UNITED STATES – MEASURES CONCERNING THE IMPORTATION, MARKETING AND SALE OF TUNA AND TUNA PRODUCTS RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES DECISION BY THE ARBITRATOR
Document: Addendum
Date: 25 April 2017
Document codes: WT/DS381/ARB/Add.1; WT/DS381/ARB.
Complainant: Mexico
Respondent: U.S.
Third parties: Australia, Brazil, Canada, China, Ecuador, EU, Guatemala, India, Japan, South Korea, New Zealand, Norway
Dispute stage: Implementation & Compliance
Agreements cited: Art. I:1, III:4  GATT 1994Art. 2.1, 2.2, 2.3, 2.4  Technical Barriers to Trade (TBT)

UNITED STATES – MEASURES CONCERNING THE IMPORTATION,
MARKETING AND SALE OF TUNA AND TUNA PRODUCTS
RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES
DECISION BY THE ARBITRATOR
Addendum
This addendum contains Annexes A to B to the Decision by the Arbitrator to be found in document

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LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF 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 THE PARTIES
Contents Page
Annex B-1 Executive summary of the arguments of Mexico B-2
Annex B-2 Executive summary of the arguments of the United States B-10

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ANNEX A
WORKING PROCEDURES OF 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

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ANNEX A-1
WORKING PROCEDURES OF THE ARBITRATOR
Adopted on 7 June 2016

Modified on 3 August 2016

1. In its proceedings, the Arbitrator shall follow the relevant provisions of the Understanding on
Rules and Procedures Governing the Settlement of Disputes (DSU). In addition, the following
Working Procedures shall apply.
General

2. The deliberations of the Arbitrator and the documents submitted to it shall be kept confidential.
Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute (hereafter
"party") from disclosing statements of its own positions to the public. Business Confidential
Information (BCI), as defined in the Arbitrator's Additional P rocedures Concerning Business
Confidential Information, shall be submitted and treated in accordance with those Additional
Procedures.
3. The Arbitrator shall conduct its internal deliberations in closed session. The parties shall be
present at meetings only when invited by the Arbitrator to appear before it. The Arbitrator may,
upon request by a party, authorize that party to lift the confidentiality, by way of delayed viewing,
of its own statements made during the Arbitrator's meeting with the parties. Such lifting of
confidentiality will be authorized only where it does not impair or otherwise interfere with either
the rights of the other party or the integrity and promptness of the dispute settlement process.
Moreover, such lifting of confidentiality s hall be in accordance with additional working procedures,
to be adopted by the Arbitrator after consulting with the parties. A request that the Arbitrator
adopt additional working procedures to facilitate this lifting of confidentiality shall be made to th e
Arbitrator no fewer than six weeks before the meeting where the statements in question will be
delivered.
4. Each party has the right to determine the composition of its own delegation when meeting with
the Arbitrator. Each party shall have responsibili ty for all members of its own delegation and shall
ensure that each member of such delegation acts in accordance with the DSU and these Working
Procedures, particularly with regard to the confidentiality of the proceedings.
Submissions

5. Mexico shall transmit to the Arbitrator and to the United States a communication explaining the
basis for its request, including the methodology and data supporting it, in accordance with the
timetable adopted by the Arbitrator.
6. Each party to the dispute shall als o transmit to the Arbitrator a written submission in which it
presents the facts of the case and its arguments, in accordance with the timetable adopted by the
Arbitrator.
7. A party shall submit any request for a preliminary ruling at the earliest possib le opportunity
and in any event no later than in its written submission to the Arbitrator. If the United States
requests such a ruling in its written submission to the Arbitrator, Mexico shall submit its response
to the request in its written submission. I f Mexico requests such a ruling in its written submission
to the Arbitrator, the United States shall submit its response to the request prior to the substantive
meeting, at a time to be determined by the Arbitrator in light of the request. Exceptions to th is
procedure shall be granted upon a showing of good cause.
8. Each party shall submit all factual evidence to the Arbitrator no later than in its written
submission, except with respect to evidence necessary for purposes of rebuttal, answers to

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questions or comments on answers provided by the other party. Exceptions to this procedure shall
be granted upon a showing of good cause. Where such exception has been granted, the Arbitrator
shall accord the other party a period of time for comment, as appropriate , on any new factual
evidence submitted after the substantive meeting.
9. Where the original language of exhibits is not a WTO working language, the submitting party
shall submit a translation into the WTO working language of the submission at the same t ime. The
Arbitrator may grant reasonable extensions of time for the translation of such exhibits upon a
showing of good cause. Any objection as to the accuracy of a translation should be raised promptly
in writing, preferably no later than the next filing or meeting (whichever occurs earlier) following
the submission which contains the translation in question. The Arbitrator may grant reasonable
extensions of time for the filing of such objection upon a showing of good cause. Any objection
shall be accompan ied by a detailed explanation of the grounds of objection and an alternative
translation.
10. In order to facilitate the work of the Arbitrator, each party is invited to make its submissions
in accordance with the WTO Editorial Guide for Submissions, as relevant and to the extent that it is
practical to do so.
11. To facilitate the maintenance of the record of the dispute and maximize the clarity of
submissions, each party shall sequentially number its exhibits throughout the course of the
proceedings. For example, exhibits submitted by Mexico could be numbered MEX -1, MEX-2, etc. If
the last exhibit in connection with the first submission was numbered MEX -5, the first exhibit of
the next submission thus would be numbered MEX-6.
Questions

12. The Arbitrator may at any time pose questions to the parties, orally or in writing, including
prior to the substantive meeting.
Substantive meeting

13. Each party shall provide to the Arbitrator the list of members of its delegation in advance of
each meeting with the Arbitrator and no later than 5.00 p.m. the previous working day.
14. The substantive meeting of the Arbitrator with the parties shall be conducted as follows:
a. The Arbitrator shall invite the United States to make an opening statement to presen t its case
first. Subsequently, the Arbitrator shall invite Mexico to present its point of view. Before each
party takes the floor, it shall provide the Arbitrator and other participants at the meeting with a
provisional written version of its statement. E ach party shall make available to the Arbitrator
and the other party the final version of its statement, preferably at the end of the meeting, and
in any event no later than 5.00 p.m. on the first working day following the meeting.
b. After the conclusion of the statements, the Arbitrator shall give each party the opportunity to
ask each other questions or make comments, through the Arbitrator. Each party shall then
have an opportunity to answer these questions orally. Each party shall send in writing, with in a
timeframe to be determined by the Arbitrator, any questions to the other party to which it
wishes to receive a response in writing. Each party shall be invited to respond in writing to the
other party's written questions within a deadline to be determined by the Arbitrator.
c. The Arbitrator may subsequently pose questions to the parties. Each party shall then have an
opportunity to answer these questions orally. The Arbitrator shall send in writing, within a
timeframe to be determined by it, any quest ions to the parties to which it wishes to receive a
response in writing. Each party shall be invited to respond in writing to such questions within a
deadline to be determined by the Arbitrator.
d. Once the questioning has concluded, the Arbitrator shall a fford each party an opportunity to
present a brief closing statement, with the United States presenting its statement first.

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Executive summaries

15. The description of the arguments of the parties in the Decision of the Arbitrator shall consist
of execu tive summaries provided by the parties, which shall be annexed as addenda to the
decision. These executive summaries shall not in any way serve as a substitute for the
submissions of the parties in the Arbitrator's examination of the case.
16. Each party shall submit an executive summary of the facts and arguments as presented to the
Arbitrator in its written submissions and oral statements, in accordance with the timetable adopted
by the Arbitrator. Each such executive summary shall not exceed 15 pages. The Arbitrator will not
summarize in a descriptive part, or annex to its decision, the parties' responses to questions.
Service of documents

17. The following procedures regarding service of documents shall apply:
a. Each party shall submit all document s to the Arbitrator by filing them with the DS Registry
(office No. 2047).
b. Each party shall file five (5) paper copies of all documents it submits to the Arbitrator.
However, when exhibits are provided on CD-ROMS/DVDs, four (4) CD-ROMS/DVDs and two (2)
paper copies of those exhibits shall be filed. The DS Registrar shall stamp the documents with
the date and time of the filing. The paper version shall constitute the official version for the
purposes of the record of the dispute.
c. Each party shall also provide an electronic copy of all documents it submits to the Arbitrator at
the same time as the paper versions, preferably in Microsoft Word format, either on a CD -
ROM, a DVD or as an e -mail attachment. If the electronic copy is provided by e -mail, it should
be addressed to DSRegistry@wto.org, with a copy to ***.***@wto.org, ***.***@wto.org,
***.***@wto.org, ***.***@wto.org, and ***.***@wto.org. If a CD-ROM or DVD is provided,
it shall be filed with the DS Registry.
d. Each party shall serve any document submitted to the Arbitrator directly on the other party.
Each party shall confirm, in writing, that copies have been served as required at the time it
provides each document to the Arbitrator.
e. Each party shall file its documents with the DS Registry and serve copies on the other party by
5.00 p.m. (Geneva time) on the due dates established by the Arbitrator. A party may submit
its documents to another par ty in electronic format only, subject to the recipient party's prior
written approval and provided that the Arbitrator's Secretary is notified.
f. The Arbitrator shall provide the parties with an electronic version of its decision, as well as of
other documents as appropriate. When the Arbitrator transmits to the parties both paper and
electronic versions of a document, the paper version shall constitute the official version for the
purposes of the record of the dispute.
Modification of Working Procedures
18. The Arbitrator reserves the right to modify these procedures as necessary, after consultation
with the parties.

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ANNEX A-2
PROCEDURES OF THE ARBITRATOR CONCERNING BUSINESS CONFIDENTIAL INFORMATION1
(DS381)
Adopted on 7 June 2016

1. These procedures apply to any business confidential information (BCI) that a party submits
to the Arbitrator.
2. For the purposes of these procedures, BCI is defined as any information that has been
designated as such by the party submitting the information and that is not available in the public
domain and the release of which could reasonably be considered to cause or threaten to cause
harm to an interest of the person or entity that supplied the business information to the party.
3. No person may have access to BCI excep t a member of the Secretariat or the Arbitrator, a
party's employee participating in the dispute, and a party's outside advisor for purposes of this
dispute. However, an outside advisor is not permitted access to BCI if that advisor is an officer or
employee of an enterprise engaged in the production, export, or import of tuna or tuna products.
When a party provides BCI to an outside advisor who is an employee or officer of an industry
association of such enterprises, that party shall obtain written assuran ces from such advisor that
he or she has read and understands these procedures and will not disclose any BCI in
contravention of these procedures.
4. A party obtaining access to BCI as a result of the BCI being submitted in this dispute shall
treat it as c onfidential, i.e. shall not disclose that information other than to those persons
authorized to receive it pursuant to these procedures. Each party shall have responsibility in this
regard for its employees as well as any outside advisors for the purposes of this dispute. BCI
obtained under these procedures may be used only for the purpose of providing information and
argumentation in this dispute.
5. A party submitting or referring to BCI in a document shall mark the cover and each page of
the document to indicate the presence of BCI in the document as follows: BCI shall be placed
between double brackets (for example, [[xx,xxx.xx]]). The cover and the top of each page of the
document shall contain the notice "Contains Business Confidential Information". Any BCI that is
submitted in electronic form shall be clearly marked with the phrase "Contains BCI" on a label on
the storage medium, and clearly marked with the phrase "Contains BCI" in the electronic file
name.
6. The parties and the Arbitrator shall store all documents containing BCI so as to prevent
unauthorized access to such information.
7. The Arbitrator shall not disclose BCI, in its decision or in any other way, to persons not
authorized under these procedures to have access to BCI. The Arbitrator may , however, make
statements of conclusion drawn from such information. Before the Arbitrator makes its decision
publicly available, the Arbitrator shall give each party an opportunity to ensure that the decision
does not contain any information that it has designated as BCI.

1 These procedures are adopted according to, and are an integral part of, the Arbitrator's Working
Procedures of 7 June 2016.

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ANNEX A-3
ADDITIONAL WORKING PROCEDURES OF THE ARBITRATOR ON PARTIALLY OPEN MEETINGS
Adopted on 18 October 2016

 Having regard to paragraph 3 of the Arbitrator's Working Procedures, and having received a
request from the United States for the adoption of additional working procedures to facilitate the
lifting of the confidentiality of its statements at the Arbitrator's meeting with the parties, the
Arbitrator has, after consulting with the parties, adopted the following Additional Worki ng
Procedures:
1 DEFINITIONS
1.1. For the purposes of these Additional Working Procedures:
a. "Disclosing party" means any party that wishes to lift the confidentiality of its statements
at the Arbitrator's meeting with the parties;
b. "Non-disclosing party" means any party that wishes to maintain the confidentiality of its
statements at the Arbitrator's meeting with the parties;
c. "Statement" means:
i. A party's opening oral statement;
ii. A party's closing oral statement;
iii. A party's oral respons es to questions from the Arbitrator concerning (a) issues of
law; and (b) the disclosing party's own exhibits, arguments, or positions (referred to
in these Working Procedures as a "paragraph 1.1(c)(iii) question");
excluding, however, any part or section of those items that discloses, directly or
indirectly, the exhibits, arguments, or positions of a non -disclosing party. Any part or
section of the items that discloses, directly or indirectly, the exhibits, arguments, or
positions of a non -disclosing party shall, prior to the delayed viewing, be redacted in
accordance with the procedures provided for in Section 4 of these Additional Working
Procedures.
d. "Delayed viewing" means the broadcasting by the WTO Secretariat, after the conclusion
of the Arbitrator's meeting with the parties, of the statements of disclosing parties that
have been recorded and redacted in accordance with Sections 3 and 4 of these
Additional Working Procedures.
2 GENERAL
2.1. Disclosure by a disclosing party of its statements at th e Arbitrator's meeting with the parties
shall be by way of delayed viewing. The viewing shall be in a room inside the WTO Secretariat
building. It will be open to officials of WTO Members and Observers, and, upon registration with
the Secretariat, to accre dited journalists, accredited representatives of non -governmental
organizations, and other interested persons, including members of the public. The names of all
persons registered to attend the delayed viewing will be shared with the parties. To this effec t, the
Secretariat will place a notice on the WTO website, informing the public of the delayed viewing and
including a link through which members of the public can register to attend. The notice shall
specify: (a) that the names of all persons registered t o attend the delayed viewing will be shared
with the parties; and (b) that no person attending the delayed viewing is allowed to use electronic
devices to record any portion of the broadcast.
2.2. The date of the delayed viewing will be decided by the Arb itrator after consulting with the
parties. The redacted recording will be broadcast once, simultaneously in English and Spanish.

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3 RECORDING OF STATEMENTS
3.1. In accordance with the usual practice of the WTO, the audio of the entirety of the Arbitrator 's
meeting with the parties (including the floor recording and interpretation) shall be recorded and
entered into the dispute record.
3.2. The entirety of a disclosing party's opening and closing oral statements shall be video
recorded, except as provided for in paragraph 3.7.
3.3. A disclosing party's oral responses to paragraph 1.1(c)(iii) questions shall also be video
recorded, except as provided for in paragraph 3.4. A disclosing party shall advise the Arbitrator,
prior to responding to a paragraph 1. 1(c)(iii) question, if its response to that question discloses,
directly or indirectly, the exhibits, arguments, or positions of a non-disclosing party.
3.4. To facilitate the implementation of paragraph 3.3:
a. The Arbitrator shall, when it sends advanc e questions to the parties, indicate which
questions it considers meet the definition in paragraph 1.1(c)(iii) of these Additional
Working Procedures.
b. Either disputing party shall promptly inform the Arbitrator if it considers (a) that a
question indica ted by the Arbitrator as meeting the definition in paragraph 1.1(c)(iii)
does not meet that definition; or (b) that a question not indicated by the Arbitrator as
meeting the definition in paragraph 1.1(c)(iii) meets that definition. The Arbitrator, after
hearing the views of the other disputing party, will decide whether the question meets
the definition in paragraph 1.1(c)(iii).
c. Spontaneous questions asked by the Arbitrator during the course of the meeting shall
not be recorded.
3.5. The video recording foreseen under paragraphs 3.2 and 3.3 shall be entered into the dispute
record.
3.6. The video recording foreseen under paragraphs 3.2 and 3.3 shall be made from a single
camera. The camera shall be set at the same position, zoom, and focus throughout the meeting.
3.7. In addition to the video recording foreseen under paragraphs 3.2 and 3.3, a secondary video
recording, using a separate video recording channel but captured from the video camera
referenced in paragraph 3.6 will be made of the entirety of the Arbitrator's meeting with the
parties for back -up purposes. Except where the primary video recording is technically defective,
this secondary video will not be used when the Secretariat compiles the video for the delayed
viewing, and will be deleted o nce the procedures provided for in Section 4 of these Additional
Working Procedures have been completed.
3.8. A disclosing party shall advise the Arbitrator prior to addressing its own or another party's
BCI in its statements. When a disclosing party so advises, both video recordings will be
discontinued for the relevant portion of the statement, after which the video recordings will be
resumed. At the conclusion of a disclosing party's statement, the Arbitrator will ask the non -
disclosing party to confi rm that none of its own BCI was disclosed during the video recorded
portion of the statement. In the interests of ensuring an efficient meeting, a disclosing party is
invited to structure its statements so as to first deliver a non -BCI portion before deliv ering a
portion that contains BCI.
4 REDACTION OF RECORDED STATEMENTS
4.1. In order to ensure, pursuant to paragraph 3 of the Arbitrator's Working Procedures, that
disclosure by a disclosing party of its statements at the Arbitrator's meeting with the p arties does
not impair or otherwise interfere with either the rights of a non -disclosing party or the integrity
and promptness of the dispute settlement process, statements recorded pursuant to Section 3 of
these Additional Working Procedures shall be redacted as described in this Section prior to delayed
viewing.

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4.2. A disclosing party shall indicate, in the final written version of its opening and closing oral
statements, which paragraphs disclose, directly or indirectly, the exhibits, arguments, or pos itions
of a non -disclosing party. For example, a disclosing party could use the following phrases in the
final written version of its opening and closing oral statements: *Beginning of discussion of [non -
disclosing party]'s submissions* and *End of discuss ion of [non -disclosing party]'s submissions*.
Paragraphs that disclose, directly or indirectly, the exhibits, arguments, or positions of a non -
disclosing party shall be redacted from the video recording. In order to avoid unnecessary
discontinuity in the delayed viewing, a disclosing party is invited to structure its statements in such
a way as to separate those statements that disclose, directly or indirectly, the exhibits, arguments,
or positions of a non-disclosing party.
4.3. Pursuant to paragraph 3.3 of these Additional Working Procedures, where a response to a
paragraph 1.1(c)(iii) question discloses, directly or indirectly, the exhibits, arguments, or positions
of a non-disclosing party, that response shall be redacted from the video recording.
4.4. Following the conclusion of the Arbitrator's meeting with the parties, the Arbitrator will review
the recorded statements and the final written versions of a disclosing party's opening and closing
oral statements. Using the paragraph numbers contained in the final written version of a disclosing
party's opening and closing oral statements, the Arbitrator will identify to the disputing parties any
paragraphs additional to those identified by the disclosing party pursuant to paragraph 4.2 that, in
the Arbitrator's view, disclose, directly or indirectly, the exhibits, arguments, or positions of a non -
disclosing party. These paragraphs will be redacted from the video recording, except as provided
for in paragraph 4.7.
4.5. Following the conclusion of the Arbitrator's meeting with the parties, the Arbitrator will review
the video recording of a disclosing party's oral responses to paragraph 1.1(c)(iii) questions. The
Arbitrator will identify to the disputing parties, by reference to the question number, any
responses additional to the responses identified by the disclosing party pursuant to paragraph 3.3
of these Additional Working Procedures that, in the Arbitrator's view, disclose, directly or
indirectly, the exhibits, arguments, or positions of a non-disclosing party. These responses will also
be redacted from the video recording, except as provided for in paragraph 4.7.
4.6. If a non -disclosing party considers that any part of the video -recorded statements not
identified by a disclosing party (pursuant to paragraphs 4.2 and 4.3 of these Additional Working
Procedures) or redacted by the Arbitrator (pursuant to paragraph 4.4 or 4.5 of these Additional
Working Procedures) discloses, directly or indirectly, the exhibits, arguments, or positions of a
non-disclosing party, that party may bring such part of the video -recorded statements to the
attention of the Arbitrator (through the Secretariat) and the disclosing party. Such notification
should be made within a deadline to be specified by the Arbitrator, and s hould identify the
particular paragraph of the relevant opening or closing statement (or, where relevant, third party
statement), or the particular response by question number, and indicate how, in the view of the
notifying party, it discloses, directly or indirectly, the exhibits, arguments, or positions of a non -
disclosing party. Before the Arbitrator makes a decision regarding any identified issue, the
disclosing party will be afforded an opportunity to explain where appropriate why, in its view, the
identified part of the video -recorded statements does not disclose, directly or indirectly, the
exhibits, arguments, or positions of a non-disclosing party.
4.7. If a disclosing party considers that any part of the video-recorded statements redacted by the
Arbitrator (pursuant to paragraph 4.4 or 4.5 of these Additional Working Procedures) does not
disclose, directly or indirectly, the exhibits, arguments, or positions of a non -disclosing party, that
party may bring such part of the video -recorded statements to the attention of the Arbitrator
(through the Secretariat) and the non -disclosing party. Such notification should be made within a
deadline to be specified by the Arbitrator, and should identify the particular paragraph of the
relevant opening or closing statement (or, where relevant, third party statement), or the particular
response by question number, and indicate how, in the view of the notifying party, it does not
disclose, directly or indirectly, the exhibits, arguments, or positions of a non -disclosing party.
Before the Arbitrator makes a decision regarding any identified issue, the non -disclosing party will
be afforded an opportunity to explain where appropriate why, in its view, the identified part of the
video-recorded statements does disclose, directly or indirectly, the exhibits, arguments, or
positions of a non-disclosing party.

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4.8. The Arbitrator is mindful of the need to ensure the promptness of the dispute settlement
process. Therefore, in the interests of ensuring the workability and ef ficiency of these Additional
Working Procedures, where a paragraph of a disclosing party's opening or closing oral statements,
or a disclosing party's response to a paragraph 1.1(c)(iii) question, is found to disclose, directly or
indirectly, the exhibits, arguments, or positions of a non -disclosing party, the entire paragraph or
response will be redacted, even if the paragraph or response also contains content that does not
disclose, directly or indirectly, the exhibits, arguments, or positions of a non-disclosing party.
4.9. If either party requests to view the redacted video recording prior to the delayed viewing, the
Arbitrator will invite both parties to attend a preview session, accompanied by a representative of
the Secretariat, on the premises of t he WTO. The preview session will be held on a date to be
determined by the Arbitrator in consultation with the parties.
4.10. The Arbitrator retains the right to modify these procedures after consulting with the parties.

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ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 Executive summary of the arguments of Mexico B-2
Annex B-2 Executive summary of the arguments of the United States B-10

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ANNEX B-1
EXECUTIVE SUMMARY OF THE ARGUMENTS OF MEXICO
1. Mexico's methodology paper de monstrates that the amended 2013 Tuna Measure (Tuna
Measure) in place at the expiration of the reasonable period of time (RPT) on 13 July 2013 has
caused significant monetary losses to the Mexican tuna industry from reduced export revenues.
Because the United States has not brought the Tuna Measure into conformity with its obligations,
Mexico is seeking authorization to suspend concessions in the amount of USD $472.3 million.
2. Under Article 22.4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU), the level of suspension must be "equivalent to the level of the
nullification or impairment". In the present case, the Arbitrator's mandate under Articles 22.6 and
22.7 of the DSU is to determine whether the proposed level of t he suspension of concessions
requested by Mexico is equivalent to the level of the nullification or impairment of benefits
accruing to Mexico as a result of the United States' failure to bring its WTO -inconsistent Tuna
Measure into compliance. To determine the level of benefits to suspend, Mexico has compared the
actual circumstances of the U.S. market for Mexican tuna products during 2014 (first calendar year
after the expiration of the RPT on 13 July 2013) to a counterfactual in which the WTO -inconsistent
discriminatory aspects of the original and amended Tuna Measure were eliminated. The difference
between those circumstances is the amount of the nullification or impairment caused by the
amended Tuna Measure.1
3. Mexico's methodology and calculations are based on a calibrated partial equilibrium model
of the American and Mexican canned tuna markets. The calculations assume a counterfactual for
2014 where there is no measure for the labeling of tuna as "dolphin -safe" that discriminates in a
WTO-inconsistent manner between Mexican tuna products and tuna products from the United
States and other countries.
4. The structure of Mexico's model to calculate the level of nullification or impairment is as
follows. First, demand equations for tuna products in the Uni ted States and Mexico are derived
based on consumers' preference for yellowfin tuna and generic tuna (all other tuna) and
consumption values in 2014. Second, supply equations for canned yellowfin tuna and canned
generic tuna to the United States and Mexico are derived based on observed supply in 2014. Third,
the model finds the market equilibrium under the counterfactual where the Tuna Measure is
removed. The model's solution yields increased exports of Mexican canned yellowfin tuna products
to the United States. Under this counterfactual, based on values observed for 2014, Mexico
exports a total of USD $495 million (63,568 metric tonnes x USD $7.79/kg) of canned tuna to the
United States. Trade loss for Mexico is calculated by deducting from the aforementi oned figure the
actual value of exports of Mexican canned tuna to the United States in 2014 (USD $22.65 million),
which gives rise to an amount of USD $472.3 million annually.
5. In response, the United States proposes a "market-based approach" that builds on the
comparison, on a prospective basis, of the U.S. imports from Mexico of tuna product with the
measure in place to the level of imports that would occur if the measure were withdrawn. The
approach used by the United States is flawed in many ways. For example, the U.S. calculations are
based on data from the late 1980s. The amount of time elapsed is too long to make the late 1980s
a proper counterfactual for 2014 as markets for canned tuna have very much changed since then.
Further, the U.S. methodolog y assumes that retailers accounting for 46.4 percent of the U.S.
market for tuna products will not purchase and offer for sale Mexican tuna products because the
tuna was caught using the AIDCP -certified dolphin encirclement fishing method. 2 In addition, th e
United States assumes that 100 percent of tuna products from all other sources will be able to use
the dolphin-safe label.3 All of these assumptions are incorrect.

1 The relevant data is more readily available on a calendar year basis and 2014 is the most immediate
calendar year following the end of the RPT. This approach is consistent with Mexico's approach in the
Article 22.6 arbitration in US – COOL where the RPT expired on 23 May 2013 and the baseline year for Mexico's
and the arbitrator's analysis was calendar year 2014.
2 U.S. written submission, paras. 135-136.
3 U.S. written submission, paras. 71, 76 and 123.

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6. Mexico's methodology paper need only present a counterfactual that is "plausible" or
"reasonable". It is not for an arbitrator to speculate on what might have been the "most likely"
scenario of compliance by the Member concerned; 4 rather, a counterfactual should reflect at least
a "plausible" or "reasonable" compliance scenario. 5 For the Uni ted States to merely present an
alternative methodology, scenario or period (i.e., 2015) is insufficient to rebut the level of
nullification or impairment in Mexico's methodology paper. In US – COOL, the Arbitrator stated
that "[i]n the absence of a demons tration that the proposing party's methodology is incorrect, the
mere submission of an alternative methodology would not meet the objecting party's burden of
proof".6 This standard is consistent with the burden of proof applied in other arbitrations, inclu ding
EC – Hormones (US) (Article 22.6 – EC), EC – Bananas III (Ecuador) (Article 22.6 – EC) and US –
1916 Act (EC) (Article 22.6 – US).
7. Thus, the United States bears the initial burden of establishing a prima facie case that the
level of suspension of b enefits requested by Mexico is not in accordance with the requirements of
the DSU. The United States has failed to discharge its burden. There are significant
mischaracterizations and misinterpretations of economic concepts in the United States' criticisms
of Mexico's methodology, and also legal errors in the alternative methodology that the United
States proposes. Mexico's comprehensive analysis is the appropriate approach under the
circumstances, and it has been properly applied to accurately estimate the level of nullification and
impairment caused by the amended Tuna Measure. The United States' incorrect criticisms and
flawed alternative "market -based approach" that relies on historical levels of U.S. imports of
Mexican tuna and tuna products prior to 1990 (1987-1989) are therefore insufficient to establish a
prima facie case that Mexico's methodology is inconsistent with DSU Article 22.4. Thus, there is no
basis to reject the use of 2014 as the period of reference in Mexico's methodology paper or to use
the United States' projections.
8. In the event that the Arbitrator disagrees and finds instead that the United States has
established a prima facie case, in whole or in part, then Mexico submits that even if the alternative
counterfactual proposed by the United States is used, the level of nullification or impairment will
not change, provided that reasonable assumptions are made under that counterfactual. That
counterfactual assumes a scenario whereby Mexican tuna products can use the AIDCP -certified
dolphin-safe label, and all other tuna products can use a dolphin -safe label provided that it is
accurate and does not deceive U.S. consumers. The level of the nullification or impairment
estimated by Mexico will be no lower, and possibly higher, under the U.S. counterfactual.7
The measure to be analyzed is the 2013 Tuna Measure
9. As the Arbitrator confirmed, its sole mandate in this arbitration is to either confirm or
determine the appropriate level of suspension for the purposes of Article 22 of the DSU with
respect to the 2013 Tuna Measure. This is consistent with the provisions of the DSU and the
Understanding between the United States and Mexico regarding Procedures under Articles 21 and
22 of the DSU,8 since the arbitration is based on the DSB's recommenda tions and rulings pursuant
to Article 21.5 in the first compliance proceeding, specifically with regard to the nullification and
impairment sustained by Mexico as a result of the United States' failure to bring the tuna measure,

4 US - Gambling (Article 22.6 - US), paras. 3.26 ("We do not consider that the proposed counterfactual
must necessarily reflect the 'most likely' scenario of compliance by the Member concerned. … It is not for us to
speculate on what might have been the 'most likely' such scenario") and 3.56 ("whether the scenario at issue
is the 'most likely' … is not pertinent as such in our determination").
5 US - Gambling (Article 22.6 - US), paras. 3.26-3.27 and 3.56.
6 Decisions by the Arbitrators, US – COOL, para. 4.12.
7 In its description of the history in paragraph 11 of its written submission, the United States omits to
mention that the United States maintained a complete embargo on imports of Mexican yellowfin tuna products
from 1999 until 2000, although the embargo had been found inconsistent with the United States'
GATT obligations in 1991. US – Tuna (Mexico) (GATT). The United States also omits that, in connection with
the creation of the AIDCP, in the 1995 Panama Declaration the United States committed to revise the definition
of "dolphin-safe" in the tuna measure to match that of the AIDCP. See Panel Report, US – Tuna II (Mexico),
paras. 2.35–2.39. Moreover, the United States sought to implement that commitment until the Hogarth court
ruling in 2007. See Panel Report, US – Tuna II (Mexico), paras. 4.23–4.24 and 7.332. Mexico reaffirms that its
tuna industry has been improperly blocked from the U.S. market for over 25 years. Mexico also notes that the
United States incorrectly states that Mexico initiated the WTO proceedings in 2009; Mexico initiated the
proceedings in 2008, shortly after the United States indicated it was giving up on implementing its
commitment. WT/DS381/1 (28 Oct. 2008).
8 Understanding between the United States and Mexico regarding Procedures under Articles 21 and 22
of the DSU, US – Tuna II (Mexico), WT/DS381/19 (7 Aug. 2013).

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as amended by the 2013 Final Rule, into compliance before the expiry of the RPT on 13 July 2013.9
Thus, Mexico's model is based on the 2013 Tuna Measure.
Appropriateness of Mexico's Partial Equilibrium Model
10. The partial equilibrium model presented by Mexico is fully consistent with the proposed
counterfactual for the calculation of the export losses to Mexico. A simulation using a partial
equilibrium model is the proper method to employ given the data available and the amount of time
since the adoption of the tuna measure. Mexic o follows a state -of-the-art approach in its
simulation.10 Simulations in partial equilibrium models have been used in previous disputes at the
WTO (e.g., US – Upland cotton, US – COOL). The partial equilibrium model of Mexico focuses very
precisely on the issue at hand, which is the modification of the Tuna Measure in a manner that is
consistent with WTO obligations.
11. Mexico's partial equilibrium model captures the essential features of the canned tuna
market in the United States and Mexico. The product ion of canned tuna in Mexico is mostly
specialized in the production of canned yellowfin tuna, which is of higher quality than the average
tuna quality consumed in the United States.
12. The partial equilibrium model is calibrated to data observed for 2014 . As such, it captures
the state of the market in 2014 and incorporates in the demand curves relative preferences and
substitution between generic tuna and yellowfin tuna and income, and it incorporates in the supply
curves input prices, production technol ogy and expectations. Equilibrium prices and quantities are
found at the intersection of demand and supply curves.
Supply and demand equations for the U.S. Market
13. Mexico's model is based on the total supply of canned tuna to the United States observe d
in 2014. At the margin, the price of canned tuna in the U.S. market is determined by the world
supply of canned tuna to the United States. The world supply of canned tuna to the United States
is assumed perfectly elastic in Mexico's model because the Uni ted States is a relatively small
market for canned tuna but this can be adjusted.11
14. The total U.S. import cost of canned tuna products (which is the sum of the import value,
the duties and the charges, divided by the import quantities) in 2014 was on average
USD $5.00/kg, significantly more than the import cost of tuna from Mexico, which was
USD $4.06/kg. The supply of canned tuna to the United States under the Tuna Measure is for what
is labeled as "generic" tuna in Mexico's methodology paper. Generic tuna is a composite category
that includes all canned tuna currently offered in the United States. This is mostly skipjack, but it
also includes albacore and tongol. This generic tuna is of an overall lower quality than Mexican
canned yellowfin tuna.
15. With regard to the demand for tuna products, the total consumption of canned tuna in the
United States in 2014 was 330,264 metric tonnes. As mentioned before, most of that canned tuna
is generic tuna, with marginal volumes of canned yellowfin tuna products . However, this does not
mean that there is no demand for canned yellowfin tuna in the United States.
16. Yellowfin tuna products are superior in quality to generic tuna products because they offer
a more desirable solid pack for canning with a firm and m ild tasting meat. The model recognizes
the quality difference between generic and yellowfin tuna. The model assumes that consumers can
purchase two types of canned tuna: generic and yellowfin. The results of an econometric analysis
show that U.S. consumers have been paying a significant premium for canned yellowfin tuna. If
generic tuna and yellowfin tuna are offered at the same price, almost all consumers will purchase
yellowfin tuna over generic tuna. Consumers' preferences are modeled using a choice model that is
standard in economics. Demand equations for canned generic tuna and canned yellowfin tuna are

9 Recourse to Article 22.2 of the DSU by Mexico, Tuna II (Article 22.2 – Mexico), p. 2 ("As required by
Article 22.4 of the DSU, the level of suspension of concessions proposed by Mexico is equivalent on an annual
basis to the level of the nullification or impairment of benefits accruing to Mexico under the covered
agreements due to the United States' failure to bring its Tuna measure into compliance by 13 July 2013 or to
otherwise comply with the recommendations and rulings of the DSB in United States – Measures Concernin the
Importation, Marketing and Sale of Tuna and Tuna Products"); Dispute Settlement Body, Minutes of Meeting
(13 May 2016), WT/DSB/M/376, para. 7.6 ("Mexico's request for the suspension of concessions complied with
all of the requirements under Article 22.2 of the DSU, in particular the failure by the United States to comply
with the DSB's recommendations and rulings within the reasonable period of time").
10 See Exhibit US-57 p. 139.
11 The R code in Exhibits MEX-100-f and MEX-100-g allows for adjusting the world supply of canned
generic tuna to the United States.

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derived by aggregating individual consumers' demand for yellowfin and generic tuna. The demand
model is calibrated using a conservative approach in which it is assumed that the mean willingness
to pay for yellowfin tuna is lower than the premium currently observed.
17. Contrary to the United States' explanation that the weak consumption of yellowfin tuna in
the United States is a consequence of a weak dem and, there is strong demand for canned
yellowfin tuna in the United States. Observed small consumption volumes of canned yellowfin tuna
reflect the intersection of the demand and the supply for that product. Because, under the Tuna
Measure, canned yellowfi n tuna is supplied at a high cost to the United States, the U.S. demand
for canned yellowfin tuna meets the supply to the United States of canned yellowfin tuna at a
small volume. Mexico has put forward evidence of an increase in the price of raw yellowfin tuna
paid by U.S. canneries. The decline in U.S. cannery receipts for yellowfin tuna is a consequence of
the Tuna Measure, was not caused by U.S. consumers valuing yellowfin tuna less, and reflects
world market conditions for yellowfin tuna products.12
18. Although the United States argues that consumers are not willing to pay a premium for
canned yellowfin tuna, Mexico's methodology paper provides significant evidence that U.S.
consumers are willing to pay such a premium. This premium is reflected in the data. If consumers
were not willing to pay a premium for canned yellowfin tuna, as it is currently selling for a high
price, there would be no consumption of yellowfin tuna in the United States. In Mexico's model,
albacore tuna is bundled together with all other canned tuna. The regression model provides
evidence that U.S. consumers are willing to pay a premium for canned yellowfin tuna versus the
average (generic) canned tuna consumed in the United States. This is the appropriate way to
provide evidence of willingness to pay for canned yellowfin tuna because it is consistent with the
construction of the model. The regression model provides the necessary information to support
that there is a premium for yellowfin tuna.13
19. Another argument that the United States claims as evidence that there is little demand for
yellowfin tuna is that some yellowfin tuna is mixed with skipjack in light tuna. However, for the
model in Mexico's methodology paper, the mixing of yellowfin tuna or albacore tuna in light meat
tuna is not problematic. 100 percent canned yellowfin tuna is the product that Mexico would export
to the United States and is of higher quality than the yellowfin tuna mixed into light tuna. The
model is calibrated for canned yellowfin tuna that is marketed as such, versus all other (generic)
canned tuna. Whether the generic canned tuna contains some yellowfin or not is captured in the
value of the mean premium.
20. The United States has also raised the issue that yellowfin contains more mercury than
skipjack tuna, hence depressing the demand for yellowfin tuna. However, according to the U.S.
government itself, the mercury content in albacore tuna is essentially the same as in yellowfin
tuna.14 With increased U.S. consumption of canned albacore tuna since the adoption of the Tuna
Measure and with its consumption occupying nearly a third of the U.S. canned tuna market by
volume, it is clear that mercury is not a primary concern of a large segment of U.S. consumers.
Thus, mercury issues do not have a material impact on purchases of yellowfin tuna products in the
U.S. market.
21. Mexico's methodology model does not assume any shift in demand. The increased
consumption for canned yellowfin tuna in the United States comes from a decline in the price that
comes from an increase in supply from the introduction of supplies of canned yellowfin tuna from
Mexico. In this regard, an elastic demand for yellowfin tuna products explains why the
consumption of yellowfin increases substantially with the decline of the price of y ellowfin tuna in
the United States. An elastic demand means that consumption is sensitive to changes in the price
of a good. The modification of the Tuna Measure under the counterfactual yields a decline in the
price of yellowfin tuna products in the Unite d States. Because the demand for yellowfin tuna
products is elastic, even a small decline in the price of canned yellowfin tuna yields a large
increase in the consumption of canned yellowfin tuna. Thus, as the price of yellowfin canned tuna
declines, many consumers naturally switch from the consumption of canned generic tuna to the

12 The shift of the U.S. fleet out of the ETP/away from yellowfin and to the Western and Central
Pacific/to skipjack in the late 1980's and early 1990's closely mirrors the decline in consumer consumption of
canned tuna in the U.S. market. It is reflective of the declining quality of generic tuna with the removal of
yellowfin from the supply chain.
13 See Tables 5, 6 and 7 of Mexico's methodology paper (Exhibit MEX-2).
14 See U.S. Food and Drug Administration, "Mercury Levels in Commercial Fish and Shellfish
(1990-2010)", available online at http://www.fda.gov/Food/FoodborneIllnessContaminants/
Metals/ucm115644.htm (Exhibit MEX-64).

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consumption of canned yellowfin tuna, namely, the modification of the Tuna Measure would bring
about a significant decline in the price of canned yellowfin tuna in the United Sta tes and hence a
very large increase in consumption because the demand is elastic.
22. U.S. consumer preferences for the "dolphin safe" label today, and at the time of the expiry
of the RPT, are shown in a September 2016 consumer survey submitted by Mexico. 15 According to
this survey, a majority of Americans believe that "dolphin safe" means that no dolphins were
injured or killed in the course of capturing tuna, and that the definition of "dolphin safe" should be
that no dolphins were injured or killed in t he course of capturing tuna. 16 Moreover, an
overwhelming number of adults believe that it is important to have environmentally -sustainable
seafood products that ensure the health of the whole ecosystem, including dolphins, and not just
the health of dolphi ns in particular. 17 Thus, if the tuna measure permitted U.S. consumers to be
fully informed of the dolphin protection and environmental virtues of AIDCP -compliant fishing and
the disadvantages of alternative fishing methods, they would prefer tuna products containing tuna
caught in the manner used by the Mexican tuna fleet.
23. Contrary to the argument of the United States, the model in Mexico's methodology paper
captures the necessary market realities of the U.S. canned tuna market to properly calculate th e
level of nullification or impairment. These market realities include differentiation in the canned
tuna market and U.S. consumers' willingness to pay a premium for canned yellowfin tuna over
canned generic tuna.
Supply and demand equations for the Mexican Market
24. Regarding Mexican supply, the counterfactual considers that the Mexican tuna industry
produces canned tuna using domestically caught yellowfin and skipjack, as well as yellowfin tuna
imported for canning. That is, Mexican production capacity is not limited by domestic catch under
the counterfactual and allows for imports of unprocessed yellowfin tuna from other ETP countries.
Mexican canneries operated in 2014 with a single day shift. This means that production could
easily be expanded using i mported yellowfin tuna. The export volume to the United States is
limited to yellowfin tuna caught by the Mexican fleet and canned yellowfin tuna made from
imported tuna is consumed in Mexico.
25. The United States incorrectly describes Mexico's model when stating that "Mexico has a
completely elastic supply curve (i.e., Mexican industry could supply an unlimited quantity of
canned yellowfin at no increasing marginal cost)." 18 As Mexico has explained, the supply curve of
canned yellowfin tuna by Mexican can neries is initially perfectly elastic, but for a quantity equal to
the Mexican production of yellowfin tuna in 2014 it becomes perfectly inelastic. The model
assumes that Mexican canneries could increase production by importing yellowfin tuna from other
countries. Furthermore, the model assumes a constant marginal cost (perfectly elastic supply) for
the Mexican production of canned yellowfin tuna up to the assumed production capacity where it
increases to infinity (perfectly inelastic supply).
26. The demand for canned tuna in Mexico is modeled in the same way as the demand for
canned tuna in the United States. It is calibrated based on consumption observed in 2014.
Model Solution
27. Imports from Mexico are cost competitive compared to other imports becaus e of
geographic proximity to the U.S. market and lower customs duties. Thus, modifications of the tuna
measure would bring new inexpensive supplies of canned yellowfin tuna from Mexico into the U.S.
market. Accordingly, the removal of the tuna measure is a ppropriately modeled as a shift to the
right of the supply of canned yellowfin tuna on the United States market.
28. The broad geographic scope of the sources of supply for U.S. production and imported
products encompasses the many regions in which dolphi ns are killed and seriously injured during
tuna fishing operations. Other than Mexico, there are a few Central and South American countries
that harvest tuna in the ETP. However, these countries have small production capacities and could
not compete with M exico's canned yellowfin tuna products because they are located further from
the United States and these countries have chosen not to seek an "affirmative finding" from the

15 Public Opinion Strategies, Dolphin Safe National Survey (Exhibit MEX-71).
16 Ibid., pp. 6 and 8.
17 Ibid., p. 14.

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Department of Commerce that they are in compliance with the AIDCP.19 This means that an export
response by other countries to modifications to the Tuna Measure would be small and that only
Mexico's exports to the United States would be significantly impacted by the removal of the tuna
measure. Similarly, because imports from all other o cean regions have been permitted to use the
dolphin-safe label without independent observer monitoring or comprehensive tracking and
verification systems, no tuna products from those other regions have been affected by the Tuna
Measure, and therefore they would also not be affected by the withdrawal of the Tuna Measure.
29. The model shows that because transportation costs between Mexico and the United States
are small, the removal of the tuna measure would yield large exports of Mexican canned yellowfin
tuna to the United States.
30. Arbitrage between Mexico and the United States causes the price of canned yellowfin tuna
to equalize between the two countries once transportation costs are accounted for. The model is
solved assuming that Mexico imports yellow fin tuna products that are canned domestically for
domestic consumption to replace some of the canned yellowfin tuna exported to the United States.
Other Central and South American countries harvest tuna in the ETP. The proximity of these
countries to Mexico means a low cost of transporting tuna to Mexico. Many vessels would directly
unload their catch in Mexico.
31. Under the counterfactual considered in Mexico's methodology paper, tuna products made
from tuna caught by other fleets can be sold on the Mexi can domestic market. The scenario
considered assumes that Mexico would import from other ETP countries the equivalent of tuna for
producing 20,000 metric tonnes of canned yellowfin tuna. With this Mexican import volume of
yellowfin tuna, nearly all of the yellowfin tuna harvested and canned by Mexican firms to be
exported to the United States. Other ETP countries are not in a position to compete with Mexico in
the U.S. market for canned yellowfin tuna. This is because of Mexico's competitive advantage from
its nearby location, its large production capacity, its low marginal cost and its access to the U.S.
market free of import tariffs. It is also because most of the tuna products from other ETP countries
are completely banned by other U.S. measures from expo rting yellowfin tuna products to the
United States. Mexican imports of yellowfin tuna from other ETP countries are a natural outcome of
economic forces operating under the removal of the Tuna Measure.
32. The model finds that with the removal of the tuna m easure, 21.5 percent of U.S.
consumption of canned tuna would be from canned yellowfin tuna imported from Mexico. This is a
reasonable market share given the low production costs for canned tuna in Mexico, the absence of
duties for U.S. imports of canned t una from Mexico and the small transportation cost for canned
yellowfin tuna given the proximity of Mexico to the United States. Moreover, in 1987, canned
yellowfin tuna occupied at a minimum 22 percent of the consumption of canned tuna in the United
States.20 With the removal of the tuna measure, a similar market share would be observed with
the difference that canned yellowfin tuna would be produced in Mexico rather than in the
United States before the adoption of the tuna measure.
33. Under Mexico's counterfactual, Mexico exports a total of USD $495 million (63,568 metric
tonnes x USD $7.79/kg) of canned tuna to the United States. Therefore, deducting from this figure
the actual value of exports of Mexican canned tuna to the United States in 2014
(USD $22.65 million) yields a trade loss to Mexico of USD $472.3 million annually.
The United States' Market-Based Approach is unreliable
34. Apart from employing a counterfactual that is not correctly defined, the "market -based
approach" proposed by the United Sta tes is flawed and underestimates losses from the tuna
measure to Mexico.
35. The calculation of the United States is based on the historical import volumes of canned
tuna from Mexico before the adoption of the tuna measure. However, these historical figure s are
not instructive of the levels of imports if the Tuna Measure were withdrawn. A proper
counterfactual keeps everything but the measure of interest constant. It is obviously not the case
that market conditions when the original tuna measure was enacted in 1990 are the same as in
2014. For instance, the United States maintained a trade embargo on imports of Mexican tuna
from 1980 to 1986, which arose from a dispute over the scope of territorial waters and fishing

19 NOAA Fisheries, Tuna/Dolphin Embargo Status Update, available at
http://www.nmfs.noaa.gov/pr/dolphinsafe/embargo2.htm (Exhibit MEX-72).
20 Mexico's Response to Arbitrator's question 119.

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rights. Therefore, the period immediately following the termination of the embargo is not
representative of open market conditions.
36. In addition, the reference of the United States concerning Mexico's share of U.S. imports of
tuna products of 3.9 percent on a weight basis for the 1987 -89 period21 does not correspond to
what would be observed with the removal of the Tuna Measure in 2014. Indeed, Mexican firms
now have a much better access to the U.S. market than in the period between 1987 and 1989
because Mexico is a signatory of North American Free Trade Agreement (NAFTA). Therefore,
Mexico can export canned tuna to the United States free of duties. Moreover, the Mexican canned
tuna industry has developed since the adoption of the tuna measure to increase its production and
become much more cos t competitive, including by building canneries devoted exclusively to
producing tuna products. In addition, unlike the 1987 to 1989 period, the market conditions for
canned yellowfin tuna observed in 2014 have left the U.S. market almost empty of canned
yellowfin tuna.
37. The United States' assumption that retailers accounting for 46.4 percent of the
U.S. market for tuna products will not purchase and offer for sale Mexican tuna products because
the tuna was caught using the AIDCP -certified dolphin encircl ement fishing method22 is incorrect.
The United States' assumption is incorrectly based on the premise that the dolphin -safe label itself
has no value because the market is only concerned with the narrow question of whether or not
dolphins were encircled in the process of harvesting the tuna. This is contradicted by the findings
of the Panels and Appellate Body in the prior proceedings. Besides, the United States' premise
depends almost exclusively on information and activities related to Earth Island Ins titute (EII)
which refers to historic "unregulated" dolphin encirclement and ignores the AIDCP dolphin -safe
requirements and the success of the Mexican fleet in protecting dolphins for over twenty years.
Furthermore, the letters submitted by the United Sta tes as "evidence" to demonstrate that U.S.
retailers would not carry Mexican tuna products are unreliable since they rather demonstrate that
the United States is "shaping" consumer expectations in the market to comport with its outdated
perspective on dolphin mortalities in the ETP large purse seine fishery. In fact, the United States
has mischaracterized the content of most of the letters, and the current policies of the great
majority of the retailers as published on their websites actually suggest that they would carry
Mexican products. The published policies of the retailers are much more compelling evidence of
the retailers' policies that the letters submitted by the United States.
38. As part of its counterfactual, the United States endorses EII's pu rported dolphin -safe
program, arguing in effect that if the United States were to withdraw the Tuna Measure, EII should
be viewed as controlling use of the dolphin -safe label. However, the Arbitrator should not base the
counterfactual on the United States' speculation about whether a new label might be created by a
non-governmental entity and whether it could convince retailers that such a label would be more
meaningful than the AIDCP dolphin -safe label. Indeed, if the United States were to withdraw the
measure entirely, the AIDCP dolphin-safe label would become the only official dolphin -safe label in
the U.S. market, and, in particular, the only label endorsed by the U.S. government through its
role in the AIDCP. Mexico also submitted evidence demonstratin g that major suppliers and
retailers use tuna sources that are not authorized by EII, showing that EII does not have the
market power attributed to it by the United States.
39. The United States also bases its counterfactual on the assumption that 100 percent of tuna
products from all other sources will be able to use the dolphin -safe label. 23 Under the United
States' proposed counterfactual, the U.S. Federal Trade Commission (FTC) consumer labelling
rules apply generally and all tuna products would be able to use a dolphin-safe label provided that
such label is accurate so that consumers are not deceived. Thus, tuna products from the United
States and other countries would be able to use a dolphin -safe label provided that such a label is
accurate so that U.S. consumers are not deceived. However, it would not be reasonable to assume
that consumers and retailers, let alone the FTC, would accept that a "dolphin -safe" label could be
used on tuna products containing tuna that was caught in a fishing set or gear d eployment in
which dolphins were killed or seriously injured, and/or in circumstances where it is impossible to
verify that the product contains only tuna that was caught in a dolphin -safe manner. Thus, some
form of mechanism will have to be put in place b y tuna product suppliers so that dolphin -safe
claims can be verified. The implementation of such procedures will take time and will involve costs.

22 U.S. written submission, paras. 135-136.
23 U.S. written submission, paras. 71, 76 ("all tuna product that currently qualifies as dolphin safe would
continue to qualify for the label") and 123.

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Some suppliers will invest the time and money to adopt and implement, others will not.
Accordingly, it is un reasonable for the United States to assume that 100 percent of the tuna
products containing tuna caught outside the ETP will immediately be eligible to use a dolphin -safe
label.
Conclusion
40. For the reasons explained in Mexico's methodology paper (based on the detailed
econometric analysis) and in its submission, Mexico reaffirms its requested authorization to
suspend concessions equal to USD $472.3 million annually, which is the level of the nullification
or impairment resulting from the failure of the United States to comply with the
recommendations and rulings of the DSB and bring the Tuna Measure into consistency with
the covered agreements after the expiry of the RPT . If the Arbitrator disagrees with some of the
assumptions of Mexico's model, Mexico i nvites the Arbitrator to use the R code submitted by
Mexico to calculate the amount of nullification or impairment under the assumptions it considers
reasonable.

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ANNEX B-2
EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE UNITED STATES
SUMMARY OF U.S. WRITTEN STATEMENT
1. Mexico's Methodology Paper dramatically overestimates the level of nullification or
impairment attributable to the U.S. dolphin safe labeling measure. In lieu of Mexico's fatally flawed
model, the United States puts forward an approach based o n levels of U.S. imports from Mexico
prior to the adoption in 1990 of the original Dolphin Protection Consumer Information Act (DPCIA).
Such a historical, market-based approach is the most appropriate in the light of the available data
and is consistent with the approach taken by past Article 22.6 arbitrators.
I. THE U.S. TUNA PRODUCT MARKET
2. The measure at issue is the U.S. dolphin safe labeling measure for tuna products. 1 The
measure sets out the minimum conditions under which tuna product may be marke ted as "dolphin
safe." The U.S. canned tuna product market is an approximately $1.5 billion market. Eighty
percent of the market is served by three companies: Bumblebee, Chicken of the Sea, and StarKist
("the big three"), which produce tuna product from U.S. and foreign canneries. About half the U.S.
market is supplied by canneries located in the United States and its territories.
A. U.S. Consumer Preferences for Tuna Product
3. U.S. consumers of canned tuna have definite preferences with respect to price, taste,
texture, and whether the tuna product was produced in a dolphin safe manner, in particular that it
was not produced from the intentional encirclement of dolphins. There is no overriding demand for
tuna product produced from yellowfin tuna as Mexico claims, and U.S. consumers are disinclined to
purchase tuna product produced by setting on dolphins. Therefore, demand for Mexican canned
tuna is low, irrespective of the U.S. dolphin safe labeling requirements.
1. U.S. Consumer Preference for Less Expensive Tuna Product
4. The U.S. canned tuna market is "characterized by high volume and low margins." Since the
advent of canned tuna in the 1900s, it has been considered a low cost and practical source of
protein for the U.S. consumer. The literature indicate s that there is a "psychological limit" for U.S.
consumers against paying more than $1 for a can of tuna. Consistent with that proposition is the
fact that as the per can cost approaches $1, U.S. demand for canned tuna weakens.
2. U.S. Consumers Preference for Canned Albacore
5. Although the U.S. market is generally characterized by high volume, low value products,
some tuna products are sold at a premium. In the canned market, that differentiation occurs
largely between premium canned albacore, which is so ld as "white" tuna, and discount canned
tuna, which is sold as "light" tuna and generally contains skipjack tuna, alone or in combination
with other species. Under U.S. Food and Drug Administration (FDA) regulations, canned tuna can
be labeled "white meat " if it is 100 percent albacore, while tuna product produced from other
species generally qualifies for the "light meat" label. Canned tuna can also be labeled by species –
albacore, skipjack, yellowfin, etc. – if it is 100 percent composed of that species.
6. U.S. consumers have a preference for canned albacore over tuna product containing other
tuna species due to albacore's mild flavor, firm texture, and light color. Many U.S. consumers are

1 "Tuna product" refers to a "food item which contains tuna and which has been processed for retail
sale, except perishable sandwiches, salads, or other products with a shelf life of less than 3 days." In other
words, "tuna product" is tuna that has undergone some processing and is not sold as "fresh" tuna. In light of
the fact that much of the other processed products are ultimately processed into canned tuna, much of the
data in the literature regarding "tuna product" focuses on canned tuna rather than the other smaller-volume
tuna products.

- B-11 -

willing to pay a price premium for albacore, as shown by the fa ct that the average retail price for
canned albacore is $5.32 a pound, while the average retail price for skipjack is $3.17 a pound.
Exhibit MEX-15 shows that sales of canned albacore accounted for 29 percent of canned tuna sales
during the covered period by weight but 40 percent by value. This preference for albacore is
distinct from consumer preferences in other countries, as the U.S. market consumes 19 percent of
global production of canned tuna overall but 55-60 percent of world consumption of albacore.
3. Weak U.S. Consumer Demand for Canned Yellowfin
7. Dolphin safe tuna product sold in the United States can be, and is, produced from yellowfin.
Such tuna product is either sold as "yellowfin" or as "light tuna." Canned yellowfin can command a
higher pr ice within the gourmet market, but demand is limited, and so much of the canned
yellowfin produced for the U.S. market is labeled as "light tuna" – often canned with skipjack –
rather than as "yellowfin." A 2005 investigation found that only about half the cans of yellowfin are
labeled as such, and industry officials explained that vessels producing for the U.S. market catch
more yellowfin than can be sold as a gourmet product. Canned yellowfin has long been marketed
to U.S. consumers as "light meat," and that practice continues today.
8. Another factor dampening demand for yellowfin tuna product is consumer concerns
regarding mercury in canned tuna. Mercury is present in marine creatures, particularly in the
larger predators, such as albacore and yellowfin, and to a lesser extent in smaller fish, such as
skipjack. One of the reasons that producers process yellowfin and skipjack together and sell it as
"light tuna," rather than selling cans of 100 percent yellowfin, is to lower the per can mercury level
of canned yellowfin and produce a safer product that is consistent with FDA regulations.
9. U.S. cannery receipts tell a consistent story of weak demand for canned yellowfin. In 1987,
when the U.S. fleet was still operating in the ETP, 46.1 percent of U.S. can nery receipts were
yellowfin. But the next year, yellowfin's share dropped to 31.6 percent. Between 1991 and 1999,
the percentage was between 17.3 -24.3 percent (with albacore increasing to 33.8 percent by 1999
and skipjack constituting about half of the to tal). In the 2000s, the share of yellowfin continued to
drop. Since 2009, the share of yellowfin has been below 7 percent, while the share of albacore has
been above 35 percent and the share of skipjack has been above 46 percent.
10. These low percentages of yellowfin being processed by U.S. canneries do not indicate lack of
availability of dolphin safe yellowfin. Market data show that about 40 percent of the yellowfin -
labeled canned tuna was produced by the big three brands, all of which sell only dolphin safe
products. This suggests that if there were greater demand for canned yellowfin, the market would
have met that demand. The fact that the tuna industry has instead produced less and less canned
yellowfin over the last few decades indicates how weak U.S . consumer demand for canned
yellowfin is, even where that tuna product is marketed as "dolphin safe."
4. Weak Demand for Canned Tuna Produced from Setting on Dolphins
11. It is established that U.S. consumers prefer dolphin safe tuna product and that th is
"sensitiv[ity]" is driven by a desire not to purchase tuna produced from setting on dolphins. As the
original panel discussed, in the 1980s, in reaction to purse seine vessels killing tens to hundreds of
thousands of dolphins in the ETP every year, one NGO, Earth Island Institute (EII), led a media
campaign to raise consumer awareness of the issue. This campaign produced significant results, as
the big three and other companies changed their purchasing policies in April 1990 to not purchase
tuna from vessels that set on dolphins. These policies remain in place today because canned tuna
produced from the intentional harassment and capture of dolphins remains an important issue for
consumers. As the original panel noted, these policies "suggest[] that the producers themselves
assume that they would not be able to sell tuna products that do not meet dolphin -safe
requirements, or at least not at a price sufficient to warrant their purchase."
12. The most engaged actor on the dolphin safe issue is EII. EII has its own standard for
"dolphin safe," which includes a prohibition on setting on dolphins. Companies that agree to
adhere to the EII dolphin safe standard, pay a licensing fee, and otherwise promise to comply with
EII requirements, can use the EII label. E II reportedly has commitments from 90 percent of all
tuna companies to, inter alia, not produce, hold, or sell tuna product produced from setting on
dolphins. In general, EII has certified compliance of upstream companies, such as producers and

- B-12 -

distributors. EII has agreements with 159 processing and fishing companies in 51 countries and
territories. All major exporting and importing countries are represented. For the United States,
53 companies have agreements with EII, including many of the largest player s in the U.S. market.
The vast majority of tuna product sold at retail in the United States passes through at least one of
these companies, the major exception being Mexican tuna product.
13. In light of the fact that EII's focus is primarily on upstream companies, the United States
contracted a leading market research firm to provide specific data as to the retail market, which
accounts for about 70 percent of all sales of canned tuna. Based on that list, the United States
reviewed the evidence as to dolp hin safe policies of the companies that have the largest share of
the U.S. market. This evidence confirms the thrust of the EII data, i.e., that major U.S. retailers
are sensitive to the demands of their consumers, and, as such are committed to selling onl y
"dolphin safe" tuna product and will not carry tuna product produced from setting on dolphins. In
addition, the United States is aware of a statement by Walmart, the leading seller of tuna product
in the United States, stating that all major brands it se lls are not produced from setting on
dolphins and that purchasing decisions are governed by Walmart's sustainability policy, rather than
whether the tuna product qualifies for the dolphin safe label under the U.S. measure.
14. As demonstrated and reinforce d by these policies, there is no demand for Mexican tuna
product in this segment of the market. Further, this lack of demand relates to the substance of
Mexico's fishing practices not the measure at issue. Including Walmart, the retailers covered by
statements account for 66 percent of retail market share, 46.4 percent of total consumption.
2. The Supply of Tuna to the U.S. Tuna Product Market
15. The United States is the largest consumer of canned tuna, with an estimated 19 percent
share of the global m arket. Approximately 50 -55 percent of the canned tuna supplying the U.S.
market is produced by U.S. processors, using U.S. -caught tuna and imported tuna for canning.
The other 45 -50 percent of the market is supplied by canned tuna imports. The top export ers of
canned tuna product to the United States are Thailand, Ecuador, Vietnam, the Philippines, and
Indonesia, which together account for 93 percent of canned tuna imports into the United States.
II. THE LEVEL OF SUSPENSION OF CONCESSIONS PROPOSED BY MEXICO IS NOT
EQUIVALENT TO THE LEVEL OF NULLIFICATION OR IMPAIRMENT
16. Pursuant to Article 22.6 of the DSU, the United States objected to Mexico's proposed level of
suspension of concessions because that proposed level is not equivalen t to the level of nullification
or impairment attributable to the measure. Article 22.4 of the DSU is explicit and requires that the
"level of suspension of concessions or other obligations authorized by the DSB shall be equivalent
to the level of nullific ation or impairment." Mexico's calculations suffer from conceptual flaws and
methodological errors that result in estimates of the level of nullification or impairment that are
not accurate and inconsistent with Article 22.4 of the DSU.
A. Mexico Has Proposed Incorrect Counterfactuals
17. Mexico describes its proposed counterfactual as one where "the WTO -inconsistent
discriminatory aspects of the original and amended Tuna Measure were eliminated." However, a
Member has discretion as to how to implement DSB recommendations and rulings. Further, past
WTO arbitrators have indicated that the normal counterfactual for calculating nullification or
impairment is withdrawal of the measure. There is no precedent for an arbitrator choosing a
counterfactual that based on a complainant's theory of compliance that is not related to the
DSB recommendations and rulings. Withdrawal of the measure is thus the appropriate
counterfactual.
B. Mexico's Model Is Fundamentally Flawed and Overstates of the Level of
Nullification or Impairment
18. Mexico's proposed level of $472.3 million dramatically overstates the level of nullification or
impairment because it is calculated using a deeply flawed economic model.

- B-13 -

1. Mexico's Model Is Not Appropriate in Light of Available Data
19. In this context, the generally accepted way to use partial equilibrium analysis would be to
determine the value of the U.S. dolphin safe label and model the effect of its removal on the
equilibrium price and quantity of Mexican tuna product sold in the Uni ted States. To determine the
value of the dolphin safe label would require detailed data on U.S. purchases of tuna product with
and without the dolphin safe label, including store -by-store sales of tuna by type, accounting for
product characteristics, and including information on the timing of sales and whether sales were
made at promotional values. It appears to be undisputed that this level of data concerning the
U.S. tuna product market is not available. Mexico's dataset does not include retailer-level data that
would allow the comparison between particular types of labeled and unlabeled tuna product that
would be necessary to estimate the value of the dolphin safe label.
20. Mexico's partial equilibrium model thus does not seek to measure the value of th e U.S.
dolphin safe label and the effect of its removal. Rather, Mexico's model asks a wholly different
question, namely what is the demand for canned yellowfin tuna in the U.S. market if one assumes:
1) canned yellowfin's access to the U.S. market is so s everely restricted that current consumption
is not indicative of demand; 2) U.S. consumers have a strong preference for canned yellowfin tuna
(including produced by setting on dolphins) over all other canned tuna; and 3) Mexico is the only
possible supplie r of canned yellowfin tuna to the U.S. market. Mexico's model is simply not an
appropriate model to use for this case given the available data and also because Mexico's
assumptions have no basis in the real world.
2. Mexico's Model Is Based on Incorrect As sumptions and Is
Fundamentally Flawed as a Result
21. Mexico's model is defined by a series of demand equations and that are specified almost
entirely based on assumptions. Specifically, the model is bas ed on the assumptions that:
(1) yellowfin tuna produc t has been so restricted in its entry into the U.S. market that current
consumption levels have no relationship to demand; (2) the Mexican and U.S. tuna product
markets constitute a single market with an identical consumer preference for yellowfin tuna
product; (3) Mexico is the only possible supplier of yellowfin tuna product to the U.S. market; and
(4) Mexico has a completely elastic supply curve. Each of the four key assumptions is incorrect,
and Mexico's model results in an inflated level of nullification or impairment.
a. There Is No Pent-Up Demand for Canned Yellowfin
22. Mexico's model is premised on the assumption that canned yellowfin tuna has been almost
entirely barred from the U.S. market such that the current U.S. consumption of canned yellowfi n
does not reflect demand. The model then disregards all evidence of U.S. consumer preferences, as
reflected in actual consumption, and derives demand based on assumptions. But the underlying
assumption is incorrect: dolphin safe yellowfin canned tuna is sold in the U.S. market but it is sold
in small quantities because demand is weak.
23. Contrary to Mexico's assumptions, there are numerous other sources of canned yellowfin in
the U.S. market that are not adversely affected by the U.S. dolphin safe labeling measure and thus
are available on an unrestricted basis. For example, all of the "big three" companies sell all -
yellowfin dolphin safe tuna products in the United States. Other tuna processors also sell canned
yellowfin on the U.S. market. Indeed, from 2 010-2015, dolphin safe yellowfin accounted for
between 4.3 and 6.7 percent of the tuna processed by U.S. canneries. U.S. canneries sourced this
dolphin safe yellowfin from both U.S. vessels and foreign vessels.
24. If demand for canned yellowfin tuna were strong, dolphin safe canned yellowfin would sell in
higher quantities given the available supply of yellowfin caught in a dolphin safe manner, but that
is not the case. Sales of tuna products containing 100 percent yellowfin are dwarfed by sales of
albacore and lightmeat tuna. Further, much of the dolphin safe yellowfin produced for the U.S.
market is not marketed as "yellowfin" at all, but sold (often combined with skipjack) as
"lightmeat". There is simply not sufficient demand for even the amount of d olphin safe yellowfin
currently available. In this regard, Mexico's evidence suggests the same is true for non-dolphin
safe canned yellowfin, since Exhibit MEX -15 indicates that both leading Mexican brands, Tuny and
Dolores, market "chunk light" products in the United States.

- B-14 -

25. The absence of demand for yellowfin tuna product is further confirmed by the fact that the
decline in the quantity and share of the yellowfin processed by U.S. canneries continued after the
measure went into effect. The share of tu na processed by U.S. canneries made up by yellowfin
was already falling before the DPCIA was enacted – from 46.1 percent in 1987 to 33.2 percent in
1990 – and fell to 23.0 percent in 1991. Instead of stabilizing at that level, however, (or rising
back to the earlier level), the share of tuna processed by U.S. canneries represented by yellowfin
has steadily fallen. Mexico's story of the measure operating as a supply restriction does not explain
this continued decline in yellowfin's share of the U.S. cannery receipts.
26. Thus, Mexico's model is based on the assumption of an unsatisfied demand for canned
yellowfin that is contradicted by the evidence. U.S. consumers have access to canned yellowfin,
both dolphin safe and non -dolphin safe, but the data prove th at they do not demand the product
enough for canneries to increase supply or even to market all of the yellowfin they have as such.
There is, therefore, no reason to think that U.S. consumption of yellowfin would increase if the
U.S. measure were removed and Mexican producers could market their canned yellowfin as
"dolphin safe." Thus, the assumption upon which Mexico's model is premised is false.
b. The U.S. and Mexican Markets Are Not One Market with a
Strong Preference for Canned Yellowfin
27. Another factor driving the outcome of Mexico's model is its assumption that the United
States and Mexico constitute a single market with a strong preference for canned yellowfin. The
model sets the willingness to pay for yellowfin, distribution of willingness to p ay, and the elasticity
of demand for tuna equal across the two countries. This leads to a result that is almost entirely
driven by the percentage of consumption between the two countries, because the "intensity of
demand" parameter is the only variable tha t differs between the U.S. and Mexican demand
equations. However, Mexico's assumption is incorrect, and, consequently, the parameters of
Mexico's model relating to U.S. demand are all inaccurate.
28. First, there is no reason to believe that Mexican and U. S. consumers have the same
preferences concerning canned tuna. Mexican and U.S. consumer preferences for food products
often differ. For example, Mexican and U.S. consumers have different preferences concerning
chicken meat, with U.S. consumers preferring white meat and Mexican consumers preferring dark
meat. Preferences are also different with respect to cheeses and fruits and vegetables.
29. Mexico submits no evidence substantiating its assertion that "[t]here is no reason for U.S.
consumers to have a different appreciation for canned yellowfin tuna than Mexican consumers."
The fact that 17 percent of Americans are Hispanic suggests that some part of that 17 percent of
the U.S. population may have preferences similar to Mexican consumers but does not support the
idea that U.S. consumers generally have the same preferences as Mexican consumers. Indeed, the
fact that Hispanic Americans are regarded as a subgroup with distinct preferences suggests that
the opposite is true. Further, the evidence indicate s that U.S. and Mexican consumers differ in
their willingness to purchase tuna product produced from setting on dolphins.
30. Second, the assumption that U.S. consumers have a strong preference for canned yellowfin
vis-à-vis canned "generic" tuna is also r efuted by the available evidence. The U.S. tuna product
market is made up of a variety of products – not "yellowfin" and "generic." The low -end portion of
the market is composed of light tuna and is heavily influenced by cost. The high -end portion of the
market is dominated by albacore. Some products labeled yellowfin also fall into the high -end
portion of the market, although demand for such products is low because U.S. consumers do not
prefer it to canned albacore.
31. Mexico has provided no evidence in s upport of its assumption that U.S. consumers have a
preference for yellowfin tuna over all other types of canned tuna. Indeed, Mexico's model does not
even acknowledge the existence of albacore and its popularity with U.S. consumers, despite the
fact that Exhibit MEX -9 states that albacore is an important premium tuna product on the
U.S. market. Further, Exhibit MEX-29 relates to Mexican consumer preferences rather than to U.S.
consumer preferences. Pinsa and Marindustrias, the two leading Mexican tuna pro duct companies
mentioned in the exhibit, may market only yellowfin as a premium product, but many companies
focused on the U.S. tuna product market, including the "big three" companies, have one or more
premium albacore products, as well as sometimes premium yellowfin products.

- B-15 -

32. Further, the $2 per kg value assigned to the mean willingness to pay for canned yellowfin
over "generic" tuna is divorced from the reality of the U.S. market. Mexico suggests that this
figure is conservative in light of a regress ion analysis that suggested an estimated premium on
yellowfin tuna of $1.13 -$4.67 per kg, yet Mexico acknowledges that the data is not available "to
calibrate the distribution of preference for canned yellowfin tuna versus canned generic tuna."
Mexico also asserts, in contradiction to its price premium assumption, that "canned yellowfin tuna
is priced to compete with other canned tuna products." Further, the regression does not properly
represent the price premium for yellowfin, as, inter alia, the data is not detailed enough to do a
proper analysis and the regression does not account for albacore.
33. The assumption of a logistic distribution of willingness to pay, for which Mexico provides no
justification, is also inconsistent with the reality of the U.S . market. A logistic distribution means
that half of consumers are willing to pay more than the mean premium and half are willing to pay
less. This does not describe the U.S. distribution of willingness to pay for tuna, where many
consumers show a high sen sitivity to price, as shown by the fact that nearly half of all sales of
canned tuna are at discounted (sale) prices, suggesting that consumers are unwilling to pay full
price, let alone a premium. A recent study found that yellowfin and skipjack have part icularly
elastic demand such that consumers will decrease consumption of these types of canned tuna by
more than a proportional amount as prices rise.
34. Thus, the key assumptions underlying the demand side of Mexico's model are not supported
by the evide nce. The demand parameters set based on those assumptions are, therefore, also
incorrect. Specifically: (i) Equations 1 and 2 are wrong in assuming a market in which all premium
product is yellowfin; (ii) Equation 3 is wrong in establishing a mean willingn ess to pay of $2 per
kg. for yellowfin over all other tuna products; (iii) the intensity of demand parameter introduced in
Equation 5 wrongly assumes that the only difference between the U.S. and Mexican markets is the
quantity of tuna consumed; and (iv) t he logistic distribution assumed in Equation 8 is
inappropriate because it ignores the fact that tuna sales are highly sensitive to price and,
therefore, willingness to pay is not distributed in this manner. These equations are central to
Mexico's model and, consequently, Mexico's model is critically flawed.
c. Mexico Is Not the Only Supplier of Canned Yellowfin
35. Another key assumption underlying Mexico's model is that Mexico is the only potential
supplier of yellowfin tuna product to the U.S. market. M exico assumes that, once the alleged
latent demand for yellowfin has been awakened, only Mexican producers will be able to respond to
it. Mexico asserts that U.S. canneries could not increase production and that Mexico is the only
supplier of yellowfin tuna product to the U.S. market. These assumptions are incorrect.
36. First, yellowfin tuna is caught and processed throughout the world; Mexico is not the sole
supplier. The data presented in Exhibit MEX -15 shows that at least 30 different brands from Nort h
America, Europe, Asia, and South America marketed all -yellowfin tuna products in the U.S.
market. Similarly, U.S. cannery receipts show that U.S. canneries purchase from U.S. vessels and
import yellowfin each year for processing. Data from regional fishe ries management organizations
(RFMOs) similarly show that many countries' vessels harvest yellowfin.
37. Second, if there were a sudden increase in U.S. demand for canned yellowfin, the Mexican
industry would not be the only one to respond. U.S. canneries are not operating at full capacity,
and there is no reason to think that other tuna industries in other countries could not also increase
production. In particular, canneries in Thailand and Ecuador – the two largest exporters of canned
tuna to the United States – are operating at about 80 and 70 percent capacity. Consequently,
there is every reason to believe that the tuna processing industries in these countries would
increase production to meet any increased U.S. demand for canned yellowfin.
38. Thus, Mexico's assumption that only the Mexican tuna industry could respond to any change
in U.S. demand for yellowfin is incorrect. In reality, both U.S. canneries and the foreign canneries
that currently supply the U.S. market with yellowfin and other tuna prod uct would compete to
satisfy any new U.S. demand. Consequently, Equation 20, the parameter imposing that
assumption on the U.S. market, and Mexico's model as a whole are fundamentally flawed.

- B-16 -

d. Mexican Canneries Do Not Have the Ability to Increase
Production Without Any Impact on Marginal Cost
39. Mexico's model assumes that Mexico has the ability to increase production of canned
yellowfin without increasing marginal cost. This assumption is incorrect because (1) the United
States is a sufficiently importa nt consumer of canned tuna that a shift in demand of the size
Mexico envisions would affect world prices of cannery grade yellowfin; and (2) Mexico could not
import large quantities of yellowfin from other ETP fishing nations at no increased cost.
40. On the second point, the supply of yellowfin in the ETP is not unlimited and an increase of
the kind Mexico assumes would encounter hard supply constraints. Catches of tuna in the ETP are
regulated by the IATTC, and the latest IATTC report found that recent f ishing mortality rates are
slightly below the MSY level, suggesting that yellowfin tuna was in an overfished state. This
suggests that the IATTC would take action if catches of yellowfin in the ETP increased
substantially. Indeed, at the 2016 meeting of the IATTC, the Commission adopted interim harvest
control rules for yellowfin tuna that would trigger measures to reduce catch.
41. Mexico's assumption that it could import additional yellowfin for canning without any
increased cost is particularly flawed. Mexico claims that it would import from other ETP fishing
countries the 20,000 additional mt. of yellowfin that its processors would need to serve the
Mexican market, given the increased exports to the United States. Ecuador is the only country that
could supply that volume, but Ecuador has its own tuna processing industry. It was the second
largest producer of canned tuna as of 2008 and is the second largest exporter (by value) of
canned tuna to the United States. Yet Mexico's model assumes that if the U. S. measure were
changed so as to unleash a latent demand for canned yellowfin, the Ecuadorian industry would not
try meet this demand itself, but instead would sell the less valuable raw/frozen input to Mexico so
that the Mexican industry could reap the profits of producing a processed product.
42. Thus, Mexico's assumption of a perfectly elastic supply curve based on its ability to import
yellowfin for canning without limit and without any effect on its price, reflected in Equations 20 and
22, is not reaso nable. Relatedly, Mexico's assumption of a constant price of yellowfin supply and
other tuna product, reflected throughout its model, is also incorrect. These assumptions are both
central to Mexico's model and, therefore, the model itself is deeply flawed.
III. THE APPROPRIATE CALCULATION OF THE LEVEL OF NULLIFICATION OR
IMPAIRMENT
A. The Appropriate Counterfactual Is Withdrawal of the Measure
43. A Member has discretion as to how to implement DSB recommendations, and past
WTO arbitrators have indicated that the normal counterfactual is withdrawal of the measure. The
United States uses this counterfactual to calculate the level of nullification or impairment. Under
this counterfactual, it is reasonable to conclude that all tuna product currently meeting t he dolphin
safe labeling requirements, as well as tuna product produced from setting on dolphins consistent
with the AIDCP, could be sold with some label suggesting it is "dolphin safe." It is also reasonable
to conclude that producers and retailers of tuna product not produced from setting on dolphins will
continue to seek to differentiate their product from tuna product produced from setting on
dolphins. Finally, it is reasonable to conclude that the commitments made to EII or directly to
customers by the vast majority of producers, distributors, exporters, importers, and retailers that
serve the U.S. tuna product market to not produce, hold, or sell tuna or tuna product produced
from setting on dolphins would remain in place.
B. A Market -Based Approach Is the Appropriate Method of Calculating the
Level of Nullification or Impairment
44. In light of the evidence available, the most appropriate methodology to calculate the level of
nullification or impairment would be to compare, on a prospective basis, the U.S. imports from
Mexico of tuna product with the measure in place to the level of imports that would occur if the
measure were withdrawn. This approach, which examines Mexico's historical market share of the
U.S. tuna product market prior to the adoption of the DPCIA, is both consistent with the approach
taken by past Article 22.6 arbitrators as well as the evidence on this record.

- B-17 -

45. Where relevant data were available, previous arbitrators have used historical trade data to
determine the level of nullifi cation or impairment. Such an approach is appropriate here. Prior to
1990, there was no dolphin safe labeling measure or other instrument addressing dolphin safety
concerns. As such, levels of Mexican exports to the United States prior to 1990 during years when
there was no measure and market access was not limited are instructive as to the levels of imports
from Mexico that might exist if the measure were withdrawn. The U.S. model, therefore, uses
Mexican exports during the three years preceding 1990 (1987-1989).
46. The U.S. approach uses Mexico's share of U.S. tuna imports during the relevant period
rather than absolute quantities of imports for two reasons. First, U.S. consumption of tuna product
has declined since the period before the DPCIA was adopted , and a volume-based approach would
not account for this decline. Second, data on imports of "tuna product," as such, is only available
beginning in 1989. It is preferable not to base a historical analysis on data from a single year, as
that year may not be representative. The U.S. model therefore uses Mexico's share of imports of
all tuna ( i.e., tuna products and fresh tuna) during the three years prior to 1990. This may
overestimate the level of nullification and impairment, but is likely very close to Mexico's historical
share of tuna product imports because: (1) tuna product is a substantial subset of the "all tuna"
category, accounting for between 90.3 and 98.0 percent of U.S. imports of all tuna, by volume,
since 1989; and, (2) Mexico's share of U.S. imports of tuna product in 1989 (3.8 percent) was
very close to Mexico's share of U.S. imports of all tuna (3.4 percent).
47. On this basis, the United States identified U.S. imports of tuna from Mexico in the three
years prior to 1990 and calculated Mexi co's market share, by volume, which was 3.9 percent. The
United States also notes that in 1987 Mexico's import share reached its high of 5.8 percent. Thus,
3.9 percent is a reasonable estimate of what Mexico's annual share of U.S. imports of tuna product
would be in the absence of the U.S. measure, and 5.8 percent represents the highest possible level
of potential imports that could be affected by the U.S. measure (without taking into account U.S.
consumer preferences for tuna product not produced from setting on dolphins).
48. Next, to establish a range of U.S. imports of Mexican tuna product that could be expected
under the counterfactual, the United States applied both percentages to current U.S. imports of
tuna product based on average annual imports for 2013-2015. Over this period, the United States
imported, on average, 251,011 mt. of tuna product per year. Assigning Mexican products a 3.9
percent share of imports at this level suggests that U.S. imports of Mexican tuna product would be
approximately 9,789 mt. per year. At Mexico's historical high import share of 5.8 percent,
U.S. imports of Mexican tuna product would be 14,559 mt. a year.
49. To establish the value of U.S. imports of Mexican tuna product under the counterfactual, the
United States mu ltiplied the projected quantity of Mexican tuna product imports by the average
import price of tuna products from the world, excluding Mexico, for 2013 -2015. Excluding imports
from Mexico from the calculation of the average price of tuna product accounts f or any price
difference between Mexican tuna product and other tuna product due to the ineligibility of Mexican
product for the label. Based on this calculation, the annual value of U.S. imports of Mexican tuna
product under the counterfactual would be $51 .8 million, based on a 3.9 percent share of tuna
product imports, and $77.1 million, based on a 5.8 percent share.
50. From this projected value of U.S. imports of Mexican tuna product under the counterfactual,
it is necessary to subtract the value of curr ent U.S. imports of Mexican tuna product to identify
how much higher such imports would be if the U.S. measure were withdrawn. Using the average
actual value of U.S. imports of Mexican tuna product for 2013 -2015 produces a result of $32.9
million, based o n a 3.9 percent import share, and an upward bound of $58.1 million, based on
Mexico's historical high import share.
C. Results of the Market -Based Approach Must Be Discounted to Account for
U.S. Preferences to Arrive an Accurate Level of Nullification or Impairment
51. As noted above, this market -based approach does not take into account the current U.S.
consumer preference for tuna product produced from fishing methods other than setting on
dolphins. In light of this fact, and the fact that under the count erfactual producers and retailers
would still be able differentiate products produced from fishing methods other than setting on

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dolphins from products produced from setting on dolphins, the figures listed in the preceding
section should be discounted to arrive at an accurate level of nullification or impairment.
52. The market impact of this consumer preference can be found in the commitments that the
many companies serving the U.S. market have made to EII. These commitments do not depend on
the content of U.S. law and likely would not change if the measure were withdrawn. It is difficult
to estimate how much of the U.S. market is covered by commitments to EII, although 90 percent
is a reasonable estimate, since about 90 percent of tuna companies globall y have made
commitments to EII. At a minimum, the discount must reflect the policies of individual retailers on
the record. Retailers accounting for 46.6 percent of total U.S. tuna product consumption have
policies not to sell tuna product produced by setting on dolphins or policies that are not affected by
the dolphin safe labeling measure. It is necessary, therefore, to reduce by that amount the
projections of Mexican exports of tuna product to the United States under the counterfactual. To
do so, the U .S. model, after calculating the estimated value of imports of Mexican tuna product,
multiplied that figure by 0.53, to reflect the market share available to tuna product produced from
setting on dolphins, before subtracting the value of Mexico's actual imports.
53. Thus, the level of nullification or impairment, adjusted for consumer preferences, would
amount to $8.5 million, using the average actual value of U.S. imports of Mexican tuna product
for 2013-2015, and $21.9 million, using Mexico's historical high import share.
V. CONCLUSION
54. The United States requests that the Arbitrator find that the level of suspension of
concessions requested by Mexico is in excess of the appropriate level of nullification or
impairment. The more appropriate level would be about $8.5 to $21.9 million per year.
SUMMARY OF U.S. OPENING STATEMENT
55. The question in this proceeding is whether Mexico's request for authorization to suspend
concessions is "equivalent" to the level of nullification or impairment caused by the measure, and if
not, then what the equivalent level is. The United States has shown that Mexico's request is not
consistent with the requirements of the DSU. As a result, it is appropriate to move to the second
part of the question. Th e U.S. analysis and calculations show that the level of nullification or
impairment should be no more than $8.5 to $21.9 million per year.
I. MEXICO'S MODEL IS FUNDAMENTALLY FLAWED AND IS NOT CAPABLE OF
ACCURATELY ESTIMATING THE LEVEL OF NULLIFICATION AND IMPAIRMENT
56. The evidence shows that the three critical assumptions underlying Mexico's model are all
incorrect and that Mexico's calculation of nullification or impairment is grossly inflated.
A. The Measure Does Not Ban the Sale of Canned Yellowfin in the United
States
57. One of the key assumptions underlying Mexico's model is that the U.S. measure "effectively
bans" sales of canned yellowfin in the United States. Based on this assumption, Mexico estimates
the level of nullification or impairment by modeling the introduction of a hypothetical new product
in the U.S. market, instead of modeling the removal of the labelling standards. In doing so, Mexico
ignores the data on actual U.S. imports and consumption of canned yellowfin and derives demand
for the product based on incorrect assumptions.
58. The U.S. measure is neither a de facto nor a de jure prohibition on the sale of canned
yellowfin. Many countries around the world catch and process yellowfin. Yellowfin is the second
most produced tuna specie s, by volume, in the global tuna industry. The majority of this catch is
by purse seine vessels and destined for the global canned market. Exhibit MEX -15 shows that
U.S.-produced and imported canned yellowfin products are sold in the U.S. market. Mexico al so
exports canned tuna to the United States. Mexico was the sixth largest source of U.S. canned tuna
imports in 2014-2015, accounting for 3.6 percent of all canned tuna imports, by volume. Mexico's
share of U.S. imports of canned tuna is consistent with Me xico's share of U.S. imports of other
major seafood products, such as shrimp, crab, and sardines.

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59. Further, evidence proves that a lack of demand, not lack of supply, is responsible for the
fact that canned yellowfin accounts for only 1 -2 percent of U.S . canned tuna consumption.
First, yellowfin accounted for a larger share of U.S. cannery receipts in the 1980s than it does
today, but during that time it largely was sold not as "yellowfin," but, combined with skipjack, as
"light tuna." Thus, the fact th at U.S. canneries used to purchase more yellowfin does not mean
that there ever was strong demand for all -yellowfin products. Second, the steady decline in U.S.
cannery purchases of yellowfin over the last three decades confirms the lack of U.S. consumer
demand for canned yellowfin. Third, the behavior of tuna producers in the U.S. market, in
supplying increasing quantities of albacore products while canning yellowfin with skipjack as light
tuna, also confirms the lack of U.S. consumer demand for yellowfin. Fourth, the rise of U.S.
wholesale and retail tuna prices during the early 1990s refutes Mexico's claim that the decline in
U.S. cannery yellowfin purchases was caused by the measure restricting supply.
60. There are several factors that have driven down demand for canned yellowfin, including: (1)
yellowfin is the only type of tuna caught in association with dolphins, which U.S. consumers
strongly do not prefer; (2) growing preference for albacore; and, (3) a preference for light tuna
containing exclusively or primarily skipjack, which has a lower mercury content than yellowfin and
is less expensive. Thus, the evidence refutes Mexico's claim that the U.S. measure effectively bars
sales of canned yellowfin in the U.S. market. Consequently, the decision to d isregard existing
consumer data and to derive a demand function based entirely on the assumption of a tremendous
unobserved preference for canned yellowfin is wrong.
B. Mexico Is Not the Only Possible Supplier of Canned Yellowfin
61. Another major assumpt ion underlying Mexico's model is that Mexico is the only possible
supplier of canned yellowfin to the U.S. market, or the only possible supplier of low cost canned
yellowfin. Based on this assumption, Mexico's model equates "canned yellowfin" with Mexican
canned tuna exports to the United States and ignores all other potential sources of canned
yellowfin. In reality, however, Mexico is not the supplier of a unique product, either canned
yellowfin or "low cost" canned yellowfin, and U.S. consumers do not have a preference for Mexican
canned yellowfin over all other types of canned tuna.
62. As already explained, Mexico is far from the only source of cannery grade yellowfin, and the
U.S. tuna product market is deeply integrated into the global tuna industry. A significant amount
of tuna purchased by U.S. canneries has been caught by foreign flagged vessels, and imports
account for nearly half of all canned tuna on the U.S. market. The sources of U.S. tuna product
imports include Members whose fleets are among the top harvesters of yellowfin and Members
that purchase tuna from the top harvesters of yellowfin. Not surprisingly, numerous tuna
companies, both U.S. and foreign, market all - or partly -yellowfin products in the U.S. market.
Thus there are many current suppliers of canned yellowfin to the U.S. market that have the
capacity to supply significantly more canned yellowfin if U.S. demand were greater.
63. Mexico now acknowledges this is the case, but claims that only Mexican canned yellowfin
would enter the U.S. market on the grounds that: 1) Mexico is a unique producer of low -cost
yellowfin; and 2) there is "no reason" that if the scenario Mexico models comes to pass that the
domestic and foreign competitors of Mexico would increase their production of canned yellowfin for
the U.S. market. The evidence on the record proves otherwise.
64. First, Mexico presents no evidence regarding the cost of production of its industry or the
industries of other Members to prove that the Mexican industry is the lowest cost producer of
canned yellowfin. In fact, the available evidence indicates that this is not the case. Other countries
have much greater advantages in terms of low -cost tuna processing. Mexico's claim is also
contradicted by the fact that its model assumes t hat Ecuadorian yellowfin is interchangeable with
Mexican yellowfin and by the fact that Mexican products are not currently the least expensive
canned yellowfin products on the U.S. market.
65. Second, Mexico is wrong when it claims that there is "no reason" that, if the scenario Mexico
models comes to pass, other domestic and foreign tuna industries would not increase sales canned
yellowfin on the U.S. market. The basis of Mexico's claim is that other producers would not be
affected by the removal of the U. S. measure, but this is not what Mexico modeled. Mexico
modeled the introduction of a new product for which there is significant, untapped consumer

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demand, such that the product sells at a higher price and in much greater quantities than canned
yellowfin does. The U.S. import price generated by Mexico's model is significantly higher than the
current import price of Mexican canned tuna and of canned tuna from other countries that produce
canned yellowfin. It is also significantly more than the current average EU import price for canned
yellowfin. It is simply unreasonable to assume, as Mexico does, that all producers of canned
yellowfin would not react to the dramatically increased demand assumed in Mexico's model by
increasing production of that product for the U.S. market.
66. In short, the available evidence contradicts Mexico's claim that it is the only possible
supplier of canned yellowfin, low cost or otherwise, to the U.S. market. Thus, the decision to
equate U.S. imports of canned yellowfin with Mexican canned tuna exports is wrong and cannot be
used to accurately calculate the level of nullification and impairment in this dispute.
C. Mexico's Demand Equations Are Incorrect
67. Mexico used a choice model to depict demand in the U.S. and Mexican market s but derived
the demand equations based entirely on assumptions rather than on the highly disaggregated
consumer-level data or academic studies that would normally be used to construct such a model.
The evidence proves that the assumptions Mexico made are incorrect.
68. First, Mexico's assumption that the United States and Mexico are a single market, in which
consumers have the same preferences, is contradicted by the evidence. The evidence shows that
U.S. and Mexican consumers have different preferences concerning many different food products,
including canned tuna. For example, U.S. consumers have a distinct preference for canned
albacore that Mexican consumers do not share, and Mexican consumers have a much stronger
preference for canned yellowfin. Also , U.S. consumers have demonstrated a preference for tuna
not caught by setting on dolphins that seems to be absent among Mexican consumers. Finally,
Mexico's claim that Mexican canned tuna is a gourmet product that is "competitively -priced" with
"generic" products and that, therefore, U.S. consumers could not possibly not prefer it, is
incorrect. In fact, the Mexican canned yellowfin products sold on the U.S. market are not gourmet
products and are not priced competitively with bargain-end products.
69. Second, Mexico's unsubstantiated assumption that U.S. demand for canned tuna is
represented by a logistically distributed $2 per kg. mean willingness to pay for canned yellowfin
over other types of canned tuna is inconsistent with a properly structured c onsumer choice model
and refuted by the evidence on the record. Mexico asserts that its assumption of a $2 per kg.
mean willingness to pay a premium for yellowfin is conservative because it is less than the
premium calculated using its weighted OLS regression. But Mexico ignores the fact that the $2 per
kg. is more than the premium calculated using the OLS regressions. Scaling the distribution
function such that 6.6 percent of consumers are willing to pay a premium of $4.65 per kg. is
wrong regardless because only 1 -2 percent of consumers are paying the current premium. Also,
the fact that nearly half of all canned tuna in the United States is sold on sale confirms that the
logistic distribution Mexico chose is not accurate for the U.S. market. Finally, t he import prices of
yellowfin tuna products in the EU demonstrate that, if U.S. demand for yellowfin were such that
the United States would import 63,568 metric tons of canned yellowfin if the U.S. import price rose
to $7.84 per kg., many countries other than Mexico would supply the product.
70. Third, Mexico's "intensity of demand" parameter is inconsistent with the appropriate use of a
consumer choice model and is contradicted by the evidence. In Mexico's model, all consumer
preferences other than the pre ference for yellowfin are represented by a single variable that
reflects total consumption in the United States and Mexico. Because this is essentially the only
variable that differs between U.S. and Mexican demand, it is the main factor driving the outcom e
of the model. This is inconsistent with the appropriate use of a choice model, as a properly
specified model would derive demand for products based on the product characteristics valued by
consumers. Further, Mexico's use of the intensity of demand param eter is inconsistent with the
evidence, since it is not correct that the entire U.S. canned tuna market represents the market for
canned yellowfin. Only 1 -2 percent of all consumption of canned tuna is yellowfin, and at most
only 6 percent of consumers, ac cording to Mexico's own consumer survey, even look for canned
yellowfin. But Mexico's use of the demand intensity parameter assumes that the U.S. market for
canned yellowfin is the same as the U.S. market for all canned tuna . In reality, the fact that the
U.S. market for all canned tuna is larger than the Mexican one does not mean that the U.S. market

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for canned yellowfin is proportionally as large. That is why, to accurately reflect demand, a model
must be based on economic data, not unreasonable assumptions.
II. THE U.S. MODEL PROVIDES A REASONABLE ESTIMATE OF THE LEVEL OF
NULLIFICATION AND IMPAIRMENT
71. The United States has presented a model that provide a reasonable estimate of the level of
nullification and impairment, and Mexico has not shown that the period prior to 1990 is
inappropriate to use to estimate Mexico's market share if the measure were withdrawn.
72. First, the agreement between the United States and Mexico concerning U.S. imports of
Mexican tuna between 1987 and 1989 did not restrict imports during the period. In only one year,
1987, did U.S. imports of Mexican tuna product come close to the agreed level. In 1988 and 1989,
U.S. imports from Mexico were only 29.7 and 47.5 percent of the agreed levels. Additionally,
evidence of Mexico's share of U.S. imports of all tuna product during the period prior to the 1980
embargo confirms that Mexico's import share for 1987 -1989 was representative of Mexico's share
in the absence of any measure affecting Mexican exports to the United States.
73. Second, the available evidence suggests that NAFTA would not make a significant difference
in Mexico's market share of U.S. imports of tuna product. Trends in Mexico's market share of the
products most similar to tuna product reveal that NAFTA did not hav e a large or long-lasting effect
on Mexico's import share. Mexico's share of U.S. crab, shrimp, and sardine imports all rose in the
years following NAFTA (although noting close to the 2,056 percent increase in Mexico's share of
canned tuna imports predicte d by Mexico's model), but all later declined to pre -NAFTA levels (all
except sardines within 5 years of NAFTA coming into force). Data on U.S. imports of canned tuna
from other countries that have experienced a change in tariff treatment also suggests that using
Mexico's pre-NAFTA market share is not unreasonable.
74. Third, the location and capacity of U.S. canneries and the capacity of Mexican canneries are
controlled for by using Mexico's market share of all tuna as the baseline. In the 1980s, when the re
were more U.S. canneries in the EPO region and Mexico's canning capacity was lower, Mexico
exported tuna loins and frozen tuna to the U.S. market. As Mexico's canning industry developed,
the balance of Mexico's exports shifted towards canned tuna. The U .S. model controls for shifts in
the balance of Mexico's exports to the United States by using Mexico's historical share of imports
of all tuna to estimate Mexico's share of tuna product imports in the absence of the measure, while
multiplying the estimated quantity of imports from Mexico by the higher price of all tuna product
rather than the lower price of raw tuna for canning.
75. In conclusion, the U.S. model is consistent with models used in previous arbitrations and
generates a reasonable outcome. Mexico has not shown that this is not the case. Thus, the level of
nullification and impairment of $8.5 to $21.9 million per year is appropriate.