
5.36.  We note that Exhibit USA -10 (BCI ) contains a market review for yellowf in products prepared 
by a US tuna canning company. It mentions that growth of yellowfin products in the US shelf 
stable seafood segment has been [[ xxx174, ]] and states that th ese types of products are [[ xxx 
]].175 Additionally, we note that the Exhibit states that [[ xxx ]].176 In our view, when the relevant 
parts of the Exhibit are taken as a whole, it is reasonable to conclude that the market review 
suggests that the cost associ ated with  the production of yellowfin products is [[ xxx ]] and that 
this can in turn be explained by [[ xxx ]]. 
5.37.  Therefore, in our view, although Exhibit USA -10 (BCI) seems to lend some support to 
Mexico's argument, we do not interpret it to show that the Tuna Measure restricted the supply of 
canned yellowfin from Mexico to the United States. This is mainly because  Exhibit USA -10 (BCI) is 
not concerned with the impact of the Tuna Measure on the supply of canned yellowfin from Mexico, 
but rather with providi ng a description of the trends in the US canned tuna market. Further, we 
note that this market review does not cover the period when the original Tuna Measure was 
adopted, and therefore provides no information as to how the market for tuna products reacted  to 
the adoption of that Measure. We therefore turn to the rest of the evidence on the record 
regarding prices in order to assess the impact that the Tuna Measure may have had on the 
evolution of yellowfin prices in the US market.  
5.38.  At the outset, we observe  that the parties have presented arguments on how the impact of 
the Tuna Measure, in particular on prices, might be different depending on the level of the market 
that is analysed , e.g. harvesting, canning, or wholesaling of tuna products, and depending on  the 
type of the particular tuna product under review, e.g. frozen, fresh, or canned tuna. In this 
connection, we note that Mexico maintains that when assessing prices for yellowfin tuna and the 
effect of the Tuna Measure, it is important to understand at what stage of the supply chain the 
prices are measured. According to Mexico, the immediate effect of the Tuna Measure can be 
described as a shift to the left of the supply curve for canned yellowfin to the United States, 
because the Tuna Measure "effective ly banned"177 tuna harvested from an important source of 
inexpensive yellowfin. For Mexico, the loss of an inexpensive source of yellowfin resulted in an 
increase in the cost of supply of canned yellowfin to the US market. A second effect of the Tuna 
Measure , according to Mexico, is a decrease in the demand for frozen yellowfin from the ETP 
because that tuna is "no longer welcome on the US market, the largest market in the world for 
canned tuna".178 This is so because, as a consequence of the Tuna Measure, the US tuna fishing 
                                               
168 Mexico's response to Arbitrator question No. 72.  
169 Mexico's response to Arbitrator question No. 72.  
170 Mexico's response to Arbitrator question No. 72.  
171 Mexico contends that Exhibit U SA-10 (BCI) explains that consumption of yellowfin is limited by the 
higher cost of yellowfin and that US tuna producer [[ xxx ]] stated that:  [[ xxx ]]. Mexico submits that 
[[ xxx ]] also stated that [[ xxx ]]. Mexico's written submission, paras. 125 -126. 
172 United States' response to Arbitrator question No. 130.  
173 United States' response to Arbitrator question No. 130.  
174 Exhibit USA -10 (BCI) p. 3.  
175 Exhibit USA -10 (BCI) p. 4. [[ xxx ]]. 
176 Exhibit USA -10 (BCI) p. 10.  
177 Mexico's response to Arbitrator questi on No. 72.  
178 Mexico's response to Arbitrator question No. 72.  WT/DS381/ARB  
 
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  fleet moved out of the ETP region and US canneries stopped accepting tuna of ETP origin.179 To 
show how the impact of the adoption of the Tuna Measure might differ depending on the 
production stage, Mexico refers to a 1992 Report of the USITC  that shows that prices of frozen 
tuna in the US market fell between 1990 and 1992180 although, in Mexico's view, the prices of 
canned yellowfin went up in the same period.181 
5.39.  We note that Exhibits MEX -79 and MEX -104 contain price data relevant to our analysis . 
Exhibit MEX -79 contains a graph showing the price of US imported tuna from 1980 to 2014. 
Mexico explains that this Exhibit illustrates US import prices for fresh and frozen tuna, and argues 
that it shows that the price of frozen yellowfin significantly d iffered from the price of skipjack and 
albacore as of the beginning of the 1990s.182 Exhibit MEX -104 contains data on the price of tuna 
landings183 for several species, including yellowfin, from 1980 to 2014. In Mexico's view, like 
Exhibit MEX -79, Exhibit MEX -104 provides price information on fresh and frozen yellowfin landings 
in the United States between 1980 and 2014. In Mexico's view, the data in Exhibit MEX -104 shows 
that the price of yellowfin was higher than that of other tuna species, including albacore  and 
skipjack, in the years immediately before and after the introduction of the Tuna Measure, and that 
the price of yellowfin started deviating from the prices of albacore and skipjack after the 
introduction of the Tuna Measure.184 In Mexico's view, this in dicates that, following the 
introduction of the Tuna Measure, yellowfin became relatively more expensive than skipjack or 
albacore.  
5.40.  The United States does not consider  that Exhibits MEX -79 and MEX -104 support Mexico's 
position. Importantly, the United Sta tes draws a distinction between the price for fresh and frozen 
yellowfin, on the one hand, and the price of cannery -grade yellowfin185, on the other hand, and 
contends that the price of the former is not a good proxy for the latter.186 With respect to Exhibit 
MEX-79, the United States notes that the last major cannery that bought yellowfin to can in the 
United States was closed in 2001.187 The United States argues that, as from 2001, US canneries 
only processed tuna loins, as opposed to whole fish, to produce can ned tuna. Therefore, in the 
view of the United States, after this period there is no relationship between the price of fresh and 
frozen yellowfin and the price of cannery -grade yellowfin.  
5.41.  The United States also disagrees with Mexico about the relevance to our inquiry of the price 
data presented in Exhibit MEX -79. With regard to the data for the period prior to 2001, the United 
States contends that the price data presented in this Exhibit do not pertain exclusively to cannery -
grade yellowfin, and therefore o verstates the prices of cannery grade yellowfin.188 As for the price 
data after 2001, the United States underlines the fact that such data bears no relationship to the 
raw material (loins, not the entire yellowfin tuna) that US canneries use to produce canne d 
yellowfin. Consequently, the United States argues that the prices reported in Figure 1 of Exhibit 
MEX-79 reflect the changing composition of US yellowfin imports, and not an increase in the price 
of cannery -grade yellowfin.189 The United States submits tha t the data in Exhibit MEX -104 is 
similarly unhelpful to the Arbitrator's analysis.190 
5.42.  As noted above, Exhibit MEX -79 presents a graph illustrating fresh and frozen yellowfin 
prices , presented in Exhibit MEX -80. The same graph has been presented by Mexico in a way that 
shows the annual trends in prices, as follows:191 
                                               
179 Mexico's response to Arbitrator question No. 72.  
180 Mexico's response to Arbitrator question No. 72 (referring to Exhibit MEX -73). 
181 Mexico's response to Arbitrator question No. 72 (referring t o Exhibit MEX -74). 
182 Mexico's response to Arbitrator question No. 153.  
183 We understand "fish landings" to indicate the volume and value of fish landed and sold at the dock, 
usually in pounds (or other weight measurement) and ex -vessel dollar value of fish caught and sold. See 
http://www.st.nmfs.noaa.gov/commercial -fisheries/commercial -landings/landings -background/index  (last 
accessed on 13 February  2017).  
184 Mexico's response to Arbitrator question No. 153.  
185 We understand "cannery -grade yellowfin" to be the particular yellowfin tuna or tuna product that is 
used to produce canned yellowfin.  
186 United States' response to Arbitrator question No. 153.  
187 United States' response to Arbitrator question No. 153 (referring to Exhibit USA -192).  
188 United States' comments on Mexico's response to Arbitrator question No. 158.  
189 United States' response to Arbitrator question No. 153.  
190 United States' comments on Mex ico's response to Arbitrator question No. 153.  
191 Mexico's response to Arbitrator question No. 153.  WT/DS381/ARB  
 
- 45 - 
 
  
 
* Data for 2016 covers period until August.  
Source: Exhibits MEX -79 and 80.  
 
5.43.  In our view, the relevant period to assess the effects that the Tuna Measure might have ha d 
on the prices of yellowfin  is the years following its introduction in 1990. The graph shows that 
prices for fresh and frozen yellowfin remained more or less stable from 1980 to 1990 and 
increased in the early 1990s, especially when compared with the stable trends in the prices of 
albacore and skipjack. We note, however, that after the adoption of the Tuna Measure, the prices 
did not increase particularly quickly, and that the above graph does not show a significant spike in 
prices immediately after the introduction of the Tuna Measu re. 
5.44.  We further note that, as Mexico also acknowledges192, from 1990 to 1992 prices of fresh 
and frozen yellowfin  decreased before starting to increase again. The United States argues that 
this trend contradicts Mexico's assertion that cannery -grade yellowfin  prices increased in the US 
market after the adoption of the Tuna Measure.193 Mexico, however,  argues that the Tuna Measure 
decreased demand for frozen yellowfin from the ETP , thereby causing a decrease in its price.194 
5.45.  In our view, the decline in the prices  of fresh and frozen yellowfin  from 1990 to 1992  does 
not necessarily undermine  Mexico's  argument that the  Tuna Measure  had a restrictive effect.195 
Simply put, this  observed decline might reflect short -term price adjustments  following the 
adoption of the Tuna Measure.  This is explained by the fact that , since US canneries were  no 
longer  buying frozen yellowfin of ETP origin, the demand for frozen yellowfin went down, so did its 
price. Indeed, the 1992 USITC report also indicates that, around the time of the ad option of the 
Tuna Measure, US canneries substituted large yellowfin of ETP origin with small yellowfin and 
skipjack , and that "[t]he supply of [large] yellowfin declined, but demand declined even more; 
thus, the price dropped by 18 percent immediately aft er the dolphin -safe announcement in April 
1990".196 Such decline in the demand for and price of large yellowfin of ETP origin  may thus well 
have disrupted the link between the evolution of the price of frozen yellowfin from the ETP and the 
price of canned ye llowfin in the US market , at least temporarily . Furthermore, we note that the 
decline from 1990 to 1992 was followed by a steady increase in the following decade. In our view, 
it is reasonable to assume that i t took some  time for large yellowfin (that  could no longer be sold 
to the United States ) to find other b uyers. This may account for the price decline observed 
between 1990 -1992.  
5.46.  Turning now to the United States' argument that the price data contained in Exhibit MEX -79 
relates to fresh and frozen tuna r ather than cannery -grade tuna, we note that this argument 
differentiates between two periods, i.e. before and after 2001. As far as the period before 2001 is 
concerned, we understand the United States to contend that the prices presented in this Exhibit do  
                                               
192 Mexico's response to Arbitrator question No. 72 (referring to Exhibit MEX -73). 
193 United States' comment on Mexico's response to Arbitrator question No. 153 . 
194 Mexico's response to Arbitrator question No. 72.  
195 Mexico's response to Arbitrator question No. 72 (referring to Exhibit MEX -74). 
196 Exhibit MEX -73, p. 2 -10. WT/DS381/ARB  
 
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  not pertain exclusively to cannery -grade yellowfin. However, we understand that the raw material 
for producing canned tuna is typically frozen tuna, and thus there is a relationship between frozen 
and cannery -grade yellowfin.197 Indeed, the United States se ems to agree with the proposition that 
that there is a connection between frozen and cannery grade  tuna198, and has acknowledged that 
"[p]rior to 2000, there is some relationship"199 between the prices of cannery -grade yellowfin and 
frozen yellowfin. Moreover,  our understanding is that the prices presented in Exhibit MEX -79 cover 
all yellowfin, including cannery -grade. The United States has not argued that the product scope of 
this Exhibit for the years before 2001 excludes  cannery -grade yellowfin. Therefore, w e find the 
prices presented in this Exhibit for the period prior to 2001 to be relevant to our inquiry.  
5.47.  As for the period from 2001, the United States argues that in this period US canneries 
exclusively used loins, as opposed to whole fish, to produce can ned tuna products, and that 
therefore the prices in Exhibit MEX -79, which pertain to whole fish, bear no relationship to the 
prices of the tuna used by canneries. In our view, the evolution of prices in the 2000s is not 
relevant for our inquiry, as it is t oo far away from the date of adoption of the Tuna Measure. 
Accordingly, we need not determine whether the price data from this period related to whole fish 
rather than loins.  
5.48.  Turning to the other Exhibit presented by Mexico containing price data relevant t o our 
analysis , Exhibit MEX -104, we note that it presents  data on the prices of fresh and frozen yellowfin 
landings on an annual basis. Mexico presented this data in a graph, which we reproduce below :200 
 
5.49.  This graph shows that, similar to the trends observe d in Exhibit MEX -79, yellowfin tuna  
landing  prices increased in the years after the adoption of the Tuna Measure, continuing a trend 
that began a few years earlier. Furthermore, and importantly, this graph shows that the prices of 
yellowfin landings starte d deviating from those for albacore and skipjack at around the time of the 
adoption of the Tuna Measure. Specifically, the price of yellowfin increased while the price of 
albacore and especially skipjack decreased. Thus, after the introduction of the Tuna Measure, 
there was an increase in the relative price of yellowfin tuna as compared to the prices of albacore 
and skipjack.  This suggests to us that the relative competitiveness of yellowfin was negatively 
affected by the Tuna Measure, as it became relative ly more expensi ve than skipjack or albacore. 
As a result, canneries would have faced increased costs in the canning of yellowfin  and this might, 
in turn, have created the incentives for canneries to substitute yellowfin for less -expensive 
skipjack or albac ore tuna .  
                                               
197 Mexico's response to Arbitrator question No. 153.  
198 The United States argues that "…the fatal  flaw in the exhibit is that, from 2000 onwards, it depicts 
exclusively imports of fresh and frozen yellowfin for direct consumption" and that "[c]onsequently, since 2000, 
the data in the exhibit refer entirely to imports of sashimi grade fresh and frozen yellowfin for the direct 
consumption market". United States' comments on Mexico's response to Arbitrator question No. 153.  
199 United States' comments on Mexico's response to Arbitrator question No. 158.  
200 Mexico's response to Arbitrator question No. 153.  WT/DS381/ARB  
 
- 47 - 
 
  5.50.  The United States contends that the prices of frozen yellowfin remained stable between the 
early- and mid -1990s following the adoption of the Tuna Measure. In this connection, it has 
presented evidence, in Exhibit USA -205, which, in its view, co ntradicts the price evidence 
submitted  by Mexico. Exhibit USA -205 contains the following graph:  
 
Source: Exhibit USA -205, reporting data from US Census Bureau.  
5.51.  At the outset, we note that this graph shows only the prices of frozen yellowfin, whereas the 
evidence presented by Mexico covers the prices of both fresh and frozen yellowfin. We also note 
that although, as the United States argues, this graph shows that the prices of frozen yellowfin 
remained stable until the mid -1990s, it also shows that such pri ces increased significantly 
thereafter. In this connection, we recall Mexico's argument that, to the extent that no increase was 
observed in yellowfin prices in the US market following the adoption of the Tuna Measure, this 
could be explained by the fact t hat the US canneries started importing lower quality yellowfin.201 
Support for this argument is found in the USITC report cited in paragraph s 5.24 and 5.31 above , 
which states:  
[T]he shift by some foreign and most U.S. fishermen from the large -yellowfin fishery 
to the fisheries for skipjack and small yellowfin entails an effective decline in average 
unit value received by the fishermen, even if  canner -contracted prices by fish catego ry 
do not change. That is, small tuna of any one species receive a lower price from the 
canner than do large tuna of the  same species because the processing costs for the 
former exceed those for the latter.202 
5.52.  As pointed out above, we are of  the view that th e decline from 1990 to 1992 does not 
change the fact that prices followed a generally increasing trend as from 1990. The fact that frozen 
yellowfin prices did not go up following the adoption of the Tuna Measure may in our view be 
explained by short -term p rice adjustments. The excerpt from the USITC report shows that , in that 
period, US canneries started substituting l arge yellowfin with skipjack and small yellowfin . In our 
view, the price increase that  could have been expected  for frozen  yellowfin was coun terbalanced 
by this fact.  We also find it reasonable to consider that , as the demand for cheaper small yellowfin 
increased, eventually the price of frozen yellowfin also started increasing, as shown by the graph 
provided by the United States.  
5.53.  To sum up, we note that both the data presented by Mexico on the price of fresh and frozen 
yellowfin and the data presented by the United States on the price of frozen yellowfin show a 
generally increasing trend  in the price of fresh and frozen yellowfin in the years a fter the 
introduc tion of the Tuna Measure. Such trend is apparent in Mexico's data since 1992, after a price 
decrease between 1990 and 1992, and in the United States' data  since 1994, after a stable pattern 
between 1990 and 1994.  Considering the data submi tted by Mexico and the United States 
together, we note that they are consistent in showing a trend of non -decreasing yellowfin prices 
from 1994 onwards.  The fact that th e price of frozen yellowfin may not have increased 
immediately after the adoption of th e Tuna Measure in 1990 can be explained by short -term price 
adjustments , as mentioned above . The trend of non -decreasing yellowfin prices from 1994 
onwards  is in our view consistent with the notion that the Tuna Measure restricted the supply of 
Mexican yel lowfin in the US market.  
                                               
201 Mexico's comment on the United States' response to Arbitrator question No. 153.  
202 Exhibit MEX -73, p. 3 -18. WT/DS381/ARB  
 
- 48 - 
 
  5.1.3.1.3   Conclusion  
5.54.  We have found that, following the adoption of the Tuna Measure, the volume of  tuna 
exports from Mexico to the United States and US cannery purchases of yellowfin declined. This is 
consistent with the view that the Tuna M easure had a restrictive effect on the supply of Mexican 
yellowfin into the United States. Moreover, prices in the US market for fresh or frozen yellowfin 
increased, or at the very least remained stable, in the years immediately after the introduction of 
the Tuna Measure. This too is consistent with the view that the Tuna Measure had a restrictive 
effect. We therefore conclude that the assumption that the Tuna Measure restricted the supply of 
canned yellowfin from Mexico to the United States is reasonable. However, we do not consider that 
the Tuna Measure is tantamount to an import ban, as Mexico has suggested.203 
5.1.3.2   US Consumers have a preference for canned yellowfin and US retailers would 
sell Mexican canned yellowfin after the withdrawal of the Tuna Measure  
5.55.  The second assumption underlying Mexico's model is that US consumers have a preference 
for canned yellowfin , and that US retailers would sell Mexican canned yellowfin after the 
withdrawal of the Tuna Measure. Mexico maintains that, following the withdrawal o f the Tuna 
Measure, Mexican producers would be able to inform US consumers about the real nature of their 
fishing methods. As a result of this, the misconception about setting on dolphins would be 
corrected and the US consumers' real preferences for yellow fin would be revealed to the market. 
In this situation, canned yellowfin produced from tuna caught by setting on dolphins would be 
supplied in the market as a product like ca nned yellowfin caught by other methods. Given this 
additional supply, the price of  canned yellowfin would fall and its consumption in the US market 
would increase.  
5.56.  The second assumption is based on two main arguments , one concerning consumer 
preferences, the other concerning US retailers' willingness to sell Mexican canned yellowfin.  The 
Arbitrator examines each of these in turn.  
5.1.3.2.1   US consumers' preferences  
5.57.  With regard to the first argument  concerning consumer preferences, we  begin by noting  
that the parties disagree on certain issues. One point of  disagreement  pertains to the fishing 
method by which tuna is caught. In this regard, we note that Mexico argues, and the United States 
agrees, that if the Tuna Measure were withdrawn, Mexican producers would be able to use a label 
containing  the words "dolphin -safe". Indeed, the United States sub mits that Mexican tuna products 
produced consistently with the rules  of the Agreement on the International Dolphin Conservation 
Program (AIDCP)  would likely be able to be marketed as "AIDCP -certified dolphin -safe" or 
similar.204 However, t he United States al so notes that if the Tuna Measure were withdrawn, it 
would be  reasonable to expect that producers and retailers of tuna products not produced from 
setting on dolphins would seek to differentiate their products from tuna products produced from 
setting on do lphins,  including  by marketing their products in ways that Mexican producers could 
not.205 
5.58.  Mexico claims that US consumers  would  distinguish between tuna products made from 
unregulated and regulated setting on dolphins.206 In this connection, Mexico argues  that the Tuna 
Measure does not correctly inform US consumers about the impact on dolphins of fishing 
techniques used in the production of  tuna products that are currently allowed to carry the dolphin -
safe label. Following the withdrawal of the Tuna Measure, M exican producers would be able to use 
an "AIDCP -certified dolphin -safe" or "AIDCP -compliant setting on dolphins" label on their products, 
and "market misconceptions regarding unregulated fishing methods and AIDCP -compliant fishing 
methods [would] be immedi ately corrected".207 This, in Mexico's view, would educate US 
consumers about dolphin -safe fishing methods and have an effect on the consumption of canned 
yellowfin in the United States.  
                                               
203 Mexico's written submission, para. 172.  
204 United States' response to Arbitrator question No. 57.  
205 United States' written submission, para. 123.  
206 We understand Mexico to use the term "regulated setting on dolphins" to refer to setting on dolphins 
in compliance with AIDCP rules.  
207 Mexico's  written submission, para. 76.  WT/DS381/ARB  
 
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  5.59.  According to the United States, US consumers distinguish between tuna c aught by setting 
on dolphins  on the one hand,  and by other fishing methods  on the other hand. According to the 
United States, consumers do  not, as Mexico argues, distinguish between regulated and 
unregulated setting on dolphins.208 In other words, while Mexi co contends that the AIDCP -
compliant setting on dolphins label would inform US consumers that this method is harmless to 
dolphins and that, as a result, consumers would buy Mexican canned yellowfin, the United States 
maintains that US consumers would not b uy tuna products made from tuna caught by setting on 
dolphins regardless of whether the affected dolphins were set on in compliance with AIDCP rules. 
The United States argues  that there is no evidence to support Mexico's contention in this regard.209 
5.60.  Both pa rties have submitted survey results to s upport their positions in this connection . 
Mexico submitted two surveys, in Exhibit MEX -63 and MEX -71. The survey presented in Exhibit 
MEX-63 was conducted in 2010 by Public Opinion Strategies. It shows that when ask ed what 
"dolphin -safe" means, 59% of interviewees said that it means that no dolphins were injured or 
killed in the course of capturing tuna, whereas 10% said it means that dolphins were not encircled 
and then released in the capture of the tuna.210 The surv ey also asked the interviewees whether, if 
they learned that under a series of international dolphin conservation agreements in place since 
1993 dolphin mortalities in the ETP had declined  from more than 150,000 per year throughout the 
1980s to less than 2 00 each year since 1993 , they  would consider those agreements to be working 
towards the conservation of dolphins. In response, 71% of the interviewees said yes, and 14% 
said no.  
5.61.  The survey presented in Exhibit MEX -71 was also conducted by Public Opinion St rategies, 
but dates from 2016. It shows that while one third of Americans interviewed "look for" the dolphin -
safe label when buying canned tuna, another one third do not.211 It also shows that one quarter of 
Americans interviewed specifically "inspect" tuna cans to find a dolphin -safe label before adding it 
to their shopping cart, while 6% do not.212 Finally, it shows that 52% of Americans interviewed 
think that "dolphin -safe" means that no dolphins were injured or killed in the capture of the tuna, 
while 14% think that it means that dolphins were not encircled and then released in the capture of 
the tuna.213 
5.62.  In Exhibit USA -148, the United States submitted a survey conducted by Remington 
Research Group in 2016. The survey results show that 50% of interviewees cons idered that tuna 
caught by intentionally chasing and capturing dolphins should not be labelled as "dolphin -safe" 
even if that method does not kill or seriously injure dolphins. 74% of the interviewees also said 
that they would not buy canned tuna produced from tuna caught by such a method. In response to 
a question as to what should be the definition of dolphin -safe for tuna, 39% of the interviewees 
said it should mean that no dolphins were intentionally killed or seriously injured or intentionally 
chased a nd captured in catching tuna, 27% said it should mean that no dolphins were intentionally 
chased and captured in catching the tuna, and 17% said it should mean that no dolphins were 
killed or seriously injured in catching the tuna.214 
5.63.  We note that the three surveys show a mixed picture of the extent to which US consumers 
perceive the dolphin -safe label as referring to catching tuna by setting on dolphins rather than to a 
fishing method that does not kill or seriously injure dolphins. We also note that due to the 
difference in the questions asked in these surveys, they are not fully comparable.  Moreover, in the 
absence of general US census data against which we could compare the survey sample sizes, it is 
not clear to us whether the survey samples accurately re present US census demographics in terms 
of population age, ethnicity, or educational attainment.  Accordingly, we are not persuaded that it 
would be appropriate to attach weight to  these surveys . 
5.64.  We accept the United States' position that it adopted the Tun a Measure in response to 
growing public awareness about the well -being of dolphins and the preservati on of marine 
mammals in general. However,  we do not necessarily interpret this to mean that US consumers 
                                               
208 United States' response to Arbitrator question No. 133.  
209 United States' respons e to Arbitrator question No. 133.  
210 Exhibit MEX -63, p. 2. 
211 Exhibit MEX -71, p. 3.  
212 Exhibit MEX -71, p. 4.  
213 Exhibit MEX -71, p. 6.  
214 Exhibit USA -148, p.2. WT/DS381/ARB  
 
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  predominantly interpret the dolphin -safe label as indicating that  a labelled product was not 
produced using tuna caught by  setting on dolphins . It is therefore not apparent to us that US 
consumers would not buy Mexican canned yellowfin after the withdrawal of the Tuna Measure , if 
Mexican producers were th en able to use a label showing that their methods are AIDCP -certified 
dolphin -safe. We find both parties' arguments on this issue, and their reliance on the mentioned 
survey results, to be unpersuasive and decline to adopt them as presented.  
5.65.  The second dis agreement  between the parties with regard to consumer preferences pertains 
to the characteristics of yellowfin as opposed to other species of tuna. Mexico argues in this 
respect that canned yellowfin, like canned albacore, is a premium tuna product. Mexico  submits 
that US consumers would therefore pay a premium for canned yellowfin, and  that canned 
yellowfin,  if priced competitively, would sell in significant quantities in the US market. In support of 
this argument, Mexico provides empirical evidence that c onsumers prefer yellowfin over generic 
tuna, including  albacore. This evidence shows that consumers are willing to pay a premium to buy 
yellowfin.215 
5.66.  The United States disagrees with Mexico. It considers that the demand for canned yellowfin 
is limited becaus e US consumers dislike its taste, texture, and colour, compared with albacore.216 
In addition, the United States submits that while yellowfin is indeed sold partly as a gourmet 
product, it is often sold as "light" tuna, which is a term used to refer to yello wfin canned with 
skipjack.  
5.67.  Based on the evidence on the record, we consider reasonable Mexico's assumption that 
yellowfin, sold on its own (rather than as "light" tuna), is a premium product. In this regard, we 
note that the United States recognizes the e xistence of a premium segment in the canned tuna 
market. That segment is currently being served with albacore tuna and, to a significantly lesser 
extent, yellowfin tuna.217 We also note the United States' recognition that canned yellowfin can be 
considered a  premium or gourmet product in some circumstances.218 
5.68.  Regarding consumer preferences, the United States further asserts that one reason why 
producers combine yellowfin and skipjack together and sell it as "light tuna", rather than selling 
cans of 100% yellow fin, is to lower the mercury level per can of yellowfin and  thus produce a safer 
product that is consistent with US Food and Drug Administration (USFDA) food safety regulations. 
The United States contends that US consumers are concerned about mercury level s in light tuna 
products composed of large tuna, namely yellowfin,  as compared to the mercury levels of light 
tuna products  composed of skipjack.219 
5.69.  In response to the United States' argument, Mexico submits that although US consumers 
are sensitive to the me rcury content of tuna, the mercury level in yellowfin is not higher than that 
in other large tuna species, such as albacore. Therefore, in Mexico's view, consumers would buy 
Mexican canned yellowfin.  
5.70.  We note that the evidence presented in Exhibit MEX -64 sh ows that mercury levels in 
yellowfin and albacore are almost identical. Even accepting that US consumers may be sensitive to 
the mercury content of tuna products and may not be willing to buy products with high mercury 
levels, we also note that canned alba core, which contains the almost the same levels of mercury 
as yellowfin, is widely consumed in the United States. This, in our view, undermines the United 
States' argument that US consumers would refrain specifically from buying canned yellowfin 
because of  its mercury level.  
5.71.  Based on the foregoing, we agree with Mexico's argument that US consumers have a 
preference for canned yellowfin.  
                                               
215 Exhibit MEX -02, table 7 on p. 20.  
216 United States' written submission, para. 23.  
217 United States' wr itten submission, paras. 20 -23. 
218 United States' written submission, paras. 22 and 102; response to Arbitrator question No. 143.  
219 United States' response to Arbitrator question No. 54.  WT/DS381/ARB  
 
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  5.1.3.2.2   US retailers' willingness to sell Mexican canned yellowfin  
5.72.  Mexico's second argument  is that US retailers would carry Mexic an canned yellowfin 
following the withdrawal of the Tuna Measure. The United States disagrees , and argues that US 
retailers are sensitive to consumer demand and that they therefore would only sell  tuna products 
not produced from tuna caught by s etting on d olphins.220 
5.73.  At the outset, we note that there is evidence on the record suggesting that at least some US 
retailers would be willing to sell canned yellowfin from Mexico if it were eligible to receive a 
dolphin -safe label. Exhibit MEX -36 (BCI) contains an aff idavit dated 2010 from  [[ xxx ]], attesting 
to several facts relevant to our analysis. In particular, the affidavit mentions that [[ xxx ]]. 
Notably, the exhibit also contains an e -mail from [[ xxx ]]. The e -mail closes by stating that [[ xxx 
]]. 
5.74.  Further, we note that in a  three -week period in 2003 when , because of modifications made 
to the US law, Mexican producers had an opportunity to export canned  yellowfin to the United 
States  carrying a dolphin -safe label, some US retailers accepted to sell that produ ct. In this 
regard, Exhibit MEX -45 (BCI) contains an affidavit supplementing the affidavit contained in MEX -36 
(BCI). It states that  in January 2003, following a change by the US government on the definition 
of dolphin safe, [[ xxx ]]. In February of the s ame year, [[ xxx ]]. In our view, Exhibits MEX -36 
(BCI) and MEX -45 (BCI) lend support to Mexico's argument, in that they demonstrate that there 
are US retailers who have indicated that they would sell Mexican canned yellowfin after the 
withdrawal of the Tu na Measure, when such  products would be eligible  to carry a dolphin -safe 
label.  
5.75.  We note, however, that the United States argues that many of the companies engaged in 
the sale of tuna products in the US market have agreements with the Earth Island Institute  (EII) 
and adhere  to EII's dolphin -safe standard, which excludes tuna caught by setting on dolphins.221 
In particular, the United States argues that the dolphin safe policies of the companies that have 
the largest market share in the United States222 confirm  that US retailers are sensitive to  the 
demands of their consumers  and are committed not to sell tuna products containing tuna caught 
by setting on dolphins .223 The United States contends that it is aware of written statements to that 
effect from retailers accounting for [[ xxx ]]% of the retail market and [[ xxx ]]% of all canned 
tuna consumption .224 In addition, the  United States notes  a statement by Walmart in dicating that 
none of the tuna  major brands it sells produce products from tuna caught by setting on d olphins , 
and that purchasing decisions are governed by Walmart's new sustainability policy, rather than  by 
whether the tuna product qualifies for the dolphin safe label under the US measure. The United 
States concludes , that including Walmart, the retailer s covered by statements account for [[ xxx 
]]% of the US retail market share, and [[ xxx ]] % of total US consumption.225 
5.76.  Mexico responds that these statements were "manufactured"226 by the United States solely 
for the purposes of these arbitration proceedings,  and alleges that the retailers were pressured 
into stating that they would not sell Mexican tuna products. In Mexico's view, therefore, these 
statements do not have important evidentiary value.227 With respect to the statement by Walmart 
in particular, Mexi co notes that this statement does not mention setting on dolphins, but refers 
rather to the sustainability of  different  fishing methods. Mexico therefore  considers tha t Walmart's 
statement does not  support the United States' argument.228 
5.77.  The statements prese nted by the United States pertain to 15 companies and are found in 
Exhibit USA -40. Of these 15 statements, 14 indicate , either explicitly or by reference to the EII 
standards , that the relevant company commits not to sell tuna products obtained from settin g on 
dolphins. The statement by Walmart, however, contains no reference to setting on  dolphins, and 
states instead that Walmart's policy is to sell tuna products obtained from sustainable fisheries.  
                                               
220 United States' written submission, para. 33.  
221 United States' writte n submission, paras. 31 -32. 
222 United States written' submission, para. 33 (referring to Exhibit USA -38 (BCI) ). 
223 United States written' submission, para. 33 (referring to Exhibit  USA-40). 
224 United States written' submission, para. 3 3 (referring to Exhibit USA-38 (BCI)  and USA-41 (BCI) ). 
225 United States written' submission, para. 35.  
226 Mexico's written submission, para. 15 and Section III.B.2.a.(2)(b).  
227 Mexico's written submission, para. 77.  
228 Mexico's written submission, para. 79.  WT/DS381/ARB  
 
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  5.78.  Mexico questions the relevance of some of these statement s, many of which were prepared 
years ago.229 Indeed, some of these statements were made in 1999, 2007, or 2011, which was 
prior to the expiry of the RPT granted to the United States to comply with the DSB 
recommendations or rulings, while others were made in  2015 or 2016. The United States 
acknowledges that some of the statements are older than others, but contends that the five 
retailers that signed statements predating the  expiry of the  RPT continue to be in EII's list of 
approved dolphin -safe retailers, wh ich was last updated in December 2015.230 Mexico does not 
dispute  this contention.  
5.79.  Based on the evidence on the record, we find reasonable the United States' contention that 
certain US retailers would not change their dolphin -safe policies and would continue  to refrain from 
offering for sale Mexican canned yellowfin made from tuna caught by setting on dolphins, even if 
the Tuna Measure were withdrawn. In particular, we accept that companies that have made 
commitments to EII would not begin purchasing tuna pro ducts made from tuna caught by setting 
on dolphins if the Tuna Measure were withdrawn. Certainly, we are not persuaded that they would 
abandon their dolphin -safe policies in the short-term.  We would add that, in our view, Mexico has 
not substantiated its a llegation that the statements were manufactured solely for the purposes of 
these proceedings.   
5.80.  The situation in respect of Walmart is less clear. The  Walmart  statement refers to Walmart's 
Canned Tuna Policy and indicates that this policy was released in Ma y 2015, that is to say, on a 
date well after the end of 2014, which is the year for which we are assessing the level of 
nullification or impairment.231 As we have no information on Walmart's purchasing policy in 2014, 
it would not be appropriate in our view to make assumptions on the basis of that new policy 
regarding Walmart's purchasing policy in 2014.  
5.81.  Even disregarding this, we note that the focus of Walmart's statement is the sustainability 
of the relevant fishery, as evidenced in particular through part icipation in a recognized 
sustainability programme.232 Walmart's 2015 canned tuna purchasing policy as reflected in the 
statement submitted to us does not explicitly commit Walmart not to purchase Mexican tuna 
products without a dolphin -safe label. Similarly , the purchasing policy does not explicitly commit 
Walmart not to purchase tuna products produced from tuna caught by setting on dolphins. 
Moreover, the excerpt from Walmart's purchasing policy provided to us is ambiguous as to the 
precise requirements or circumstances in which tuna products would be considered sustainable. In 
particular, it is not clear to us what the different sustainability programmes listed by Walmart 
require or entail, and whether any of those programmes requires canned tuna to be "dol phin-
safe", and if so, whether this would necessarily exclude tuna products produced from setting on 
dolphins.233 Therefore, even considering this statement, we are unable to determine on the basis 
of this statement alone whether the United States is correct  in suggesting that Walmart would not 
offer for sale Mexican canned yellowfin made from tuna caught by setting on dolphins, even if the 
Tuna Measure were withdrawn.  
                                               
229 Mexico's written submis sion, para. 85.  
230 United States' response to Arbitrator question No. 146(c).  
231 Exhibit USA -40, p. 16.  
232 Walmart's canned tuna policy requires all canned tuna suppliers to source from f isheries that: (a) 
comply with I nternational Sustainable Seafood Foundat ion (ISSF) sustainability conservation measures, 
including those adopted in collaboration with relevant tuna RFMO and from vessels that are registered on the 
Pro-active Vessel Register (PVR); (b) Manage a program in accordance with the Principles of Credib le 
Sustainability Programs developed by The Sustainability Consortium (third party review must be commissioned 
and provided upon request) or certified as sustainable using Marine Stewardship Council (MSC); (c) use better 
management fishing practices as val idated through chain of custody (e.g. pole and line, free -school sets); or 
(d) actively work toward certification or involved in a Fisheries Improvement Project (FIP) that has definitive 
and ambitious goals, measurable metrics and time bound milestones.  
233 While we have some evidence concerning the requirements for sustainability certification under the 
Marine Stewardship Council, no evidence has been submitted concerning the contents of the International 
Sustainable Seafood Foundation programme, or concerni ng whether eligibility for the dolphin -safe label may be 
of relevance under a Fisheries Improvement Project or in the context of "better management fisheries 
practices".  WT/DS381/ARB  
 
- 53 - 
 
  5.82.  Mexico has submitted an affidavit from July 2016 [[ xxx ] ]. The statement provides no 
information regarding when this exchange took place, and so we cannot assume that it concerns 
2014 and draw inferences concerning that year.234 [[ xxx ]].   
5.83.  Moreover, the fact that Walmart may not have been purchasing Mexican canned yellowfin is 
not, in our view, a reason to think that it would not purchase such products if the Tuna Measure 
were withdrawn and Mexican canned yellowfin were eligible to be labelled as  "dolphin -safe" in the 
US market.  
5.84.  For the reasons given above, we conclude that the information befor e us does not allow us 
to conclude that Walmart would not offer for sale canned yellowfin if the Tuna Measure were 
withdrawn and Mexican producers therefore had the ability to use a "dolphin -safe" label. 
Consequently, we do not consider it appropriate to i nclude Walmart's [[ xxx ]]% market share in 
the total market share of retailers who, following the withdrawal of the Tuna Measure, would not 
offer Mexican canned yellowfin  for sale . Based on the evidence before us, we therefore accept that 
US retailers acc ounting for 26.9% of total US consumption of tuna products would not 
commercialize Mexican canned yellowfin even after the withdrawal of the Tuna Measure. The 
remainder of US retailers, which account for 73.1%235 of total US consumption of tuna products, 
are retailers in respect of which we have no evidence suggesting that they would not offer for sale 
Mexican canned yellowfin after the withdrawal of the Tuna Measure.236 
5.85.  Based on the foregoing, we consider that there is no reason to assume that US retailers 
would not sell Mexican canned yellowfin after the withdrawal of the Tuna Measure, except those 
retailers accounting for 26.9% of total consumption of tuna products with respect to whom 
evidence on the record suggests that they would not sell tuna caught by se tting on dolphins  
regardless of whether i t carried  a dolphin -safe label.  
5.1.3.2.3   Conclusion  
5.86.  Based on the above considerations,  we consider reasonable the second assumption 
underlying Mexico's model, namely, that US consumers have a preference for canned yellowfin,  
and that there is no reason to assume that US retailers would  not sell Mexican canned yellowfin 
after the withdrawal of the Tuna Measure , except those that made statements to the contrary, as 
explained above . We also note that the evidence on the record s hows that the share of yellowfin in 
US cannery receipts was 34% in the period 1980 -1989237, prior to the adoption of the Tuna 
Measure. This, in our view, lends support to our finding that the second assumption is reasonable.  
5.1.3.3   Mexican producers would supply al l of the increased consumption of canned 
yellowfin in the US market following the withdrawal of the Tuna Measure  
5.87.  The third assumption underlying Mexico's model is that, following the withdrawal of the 
Tuna Measure, Mexico will be the sole supplier of canne d yellowfin in the US market.238 In Mexico's 
view, this assumption is "strongly supported by market realities".239 The United States disagrees 
with this assumption, and submits that both US and foreign canneries that currently supply the US 
market with canned yellowfin would compete with Mexican producers to satisfy any increased 
demand for canned yellowfin in the US market.240 
5.88.  Before proceeding to an assessment of the specific arguments underlying this aspect of 
Mexico's model, we find it useful to clarify the e xact nature of Mexico's contention. Specifically, we 
                                               
234 Reading Exhibit MEX -106 (BCI)  together with Exhibit MEX -36 (BCI) , which contains an earlier 
affidavit by the same person, it appears that the relevant exchange may have taken place in 2008.   
235 73.1% is equal to the sum of Walmart's  [[ xxx ]]% market share and the [[ xxx ]]% market share of 
other US retailers that have not, ex ante, ruled  out the possibility of selling Mexican canned yellowfin after the 
withdrawal of the Tuna Measure.  
236 We note that while the United States argued that [[ xxx ]] % of the retailers are committed to selling 
only "dolphin safe" tuna product and will not carry t una product produced from setting on dolphins, this figure 
refers to 2015. According to USA -41 (BCI) , for the year 2014, the corresponding number is [[ xxx ]]% and 
Walmart's market share is [[ xxx ]]%. 
237 Exhibit USA -22 revised.  
238 Exhibit MEX -02, p. 30.    
239 Mexico's written submission, para. 175.  
240 United States' written submission, para. 112. WT/DS381/ARB  
 
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  need to assess  whether Mexico's argument is (a ) that in the counterfactual situation, i.e. where 
the United States withdraws the Tuna Measure, suppliers from countries other than Mexico (US 
canneries and  canneries from third countries) would not supply canned yel lowfin to the US 
market), or (b ) whether Mexico recognizes that there would or may  be such supply, but chooses to 
disregard it for the purposes of modelling the counterfactual (for instance, becau se in Mexico's 
view the volume of supply from countries other than Mexico would be very small).  
5.89.  At the outset, we note that in Mexico's model, the United States does not import canned 
yellowfin from third countries (i.e. countries other than Mexico). Indee d, equation 20 in Exhibit 
MEX-02 says that yellowfin tuna consumed in the United States comes from Mexico.241 This 
suggests that Mexico might be arguing that, after the withdrawal of the Tuna Measure, Mexico 
would be the only supplier of canned yellowfin in the US market. We asked Mexico to help us 
clarify its position. In response, Mexico indicated that it agreed with the United States' argument 
that "yellowfin tuna is produced el sewhere in the world and that US  canneries do not operate at 
full capacity".242 However, Mexico argues that the share of canned yellowfin currently being 
imported into the United States from countries other than Mexico is 1.2% of the overall 
consumption of tuna products in the United States. Moreover, Mexico argues that this share woul d 
not be affected by the withdrawal of the Tuna Measure because the import of such products into 
the US market is not limited by the Tuna Measure. Mexico further contends that the non -Mexican 
yellowfin currently being imported into the US market sells at a  price higher than that at which 
Mexico would supply its canned yellowfin after the withdrawal of the Tuna Measure.243 According to 
Mexico, these two factors (current small supply and high price) mean that, if anything, the supply 
of canned yellowfin from ot her sources "would be even smaller with the removal of the tuna 
measure[]" than it is currently.244 Thus, in Mexico's view, "the inclusion of the global supply of 
canned yellowfin tuna into the model would have a marginal negative impact on the level of 
nullification or impairment".245 Mexico argues that, for modelling purposes, the supply of non -
Mexican canned yellowfin can be excluded in calculating the level of nullification or impairment 
caused to Mexico by the Tuna Measure.246  
5.90.  Based on these clarifications,  we understand Mexico's argument to be that although there is 
currently some limited supply of canned yellowfin from US canneries and third countries, and 
although such supply would or at least may remain in the market after the withdrawal of the Tuna 
Measure, Mexico's model need not account for it because the volume of that supply is small, and 
will become even smaller following the withdrawal of the Tuna Measure. In the light of this, Mexico 
considers it appropriate, for modelling purposes, to treat Mexic o as the sole supplier of canned 
yellowfin in the US market, as this assists in simplifying the calculation of the alleged level of 
nullification or impairment. Accordingly, we understand Mexico's argument to be that although in 
the counterfactual situatio n Mexico would not be the sole supplier of yellowfin in the US market 
following the withdrawal of the Tuna Measure, but rather the dominant  supplier, for modelling 
purposes Mexico considers it acceptable to ignore other suppliers and treat Mexico as though  it 
would be the sole supplier.  
5.91.  Given Mexico's argument, the issue that the third assumption raises is whether it is 
reasonable to assume that Mexico would be the dominant supplier of canned yellowfin to the 
United States following the withdrawal of the T una Measure. If we find that it would, we will then 
discuss whether it is also appropriate, in Mexico's model, to disregard other sources of canned 
yellowfin (US canneries and imports from third countries), treating Mexico as the sole supplier of 
canned ye llowfin in the US market.  
5.92.  Mexico's assumption that it would be the dominant supplier of canned yellowfin to the US 
market after the withdrawal of the Tuna Measure  is based on three arguments: (a ) the Mexican 
canning industry would be competitive in the US canned yellowfin market vis-à-vis US canneries 
and other foreig n canned yellowfin suppliers; (b ) no other potential large supplier is affected by 
the Tuna Measure, and unaffected suppliers would not be incentivized to sell canned yellowfin to 
the United St ates after the withdraw al of the Tuna Measure; and (c ) Mexico could and would 
                                               
241 Exhibit MEX -02, p. 30.  
242 Mexico's response to Arbitrator question No. 18.  
243 Mexico's response to Arbitrator question No. 123.  
244 Mexico's response to Arbitrator ques tion No. 123.  
245 Mexico's response to Arbitrator question No. 123.  
246 Mexico's response to Arbitrator question No. 123.  WT/DS381/ARB  
 
- 55 - 
 
  import canned yellowfin from other countries in the region to meet its own domestic demand. We 
will assess each of these arguments in turn.  
5.1.3.3.1   The Mexican canning industry would be competitive in the US canned 
yellowfin market vis-à-vis US canneries and other countries exporting canned yellowfin 
to the United States  
5.93.  Mexico argues that it has an important cost advantage in the canned yellowfin market over 
other countries. According to  Mexico, the factors underpinning  this cost advantage include (a ) the 
installed processing capacity in Mexico; (b ) the vertical integration of the Me xican canned tuna 
industry; (c ) Mexico's strategic location near the fishing zones and as a neighbour t o the United 
States; (d ) the inexpensi ve labour cost in Mexico; and (e ) duty -free access to the US market by 
virtue of being a signatory to NAFTA.247 
5.94.  Mexico also asserts that although it is competitive in the canned yellowfin markets of 
developed countries such as the European Union and the United States, tariff rate quotas limit 
exports to the European Union248, while the Tuna Measure restricts exports to the United States.249 
In respect of the EU market, Mexico elaborates further by pointing out that its exports of  canned 
yellowfin to the EU market are subject to se veral constraints, including (a ) a tariff rate quota 
comprising an over -quota tariff of 24% and an in -quota tariff of 6.8% for a volume in 2014 of 
between 8500 and 9000 tonnes; (b ) higher transportation c osts than some of Mexico's main 
competitors; (c ) the existence of a large, established supply of yellowfin from the fleets of Spain,  
Italy, Portugal,  and France; (d ) unlimited duty -free treatment accorded by the European Union to  
certain other countries; a nd (e ) subsidies provided by the European Union and its member States 
to the EU fleets. Mexico further explains that its exports to South American markets are limited 
because of the large, established supply of tuna in those markets, in particular, from th e 
Ecuadorian fleet.250 Thus, in Mexico's view, any current limitations of its supply of canned yellowfin 
to foreign markets do not indicate any inherent lack of competitiveness.  
5.95.  In response to Mexico, the United States argues that Mexico's assertion about th e 
competitiveness of its canned yellowfin industry is contradicted by the evidence on the record.251 
The United States contends that Ecuador has almost all of the advantages that Mexico asserts give 
it a cost advantage, but has greater capacity than Mexico t o take advantage of economies of scale. 
In this regard, the United States refers, in particular, to the fact that Ecuador has installed 
processing capacity, a semi -vertically integrated canning industry, is located near the relevant 
fishing zones, and has a relatively inexpensive, productive labour force.252 
5.96.  The United States further submits that Thailand has many of the advantages that Mexico 
claims , and in particular  that Thailand benefits from close proximity to the Western and Central 
Pacific Ocean (WCPO) . The United States contends that fish is the most significant component in 
the cost of canned tuna and Thailand's dominance in the canning industry makes it a global leader 
in canning -grade frozen skipjack and yellowfin.253 According to the United States, T hailand is also 
better placed than any industry in the world to take advantage of economies of scale in processing 
and canning due to the high concentration of processing facilities around Bangkok.254 The United 
States also argues that Thailand has a low -cost, highly productive labour force, which is about 7% 
more productive, per metric ton of production, than Ecuador's.255 The United States contends that 
other WCPO countries, such as the Philippines and China, also benefit from many of the 
advantages enjoyed b y Thailand, including installed processing capacity, strategic location near 
fishing zones, and a low -cost, high productivity workforce.256 
                                               
247 Mexico's written submission, para. 175.  
248 Mexico's response to Arbitrator question No. 85.  
249 Mexico's response to Arbitrator question No . 149.  
250 Mexico's response to Arbitrator question No. 85.  
251 United States' response to Arbitrator question No. 66 (referring to Mexico's written submission, 
paras. 129, 148).  
252 United States' response to Arbitrator question No. 66 (referring to Exhibits ME X-21 and USA -07). 
253 United States' response to Arbitrator question No. 66 (referring to Exhibits  USA-07 and MEX -02). 
254 United States' response to Arbitrator question No. 66 (referring to Exhibits  USA-114).  
255 United States' response to Arbitrator question N o. 66 (referring to Exhibits  USA-114).  
256 United States' response to Arbitrator question No. 66.  WT/DS381/ARB  
 
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  5.97.  The United States also notes that Mexico exports very little canned tuna to the European 
and South American markets. A ccording to the United States, these small export volumes suggest 
deficiencies in Mexico's competitiveness in those markets.257 For the United States, Mexico's failure 
to compete in the European Union is particularly notable given the European consumer prefe rence 
for yellowfin and the fact that there is no EU -wide measure equivalent to the US Tuna Measure.258 
The United States recognizes that, owing to its NAFTA membership, Mexican tuna products have a 
tariff advantage vis-à-vis most other imported canned tuna products in the US market. However, 
the United States contends that this tariff advantage has a limited impact on Mexico's overall 
competitiveness in the US market for canned yellowfin.259 The United States argues that Mexico 
has provided no evidence suggest ing that duty -free access under NAFTA counterbalances the 
significant competitive advantages of the existing major suppliers to the US market.260 
5.98.  Additionally, the United States asserts that Mexico's exports of canned yellowfin to the EU 
market also benefit from preferential tariff treatment, compared to many other major canned tuna 
producing countries, including Thailand, China, Indonesia, Vietnam, and Senegal. The United 
States does not dispute the existence of the tariff rate quota in the EU market, but ar gues that 
Mexico has never come close to fulfilling its tariff rate quota in prepared tuna (i.e. canned tuna and 
tuna loins) exports.261 According to the United States, the fact that Mexico is unable to compete 
with those other exporting countries in the EU market despite its tariff advantage, which the 
United States says is larger than its NAFTA tariff advantage in the US market, proves that Mexico 
is not a competitive supplier of canned yellowfin. The United States infers from this that Mexico 
would not be the only supplier of canned yellowfin to the US market in the event of the withdrawal 
of the Tuna Measure, as Mexico's model assumes.262 
5.99.  The issue we need to consider is whether Mexico would be sufficiently competitive vis-à-vis 
other suppliers of canned yel lowfin in the US market, in a way that would support the argument 
that Mexico would in the short -term become the dominant supplier of canned yellowfin in the US 
market following the withdrawal of the Tuna Measure.  
5.100.   We begin our analysis of this issue by con sidering whether Mexican canned yellowfin would 
be competitive vis-à-vis US canned yellowfin. In this connection, we note that, as far as the 
Mexican industry's competitiveness vis-à-vis the US canneries is concerned, both parties agree 
that US vessels wou ld not return to the ETP in order to set on dolphins. Further, since US 
canneries are not vertically integrated and currently produce the majority of their tuna product 
from tuna caught by non -US vessels, as acknowledged by the United States263, they would h ave to 
purchase yellowfin from other fleets fishing in the WCPO and elsewhere that catch substantial 
quantities of yellowfin. Given the distance of those regions from the United States, it is plausible 
that such purchases would command higher prices compar ed to the Mexican producers' prices, 
which, in turn, would increase the production costs of US canneries. This, in our view, means that 
the Mexican canning industry would enjoy a competitive advantage vis-à-vis the US canneries.  
5.101.   We now turn to Mexico's arg ument regarding its industry's competitiveness vis-à-vis the 
suppliers from third countries. To assess the merits of Mexico's argument about the 
competitiveness of the Mexican canning industry in the US market, we would ideally need 
information on the cost s of production of Mexican producers relative to their competitors from third 
countries. Such information, however, is not on the record. In our view, Mexico's argument that its 
canning industry is vertically integrated and, therefore, faces lower producti on costs is not by itself 
sufficient to support Mexico's claim. Other suppliers, such as Ecuador, are in fact also vertically 
integrated.264 
5.102.   However, as regards market access conditions to the US market, Mexico's close 
geographical proximity to the United St ates and the fact that it has duty -free access to the US 
                                               
257 United States' response to Arbitrator question No. 55.  
258 United States' response to Arbitrator question Nos. 55 and 149; opening statement at the meeting of 
the Arbitrator, para. 34.  
259 United States' response to Arbitrator question No. 142.  
260 United States' response to Arbitrator question No. 66.  
261 United States' comment on Mexico's response to Arbitrator question No. 85.  
262 United States' comment on Mexico's re sponse to Arbitrator question No. 85.  
263 United States' response to Arbitrator question No. 66.  
264 See, for instance, Exhibit USA -07, p.  29. WT/DS381/ARB  
 
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  market as a NAFTA member265 in our view provide Mexico with a crucial dual advantage relative to 
its competitors. In this context, we do not consider that the United States' argument that "the fact 
that Mexico is unable to compete with [Indonesia, Vietnam, Senegal and China] in the EU market, 
despite a tariff advantage that is larger  than its NAFTA tariff advantage in the U.S. market" 
provides a basis to ignore Mexico's tariff preference  in the US marke t and its proximity to the 
United States.266 In other words, Mexico enjoys an advantage in the US market that it does not 
enjoy in the EU market, especially regarding geographical proximity.  
5.103.   As for the United States' argument regarding the inability of Mexic o's canning industry to 
compete in markets such as the European Union or South American countries267, we accept that it 
may in principle be appropriate for the Arbitrator to make such horizontal comparisons in 
ascertaining Mexico's competitiveness in the US market. In our view, however, the circumstances 
in those markets, which Mexico refers to and we note in paragraph 5.94 above, distinguish such 
markets from the US market, and counsel against drawing conclusions from the situati on observed 
in those other markets. Therefore, we do not consider it appropriate to attach weight to Mexico's 
allegedly limited competitiveness in such other markets.  
5.104.   On the basis of the above, our view is that Mexico does have a competitive advantage in 
the US market vis-à-vis other foreign canned yellowfin producers.  
5.105.   In sum, we find plausible the argument that the Mexican industry would be competitive 
vis-à-vis the US canneries after the withdrawal of the Tuna Measure mainly because the Mexican 
industry i s vertically integrated whereas the US canneries buy yellowfin from WCPO and other 
distant countries at considerable transport costs. Additionally, given Mexico's important advantage 
stemming from its geographical proximity to the United States and the tar iff preference resulting 
from its NAFTA membership, we also find plausible the argument that the Mexican industry would 
be competitive vis-à-vis other suppliers of canned yellowfin. For these reasons, we find plausible 
Mexico's argument that it will, in th e short -term, be competitive vis-à-vis other suppliers of canned 
yellowfin in the US market after the withdrawal of the Tuna Measure.  
5.1.3.3.2   No other potential large suppl ying country  is affected by the Tuna Measure, 
and unaffected suppl ying countries  would not b e incentivized to sell canned yellowfin 
after the withdrawal of the Tuna Measure  
5.106.   Mexico argues that there are no potential important suppliers of canned yellowfin to the 
United States other than Mexico that are affected by the Tuna Measure, and that only e xports of 
canned tuna from Mexico would increase in a significant way after the withdrawal of the Measure. 
Mexico contends that the market forces that have so far prevented exports of greater quantities of 
canned yellowfin from other countries would not be  affected by the withdrawal of the Measure. In 
Mexico's view, the same market forces would also continue to operate in such a way as to stop US 
canneries from increasing their production of canned yellowfin after the withdrawal of the Tuna 
Measure.268 
5.107.   While Mexico recognizes that canned yellowfin tuna could be produced by the United 
States if the US fleet were to move back into the ETP to catch yellowfin in response to the 
withdrawal of the Tuna Measure, Mexico argues that this would not be feasible in the sh ort-run 
because US vessels are not equipped to catch yellowfin by setting on dolphins in the ETP. Even if it 
were feasible for US boats to move back into the ETP, fishing in the ETP would not be profitable.269 
5.108.   Mexico acknowledges that yellowfin is produced e lsewhere in the world and that US 
canneries are not operating at full capacity, but contends that this is not relevant to the 
Arbitrator's analysis. For Mexico, the relevant question is whether the Tuna Measure currently 
prevents these countries from expor ting canned yellowfin to the United States and thus whether 
                                               
265 The United States' MFN duty rate is 35% for tuna products in oil, and 6% for those in water. Exhibit 
MEX-05. We not e that the United States agrees that NAFTA membership provides a tariff advantage. See 
United States' response to Arbitrator's Question No. 142.  
266 United States' comment on Mexico's response to Arbitrator question No. 85.  
267 United States' response to Arbit rator question No. 55.  
268 Mexico's written submission, para. 174.  
269 Mexico's written submission, para. 176. WT/DS381/ARB  
 
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  the withdrawal of the Measure would increase their exports to the United States.270 Mexico argues 
that suppliers of canned yellowfin located in South East Asia are not currently impacted by the 
Tuna Measure because the Measure affects only the countries that harvest tuna by setting on 
dolphins in the ETP.271 Additionally, Mexico recognizes that there are a few Central and South 
American countries that harvest tuna in the ETP, but argues that those coun tries would not be able 
to compete with Mexico's producers of canned yellowfin because they have small production 
capacities, are located further from the United States, and their exports are subject to US import 
tariffs. Mexico also underlines the fact th at the United States maintains embargoes on imports of 
yellowfin products from Belize, Bolivia, Colombia, Honduras, Nicaragua, Panama, Vanuatu, 
Venezuela, and Peru, as these countries have chosen not to seek an "affirmative finding" from the 
US Department of Commerce that they are in compliance with the AIDCP requirements. This, in 
Mexico's view, shows that any export response by other countries to the withdrawal of the Tuna 
Measure would be minor.272 
5.109.   The United States submits that countries that fish and pro cess tuna in the WCPO region 
could supply canned yellowfin to the US market. The United States explains that the WCPO is the 
most important source of yellowfin in the world, including yellowfin produced for canning, and that 
the United States imports subst antial amounts of canned tuna from all of the WCPO producers, 
including Thailand, Vietnam, the Philippines, and Indonesia, which together accounted for 79% of 
all canned tuna imported into the United States between 2010 and 2015.273 The United States 
submits  that it already imports canned yellowfin from these and other tuna producing countries.274 
The fact that the United States does not import more canned yellowfin is, therefore, due to a lack 
not of supply but of demand. Finally, regarding Mexico's arguments concerning the US fleet, the 
United States agrees with Mexico that it is reasonable to consider that US vessels would not return 
to the ETP in order to set on dolphins. However, the United States contends that the reason for 
this is not because US cannerie s "are not set up" to process ETP yellowfin, but rather because such 
canneries would not purchase tuna products produced from tuna caught by setting on dolphins 
because US consumers do not want such product.275 
5.110.   In assessing Mexico's argument about the possib le export response by other countries to 
the withdrawal of the Tuna Measure, the Arbitrator finds it important to note that, in small 
quantities276, canned yellowfin is already sold in the US market.277 We recall that the share of 
yellowfin in the total consum ption of tuna products in the US market is 1.2%. In examining 
whether countries other than Mexico would also export canned yellowfin to the United States 
following the withdrawal of the Tuna Measure, we find it useful to separate those countries in to 
two g roups: (a ) countries that already supply canned yel lowfin to the US market, and (b ) countries 
that do not currently supply canned yellowfin to the US market.  
5.111.   Regarding the countries whose products are already sold in the US market, Mexico argues 
that the m arket forces that currently limit the amount of their exports to the United States would 
remain the same following the withdrawal of the Tuna Measure.278 This aspect of Mexico's 
argument would be reasonable if the current price of canned yellowfin in the US market were 
higher than or equal to the price generated by Mexico's model. That is, if the price generated by 
Mexico's model is higher than the prevailing price in the US market, the producers of other 
countries would tend to increase their exports to the United States. For Mexico to become the 
dominant supplier in the US market, it is necessary that the price of canned yellowfin decrease 
with Mexico's entry into the US market following the withdrawal of the Tuna Measure.  
                                               
270 Mexico's response to Arbitrator question No. 18.  
271 Mexico's response to Arbitrator question No. 18; opening statement at the meeting of the Arbitra tor,. 
272 Mexico's response to Arbitrator question No. 18 (referring to NOAA Fisheries, Tuna/Dolphin Embargo 
Status Update, Exhibit MEX -72).  
273 United States' response to Arbitrator question No. 66 (referring to Exhibit USA -36). 
274 United States' response to Arbitrator question No. 66 (referring to Exhibits MEX -15, USA -10 (BCI)  
and USA -90). 
275 United States' response to Arbitrator question No. 66.  
276 Mexico's response to Arbitrator question No. 150 ; United States' comments on Mexico's response to 
Arbitrator ques tion No. 150 . 
277 Exhibits MEX -15, USA -10 (BCI) , USA -36, USA -93 and USA -96; United States' response to Arbitrator 
question No. 157.  
278 Mexico's written submission, para. 174.  WT/DS381/ARB  
 
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  5.112.   We note that the parties have not s ubmitted information on the 2014 prices of canned 
yellowfin. Only some indirect evidence has been provided using 2015 export prices to the 
European Union.279 Not only do we not have clear information on the price of  wholesale  yellowfin 
in the United States i n 2014, it is also not clear to us how the quality of the canned yellowfin that 
Mexico's model assumes will be sold to the United States compares to the quality of the canned 
yellowfin currently sold in the US market. We observe, however, that, as noted ab ove, it can 
reasonably be expected that Mexico would increase its exports of canned yellowfin to the United 
States following the withdrawal of the Tuna Measure. Such an increase in the supply of canned 
yellowfin would most likely decrease the price of this  product in the US market. In such a 
situation, producers from other countries would not have any incentive to increase their exports to 
the United States. If anything, such a development would potentially decrease the exports from 
such countries. We there fore find this aspect of Mexico's assumption to be reasonable.  
5.113.   Regarding the effect of the withdrawal of the Tuna Measure on canned yellowfin suppliers 
whose products are not currently sold in the US market, we note that Mexico itself recognizes that 
count ries that harvest tuna in the ETP would  be affected by the withdrawal of the Measure.280 
Countries that can reasonably be expected to be affected by the withdrawal of the Tuna Measure 
are those that harvest yellowfin in the ETP by setting on dolphins and tha t, consequently, are not 
eligible for the dolphin -safe label in the US market.  This group includes 11 countries: Belize, 
Bolivia, Colombia, Ecuador, El Salvador, Guatemala, Nicaragua, Panama, Peru, Vanuatu, and 
Venezuela. Of these 11 countries, seven, i.e.  Colombia, Ecuador, Guatemala, Mexico, Nicaragua, 
Panama,  and Venezuela281, were granted dolphin mortality limits (DMLs)282 during the period 
2012-2014, and eight had requested DMLs for the period 2015 -2017.283 While we are mindful of 
Mexico's argument that the United States maintains an embargo on imports of yellowfin tuna 
products from some of these countries, we note that Mexico itself recognizes that Ecuador and 
Guatemala harvest yellowfin by setting on dolphins, with no embargo being imposed by the United 
States on yellowfin from these countries. Therefore, the withdrawal of the Tuna Measure would 
likely encourage Ecuador and Guatemala, at least, to seek to expand their exports of canned 
yellowfin to the United States. However, the capacity of these two count ries to export to the 
United States yellowfin caught by setting on dolphins and eligible to receive the AIDCP dolphin -
safe label is limited. Each of these countries had only one vessel with a DML in 2014.284 Further, 
neither of these countries benefit from p referential access to the US market. Therefore, we do not 
consider that they could in the short -term significantly increase their exports of canned yellowfin 
to the United States after the withdrawal of the Tuna Measure.  
5.114.   On this basis, we find plausible Me xico's argument that unaffected suppl ying countries  
would not be incentivized to sell canned yellowfin – and that affected suppliers would  not 
contribute significantly to an increase in supply of canned yellowfin – to the US market after the 
withdrawal of the Tuna Measure.  
5.1.3.3.3   Mexico would import canned yellowfin from other countries in the region to 
meet its own domestic demand  
5.115.   Mexico's model assumes that nearly all of Mexico's production of canned yellowfin will be 
exported to the United States and that Mexic o will import the equivalent of 20,000 metric tonnes 
of canned yellowfin from other ETP countries in order to meet its domestic demand for canned 
yellowfin.285 The United States disagrees with Mexico's argument, and maintains that the only ETP 
country that c ould provide this much yellowfin to Mexico is Ecuador, and it is not clear why 
                                               
279 United States' response to Arbitrator question No. 138; oral statement at the meet ing with the 
Arbitrator, paras. 31 -33. 
280 Mexico's response to Arbitrator question No. 18 (referring to NOAA Fisheries, Tuna/Dolphin Embargo 
Status Update, Exhibit MEX -72). See also fn. 44, Mexico's written submission: "other countries are affected by 
the tuna measure. But as discussed by Mexico before, it is not expected that they will be able to export canned 
yellowfin tuna on the U.S. market once the measure is removed".  
281 Exhibit USA -200. 
282 We understand that in order to be eligible to receive the AIDCP dolphin -safe label, the vessel that 
harvests the tuna must have a DML. Thus, only tuna caught by those types of vessels could eventually 
compete with Mexican canned yellowfin in the US market.  
283 Colombia, Ecuador, Guatemala, Mexico, Nicaragua, Panama, the United States and Venezuela. 
Exhibit USA -160. 
284 Mexico's response to Arbitrator question No. 80.  
285 Exhibit MEX -02, pp. 28 -29. WT/DS381/ARB  
 
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  Ecuador would prefer selling its yellowfin to Mexico rather than canning and exporting it to the 
United States itself.286 The United States also argues that Mexico could not make such purchases 
without causing an increase in yellowfin prices.287 
5.116.   In our view, Mexico would not necessarily need to purchase all of its imported yellowfin 
from a single ETP country, i.e. Ecuador. Indeed, Table 10 in Exhibit MEX -02 shows that the 
combined ca pacity of other ETP countries is greater than Ecuador's. We do not, however, need to 
deal with this argument because we reject Mexico's argument for reasons explained below.  
5.117.   We do not find Mexico's argument persuasive. To justify this assumption, Mexico wo uld 
need to show either that one or more ETP countries would catch 20,000 metric tonnes in addition 
to the quantity currently harvested, or that one or more ETP countries would be willing to sell 
20,000 metric tonnes of their yellowfin to Mexico rather tha n destine it for internal consumption or 
sell it to other countries.  
5.118.   In the first scenario, it is not clear whether catching the corresponding additional quantity 
of yellowfin tuna in the ETP would be allowed under other international rules, such as the IA TTC, 
which regulates catches of tuna species in the ETP, monitors and takes corrective action if they 
rise above sustainable levels.288 
5.119.   In the second scenario, we do not understand how the market price could remain the same 
if certain suppliers decided to se ll their product to Mexican canneries and not to the canneries in 
those countries to which they normally export. In this regard, we find it important to note that 
20,000 metric tonnes represents a significant amount, given that the total equivalent quantit y of 
canned yellowfin harvested in the ETP region from which Mexico intends to source its imports of 
yellowfin289 was 55,388 metric tonnes in the year 2014.290 In percentage terms, 20,000 metric 
tonnes amounts to 36% of total production from the mentioned ETP region. In our view, if Mexico 
were to purchase as significant a share as this, it would cause an increase in Mexico's import 
prices. Depending on the magnitude of such a price increase, Mexican producers might choose to 
sell part or all of their canned ye llowfin in the Mexican market rather than exporting to the US 
market. Mexico submits that the United States has not demonstrated why Mexico's assumption 
about the availability of 20,000 metric ton nes of yellowfin from the South American countries is 
invali d.291 In our view, however, it is for Mexico to demonstrate the validity of its own assumption 
before we would expect the United States to refute that assertion. Mexico has not done so.  
5.120.   Based on these considerations, we do not find plausible Mexico's argumen t that it could 
import the equivalent of 20,000 metric tonnes of canned yellowfin from other ETP countries in 
order to meet its domestic demand for canned yellowfin.  
5.1.3.3.4   Conclusion  
5.121.   As we have explained, the third assumption underlying Mexico's model is base d on three 
arguments, namely, (a ) that the Mexican producers would be competitive vis-à-vis the US 
canneries and pro ducers from other countries, (b ) that no country other than Mexico would be 
significantly incentivized to export canned yellowfin to the United  States after the withdraw al of 
the Tuna Measure, and (c ) that Mexico would buy the equivalent of 20,000 metric tonnes of 
canned yellowfin from other ETP countries to meet the domestic demand for canned yellowfin in 
Mexico.  
5.122.   We find the first argument to be  plausible mainly because of Mexico's geographical 
proximity to the US market and the tariff -free treatment that it enjoys as a NAFTA member. We 
have also agreed with the argument that the withdrawal of the Measure would not lead to a 
significant increase in the volume of exports to the United States of canned yellowfin from 
countries other than Mexico. In this regard, we have noted that the situation of countries that 
already export canned yellowfin to the United States would not change after the withdrawa l of the 
                                               
286 United States' written submission, para. 118.  
287 United States' comments on Mexico's response to Arbitrator question No. 80.  
288 United States' written submission, para. 117, referring to Exhibits USA -43 and USA -52. 
289 See Exhibit MEX -02, table 10.  
290 Exhibit MEX -02, table 10.  
291 Mexico's comments on the United States' response to Arbitrator question No. 141.  WT/DS381/ARB  
 
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  Tuna Measure. As for the two ETP countries that might be affected by the withdrawal of the Tuna 
Measure, namely, Ecuador and Guatemala, we have noted that because their capacity is limited, 
they would not be in a position to significantly increase  their exports to the United States in the 
short-term. However, we do not find plausible the third argument underlying this assumption, 
namely, that Mexico could import the equivalent of 20,000 metric tonnes of canned yellowfin from 
other ETP countries to meet its domestic demand for canned yellowfin. Mexico has not 
demonstrated to us that in the short -term there could be excess supply in the ETP which  would 
allow Mexico to purchase the equivalent of 20,000 metric tonnes of canned yellowfin , without 
increas ing the catch level in that region , or the price of fresh and frozen yellowfin in a way that 
would undermine Mexico's competitiveness vis-à-vis other countries  that could supply the US 
market.  
5.123.   In the light of these findings, we conclude, overall, that Mexi co's third assumption, which 
implies that it would be the dominant supplier of canned yellowfin in the US market following the 
withdrawal of the Tuna Measure, is a reasonable one. We consider that the fact that Mexico would 
be competitive vis-à-vis US cann eries and suppliers from third countries, coupled with the fact that 
the third -country suppliers would not be incentivized to significantly increase their exports of 
canned yellowfin to the United States following the withdrawal of the Tuna Measure, suppor ts this 
conclusion, even if we do not find plausible Mexico's argument about purchasing the equivalent of 
20,000 metric tonnes of canned yellowfin. In our view, Mexico would still be the dominant supplier 
of canned yellowfin in the US market in the short -term even if it were not able to import the 
equivalent of 20,000 metric ton nes of canned yellowfin from the other ETP countries.  
5.124.   Having found that it is reasonable to assume that Mexico would be the dominant supplier 
of canned yellowfin to the United States  after the withdrawal of the Tuna Measure, the next 
question is whether it is also appropriate that Mexico, for modelling purposes, disregards the 
supply of canned yellowfin from other sources and in its model treats Mexico as the sole supplier of 
that pro duct to the United States, in order to facilitate the actual calculation of the level of 
nullification or impairment. For reasons explained in Section  6.2.2 below , we find this approach to 
be appropriate in calculat ing the level of nullification or impairment.  
5.1.3.4   Conclusion on Mexico's  proposed  model  
5.125.   In the preceding paragraphs, we have described and critically analysed Mexico's proposed 
model. We have found that many but not all of the assumptions on which the model is based ar e 
reasonable. Therefore, we consider that it could, in principle, be appropriate for us to base our 
calculation on Mexico's model, provided that we respecified those assumptions that we have found 
to be unreasonable.  
5.126.   Before we could  do so , however, we mus t examine the alternative model proposed by the 
United States , to determine whether it constitutes a reasonable or superior alternative to the 
model proposed by Mexico.  
5.2  United States' proposed model for determining the level of nullification or 
impairment  
5.2.1   Description of the model  
5.127.   The United States uses a model which examines Mexico's historical share in the US tuna 
products market prior to the adoption of the  Dolphin Protection Consumer Information Act  (DPCIA ) 
and compares actual US imports from Mexico of t una products with the 2013 Tuna Measure in 
place to the level of imports that would occur if the Measure were withdrawn. The United States 
contends that this approach is consistent with that taken by past arbitrators as well as with the 
evidence on the rec ord.292 According to the model presented by the United States, the level of 
nullification or impairment suffered by Mexico in the present case is between USD 8.5 and USD 
21.9 million .293 
                                               
292 United States' written sub mission, para. 125.  
293 United States' written submission, para. 137.  WT/DS381/ARB  
 
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  5.128.   The United States' model can be described as a five -step methodology gear ed towards 
calculating the hypothetical US imports of Mexican tuna products in the counterfactual scenario294:  
a. The United States identifies Mexico's share in US imports of tuna products prior to the 
adoption of the DPCIA;  
b. it applies those percentages to cu rrent US imports of tuna products;  
c. it multiplies the projected import volumes by  the average price of  imported  tuna 
products, excluding Mexican tuna products;  
d. it discounts the results from the previous step in order to account for the alleged 
current US consumer preference for tuna products produced from fishing methods 
other than setting on dolphins over tuna products produced from setting on dolphins; 
and 
e. it subtracts the value of Mexico's actual imports from the figure calculated in the 
previous step.  
5.129.   Regarding the first step, the United States explains that it identified exports of tuna 
products from Mexico to the United States  in the period 1987 -1989 and calculated Mexico's export  
share by volume, which amounted to 3.9%, with a historical high of 5.8%  in 1987.295 The United 
States considers 3.9% to be a reasonable estimate of what Mexico's annual share of US imports of 
tuna products would be in the absence of the Tuna Measure, and 5.8% to represent the highest 
possible share of potential imports that cou ld be affected by the Tuna Measure. The United States 
explains that its approach uses Mexico's share in US imports of the covered products during the 
relevant historical period rather than absolute quantities of imports296, and that although using 
Mexico's h istorical share of all tuna imports, rather than just tuna products, may overestimate the 
level of nullification or impairment, the resulting estimate is likely very close to Mexico's historical 
share in the US imports of tuna products.297 
5.130.   Regarding the seco nd step, the United States explains that it applies the percentages 
obtained in the first step to current US imports of tuna products based on average annual imports 
of tuna products for 2013 -2015.298 The United States argues that during this three -year peri od, it 
imported on average 251,011 m etric tonnes  of tuna products , and that assigning Mexican tuna 
products a 3.9% share of imports at this level suggests that US imports of Mexican tuna products 
would be approximately 9,789 m etric tonnes  per year, and tha t at 5.8%, US imports of Mexican 
tuna products would be 14,559 m etric tonnes  a year.299 
5.131.   In the third step, the United States multiplies the projected quantity of Mexico's exports of 
tuna products by the average import price of tuna products from the world, e xcluding Mexico, for 
the period 2013 -2015300, resulting in an annual value of US imports of Mexican tuna products of 
USD 51.8 million, based on a 3.9% share in overall US imports of tuna products, and USD 77.1 
million, based on a 5.8% share in those imports.  The United States explains that excluding imports 
from Mexico from the calculation of the average price of tuna products has the virtue of accounting 
for any price difference between Mexican tuna products and other tuna products due to the 
ineligibility o f the Mexican product for the dolphin -safe label.301 
5.132.   In the fourth step, the United States discounts the figures obtained thus far to reflect its 
contention that producers and retailers would continue to differentiate tuna products produced 
from fishing meth ods other than setting on dolphins from tuna products produced from tuna 
                                               
294 United States' written submission, paras. 124 -137; Exhibit USA -81.  
295 United States' written submission, para. 130. We note that the United States contends that using an 
average is prefe rred in cases like this as it smooths year -to-year anomalies and gives a more accurate picture 
of Mexico's market share during the relevant period.  
296 United States' written submission, para. 128.  
297 United States' written submission, para. 129.  
298 United Sta tes' written submission, para. 131 (referring to Exhibits USA -62 and USA -81). 
299 United States' written submission, para. 131.  
300 United States' written submission, para. 132.  
301 United States' written submission, para. 132.  WT/DS381/ARB  
 
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  caught by setting on dolphins.302 The United States argues that these preferences are revealed in 
the commitments that many companies serving the US market have made to the EII not to 
produce, hold, or sell tuna products produced from setting on dolphins and that, as these 
commitments do not depend on the content of US law, they would not likely change even if the 
Tuna Measure were withdrawn.303 According to the United States, retailers th at account for [[ xxx 
]]% of total consumption of tuna products in the US market have such policies. The United States 
introduces this discount in its model by multiplying the estimated value of imports of Mexican tuna 
products, the figure resulting from t he third step, by 0.53 to reflect the market share available to 
tuna products produced from setting on dolphins.304 This leads to a result of USD 27.45 million 
based on a 3.9% share in overall US imports of tuna products, and USD 40.8 million, based on a 
5.8% share in those imports.  
5.133.   In the fifth step, the United States subtracts the value of current US imports of Mexican 
tuna products from the value of imports from Mexico that would have occurred in the 
counterfactual situation. Using the average actual value  of US imports of Mexican tuna products 
for 2013 -2015 produces a result, which, the United States argues, constitutes its estimate of the 
level of nullification or impairment, of USD 8.5 million, based on a 3.9% share in overall US 
imports of tuna products , and an upward bound of USD 21.9 million, based on a 5.8% share in 
those imports.305 
5.2.2   Mexico's arguments on the United States' model  
5.134.   Mexico argues that the market -based approach proposed by the United States is flawed 
and underestimates losses suffered by Me xico because of the Tuna Measure.306 For Mexico, the 
historical figures used in the United States' model are not indicative of the levels of imports in the 
case of the withdrawal of the Tuna Measure because these import volumes occurred more than 25 
years ag o, at a time when market conditions were very different from those observed in 2014.307 
Mexico considers that the historical market share approach suggested by the United States leads 
to a flawed counterfactual because market conditions prevailing at the tim e of adoption of the 
Tuna Measure in 1990 were not the same as the conditions in 2014.308 
5.135.   Mexico presents several reasons why the market conditions have changed between the 
period 1987 -1989 and 2014. First, Mexico argues that the United States maintained a t rade 
embargo on imports of Mexican tuna from 1980 -1986 and that when the United States lifted the 
embargo, it pressured Mexico to agree to "voluntarily" restrain exports to the United States.309 
Second, Mexico contends that the 1987 -1989 period does not corr espond to what would be 
observed following the withdrawal of the Tuna Measure in 2014 because Mexican firms now have 
much better access to the US market due to Mexico's membership in NAFTA . In particular, Mexico 
notes that while the applicable duty rate in  the 1987 -1989 period was 35% for tuna products in oil 
and 12.5% for tuna products not in oil, as a NAFTA member, Mexico can now export canned tuna 
to the United States free of customs duties.310 Third, Mexico submits that the US market was 
essentially empti ed of canned yellowfin in 2014 , while during 1987 -1989 the market for canned 
yellowfin was occupied by US domestic production.311 Mexico underlines that competition in the 
canned yellowfin market was "stiff"312 in the 1987 -1989 period and that prior to the ena ctment of 
the Tuna Measure in 1990, US canneries processed large quantities of yellowfin from domestic and 
imported sources. Mexico argues that in this period, canned yellowfin tuna produced by US 
companies competed with Mexican canned tuna in the US marke t, and limited the presence of 
Mexican canned tuna in the US market. However, Mexico submits that the US fleet has since 
moved out of the ETP , and that the US canning industry has changed so significantly that it is no 
longer capable of processing large qu antities of yellowfin from the ETP.313 In Mexico's view, it 
                                               
302 United States' written submissi on, para. 134.  
303 United States' written submission, para. 135.  
304 United States' written submission, para. 136.  
305 United States' written submission, para. 133.  
306 Mexico's written submission, para. 177.  
307 Mexico's written submission, para. 178  
308 Mexico's wri tten submission, paras. 177 and 178.  
309 Mexico's written submission, para. 179.  
310 Mexico's written submission, para. 180 (referring to Exhibit MEX -68). 
311 Mexico's response to Arbitrator question No. 112.  
312 Mexico's written submission, para. 181.  
313 Mexico's written submission, para. 181. WT/DS381/ARB  
 
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  follows from these reasons that the market segment in which Mexico specializes is currently not 
occupied, and that it can therefore be expected that Mexico's market share after the wi thdrawal of 
the Tuna Measure will be much larger than what it was in the 1987 -1989 period.314 
5.136.   Mexico also contends that the United States' model does not control for the shifts that 
have been made in Mexico's production from raw and frozen tuna to canned tuna products. Mexico 
notes in particular that the fact that  Mexico exported a certain quantity of raw yellowfin to the 
United States in the  period  1987-1989 does not mean that Mexico would  export the same quantity 
of canned yellowfin to the United States in 2014, because i t has since modernized its boats and 
canning facilities. Mexico submits that the shift in production has implications on production costs 
that are not taken into account in the United States' model and  argues  that the Mexican canned 
tuna industry is now ve rtically integrated, making it even more cost -efficient. For these reasons, 
Mexico contends that it would export much higher quantities of canned yellowfin to the United 
States than its exports of raw yellowfin in 1987 -1989.315 
5.2.3   Arbitrator's analysis  
5.137.   As we di d before with Me xico's model, we will, in this S ection, identify and assess the main 
assumptions underlying the United States' model. The United States' model rests on two main 
assumptions: (a ) that US imports of tuna products from Mexico in the period 198 7-1989 provide a 
reasonable basis to estimate the quantity of US imports of tuna produ cts from Mexico in 2014, and 
(b) that even if the Tuna Measure were withdrawn, some of the retailers in the US market would 
still not carry Mexican canned yellowfin due t o the fact that they have made commitments not to 
produce, hold, or sell tuna products produced from setting on dolphins. We will assess each of 
these assumptions in turn.  
5.2.3.1   US imports of tuna products from Mexico in the period 1987 -1989 provide a 
reasonable  basis to estimate the quantity of US imports of tuna products from Mexico in 
2014  
5.138.   To recall, in the first step of its methodology, the United States uses the value of US 
imports of tuna products from Mexico in the 1987 -1989 period and calculates Mexico's share, by 
volume, in overall US imports of such products.316 The United States considers the resulting 
figures to be a reasonable estimate of what Mexico's annual share of US imports of tuna products 
would be in the absence of the Tuna Measure.317 In contrast,  as we mentioned in S ection 5.2.2 
above, Mexico contends that the approach taken by the United States is not instructive of the 
levels of imports in the scenario where the Tuna Measure is withdrawn , because thes e import 
volumes were observed more than 25 years ago, at a time when market conditions were very 
different from those observed in 2014.318 The gist of Mexico's argument is that because a proper 
counterfactual keeps everything but the measure of interest con stant, and because market 
conditions when the tuna measure was enacted in 1990 were not the same as in 2014, the United 
States' approach is flawed.319 
5.139.   The issue before us with respect to the first assumption is whether the market conditions 
in the period 198 7-1989 were sufficiently similar to the conditions in 2014 such that the volume of 
exports of tuna products from Mexico to the United States in 1987 -1989 represents "a reasonable 
estimate"320 for what the volume of Mexico's exports of canned yellowfin to the  United States in 
2014 would have been in the event of withdrawal of the Tuna Measure.321 
5.140.   In response to Mexico's arguments regarding the United States' methodology, the United 
States argues that neither the fact that there were voluntary export restraints d uring the period 
mentioned by Mexico, nor the fact that Mexico is now a signatory to NAFTA,  renders the United 
States' methodology inappropriate for calculati ng of the level of nullification or impairment caused 
                                               
314 Mexico's response to Arbitrator question No. 112.  
315 Mexico's response to Arbitrator question No. 112.  
316 United States' written submission, para. 130.  
317 United States' written submission, para. 130.  
318 Mexico's written submi ssion, para. 178.  
319 Mexico's written submission, paras. 177 and 178.  
320 United States' written submission, para. 130.   
321 United States' written submission, para. 130.  WT/DS381/ARB  
 
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  to Mexico.322 Regarding the first point, the U nited States contends that while the United States and 
Mexico agreed to certain voluntary export restraints on Mexico's total exports of tuna and tuna 
products to the United States, Mexico's actual exports of such products to the United States were 
below t he agreed level in each of the three years during which the restraints were in place.323 
Regarding the second point, the United States argues that data on Mexico's pre - and post -NAFTA 
exports of other seafood products to the United States, as well as data on  other countries' exports 
of canned tuna to the United States,  demonstrate that Mexico's share in the overall US imports of 
tuna products would not be significantly different in 2014 from its share in the 1987 -1989 period 
simply because NAFTA came into eff ect.324 The United States also contends that the structure of 
the US market has been remarkably consistent over the past 25 years, and that changes in the 
Mexican tuna industry (away from exporting loins towards exporting canned products) do not 
suggest that  Mexico's overall share in the United States' tuna product imports would be affected. 
Rather, in the United States' view, Mexican producers would simply export a higher  value product, 
since the overall capacity of Mexico's tuna industry is essentially unch anged from the late 
1980s.325 
5.141.   The United States further submits that its model controls for certain other factors 
mentioned by Mexico, namely, the location and capacity of US canneries and the capacity of 
Mexican canneries, by using Mexico's market share of all tuna products as the baseline.326 The 
United States argues that Mexico has not explained the "many other reasons" allegedly showing 
that the 1987 -1989 period was different from 2014,327 despite the fact that US tuna products 
imports have been remarkably co nsistent over the past 25 years.  
5.142.   We note that there is a difference of approximately 25 years between the period 1987 -
1989 and the year 2014, which is the year for which we determine the level of nullification or 
impairment in these proceedings. We conside r this gap to be too substantial to justify the United 
States' reliance on this historical comparison. We do not find reasonable the assumption that the 
state of the world in the period 1987 -1989 was sufficiently similar to 2014 to justify such a 
compariso n. We are not saying that for a comparison to be reasonable the time periods compared 
must in all cases be very close. However, where the periods compared are as distant as they are in 
the US model, we would expect a persuasive explanation why such a compa rison is reasonable, 
despite the very substantial gap. On balance, we are not persuaded by the explanations provided 
by the United States. For example, the United States argues that trends in imports of other 
seafood products from Mexico and of canned tuna  from other countries "suggest that the fact that 
1987-1989 pre -date NAFTA does not render the US counterfactual inappropriate"328. In our view, 
however, this argument does not suffice to justify such a comparison. For this argument to 
amount to a prima faci e showing, we would have expected the United States to demonstrate, for 
instance, that these other US seafood products markets behaved similarly to the US tuna products 
market before the Tuna Measure, and that they have been facing similar types of market changes 
since. In our view, given the substantial gap between these two periods, significant changes would 
have occurred in the market, including, but not limited to, those referred to by Mexico, for 
instance the fact that the Mexican tuna industry is now vertically integrated and that Mexico is a 
signatory of the NAFTA. We are not convinced that all such changes have been described and 
adequately controlled for in the US model.  
5.143.   We therefore do not find it reasonable to base our calculation of the level of nullification or 
impairment on a comparison between Mexico's shares in overall US imports of tuna products in the 
1987-1989 period and 2014.  
                                               
322 United States' response to Arbitrator question No. 56.  
323 United States' response to Arbi trator question No. 56 (referring to Exhibits USA -111 and USA -142).  
324 United States' response to Arbitrator question No. 56.  
325 United States' response to Arbitrator question No. 155.  
326 United States' oral statement at the meeting with the Arbitrator, para.  65. 
327 United States' oral statement at the meeting with the Arbitrator, para. 65 (referring to Mexico's 
written submission, para. 182).  
328 United States' response to Arbitrator question No. 56.  WT/DS381/ARB  
 
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  5.2.3.2   Some of the retailers in the US market would still not carry Mexican canned 
yellowfin due to the fact that they hav e made commitments not to produce, hold, or sell 
tuna products produced from setting on dolphins  
5.144.   The second assumption underpinning the US model is that even if the Tuna Measure were 
withdrawn, some of the retailers in the US market would still not carry M exican canned yellowfin 
because  they have made commitments not to produce, hold, or sell tuna products produced from 
setting on dolphins.  
5.145.   We have examined this argument presented by the United States in assessing Mexico's 
methodology in Section  5.1.3.2.2 above , and concluded that it was reasonable to assume that US 
retailers representing 26.9%329 of all tuna product sales in the US market would not carry Mexican 
canned yellowfin even if the Tuna Measure were withdrawn. For the same reasons, we find it 
reasonable to assume that some retailers would not carry Mexican canned yellowfin even after the 
Tuna Measure has been removed.  
5.2.3.3   Conclusion  on the United States' proposed model  
5.146.   For the foregoing reasons, we decline to use the US mod el in our assessment of the 
nullification or impairment in these proceedings. We will, however, incorporate elements of the 
United States' assumption that some of the retailers in the US market would still not carry Mexican 
canned yellowfin because of thei r commitments, in our calculation of the level of nullification or 
impairment.  
5.3  Overall conclusion  
5.147.   In the preceding paragraphs, the Arbitrator has addressed the models that Mexico and the 
United States have submitted, as well as the assumptions underpinnin g them. In this process, we 
have described both models and highlighted the main concerns we have.    
5.148.   To recall, Mexico presents a  calibrated partial equilibrium model of the US and Mexican 
canned tuna markets.330 It consists of a set of equations purporting t o describe the US and 
Mexican tuna markets by defining (a ) the demand for canned tuna in the United States and 
Mexico, re spectively, (b ) the supply of canned tuna in the United States an d Mexico, respectively, 
and (c ) the market equilibrium conditions in t he US and Mexican markets for canned tuna.331 We 
note that Mexico's model is underpinned by three main assumptions, namely, that (a) the Tuna 
Measure has restricted the supply of canned yellowfin from Mexico into the United States; (b) that 
US consumers have  a preference for canned yellowfin and US retailers would sell Mexican canned 
yellowfin after the withdrawal of the Tuna Measure; and (c) that Mexican producers would supply 
all of the increased consumption of canned yellowfin in the US market following th e withdrawal of 
the Tuna Measure. We found that, on the whole, these assumptions are reasonable, although we 
are not convinced by some of Mexico's intermediate arguments, in particular its arguments that 
(a) all US retailers would be willing to sell canned  yellow fin imported from Mexico and (b ) Mexico 
would export all of its canned yellowfin to the United States and import yellowfin from other 
producing countries to produce canned yellowfin for its domestic consumption.  
5.149.   With respect to the United States' mo del, we recall that that model is based on Mexico's 
historical share in the US tuna products market prior to the adoption of the Tuna Measure. It 
compares actual US imports from Mexico of tuna products with the Tuna Measure in place with the 
level of impor ts that would occur if the Measure were withdrawn. We have explained above that 
the United States' model would not be a reasonable basis for our calculation of the level of 
nullification or impairment caused by the 2013 Tuna Measure because it bases Mexico 's share in 
the US tuna market on historical data that goes too far back into the past.  
5.150.   Thus, for the reasons given above, we conclude that both of the models proposed by the 
parties have shortcomings. Accordingly, in our view, neither model, at least as i nitially presented 
                                               
329 As explained in para. 5.84, 26.9% reflects the total share of consumption covered by retailers' 
statements ([[ xxx ]]%  minus Walmart's market share [[ xxx ]]%). 
330 Mexico's methodology paper, para. 27.  
331 Mexico's methodology paper, paras. 20-40; Exhibit MEX -02, pp. 4 -27. WT/DS381/ARB  
 
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  by the parties, provides an appropriate basis for our calculation of the level of nullification or 
impairment caused by the 2013 Tuna Measure.  
5.151.   Assessing the two models in comparative terms, we recall that the fundamental difference 
betwe en Mexico's and the United States' arguments is that Mexico is of the view that the Tuna 
Measure restricted the supply of canned yellowfin from Mexico to the United States,  whereas the 
United States maintains that the decline in supply has been due to weak  demand for canned 
yellowfin in the US market. As we have explained, we think that the evidence on the record tends 
on the whole to support Mexico's assertion that the Tuna Measure has restricted the supply of 
yellowfin tuna to the US market. We also agree  with Mexico that the evidence demonstrates the 
existence of demand in the US market for canned yellowfin , and establishes that Mexico would be 
a competitive supplier of canned yellowfin. Accordingly, it would in our view be possible to base 
our calculatio n on a modified version of Mexico's model, that is, a version of Mexico's model that 
replaces those assumptions we have not found to be reasonable with other assumptions that we 
think better reflect the counterfactual on which we base our assessment.  
5.152.   We re call that, in assessing the level of nullification or impairment caused by the 2013 
Tuna Measure, we are not bound to base our calculation on either Mexico's or the United States' 
model. We could, in principle, attempt to develop an alternative model that would more accurately 
represent our understanding of the relevant counterfactual.  
5.153.   The most plausible alternative approach would be the so -called "price wedge method", 
whereby one would first determine the tariff equivalent of the US dolphin -safe label, an d then 
model the effect of its removal on the equilibrium price and quantity of Mexican canned tuna 
products sold in the United States.332 However, as both parties acknowledge, the data on the 
record does not allow the Arbitrator to apply the price wedge app roach, because the data does not 
allow for a comparison between the price of labelled and unlabelled tuna products.333  
5.154.   As we are unable to develop an alternative model, and because we find the theory 
underlying Mexico's model more convincing than the theory  underlying the United States' model, 
we will base our calculation on a respecified version of Mexico's model.  
5.155.   In practical terms, this means that we will use a partial equilibrium model to calculate the 
level of nullification or impairment. Partial equil ibrium models are used to calculate the equilibrium 
price and quantity in a certain market. Market demand and supply curves are constructed on the 
basis of consumer preferences and income, production technology, input costs, and conditions of 
competition, among other factors.334 The equilibrium price and quantity of the goods at issue in 
the specific market are found by equating supply and demand.335 
5.156.   As the United States also recogni zes, "partial equilibrium models are often used to show 
the impact of a policy change, which is modelled as an exogenous change in supply or demand, as 
appropriate".336 In the case at hand, the parties have proposed to calculate the level of nullification 
or impairment as the export loss, i.e. the difference between the counterfactual level of exports of 
canned tuna (in the case of the withdrawal of the 2013 Tuna Measure) and the actual level of 
exports, with both levels being determined for the year 2014. A partial equilibrium model can 
therefore be used to analyse the impact of the wi thdrawal of the Tuna Measure – which, in 
economic terms, can be conceived of as an exogenous shift in supply – on Mexico's exports of 
canned tuna to the United States. Indeed, as discussed above, the Arbitrator considers reasonable 
Mexico's assumption that  the Tuna Measure has restricted Mexico's supply of canned yellowfin to 
the US market and therefore finds it reasonable to model the counterfactual as a shift to the right 
of the supply curve of canned yellowfin from Mexico to the United States, reflecting  the expected 
increase in supply under the counterfactual.  
5.157.   In conclusion, it is the Arbitrator's view that, if appropriately implemented, the partial 
equilibrium modelling approach proposed by Mexico is a reasonable methodology to estimate the 
                                               
332 United St ates' written submission, paras. 84 and 86.  
333 United States' written submission, paras. 81-87; response to Arbitrator question No. 62 ; Mexico's 
written submission, para. 172.  
334 Exhibit USA -55, p. 3.  
335 Exhibit USA -55, p. 8.  
336 United States' written submissi on, para. 83.  WT/DS381/ARB  
 
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  export losse s caused by the Tuna Measure. Accordingly, in the following Section we will calculate 
the level of nullification or impairment on the basis of a respecified partial equilibrium model.  
6  THE ARBITRATOR'S OWN  DETERMINATION OF THE  LEVEL OF NULLIFICATI ON OR 
IMPA IRMENT  
6.1.   The Arbitrator now turns to its own assessment of the level of nullification or impairment 
caused by the 2013 Tuna Measure. In particular, we will begin by examining the demand and 
supply function of canned tuna products in Mexico and in the United  States and the 
parametrization of the model. Subsequently, we will discuss our calculation of the level of 
nullification or impairment and discuss the reasonableness of the result in the light of the issues 
raised by the parties during the proceedings.  
6.1  Demand for canned tuna  
6.2.  The Arbitrator begins by examining the demand and supply function of canned tuna products 
in Mexico and in the United States. We note first that a preliminary decision to take when defining 
the demand function in a market is how to mod el consumer preferences among different varieties 
of goods. To simplify the model and allow for its numerical simulations, different varieties of a 
good (in this case, different varieties of canned tuna) may need to be treated as a composite 
good.  
6.1.1   Modellin g consumers' choices across different varieties of canned tuna  
6.3.  As we have explained above in our description of Mexico's model, Mexico constructs the 
demand for canned tuna in the United States assuming that consumers take their decisions as to 
how much ye llowfin to consume at a given price of yellowfin, taking into consideration the price of 
generic tuna (an aggregate of all other types of tuna) and their preferences for yellowfin.  
6.4.  We specify the demand for canned tuna in both the United States and Mexico based on 
Mexico's quality differentiation model.337 Consumers choose between two products , canned 
yellowfin and canned generic tuna. We define the former as canned tuna that includes 100% 
yellowfin, in chunk or any other form. We define the latter as canned tuna that either does not 
include yellowfin or includes yellowfin mixed with other tuna, such as skipjack, in which case the 
canned tuna product is not made of 100% yellowfin.338 
6.5.  The United States argues that Mexico's use of the choice (or hedonic) model to model 
consumer demand for the product is incorrect, and that the standard way to model consumer 
demand for a product that is already on the market would be the almost ideal demand system 
(AIDS) model.339 Even though the AIDS model is used extensively in the economic literature as a 
way to test and calibrate demand (and indeed, Mexico refer s to several studies using the AIDS 
model to estimate elasticity for canned tuna), we consider it more appropriate to model demand 
for canned tuna with the choice model in t hese proceedings, for several reasons. First, as 
recognised in the literature, in its simple static form, the AIDS model does not provide a fully 
satisfactory explanation of consumers' behaviour .340 Second, as Mexico argues, the AIDS model "is 
an empirical m odel of demand … typically used to estimate elasticities of demand (own -price, 
cross-price and income)".341 However, the AIDS model "cannot provide information about 
consumers' valuation of different tuna species".342 It is therefore not clear to us how the AI DS 
model could be used in the context of our model, taking into account the data on the record. 
Accordingly, in our view, the appropriate model is the hedonic model, which is used in Mexico's 
methodology paper.  
                                               
337 Exhibit MEX -02, pp. 11 -33. 
338 We note that Mexico argues that the type of tuna that Mexico would export to the United States 
under the counterfactual is canned tuna that includes 100% yellowfin (see Mexico's response to Arbitrator 
question N o. 83, para. 57) . 
339 United States' written submission, footnote 165 (referring to Exhibit USA -8).  
340 A. Deaton and J. Muellbauer (1980), "An Almost Ideal Demand System," American Economic Review  
70(3): 312 –326.  
341 Mexico's response to Arbitrator question N o. 34.  
342 Mexico's response to Arbitrator question No. 34.  WT/DS381/ARB  
 
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  6.1.2   Aggregation across tuna species  
6.6.  The United St ates further argues that it is wrong to aggregate light meat tuna, such as 
skipjack , and albacore, in the same composite good. We recall in this regard that, in Mexico's 
model, there are two types of canned tuna products: yellowfin and generic. This distin ction is 
based on assumed quality differences between higher quality yellowfin and lower quality generic 
tuna, broadly defined to include skipjack, albacore and tongol.343 
6.7.  In the view of the United States, Mexico errs in aggregating demand for albacore and l ight 
tuna.344 The United States asserts that "Mexico could have justified its aggregation of skipjack and 
albacore in one (or both ) of two ways, either with Hick s' Composite Commodity Theorem, as 
Mexico has tried to do, or with the Leontief -Sono separability  assumption. However, neither of 
these holds in this instance".345 In the United States' view, the US tuna product market is made up 
of a variety of products – not only "yellowfin" and "generic" as Mexico assumes.346 The market has 
a low -end portion, composed of "light tuna" – a mixture of skipjack, yellowfin, tongol, and/or big -
eye tuna – and a high -end portion, dominated by "white tuna" (i.e. albacore).347 According to the 
United States, albacore is more similar to canned premium yellowfin than to generic light  tuna.348 
Consequently, albacore and generic light tuna do not fall into the category of products that – 
according to the Leontief -Sono separability condition – can properly be aggregated into a 
composite commodity vis-à-vis yellowfin. According to the Unite d States, this is because the 
marginal rate of substitution between skipjack and albacore is not independent of yellowfin.349 
6.8.  With regard to the requirements of the Hick s' composite commodity theorem, the parties 
agree that the aggregation of tuna species su ch as skipjack and albacore in a single composite 
good is valid if the conditions stated in the theorem hold, i.e. if the prices of the group of 
aggregated goods change proportionally.350 The parties disagre e, however, on whether the Hick s' 
composite commodi ty theorem is satisfied in this case.  
6.9.  Mexico argues that the theorem is indeed satisfied in this case. In Mexico's view, the demand 
for canned generic tuna and the demand for canned albacore tuna respond in the same way (i.e. 
shifting to the left) to the decline in the price of canned yellowfin. According to Mexico, this is true 
even though the two types of product are of different qualities.351 Mexico further refers to the 
results of an academic study showing that both skipjack and albacore are substitute g oods for 
yellowfin (both have positive cross price elasticities with respect to yellowfin).352  
6.10.  By contrast, the United States argues that the conditions of the theorem are not met. This is 
because there is evidence from the above -mentioned academic study of  statistically significant 
substitution elasticities between albacore and skipjack, and because "the price of canned albacore 
and all other canned tuna imports (a reliable proxy for skipjack) do not always move in the same 
direction, let alone proportional ly, to the price of all canned tuna imports".353 
6.11.  We understand that there may be reasons for a more detailed disaggregation of the model 
for the calculation of the level of nullification or impairment. However, a model with individual 
demand for canned skipj ack and canned albacore would be significantly more complex and less 
transparent than a model with non -yellowfin products aggregated into a single composite 
commodity.354 Furthermore, while the parties acknowledge that albacore and yellowfin are both 
premium  products, the evidence on the record indicates that US consumers have also been paying 
a premium for canned yellowfin as compared to canned albacore, and not only as compared to 
                                               
343 Exhibit MEX -02, p. 11.  
344 United States' response to Arbitrator question No. 64.  
345 United States' comments on Mexico's response to Arbitrator question No. 86 . 
346 United States' written submission, p ara. 102.  
347 United States' written submission, para. 102.  
348 United States' response to Arbitrator question No. 64.  
349 United States' response to Arbitrator question No. 64; comments on Mexico's response to Arbitrator 
question No. 86, para. 53. 
350 Mexico's re sponse to Arbitrator question No. 86; United States' comments on Mexico's response to 
Arbitrator question No. 86.  
351 Mexico's response to Arbitrator question No. 38 (referring to Exhibit USA -8). 
352 Mexico's response to Arbitrator question No. 86.  
353 United S tates' comments on Mexico's response to Arbitrator question No. 86.  
354 Mexico's response to Arbitrator question No. 38.  WT/DS381/ARB  
 
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  skipjack.355 We further note that the price data in Exhibit US -214 actually sho w a significant co -
movement of the prices of albacore and skipjack in the period 1989 -2015 (although admittedly not 
in every single year). In the light of this evidence on the record, and accounting for the potential 
repercussions of working with a more co mplex and less transparent model, we consider it 
reasonable to simplify the modelling of the US canned tuna market by assuming that it is made up 
of two product types: generic tuna and yellowfin.  
6.12.   Having determined that we can model the demand for canned t una in both the United 
States and Mexico as a consumer decision between two products, canned yellowfin and canned 
generic tuna, we now proceed to specify the demand equations. As further detailed in equations 1, 
2, 3 and 4 in Appendix  1 to this Decision , the demand for each canned tuna product (yellowfin or 
generic) in each country356 depends on the price of the product357; preferences for yellowfin versus 
generic tuna358; and two parameters , the demand intensity and the elasticity of demand.359 In the 
United State s, the demand for each canned tuna product (yellowfin or generic) also depends on a 
third parameter, namely the share of US retailers that would sell Mexican canned yellowfin. We 
now proceed to discuss all the determinants of the demand for canned tuna in the two countries, 
starting with the distribution of preferences.  
6.1.3   Distribution of preferences and its functional form  
6.13.  Consumer preferences for yellowfin versus generic tuna depend on how much a consumer 
prefers yellowfin to generic tuna, relative to how m uch higher is the price of yellowfin than the 
price of generic tuna.360 All consumers with a "willingness to pay" for yellowfin below the price 
premium for yellowfin ( p, defined as  py - pg) will only purchase generic tuna. All consumers with a 
"willingness t o pay" for yellowfin above the price premium p will only purchase yellowfin. The 
share of consumers purchasing generic tuna, H(·), and the share of consumers purchasing 
yellowfin, 1 - H(·), will therefore depend on the price premium p, that is H(·) = H(p) . 
6.14.  Mexico assumes, both for US and Mexican consumers, a logistic distributional form for the 
function H(p).361 Accordingly, the function H(p) is equal to 
 , where e(·) is the exponential 
function. With this specification, H(p) is increasing in the price premium p (i.e., the larger the price 
premium, the larger the share of consumers that will purchase generic tuna). Furthermore, it 
depends on two parameters: the mean and median willingness to pay (henceforth, "mean 
willingness to pay") for canned ye llowfin over canned generic tuna among consumers ( μ), and a 
scale parameter ( s), which determines the dispersion of the distribution (the larger s, the more 
dispersed the distribution).  
6.15.  We accept the assumption that the function H(p) can be parameterized w ith a logistic 
functional form, both in the case of US consumers and in the case of Mexican consumers, for the 
following three reasons. First, the United States argues that a logistic function does not describe 
the US distribution of willingness to pay for  tuna, because many US consumers show a high 
sensitivity to price. This is shown, according to the United States, by the fact that nearly half of all 
US sales of canned tuna are at discounted (sale) prices.362 Mexico counters this argument by 
contending that  there is nothing in the logistic distribution that impedes the demand for canned 
yellowfin being sensitive to its price.363 We agree with Mexico on this point. Second, the United 
States contends that an exponential distribution for US consumers' willingness  to pay should be 
adopted.364 However, the United States does not offer a compelling argument for using an 
                                               
355 Mexico's response to Arbitrator question No. 79.  
356 Respectively, Q yus for the demand for yellowfin in the United States in equation 1; Qgus for the 
demand for generic in the United States in equation 2; Qymx for the demand for yellowfin in Mexico in equation 
3; and Qgmx for the demand for generic in Mexico in equation 4.  
357 Respectively, pyus for the price of yellowfin in the United States ; pgus for the price of generic in the 
United States; pymx for the price of yellowfin in Mexico; and pgmx for the price of generic in Mexico.  
358 Respectively, the functions H(·) us for the United States and H(·) mx for Mexico.  
359 The demand intensities are de noted Aus and Amx for the United States and Mexico, respectively. The 
demand elasticity is the parameter η. 
360 Exhibit MEX -02, pp. 11 -13. 
361 Exhibit MEX -02, p. 14 (referring to equation 8 therein).  
362 United States' written submission, para. 105. 
363 Mexico's r esponse to Arbitrator question No. 37.  
364 United States' response to Arbitrator question No. 71.  WT/DS381/ARB  
 
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  exponential distribution to model US consumers' preferences.365 Third, the parties agree that by 
manipulating the logistic functional form, the willingne ss to pay can easily be parameterized based 
on actual consumption shares H(p) and 1 - H(p) observed in the United States and in Mexico in 
2014. We will follow the procedure suggested by the parties when assigning parameter values to μ 
for the United States  and Mexico.  
6.16.  The scale parameter of the logistic distribution and the mean willingness to pay are 
parameters (not variables to be solved for) of the model. We therefore need to assign values to 
them (that is, "parameterize" them).  
6.1.3.1   Parameterization of the s cale parameter of the logistic distribution  
6.17.  Mexico proposes to use s = 1, arguing that this is common in the empirical literature for 
logistic regression models.366 Mexico provides sensitivity analysis showing that the higher the scale 
parameter s, the large r the export loss.367 The United States disagrees, arguing that Mexico has 
presented no evidence to explain the basis for parameterizing s = 1 and asserts that a scale 
parameter equal to 1 concentrates the majority of consumers close to the centre of prefere nce.368 
We are not persuaded that the latter is a problem, and we note that the United States does not 
suggest a different s. We therefore accept the parameterization s = 1, both in the United States 
and in Mexico.  
6.1.3.2   Parameterization of the mean willingness to  pay 
6.18.  To parameterize the mean willingness to pay μ, Mexico initially assumed a value of USD 
2/kg, both for the United States and for Mexico. Mexico submitted that there is no reason to 
believe that preferences for canned tuna should differ across the two c ountries.369 We disagree 
with this contention because, as the United States contends, "Mexican and U.S. consumer 
preferences differ both in general terms and in specific preferences for food products" .370 In what 
follows, we proceed to parameterize the mean "w illingness to pay" for the United States and 
Mexico based on the observed yellowfin shares in the overall consumption of canned tuna in 2014.  
6.1.3.2.1   Willingness to pay in the United States  
6.19.  To justify the assumed value of USD 2/kg for the mean willingness to pay, Mexico initially 
argued that it was following a conservative approach, assuming that the mean willingness to pay 
for canned yellowfin was much lower than an econometrically -estimated premium.371 The United 
States asserts that the USD 2/kg value assigned by M exico to the mean willingness to pay for 
canned yellowfin over generic tuna products is a mere assumption and divorced from the reality of 
the US market.372 Despite this disagreement, the parties agree that canned yellowfin only 
represented a share of 1.2% o f the US canned tuna market in 2014.373 Thus, at our substantive 
meeting with the parties, the United States proposed a method to parameterize the mean 
willingness to pay with simple algebraic manipulations of the logistic functional form for the 
function H(p), based on yellowfin's 1.2% share in overall canned tuna product consumption in 
2014 and an econometrically -estimated price premium.374 
6.20.  We accept the methodology proposed by the United States to parameterize the mean 
willingness to pay in the United States . Since parameterization is meant to reflect the status quo , 
                                               
365 Mexico's response to Arbitrator question No. 102.  
366 Mexico's response to Arbitrator question No. 92.  
367 Exhibit MEX -02, p. 46 (referring to Figure 5 therein).  
368 United States' comments on Mexico's response to Arbitrator question No. 92, para. 70; written 
submission, para. 90.  
369 Mexico's written submission, para. 160.  
370 United States' written submission, para. 100.  
371 Exhibit MEX -02, p. 20.  
372 United States' writte n submission, para. 104. 
373 Mexico's response to Arbitrator question No. 150 ; United States' comments on Mexico's response to 
Arbitrator question No. 150.  
374 The United States' methodology in this respect is to solve equation (8) in Exhibit MEX -02 (p. 14) fo r 
the variable μ, yielding 
 , where p is the econometrically -estimated price premium; H(p) = 
0.988 (since the share of canned yellowfin in the United States, 1 – H(p), is 0.012); and s is assumed to be 
equal to 1. See Exhibit USA -150. WT/DS381/ARB  
 
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  that is, the current conditions, we consider it reasonable to use all available information – and in 
particular, the share of canned yellowfin in total US tuna product consumption – when assignin g 
parameter values. Mexico accepts the approach375, and we are therefore proceeding in a manner 
that is consistent with the parties' views on this issue.  
6.21.  Since, as explained above, μ is chosen as the solution to the equation
 , 
the determination of the price premium p is crucial to the determination of μ. To determine the 
value of p, Mexico proposes a hedonic regression model, in which the dependent variable is the 
price o f canned tuna in the United States, expressed in USD per kilogram, and the explanatory 
variables are its attributes (size, form, type of container, flavour, pack and salt content).376 Mexico 
relies on scanner data for canned tuna by Universal Product Code an d presented in Exhibit MEX -15 
(the Nielsen data). These data come in two sets, a 12 -week period and a 52 -week period dataset. 
Both datasets contain a breakdown of total sales, number of units sold, and average price per US 
region (East North Central, East South Central, Middle Atlantic, Mountain, New England, Pacific, 
South Atlantic, West North Central and West South Central).  
6.22.  Mexico estimates the premium for canned yellowfin sold in the United States using the 
coefficient on the dummy variable "yellowfin",  i.e., a variable equal to 1 if the canned tuna is 
yellowfin, and zero if it is not. This variable captures all attributes of canned yellowfin (other than 
size, form, type of container, brand, region etc.) that differ from generic tuna but that are not 
controlled for in the regression model.377 
6.23.  We note that the parties disagree on four issues regarding the econometric estimation of 
the price premium. First, Mexico deletes observations where the quantity sold is zero.378 Second, 
Mexico proposes two alternative e conometric specifications for each of the two datasets: ordinary 
least squares (OLS) and weighted least squares (WLS). The WLS method uses the number of units 
sold as weights in the regression, such that the more the units of a product sold, the more the 
product's weight in the regression model.379 Third, Mexico estimates an additional premium for 
yellowfin because it is offered in more desirable forms than generic tuna.380 Fourth, the United 
States submits that it is necessary to adjust the econometrically  estimated premium for a mark -up 
from import to retail.381 
6.24.  Regarding the first issue, namely the deletion of observations where the quantity sold is 
zero, the United States notes that the need to remove over 60% of observations due to lack of 
sales demonstrates that the dataset is not representative of the entire market.382 Mexico 
disagrees, arguing that "several of these [canned tuna] products were not sold at the time when 
the data were collected and may not have been sold for years. The quantities for these prod ucts 
appear as zero".383 When a product is not sold, there is no recorded price, and it is impossible to 
include zero quantity observations in the regressions. Therefore, the deletion of zero quantity 
observations is, in Mexico's view, "the only way to proce ed" and "a necessity rather than a matter 
of choice".384 We find Mexico's position reasonable because there is no way to include missing data 
in a regression. We therefore follow Mexico's position in our assessment.  
6.25.  Concerning the second issue, namely the r egression methodology, Mexico argues that the 
WLS regressions are to be preferred to the OLS regressions for two reasons: first, if the number of 
units sold is not used as weight, the high -priced generic tuna biases down the estimated premium 
for canned ye llowfin; and second, the WLS regressions have a much better fit (higher R -squared) 
than the OLS regressions.385 The United States argues that using the OLS regressions "is standard 
                                               
375 See Mexico's opening s tatement at the meeting of the Arbitrator, para. 45; Mexico's response to 
Arbitrator question No. 121.  
376 Exhibit MEX -02, pp. 16 -17. 
377 Exhibit MEX -02, p. 19.  
378 Exhibit MEX -02, p. 18.  
379 Exhibit MEX -02, p. 18.  
380 See Exhibit MEX -02, pp. 18 -19; Mexico's comment s on the United States' response to Arbitrator 
question No. 141.  
381 United States' response to Arbitrator question No. 141.  
382 United States' written submission, para. 104. 
383 Mexico's response to Arbitrator question No. 49.  
384 Mexico's response to Arbitrator question Nos. 49 and 50.  
385 Exhibit MEX -02, p. 20.  WT/DS381/ARB  
 
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  unless there is reason to think that the data observations are measured with varying degrees of 
precision and/or data are heteroskedastic, and Mexico advances no such reason".386 At our 
substantive meeting with the parties, the United States expressed the view that – if a weighted 
regression approach should be used at all – the weigh ts in the WLS regression ought to be in 
terms of volumes (kilograms) rather than number of units sold.387 Moreover, the United States 
argues that it is standard in economics to take the square root of a variable on which a regression 
is weighted.388 
6.26.  We asked M exico whether the large differences in coefficient estimates between OLS and 
WLS obtained by Mexico could reflect model misspecification. Mexico replied that such differences 
do not reflect model misspecification, but that "[an OLS] regression that conside rs all products 
equally will yield very different results than a weighted regression when some products sell 
thousand times more than others".389 Moreover, Mexico argues that "weighted regression should 
be used if a census parameter estimate is desired"390, as is the case of the regression for the 
premium paid for canned yellowfin in Mexico's methodology. Since both parties eventually 
presented WLS regressions (although with different weighting variables), we will also use WLS 
regressions in our calculations.   
6.27.  With regard to the United States' contention that the square root of weights should be used 
in weighted regressions, Mexico argues that this is incorrect.391 The United States asserts that , 
while Stata software automatically takes the square root of the weig hted variable when performing 
a WLS regression, the software used by Mexico (R) does not automatically take the square root.392 
We note, however, that: (a) we could replicate with alternative software, namely Stata, all the 
regressions that Mexico estimated,  without taking the square root of the weighting variable, with 
the R software; and (b) the results of our own WLS regressions are identical when estimated with 
the R software and when estimated with the Stata software, always using the variable itself, ra ther 
than its square root, as weights. We therefore reject the United States' argument that, while the 
Stata software automatically takes the square root of the weighted variable in a WLS regression, 
the R software does not. Accordingly, we estimate WLS re gressions with the weighting variable 
itself, rather than its square root, as weights.  
6.28.  With regard to the United States' argument that the weights in the WLS regression ought to 
be in terms of volumes (kilograms) rather than number of units sold, Mexico al so estimates WLS 
regressions using the total volume sold (measured in kilograms) as weight, as suggested by the 
United States.393 Since both parties propose estimations with volume weights, we also use such 
weights.  
6.29.  Concerning the third issue, namely the add itional "form" premium for yellowfin, Mexico 
calculates that US consumers have paid USD 1.18/kg more for yellowfin because it is offered in 
more desirable forms than generic tuna.394 Mexico suggests that the estimated form premium 
should be added to the coef ficient on the yellowfin dummy to get an estimated value of the price 
                                               
386 United States' response to Arbitrator question No. 71, footnote 289. In econometrics, the concept of 
heteroscedasticity (from Ancient Greek hetero  "different" and skedasis  "dispersion") refers to the pres ence of 
different variances across sub -groups of the error term of a regression.  
387 This is because, according to the United States, the purpose of the analysis is to study the price of 
tuna by weight, not by number of units sold, and the units vary substan tially by size (can size, as well as packs 
of 4 or more). See United States' comments on Mexico's response to Arbitrator question No. 100.  
388 United States' comments on Mexico's response to Arbitrator question No. 100 . 
389 Mexico's response to Arbitrator ques tion No. 100.  
390 Mexico's response to Arbitrator question No. 100 , citing A. C. Cameron and P. K. Trivedi (2009), 
Microeconometrics Using Stata , College Station (TX): Stata Press (Exhibit MEX -115). As explained in Exhibit 
MEX-115, p. 107, census parameter e stimates give more weights to oversampled groups in the population.  
391 In Mexico's comments on the United States' response to Arbitrator question No. 131, Mexico explains 
that it is possible to produce WLS estimators by multiplying the dependent and the ind ependent variables of a 
regression model by the square root of the regression weights. But regression packages in common statistical 
software programs (e.g., R or Stata) make this unnecessary. Weighting in these regression packages requires 
specifying the weights as the weighting variable itself, rather than as its square root.  
392 United States' comments on Mexico's response to Arbitrator question No. 100 . 
393 Mexico's response to Arbitrator question No. 79.  
394 See Exhibit MEX -02, p. 19. The premium for the for m is estimated, both for yellowfin and generic 
tuna, in comparison with the chunk form.  WT/DS381/ARB  
 
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  premium.395 This is because "[t]he form in which tuna is canned reflects the characteristics of the 
tuna meat and it cannot always be chosen by canneries, as it depends on the species and the size 
of tuna caught".396 The United States disagrees with this argument, noting that the form premium 
"has no place in the calculation of the level of nullification or impairment. Mexico exports only 
chunk products to the United States and is no longer e ven asserting that they would export a 
higher -quality product under the counterfactual".397 In our view, a premium for the form should be 
added, for the following reasons.  
6.30.  First, there is evidence on the record indicating that yellowfin, especially large yel lowfin, is 
better suited and more likely to be canned in the form of solid or fillet than generic tuna.  This is 
confirmed by a report by the United Nations Food and Agriculture Organization (FAO) explaining 
that "[m]ost of the commercial [yellowfin] catch is used for canning and fish over 10 kg are 
considered prime raw material for this purpose"398, as well as by the Tuna Species Guide from 
Atuna.com, which reports that "the large size of the yellowfin makes it well fit for solid packaging 
in cans".399 Tuna fis hed in the ETP falls in this category of tuna because it is large.400 In addition, 
Exhibit MEX -02 shows that the percentage of yellowfin canned in the form of fillet (20.5%) is much 
larger than the percentage of generic tuna in that form (2%).401   
6.31.   Furthermor e, we believe that the counterfactual does not need to be restricted by the 
assumption that Mexico would continue to export to the United States tuna in the form it currently 
exports (chunk). The evidence on the record shows that Mexico produces and export s "Ventresca" 
(tuna belly, a gourmet cut of tuna in solid form) in olive oil.402 Although Mexico does not currently 
export this product to the United States403, we find it reasonable to assume that Mexico could 
potentially export canned tuna in fillet or solid  form. The form premium is computed using the 
share of each form in the total volumes sold in the US market.  
6.32.  Concerning the fourth issue, namely whether the econometrically -estimated premium 
should be adjusted for a mark -up from import to retail, the Unite d States argues that while the 
level of nullification or impairment should be based on the premium calculated using import prices 
(a proxy of the price paid to the exporter in Mexico), Mexico wrongly calculates the premium at 
retail prices.404 In so doing, t he United States argues, Mexico overestimates the premium for 
canned yellowfin at importation.405 The United States asserts that "[i]n general, the mark -up from 
import to retail is based on the price of the product and is higher for gourmet products because 
these have fewer close substitutes and are purchased by consumers who have lower marginal 
utility of income".406 In support of this argument, the United States cites Exhibit USA -174, which 
shows that in 2007 the retail mark -up for imported fish and seafood w as 29%.  
6.33.  Mexico explains that its methodology applies at the wholesale level. Since only retail data 
are available, Mexico assumes that the wholesale to retail mark -up is the same for canned generic 
and for canned yellowfin tuna.407 In Mexico's view, this is a reasonable assumption because the 
mark-up reflects costs and there is no reason to think that costs are different for canned yellowfin 
and generic tuna. According to Mexico, it costs the same to take canned yellowfin and canned 
generic tuna from wholesal e to retail because these canned products are of similar sizes and 
weights.408 Furthermore, Mexico argues that even "if there were a reason to make adjustments to 
                                               
395 See Mexico's response to Arbitrator question No. 121 ; Mexico's comments on the United States' 
response to Arbitrator question No. 141.  
396 Exhibit MEX -02, p. 18.  
397 United States' comments on Mexico's response to Arbitrator question No. 121.  
398 Exhibit USA -87, p. 9.  
399 Exhibit MEX -06, p. 6.  
400 The United States reports that "[I]n 2015, for example, the average weight of the yellowfin tuna 
caught in the WCPO, the ETP, and th e Indian Ocean was 18.9 kg., 13.9 kg., and 45.8 kg per fish. Dolphin sets 
in the ETP also tend to produce large yellowfin (the aver age weight per fish was 21.4 kg  in 2015)" [footnotes 
omitted] (United States' response to Arbitrator question No. 151).  
401 See Exhibit MEX -02, Table 6, p. 19.  
402 Mexico's response to Arbitrator question No. 78.  
403 United States' comments on Mexico's response to Arbitrator question No. 78.  
404 United States' response to Arbitrator question No. 141.  
405 United States' response to Arbitra tor question No. 141.  
406 United States' response to Arbitrator question No. 141 . 
407 Exhibit MEX -02, p. 16.  
408 See Exhibit MEX -02, p. 16; Mexico's comments on United States' response to Arbitrator question 
No. 141. WT/DS381/ARB  
 
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  the model because of an unaccounted -for mark -up, the material in Exhibit USA -174 does not offer  
the information necessary to perform such a correction"409, because it is unclear how data in 
Exhibit USA -174 have been calculated, and the original source (of which Exhibit USA -174 is an 
excerpt) is not publicly available.  
6.34.  We agree with the United States t hat the canned tuna prices on which the calculation of the 
level of nullification or impairment should be based are the prices paid to the exporter in Mexico410, 
and that the value added on services rendered in the United States should be excluded from the 
relevant price in the calculations. In this regard, we note that Mexico's model is indeed calibrated 
at wholesale prices and that Mexico uses retail prices only to estimate the price premium. We 
understand that the key issue is whether the wholesale to reta il mark -up differs between yellowfin 
and generic tuna. We agree with Mexico that, insofar as the mark -up reflects transportation costs, 
it is reasonable to assume that they mainly depend on volume and weight and are unlikely to 
depend on the value of the s pecific can of tuna. We also understand that other factors can affect 
the mark -up, which can depend on price, for example, when markets are not perfectly 
competitive. However, the evidence on the record does not allow us to assess whether these 
circumstanc es exist in this case. On this basis, we consider reasonable Mexico's assumption that 
the mark -up is approximately the same for canned yellowfin and generic tuna. We therefore reject 
the United States' contention that the econometrically  estimated premium should be adjusted for a 
mark-up from wholesale to retail.  
6.35.  The only remaining issue to discuss is whether to rely on the 12 -week or the 52 -week 
dataset in our calculations. The parties have not discussed this specific issue. Both datasets have 
unique obser vations by Universal Product Code and region. The difference between the two is the 
timespan for the average of all variables across Universal Postal Codes and regions. The 12 -week 
dataset uses an average over the 12 weeks ending on 24 October 2015; the 52 -week dataset uses 
an average over the 52 weeks ending on 24 October 2015. We prefer the estimations based on the 
52-week dataset, for three reasons: first, the longer timespan used to average variables implies 
that the resulting averages are less sensitiv e to the economic cycle; second, the 52 -week dataset 
covers two months of 2014 – the first calendar year following the expiry of the RPT and the year 
for which we have chosen to calculate the level of nullification or impairment – while the 12 -week 
dataset  only covers the year 2015; and third, the number of observations N is approximately 10 % 
larger in the 52 -week dataset (N 52 = 3379) than in the 12 -week dataset (N 12 = 3009).  
6.36.  To summarize, we find it appropriate in the circumstances of this dispute to estim ate 
econometrically the price premium using WLS, with weights given by the total volume sold 
(measured in kilograms), in the 52 -week dataset, assuming the same mark -up from wholesale  to 
retail for yellowfin and generic tuna. Our estimated coefficient for t he yellowfin dummy, which 
represents the price premium of yellowfin relative to all other tuna, after controlling for a full set of 
dummy variables for form, brand, container, flavour, pack, salt and region, is equal to 3.76 
(standard error equal to 0.51).  Then, we add the form premium, also calculated using the 52 -week 
dataset and WLS with volumes as weights, of 0.85. Therefore, the total premium of yellowfin plus 
the form is 4.61.  
6.37.  It follows that, for the United States, using our econometrically  estimated  price premium ( p) 
of 4.61, a value of 1 - H(p) of 1.2% and a value of s equal to 1 in the equation 
 , 
we parameterize the mean willingness to pay in the United States, μus, to be equal to 0.199.  
                                               
409 Mexico's comments on United States' respons e to Arbitrator question No. 141.  
410 We note that this is consistent with the approach taken by previous arbitrators to focus on "trade 
forgone", i.e. lost exports: "In this sense, our task of estimating nullification and impairment is very different 
from t hat of a panel examining the WTO conformity of certain measures.  Once a panel has found a WTO 
inconsistency, it can presume – pursuant to Article 3.8 of the DSU – that the inconsistency has caused 
nullification and impairment.  On that ground the panel can give redress to the winning party under 
Article  XXIII of GATT 1994 or corresponding provisions in other WTO agreements.  What normally counts for a 
panel are competitive opportunities and breaches of WTO rules, not actual trade flows.  A panel does not 
norma lly need to further assess the nullification and impairment caused;  it can presume its existence.  We, in 
contrast, have to go one step further.  We can take it for granted here that the hormone ban is WTO 
inconsistent.  What we have to do is to estimate the nullification and impairment caused by it (and presumed to 
exist pursuant to Article 3.8 of the DSU).  To do so in the present case, we have to focus on trade flows. We 
must estimate trade foregone due to the ban's continuing existence beyond 13 May 1999." Decision by the 
Arbitrator, EC – Hormones (Canada) (Article 22.6 – EC), para. 41. See also Decision by the Arbitrator, US – 
1916 Act (EC) (Article 22.6 – US) para. 5.24.  WT/DS381/ARB  
 
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  6.1.3.2.2   Willingness to pay in Mexico  
6.38.  To parameterize the  mean willingness to pay in Mexico, μmx, we follow the same procedure 
as the one used above for μus, considering that the parties agree on this procedure and on the 
calibration result.411 
6.39.  Mexico estimates a price premium for canned yellowfin in 2014 in Mexic o equal to USD 
1.10/kg.412 Mexico further estimates the following consumption shares in Mexico: H(p) (share of 
generic tuna consumption in Mexico) equal to 29,585/87,929 (33.65%) and 1 - H(p) (share of 
yellowfin consumption in Mexico) equal to 58,344/87,929 (66.35%). Using these values in the 
formula proposed by the United States for the calculation of the mean willingness to pay, which we 
have already used for the United States, yields 
 . Therefore, 
in keeping with both parties' views, we calibra te μmx = 1.78.  
6.1.4   Parameterization of the demand intensity  
6.40.  Mexico calibrates the US aggregate demand intensity parameter Aus assuming that, in the 
status quo , the consumption of canned yellowfin in the United States is low enough to be 
considered de minimis . Under this assumption, the share of the United States' consumption of 
canned generic tuna, H(p), is equal to 1, and the demand equation for canned generic tuna in the 
United States can be written as 
 . Solving this equation for Aus, using the a verage 
observed price of imported canned tuna of USD 5/kg in 2014, a value of total US consumption of 
canned tuna of 330,264 metric tonnes and a price elasticity η = -1, the aggregate demand 
intensity parameter Aus computed by Mexico is 1,651,320,000.413 
6.41.  In order to take into consideration the small share of yellowfin consumption in the United 
States, we slightly modify these calculations and assume H(p) to be equal to 0.988 in the equation 
. Using the same values for pg (equal to 5) and for η (equal to -1) as the ones used 
by Mexico, we obtain a (slightly higher) calibrated value for Aus, equal to 1,671,376,518.  
6.42.  To calibrate the aggregate demand intensit y parameter Amx, for Mexico, we cannot use the 
same approach used to calibrate Aus. This is because a product can be sold as yellowfin in Mexico if 
the pack contains at least 40% yellowfin. The resulting mixing of tuna species in canned tuna 
makes it impos sible to isolate prices for yellowfin and generic tuna in Mexico.414 In this connection, 
we rely on the methodology used by Mexico, noting that this methodology is not contested by the 
United States. We therefore assume that Amx equals 443,162,161.415 
6.1.5   Paramete rization of the elasticity of demand  
6.43.  Mexico uses an elasticity of demand η equal to -1 in the equation 
  for both the US 
and Mexican markets and for both canned  yellowfin  and generic tuna. Mexico argues that this 
                                               
411 Mexico's response to Arbitrator question No. 121.  
412 Exhibit MEX -02, p. 27.  
413 See Exhibit MEX -02 (referring to equation (12), p. 16) . 
414 See Exhibit MEX -02, p. 26.  
415 Mexico calibrates Amx solving a system of three equations: the demand equations for yellowfin and 
generic tuna in Mexico, respectively 
  and 
 , and an e quation 
that models the average price of canned tuna in Mexico as a weighted average of the price of yellowfin and 
generic tuna, with weights given by consumption shares: 
 . We note that to 
solve the system of three equations described above, i t is necessary to transform the observed average retail 
price of USD 5.58 per kg into a wholesale price. Using data for 2014 from Exhibit MEX -20, Mexico estimates 
the mark -up between wholesale and retail prices as the coefficient on a dummy variable taking  value one if the 
marketing level is wholesale, and zero if the marketing level is retail, in an OLS regression controlling for brand 
dummies, product dummies, region dummies and month dummies ( Exhibit MEX -02, p. 27). Since the 
coefficient on the "wholesal e" dummy is estimated at -0.54, Mexico subtracts this value from the observed 
average retail price of USD 5.58 per kg, obtaining an estimated wholesale price 
 = USD 5.04 per kg. Using 
this value, along with with Qy = 58,344 metric tonnes, Qg = 29,585 metric tonnes, a resulting consumption 
share for canned yellowfin ( 1 - H(p)) of 66.35%, and a resulting consumption share for canned generic ( H(p)) 
of 33.65% in the system of three equations, yields a solution for Amx equal to 443,162,161 ( Exhibit M EX-02, 
pp. 26 -27).  WT/DS381/ARB  
 
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  value is in the upper range of elasticities reported in the literature.416 The United States contends 
that both yellowfin and skipjack have particularly elastic demand.417 However, Mexico has shown 
mathematically that the assumption of unitary price elasticity for the individual demand for canned 
tuna is not incompatible with higher values (in absolute values) of the price elasticities of 
aggregate demand for generic tuna and canned yellowfin.418 We therefore accept this argument by 
Mexico and use the parameterization η = -1. 
6.1.6   Accounting for some US retailers not commercializing Mexican canned yellowfin  
6.44.  Having established that there is evidence on the record suggesting that a subset of US 
retailers, representing a fraction 
  = 1 - 73.1% = 26.9% of consumption  of canned tuna 
products in the United States, would not purchase Mexican canned yellowfin harvested by setting 
on dolphins, we proceed to modify the US market shares for canned yellowfin and for canned 
generic tuna.  
6.45.  Both the United States and Mexico propo se a method we could use to adjust the demand for 
canned yellowfin if a segment of retailers is not willing to sell tuna caught by setting on dolphins. 
The United States removes a share 1 - 
 of tuna consumption from the US yellowfin intensity o f 
demand parameter and adds it to the consumption of generic tuna.419 Mexico modifies the market 
shares of canned yellowfin and generic tuna consumption as 
  and 
 , 
respectively, in the demand equations for canned yellowfin and for ca nned generic tuna.420 
6.46.  The United States submits that Mexico's methodology in this respect produces estimates of 
the level of nullification or impairment that are not materially different from those produced 
applying the United States' approach.421 On this basi s, we accept the modification suggested by 
Mexico in our determination of the level of nullification or impairment.  
6.2  Supply of canned tuna  
6.2.1   The counterfactual  
6.47.  As discussed above, we consider that withdrawal of the Tuna Measure is the appropriate 
counterfactu al for the calculation of the level of nullification or impairment in these proceedings. 
We also consider reasonable Mexico's assumption that the Tuna Measure has restricted Mexico's 
supply of canned yellowfin to the US market. Therefore, we model the coun terfactual as a shift to 
the right of the supply curve of yellowfin to the United States.  
6.48.  In the following paragraphs, we describe how we model and parametrize the supply of 
canned yellowfin and generic tuna in the United States and in Mexico422, and how we reflect the 
shift of the supply of tuna products in the definition of the counterfactual.  
6.2.2   Export supply of canned yellowfin  
6.49.  Following Mexico's modelling approach, we model the counterfactual as a shift of Mexico's 
supply of canned yellowfin. Although, as n oted above, the Tuna Measure constitutes a restriction 
on imports, rather than an import ban, given the small share that canned yellowfin had in the US 
tuna product market in 2014 and that only a small portion of that small share was supplied  by 
Mexico, for simplicity , we specify the model as if  Mexico did not  export canned yellowfin to the 
United States in 2014 . Specifically , we note that in 2014 c anned yellowfin represented only 1.2% 
                                               
416 Exhibit MEX -02, p. 15.  
417 United States' written submission.  
418 Mexico's written submission, para. 143.  
419 United States' response to Arbitrator question No. 141.  
420 That is, the aggregate demand for canned yellowfin in the United States becomes  
 
 , and the aggregate demand for canned generic tuna in the United States becomes  
 
 . See Mexico's responses to Arbitrator question No. 146.  
421 United States' comments on Mexico's response to Arbitrator question No. 146.  
422 We denote by Qymx Mexican production of canned yellowfin; Qymx_exp  Mexican exports of canned 
yellowfin; Qymx_imp  Mexican imports of canned yellowfin; Qgmx Mexican production of canned generic; Qgus US 
production of canned generic; and Qgus_imp  US imports of canned generic. See equation s 5, 6, 7, 9, 11 and 12 in 
Appendix  1 to this Decision.  WT/DS381/ARB  
 
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  of the United States' consumption of tuna products. Of this share, only a small percentage was 
accounted for by Mexican exports. It therefore seems to us to be a reasonable approximation of 
reality to specify the model as if no canned Mexican yellowfin  was imported  into the US market  in 
2014. 
6.50.  Following the withdrawal of the Tu na Measure, Mexico would be able to supply canned 
yellowfin tuna to the US market. Under the counterfactual, Mexico would be supplying canned 
yellowfin at a lower price than that currently prevailing in the US market given its competitive 
advantage. Theref ore, Mexico would be the dominant supplier of canned yellowfin to the United 
States.423 Countries other than Mexico currently supply canned yellowfin to the US market in small 
quantities, and would likely continue to do so. Further, as we noted in paragraph  5.113 above , 
Ecuador and Guatemala would also seek to expand their exports of canned yellowfin to the United 
States after the withdrawal of the Tuna Measure. Indeed, we understand that consumers like 
having access to a range  of canned tuna products, and that one or more varieties of canned 
yellowfin, including gourmet products in olive oil, could therefore maintain a certain share of the 
US market even in the presence of a more competitive supplier of canned yellowfin. Howeve r, 
empirical models built to simulate the impact of a policy change need to strike a balance between 
tractability and transparency on the one hand and reasonableness of the assumptions on the 
other. In order to build a model where suppliers of canned yello wfin other than Mexico retain a 
small share of the US market following the removal of the Tuna Measure, Mexico's model would 
need to be substantially restructured424 and much more information ( such as information on  
marginal costs across countries and substi tution possibilities across products) would be 
required.425 
6.51.  In our view, in the specific circumstances of this case, given that the production capacity of 
ETP countries that would be directly affected by the withdrawal of the Tuna Measure is small, and 
that we are assessing the short -run effect of such withdrawal, it is reasonable to approximate 
market conditions by assuming that there would be no additional supply of canned yellowfin into 
the US market by other ETP countries following the removal of the Tuna  Measure. As far as 
existing suppliers of canned yellowfin are concerned, we are of the view that, given that they 
currently only represent a small share (1.2%) of the US market for canned tuna, modelling their 
exports would further complicate the model wi thout significantly affecting the calculations of the 
level of nullification and impairment. We acknowledge that, as we have explained above, under the 
counterfactual Mexico would not fully displace exports of existing suppliers that benefit from long -
term relationships with retailers and renowned brands. However, we choose not to model the 
presence of such existing suppliers in the market because they only have a small share of the 
market and therefore inclusion of their export volume would not, in our vie w, meaningfully affect 
the outcome of our calculations. Furthermore, as we have already explained, so long as Mexico is a 
cheaper source of canned yellowfin, we believe that it is unlikely that existing exporters would 
react to the withdrawal of the Tuna M easure by exporting at a lower price to match the price at 
which Mexico would export to the United States. Therefore, in what follows, we will only model the 
supply of canned yellowfin into the US market from Mexico.  
6.52.  Having decided to model the counterfact ual as a shift of Mexico's supply of canned yellowfin 
into the US market, we move to the next step of our analysis, namely, the determination of the 
shape of Mexico's supply curve. Depending on the value of the export supply elasticity, the supply 
curve ma y be flat, positively sloped or vertical. Like Mexico, we consider it reasonable to assume 
that the export supply of canned yellowfin to the United States is infinitely elastic (flat) until a 
threshold quantity, beyond which the supply of canned yellowfin becomes perfectly inelastic 
(vertical). However, unlike Mexico, we set this threshold equal to Mexico's production in 2014. We 
explain the rationale for our approach in the following paragraphs.  
6.2.2.1   Export supply elasticity for yellowfin  
6.53.  The United States cont ests Mexico's assumption of an infinitely elastic supply curve, and 
argues that this assumption is "unsupported and incorrect".426 Unlike the United States, we do not 
understand Mexico's assumption to imply that Mexico could produce an infinite amount of can ned 
                                               
423 See Section 5.1.3.3  above.  
424 United States' response to Arbitrator question No. 131.  
425 United States' response to Arbitrator question No. 131. 
426 United States' written submission, para. 116.  WT/DS381/ARB  
 
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  yellowfin without incurring any additional marginal costs.427 Rather, the way it is presented, 
Mexico's assumption holds true only up to a threshold: the current level of canned tuna 
production.428 
6.54.  We also disagree with the United States' claim that "Mexic o presents no evidence justifying 
the decision to model Mexico's supply of canned yellowfin as perfectly elastic until a point and then 
perfectly inelastic".429 In fact, Mexico justifies its modelling assumption on the basis of the small 
share that yellowfin  has in the overall tuna products consumption in the United States.430 In 
Mexico's general formulation, the elasticity of supply of canned yellowfin to the United States will 
be equal to the ratio between the elasticity of the world supply of canned yellowfi n and the US 
share in the world production of canned yellowfin.431 Although the record contains no data on 
world production of canned yellowfin, and therefore it is not possible to calculate the US share in 
that production, this share is likely to be small. In fact, US consumption of canned yellowfin 
represents only 2.7% of Mexico's production.432 It would therefore be logical to consider that, if all 
world supply of canned yellowfin were taken into consideration, the United States would represent 
an even lower  share of that consumption.  
6.55.  Moreover, we disagree with the United States' argument that in modelling the supply of 
canned yellowfin as very elastic, Mexico "appears to acknowledge that there is not, in fact, a 
restriction on the supply of canned yellowfin to the U.S. market, and, therefore, no reason why the 
demand observed in the market currently does not reflect actual U.S. consumer demand".433 In 
our view, the assumption that Mexico's supply of canned yellowfin to the US market is perfectly 
elastic does no t necessarily contradict the assumption that the supply of canned yellowfin into the 
US market is currently restricted. As Mexico acknowledges434, it is correct that the United States is 
fully integrated into the global canned yellowfin market, and most like ly it is also correct that the 
United States imports from countries whose fleets are the top harvesters of yellowfin in the WCPO. 
However, the evidence on the record shows that the price at which canned yellowfin is currently 
supplied into the US market is  higher than that of other types of tuna.435 Therefore, it is possible 
that, although potentially infinitely elastic, the current supply of dolphin safe canned yellowfin is 
set at a high price, thus yielding low levels of consumption.  
6.56.  Furthermore, as noted a bove in connection with our description of Mexico's model, we are of 
the view that Mexico's duty -free access to the United States under NAFTA rules as well as Mexico's 
proximity to the United States and the consequent lower transportation costs provide Mex ico with 
a significant advantage in the US market for canned tuna products. It is therefore reasonable to 
expect that if the Tuna Measure were to be withdrawn and Mexico were to export canned yellowfin 
to the US market, canned yellowfin would be available in the US market at a cheaper price than 
the actual 2014 prices.  
6.57.  Finally, we find plausible Mexico's characterization of the counterfactual export supply to the 
United States whereby once the threshold quantity, Qymx (which corresponds to Mexico's 
producti on capacity of canned yellowfin in 2014)436, has been reached, the supply curve becomes 
vertical, i.e. perfectly inelastic. This is consistent with our decision in the context of these 
proceedings to focus our analysis on the short -run effects of the withdra wal of the Tuna Measure.  
6.2.2.2   Mexican production capacity of canned yellowfin  
6.58.  As calculated by Mexico, we set the value of Qymx equal to the Mexican production capacity 
in 2014, i.e. 65,342 metric tonnes. This value has been computed as carcass weight net of exports 
                                               
427 United States' written submission, para. 116.  
428 Mexico's written submission, para. 141.  
429 United States' comments on Mexico's response to Arbitrator question No. 115 . 
430 Mexico's response to Arbitrator question No. 115.  
431 Mexico's response to Arbitrator question No. 115.  
432 Mexico's response to Arbitrator question No. 115.  
433 United States' comments on Mexico's response to Arbitrator question No. 115 . 
434 Mexico's response to Arbitrator question No. 123.  
435 Mexico's response to Arbitrator question No. 119; Mexico's response to Arbitrator question No. 153; 
Exhibit USA -10 (BCI) . 
436 Exhibit MEX -02, p. 22.  WT/DS381/ARB  
 
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  plus the imports for production, using 2014 data.437 We consider this to be a plausible approach, 
and note that the United States does not contest it.  
6.59.  We set Mexican imports ( Qymx_imp ) from other ETP countries equal to zero. This is despite 
Mexico's as sumption that it would be able to import an additional quantity equivalent to 20,000 
metric tonnes of canned yellowfin from other ETP countries and process it in Mexican canneries, 
for domestic consumption.438 Mexico claims that it would be able to expand it s production capacity 
without incurring increased marginal costs. Mexico has explained that this is because Mexican 
canneries operated in 2014 with a single day shift.439 According to Mexico, the increase in 
production would take place at constant marginal c osts because it "would come from an increase 
in production time in existing facilities".440 Mexico claims that "as shown in Table 10 of [Exhibit] 
MEX-02, the catch of yellowfin tuna from other ETP countries is plentiful enough to provide a 
quantity equivalen t to 20,000 metric tonnes of canned yellowfin tuna to Mexico".441 Table 10 in 
Exhibit MEX -02 shows that in 2014 total yellowfin catch of selected ETP countries was around 
55,300 metric tonnes (equivalent quantities canned). According to this data, ETP countr ies would 
export 36% of their catch to Mexico. However, in our view, and as we have explained above, 
Mexico has not convinced us that this assumption (that it would import an additional quantity 
equivalent to 20,000 metric tonnes of canned yellowfin from o ther ETP countries and process it in 
Mexican canneries, for domestic consumption) is reasonable.  
6.60.  First, Mexico has not shown how much yellowfin each of these ETP countries consumes and 
would be able to export. There is no evidence on the record indicating that other ETP countries can 
and would increase their supply of yellowfin to Mexico by an amount equivalent to 20,000 metric 
tonnes of canned tuna. In contrast, the United States has submitted evidence showing that the 
catch of tuna in the ETP is limited u nder international rules, and that current levels of tuna catch 
cannot be increased by any significant amount. The catch of tuna species in the ETP is regulated 
by the IATTC, which monitors catches and takes corrective action if they rise above sustainable  
levels. The latest IATTC report suggested that "yellowfin tuna was in an overfished state".442 
Therefore, we find it reasonable to assume that the IATTC would take action if the catch of 
yellowfin in the ETP were to increase substantially. Indeed, the IATTC  Resolution C -13-01 declared 
a yearly 62 -day closure period for the large purse seine fishery in the ETP for 2014 -2016.443 
Furthermore, we note that "at the 2016 meeting of the IATTC, the Commission adopted interim 
harvest control rules for yellowfin tuna th at would trigger measures to reduce catch".444 We 
therefore find persuasive the United States' contention that there is a limited quantity of yellowfin 
available in other ETP countries.445 
6.61.  Second, even if an excess supply of yellowfin existed in the other ETP countries, it is not 
clear to us why other countries in the region, such as Ecuador, which can currently export 
yellowfin to the United States using the dolphin -safe label, would not already import such excess 
supply in order to process it, consume it dome stically and/or increase exports of dolphin -safe tuna 
to the United States.  
6.62.  Finally, we are of the view that setting Mexican imports from other ETP countries equal to 
zero is consistent with the setup of the model. As discussed above, it is a simplified mo del where 
the impact of the withdrawal of the Tuna Measure on ETP countries that may potentially be 
affected by the Measure (e.g. Guatemala and Ecuador) is not taken into account because their 
potential additional export supply of yellowfin is limited by t heir own production capacity in 2014. 
In particular, we recall that in 2014 , Ecuador and Guatemala each had only one vessel  with a 
DML446 that caught tuna by setting on dolphins. This argument is used also by Mexico to support 
its assumption that other ETP c ountries that may potentially be affected by the Tuna Measure can 
                                               
437 Calculations using the data from Table 8 on p. 24 of Exhibit MEX -02 yield: (144,650 -
16,870+2,560)*0.525 -3,091=65,342 metric tonnes. Mexico approximates this amount to 65,500 metric 
tonnes. We do not follow this approach as there is no need for such approximation.  
438 Exhibit MEX -02, p. 22 and Exhibit MEX -02, Table 11, p.32.  
439 Exhibit MEX -02, p. 22, 29; Mexico's written submission, para. 142. 
440 Exhibit MEX -02, p. 22.  
441 Mexico's response to Arbitrator question No. 45.  
442 United States' written submission, para. 117 (referring to Exhibit USA -43). 
443 United States' written submission, para. 117 and footnote 231 (referrin g to Exhibit USA -77). 
444 United States' written submission, para. 117.  
445 United States' comments on Mexico's response to Arbitrator question No. 115.  
446 Exhibit USA -200. See para. 5.113 . WT/DS381/ARB  
 
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  only marginally change the export volumes.447 In our view, however, if Mexico's argument about 
importing the equivalent of 20,000 metric tonnes of canned yellowfin for domestic consumption 
were accepted, it would be necessary to extend the same assumption to other ETP countries. For 
example, we would also need to allow that Ecuador could import more for domestic consumption. 
Therefore, we agree with the United States that removing these additio nal 20,000 metric tonnes 
equivalent of canned yellowfin from the model "would partly account for the fact that other 
countries, including Ecuador, could produce canned yellowfin".448 
6.2.3   Export supply of generic tuna  
6.63.  As foreseen in Mexico's model, we assume that  canned generic tuna is produced 
domestically in the United States and Mexico, and that any excess demand is fulfilled by imports 
from the rest of the world. Mexico's model sets the United States' domestic production of canned 
generic tuna ( Qgus) equal to 177,351 metric tonnes.449 This value is uncontested by United States. 
We set the Mexican production of canned generic tuna ( Qgmx) equal to 23,000 metric tonnes. This 
value has been computed by Mexico as carcass weight net of exports plus the import for 
produ ction450 and is uncontested by the United States.  
6.64.  The world export supply of canned generic tuna to the United States is defined in Mexico's 
model as:  
 
where Qgw_exp = Qgus_imp = Qdgus - Qgus is US excess demand for canned generic tuna; β is a 
measure of th e intensity of supply; pgw is the price of generic tuna; and ε is the elasticity of export 
supply.451 We now discuss how ε and  pgw are parametrized.452 
6.2.3.1   Elasticity of export supply of canned generic tuna  
6.65.  The shape of the world supply curve of canned generic tun a depends on the value assigned 
to the ε parameter. The correct parametrization of ε is an issue between the parties because the 
export supply elasticity that a country faces depends on the country's size in the global market. 
Thus, if the United States we re a "small country"453 in the world tuna market, its consumption 
choices would not affect the world price of canned tuna. Hence, ε would be large and the United 
States would face a perfectly elastic (flat) world supply curve. In contrast, if the United Stat es 
were a large country relative to the world tuna market, it would affect the world price of canned 
tuna. In this case, the ε parameter would take a finite value. The world supply curve would be 
imperfectly elastic and positively sloped.  
6.66.  Thus, the first i ssue we must resolve is whether the United States' tuna market is small or 
large relative to the world market for canned tuna. The evidence on the record is contradictory on 
this point. Mexico asserts that "[t]he United States production and consumption of  tuna are small 
shares of the global tuna market" because its production and consumption of tuna account, 
respectively, for almost 6.72% and 7.83% of the world tuna harvest.454 Arguing that these shares 
                                               
447 Mexico's response to Arbitrator question  No. 18.  
448 United States' response to Arbitrator question No. 131.  
449 Exhibit MEX -02, Tables 1 and 2, p. 5. The value is obtained from Exhibit MEX -03. 
450 Exhibit MEX -02, Table 8, p. 24. 23,000 = (17,771 -7,090+29,467)*0,525+1,860. The approximation 
does not a ffect the estimated level of nullification or impairment.  
451 See Mexico's written submission, para. 163. Mexico expresses the equation as 
 . We use 
 for consistency with the notation i n Exhibit MEX 100 -f and in Appendix  3 to our Dec ision.  
452 Qgwexp and β are endogenous variables.  
453 In the economic terminology, a country is "small" when it is assumed not to affect the world price.  
454 Exhibit MEX -02, p. 7. 6.72% is computed as the ratio of the total US supply of fresh and frozen tuna 
for canning in 2014 (258,258 metric tonnes) and the world harvest of tuna (4.3 million metric tonnes). 
Conversely, 7.83% is the ratio of the total US consumption of canned tuna in 2014 (330,264 metric tonnes) 
and the world harvest of tuna (4.3 million metri c tonnes).  WT/DS381/ARB  
 
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  are small, Mexico initially modelled the world supply f or canned generic tuna to the United States 
as very elastic.455 In particular, Mexico set the parameter ε equal to 100000000000.456 
6.67.  Conversely, the United States asserts that it is "by far the single biggest consumer of 
canned tuna, representing 19 percent of world consumption".457 Given this share, the United 
States claims that it "is the single greatest influence on the global market for canned tuna"458 and 
that it would not face a perfectly elastic world supply curve. However, the United States does not 
provide an indication of what would be the correct figure for the export supply elasticity. In 
response to the United States' assertion that the United States does not face infinite export supply 
elasticity in the market for canned generic tuna, Mexico proposes al ternative results based on two 
different calibrations of the export supply elasticity, with the export supply elasticity equal to 1 or 
10, respectively.459 
6.68.  In order to select a value for ε, we have proceeded as follows. First, we calculated the size 
of each country's market in the world tuna market in terms of their trade shares.460 We extracted 
data on imports of canned tuna from the UN Comtrade database using WITS. We used the 2012 
HS classification and took into account HS codes 160414, i.e. "Fish preparatio ns; tunas, skipjack 
and Atlantic bonito (sarda spp.), prepared or preserved, whole or in pieces (but not minced)",  and 
160419, i.e. "Fish preparations; fish prepared or preserved, whole or in pieces (but not minced), 
n.e.c. in heading no. 1604".461 On the ba sis of these two HS codes, we find that Mexico's imports 
account for only 0.32% of global imports of canned tuna, while the United States accounts for 
12.65% of those imports. These percentages are equal to 0.34% and 15.29% for Mexico and the 
United States , respectively, using the HS code 160414 only, as done by the United States.462 
These results suggest that while Mexico is likely to behave like a "small country" in the global tuna 
market, the United States is likely to be a "large country" in the global tu na market, facing finite 
export supply elasticity.  
6.69.  Second, i n the absence of a specific value for the elasticity of supply produced by the 
parties, we have looked at the existing economic literature for guidance. A peer reviewed study 
published in an inter national journal463 provides estimates for the export supply elasticity for the 
product category of "preserved and prepared fish" (HS heading 1604 – a wider category than tuna 
products) across several countries, ranging between 0 and 10 with an average equal  to 2.2. In 
particular, the estimate for the export supply elasticity faced by the United States is equal to 2.61. 
Guided by this evidence, we find it reasonable to use a value of ε = 2.61 in our model. This 
number also falls within the range of parameter values used by Mexico for the world supply of 
generic tuna to the United States in its simulations (namely, 1 and 10).464 We note, in addition, 
that we have tested the sensitivity of our simulation results to alternative values of the export 
supply elasticit y, including the assumption of a perfectly elastic supply. The results are only 
marginally affected. We are therefore confident that our estimate of the level of nullification or 
impairment is robust to alternative assumptions on the supply elasticity of g eneric tuna.  
6.2.3.2   World price of canned generic tuna  
6.70.  Data for the calibration of the world price of generic tuna, pgw, comes from Table 3 in Exhibit 
MEX-02. The parameter pgw is computed as the ratio between total import value and import 
                                               
455 Exhibit MEX -02, Figure 1, p. 9.  
456 Exhibit MEX 100 -f, line 89.  
457 United States' written submission, para. 15. Exhibit USA -07 shows that the United States consumes 
600,000 metric tonnes of canned tuna compared to the 3,137,500 metric tonnes cons umed globally. According 
to Exhibit USA -8, p. 5, "[t]he US is the world’s largest consumer of canned tuna (as a country, the European 
Union is higher as a block)."  
458 United States' written submission, para. 15.  
459 Mexico's written submission, paras. 166 (wh en assuming ε = 1) and 164 (when assuming ε = 10). 
See also Mexico's response to Arbitrator question No. 46, para. 83 and Tables 4 and 5 therein.  
460 S.M. Suranovic (2010), International Trade Theory and Policy , Chapter  90-3 (retrieved from 
http://internationalecon.com/Trade/Tch90/T90 -3.php ) suggests that the share of country imports or exports in 
the world market should be used to determine the relative size of a country.  
461 These two HS codes are referr ed to in Table 9 of Exhibit MEX -02, p.25.  
462 United States' response to Arbitrator question No. 67, Table entitled "U.S. Imports of Canned Tuna in 
2015".  
463 C. Broda, N. Limao and D.E. Weinstein (2008), "Optimal Tariffs and Market Power: the Evidence," 
Ameri can Economic Review 98(5): 2032 -2065.  
464 Mexico's written submission, paras. 164 -166. WT/DS381/ARB  
 
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  quantity. As such, it i s the average unit value across all listed countries. The specific value of 
parameter pgw is equal to 4.30 USD/kg. This value is not contested by the United States.  
6.3  Other parameters of the model: Duty rates, transport costs and charges  
6.71.  All other parameters  of the model are set as in Mexico's model, because the data provided 
by Mexico are uncontested.  
6.72.  We set the duty rate for the United States' imports of canned tuna ( dus) at 12.5%. This 
figure, uncontested by the United States, is computed as the ratio betw een the duty value (USD 
83,778) and the total value of imports (USD 667,178) in 2014.465 We set the duty rate for Mexico's 
imports of canned tuna ( dmx) at 20%.466 We set the transport costs between the United States and 
Mexico ( t) at USD 0.05/kg.467 These are co mputed as the ratio of the costs of insurance and 
freight (USD 305) and the import quantities (5657 metric tonnes).468 Finally, we compute the 
charges for the United States' imports ( tus) as the average charge for all imports of canned tuna, 
i.e. USD 0.16/kg .469 Mexico asserts that "[g]iven the proximity of the U.S. and Mexican markets 
and that these countries both import skipjack from South -East Asia, the same import charge is 
applied to U.S. and Mexican imports".470 Therefore, we also set the charges for Mexico 's imports, 
tmx, at USD 0.16/kg. Table 1 below summari zes all parameter values in our model.  
Table 1: Exogenous variables and parameters  
 
Variable  Value  
US production of canned generic tuna, Qgus (metric tonnes)  177,350  
US consump tion of canned tuna, cons us (metric tonnes)  330,264  
Share of canned generic tuna consumption in the United States, Hus (%) 98.8 
Average price of canned tuna in the United States, pus (USD/kg)  5 
Mexican production of canned yellowfin tuna, Qymx (metric t onnes)  65,342  
Mexican production of canned generic tuna, Qgmx (metric tonnes)  23,000  
Mexican consumption of canned yellowfin tuna, cons mxy (metric tonnes)  58,344  
Mexican consumption of canned generic tuna, cons mxg (metric tonnes)  29,585  
Share of canned  generic tuna consumption in Mexico, Hmx (%) 33.65* 
Average price for canned tuna in Mexico, pmx (USD/kg)  5.04 
Mexican imports of canned yellowfin tuna, Qymx_imp  (metric tonnes)  0 
Transportation costs between Mexico and the United States, t (USD/kg)  0.05 
World price of generic tuna, pgw (USD/kg)  4.30 
Duty rate for Mexican imports of tuna , dmx (%) 20 
Duty rate for US imports of tuna,  dus (%) 12.5 
Charge for Mexican imports of tuna, tmx (USD/kg)  0.16 
Charge for US imports of tuna, tus (USD/kg)  0.16 
Share of US retailers willing to sell Mexican canned yellowfin tuna, 
 (%) 73.1 
Shape parameter of the logistic distribution, s 1 
Price elasticity of demand  for canned tuna , η -1 
Price elasticity of export supply  of canned generic tuna , ε 2.61 
US demand intensity parameter, Aus (USD million)  1,671.37  
Mexican demand intensity parameter, Amx (USD million)  443.162  
Mean willingness to pay for canned yellowfin tuna in the Unite d States, μus 0.199  
Mean willingness to pay for canned yellowfin tuna in Mexico, μmx 1.78 
* Hmx = cons mxg/( cons mxg + cons mxy) = 29,585/(29,585+58,344)  
 
                                               
465 Exhibit MEX -02, Table 11, p. 32. The value is obtained from Exhibit MEX -04. 
466 Exhibit MEX -02, Table 11, p. 32. The value is obtained from Exhibit MEX -24. 
467 Exhibit MEX -02, p. 7 and Table 11, p. 32.  
468 Exhibit MEX -02, p. 7 and Table 3, p. 6.  
469 Exhibit MEX -02, Table 11, p. 32. The value is obtained from Exhibit MEX -04. See also Mexico's 
response to Arbitrator question No. 90 . 
470 Exhibit MEX -02, p. 31.  WT/DS381/ARB  
 
- 84 - 
 
  6.4  Calculation of the level of nullification or impairment  
6.73.  The results of the endogenous variables in th e model are summarized in Table 2.471 
Table 2: Results  
 
 United States  Mexico  
Consumption of yellowfin (metric tonnes)  28,077  37,265  
Consumption of generic (metric tonnes)  311,622  38,752  
Price of yellowfin (USD/kg)  6.67 6.62  
Price of generic (USD/kg)  4.76 5.07 
Exports of yellowfin (metric tonnes)  0 28,077  
Imports of yellowfin (metric tonnes)  28,077  0 
Exports of generic (metric tonnes)  0 0 
Imports of generic (metric tonnes)  134,272  15,752  
Export value of canned tuna to the United 
States (million USD)  0 185.88 
6.74.  We consider it crucial that the counterfactual price of yellowfin in the United States is lower 
than the actual 2014 price. As noted above, we do not know the price level for canned yellowfin in 
the US market in 2014. However, the United States argues that the US import price of canned 
yellowfin exported from the European Union could provide a good proxy for the wholesale price of 
canned yellowfin. This is because at higher import prices several exporters of yellowfin to the 
European Union would divert their exports to the US market.472  
6.75.  In this connection, the United States argues that in 2015, the European Union imported 
nearly 77,000 metric tonnes of canned yellowfin at an average price of USD 5.31/kg.473 After 
adjusting for duty rates and charges on US canned tuna imports estimated equal to USD 0.85/kg, 
this price would corresponds to USD 6.16/kg.474 In response, Mexico notes that the price used by 
the United States pertains to 2015, while the counterfactual year is 2014. Mexico also notes that 
the v alue of the US dollar compared to the Euro increased by 20% from 2014 to 2015. Thus, 
Mexico contends that the value of USD 5.31/kg in 2015 is equivalent to USD 6.35/kg in 2014 (USD 
5.31/kg*1.195). Furthermore, Mexico adjusts the value of total US tariffs a nd charges in 2015 
(USD 0.85/kg) to 2014, obtaining USD 1.02/kg (USD 0.85/kg * 1.195). Adding this estimated 
value of tariffs and charges in 2014 to the estimated price of canned yellowfin in 2014 (USD 
6.35/kg) yields a total export price to the United Sta tes, after adjustments for exchange rate 
movements and US tariffs and charges, of USD 7.37/kg in 2014.475  
6.76.  As shown in Table 2 above, we estimate a counterfactual price of canned yellowfin in the 
United States of USD 6.67/kg. We note that this is clearly bel ow the price estimated in Mexico's 
model (USD 7.84/kg476) and the counterfactual 2014 import price adjusted as proposed by Mexico 
(USD 7.37/kg), and only slightly above the reference price submitted by the United States for 
2015 (USD 6.16/kg). We note, howev er, that the evidence on the record shows a fall in the EU 
import prices of frozen yellowfin for processing – which, as argued by the United States, are 
"consistent with the global cannery -grade yellowfin price"477 – between 2014 and 2015.478 
Therefore, in all  likelihood, the price of canned yellowfin that prevailed in the US market was 
higher in 2014 than in 2015. From this, we can conclude with reasonable confidence that we solve 
                                               
471 Appendix  1 presents th e theoretical model we used  for the simulation. Appendix  2 provides the Stata 
do file used for econometric estimat ions of the price premium. Appendix  3 provides the R codes for solving the 
model.  
472 United States' opening statement at the meeting of the Ar bitrator, para. 32.  
473 United States' opening statement at the meeting of the Arbitrator, para. 31.  
474 As argued by Mexico, Exhibit USA -144 is not detailed, but it seems from its last page that the total of 
US tariff and charges was USD 0.85/kg in 2015 (see Mexico's response to Arbitrator question No. 124).  
475 Mexico's response to Arbitrator question No. 124.  
476 See Exhibit MEX -02, Table 12, p. 33.  
477 United States' response to Arbitrator question No. 153.  
478 See Exhibit USA -199, showing that the EU import prices  of frozen yellowfin for processing decreased 
from USD 2.85/kg to USD 2.10/kg (a 26.3% decrease) between 2014 and 2015.  WT/DS381/ARB  
 
- 85 - 
 
  for a price decrease. This is consistent with the modelled increase in the suppl y of canned yellowfin 
to the United States.  
6.77.  As regards the level of nullification or impairment resulting from our model and its 
endogenous variables, we recall that the level of nullification or impairment in these proceedings is 
the difference between th e value of total canned tuna exports estimated under the counterfactual 
and the value of Mexico's actual exports of canned tuna to the United States, with both levels 
being calculated for the year 2014. Under the counterfactual, we estimate the value for t otal 
exports in 2014 of canned tuna from Mexico to the United States (all of it being canned yellowfin) 
to be equal to USD 185.88 million. The value of Mexican canned tuna actually exported to the 
United States in 2014 was USD 22.65 million. Taking the dif ference between the total value of 
exports of canned tuna from Mexico to the United States under the counterfactual and the total 
value of actual exports in 2014, we find that Mexico's estimated trade loss in 2014 amounted to 
USD 163.23 million.  
7  CONCLUSION  AND AWARD  
7.1.  For the reasons set out above, the Arbitrator determines that the level of nullification or 
impairment of benefits accruing to Mexico as a result of the 2013 Tuna Measure is USD 163.23 
million per annum. Therefore, in accordance with Article 22. 4 of the DSU, Mexico may request 
authorization from the DSB to suspend concessions or other obligations as indicated in document 
WT/DS381/29 at a level not exceeding USD 163.23 million per annum.  
__________WT/DS381/ARB  
 
- 86 - 
 
   
ECONOMIC APPENDEXES  
 
APPENDIX  1. Equations of th e Arbitrator's model  
Equation 1: US demand for canned yellowfin tuna  
 
 
 
 
Equation 2: US demand for canned generic tuna  
 
 
 
 
Equation 3: Mexican demand for canned yellowfin tu na 
 
 
 
 
Equation 4: Mexican demand for canned generic tuna  
 
 
 
 
Equation 5: Mexican export supply of canned yellowfin tuna  
 
 
 
 
Equation 6: US import demand of canned generic tuna 
 
 
 
 
Equation 7: World price of canned generic tuna  
 
 
 
 
Equation 8: US price of canned generic tuna  
 
 
 
 WT/DS381/ARB  
 
- 87 - 
 
  Equation 9: Mexican price of canned generic tuna  
 
 
 
 
Equation 10: US price of canned yellowfin tuna (arbitrage condition)  
 
 
 
 
Equation 11: Mexican exports of generic tuna to United States  
 
 
 
 
Equation 12: Mexican imports of generic tuna  from other countries  
 
 
 
 WT/DS381/ARB  
 
- 88 - 
 
   
APPENDIX  2. Stata do file for econometric estimation of price premium  
clear all  
cap log close  
set more off, perm  
 
global WD "USE YOUR OWN DIRECTORY "  /* Working directory  */ 
cd "$WD"  
 
 
****************************************** *****************************************
** 
* Preliminary dataset construction         
    * 
{ 
 
quietly  { 
 
foreach k in 12 52  { 
 
insheet using Nielsen_`k'_week.csv, clear    
 
/*  These CSV datasets are created in lines 168 -169 of R file 
"Arbitrator_constru ction_12week_52week_Nielsen_csv_datasets". This is  
  mutuated from lines 1 -169 of Exhibit "MEX -100-b - US Nielsen data.R"  
*/ 
 
foreach var of varlist  brand_ form_ container_ flavor_ pack_ salt_ region_  { 
 
 unique `var'  
 vallist `var', sort  
 tab `var', g(` var'_cat)  
  
               
      } 
               
      * `var' 
 
 
save Arbitrator_`k'weeks_temp, replace  
 
 
     } 
     * `k' 
      
   } 
   * quietly ends here  
      
}      
***********************************************************************************
** 
 
 
***********************************************************************************
** 
* Arbitrator's determination if premium for the form NOT considered   
  * 
{ 
 
local controls  
 
  
 foreach m in 12 52       { 
 
  use Arbitrator_`m'weeks_temp, replace  WT/DS381/ARB  
 
- 89 - 
 
   
   foreach k in volume n_units   {  
 
    reg  price_`m' *cat*  yellowfin  `controls'  [aweight = 
`k'_`m']  
    scalar beta_yf_`m'_`k' = _b[yellowfin]  
    scalar mu_`m'_`k' = _b[yellowfin] + ln((1/(1 -.012))-1)*1 
    scalar list beta_yf_`m'_`k' mu_`m'_`k'  
     
           } 
           * `k' 
            
           } 
           * `m' 
      
 
*********************************************************  
* Calculation of mu_US         * 
{      
 
scalar    NO_mu_52_volume    = (mu_52_volume)  
scalar list  NO_mu_52_volume  
 
scalar    NO_mu_52_avg_volume_units  = (mu_52_volume + mu_52_n_units)/2  
scalar list  NO_mu_52_avg_volume_units  
 
scalar    NO_mu_avg_12_52_n_units  = (mu_12_n_units + mu_52_n_units)/2  
scalar list  NO_mu_avg_12_52_n_units  
      
scalar    NO_mu_avg_12_52_volume   = (mu_12_volume + 
mu_52_volume)/2  
scalar list  NO_mu_avg_12_52_volume  
 
scalar    NO_mu_avg_overall    = (mu_12_volume + mu_52_volume 
+ mu_12_n_units + mu_52_n_units)/4  
scalar list  NO_mu_avg_overall  
 
} 
******************************************************** * 
 
} 
***********************************************************************************
** 
 
 
***********************************************************************************
** 
* Arbitrator's determination if premium for the form IS considered   
  * 
{ 
 
*********************************************************  
* Preliminary construction        * 
{ 
    
   foreach m in 12 52          
      { 
    
   foreach k in volume n_units        
      { 
    
   foreach x in form  /*brand container flavor pack salt region  */
  { 
 
    
    preserve  
     WT/DS381/ARB  
 
- 90 - 
 
      use Arbitrator_`m'weeks_temp, replace  
   
    bysort yellowfin: egen total_`k'_`m'_temp = total(`k'_`m')  
    bysort yellowfin form_: egen total_`k'_`m'_form_temp = 
total(`k'_`m')  
    g share_`k'_`m' = total_`k'_`m'_form_temp / t otal_`k'_`m'_temp  
    keep yellowfin form_ share*  
    duplicates drop  
    reshape wide share_`k'_`m', i( form_) j(yellowfin)  
    ren share_`k'_`m'0 sh_`k'_other  
    ren share_`k'_`m'1 sh_`k'_yfin  
    
   foreach j of varlist sh*   { 
      
    replace `j' = 0  if missing(`j')  
      
           } 
           * `j' 
 
    save temp_`m'_form_`k'_shares, replace  
     
    restore 
    
               
       } 
               
       * `x' 
               
        
               
       } 
               
       * `k' 
               
        
               
       } 
               
       * `m' 
               
        
 *************************************************************************  
 * Calculation of "form premium" (12 -week dataset, volume weight)   * 
 { 
 
 use Arbitrator_12wee ks_temp, replace  
 
 *****************************************************************  
 * Shares from "temp_12_form_volume_shares.dta" dataset   * 
 { 
 
 g other_share_Iform2   = 0.0016170  
 g other_share_Iform3   = 0.0005138  
 g other_share_Iform4   = 0.0003206  
 g other_share_Iform5   = 0.0032770  
 g other_share_Iform6   = 0.2617792  
 g other_share_Iform7   = 0.0000251  
 
 g yfin_share_Iform2    = 0.1838225  
 g yfin_share_Iform3    = 0.0000000  
 g yfin_share_Iform4    = 0.0033019  
 g yfin_share_Iform5    = 0.0000000  
 g yfin_share _Iform6   = 0.2088498  
 g yfin_share_Iform7    = 0.0000000  
 
 } 
 *****************************************************************   WT/DS381/ARB  
 
- 91 - 
 
   
 local controls  
 
 drop *__*  
 ren pack_size size_pack  
 tostring region, replace  
 
 renvars, subs(container ctn)  
 
   foreach x in  form   { 
    
    encode `x', g(encoded_`x')  
    tab `x' encoded_`x'  
     
          } 
          * `x' 
     
 xi:  reg  price_12  i.brand i.form i.ctn i.flavor i.pack i.salt i.region 
yellowfin  `controls' [aweight = volume_12]  
 est store Arbitrator  
 
 forvalue s k = 2(1)7   { 
 
  g beta_Iform`k' = _b[_Iform__`k']  
   
       } 
       * `k' 
        
 g form_premium_12 =  beta_Iform2*(yfin_share_Iform2 - other_share_Iform2)  + 
/// 
       beta_Iform3*(yfin_share_Iform3 - 
other_share_Iform3)  + /// 
       beta_Iform4*(yfin _share_Iform4 - 
other_share_Iform4)  + /// 
       beta_Iform5*(yfin_share_Iform5 - 
other_share_Iform5)  + /// 
       beta_Iform6*(yfin_share_Iform6 - 
other_share_Iform6)  + /// 
       beta_Iform7*(yfin_share_Iform7 - 
other_share_Iform7)  
 sum form_premium_12  
 
 scalar define form_premium_12_volume = r(mean)  
 scalar list form_premium_12_volume  
 
 } 
 *************************************************************************  
 
 
 *************************************************************************  
 * Calculation o f "form premium" (52 -week dataset, volume weight)   * 
 { 
 
 use Arbitrator_52weeks_temp, replace  
 
 *****************************************************************  
 * Shares from "temp_52_form_volume_shares.dta" dataset   * 
 { 
 
 g other_share_Iform2   = 0.0015417 
 g other_share_Iform3   = 0.0003065  
 g other_share_Iform4   = 0.0003542  
 g other_share_Iform5   = 0.0027262  
 g other_share_Iform6   = 0.2634644  
 g other_share_Iform7   = 0.0000080  
 
 g yfin_share_Iform2    = 0.1823488  WT/DS381/ARB  
 
- 92 - 
 
   g yfin_share_Iform3    = 0.0000000  
 g yfin_share_Iform4    = 0.0034064  
 g yfin_share_Iform5    = 0.0000000  
 g yfin_share_Iform6    = 0.1990382  
 g yfin_share_Iform7    = 0.0000000  
 
 } 
 *****************************************************************   
 
 local controls  
 
 drop *__*  
 ren pack_size size_ pack 
 tostring region, replace  
 
 renvars, subs(container ctn)  
 
   foreach x in form    { 
    
    encode `x', g(encoded_`x')  
    tab `x' encoded_`x'  
     
          } 
          * `x' 
     
 xi:  reg  price_52  i.brand i.form i.ctn i.flavor i.pack i.salt i.regi on 
yellowfin  `controls' [aweight = volume_52]  
 est store Arbitrator  
 
 forvalues k = 2(1)7   { 
 
  g beta_Iform`k' = _b[_Iform__`k']  
   
       } 
       * `k' 
        
 g form_premium_52 =  beta_Iform2*(yfin_share_Iform2 - other_share_Iform2)  + 
/// 
       beta_Iform3*(yfin_share_Iform3 - 
other_share_Iform3)  + /// 
       beta_Iform4*(yfin_share_Iform4 - 
other_share_Iform4)  + /// 
       beta_Iform5*(yfin_share_Iform5 - 
other_share_Iform5)  + /// 
       beta_Iform6*(yfin_share_Iform6 - 
other_share_Iform6)  + /// 
       beta_Iform7*(yfin_share_Iform7 - 
other_share_Iform7)  
 sum form_premium_52  
 
 scalar define form_premium_52_volume = r(mean)  
 scalar list form_premium_52_volume  
 
 } 
 *************************************************************************  
 
 
 ************ *************************************************************  
 * Calculation of "form premium" (12 -week dataset, n_units weight)  
 * 
 { 
 
 use Arbitrator_12weeks_temp, replace  
 
 *****************************************************************  
 * Shares from  "temp_12_form_n_units_shares.dta" dataset   * 
 { WT/DS381/ARB  
 
- 93 - 
 
   
 g other_share_Iform2   = 0.00215040  
 g other_share_Iform3   = 0.00019197  
 g other_share_Iform4   = 0.00041838  
 g other_share_Iform5   = 0.00813812  
 g other_share_Iform6   = 0.22235054  
 g other_share_Iform7   = 0.00003278  
 
 g yfin_share_Iform2    = 0.20729758  
 g yfin_share_Iform3    = 0.00000000  
 g yfin_share_Iform4    = 0.00568317  
 g yfin_share_Iform5    = 0.00000000  
 g yfin_share_Iform6    = 0.21372929  
 g yfin_share_Iform7    = 0.00000000  
 
 } 
 ************************ *****************************************   
 
 local controls  
 
 drop *__*  
 ren pack_size size_pack  
 tostring region, replace  
 
 renvars, subs(container ctn)  
 
   foreach x in form    { 
    
    encode `x', g(encoded_`x')  
    tab `x' encoded_`x'  
     
          } 
          * `x' 
     
 xi:  reg  price_12  i.brand i.form i.ctn i.flavor i.pack i.salt i.region 
yellowfin  `controls' [aweight = n_units_12]  
 est store Arbitrator  
 
 forvalues k = 2(1)7   { 
 
  g beta_Iform`k' = _b[_Iform__`k']  
   
       } 
       * `k' 
        
 g form_premium_12 =  beta_Iform2*(yfin_share_Iform2 - other_share_Iform2)  + 
/// 
       beta_Iform3*(yfin_share_Iform3 - 
other_share_Iform3)  + /// 
       beta_Iform4*(yfin_share_Iform4 - 
other_share_Iform4)  + /// 
       beta_Iform5*(yfin_share_Iform5 - 
other_share_Iform5)  + /// 
       beta_Iform6*(yfin_share_Iform6 - 
other_share_Iform6)  + /// 
       beta_Iform7*(yfin_share_Iform7 - 
other_share_Iform7)  
 sum form_premium_12  
 
 scalar define form_premium_12_n_units = r(mean)  
 scalar list form_premium_12_n_units  
 
 } 
 *************************************************************************  
 
 
 *************************************************************************  WT/DS381/ARB  
 
- 94 - 
 
   * Calculation of "form premium" (52 -week dataset, n_units weight)  
 * 
 { 
 
 use Arbitrator_52weeks_t emp, replace  
 
 *****************************************************************  
 * Shares from "temp_52_form_n_units_shares.dta" dataset   * 
 { 
 
 g other_share_Iform2   = 0.00198908  
 g other_share_Iform3   = 0.00012039  
 g other_share_Iform4   = 0.00045978  
 g other_share_Iform5   = 0.00672650  
 g other_share_Iform6   = 0.22540790  
 g other_share_Iform7   = 0.00001032  
 
 g yfin_share_Iform2    = 0.20455195  
 g yfin_share_Iform3    = 0.00000000  
 g yfin_share_Iform4    = 0.00582262  
 g yfin_share_Iform5    = 0.00000000  
 g yfin_share_Iform6    = 0.20176426  
 g yfin_share_Iform7    = 0.00000000  
 
 } 
 *******************************************************************   
 
 local controls  
 
 drop *__*  
 ren pack_size size_pack  
 tostring region, replace  
 
 renvars, subs(container ctn)  
 
   foreach x in form    { 
    
    encode `x', g(encoded_`x')  
    tab `x' encoded_`x'  
     
          } 
          * `x' 
     
 xi:  reg  price_52  i.brand i.form i.ctn i.flavor i.pack i.salt i.region 
yellowfin  `controls' [aweight = n_units_52]  
 est store Arbitrato r 
 
 forvalues k = 2(1)7   { 
 
  g beta_Iform`k' = _b[_Iform__`k']  
   
       } 
       * `k' 
        
 g form_premium_52 =  beta_Iform2*(yfin_share_Iform2 - other_share_Iform2)  + 
/// 
       beta_Iform3*(yfin_share_Iform3 - 
other_share_Iform3)  + /// 
       beta_Iform4*(yfin_share_Iform4 - 
other_share_Iform4)  + /// 
       beta_Iform5*(yfin_share_Iform5 - 
other_share_Iform5)  + /// 
       beta_Iform6*(yfin_share_Iform6 - 
other_share_Iform6)  + /// 
       beta_Iform7*(yfin_share_Iform7 - 
other_share_Iform7)  
 sum form_ premium_52  WT/DS381/ARB  
 
- 95 - 
 
   
 scalar define form_premium_52_n_units = r(mean)  
 scalar list form_premium_52_n_units  
 
 } 
 *************************************************************************  
  
  
 *************************************************************************  
 * Calculation of average form premia        
  * 
 { 
 
  
 scalar   form_premium_52_avg_volume_units  = (form_premium_52_volume 
+ form_premium_52_n_units)/2  
 scalar list  form_premium_52_avg_volume_units  
  
 scalar   form_premium_avg_12_52_volume   = (form_prem ium_12_volume 
+ form_premium_52_volume)/2  
 scalar list  form_premium_avg_12_52_volume  
 
 scalar   form_premium_avg_overall    = (form_premium_12_volume 
+ form_premium_52_volume + form_premium_12_n_units + form_premium_52_n_units)/4  
 scalar list  form_premiu m_avg_overall  
 
 
 } 
 *************************************************************************   
 
 
} 
*********************************************************  
 
 
*********************************************************  
* Calculation of mu_US         * 
{ 
 
scalar    YES_mu_52_volume     = (mu_52_volume + 
form_premium_52_volume)  
scalar list  YES_mu_52_volume  
 
scalar    YES_mu_52_avg_volume_units   = NO_mu_52_avg_volume_units + 
form_premium_52_avg_volume_units  
scalar list  YES_mu_52_avg_volume_units  
 
scalar    YES_mu_avg_12_52_volume   = NO_mu_avg_12_52_volume + 
form_premium_avg_12_52_volume  
scalar list  YES_mu_avg_12_52_volume  
 
scalar    YES_mu_avg_overall     = NO_mu_avg_overall + 
form_premium_avg_overall  
scalar list  YES_mu_avg_overall  
 
} 
************************ *********************************  
 
} 
***********************************************************************************
** 
 
 
***********************************************************************************
** 
* Erase temp files            
     * WT/DS381/ARB  
 
- 96 - 
 
  { 
 
foreach k in *temp*.dta         {  
  
 local myfiles: dir . files "*`k'*", respectcase  
 foreach file of local myfiles {  
   capture rm  "`file'"  
   } 
   * 
             } 
             * `k' 
              
} 
************************************************************* **********************
** 
 
 WT/DS381/ARB  
 
- 97 - 
 
   
APPENDIX  3. R files for solving the model  
Model functions  
################################################  
### Return the correct distribution function ###  
################################################  
 
pdist_US < - function( premium, mu, s){  
   
  if(dist_US == "logistic"){return(plogis(premium, location = mu, scale = s))}  
   
} 
 
pdist_MX < - function(premium, mu, s){  
   
  if(dist_MX == "logistic"){return(plogis(premium, location = mu, scale = s))}  
   
} 
 
 
######################## ##############  
### Function for interior solution ###  
######################################  
 
func_interior < - function(theta){  
 
  ##############################  
  ### Equations of the model ###  
  ##############################  
   
  #World price of generic  tuna (world supply - from Mexico's submission)  
  pgw_func < - function(qgusimp){  
      as.numeric(theta["beta_us"]*qgusimp^(1/theta["epsilon"]))  
  } 
   
  #US price of yellowfin - arbitrage between US and Mexico  
  py_func < - function(pymx){as.numeric(pymx +  theta["t"])}  
   
  #US price of generic tuna  
  pgus_func < - function(qgusimp){as.numeric(pgw_func(qgusimp)*(1+theta["dus"]) + 
theta["tus"])}  
   
  #MX price of generic tuna  
  pgmx_func < - function(qgusimp){as.numeric(pgw_func(qgusimp)*(1+theta["dmx"]) + 
theta["tmx"])  }  
   
  #US demand for yellowfin  
  qdyus_func < - function(pymx, qgusimp){  
    as.numeric(theta["Aus"]*a_share*(1 -pdist_US(py_func(pymx) - pgus_func(qgusimp), 
theta["mu_us"], theta["s_us"]))*py_func(pymx)^theta["eta"])  
  } 
   
  #US demand for gen eric tuna  
  qdgus_func < - function(pymx, qgusimp){  
    as.numeric(theta["Aus"]*(1 -a_share*(1 -pdist_US(py_func(pymx) - 
pgus_func(qgusimp), theta["mu_us"], 
theta["s_us"])))*pgus_func(qgusimp)^theta["eta"])  
  } 
   
  #MX demand for yellowfin  
  qdymx_func < - function(pymx, qgusimp){  
    as.numeric(theta["Amx"]*(1 -pdist_MX(pymx - pgmx_func(qgusimp), theta["mu_mx"], 
theta["s_mx"]))*pymx^theta["eta"])  
  } WT/DS381/ARB  
 
- 98 - 
 
     
  #MX demand for generic tuna  
  qdgmx_func < - function(pymx, qgusimp){  
    as.numeric(theta["Amx"]*pdist_MX( pymx - pgmx_func(qgusimp), theta["mu_mx"], 
theta["s_mx"])*pgmx_func(qgusimp)^theta["eta"])  
  } 
   
  ##########################  
  ### Equations to solve ###  
  ##########################  
   
  #Quantity of generic tuna in U.S. (from Mexico's submission)  
  qg_sol_func < - function(pymx, qgusimp){  
    as.numeric(qgusimp + theta["Qgus"] - qdgus_func(pymx, qgusimp))  
  } 
   
  #Quantity of yellowfin tuna  
  qy_sol_func < - function(pymx, qgusimp){  
    as.numeric(theta["Qymx"] - qdymx_func(pymx, qgusimp) - qdyus_func(py mx, 
qgusimp))  
  } 
   
  #Objective function  
  obj_func < - function(x){  
    pymx <- x[1] 
    qgusimp < - x[2] 
    y <- numeric(2)  
    #Objective function  
    y[1] <- qg_sol_func(pymx, qgusimp)  
    y[2] <- qy_sol_func(pymx, qgusimp)  
    #Return vector of funct ions 
    y 
  } 
   
  #Square function to solve - for corner solution on qgusimp = 0  
  obj_func_2 < - function(pymx){  
    as.numeric((qy_sol_func(pymx, 0))^2)  
  } 
   
  #################  
  ### Solutions ###  
  #################  
   
  sol <- nleqslv(c(7, 80000000 ), obj_func, control = list(cndtol = 1e -16)) 
  print(sol$message)  
     
  pymx_sol < - as.numeric(sol$x[1])  
  qgusimp_sol < - as.numeric(sol$x[2])  
   
  #Return solutions for all variables in a vector  
  vec_sol < - c(Qdymx = qdymx_func(pymx_sol, qgusimp_sol),  
               Qdgmx = qdgmx_func(pymx_sol, qgusimp_sol),  
               Qdyus = qdyus_func(pymx_sol, qgusimp_sol),  
               Qdgus = qdgus_func(pymx_sol, qgusimp_sol),  
               Qymx_exp = max(0, theta["Qymx"] - qdymx_func(pymx_sol, 
qgusimp_s ol)), 
               Qymx_imp = max(0, qdymx_func(pymx_sol, qgusimp_sol) - 
theta["Qymx"]),  
               Qgmx_exp = max(0, theta["Qgmx"] - qdgmx_func(pymx_sol, 
qgusimp_sol)),  
               Qgmx_imp = max(0, qdgmx_func(pymx_sol, qgusimp_sol) - 
theta["Qgmx "]), 
               Qgus_imp = max(0, qdgus_func(pymx_sol, qgusimp_sol) - max(0, 
theta["Qgmx"] - qdgmx_func(pymx_sol, qgusimp_sol)) - theta["Qgus"]),  
               pymx = pymx_sol,  
               pgmx = pgmx_func(qgusimp_sol),  
               pyus = py_f unc(pymx_sol),  WT/DS381/ARB  
 
- 99 - 
 
                 pgus = pgus_func(qgusimp_sol))  
 
  return(vec_sol)  
 
} 
 
#####################################  
### Function for corner solution  ###  
#####################################  
 
func_corner < - function(theta){  
   
  #(Re)calculate Mex ico's domestic production - corner solution on exports of 
yellowfin tuna  
  qymx_dom < - theta["Qymx"] - ymx_imp 
   
  ##############################  
  ### Equations of the model ###  
  ##############################  
   
  #World price of generic tuna (world su pply - from Mexico's submission)  
  pgw_func < - function(qgusimp){  
    as.numeric(theta["beta_us"]*qgusimp^(1/theta["epsilon"]))  
  } 
   
  #US price of generic tuna  
  pgus_func < - function(qgusimp){as.numeric(pgw_func(qgusimp)*(1+theta["dus"]) + 
theta["tus"] )} 
   
  #MX price of generic tuna  
  pgmx_func < - function(qgusimp){as.numeric(pgw_func(qgusimp)*(1+theta["dmx"]) + 
theta["tmx"])}  
   
  #US demand for yellowfin  
  qdyus_func < - function(pyus, qgusimp){  
    as.numeric(theta["Aus"]*a_share*(1 -pdist_US(pyus - pgus_func(qgusimp), 
theta["mu_us"], theta["s_us"]))*pyus^theta["eta"])  
  } 
   
  #US demand for generic tuna  
  qdgus_func < - function(pyus, qgusimp){  
    as.numeric(theta["Aus"]*(1 -a_share*(1 -pdist_US(pyus - pgus_func(qgusimp), 
theta["mu_us"], theta["s_us"] )))*pgus_func(qgusimp)^theta["eta"])  
  } 
   
  #MX demand for yellowfin  
  qdymx_func < - function(pymx, qgusimp){  
    as.numeric(theta["Amx"]*(1 -pdist_MX(pymx - pgmx_func(qgusimp), theta["mu_mx"], 
theta["s_mx"]))*pymx^theta["eta"])  
  } 
   
  #MX demand for ge neric tuna  
  qdgmx_func < - function(pymx, qgusimp){  
    as.numeric(theta["Amx"]*pdist_MX(pymx - pgmx_func(qgusimp), theta["mu_mx"], 
theta["s_mx"])*pgmx_func(qgusimp)^theta["eta"])  
  } 
   
  ##########################  
  ### Equations to solve ###  
  ######### #################  
   
  #Quantity of generic tuna in U.S. (from Mexico's submission)  
  qg_sol_func < - function(pyus, qgusimp){  
    as.numeric(qgusimp + theta["Qgus"] - qdgus_func(pyus, qgusimp))  
  } 
 
  #Quantity of yellowfin tuna  WT/DS381/ARB  
 
- 100 - 
 
    qy_sol_func < - function(p yus, qgusimp){  
    as.numeric(qymx_dom - qdyus_func(pyus, qgusimp))  
  } 
 
  #Objective functions  
  obj_func < - function(x){  
    pyus <- x[1] 
    qgusimp < - x[2] 
    y <- numeric(2)  
    #Objective function  
    y[1] <- qg_sol_func(pyus, qgusimp)  
    y[2] <- qy_sol_func(pyus, qgusimp)  
    #Return vector of functions  
    y 
  } 
 
  #Mexican consumption of yellowfin tuna equals its imports  
  obj_func_mx < - function(pymx, qgusimp){  
    #Objective function  
    y <- qdymx_func(pymx, qgusimp) - ymx_imp 
    #Return vect or of functions  
    y^2 
  } 
   
  #Square function to solve - for corner solution on qgusimp = 0  
  obj_func_2 < - function(pymx){  
    as.numeric((qy_sol_func(pymx, 0))^2)  
  } 
   
  #################  
  ### Solutions ###  
  #################  
   
  sol <- nleqslv( c(pyus = 7, qgusimp = 80000000), obj_func, control = list(cndtol = 
1e-16)) 
  print(sol$message)  
   
  pyus_sol < - as.numeric(sol$x[1])  
  qgusimp_sol < - as.numeric(sol$x[2])  
   
  #Solve for Mexican price of yellowfin  
  pymx_sol < - optimize(obj_func_mx, c(2,1 0), qgusimp = qgusimp_sol, tol = 
.Machine$double.eps^2)$minimum  
   
  #Return solutions for all variables in a vector  
  vec_sol < - c(Qdymx = ymx_imp,  
               Qdgmx = qdgmx_func(pymx_sol, qgusimp_sol),  
               Qdyus = as.numeric(qymx_dom),  
               Qdgus = qdgus_func(pyus_sol, qgusimp_sol),  
               Qymx_exp = max(0, qymx_dom),  
               Qymx_imp = max(0, ymx_imp),  
               Qgmx_exp = max(0, theta["Qgmx"] - qdgmx_func(pymx_sol, 
qgusimp_sol)),  
               Qgmx_imp = max(0, qdgmx_func(pymx_sol, qgusimp_sol) - 
theta["Qgmx"]),  
               Qgus_imp = max(0, qgusimp_sol),  
               pymx = pymx_sol,  
               pgmx = pgmx_func(qgusimp_sol),  
               pyus = pyus_sol,  
               pgus = pgus_func(qgusi mp_sol))  
   
  return(vec_sol)  
   
} 
 
################################################################  
### Function to select solution depending on corner solution ###  WT/DS381/ARB  
 
- 101 - 
 
  ################################################################  
 
sol_func < - function(ga mma){ 
  ifelse(func_interior(gamma)["Qymx_exp"] <= 65500000, 
return(func_interior(gamma)), return(func_corner(gamma)))  
   
} 
 
###############################  
### Function to solve model ###  
###############################  
 
model_solution < - function(x, lamb da, vec_US, vec_MX){  
   
  ###########################################  
  ### Calibration of US demand and supply ###  
  ###########################################  
   
  #Demand intensity parameter  
  Aus <- as.numeric(vec_US["cons_US"]/(Hus*(vec_US["p_US"]^x[ "eta"])))  
   
  #Supply intensity parameter  
  beta_us < - as.numeric(lambda["pgw"]/(vec_US["cons_US"] -
vec_US["Qgus"])^(1/x["epsilon"]))  
   
  ###############################################################  
  ### Calibrate Mexican demand                                ### 
  ###############################################################  
   
  MX_func < - function(py){  
    py <- py[1] 
    # 
    pg <- function(py){  
      (vec_mx["p_mx"] - (1-vec_mx["Hmx"])*py)/vec_mx["Hmx"]  
    } 
 
    y1 <- vec_mx["cons_MXy"]/vec_m x["cons_MXg"] - ((1-pdist_MX(py - pg(py), 
x["mu_mx"], x["s_mx"]))/pdist_MX(py - pg(py), x["mu_mx"], 
x["s_mx"]))*(py/pg(py))^x["eta"]  
     
    return(y1^2)  
  } 
   
  pymx <- optim(c(5.4), MX_func, method = "Brent", lower = 4.00, upper = 8, control 
= list(abs tol = .Machine$double.eps))$par  
  #pymx 
   
  #Find value for pg  
  pgmx <- (vec_mx["p_mx"] - (1-vec_mx["Hmx"])*pymx)/vec_mx["Hmx"]  
 
  #Find value for A  
  Amx <- as.numeric(vec_mx["cons_MXy"]/((1 -pdist_MX(pymx - pgmx, x["mu_mx"], 
x["s_mx"]))*pymx^x["eta"]))  
  #Amx 
   
  ###################  
  ### Solve model ###  
  ###################  
   
  sol <- sol_func(c(x, lambda, Aus = Aus, Amx = Amx, beta_us = beta_us, Qgus = 
as.numeric(vec_US["Qgus"])))  
   
  #Return vector of solutions and parameters of calibration  
  return(c(sol, Aus_cal = Aus, Amx_cal = Amx, beta_us = beta_us, pymx_cal = pymx, 
pgmx_cal = pgmx))  
   
} WT/DS381/ARB  
 
- 102 - 
 
   
Model solutions  
#Clear memory of all objects  
rm(list = ls())  
 
#Load library for numerical optimizer  
library(nleqslv)  
library(stringr)  
 
##################### ############  
### Set the working directory ###  
#################################  
 
setwd("USE YOUR OWN DIRECTORY") #use "/" rather than " \" 
 
####################################################################  
### Load the R file with model equations and nu merical solutions ###  
####################################################################  
 
source("Arbitrator Final - Model functions.R")  
 
###############################  
### Parameter for US demand ###  
###############################  
 
vec_US < - c(Qgus= 1 77350000,  
            cons_US = 330264000,  
            p_US = 5)  
 
####################################  
### Parameter for Mexican demand ###  
####################################  
 
vec_mx < - c(cons_MXy = 58344000,  
            cons_MXg = 29585000,  
            p_mx = 5.04,  
            Hmx = 29585000/(29585000+58344000))  
 
########################  
### Model parameters ###  
########################  
 
ymx_imp < - 0 
 
vec_cal < - c(Qymx = 65342000 + ymx_imp,  
             Qgmx = 23000000,  
             t = 0.05,  
             pgw = 4.30,  
             dmx = 0.20,  
             dus = 0.125,  
             tmx = 0.16,  
             tus = 0.16)  
 
##############################  
### Choice of distribution ###  
##############################  
 
dist_US < - "logistic"  
 
dist_MX < - "logistic" 
 
 
#####################################  
### Adjustment for lack of access ###  
#####################################  WT/DS381/ARB  
 
- 103 - 
 
   
a_share < - .731   #26.9% of US retailers will not sell Mexican yellowfin  
Hus <- .988       #Since we parameterize Aus with observed consumption share of 
1.2% for yellowfin"  
 
 
############################################################  
### Vector of parameters for demand and supply equations ###  
############################################################  
 
s_logis < - 1 
 
vec_par < - c(eta = -1,  
             epsilon = 2.610382,  
             mu_us = .19906683,  
             mu_mx = 1.779089,  
             s_us = s_logis,  
             s_mx = s_logis)  
 
 
###################  
### Solve model ###  
###################  
 
sol <- model_solution(vec_pa r, vec_cal, vec_US, vec_mx)  
 
#Make table of results  
results < - data.frame(array(NA,c(8,2)))  
colnames(results) < - c("US", "Mexico")  
rownames(results) < - c("Cons_y", "Cons_g", "Price_y", "Price_g", "Exp_y", "Imp_y", 
"Exp_g", "Imp_g")  
 
results["Cons_y", "US"]  <- sol["Qdyus"]  
results["Cons_g", "US"] < - sol["Qdgus"]  
results["Price_y", "US"] < - sol["pyus"]  
results["Price_g", "US"] < - sol["pgus"]  
results["Exp_y", "US"] < - 0 
results["Imp_y", "US"] < - sol["Qdyus"]  
results["Exp_g", "US"] < - 0 
results["Imp_g", "US"] < - sol["Qgus_imp"]  
results["Aus", "US"] < - sol["Aus_cal"]  
 
results["Cons_y", "Mexico"] < - sol["Qdymx"]  
results["Cons_g", "Mexico"] < - sol["Qdgmx"]  
results["Price_y", "Mexico"] < - sol["pymx"]  
results["Price_g", "Mexico"] < - sol["pgmx"]  
results["Exp_y", "Mexi co"] <-sol["Qymx_exp"]  
results["Imp_y", "Mexico"] < - ymx_imp 
results["Exp_g", "Mexico"] < - 0 
results["Imp_g", "Mexico"] < - sol["Qgmx_imp"]  
results["Amx", "Mexico"] < - sol["Amx_cal"]  
 
 
########################  
### Table of results ###  
##################### ### 
 
results 
 
library(xlsx)  
write.xlsx(results, file = "Arbitrator Final - Model results.xlsx")  
 
###############################  
### Calculate export losses ###  
###############################  
 WT/DS381/ARB  
 
- 104 - 
 
  exp_value < - as.numeric(sol["Qymx_exp"]*(sol["pyus"] -vec_cal[" t"]) + 
sol["Qgmx_exp"]*sol["pgmx"])  
exp_value/1000000  
exp_value - 22650000 -> nullification  
 
 
#################################################################  
### Arbitrator's determination of nullification or impairment ###  
############################# ####################################  
 
nullification/1000000  
 
__________