Panels established to review US renewable energy measures and Russian transit restrictions
The Dispute Settlement Body (DSB) agreed on 21 March to the establishment of two new dispute panels: one to review a complaint filed by India regarding certain measures at the state level in the United States to promote renewable energy; and the second to review Ukraine’s complaint regarding restrictions on goods in transit through the Russian Federation.
DS510: United States — Certain measures relating to the renewable energy sector (DS510)
India said it was disappointed that its concerns in the dispute were being presented by the US as political retaliation to the findings of the DSB in DS456. India denied these assertions and noted that it had been raising its concerns in this matter in the WTO’s Committee on Trade-Related Investment Measures (TRIMs) and Committee on Subsidies and Countervailing Measures (SCM Committee) before the US had requested the establishment of a panel in DS456. India also noted that, in the past, its renewable energy equipment exports to the US had been rendered commercially unviable due, in part, to measures maintained by the US.
India reiterated that each of the programmes referred to in its panel request offered subsidies which were contingent on domestic content requirements and were inconsistent with the SCM Agreement, the General Agreement on Tariffs and Trade (GATT) 1994 and the TRIMs Agreement. India therefore requested the establishment of a panel for the second time.
The United States reiterated its position that India had launched the dispute as a response to its successful challenge in DS456 and noted that Article 3.10 of the Dispute Settlement Understanding (DSU) required that complaints and counter-complaints “should not be linked”. The US also noted that the measures identified in India’s panel request would have virtually no effect on commerce due to the low level of Indian exports of renewable energy equipment to the US. The US said that, while it questioned whether the case was an appropriate use of the WTO’s dispute settlement resources, it stood ready to defend its measures before the panel.
The DSB agreed to establish a panel. Brazil, China, Chinese Taipei, the European Union, Indonesia, Japan, Korea, Norway, the Russian Federation, Singapore and Turkey reserved their third party rights to participate in the panel proceedings.
DS512: Russia — Measures concerning traffic in transit
Ukraine reiterated its concerns over the measures imposed by the Russian Federation that prohibited or otherwise restricted traffic in transit from Ukraine, through Russia, to third countries. All the measures had had detrimental economic consequences on Ukraine and were inconsistent with both the GATT 1994 and Russia’s Accession Protocol. Consultations had been held on 10 November 2016 but had failed to settle the dispute. As such, Ukraine requested the establishment of a panel, for the second time, to examine its complaint.
The Russian Federation said that it was disappointed with Ukraine’s decision to request the establishment of a panel for a second time and with Ukraine’s failure to assess whether the case would be fruitful. Russia reaffirmed its continuing respect for WTO rules and its accession commitments, and said that it stood ready to defend its rights under the WTO.
The DSB agreed to establish a panel. Brazil, Canada, China, the European Union, India, Japan, Korea, Norway, Paraguay, Singapore, Turkey and the United States reserved their third party rights to participate in the panel proceedings.
DS516: European Union — Measures related to price comparison methodologies
China recalled that, under paragraph 15(a) of its 2001 Protocol of Accession, it had agreed to certain, China-specific, treaty provisions which would be applied for a transitional period of 15 years. These provisions allowed importing members, subject to certain conditions, to depart from generally applicable WTO rules in the determination of certain elements of “price comparability” in anti-dumping proceedings involving Chinese imports. The EU had made use of these provisions, China noted. Chinese imports had been denied the relatively advantageous treatment under Articles 2(1) — 2(6) of the EU Basic Anti-Dumping Regulation (“Basic Regulation”). Rather, they were subject to the less-favourable rules set out under Article 2(7) of the Basic Regulation, unless Chinese producers could show that “market economy” conditions prevailed in the manufacture and sale of the like product concerned.
China noted that the 15 year transitional period had come to an end on 11 December 2016. As such, Chinese exporters were entitled to receive the same treatment as exporters from other WTO members. Despite this, the EU continued to apply the less-favourable Article 2(7) of the Basic Regulation to imports from China. China was concerned that these measures were inconsistent with the GATT 1994 and the WTO’s Anti-Dumping Agreement. Consultations held with the EU on 23 January 2017 had failed to resolve the dispute. As such, China requested, for the first time, the establishment of a panel.
The European Union said it regretted China’s decision to request the establishment of a panel. Article 2(7) of the Basic Regulation was currently the subject of a legislative process which could result in its withdrawal. As such, China’s request was premature, incapable of being fruitful, and an inappropriate use of the strained resources of the dispute settlement system. The EU particularly regretted what it saw as an attempt to interfere in the internal legislative process of the EU. The EU also noted China’s “thinly veiled and self-serving attempt” to maintain an unlawful short-cut between the current dispute, as it related to Article 2(7) of the Basic Regulation, and the unknown outcome of the legislative process. If China wished to challenge the resulting provisions of the EU’s legislative process it would be obliged to follow the procedures set out in the DSU for that purpose.
Upon receipt of China’s request for consultations, the EU had informed China that no consultations could be held with regard to, as yet, non-existent measures. China had not objected to the EU’s clarifications or delimitation of the scope of the consultations, and now China had to accept the consequences of its actions and omissions. The EU called on China to respect the DSU, withdraw the panel request, or, at least, eliminate the procedural defects in its consultation request and panel request. The EU objected to the establishment of a panel.
The United States said it supported the right of the EU and other members to use non-market economy methodology in anti-dumping proceedings involving China. On China’s accession, members had agreed that Chinese prices and costs could be rejected, and non-market methodology used, so long as China remained a non-market economy. China’s argument that the EU had to cease using non-market economy methodology had no legal merit and failed to take into account the remaining provisions of China’s Protocol of Accession. China’s government continued to intervene heavily in its economy, resulting in distortions of the international trading system. China’s belief that it could use the dispute settlement system to take away tools members had under the WTO to address China’s distortions was wrong. The WTO dispute settlement system could not take away the rights of WTO members. If China wished to discuss the rules allowing members to treat China as a non-market economy then China should explain how it would eliminate the distortions its policies were causing.
The US, commenting on China’s “attempt to bring an EU draft measure into the dispute”, said it was inappropriate for WTO panels or the Appellate Body to offer speculative findings on draft measures. The US said there was no reason for China to move forward with this dispute.
Japan said it supported the EU and US respective positions in this dispute and shared their concerns. In particular Japan was of the view that the WTO Agreement, including China’s Accession Protocol, continued to allow members to use methodology not based on a strict comparison with domestic prices or costs in China.
China said that paragraph 12 of its panel request expressly included within its scope “any modification, replacement or amendment to the measures identified above, and any closely connected, subsequent measures”. The footnote to this paragraph further clarified that China was aware of two legislative processes implicating potential changes to relevant provisions of the Basic Regulation and that the panel request included “any changes made to the Basic Regulation pursuant to the legislative processes”.
Following the EU’s objections, the DSB deferred the establishment of the panel.
DS518: India — Certain measures on imports of iron and steel products
Japan said that, since 14 September 2015, India had been maintaining WTO-inconsistent safeguard measures on imports of iron and steel products from Japan. These had compromised the commercial interests of Japanese exporters and producers.
Japan considered the measures to be inconsistent with the GATT 1994 and the WTO’s Agreement on Safeguards. As Japan had set out in its panel request, India had failed to provide reasoned and adequate findings in its determination of unforeseen developments; the alleged increased imports; the alleged serious injury or threat thereof to the domestic industry; and the alleged causal link between increased imports and the serious injury or threat thereof. India had also failed to observe several notification and consultation requirements under Article 12 of the Agreement on Safeguards. Consultations, held on 6-7 February 2017, had failed to resolve the dispute. As such, Japan requested the establishment of a panel with standard terms of reference. Japan also expressed its hope that the panel would be established as a matter of urgency.
India said that it was disappointed with Japan’s decision to request the establishment of a panel. India had demonstrated to Japan, during consultations, how the safeguard measures at issue were WTO-consistent. The duration of India’s safeguard measures were for a shorter period than that provided for under the Safeguards Agreement. Over time, international trading operations were becoming more complicated; this led to difficulties for investigating authorities to follow a fixed pattern in each case. As a result, differences persisted between the investigating country and the exporting country on the application of the provisions of the Safeguard Agreement in specific instances. India considered that such issues were better resolved on a bilateral basis. India objected to the establishment of a panel.
Following India’s objections, the DSB deferred the establishment of the panel.
Adoption of panel and Appellate Body reports
DS475: Russian Federation — Measures on the importation of live pigs, pork and other pig products from the European Union
The European Union said it welcomed the adoption of the panel and Appellate Body reports in DS475 which would hopefully put an end to Russian bans on live pigs, pork and certain pig products from the EU. The bans were implemented due to an outbreak of African swine fever in four EU member states in 2014. Russia had not only blocked trade from the affected areas but from the entire EU. The panel had found that the EU-wide ban did not conform to international standards, was not based upon a risk assessment and was more trade restrictive than necessary to protect animal health. The Appellate Body had confirmed that the EU had objectively demonstrated that there were areas within the EU that were disease-free and were likely to remain so — and that Russia had not adapted its sanitary and phytosanitary (SPS) measures accordingly. The Appellate Body had also brought some useful clarifications to Article 6.2 of the WTO’s SPS Agreement by pointing out that a merely “abstract” recognition of the concept of regionalism in the domestic legal framework was insufficient, as such, to claim consistency, in all cases, with the obligations in Article 6.2. The EU urged Russia to bring itself into compliance with its WTO obligations.
The Russian Federation noted that the Appellate Body had agreed that it was the importing member — and not the panel — who had to ultimately determine whether an area was disease-free. This determination had to be made pursuant to the second sentence of Article 6.2 of the SPS Agreement and not Article 6.3. This assessment required a reasonable period of time which was not contingent on meeting the conditions under Article 5.7 of the SPS Agreement. The Appellate Body had also clarified that it was not compulsory to assess the existence of, or likelihood of, disease-free areas as part of an Article 5.1 risk assessment.
Russia said it was concerned that the Appellate Body’s interpretation of Article 6.3 of the SPS Agreement appeared to have reduced the scope of the provision to a means of collecting information without any substantive implications. Russia said that, in its view, the Appellate Body had not struck a balance between Russia’s Accession Protocol and the rights and obligations set out in the covered agreements.
The DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body.
Statements on implementation
The EU, Brazil, Canada and China made statements regarding US implementation of DS217 and DS234, “US — Continued Dumping and Subsidy Offset Act of 2000”.
The United States made a statement regarding China’s implementation of DS413, “China — Certain Measures Affecting Electronic Payment Services”.
Surveillance of implementation
The United States presented its status reports with regard to DS184, “US — Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan” and DS160, “US — Section 110(5) of the US Copyright Act”. The EU presented its status report with regard to DS291, “EC — Measures Affecting the Approval and Marketing of Biotech Products”.
2017 Appellate Body selection process
The DSB chairman recalled that at the 25 January 2017 DSB meeting he had reminded delegations that the second four-year term of Mr Ricardo Ramírez Hernández would expire on 30 June 2017, and the second four-year term of Mr Peter Van den Bossche would expire on 11 December 2017. Pursuant to Article 17.2 of the DSU they were not eligible for reappointment and the DSB would have to initiate work to appoint two new Appellate Body members. At the January meeting, he also outlined two possible approaches to fill the upcoming vacancies. Following the January DSB meeting, he had consulted with members on the alternative approaches he had mentioned. Several delegations supported one single selection process.
However, two delegations expressed a preference for undertaking two independent processes. One delegation suggested that the DSB could initiate a first selection process to fill the vacancy that would expire in June 2017 and that more time should be given to decide on when to launch a second process to fill the second vacancy. It was however his understanding that those delegations supporting one single selection process would only agree to two independent processes if the work on both could be completed before the summer break or if there was prior clarity on the process and timing of both.
At the 20 February 2017 DSB meeting he had indicated his intention to consult with delegations with a view to submitting a proposal to the DSB in March on the procedural steps and the possible timetable for launching the process or processes. The chairman reported that he had indeed consulted with several delegations on these matters but, unfortunately, it had not been possible to come to an agreement on the way forward. Therefore, the chair’s consultations would have to continue. The chairman had already briefed his successor on this matter who would be taking over the chairmanship of the DSB and would continue the process of consultations in order to find a way forward.
A number of delegations took the floor to express their concerns about the impact of the current lack of consensus on the dispute system and urged members to be pragmatic in finding a solution to this issue.
Report on the dispute settlement workload
The Chair provided an update on the Appellate Body’s workload, on the number of disputes in the panel queue and at the panel composition stage, and matters referred to arbitration.
New DSB Chairman
The DSB elected, by acclamation, Ambassador Junichi Ihara (Japan) as its new chairman for 2017.
Next DSB meeting
The next meeting of the DSB will take place on 19 April 2017