Members adopt national security ruling on Russian Federation’s transit restrictions
The Dispute Settlement Body (DSB) on 26 April formally adopted a panel ruling clarifying the use of national security exceptions to WTO rules as invoked in the trade dispute between the Russian Federation and Ukraine over transit restrictions. The DSB also heard a number of members’ views on proposed reforms to the dispute settlement process in light of recent dispute cases and continued differences over the appointment of Appellate Body members.
DS512: Russia – Measures concerning traffic in transit
The DSB adopted the panel report for DS512, which the Russian Federation described as clarifying for the first time the interpretation of the national security exception or Article XXI of the 1994 General Agreement on Tariffs and Trade. The panel had found that the Russian Federation met the requirements for invoking Article XXI(b)(iii) in relation to its multiple restrictions on traffic in transit from Ukraine through the Russian Federation to third countries. The Russian Federation considered the outcome of the dispute to be well-balanced as well as providing guidance on the interpretation of Article XXI.
Ukraine said that while it was disappointed with the outcome, the findings nevertheless posed more positive than negative developments for the WTO dispute settlement system and thus Ukraine would not be appealing the ruling. The issues raised in the dispute were of historic importance as it was the first decision to examine a member’s right to impose measures under Article XXI, Ukraine said. The decision confirms that a DSB panel has jurisdiction to decide over such cases and scrutinize invocations of the security clause, Ukraine said.
Ukraine maintained that the Russian Federation’s measures could not be justified but thanked the panel for citing UN General Assembly resolutions related to the security issues. It said that it regretted, however, that the panel improperly bore the burden of proof and made the case for the respondent and that the report gave the impression that Ukraine and the European Union worked towards a free trade agreement following tensions with the Russian Federation. The EU expressed concern with the latter matter as well.
The EU, Canada, China, Turkey, Australia and Mexico similarly welcomed the interpretation of the panel ruling of the national security exception. Australia further called on members to exercise restraint against the undue use of this exception.
The United States, however, found the panel’s analysis unpersuasive and problematic for systemic reasons. It noted that it was currently involved in the litigation of dispute cases involving the same issue of national security and thus did not go into a detailed discussion of the panel report. It did mention, however, that the panel did not sufficiently examine the Russian Federation’s assertion that invocation of national security was “self-judging”. The conclusions were premature and not consistent with the interpretation standards of the Dispute Settlement Understanding and customary principles of public international law, the US said.
The US further noted that the Russian Federation did not substantiate its defence and that the panel made the case for the respondent on defining what constituted an “emergency” in international relations. It is not the role of an adjudicator to make the case for the respondent, the US said. The US further said the panel proceeded with advisory opinions beyond the factual findings it was obligated to make.
DS495: Korea – Import bans, and testing and certification requirements for radionuclides
The DSB adopted the Appellate Body (AB) ruling on DS495, circulated on 11 April, which reversed key findings of an earlier panel ruling that had favoured Japan in its complaint against Korea’s restrictions on imported fishery products and certain additional food testing requirements. Korea had imposed such measures after the Fukushima earthquake and nuclear accident in March 2011.
Korea said it was pleased the AB reversed the panel’s findings that Korea’s import bans and testing requirements were inconsistent with WTO rules. For the first time in history, this case involved the potential adverse effect of radionuclides which have unique risks related to sanitary and phytosanitary standards, Korea said. The panel’s earlier ruling, if it had not been reversed, would have had serious implications on international food safety, Korea said.
Japan, for its part, noted that the AB’s reversal was based on the technical faults in the panel’s reasoning and explanation. The panel’s factual findings about the safety of Japanese food products, in contrast, remains undisputed, Japan said. As such, the AB had failed to resolve the dispute because it did not address whether Korea’s measure was inconsistent with WTO rules. Japan expressed regret that the AB report could have significant repercussions on producers devastated by the 2011 earthquake and nuclear accident as well as have a negative impact on perceptions of the safety of Japanese food.
Further into the meeting, under the agenda item of “Other business”, Japan said it would like to continue discussions at the DSB on reforming dispute settlement procedures to ensure that the system ensures the provision of a positive solution to all disputes.
A number of members including Brazil, Canada, Ecuador, New Zealand, Malaysia, Peru and the United States took the floor to note the dispute had not been resolved. Canada said it advocated for providing the AB with the possibility to remand cases back to the original panel. The EU noted that it understood Japan’s disappointment with the ruling but considered that the AB had fully discharged is responsibility within the system as it currently stands. China also noted that the AB was constrained in the dispute and stated that any proposed reforms to remove the ability of the AB to consider the panel’s assessment of facts would undermine rather than improve the dispute settlement system.
Colombia and Pakistan stated the importance of members respecting the Agreement on Sanitary and Phytosanitary Standards. Saudi Arabia noted that it was satisfied with the safety of Japan’s food products and that it had lifted its ban.
Korea came back to add that it disagreed with many of the points raised by Japan, including Japan’s assertion that the panel’s factual findings had survived regardless of the AB’s reversal. Korea also considered that the AB had satisfactorily resolved the dispute by finding that the complainant had failed to discharge its burden of proof. Japan said it would like to continue to discuss the systemic issue of dispute settlement procedures in the coming DSB meetings.
DS 511: China – Domestic support for agricultural producers
The DSB adopted the panel ruling circulated on 28 February 2019, which found that China, between 2012 and 2015, provided farm subsidies for producers of wheat and rice in excess of its WTO domestic support limits.
The United States welcomed the findings of the panel and noted that China’s market price support programmes for wheat and rice had exceeded what it had committed to the WTO – that is, 8.5% of the total value of production for each product. The US highlighted the findings of the panel that where a measure does not explicitly provide otherwise, the quantity of eligible production (QEP) should be construed to be the total value of all production in that territory. The United States considered that this interpretation accurately reflected the text of the Agreement on Agriculture and the understanding of members. The US further noted that while the panel declined to make additional findings with respect to corn, which the US regretted, this does not alter the ultimate outcome.
China was of the view the panel did not follow the correct methodology in calculating China’s market price support. For China, it was important to situate the dispute in its broader context in consideration of the sensitivity of the agricultural sector and food security in the country. The panel report highlighted the unfair treatment suffered by developing members with regard to the WTO rules on agricultural subsidies, China said. However, while it was disappointed with certain parts of the ruling, China said it would not file an appeal.
Canada, a third party to the dispute, asserted that the panel applied the correct approach in its calculations.
DS521: EU – Anti-dumping measures on certain cold-rolled flat steel products from Russia
The Russian Federation presented its second request for the establishment of a WTO panel to rule on EU’s anti-dumping measures on certain cold-rolled flat steel products from Russia. The Russian Federation’s first request was blocked by the EU at a DSB meeting on 11 April. The dumping duties, ranging from 18.7% to 36.1%, were imposed on the Russian steel imports starting in August 2016.
The Russian Federation referred members to its statements in the previous DSB meeting. The EU said it regretted that the Russian Federation has requested the establishment of a panel and that it believed its measures were in conformity with WTO rules.
The DSB agreed to establish the panel. The following members reserved their third-party rights to participate in the panel proceedings: China, India, Japan, Korea, Ukraine and the United States.
DS576: Qatar – Certain measures concerning goods from the United Arab Emirates
The United Arab Emirates submitted its first request for a panel to examine Qatar’s measures relating to importing, stocking, distribution, marketing or sale of goods from the UAE. Consultations with Qatar failed to resolve the matter, the UAE said. It was of the view that Qatar applied these measures to unilaterally retaliate against the UAE, Bahrain, Egypt and Saudi Arabia, which had each taken measures to protect essential security interests.
The UAE said Qatar’s retaliation contravenes WTO rules and Qatar should instead have waited for a ruling on a related dispute. The UAE also noted that Qatar had indicated that its measures were taken for the purpose of consumer protection, but considered that such an objective would not require Qatar to discriminate against the UAE; it also argued that less trade restrictive alternatives were available to Qatar.
Qatar said it was surprised that the UAE had abruptly terminated consultations. Qatar is not limiting access to its markets and the situation traders face stems from UAE’s own measures prohibiting the movement of goods, it said. Qatar remains open for business to all WTO members and adheres to its international obligations, pointing out that it has continued to provide 30% of the UAE’s energy needs. All measures mentioned in UAE’s panel request do not exist or have ceased to exist, Qatar said. It thus objected to the establishment of a panel. Qatar also condemned the UAE’s failure to engage in consultations in DS526, noting that it had done so in good faith in connection with this dispute.
Bahrain, Egypt and Yemen supported the UAE’s request for a panel.
The DSB took note of the statements made and agreed to revert to the matter.
DS490, DS496: Indonesia – Safeguard on certain iron or steel products
Indonesia reported at the meeting its compliance with the August 2018 Appellate Body rulings on its disputed safeguard measure on imports of certain flat-rolled iron or steel products. Indonesia said it had adopted a Finance ministry regulation on 22 March 2019 revoking the safeguard duty by 28 March 2019. Chinese Taipei and Viet Nam, who were the complainants in the disputes, said they appreciated Indonesia’s efforts.
Seven members (EU, Canada, Mexico, China, Brazil, Guatemala, and Chinese Taipei) then took the floor to express regret that the parties to the dispute had to resort to an arrangement where they agreed early on in the dispute proceedings not to appeal the panel ruling if there were not enough AB members left by the time the report was issued. This is in light of the current impasse over the filling of AB vacancies.
The EU said that while they recognized the prerogative of parties to forgo their right to an appeal, it found it regrettable that the current crisis in AB member appointments made members feel compelled to sign such agreements. Such a solution is suboptimal, the EU said. Other members echoed this sentiment, welcoming the cooperation shown by the parties to the dispute but regretting that they had felt it necessary to enter into such an arrangement. They called for a resolution to the impasse, noting that they appreciated the chair’s ongoing consultation process.
Appellate Body appointments
Mexico, speaking on behalf of 75 members (Morocco and the Central African Republic have now joined the group, Mexico said), introduced once again the group’s proposal to start the selection processes for four vacancies in the Appellate Body. Mexico said the considerable number of members submitting the proposal reflects a common concern over the current situation in the AB that is seriously affecting its workings as well as the workings of the overall dispute settlement system against the best interest of members. WTO members have a responsibility to safeguard and preserve the AB, the dispute settlement system, and the multilateral trading system, Mexico said.
Fifteen other members (Colombia, Guatemala, China, Norway, Uruguay, Morocco, Australia, Cuba, New Zealand, Chinese Taipei, Japan, Switzerland, Brazil, Jamaica and the Philippines) took the floor to also express concern over the impasse in the selection process.
The United States, however, said it was still not in the position to support the proposal and that its concerns previously identified remain unaddressed. It reiterated concerns over the AB’s alleged overreach, disregard for deadlines, and authorization of AB members to decide appeals even after their term of office has expired. The US will continue to insist that WTO rules be followed and will continue efforts and discussions to seek a solution, it said.
The DSB Chair, Ambassador David Walker (New Zealand), said the informal process to overcome the impasse is ongoing and that he would deliver a progress report at the General Council meeting on 7 May.
Surveillance of implementation
Eight items were again addressed under this agenda heading, where members have the opportunity to report on their efforts to comply with earlier WTO rulings. Interventions were similar to those made in previous meetings.
The US presented status reports with regard to DS184, “US — Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan”, DS160, “United States — Section 110(5) of US Copyright Act”, DS464, “United States — Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea”, DS471, “United States — Certain Methodologies and their Application to Anti-Dumping Proceedings Involving China” and DS488, “US — Anti-Dumping Measures on Certain Oil Country Tubular Goods from Korea”.
On DS488, the US said its Commerce department has now commenced a proceeding to consider a determination that would be necessary to bring the anti-dumping investigation in this dispute into conformity with the DSB ruling. Korea said it urges the US to faithfully implement the ruling by the agreed extended deadline of 12 July 2019.
The European Union presented status reports with regard to DS291, “EC — Measures Affecting the Approval and Marketing of Biotech Products”.
Indonesia presented its status reports in DS484, “Indonesia — Measures Concerning the Importation of Chicken Meat and Chicken Products”, and DS477 and DS478, “Indonesia — Importation of Horticultural Products, Animals and Animal Products”.
For the agenda items concerning the US Continued Dumping and Subsidy Offset Act of 2000 and the EU’s measures affecting trade in large civil aircraft, interventions were also generally the same as those in previous meetings.
Under a separate agenda item, the DSB agreed to Norway’s proposal to add names to the indicative list of panellists.
Next meeting
The next meeting of the DSB is scheduled for 28 May.
Source: wto.org
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