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Cablegate: Dispute Settlement Body

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 05 GENEVA 002425

SIPDIS

PASS USTR FOR ALLGEIER, FIELD, DWOSKIN, BRINZA, HIRSH
EB/OT FOR CRAFT
USDA FOR FAS/ITP/SHEIHK, MTND/HENKE, FAA/SE/WILSON
USDOC FOR ITA/JACOBS

E.O. 12958: N/A
TAGS: EAGR ETRD WTRO
SUBJECT: DISPUTE SETTLEMENT BODY


1. SUMMARY: At its meeting on September 27, 2005, the WTO
Dispute Settlement Body ("DSB") heard statements regarding
the status of implementation from the United States in
United States - Section 211 Omnibus Appropriations Act of
1998; United States - Anti-Dumping Measures on Certain Hot-
Rolled Steel Products from Japan; United States - Continued
Dumping and Subsidy Offset Act of 2000; and United States -
Section 110(5) of the US Copyright Act of 2000. The DSB
heard statements from Australia, Brazil, and Thailand in
European Communities - Export Subsidies on Sugar, adopted
the panel report in United States - Countervailing Measures
Concerning Certain Products from the European Communities:
Recourse to Article 21.5 of the DSU by the European
Communities, and adopted the panel and Appellate Body
reports in European Communities - Customs Classification of
Frozen Boneless Chicken Cuts. The DSB also approved the re-
appointment of Messrs. Baptista, Lockhart, and Sacerdoti as
members of the Appellate Body. END SUMMARY.

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2. The WTO Dispute Settlement Body met at 10 am on
September 27, 2005, under the chairmanship of Ambassador
Eirik Glenne (Norway) to consider the following agenda
items:

(1) Surveillance of Implementation of Recommendations
Adopted by the DSB

A. United States - Section 211 Omnibus
Appropriations Act of 1998
(WT/DS176/11/ADD.35)

B. United States - Anti-Dumping Measures on
Certain Hot-Rolled Steel Products from Japan
(WT/DS184/15/ADD.35)

C. United States - Continued Dumping and
Subsidy Offset Act of 2
(WT/DS217/16/ADD.20 -
WT/DS234/24/ADD.20)

D. United States - Section 110(5) of the U.S.
Copyright Act (WT/DS160/24/1DD.10)

(2) European Communities - Export Subsidies on Sugar:
Implementation of DSB Recommendations and Rulings

A. Communication from Australia, Brazil and
Thailand (WT/DS265/32 - WT/DS266/32 -
WT/DS283/13)

(3) United States - Countervailing Measures
Concerning Certain Products from the European
Communities: Recourse to Article 21.5 of the DSU
by the European Communities

A. Report of the Panel (WT/DS212/RW)

(4) European Communities - Customs Classification of
Frozen Boneless Chicken Cuts

A. Report of the Appellate Body (WT/DS269/AB/R-
WT/DS286/AB/R) and Reports of the Panel
(WT/DS269/R; WT/DS286/R)

(5) Appointment of Appellate Body Members

3. The agenda was adopted without amendment. The United
States intervened on items 1, 3, and 4, per instructions
(summarized below). The complete text of all U.S.
statements can be found on the website of the U.S. Mission
in Geneva, us.mission.ch/press2005.html
(1) Surveillance of Implementation of Recommendations
Adopted by the DSB

A. United States - Section 211 Omnibus
Appropriations Act of 1998

4. The United States noted that several legislative
proposals relating to Section 211 have been introduced in
the current U.S. Congress and said that it is working with
the U.S. Congress to implement the DSB's recommendations and
rulings. Regarding the EC's statements at the last DSB
meeting, the U.S. failed to understand how its commitment to
implement the DSB recommendations and rulings in this
dispute and its efforts to comply could undermine the
"authority" of the TRIPS Agreement. To the contrary, these
affirm Members' commitments to the TRIPS Agreement.

5. The European Communities noted that there are two
disputes on the agenda for the present meeting in which the
U.S. has failed to comply with its TRIPS Agreement
obligations within the reasonable period of time for doing
so. As a main sponsor of that Agreement, the U.S.
unwillingness to comply undermines the authority of that
agreement. Adoption of one of the four bills to repeal
Section 211, which are pending before Congress, would
resolve this dispute.

6. Cuba said that the June 30 agreement between the U.S.
and EC in this dispute is a "shameful cave-in" on the part
of the EC which allows the U.S. to continue to violate its
WTO obligations by applying Section 211. It called on the
DSB to end its "complacent toleration of this flagrant lack
of compliance" by the U.S. and encouraged the U.S. to repeal
Section 211.

7. China regretted that the U.S.-EC agreement did not
contain a deadline for implementation. Implementation would
be to the U.S. benefit. It applauded the U.S.
implementation in the 1916 Act dispute and urged the U.S. to
use that momentum to bring its remaining WTO-inconsistent
measures into conformity.

8. Canada said that as the aim of dispute settlement
system is to secure a positive solution to a dispute that is
mutually acceptable to the parties (DSU Article 3.7), Cuba's
reference to the U.S.-EC agreement as "shameful" is a
departure from how that system is conceived. If Cuba
considers that it has legitimate rights in this dispute, it
can initiate a dispute on its own.

9. Cuba replied that it was not challenging the right of
the parties to enter into an agreement no matter how
shameful. The U.S.-EC agreement was concluded behind closed
doors and without consultations. Cuba is aware of its
rights.

10. The DSB took note of the statements and agreed to
revert to this matter at its next meeting.

B. United States - Anti-Dumping Measures on
Certain Hot-Rolled Steel Products from Japan

11. The United States noted that as of November 23, 2002,
U.S. authorities had addressed the DSB's recommendations and
rulings regarding the calculation of anti-dumping margins at
issue in this dispute. It said that legislation has been
introduced in the current U.S. Congress that would implement
the remaining DSB recommendations and rulings with respect
to the U.S. antidumping statute and that the House Ways and
Means Committee is currently reviewing public comments on
H.R. 2473 which it requested to be submitted by September 2.
The U.S. Administration is working with Congress on the
timely passage of such legislation.

12. Japan recalled that it has reserved its rights under
DSU Article 22.2 and encouraged the U.S. to comply with its
WTO obligations.

13. The DSB took note of the statements and agreed to
revert to this matter at its next meeting.

C. United States - Continued Dumping and
Subsidy Offset Act of 2000

14. The United States said that the U.S. Administration
proposed the repeal of the Continued Dumping and Subsidy
Offset Act (CDSOA) in its budget proposal for FY2006 and
that legislation that would repeal the CDSOA was introduced
in the U.S. House of Representatives. The Ways and Means
Committee is reviewing public comments on whether to include
that legislation in a broader trade bill and, on September
9, an amendment to appropriations legislation was filed in
the U.S. Senate which would prohibit the distribution of
CDSOA funds unless they are not otherwise inconsistent with
U.S. WTO obligations. The United States will work with the
U.S. Congress on legislation that would repeal the CDSOA and
will confer with the complaining parties to reach mutually
satisfactory solutions.

15. The European Communities recalled various recent
Congressional initiatives with respect to the CDSOA and
encouraged its repeal without delay.

16. Canada regretted that the retaliatory measures imposed
by various Members were necessary so close to the Hong Kong
Ministerial. It urged the passage of H.R. 1121 and welcomed
an explanation of the amendment to Appropriations
Legislation H.R. 2862.

17. Japan said that the proposed amendment to the U.S.
Appropriations Legislation could have been a significant
step, but understood that it was not introduced in the
Senate. Recalling that along with Canada, the EC, and
Mexico, it is imposing retaliatory measures on the U.S., it
called for a prompt repeal of the CDSOA.

18. Brazil said that the U.S. has shown no real progress on
its implementation of the DSB's recommendations and rulings
in this dispute and asked for an elaboration of the U.S.
next steps with respect to the September 9 amendment.

19. The DSB took note of the statements and agreed to
revert to this matter at its next meeting.
D. United States - Section 110(5) of the U.S.
Copyright

20. The United States noted that it will work with the U.S.
Congress and confer with the EC to reach a mutually
satisfactory resolution of this matter. Noting it strong
record of intellectual property rights protection, and other
items on the agenda, the U.S. said that the EC was not in a
position to "lecture" other Members about agreements being
"one-way".

21. The European Communities replied that the U.S. was the
only Member on the agenda which has twice failed to comply
with its TRIPS Agreement obligations within the reasonable
period of time established to do so; this was res ipsa
loquitur. The U.S. is doing little if anything to address
the issue of "substandard" IP protection in the copyright
field. The self-proclaimed champion of IPRs seems
"impotent" to live up to its TRIPS obligations. The EC
recalled that should the U.S. not work to resolve this
matter it has reserved its right to reactivate arbitration
on retaliation.

22. The DSB took note of the statements and agreed to
revert to this matter at its next meeting.

(2) European Communities - European Subsidies on
Sugar: Implementation of the DSB Recommendation and
Rulings

A. Communications from Australia, Brazil and
Thailand

23. Australia recalled that while the DSB recommendations
and rulings in this dispute require the EC to reduce its
sugar exports, the EC's declassification of quota sugar to C
sugar, which occurred during the implementation period, will
actually increase EC sugar exports. An implementation
period does not serve as a "license to unilaterally waive"
or an "open season for the non-application of" WTO
obligations during that period. The EC's actions, if
replicated, would undermine the security and predictability
of the WTO dispute settlement system and could destabilize
the world sugar market. Declassification is harmful, rather
than necessary or conducive, to implementation.

24. Brazil reiterated that EC's obligations to reduce its
sugar exports and stated that the EC's decision to
declassify will have the opposite effect. This action is in
breach of Articles 3.3 and 21.1 of the DSU, Article XVI:4 of
the Marakesh Agreement, and the principle of good faith.
The RPT was not a carte blanche for the implementing Member.
Referring to the agriculture negotiations, it noted the
negative signal sent by the EC less than three months from
the Hong Kong Ministerial.

25. Thailand stated that the EC's declassification decision
increases its sugar exports (already in excess of levels
permitted by the WTO) in the face of DSB recommendations and
rulings requiring a decrease, which in turn will adversely
affect world sugar prices. The EC's action runs counter to
its obligation to begin to implement the DSB's
recommendations and rulings.

26. The European Communities stated that an "ambitious"
proposal entailing a comprehensive reform of the EC sugar
regime is currently being discussed in the EC Council and
Parliament. Until the new regime is in place, the EC must
apply its existing rules which include requirements on the
declassification of quota sugar. While noting that its
efforts to comply with the DSB's recommendations and rulings
are underway, the EC insisted on a reasonable period of time
to do so. As defined by the DSU, implementation during that
period is a legislative process involving the elimination of
legal flaws and, in the present dispute, does not require a
gradual reduction of WTO-inconsistent sugar exports to zero.
Until the legislative process is complete, the old legal
rules continue to apply.

27. The DSB took note of the statements.

(3) United States - Countervailing Measures
Concerning Certain Products from the European
Communities: Recourse to Article 21.5 of the DSU
by the European Communities

A. Report of the Panel (WT/DS212/RW)
28. The European Communities discussed various aspects of
the report, noting in particular the panel's finding that in
a sunset review process involving privatization information,
the investigating authority is obliged under the SCM
Agreement to examine whether the privatization was at arm's
length and fair market value. Likewise, investigating
authorities must take account of all the evidence placed on
its record in making its determination of likelihood of
continuation or recurrence of subsidization. Refusal to
consider new evidence is inconsistent with Article 21.3 of
the SCM Agreement. The EC did not, however, agree with the
panel's findings with respect to "measures taken to comply"
and privatization analyses being based on the companies as a
whole. The EC requested the adoption of the report.

29. The United States welcomed the panel's findings that:
(1) certain shares in a French company at issue were not
privatized at arm's length or for fair market value; and (2)
investigating authorities need not reconsider the likelihood
of continuation or recurrence of injury merely because the
DSB's recommendations and rulings require reconsideration of
the likelihood of continuation or recurrence of
subsidization. It questioned the panel's findings regarding
the UK and Spanish reviews as they pertained to the
application of the U.S. privatization analysis. With
respect to the UK review, it did not agree with the panel's
finding that the U.S. should have considered certain
evidence that was presented to it for the first time during
the implementation of the DSB's recommendations and rulings.
With these exceptions, the panel report was overall very
positive and well-reasoned.

30. The DSB took note of the statements and adopted the
panel report.

(4) European Communities - Customs Classification of
Frozen Boneless Chicken Cuts

A. Report of the Appellate Body and Reports of
the Panel

31. Brazil and Thailand commented on the report and called
on the EC to implement immediately. Thailand also noted
that the panel and Appellate Body reports demonstrate that
"the rule-based multilateral trading system works - and
works well - for developing countries."

32. The European Communities said that while the Appellate
Body accepted several of the EC's criticisms of the panel
report, the Appellate Body ignored a number of the EC's
arguments as well. The EC did not support either the
Appellate Body's explanation of the structure of Chapter 2
of the Harmonized System or its findings on the object and
purpose under Article 31(1) of the Vienna Convention on the
Law of Treaties. It found the Appellate Body's reasoning
with regard to classification practice equally unpersuasive.
Although the EC was satisfied with the Appellate Body's
interpretation of the term "subsequent practice" found in
Article 31(3)(b) of the Vienna Convention, that
interpretation was undermined by the Appellate Body's
application of Article 32 of the Convention. For these
reasons, the EC could not support the adoption of this
report.

33. Japan commented on paragraph 199 of the Appellate Body
report, noting that the Appellate Body's interpretation of
Article 31(2)(a) of the Vienna Convention was unnecessary
with respect to its deliberations on whether the Harmonized
System was context for the purpose of analyzing the EC's
schedule of tariff concessions.

34. The United States considered several aspects of the
panel and appellate Body reports to be well-reasoned,
agreeing with the panel's and Appellate Body's conclusions
that two measures that post-dated the panel request were not
within the panel's terms of reference. It also appreciated
the Appellate Body's approach on: (1) whether the EC's
classification practice in this dispute could by itself
constitute "subsequent practice" for the purposes of an
analysis of context, as set forth in Article 31(3)(b) of the
Vienna Convention; (2) whether classification practice and
other acts of Members might be relevant for a panel's
analysis in other ways, as supplementary means of
interpretation under Article 32 of the Vienna Convention;
and (3) whether and how panels should consider judgments of
the domestic courts of a Member. However, the United
States found some of the discussion concerning "object and
purpose" troubling, particularly the suggestion that panels
could consider the object and purpose of individual treaty
provisions, and the suggestion that "security and
predictability" was itself an object and purpose of the WTO.

35. The DSB took note of the statements and adopted the
panel and Appellate Body reports.

(5) Appointment of Appellate Body Members

A. Decision by the DSB on the Reappointment of
Appellate Body Members

36. Citing DSU Article 17.2, the Chairman said that Messrs.
Baptista, Lockhart, and Sacerdoti had been appointed in
December 2001 and that their terms would expire in December
2005. Having held consultations with Members over the past
months, he noted that no delegation had objected to their
continued membership and proposed that the DSB agree to
their re-appointment.

37. Brazil thanked the chairman for his work on the re-
appointment process and noted the general support for, and
continued confidence in, these three Appellate Body members.

38. The Chairman proposed, and the DSB agreed, to reappoint
Messrs. Baptista, Lockhart, and Sacerdoti each to a second
four-year term as members of the Appellate Body.

39. Next meeting: The chair announced that the next regular
meeting of the DSB would take place on Tuesday, October 18,
2005. The deadline for inscribing items on the agenda will
be on Thursday, October 6. The airgram will be issued on
Friday, October 7.

SHARK

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