RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/208 
28 April 2006 
 (06-1998) 
Dispute Settlement Body 
24 March 2006  
 
 
 
MINUTES OF MEETING 
 
Held in the Centre William Rappard  
on 24 March 2006  
 
Chairman:  Mr.  Muhamad Noor Yacob (Malaysia) 
 
 Subjects discussed
: Page  
 
1. Mexico – Tax measures on soft drinks and other beverages.................................................1  
(a) Report of the Appellate Body and Report of the Panel...............................................................1  
2. Selection process for appointment of  an Appellate Body member.......................................3  
 
 1. Mexico – Tax measures on soft drinks and other beverages 
(a) Report of the Appellate Body (WT/DS308/AB /R) and Report of the Panel (WT/DS308/R) 
1. The Chairman
 drew attention to the communication from the Appellate Body contained in 
document WT/DS308/12 transmitting the Appellate Body Report on:  "Mexico – Tax Measures on 
Soft Drinks and other Beverages", which ha d been circulated on 6 March 2006 in document 
WT/DS308/AB/R, in accordance with Article 17.5 of  the DSU.  He reminded delegations that, the 
Appellate Body Report and the Panel Report pertaini ng to this case had been circulated as unrestricted 
documents.  As Members were aware, Article 17.14  of the DSU required that:  "An Appellate Body 
report shall be adopted by the DSB and unconditionally accepted by the parties to the dispute unless the DSB decides by consensus not to adopt the Appellate Body report within 30 days following its circulation to Members.  This adoption procedure is without prejudice to the right of Members to 
express their views on an Appellate Body report". 
2. The representative of the United States
 said that his country wished to thank the members of 
the Panel, the Appellate Body, and the Secretariat for their hard work.  The Panel and the Appellate 
Body Reports were solid, well-reasoned Reports, and the United States was pleased to propose their 
adoption.  He recalled that this dispute involved Mexico's tax on soft  drinks and other beverages made 
with any sweetener other than cane sugar.  Under th e tax, soft drinks and other beverages made with 
imported sweeteners, such as high-fructose corn syr up (HFCS) and beet sugar, were subject to a 
20 per cent tax on their sale and distribution.  The Pa nel had correctly found Me xico's beverage tax to 
be inconsistent with Articles III:2 and III:4 of the GATT 1994.  Mexico had not appealed these 
findings. 
3. The Panel had also correctly rejected Mexico 's defense that, although discriminatory, its 
beverage tax was nonetheless jus tified under Article XX(d) of the GATT 1994.  The Appellate Body 
had upheld this finding, and the United States generally  supported the analysis of the Appellate Body.  WT/DSB/M/208 
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  In the course of the dispute, the Panel had also rejected Mexico's request for the Panel to decline 
jurisdiction. The Panel had rightly concluded th at a WTO panel may not decline to exercise 
jurisdiction over disputes properly brought before it.  The Appellate Body had upheld this finding and 
the obligation of WTO panels to make findings, a nd WTO Members' right to obtain them, in disputes 
properly brought before the WTO dispute settlement system. 
4. The Panel Report was a clear indication that Mexico must eliminate its discrimination against 
US sweeteners and beverages made  with those sweeteners.  The United States found it difficult to 
conceive how Mexico could do so without elimin ating its beverage tax.  For that reason, the 
United States was particularly troubled by th e decision of the Mexican Congress to renew the 
beverage tax for 2006 and by repor ts of statements by Mexican officials that Mexico would impose 
prohibitive tariffs on US HFCS imports if in the fu ture it eliminated the tax.  The United States hoped 
that Mexico would act quickly to eliminate its di scriminatory tax, and that in doing so it would not 
simply replace one prohibitive barrier to US HFCS with another. 
5. The Panel and Appellate Body reports provided clear guidance on what Mexico needed to do 
to implement the DSB's recommendations and rulings in this dispute.  The United States called upon 
Mexico to bring itself into complian ce with its WTO obligations promptly. 
6. The representative of the European Communities
 said that the EC had been a third party in 
this dispute because of its systemic interest in the important substantive and pr ocedural legal issues at 
stake.  Accordingly, the EC wish ed to thank the Appellate Body, the Panel and the Secretariat for 
their work, and notably for giving consideration to  the views which the EC had expressed before the 
Panel and the Appellate Body.  The EC agreed with  the Panel's and the Appellate Body's conclusions 
regarding the issues of jurisdiction and Article XX(d) of the GATT 1994.  The EC particularly 
appreciated the careful analysis of Article XX(d) by the Appellate Body, including the clarification 
that international agreements might be regarded as "laws and regulati ons" where they had direct effect 
within the domestic legal order of a WTO Member. 
7. However, the EC had some concerns regardi ng the Appellate Body's reasoning, where it had 
ruled out a determination whether a WTO Member acted consistently or inconsistently with non-
WTO international obligations and where the Appe llate Body had argued that this would mean 
adjudicating non-WTO disputes.  Of course, Panels and the Appellate Body di d not have the function 
to "adjudicate" non-WTO disputes.  But interp reting and applying non-WTO law and ruling on non-
WTO obligations, where this was legally relevant for deciding a WTO dispute, did not mean "adjudicating" a non-WTO dispute.  It could even  be required, as WTO law and dispute settlement 
practice showed, for example in relation to the Vi enna Convention, the Lomé Convention, the UN 
Charter and IMF Understandings.  The EC would th erefore caution against a broad reading of the 
Appellate Body's statement regarding the perm issibility to "adjudicate non-WTO disputes." 
8. The EC also had some doubts regarding the A ppellate Body's reasoni ng on countermeasures 
and Article 23 of the DSU.  Of course, Article 23 made clear that there could be no countermeasures 
against WTO breaches, but it did not regulate whether countermeasures were permitted to redress 
non-WTO violations.  This issue was not at stake in the present case, given that Mexico had relied 
only on Article XX(d) of the GATT 1994, so there was no need to take a position in this respect. 
9. The EC also wished to comment on the part of the Panel Report which had not been appealed.  
The EC broadly agreed with the Panel's analysis  of Articles III:2 and III:4 of the GATT 1994, where 
the Panel had based its violation findings on th e observation that the sweetener exempted from 
taxation;  i.e. cane sugar, was almost exclusively a domestic product in Mexico, whereas the taxed 
beet sugar and corn syrup were pr oduced in the United States, but not in Mexico.  This was indeed the 
very feature which had resulted in the de facto discriminatory nature of the challenged Mexican taxes.  
However, the EC was puzzled that the Panel, while  basing itself on these central facts for establishing  WT/DSB/M/208 
 Page 3 
 
 
  a violation of Articles III:2 and III:4 of the GATT 1994, at two of the relevant points explicitly 
"refrains from ruling on whether such a finding is necessary in order ... to establish [a] claim under 
Article III:2, first sentence, [and Article III:4] of the GATT 1994".  If such a finding were not 
necessary, virtually any differential taxation of produc ts that were "like" would amount to a violation 
of Article III:2, and virtually any non-fiscal differentiation would amount to a violation of 
Article III:4 of the GATT 1994 – even where the di fferentiation affects im ports and like domestic 
products in the same manner or where the diffe rentiation predominantly burdened domestic like 
products. 
10. In a similar vein, the EC wondered whether the Panel had always sufficiently considered the 
extent to which the current absence of corn sy rup in the domestic production and in the use of 
sweeteners in Mexico was due to the very taxes that were challenged in  this dispute.  The EC did not 
have a basis to believe that, in the absence of the challenged taxes, there would be a similarly large 
production and use of corn syrup in Mexico as among products to be exported from the United States.  Accordingly, the Panel's ultimate c onclusions might be unaffected by this aspect in this case.  In other 
cases, however, the facts might well be different an d might well warrant a more cautious approach to 
Article III of the GATT 1994, in order to avoid that  measures without discriminatory effect were 
found to be in violation of national treatment obligations. 
11. The DSB took note
 of the statements, and adopted  the Appellate Body Report contained in 
WT/DS308/AB/R and the Panel Report contained in WT/DS308/R, as modified by the Appellate 
Body Report. 
2. Selection process for appointment of an Appellate Body member 
12. The Chairman , speaking under "Other Business", said that he wished to make a brief 
statement regarding the selection process for appointme nt of an Appellate Body member.  He recalled 
that at its meeting on 17 February 2006, the DSB had agreed to launch the process for selecting an 
Appellate Body member to replace the late Mr. J ohn Lockhart for the remainder of his term, until 
11 December 2009, in accordance with Article 17.2 of  the DSU.  He also recalled that, at that 
meeting, in accordance with the procedures set out  in document WT/DSB/1, the DSB had agreed to 
establish a Selection Committee consisting of the Dir ector-General and the 2006 Chairpersons of the 
General Council, the Goods Council, the Services Council, the TRIPS Council and the DSB.  At the 
present meeting, he wished to remind delegations that WTO Members had been invited to submit 
nominations of candidates, together with thei r curricula vitae, by no later than 5 p.m. on 
31 March 2006.  In this contex t, he noted that no nominations had yet been received. 
13. The representative of China  recalled that at its 17 February 2006 meeting, the DSB had 
launched the selection process for appointment of an Appellate Body member to replace the late Mr. 
John Lockhart for the remainder of his term.  At th at meeting, the DSB had al so agreed to establish a 
Selection Committee, and had set the deadline of 31 March 2006 for nominations of candidates.  After 
the 17 February meeting, China, as well as some other Members, had started its domestic selection 
procedures with a view to nominating capable and qualified candidates.  China's domestic selection 
process was ongoing and might not come to an end befo re the deadline of 31 March 2006.  In light of 
this, China requested that the DSB and the Sel ection Committee postpone the deadline of 31 March 
until 30 April 2006.  China believed that such pos tponement would also be nefit domestic selection 
processes of some other WTO Members, and be help ful to the selection process for appointment of an 
Appellate Body member. 
14. The Chairman  said that, in light of what had just been  stated by China, he wished to invite 
other delegations to express their views on this matter. WT/DSB/M/208 
Page 4  
 
  15. The representative of Canada
 said that his delegation fully understood that Members needed 
time to go through the selection process internally.  However, his delegation would have appreciated 
if it had received advance notice of China's request .  His delegation had not had a chance to consult 
the possibility of extension of the deadline with the capital, and this was not a matter to be consented 
to without instructions from the capital.  He was not in a position to agree to such an extension at the 
present meeting.  He did not wish to suggest that on behalf of his government he would disagree with 
China's request, but that he was not in a pos ition to agree to it at the present meeting. 
16. The representative of Japan  said that, like Canada, his delegation considered that the matter 
before the DSB was important, but it was not in a position at the present meeting to take a decision on 
China's request without any instructions from the cap ital.  Like Canada, his delegation could not, at 
the present meeting, indicate whether it would agree to or disagree with China's request. 
17. The representative of Australia  said that her country noted the Chairman's statement that no 
nominations had yet been received and considered that an extension of the deadline might indeed 
become necessary.  However, it could accept and comp letely understand the positions of Canada and 
Japan that since no notice of the pr oposal had been given in advan ce, it would be difficult to accept 
the proposal at this time.  Bearing that in mind, perhaps delegations should be given some time to 
consider China's proposal and then to come back to  this, but obviously this would have to occur quite 
quickly.  Australia just wished to emphasize the im portance of getting the process right and ensuring, 
as mentioned by China, that a qualified candidate be appointed. 
18. The representative of Brazil  said that his delegation had taken careful note of the Chairman's 
statement that the deadline was approaching.  His delegation appreciated China's efforts to complete 
its domestic selection procedures as soon as possible.   It fully understood that sometimes it was very 
difficult to meet deadlines when high standards of qua lity were at stake as in this case.  However, as 
pointed out by previous speakers this was the firs t time that his delegati on had become aware of 
China's request.  His delegation would need some ti me to consult with the capital in order to get 
instructions on this very important matter.  He said that, following consulta tions with the capital and 
the relevant authorities in Brazil, China' s request could be considered positively. 
19. The Chairman  noted that delegations were not in a position at the present meeting to decide 
on this matter and said that he would reflect on th is issue and would consul t with delegations as 
necessary. 
20. The representative of Mexico  said that his delegation noted the statements made and had no 
problem with the substance.  However, there was a procedural issue to which he wished to refer, 
namely, that the agenda of the present meeting did not contain any "Other Business" item.  The only 
item for consideration at the present meeting was th e adoption of the Appellate Body and the Panel 
Reports.  Therefore, considering the number of  delegations at the present meeting, only a few 
delegations would be able to take  a decision on this important matter at the present meeting.  Other 
delegations would have pr obably been able to participate in the present meeting had they been 
informed in advance that this matter was going to be discussed.  He reiterated that Mexico had no 
problem with the statements made by previous speakers, but believed that Members of the DSB should adhere to the rules of procedure. 
21. The representative of United States
 said that first of all his delegation wished to thank the 
delegation of China for having raised this matter with the DSB and for making Members of the DSB 
aware of its particular concerns in advance of the de adline.  This was very helpful.  At the same time, 
his delegation wished to say as well that, like others , it had had no opportunity to consult the capital 
and, therefore, it had no instructions on this matter.   His delegation shared the point of view just 
expressed by Mexico with respect to the procedur es to be followed by the DSB.  It was his 
delegation's understanding that the Chairman would be reflecting or consulting on ways forward.   WT/DSB/M/208 
 Page 5 
 
 
  Since the Chinese delegation had made it clear to all what it was that it would be hoping for, and that 
all now were aware of that, one possibility could be  for China to inscribe its request on the agenda of 
a meeting of the DSB, either a regular or one especi ally called for that purpose in the ordinary way, 
pursuant to the rules of procedure.  That would be  a way for the DSB to cons ider the issue so as to 
take account of the concerns expressed by  Mexico, which his delegation shared. 
22. The representative of European Communities  said that his delegation was very pleased to hear 
that Members were actively looking for suitable candi dates to fill the vacancy which had arisen on the 
Appellate Body following the sad passing away of J ohn Lockhart.  The EC had stated previously in 
the DSB that the most important criterion was the hi ghest quality of the successor of the late Mr. John 
Lockhart.  The EC understood that this search might require time and that indeed a certain amount of 
time beyond the deadline set by the DSB might be n eeded.  However, his delegation wished to be 
associated with previous speakers who had stated that  this should be done in accordance with the rules 
of procedure.  He then drew attention to rule 25 of the rules of procedure for meetings of WTO 
bodies, which provided that normally decisions were not taken under "Other Business", in particular 
when a matter had been put on the agenda without any advance notice.  He added that his delegation 
had no instructions at this point and proposed th at this matter be dealt with within the proper 
procedural framework. 
23. The representative of Canada  said that he had asked for the floor in response to a suggestion 
that had been made earlier in respect of the next st eps that China might undertake.  He thought that 
one had to be careful in the sense that the next meeting of the DSB, either special or regular, would only take place after the 31 March deadline.  Therefor e, to seek the extension of the deadline after the 
deadline had passed would probably send a signal ab out the procedures to be followed in the WTO 
that would not necessarily be helpful in future.  Of  course, if there were no qualified candidates and if 
that was the judgement of WTO Members at the ti me, that was one thing, but to extend a deadline 
ex post facto  seemed to be problematic.  He added that he did not have instructions one way or 
another and that this was only his initial reac tion to procedural circumstances at hand. 
24. The representative of India
 thanked the Chairman for bringing to Member's notice the issue 
about the possibility of extending the deadline, but as others, he also had no instructions from the 
capital for obvious reasons.  Nevertheless, he appr eciated the reasons given by China for seeking an 
extension of the deadline up to 30 April.  He could fairly assume that his capital might not have any objections to such an extension.  At the present meet ing, he wished to raise systemic concerns about 
Member's rights and obligations regarding matters raised under "Other Business".  India had already 
stated its concerns in this regard on previous o ccasions, namely, that some Members were tempted to 
raise under "Other Business" matters related to WTO ri ghts and obligations;  i.e. either to state that 
they had implemented the DSB's recommendations or  to make similar assertions.  However, his 
delegation recognized that the matter under discuss ion was of much more paramount collective 
importance for the DSB and the WTO and, as stated by the EC, the quality of the person that would 
be selected was as important as meeting the deadline that had been set by the DSB. 
25. The Chairman
 said that, in response to what had just b een stated, he wished to note that, in his 
statement under "Other Business", he had only wished to draw Members' attention to the deadline of 
31 March and to the fact that thus far no nominations  had been received.  He had not drawn attention 
to the possibility of the extension of the deadline.  He reiterated that he would reflect on this matter 
and would consult with Members1, bearing in mind the time constraint as pointed out by delegations. 
26. The DSB took note  of the statements.   
__________ 
                                                      
1 Informal consultations on China's proposal were held on 28 March 2006.