RESTRICTEDWORLD TRADE
ORGANIZATIONWT/DSB/M/105
19 June 2001
(01-3061)
Dispute Settlement Body
16 May 2001
MINUTES OF MEETING
Held in the Centre William Rappard
on 16 May 2001
Chairman:  Mr. R. Farrell (New Zealand)
1. Surveillance of implementation of recommendations adopted by the DSB.........................1
(a) European Communities – Regime for the importation, sale and distribution of
bananas: Status report by the European Communities................................................................2
(b) Japan – Measures affecting agricultural  products: Status report by Japan .................................4
(c) Turkey – Restrictions on imports of textile and clothing products: Status report by
Turkey......................................................................................................................... ................5
2. Egypt – Definitive anti-dumping measures on steel rebar from Turkey .............................6
(a) Request for the establishm ent of a panel by Turkey...................................................................6
3. Peru – Taxes on cigarettes................................................................................................... .....6
(a) Request for the establishm ent of a pane l by Ch ile......................................................................6
4. United States – Safeguard measures on imports of fresh, chilled or frozen lamb
meat from New Zealand and Australia...................................................................................8
(a) Report of the Appellate Body and Report of the Panel...............................................................8
5. Statement by Argentina concerning the request by the EC for arbitration under
Article 21.3(c) of the DSU in the case on "Argentina - Measures Affecting the
Export of Bovine Hides and the Import of Finished Leather" ...........................................13
1. Surveillance of implementation of recommendations adopted by the DSB
(a) European Communities – Regime for the importation, sale and distribution of bananas: Status
report by the European Communities
(b) Japan – Measures affecting agricultural products: Status report by Japan
(c) Turkey – Restrictions on imports of textile an d clothing products: Status report by Turkey
1. The Chairman recalled that Article 21.6 of the DSU required that "unless the DSB decides
otherwise, the issue of implementation of the recommendations or rulings shall be placed on the
agenda of the DSB meeting after six months following the date of establishment of a reasonableperiod of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue isWT/DSB/M/105
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resolved".  He proposed that the three sub-items to which he had just referred be considered
separately.
(a) European Communities – Regime for the importation, sale and distribution of bananas: Status
report by the European Communities (WT/DS27/51/Add.18)
2. The Chairman drew attention to document WT/DS27/51/Add.18 which contained the status
report by the European Communities on its progress in the implementation of the DSB's
recommendations concerning its banana import regime.
3. The representative of the European Communities said that for a considerable period of time,
the EC had tried to square a circle in order to reconcile different interests involved in the banana
dispute.  The EC had listened carefully to all arguments raised by the parties concerned both in
consultations and in the DSB.  The efforts undertaken in this regard had been successful and a
solution had now been found which had received broad support of the parties concerned.  He notedthat the first-come, first-served system previously proposed by the EC, which was WTO-consistent,
had not received such support.  The EC had worked hard with a view to achieving a consensus-based
solution and had found the agreement on such a solution in mid-April with the United States and on
30 April with Ecuador.  This solution provided that a tariff-only system would be put into place from
1 January 2006, which would be preceded by a system of tariff-rate quota allocation based onhistorical performance with a sufficient percentage reserved for non-traditional importers.  It seemed
that this solution had met different and often conflicting concerns of all interested parties.  He further
noted that as from 1 January 2002, quota B would be increased by 100,000 tonnes of bananas and
quota C would be reserved for ACP countries, subject to a waiver, which he hoped would be granted
with the support of all Members.  Since the text s of the US/EC and Ecuador/EC Understandings were
available to Members, he did not wish to provide details on the tariff-rate quota management during
the transition period.  However, he would be ready to respond to any questions that delegations might
raise at the present meeting.
4. The representative of the United States said that her country welcomed the prospects of
finally resolving this long-standing dispute.  As the EC was proceeding with implementing its
regulations in accordance with the Understandings, the United States hoped that the Commission
would continue its policy of consulting with interested parties.
5. The representative of Ecuador said that the information provided by the EC at the present
meeting constituted further clarification concerning the Understanding reached between the EC and
Ecuador.  His country would follow closely the implementation of both Understandings reached by
the EC in this case.
6. The representative of Colombia said that his country welcomed the progress made in the
banana dispute.  The allocation of tariff-rate quotas on the basis of historical licensing was a positive
solution since it implied that the first-come, first-served system was no longer under consideration.
Colombia believed that finding a solution to this matter was necessary for both the countries with
trade interests in the product as well as the WTO.  Colombia hoped that future developments would
enable it to know details of the new regime at various stages of implementation.  He recalled thatLatin American countries had tried to find a solution to this dispute in order to reconcile different
interests, but no agreement had been reached.  Colombia recognized the efforts made by the EC and
the United States to resolve this matter.  However,  Colombia attached great importance to its right to
country-quota allocation and recalled that under the Uruguay Round Agreement the EC was bound to
respect its obligations in this regard.
7. The representative of Jamaica said that her country shared the view that the recent
Understandings reached among the EC, the United States and Ecuador represented progress in theWT/DSB/M/105
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negotiations towards a new banana import regime, and would hopefully bring all parties closer to a
conclusion to this long-running dispute.  She reca lled that Jamaica had always stated that the most
effective means to ensure access to the EC market was through an appropriate tariff quota allocated
on the basis of past trade and that such access w ould assure viable returns to all banana growers.
However, Jamaica was unable to comment further on what had been agreed, as it had understood thatdecisions were being taken which could threaten Jamaica's continued access to the EC market and
could therefore call into question the value of the recent agreement to small suppliers such as Jamaica.
8. The representative of Panama said that the Understandings reached by the EC represented a
step forward as compared to the first-come, first-served system and demonstrated that it had been
possible to reach agreement on the basis of historic al licensing.  Panama would follow closely any
developments in this area, including the manner in which the implementing regulations would be
drawn-up in order to put into place this very broadly outlined system so as to ensure that the interests
of those countries, which needed the greatest amount of protection, were taken into account.
9. The representative of Honduras said that in previous DSB meetings, his country had stated
that the banana dispute could only be resolved through constructive dialogue.  Honduras, therefore,
welcomed the readiness for dialogue shown by the United States and the EC.  It considered that the
Understandings were a step in the right direction as well as an acceptable way of resolving thiscomplex dispute which threatened to undermine the credibility of the dispute settlement system.  In
principle, Honduras supported the Understandings, but had concerns as to whether the agreements set
out in those Understandings would be implemented in good faith, as its interests as a banana-
producing country would remain vulnerable until th e last agreed conditions had been implemented.
He stressed that before approving the waiver re quired to implement the Understandings, the parties
should give assurances that they would take the necessary measures to safeguard his country's
interest.  Honduras was ready for dialogue and supported, in principle, the Understandings subject to
good faith implementation.
10. The representative of Guatemala said that the status report submitted by the EC at the present
meeting was a positive sign that the DSB's recommendations would be finally implemented.  The first
steps towards implementing the Understanding reached by the EC and United States had just been
taken, but the end to the banana dispute was still subject to compliance in good faith by the parties.
Although Guatemala believed that the Understanding was in its best interests it regretted that it had
taken so much time for it to be reached.  In the meantime, the production and marketing of an
important agricultural product for Guatemala's economy had been severely affected and significant
losses had been endured.  Guatemala remained vigilant as to the political will of the parties to the
Understanding to comply, in particular in view of th e complexity of different steps designed to put the
Understanding into effect and the proposed timetable.  Guatemala would pay particular attention to
the waiver which required to be approved within th e framework of this Understanding, and would not
approve any waiver which did not comply with the rules or which adversely affected Guatemala's
rights.  Guatemala urged the parties to the Understanding to comply promptly and to the letter,
bearing in mind the damage that had been caused both to the system and to the economic interests ofcountries such as Guatemala, who only wished to go beyond this dispute and to pursue its efforts to
build prosperity based on fair access for its products to international markets.
11. The representative of Costa Rica said that, as indicated in a recent statement by Ministers of
the Latin American banana-exporting countries, his country supported the Understanding between the
EC and the United States.  Costa Rica believed that the Understanding provided the basis forimplementing an import licence distribution system based on past trade.  Costa Rica welcomed the
increase in the volume of quota A since this would enable the more efficient developing countries to
realize their export potential in the EC's market to a greater extent.  However, Costa Rica regretted
that its right to country-quota allocation had not yet been resolved and underlined that the EC had to
respect its obligation in this regard.  Costa Rica was concerned that the EC applied different standardsWT/DSB/M/105
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with regard to compliance with its international obligations under different agreements with two
groups of countries.  The EC sought to comply  with the Appellate Body's recommendations with
regard to Article XIII of the GATT 1994 in a different way for two groups of countries.  Thus, with
regard to its obligations towards the ACP countr ies, the EC had now announced its intention to
request a waiver in order to allocate an exclusive quota for those countries.  However, under the 1994Framework Agreement on Bananas, the EC was require d to allocate specific quotas to Colombia and
Costa Rica.  The EC had to meet its obligations regarding the need for four substantial suppliers to
agree on quota allocation.  Costa Rica regretted that the Understanding between the United States and
the EC was aimed at solving the dispute for one group of countries towards which it had specific
international obligations.  Thus, Costa Rica urged the EC to continue its dialogue in order to settle the
dispute with all interested parties.
12. The representative of Mexico said that his country's preference was a system which would
provide equal access to the EC's market and, thus, a tariff-only system with an adequate tariff level
represented the best solution.  Once a tariff-only system was put in place it would then be possible to
assess its merits.
13. The representative of Saint Lucia said that her country welcomed the Understandings reached
among the main parties as they had ended a long period of uncertainty that was very costly to farmers
and the economy as a whole.  This had brought less divisiveness and bitterness which often
characterized disputes.  Now it was the time to mend fences and to concentrate on pursuing shared
interests.  Furthermore, Saint Lucia welcomed the Understanding because it preserved the EC market
as a major market where viable returns could still be obtained by producers.  The Understanding did
not give all that was needed but at least it provided the countries with a measure of security.  SaintLucia expected that in concluding its administrative procedures, the EC would seek to ensure that
even the most vulnerable suppliers, such as Saint Lucia, would continue to enjoy market security.
14. The representative of the European Communities said that his delegation had noted the
comments made at the present meeting, which would be taken into account in the process of
implementation.
15. The Chairman said that the discussion on this subject was encouraging and noted that the item
would be removed from the agenda once full implementation had taken place.
16. The DSB took note of the statements and agreed  to revert to this matter at its next regular
meeting.
(b) Japan – Measures affecting agricultural products: Status report by Japan
(WT/DS76/11/Add.14)
17. The Chairman drew attention to document WT/DS76/11/Add.14 which contained the status
report by Japan on its progress in the implementation of the DSB's recommendations with regard to
measures affecting agricultural products.
18. The representative of Japan said that, as he had informed the DSB at the 5 April 2001
meeting, Japan had completed technical discussions with the United States with respect to its new
quarantine methodologies concerning apples and other fruits.  Japan was now in the process ofcarrying out necessary domestic procedures such as amending relevant Ministry Ordinances in order
to implement the new quarantine methodologies.  Japan hoped that it would shortly be in a position to
notify the DSB of a mutually satisfactory solution to be agreed with the United States.
19. The representative of the United States said that, as had been noted previously, her country
appreciated the extensive consultations undertaken by Japan during the preparation of itsWT/DSB/M/105
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implementation plans and was pleased that the technical discussions on these plans had now been
completed.  As the United States had stated at previous DSB meetings, all that now remained was for
Japan to complete the administrative steps necessary to  put its plans in place.  The United States was
disappointed that this had yet to occur, and that Japan had not yet completed its implementation.  It
was of even greater concern that Japan had yet to provide guidance on the date by which it wouldcomplete its administrative process.  The best plans were of limited value if they were left on the
drawing board.  Japan had to act to put its new pro cedures into effect in order to end this dispute.
However, until it did, the DSB would be unable to accept that Japan had implemented the
recommendations and rulings in this case.  The United States hoped that Japan's expectation that the
parties would be notifying the DSB of a mutually satisfactory solution in the near future would be
fulfilled, following prompt action by Japan to complete its implementation.
20. The representative of Australia said that his country wished to register its continuing interest
in this matter and, given the continued delay in coming to a final conclusion, wished to take this
opportunity to raise the following questions:  (i) what progress had Japan made towards formal
notification of the final outcomes of the dispute given this appeared to be taking longer than might
have been anticipated under WTO time-frames?;  (ii) what actions had been taken in Japan, i.e. by
domestic authorities,  to accommodate the final out comes in terms of any regulatory changes?;  and
(iii) when might all the actions result in a final conclusion to this issue?
21. The representative of the European Communities said that like the United States and
Australia, the EC was concerned about Japan's continued delay in implementing the DSB's
recommendations.  The EC urged Japan to proceed as rapidly as possible in order to implement the
DSB's recommendations and expected that such implementation would be applied on an equal footingto other countries.
22. The representative of Japan said that his country was doing its best to speed up the necessary
domestic procedures.  Japan was in the process of providing internal explanations to those concerned
with the new methodology, and wished to complete its domestic procedure as soon as practicable and
hoped that the countries concerned would continue to be cooperative and constructive.  He assureddelegations that he would convey to his authorities in Tokyo the comments made at the present
meeting.
23. The DSB took note of the statements and agreed
 to revert to this matter at its next regular
meeting.
(c) Turkey – Restrictions on imports of textile and clothing products: Status report by Turkey
(WT/DS34/Add.7)
24. The Chairman drew attention to document WT/DS34/12/Add.7 which contained the status
report by Turkey on its progress in the implementation of the DSB's recommendations with regard to
its restrictions on imports of textile and clothing products.
25. The representative of Turkey said that, as explained in the status report, contacts contniued
between capitals with a view to reaching a mutually acceptable solution as soon as possible.
26. The representative of India said that although a reasonable period of time for Turkey's
implementation in this case had expired on 19 February 2001, his country had shown considerable
flexibility.  Thus on 8 March 2001 agreement had been reached to hold consultations within the next
30 days aimed at compliance by Turkey with the DSB's recommendations and rulings and at
preserving India’s rights under Articles 21 a nd 22 of the DSU during and beyond the consultation
period.  At its meeting on 20 March 2001, the DSB had taken note of this bilateral agreement.Pursuant to that agreement, an Indian team had visited Ankara and had held consultations withWT/DSB/M/105
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Turkey's authorities on 22 and 23 March 2001.  Thereafter, consultations had continued through
diplomatic channels.  In those consultations, India had urged Turkey to fully comply with the DSB's
recommendations and had indicated that, pending full compliance, Turkey could offer, as a temporary
measure, a credible and meaningful compensation package in conformity with Article 22.1 of the
DSU.  India had made considerable efforts in this regard, but the progress achieved thus far had notbeen entirely satisfactory.  While India continued its efforts in this regard, the matter could not be
prolonged unduly, in particular since the reasonable period of time had already expired on
19 February 2001.  Therefore, if a mutually acceptable solution could not be agreed within the next
few days, India might be left with no alternative but to exercise its rights under the bilateral agreement
of 8 March 2001 and the DSU provisions.
27. The representative of Turkey said that, thus far, he had not received additional instructions
from his authorities.  He was aware that proposals had been exchanged and according to the latest
information, Turkey had submitted a counter-propos al to India and was now awaiting a response.
28. The DSB took note of the statements and agreed  to revert to this matter at its next regular
meeting.
2. Egypt – Definitive anti-dumping measures on steel rebar from Turkey
(a) Request for the establishment of a panel by Turkey (WT/DS211/2 and Corr.1)
29. The Chairman drew attention to the communication from Turkey contained in document
WT/DS211/2 and Corr.1.
30. The representative of Turkey said that detailed information concerning this case was
contained in document WT/DS211/2 and Corr. 1.  On the basis of this information his country was
requesting the establishment of a panel to examine this matter.
31. The representative of Egypt said that his delegation had noted the statement made by Turkey.
However, at the present meeting, his country was not in a position to accept the establishment of a
panel.
32. The DSB took note of the statements and agreed  to revert to this matter.
3. Peru – Taxes on cigarettes
(a) Request for the establishment of a panel by Chile (WT/DS227/2)
33. The Chairman drew attention to the communication from Chile contained in document
WT/DS227/2.
34. The representative of Chile said that on 1 March 2001, his country had requested
consultations with Peru on the tax legislation applied to cigarettes, which violated Peru's national
treatment obligations with respect to taxation as set forth, inter alia , in Article III:2 of the
GATT 1994.  To determine the tax rate on cigarettes, Peru's legislation made the followingdistinctions:  (i) between cigarettes made of dark tobacco and cigarettes made of bright tobacco,
setting a lower tax for the former;  and (ii) between standard cigarettes made of bright tobacco and
premium cigarettes made of bright tobacco.  The question was how to distinguish one from the other.
Such distinction was made on the basis of whether the brand of cigarettes was marketed in three or
more countries.  Under this scheme, the brands that were best known internationally, which werethose imported by Peru, including those produced in Ch ile, were taxed at a rate twice as high as that
applied to cigarettes which were not marketed in more than three countries, and which happened to beWT/DSB/M/105
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those produced by the Peruvian industry.  In many cases, imported cigarettes and those produced
locally were similar in quality and price.  This discriminatory treatment was a restriction on imports,
since the imported brands were normally sold in more than three markets.  It  was also a restriction on
foreign investment, since it was a disincentive to set up factories in Peru to produce international
brand cigarettes, which were taxed twice as heavily as cigarettes marketed locally – brands which
were firmly rooted in the Peruvian market - making it difficult for new brands to enter.  Finally, it was
a disincentive to Peruvian exports, since the sale of the brands on more than three markets would
mean that they would be taxed twice.  Thus, loca l industry exports went to the free zones, which were
not considered as markets for the purposes of determining the applicable tax.
35. Over the past few months, different authorities had recognized the discriminatory nature of
this tax scheme.  For example, an investigation conducted in December 2000 by the Technical
Secretariat of the Free Competition Commission of Peru's National Institute for the Defence of
Competition and Protection of Intellectual Property had concluded that the system was distortingcompetition between imported and domestic products, providing the single local producer with
protection in addition to the tariff protection. Furthermore,  in press releases at the beginning of the
year, the National Supervisor of the Peruvian Tax Administration had recognized that the tax in
question had distorted the price system for cigarettes and had established differences between
domestic production and imports.  Finally, only two weeks ago, the General Secretariat of the AndeanCommunity, in response to a complaint from one of its member countries, had concluded an
investigation in Peru and had found that the discriminatory treatment with respect to taxes on
cigarettes was contrary to the national treatment obligation in the Cartagena Agreement – which was
similar to the WTO obligations 
– and had given the Peruvian Government a 10-day period to put an
end to this violation. During the consultations held in Lima on 20 April 2001, the authorities of both
countries had explained their positions, but unfortunately no agreement had been reached.  Thisdispute had been going on for almost two years, an d all available bilateral possibilities had now been
exhausted.  Consequently, Chile had no other option but to request the establishment of a panel to
examine this matter and to conclude that the Se lective Consumption Tax Law, modified by Supreme
Decree 158-99-EF of 25 September 1999, was inconsistent with WTO rules, in particular but not
exclusively, to Article III:2 of the GATT 1994, and to recommend the abrogation of the said taxscheme.  Without prejudice to the above, Chile was ready to continue its discussions with the
Peruvian authorities in an effort to finding a mu tually acceptable solution.  In seeking such a solution,
Chile would spare no efforts.
36. The representative of Peru said that on 20 April 2001 her country had held a meeting with the
Chilean authorities concerning Peru's tax system for cigarettes.  During that meeting a positive
exchange of information had taken place with regard to the aspects of Supreme Decree 158-99-EF
which were of particular concern to Chile.  Given the constructive spirit which characterized that
meeting, it would have been desirable to continue the discussions at a bilateral level with a view to
clarifying the present situation properly and finding a mutually satisfactory solution.  As Peru's
competent authorities had explained at that  meeting, Decree No. 158-99-EF was neither
discriminatory nor intended to protect its domestic industry.  Peru wished to affirm its commitment to
the multilateral trading system and its firm resolve to respect the WTO Agreements.  Peru also wishedto reiterate its willingness to continue to seek a mutually acceptable solution.  However, should Chile
decide to pursue its request for the establishment of a panel, Peru would defend its legislation within
the framework of the DSU.  In light of the above, Peru was not in a position to accept the
establishment of a panel at the present  meeting.
37. The DSB took note of the statements and agreed
 to revert to this matter.WT/DSB/M/105
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4. United States – Safeguard measures on imports of fresh, chilled or frozen lamb meat
from New Zealand and Australia
(a) Report of the Appellate Body (WT/DS177/AB/ R-WT/DS178/AB/R) and Report of the Panel
(WT/DS177/R-WT/DS178/R)
38. The Chairman drew attention to the communi cation from the Appellate Body contained in
document WT/DS177/9-WT/DS178/10 tr ansmitting the Appellate Body Report on "United States –
Safeguard Measures on Imports of Fresh, Chille d or Frozen Lamb Meat from New Zealand and
Australia", which had been circulated in  document WT/DS177/AB/R-WT/DS178/AB/R in
accordance with Article 17.5 of the DSU.  He reminded delegations that in accordance with the
Decision on Procedures for the Circulation and Derestriction of WTO Documents contained in
WT/L/160/Rev.1, the Reports of the Appellate Body and of the Panel had been circulated as
unrestricted documents.  He recalled that Article 17.14 of the DSU required that:  "An Appellate Bodyreport 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 Appe llate 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."
39. The representative of Australia said that his country welcomed the adoption of the Reports
and thanked the Panel and the Appellate Body, as well as the Secretariat, for their work.  The
comprehensive nature of the findings made by the Panel and the Appellate Body had confirmed
Australia's view that the United States' measure was inconsistent with its obligations under
Article XIX of GATT 1994 and the Agreement on Safeguards.  The Panel and the Appellate Body
had found that the United States had applied an overly broad definition of domestic industry byincluding growers and feeders of live lambs as part of the domestic industry of lamb meat producers.
In addition, the United States' conclusions of threat of serious injury had been flawed because the data
it had collected were not sufficiently representative of the industry.  The United States had also been
found to have acted inconsistently by failing to demonstrate that the increase in imports was a result
of "unforeseen developments" as required by Article XIX of GATT 1994.  The Appellate Body hadupheld Australia's claim that the United States had failed to demonstrate that the domestic industry
was in fact threatened with serious injury. The Appellate Body had also ruled that the US
International Trade Commission, in making its determination, had failed to apply the required
causation standard set out in Article 4 of the Safeguards Agreement.  Taken together, these findings
had confirmed that imports were not in fact threatening to cause serious injury to the United States
domestic industry.  The findings clearly indicated that the United States had failed to establish any
justifiable basis for the application of safeguard measures.  Indeed, given the extent and nature of thefundamental inconsistencies in the US approach in this case, there was clearly no legal basis or
justification for the safeguard measures applied by the United States in this instance.  He recalled that
the US safeguard measure had been in place since July 1999.  In line with Article 21.1 of the DSU,
Australia called on the United States to comply promptly with the DSB's rulings and
recommendation.  It was Australia's view that the only way in which the United States couldimplement the Panel and the Appellate Body findings was to remove the safeguard measure without
delay.  Early withdrawal of the measure woul d be appropriate and desirable and an important
demonstration of the United States' commitment to meeting its WTO obligations.  Australia looked
forward to receiving early advice from the United Stat es of its intentions in respect of implementation,
as provided for in Article 21.3 of the DSU.  Australia stood ready to engage in constructivediscussions with the United States with the objective of ensuring prompt implementation.
40. The representative of New Zealand said that his country welcomed the adoption of the
Reports.  The Panel and Appellate Body had ruled comprehensively that the safeguard measure
imposed by the United States in 1999 was inconsistent with Article XIX of GATT 1994 and the
Agreement on Safeguards.  New Zealand therefore expected prompt compliance by the United StatesWT/DSB/M/105
Page 9
with this finding and the early removal of the safeguard measure on lamb meat.  The WTO placed
important disciplines on the use of safeguard measures.  Before any safeguard measure was to be
imposed, four essential elements had to be demonstrated.  First, the increase in imports had to be a
result of unforeseen developments.  In the case at hand, the Appellate Body had upheld the Panel's
finding that the United States had failed to demonstrate the existence of unforeseen developments.Second, it had to be demonstrated that there was a domestic industry that was suffering or was
threatened with serious injury.  The Appellate Body in this case had upheld the Panel's finding that the
United States had defined "domestic industry" too broadly by including the growers and feeders of
live lambs, and not just the producers of lamb meat.  Third, it had to be demonstrated that the industry
in question had to suffer or be threatened with serious injury.  On this issue the Appellate Body had
agreed with New Zealand that the Panel had erred in applying the required standard of review and had
found, moreover, that the United States had not adequately explained the determination that thereexisted a threat of serious injury.  In addition, the Appellate Body had confirmed the Panel's finding
that the data relied upon by the United States were not sufficiently representative to allow for an
objective assessment of the state of the domestic industry.  The fourth essential element was
causation, namely, it had to be shown that increased imports had caused the threat of serious injury.
As the Appellate Body had clarified in the case on "United States - Wheat Gluten Safeguard"(WT/DS166), this required, as an initial step, that injury caused by other factors was "not attributed"
to imports.  The Appellate Body in this case had found that the United States had not done this.  The
required causal link between increased imports and serious injury could therefore not be established.
These were the four factors that had to be demonstrated prior to the imposition of a safeguard
measure.  Failure to satisfy any one of these essential requirements would render a safeguard measureinconsistent with WTO rules.  The failure of the Un ited States to satisfy any of these requirements at
all in the present case clearly demonstrated that the safeguard measure it imposed on lamb meat had
no legal basis under WTO rules.  New Zealand called on the United States to respect the
comprehensive nature of the Appellate Body's ruling in the present case, and to remove the safeguard
measure as soon as possible.  New Zealand considered this to be the only viable way in which theUnited States could faithfully implement the DSB's recommendations and rulings.  New Zealand
therefore expected the United States to take, without delay, the domestic steps necessary for it to
remove the safeguard measure.  In this regard, New Zealand looked forward to information from the
United States of its intentions regarding implementation.
41. The representative of the United States  said that her country was disappointed with the Panel
and the Appellate Body Reports, and disagreed with th eir conclusions.  The United States remained of
the view that its safeguard measure on lamb meat satisfied its obligations under the SafeguardsAgreement and Article XIX of the GATT 1994.  The United States did not wish to re-argue the case
at the present meeting.  However, there were several aspects of the analysis in the Appellate Body's
report that the United States was compelled to comment upon, and at least some of these should cause
other Members concern from a systemic viewpoint.
42. The first aspect of the report related to the Appellate Body's finding that the United States had
violated Article XIX of the GATT 1994 by failing to demonstrate and to make express findings
relating to the existence of unforeseen developments as a matter of fact.  The Appellate Body's
findings on this issue were simply not supported by  the plain text of Article XIX.  In fact, the
Appellate Body's findings on this issue verged on an interpretation of a WTO agreement, even though
such interpretations could be made only by Members under the procedures provided in Article IX:2 ofthe Marrakesh Agreement.  The Appellate Body had made three findings on this issue:  (i) that the
Member taking safeguard action had to demonstrate unforeseen developments as a matter of fact;
(ii) that this demonstration had to be made before a safeguard measure was imposed;  and (iii) that the
demonstration had to appear in the report of the competent authority.  None of these findings was
based on the text of Article XIX.  As the Appellate Body had admitted, "Article XIX provided noguidance on this issue".  Instead, the Appellate Body had based its findings on "instructive guidance"
that it drew from its own findings in earlier safeguard cases.  The Appellate Body's approach wasWT/DSB/M/105
Page 10
erroneous and most unfortunate.  The Appellate Body had taken a phrase from one of its earlier
reports, that unforeseen developments were circumstances that "must be demonstrated as a matter of
fact", and used this phrase in a different context to create an entirely new obligation that was not in
the text of the agreement.  The lack of guidan ce on this issue in Article XIX demonstrated that
Members had not consented to be bound by any particular approach, and it was not the role of theAppellate Body to use its own prior decisions to create obligations that did not appear in the text.  The
Appellate Body's approach on this issue was inc onsistent with its continued emphasis on relying on
the actual language of an agreement and its criticism of panels that had tried to build on that text to
create new obligations not found in the text.  First, there was no reference to "demonstrating"
anything in Article XIX.  The Appellate Body's use of this term was unjustified.  Furthermore, the
Appellate Body's approach appeared to reverse the normal burden of proof in dispute settlement
proceedings.  Under the normal procedure, a Member challenging a safeguard measure would havethe burden to show that there were no unforeseen developments.  The Appellate Body had ignored
this, and instead it had required that the Member maintaining a safeguard measure bear the burden of
demonstrating that there were unforeseen developments.  This was a new obligation, not found in the
WTO Agreements.  Second, the Appellate Body had then built further on its own flawed foundation
to find that this "demonstration" had to be made prior to taking a safeguard measure.  Again, therewas nothing in Article XIX  about making such a demonstration, let alone the timing for it.  Third, the
Appellate Body went on in yet another layer of new obligation to find that the "demonstration" had to
be made by a Member's competent authorities, and in their published report, and not by any other
official of the Member or in any other manner.  However, Article XIX made reference neither to
competent authorities nor to published reports, two concepts that originate in the SafeguardsAgreement, not in Article XIX.  There was simply no textual basis for the Appellate Body's
conclusion that Article XIX required the competent authorities to make any finding on unforeseen
developments in their report.  The Appellate Body had supported its interpretation by claiming that
any other approach would leave the means for co mplying with Article XIX "vague and uncertain".
This was simply not true.  Like most requirement s in the WTO Agreements, a Member challenging a
measure had to prove that a measure failed to meet the requirement.  The United States appreciated
that the Appellate Body was trying to bring clarity to the requirements for applying safeguard
measures consistently with Article XIX.  In the end, however, it was outside the mandate of the
Appellate Body to elaborate on the text to satisf y the Appellate Body's own sense of what was "clear"
or "certain".  That was a task left solely up to Members.  Article 3.2 of the DSU was quite clear on
this point and had to be respected.  Finally, the United States noted that the Appellate Body had made
a legal finding on the relationship between the unforeseen developments requirement in Article XIXand the publication requirement in Article 3.1 of the Safeguards Agreement.  As the Appellate Body
noted, however, neither Australia nor New Zealand had claimed that the United States had acted
inconsistently with Article 3.1 with respect to unf oreseen developments.  Accordingly, the Appellate
Body had no mandate to consider this issue, and its finding was therefore moot and of no legal effect.
43. With regard to the issue of causation, the United States was pleased that the Appellate Body
had again rejected the Panel's conclusion that imports alone, or by themselves, had to be sufficient to
cause serious injury or threat.  There was no basis for the Panel's approach in the terms of the
Safeguards Agreement.  The United States was also pleased to note the Appellate Body's clarification
that its three-step "logical process" for reviewin g compliance with Article 4.2(b) was not a legal test
mandated by the text of the Agreement on Safeguards and that it was not necessary for a competentauthority to reach a separate finding or reasoned conclusions on each such a step.  The United States
regretted that the Appellate Body had not similarly recognized the distinctions between its own
statements on the issue of unforeseen developments and the actual terms of Article XIX.  Finally, the
United States was pleased to note that the Appellate Body had restated its finding from the case on
"United States 
– Wheat Gluten Safeguard" that a competent authority which attributed injury caused
by imports also, by implication, attributed the injury caused by other relevant factors.  The United
States wished to emphasize that the foregoing st atement accurately reflected the nature of the
obligations set forth in Article 4.2(b) of the Agreement on Safeguards.  However, the AppellateWT/DSB/M/105
Page 11
Body's suggestion in the case on "United States – Wheat Gluten Safegard" that a competent authority
was compelled to demonstrate affirmatively that any injury caused by other factors was not
improperly attributed to imports lacked any textual basis.  Turning to the remainder of the Appellate
Body's causation discussion, it was evident that so me had read the Appellate Body's report as
detracting from its earlier findings in the case on "United States – Wheat Gluten Safeguard".  In the
view of the United States, the touchstone for evaluating this issue remained the Appellate Body's
unambiguous finding that it was not necessary under the terms of the Safeguards Agreement to
demonstrate that imports alone, or by themselves, or per se , were causing a degree of injury that was
"serious".
44. The United States was also concerned about certain aspects of the Appellate Body's
discussion of the appropriate standard of review in safeguards cases.  In paragraph 106 of its Report,
the Appellate Body had reiterated that panels were not entitled to conduct de novo  reviews or to
substitute their conclusions for those of the comp etent authorities.  This statement reflected the
difference in the role of competent authorities, which was to evaluate the relevant facts and to reach
reasoned conclusions on the basis of those facts, and of panels, which was to assess how the
competent authorities had conducted this exercise.  However, the Appellate Body had then stated that
a panel had to "critically examine" the competent authority's explanation "in light of the facts before
the panel".  The United States assumed that the Appellate Body did not mean to suggest that the "factsbefore the panel" could include facts that had not been presented to the competent authority, since
considering new facts was the very essence of a de novo  review.  The Appellate Body had then gone a
step further, stating that a panel had to find that an explanation was not reasoned or adequate if there
was an alternative explanation of the facts that was plausible, and if the competent authority's
explanation did not seem adequate in light of that alternative explanation.  Presumably, the AppellateBody did not mean to suggest that a Member might submit new interpretations of the facts in dispute
settlement, interpretations that the competent authority had never been given an opportunity to
address, and that the Panel might fault the competent authority for not addressing those interpretations
in its published report.  Competent authorities could not reasonably be expected to address in their
reports not only all factual arguments that the interested parties raise, but also all conceivablearguments that could possibly be raised, and the Safeguards Agreement could not reasonably be read
to require them to do so.  Finally, it was entirely plausible that an objective analysis of the facts might
support two equally plausible conclusions.  In such a situation, a panel had to affirm the conclusion of
the competent authority.  There was no basis in the text of the Safeguards Agreement or the DSU to
conclude in such a situation that the comp laining Member's interpretation was correct.
45. On the issue of the domestic industry, the United States was troubled that the Appellate Body
had given absolutely no weight to the factually based assessment by the competent authority that
growers and feeders of live lambs were also pr oducers of lamb meat when viewed within the
particular structure and operational character of the US lamb meat industry.  Instead, by narrowly
construing which entities could qualify as producers of the like product, the Appellate Body had likely
placed the remedy afforded by the Safeguards Agreement beyond the reach of many producers, in this
and other cases, who were undeniably injured by a significant increase in imports.  In conclusion, theUnited States had serious concerns about some of  the Appellate Body's findings and the possible
implications of some of those findings.  Article XIX has long been an essential component of the
GATT because it had allowed the CONTRACTING PARTIES, whether developed or developing
countries - and now Members - to make tariff conc essions with the confidence that they could take
temporary action to assist their industries in the event that those concessions had lead to import surgesthat seriously injure or threaten to injure their domestic industries.  If this avenue had not existed, or
was unduly limited, Members would make fewer concessions in the first place, and would be more
likely to respond to injury caused by increased im ports by permanently m odifying or withdrawing
concessions under Article XXVIII of the GATT.  Both Article XIX and the Safeguards Agreement
were critical parts of the overall balance of rights and obligations under the WTO Agreements, and itWT/DSB/M/105
Page 12
did not serve the interests of the WTO membership to interpret their provisions in a way that
undermined this important purpose.
46. The representative of Japan said that his country had participated as a third party in this case
and wished to comment on the Appellate Body's decision on the issue of causation and in particular
on the non-attribution issue.  Japan recognized that the Appellate Body had found that the US
International Trade Commission had not met the requirement of the second sentence of Article 4.2(b)
of the Safeguard Agreement since its examination had not included a separation of the effects of the
other causal factors from those of increased imports.  In doing so, the Appellate Body had not
mentioned the standards under which the competent authorities should determine whether there was a
genuine and substantial relationship between increased imports and serious injury, or a threat thereof,
if such increased imports and other causal factors were examined separately.  If as stated in the
Appellate Body Report, it was not required that increased imports alone be capable of causing orthreatening to cause serious injury, then the standa rd for determining the existence of a genuine and
substantial relationship should be clarified in the near future.
47. The representative of the European Communitie s said that the EC considered that the
Appellate Body had confirmed that the United States had adopted a safeguard measure which violated
the US obligations under the GATT 1994 and the Agreement on Safeguards.  This was unfortunatelynot the first time.  The EC was concerned by the growing recourse by the United States to WTO-
incompatible protectionist safeguard measures.  The EC expected that the United States would draw
the appropriate conclusions from this Report with regard to other safeguards measures based on the
same approach.  The EC was encouraged by certain aspects of the Appellate Body Report and in
particular that on the issue of causality the Appellate Body had clarified that increased imports had tobe the single and decisive factor in bringing about injury.  Moreover, it had confirmed that application
of the US statutory substantial cause test was not sufficient for proper causality determination and the
EC was content with these findings of the Appellate Body.
48. The representative of Hong Kong, China said that although Hong Kong, China was  not a user
of safeguard measures, it maintained a long-standing systemic interest on trade remedies such as
safeguards.  He noted that the number of safeguard cases had been on the rise continuously since the
Agreement on Safeguards had come into effect in 1995.  In order to guard against any possible
abuses, it was important to ensure that relevant rules on safeguards were strictly followed.  Against
this background, his delegation wished to make a few observations on the Appellate Body's rulings in
this case.  First, the Appellate Body's ruling on the requirement of Article XIX:1(a) of GATT 1994
had once again reaffirmed that the provisions of Article XIX of GATT 1994 and the Agreement on
Safeguards had to be read as "an inseparable package of rights and disciplines".  It followed that anysafeguard measure imposed after the entry into force of the WTO Agreement had to comply with the
provisions of both the Agreement on Safeguards and Article XIX of GATT 1994.  The Appellate
Body has also reaffirmed that the existence of "unforeseen developments", as stipulated in
Article XIX:1(a) of GATT 1994, was a prerequisite that had to be demonstrated before the application
of any safeguard measure.  Moreover, the demonstration of this had to feature in the report of thecompetent authorities, as required under Article 3.1 of the Agreement on Safeguards.  This ruling
helped clarify the procedural requirements under the Agreement.
49. However, Hong Kong, China was concerned about the Appellate Body's findings on
Article 4.2(b) of the Safeguards Agreement concerning the establishment of causal link between
increased imports and serious injury or threat thereof.  The Appellate Body had drawn direct reference
from another case, namely, "United States 
– Wheat Gluten Safeguard" and had reversed the Panel's
interpretation of the causation requirements in the Agreement on Safeguards.  It had concluded that
"the Agreement on Safeguards does not require that increased imports be 'sufficient' to cause, or
threaten to cause, serious injury.  Nor does that Agreement require that increased imports 'alone' be
capable of causing, or threatening to cause, serious injury" (paragraph 170).  Having reversed theWT/DSB/M/105
Page 13
Panel's general interpretative analysis of "causation", the Appellate Body had emphasized that the
"final determination rests, properly, on the genuine and substantial relationship of cause and effect
between increased imports and serious injury" (paragraph 179) and that "the final identification of the
injurious effects caused by increased imports must follow a prior separation of the injurious effects of
the different causal factors" (paragraph 180).  The Appellate Body had explained why it consideredthat in its report, the US International Trade Commission had not explained the process by which it
had separated the injurious effects of the different causal factors.  However, it was far from clear how
safeguards authorities should attribute injuries to various factors including increased imports.  It is
also unclear what would constitute a "genuine and substantial relationship of cause and effect" in the
final determination.  In the view of Hong Kong, Ch ina further clarifications of these aspects would be
helpful in preventing safeguard authorities from manoeuvring or even abusing the grey area in Article
4.2(b).  Hong Kong, China had raised a similar concern at the DSB meeting on 19 January 2001 in thecontext of the case on "United States - Wheat Gluten Safeguard".  He wished to reiterate these
concerns at the present meeting and hoped that the Appellate Body would fully take into account the
systemic implications of its ruling on Article 4.2(b) of the Agreement on Safeguards in its future
rulings.
50. The representative of the Philippines said that the Appellate Body had determined that the
safeguard measure in question was based on the determination of serious injury caused to industry
other than the relevant domestic industry.  However, it had not determined as to whether or not live
lambs were products directly competitive to lamb meat for purposes of the definition of domestic
industry under Article 4.1(c ) of the Agreement on Safeguards.
51. The DSB took note of the statements and adopted  the Appellate Body Report in
WT/DS177/AB/R-WT/DS178/AB/R and the Panel Report in WT/DS177/R-WT/DS178/R, as
modified by the Appellate Body Report.
5. Statement by Argentina concerning the request by the EC for arbitration under
Article 21.3(c) of the DSU in the case on "Argentina - Measures Affecting the Export of
Bovine Hides and the Import of Finished Leather"
52. The representative of Argentina, speaking under "Other Business", said that his delegation
wished to refer to the EC's request for arbitra tion under Article 21.3(c) of the DSU to determine a
reasonable period of time for implementation in the case on "Argentina – Measures Affecting the
Export of Bovine Hides and the Im port of Finished Leather" (WT/DS155/6).  Argentina considered
that the DSB's recommendations and rulings concer ning Article X:3(a) of the GATT 1994 had already
been implemented.  It was thus Argentina's understa nding that such arbitration would only be carried
out with regard to the DSB's recommendations on Article III:2 of the GATT 1994.  At the 12 March2001 DSB meeting, Argentina had stated that its intention was to request a reasonable period of time
for implementation with regard to the tax advances in question.  Furthermore, Argentina had stated
that its implementation with regard to the question of involvement of the tanning industry in export
operations was underway.  Likewise, at the consultations with the EC in Brussels, Argentina had
reported that Customs authorities had put a new clearance form into effect from 26 March 2001.Argentina recognized the right of the EC to reque st arbitration and, as announced at the 12 March
DSB meeting, it would invoke the provisions of Ar ticle 21.2 of the DSU – developing country status –
in relation both to the appointment of one or more arbitrators, if necessary, and to the substantive
aspects of the dispute.
53. The DSB took note of the statement.
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