RESTRICTEDWORLD TRADE
ORGANIZATIONWT/DSB/M/69
28 October 1999
(99-4660)
Dispute Settlement Body
14 October 1999
MINUTES OF MEETING
Held in the Centre William Rappard
on 14 October 1999
Chairman:  Mr. Kåre Bryn (Norway)
Prior to adoption of the agenda, in opening the meeting, the Chairman of the General Council,
Mr. A. Mchumo, said that due to the departure of Mr. N. Akao from Geneva, he had held informalconsultations on the Chairmanship of the DSB.  As a result of these consultations, at its meeting on
6 October 1999, the General Council had agreed that Mr. K. Bryn (Norway) replace Mr. N. Akao as
Chairperson of the DSB.  He therefore proposed that the DSB elect Mr. K. Bryn as Chairman of the
body by acclamation in order to serve out the remaining term of office of Mr. N. Akao.
The DSB so agreed.
Subjects discussed: Page
1. Australia – Subsidies provided to producers and exporters of automotive leather............1
(a) Recourse to Article 21.5 of th e DSU by the United States .........................................................1
2. India – Quantitative restrictions on imports of agricultural, textile and industrial
products ....................................................................................................................... ..............3
(a) Implementation of the reco mmendations of the DSB.................................................................3
1. Australia – Subsidies provided to producers and exporters of automotive leather
(a) Recourse to Article 21.5 of the DSU by the United States (WT/DS126/8)
The Chairman drew attention to the communication from the United States contained in
document WT/DS126/8.
The representative of the United States expressed his country's regret that this matter had to
be brought back to the DSB.  He recalled that on 16 June 1999, the DSB had adopted the Panel Report
which had found that Australia had bestowed an $A30 million export subsidy on Howe Leather in
1997 and 1998, and had recommended that the subsidy be withdrawn.  The subsidy was very
significant and most of the benefit of the subsidy was attributable to the period following the adoptionof the Panel Report by the DSB.  Despite the fact that Howe continued to receive the benefit of the
export subsidy, and that most of that benefit would be received in future years, Australia claimed to
have "withdrawn" the subsidy by:  (i) having Howe  repay a mere $A8 million - only 27 per cent of the
face value of the subsidy;  and then (ii) reimbursing  Howe's parent company for even this insufficientWT/DSB/M/69
Page 2
"withdrawal" through the grant of a non-commercial lo an.  The United States believed that this did
not constitute "withdrawal of the subsidy" under the SCM Agreement or the Panel's recommendation.
In the United States' view the repayment of the subsidy, to be considered a "withdrawal", should be
from the recipient's own funds, and not from funds reimbursed by the Australian Government.
Therefore, the United States did not consider that Australia had withdrawn any portion of the exportsubsidy.
It might come as a surprise to many delegations that the United States had agreed with
Australia to pursue Article 21.5 of the DSU first and only later pursue Article 22 of the DSU and/or
Article 4.10 of the SCM Agreement.  This was not a fundamental change in the United States'
position on the applicability of those Articles.  The dispute under Article 4 of the SCM Agreement
presented special circumstances and unique opportunities.  In particular, unlike in normal disputesettlement proceedings, under the SCM Agreement the parties could agree to extend the deadline for
exercising the right to request Article 22 procedures.  The United States and Australia had done so.
This permitted the parties additional time to resort to Article 21.5 proceedings, and the United States
was willing to accommodate Australia's desires in this respect.  This approach, which was not
required under the DSU, was a special agreement for the dispute at hand only.  However, it reflected aprocess supported by many Members in the current discussions on the DSU Review.  The United
States hoped that it would demonstrate that such a process - and timetable - was workable, efficient
and prompt.
The representative of Australia said that his country considered that it had implemented the
rulings and recommendations of the Panel Report adopted by the DSB in good faith in conformity
with the findings of the Panel Report.  He recalled that Australia had accepted the Panel Report
without appealing and had implemented the conclusions in line with that Report.  Australia had
notified the DSB of its implementation in document WT/DS126/7 in accordance with Article 21.6 of
the DSU for a case under Article 4 of the SCM Agreement.  He expressed his country'sdisappointment that the United States had decided to pursue this case.  However, Australia recognized
that the United States had a right to do so under the DSU provisions and had agreed procedures with
the United States to be followed in this case.  Accordingly, Australia did not object to the
establishment of an Article 21.5 panel in the context of the DSU and the SCM Agreement to allow for
a review by the original panel.  However, the scope of the terms of reference of the panel would be
limited by the fact that this was an Article 21.5 panel regarding compliance with recommendations
and rulings adopted by the DSB, and not a more general panel about consistency of measures with theSCM Agreement.
The representative of the European Communities noted with satisfaction that the United
States was requesting a panel under Article 21.5 in order to resolve its disagreement with Australia on
the implementation in this case.  He recalled that in the beginning of 1999, the DSB had to face a verydifficult situation because the United States had refused to initiate an Article 21.5 procedure to
examine the EC's implementation on bananas.  On that occasion, the United States had made a
number of arguments to try to justify its disregard for the Article 21.5 procedure.  The United States
had considered that the EC's interpretation, that Article 21.5 was required in case of disagreement on
implementation, would render Article 22 completely inoperative because all actions under that Articlehad to take place within the 60-day period after the end of the reasonable period of time.  The EC had
also been told that the United States could only benefit from the negative consensus rule with respect
to its request for suspension of concessions, if it had made its request within 30 days after the expiry
of the reasonable period of time.  At the present meeting, the United States was not only recognizing
the existence of Article 21.5, but also agreed to extend the time periods to which it attached greatimportance.  The EC welcomed that the United States now accepted to act within the multilateral
framework to settle its disagreements on implementation.  The EC had an interest in the Article 21.5
proceeding and wished to participate therein as a third party.WT/DSB/M/69
Page 3
The representative of India said that, on many occasions, his country had stated that Members
had the duty to uphold multilateralism which was the basic foundation of the WTO.  India had always
argued that Article 22 of the DSU should not be invoked when there was a disagreement on
implementation.  Such a disagreement should be resolved through recourse to Article 21.5 of the
DSU.  His country noted with satisfaction that the United States had decided to have recourse toArticle 21.5.  He hoped that, notwithstanding the statement made at the present meeting, the United
States would see merits in the approach followed in this case.  India shared most of the views
expressed by the EC.  He noted that, in its statement, the United States had referred to the DSU
Review.  India's views expressed during the disc ussions on the DSU Review were well-known and,
therefore, he did not wish to reiterate them at the present meeting.  He only wished to reserve India's
position with regard to the process.
The DSB took note of the statements and agreed
 to refer to the original Panel pursuant to
Article 21.5 of the DSU, the matter raised by the United States in document WT/DS126/8.
The Chairman noted that the EC had stated that it wished to reserve its third-party rights to
participate in the Panel's proceedings.  He recalled  that other delegations who might wish to reserve
their third-party rights should inform the Secretariat through a written communication within the next
five days after the meeting.
The representative of Mexico sought clarification with regard to the reference made by the
Chairman to the five-day period for reservation of third-party rights.
The Chairman said that it was his understanding that under Article 4 of the SCM Agreement
time-periods were half the time prescribed in the DSU.  He had, therefore, indicated five days instead
of ten days. He asked whether Mexico wished that the Secretariat provide more detailed explanation
on this matter.
The representative of Mexico noted the explanation provided by the Chairman.  He said that it
was his understanding that the requirement of five days would not be applied in all cases involving
Article 21.5 of the DSU.
The DSB took note of the statements.
2. India – Quantitative restrictions on imports of agricultural, textile and industrial
products
(a) Implementation of the recommendations of the DSB
The Chairman recalled that in accordance with the DSU provisions, the DSB kept under
surveillance the implementation of recommendations and rulings of the DSB in order to ensure
effective resolution of disputes to the benefit of all Members.  In this respect, Article 21.3 of the DSU
provided that the Member concerned shall inform the DSB, within 30 days after the date of adoption
of the Panel or the Appellate Body report, of it s intentions in respect of implementation of the
recommendations and rulings of the DSB.  He recalled that on 22 September 1999, the DSB adoptedthe Appellate Body Report on "India - Quantitative Restrictions on Imports of Agricultural, Textile
and Industrial Products" as well as the Panel Report on this matter as upheld by the Appellate Body
Report.  He noted that the item had been inscribed on the Agenda of the present meeting at the request
of India.
The representative of India recalled that at the September DSB meeting, he had highlighted
that the Panel's and the Appellate Body's interpretation of the provisions of the DSU, GATT and BOPWT/DSB/M/69
Page 4
Understanding had serious implications for the institutional balance in the WTO between the judicial
bodies, such as panels and the Appellate Body, and the political bodies, such as the BOP Committee
and the General Council.  The Panel's interpretation, which was upheld by the Appellate Body,
removed the powers and functions that legitimately belonged to the BOP Committee and the General
Council.  The Panel assigned unto itself the compet ence to look into overall justification of BOP
measures rather than the application of each individual BOP measure.  The Panel's ruling, as upheld
by the Appellate Body would have the effect of curtailing the scope of the substantive rights of
developing countries under Article XVIII:B.  India had requested that the item be inscribed on the
agenda in accordance with Article 21.3 of the DSU in order to inform the DSB of its intention in
respect of the implementation of the DSB's recommendations and rulings.  It was India's intention to
meet its WTO obligations.  India would require a reasonable period of time to comply with the DSB's
recommendations and rulings.  In this regard, he drew attention to the Panel's recommendations andsuggestions contained in paragraphs 7.5 and 7.6 of the Report.  The Panel recognized the need for
granting India a longer period than fifteen months in order to comply with the DSB's
recommendations and rulings.  Furthermore, the Panel had recommended that in establishing a
reasonable period of time, the DSB should take into account not only the well-established practice of
IMF, BOP Committee and GATT/WTO panels granting a gradual phase-out period for elimination ofBOP restrictions, but also India's position as a de veloping country Member.  India was in touch with
the United States with a view to arriving at a mutually agreeable period of time for implementation, as
provided for in Article 21.3 (b).  The parties had until 6 November to arrive at a mutually agreed
period of time for implementation, and his delegation would keep the DSB informed of progress in
this matter.
The representative of the United States thanked India for the information in regard of its
intention to comply with the DSB's rulings and recommendations.  His delegation expected that India
would implement those recommendations promptly.  The United States looked forward to discussing
with India what the reasonable period of time fo r implementation might be, and hoped that a meeting
could be arranged shortly.  His delegation coul d not accept India's proposed period of time for
implementation and believed that India should be able to remove its quantitative restrictions sooner
than that.  The United States hoped that an agreement could be reached on this question in bilateral
discussions and that recourse to arbitration would not be necessary.
The DSB took note of the statements and of the information provided India regarding its
intentions in respect of implementation of the DSB's recommendations.
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