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WTO NEWS: 2001 NEWS ITEMS

Dispute Settlement Body 19 January 2001
EU threatens action on US goods after safeguard found to violate rules

The WTO Dispute Settlement Body on 19 January 2001 adopted the panel and Appellate Body reports on the US safeguard measure on wheat gluten imports from the EU (Case DS166). The EU said it now has the right to act against US corn gluten in response — but under provisions of the Safeguards Agreement, not the dispute settlement procedure.

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Disputes in the WTO
Appellate Body and panel reports in case DS166

  

NOTE:
This summary has been prepared by the WTO Secretariat’s Information and Media Relations Division to help public understanding about developments in WTO disputes. It is not a legal interpretation of the issues, and it is not intended as a complete account of the issues. These can be found in the reports themselves and in the minutes of the Dispute Settlement Body’s meetings.



Case DS166: Appellate Body and panel reports on “United States — definitive safeguard measures on imports of wheat gluten from the European Communities” Back to top
Case brought by the EU, with Australia, Canada and New Zealand claiming third party rights

The Dispute Settlement Body (DSB) adopted the Appellate Body report and the panel report as modified by the Appellate Body in this case.

  
The ruling and discussion

Briefly, the ruling adopted by the DSB is that the US’s safeguard measure — a quantitative restriction imposed on 1 June 1998 on wheat gluten from the EU — is inconsistent with the WTO Safeguards Agreement. There are also a number of complicated legal issues discussed in both reports, involving interpretation of the Safeguards Agreement and whether the US correctly followed various procedures and took into account appropriate facts when it decided to impose the safeguard measure.

The EU welcomed the ruling, and urged the US to repeal the measure immediately

In the meeting, a number of legal and procedural issues were discussed. These included:

  • How to show cause and effect. The Appellate Body reversed the panel’s finding on how government authorities should demonstrate that a surge in imports is the “genuine and substantial” cause of injury or threat of injury to domestic industry, particularly as in this case there can be other causes apart from a surge in imports. Some countries said this leaves the situation unclear, providing investigating authorities with too much room to manoeuvre. They suggested the Appellate Body should clear this up in future rulings. Some members said it should only be up to the members, and not the panels or Appellate Body to clarify what is required.
  • How to treat imports from a fellow-member of a free-trade area. In their reports, the panel and Appellate Body had said it was wrong (under Art. 2.1 of the Safeguards Agreement) for the US to have included imports from all sources in the investigation of injury, and then to exclude imports from fellow-members of the North American Free Trade Agreement (NAFTA) in the resulting safeguard measure.

    In the discussion in the DSB, some countries welcomed this. The US, Canada and Mexico observed that the Appellate Body did not say anything about the overall principle of excluding fellow-members of a free trade agreement from a safeguard investigation and the resulting measure.
  • Whether panels should apply “judicial economy”. One of the panel’s rulings, which the Appellate Body agreed with, was to exercise “judicial economy”, in other words once the US had been found to violate WTO agreements in certain significant ways, there was no need to continue to examine whether other complaints were also valid.

    A number of countries complained that this left some grey areas unclarified.

The proposed retaliation

The US expressed concern that — based on the Appellate Body report — the EU had already announced that it would shortly impose a retaliatory restriction on imports of corn gluten feed from the US under Article 8.2 of the Safeguards Agreement.

The US said it believed that the EU’s action would not be consistent with that article. Even though the EU had notified the Goods Council of its intention to suspend concessions (i.e. retaliate) on US corn gluten, the EU had failed to ensure that the Goods Council did not disapprove of the suspension as required by the article, the US said.

The EU said it has the right to restrict imports of US corn gluten immediately, now that the US measure is has been found to violate the agreement.

Since it had notified the proposed restriction in July 1998 to the Goods Council and since the US had not raised any objection, therefore the Goods Council had not disapproved and therefore the restriction would be legal, the EU said

Background: Action under Article 8.2 of the Safeguards Agreement is separate from sanctions imposed under the Dispute Settlement Understanding. The Safeguards Agreement speaks of ensuring that “a substantially equivalent level of concessions and other obligations” is maintained when one country takes safeguard action against imports from other countries.

Normally, after a safeguard action has been taken (which means that part of a negotiated deal on access to the market has been reduced or withdrawn temporarily) the two sides should negotiate a way of maintaining the original balance struck in the deal. If they cannot reach agreement, the countries whose exports are reduced by the safeguard action, can announce reciprocal action as compensation provided certain procedures are followed.

The reciprocal action normally has to be delayed for three years, unless, for example, the original safeguard is found to violate the Safeguard Agreement. However, this action cannot be taken if the Goods Council disapproves it.

On 29 July 1998 the EU notified the WTO Goods Council that it was preparing to restrict corn (maize) gluten imports from the US.

  
  
Case DS199: Brazil — measures affecting patent protection  Back to top
US request for a panel to be established

TBrazil objected to the panel’s establishment. Since this was the first request in this case, the request was rejected because it did not receive the necessary consensus support.

In this case, the US complains about provisions of Brazil’s 1996 industrial property law (Law No. 9,279 of 14 May 1996; effective May 1997) and other related measures. These, the US says, require “local working”, i.e. local production, of the patented invention as a condition for enjoying exclusive patent rights. Imported patented inventions would not enjoy these rights, the US says, and therefore the measure discriminates against US owners of patents registered in Brazil when the products are imported into Brazil and not locally produced there.

More specifically, according to the US complaint, “a patent shall be subject to compulsory licensing if the subject matter of the patent is not ‘worked’ in the territory of Brazil. Specifically, a compulsory license shall be granted on a patent if the patented product is not manufactured in Brazil or if the patented process is not used in Brazil. In addition, if a patent owner chooses to exploit the patent through importation rather than ‘local working,’ then Article 68 [of the Brazilian law] will allow others to import either the patented product or the product obtained from the patented process.”

The US started proceedings on 30 May 2000 by calling for consultations, as is required under the WTO Dispute Settlement Understanding. On 16 June 2000, the EU asked to join consultations on this case because it has a substantial trade interest in it.

In the meeting, Brazil said it totally disagrees with the US view and expressed confidence that its law conforms with the WTO intellectual property (TRIPS) agreement.

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