World Trade Organization: Standard of Review and Impact of Trade
Remedy Rulings (30-JUL-03, GAO-03-824).
World Trade Organization (WTO) members rely on trade remedies in
the form of duties or other import restrictions to protect their
industries from injury due to unfair foreign trade practices or
unexpected import surges. There is congressional concern that the
WTO, created in 1995 to administer trade rules, is interfering
with this ability. There is also congressional concern that the
WTO is not treating the United States fairly in resolving trade
remedy disputes. A congressional requester asked GAO to identify
trends in WTO trade remedy disputes since 1995, including the
outcomes of these disputes and how they affected members' ability
to impose trade remedies. The requester also asked GAO to discuss
the standards of review that the WTO applies when ruling on trade
remedy disputes and to present U.S. agencies' and legal experts'
views on the WTO's application of these standards and related
trade remedy issues. In their comments on a draft of this report,
the Department of Commerce and the U.S. International Trade
Commission stated that the report needed to put more emphasis on
U.S. agencies' concerns about the potential adverse impact of WTO
rulings on the U.S.'s use of trade remedies. The U.S. Trade
Representative provided only technical comments on the report.
GAO modified the report as appropriate.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-824
ACCNO: A07769
TITLE: World Trade Organization: Standard of Review and Impact
of Trade Remedy Rulings
DATE: 07/30/2003
SUBJECT: Dispute settlement
Foreign trade agreements
International agreements
International organizations
International trade
International trade regulation
Foreign trade policies
******************************************************************
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GAO-03-824
A
Letter
July 30, 2003 The Honorable Max Baucus Ranking Minority Member Committee
on Finance United States Senate Dear Senator Baucus: The World Trade
Organization (WTO) provides the institutional framework for the
multilateral trading system. Established in January 1995, the WTO
administers rules of international trade and provides a forum for
conducting trade negotiations. In addition, the WTO has a dispute
settlement system with panels and an Appellate Body that provides a
multilateral forum for resolving trade disputes among WTO members. A
dispute arises when one WTO member believes another member has violated a
WTO agreement and initiates a dispute settlement proceeding through the
WTO.
Many disputes in recent years have pertained to WTO members* use of trade
remedy measures. Members impose trade remedies in the form of duties or
import restrictions after determining that a domestic industry has been
injured or threatened with injury by imports. Specifically, member
governments impose antidumping or countervailing duties 1 when they find
that imports are priced at less than normal value, 2 or benefit from a
foreign subsidy, and that such imports injure their domestic industry.
Similarly, members impose safeguard measures 3 after finding that import
surges have
seriously injured or threatened serious injury to domestic industry. The
WTO permits its 146 members to impose such trade remedy measures but
requires them to follow certain rules before doing so, as set forth in
various
1 Antidumping or countervailing measures take the form of increased duties
on imports. Dumping is generally considered to be the sale of a commodity
in a foreign market at a lower price than its normal value. WTO rules
allow for the imposition of antidumping duties, or fees, to offset
dumping. Countervailing duties are special customs duties imposed to
offset subsidies provided on the manufacture, production, or export of a
particular good. Subsidies essentially lower a producer*s costs or
increase its revenues.
2 For the purposes of this report, we use the term *normal value* to mean
home market value. Normal value is also sometimes referred to as *fair
market value.* 3 A safeguard is a temporary import control or other trade
restriction that a WTO member imposes to prevent serious injury to
domestic industry caused by increased imports.
WTO agreements. 4 Domestic agencies usually make a number of *domestic
agency determinations.* 5 When a trade measure is challenged in the WTO
dispute settlement system and a dispute settlement panel is established,
the panel reviews the domestic agency determinations supporting the
measure to determine whether they are consistent with the relevant WTO
agreements. In addition to cases challenging WTO members* domestic
determinations to impose specific trade remedy measures, WTO members
sometimes directly challenge other members* trade remedy laws.
Over the past several years, Congress has raised concerns that some WTO
panel and Appellate Body rulings have adversely affected the U. S. *s
ability to impose trade remedy measures. For example, in the Trade Act of
2002, 6 Congress voiced concern about certain WTO rulings on trade
remedies,
including how the WTO has applied standard of review* that is, how the WTO
evaluates and defers to the factual and legal determinations of WTO
members* domestic agencies. In addition, some Members of Congress are
concerned that some WTO rulings have created new obligations for WTO
members beyond those found in the WTO agreements. For example, a Senate
report accompanying the Trade Act of 2002 stated that WTO panels and the
Appellate Body have substantially rewritten part of the WTO Agreement on
Subsidies and Countervailing Measures in ways that are disadvantageous to
the United States. 7 Accordingly, you asked us to conduct a review of WTO
dispute settlement
activity during the past 8 years, focusing on trade remedy disputes.
Specifically, in this report we (1) identified the major trends in WTO
dispute settlement activity concerning trade remedies; (2) analyzed the
4 The relevant WTO agreements for trade remedy determinations are the
Antidumping Agreement, the Agreement on Subsidies and Countervailing
Measures, the Safeguards Agreement, and parts of the General Agreement on
Tariffs and Trade 1994 (GATT 1994).
5 Throughout this report, we use the term *domestic agency determination*
to refer to a finding by a domestic agency leading to a decision to impose
one or more trade remedy measures. An example of this would be a domestic
agency finding in a safeguards case that a product is being imported in
such increased quantities as to cause or threaten to cause serious injury
to a domestic industry.
6 Public Law No. 107- 210, S: 2101, 116 Stat. 933, 993. 7 S. Rep. No. 107-
139, at 6- 7 (2002).
outcome of WTO rulings in completed trade remedy cases; 8 (3) assessed the
major impacts of these rulings on WTO members* laws, regulations,
practices, and measures 9 and on members* ability to impose trade
remedies; (4) identified the standards of review for trade remedy cases
and Appellate Body guidance on how the standards should be applied; and
(5)
summarized legal experts* views and U. S. agencies* positions on standard
of review and other trade remedy issues.
To address these objectives, we created a database using WTO data on
dispute settlement complaints filed from 1995 through 2002; reviewed WTO
and U. S. government documents; and interviewed U. S., WTO, and European
Union (EU) officials. In addition, we reviewed WTO panel and Appellate
Body reports in the 25 completed trade remedy cases through 2002. Finally,
we interviewed 18 U. S. and foreign legal experts, including
practitioners, academics, and advisors on WTO- related trade remedy
issues. Appendix I contains a full description of our scope and
methodology, and appendix II contains summaries of the 25 completed trade
remedy cases. Appendix III contains the names and affiliations of the 18
legal experts we interviewed. Appendixes IV and V contain agency comments
and our responses. Appendix VI identifies the major contributors to this
report.
Results in Brief Of the 198 cases filed in the WTO from 1995 through 2002,
one- third (64) challenged members* trade remedies, and the ratio of trade
remedy cases
filed versus other types of cases generally has increased over time. The
United States was by far the most frequent defendant in trade remedy
cases, acting as defendant in 30 of the 64 challenges, with 17 of those 30
cases filed since January 2000. In contrast, the EU had only 5 trade
remedy cases filed against it. On the other hand, the United States was
less active in
filing complaints against other WTO members. For example, the United
States filed only 5 of the 64 trade remedy cases, while the EU filed 16
such cases. Overall, WTO members challenged a small proportion of trade
measures imposed. Of the 1,405 trade measures that members notified the
8 *Completed* refers to those cases in which the WTO Dispute Settlement
Body has adopted a panel or Appellate Body report as of December 31, 2002.
9 We define *measures* broadly to include orders calling for antidumping
or countervailing duties or some type of safeguard action. For the
purposes of this report, the term *measure* does not include members*
laws, regulations, or practices.
WTO that they imposed from 1995 through 2002, WTO members challenged only
63 (4 percent) in the WTO dispute settlement system. The United States
imposed the most measures (239) and had the highest proportion of its
measures (12 percent) challenged, whereas the next biggest trade remedy
users had fewer of their measures challenged. For example, India
had none of its 226 measures challenged, while the EU had 4 of its 182
measures challenged. According to U. S. agency officials, one reason that
the United States has been a defendant more often than a complainant in
trade remedy cases is that the United States has the world*s biggest
economy and most desirable market.
In the 25 trade remedy cases completed from 1995 through 2002, the WTO
generally did not uphold WTO members* domestic determinations to impose
trade remedy measures but upheld a higher proportion of members* trade
remedy laws that were challenged. In 17 of the 21 cases involving a total
of 175 WTO findings 10 on domestic determinations, 11 the WTO rejected 50
percent or more of the agencies* determinations as not complying with WTO
agreements, rejecting all determinations in 5 of those cases. Overall, the
WTO rejected about the same percentage of the U. S. and non- U. S.
agency determinations in the 21 cases, 57 percent and 56 percent, 10 To
analyze WTO findings about domestic determinations, for the most part we
reviewed the concluding sections of panel and Appellate Body reports. When
several findings were included within a single paragraph in the concluding
section, we generally counted each finding separately. In the several
instances in which concluding sections of panel reports did not clearly
indicate these findings, we obtained our numbers by evaluating the full
reports.
11 Four cases did not involve WTO findings on domestic agency
determinations* 3 challenged only statutes, and 1 was found to be not
properly before the WTO. Although the Appellate Body ruled that another
case was not properly before the panel, the panel ruled on a number of
antidumping issues involving determinations of a domestic agency.
respectively. 12 In 9 of the 25 cases, there were 13 challenges to trade
remedy laws, all of which were U. S. laws. The WTO upheld U. S. trade
remedy laws in 11 of the 13 challenges and rejected U. S. laws in 2
challenges.
WTO rulings in the 25 completed cases we examined have not required
numerous changes to members* laws, regulations, and practices but have
resulted in the revision or removal of a number of trade remedy measures
that members imposed. As a result of the 14 cases in which the United
States was a defendant, two U. S. laws, one regulation, and three
practices were changed or are subject to change. In addition, the rulings
in 9 of those cases necessitated the onetime revision to, or removal of,
21 U. S. trade measures. However, WTO trade remedy rulings resulted in
fewer changes to the laws, regulations, practices, and measures of other
WTO members. Specifically, no foreign laws or regulations were affected,
and only one foreign practice was changed, in the 11 cases in which other
WTO members were defendants. In addition, only 7 foreign trade measures
were subject to
revision or removal. 13 U. S. officials told us that the trade remedy
rulings have not significantly impaired their ability to impose trade
remedies to date. However, they were concerned about the potential for
rulings to have a greater adverse impact in the future. For example, these
officials cited the possible negative ramifications of WTO rulings in the
privatization and EU bed linen cases. U. S. officials also said that some
WTO safeguard rulings have been extremely difficult to implement. For
instance, some safeguard rulings have placed a greater burden on domestic
agencies to establish a clearer link between increased imports and serious
injury to domestic industry. In addition, U. S. officials said that the
rulings have required U. S. agencies to provide more detailed explanations
of their analyses and
procedures for applying their methodologies in trade remedy
investigations. 12 These data, however, do not distinguish domestic agency
determinations on the basis of their importance. Thus, these
determinations ranged in importance from whether domestic agencies
established the proper link between dumped imports and injury to domestic
industry to whether the agency followed proper procedures in providing
public notice of its proceedings. Furthermore, panels and the Appellate
Body addressed the same issues in a
number of cases. See appendix I for a further discussion of the
methodological limitations on these data.
13 We relied primarily on the WTO and U. S. agencies for information about
foreign laws, regulations, practices, and measures. For the most part, we
did not obtain information from foreign governments on these matters.
The WTO uses two principal standards of review to evaluate the factual and
legal determinations of WTO member domestic agencies in trade remedy
cases* article 11 of the WTO Dispute Settlement Understanding and article
17.6 of the WTO Antidumping Agreement. Article 11 applies to all cases
brought under the WTO dispute settlement system and requires that panels
make an objective assessment of the factual and legal determinations of
WTO member domestic agencies. The Appellate Body has found that in
applying article 11, panels are not to conduct a new review of domestic
agency fact- findings nor totally defer to them. Article 17.6 applies only
to antidumping cases and is more specific and deferential than article 11.
For factual review, article 17. 6 requires panels to determine whether
domestic agencies have properly established the facts and evaluated them
in an unbiased and objective manner, and, if the agencies have done so, it
does not allow panels to overturn the agencies* determinations. For legal
review, article 17. 6 requires panels to interpret the Antidumping
Agreement by applying established international rules for interpreting
treaties and international agreements. 14 When a panel finds more than one
permissible interpretation of the Antidumping Agreement, and one of them
is consistent with a domestic agency*s determination, article 17. 6
requires the panel to uphold the agency*s determination. The Appellate
Body has concluded that panels should apply article 17.6 in a certain
order: first, apply international rules of interpretation; and then,
consider whether to uphold the domestic agency*s determination. The
Appellate Body has found that panels have generally interpreted and
applied both standards of review
correctly in the relatively few instances where standard of review was
specifically an issue in a case. Finally, the panels and the Appellate
Body discussed the standards of review in most of the trade remedy cases,
but the extent of that discussion varied by trade remedy area, case, and
issue.
The most common concern raised by legal experts with whom we spoke,
although a minority view, related to the way in which the WTO has applied
article 17. 6 to evaluate legal determinations of domestic agencies. For
example, some experts believed that Appellate Body guidance to apply
international rules of treaty interpretation first has resulted in panels*
improperly rejecting domestic agency interpretations because, in the
experts* view, these rules necessarily lead to only one interpretation.
The experts contended that this tendency to find one interpretation made
panels less likely to consider alternative domestic agency
interpretations.
14 Principally, these are articles 31 and 32 of the Vienna Convention on
the Law of Treaties, U. N. Doc. A/ CONF. 39/ 27 (May 23, 1969).
Some experts also stated that the panels and the Appellate Body have not
applied article 17.6 in as deferential a manner as the United States
intended. Overall, however, a majority of the experts with whom we spoke
indicated that the WTO had not exceeded its authority in applying the
standards of review, and that the WTO had treated its members the same in
trade remedy cases. A majority of experts also said that the WTO has not
added new obligations or diminished WTO members* rights in these cases;
however, a significant minority of experts strongly disagreed with these
views. Finally, many experts considered some of the WTO rulings on
safeguards to be unclear and difficult to implement, particularly
regarding
how agencies should link increased imports and serious injury to domestic
industry. The U. S. agencies most involved in trade remedy activities said
that the WTO has improperly applied article 17.6( ii) in some trade remedy
cases, mainly because it has not applied the article in a way that allows
for upholding permissible interpretations of WTO members* domestic
agencies. These agencies also said that in certain trade remedy cases, the
WTO has found obligations and imposed restrictions on WTO members
that are not supported by the texts of the WTO trade remedy agreements.
Background The 1994 Uruguay Round agreements created the WTO dispute
settlement
system. The new system replaced the one under the General Agreement on
Tariffs and Trade (GATT), the predecessor to the WTO. The Uruguay Round
created a stronger dispute settlement system that, unlike the system under
the GATT, discourages stalemates by not allowing parties to block
decisions. In addition, the new system established a standing Appellate
Body, with the aim of making decisions more stable and predictable.
The WTO dispute settlement system operates in four major phases:
consultation, panel review, Appellate Body review (when a party appeals
the panel ruling), and implementation of the ruling. To initiate, or file,
a dispute, a WTO member requests consultations with the defending member.
If the parties do not settle the case during consultations, the
complainant may then request that a panel be established. Nonpermanent,
three- person panels issue formal decisions, or reports, for cases that
are appealed; three members of a permanent, seven- member Appellate Body*
comprised of individuals with recognized standing in the field of law and
international trade* review panel findings. The Dispute Settlement Body,
which is comprised of representatives of all WTO members, approves all
final reports, and only a consensus of the members can block decisions.
Thus, no individual member can block a decision.
When a WTO member challenges a trade remedy measure, the panels and the
Appellate Body apply standards of review, outlined in certain WTO
agreements, to evaluate members* factual and legal determinations
supporting these measures. In the United States, the Department of
Commerce and the International Trade Commission (ITC) investigate whether
the United States should impose antidumping or countervailing
duties to offset unfair foreign trade practices. The ITC also investigates
whether the conditions exist for the United States to invoke safeguards in
response to import surges.
Trade Remedy Cases From 1995 through 2002, WTO members brought 198 formal
dispute
settlement cases against other members. 15 One- third (64 cases) involved
Increased Over Time,
members* trade remedies, and the ratio of trade remedy cases filed, versus
but Few Measures
all other types, generally increased over the time period. Among WTO Were
Challenged
members, the United States has been by far the most frequent defendant in
trade remedy cases but relatively less active in filing complaints.
Overall, however, WTO members have challenged a relatively small share of
the trade measures that their fellow members imposed, although the
proportion of U. S. trade measures challenged was larger. About One- third
of All Cases
Overall, about one- third (64) of all WTO cases involved members* trade
Involved Trade Remedies, remedies. From 1995 to 2000, an increasing
proportion of the cases filed and Ratio Increased Over pertained to trade
remedy measures and laws, as shown in figure 1. In 2001 Time and 2002,
there was somewhat of a shift in this trend. 15 These 198 cases originated
from 276 separate requests for consultation or filings* the first of the
four phases in the dispute settlement process. For the purposes of our
analysis, we
combined multiple requests for consultation regarding the same measure or
law into a single case. For instance, nine WTO members requested
consultations regarding the steel safeguard that the United States imposed
in March 2002; we counted this as one case, because all of the requests
for consultation pertained to the same measure.
Figure 1: Total Number of WTO Cases Versus Trade Remedy Cases Filed per
Year, 1995- 2002
United States Has Been the In comparing WTO members* participation in the
trade remedy cases, the
Most Frequent Defendant, United States by far has been the most frequent
defendant but less active as
but Less Active as a a complainant. As shown in figure 2, the United
States was a defendant in
Complainant 30 (47 percent) of the 64 trade remedy cases, a majority of
which were filed
since January 2000. The next most frequent defendants were Argentina,
which defended 6 cases, and the EU, a defendant in 5 cases. On the other
hand, the United States was less active than other WTO members in filing
trade remedy cases. As figure 2 also shows, the EU was the most frequent
complainant in the 64 trade remedy cases, filing 16 complaints. Six WTO
members each filed more complaints than the United States.
Figure 2: Most Frequent Complainants and Defendants in WTO Trade Remedy
Cases, 1995- 2002
U. S. agency officials said that it was not surprising that the United
States had been a defendant more often than a complainant in WTO disputes
since (1) the United States has the world*s biggest economy and most
desirable market and (2) U. S. laws and procedures are more detailed and
transparent than those of other members that are large users of trade
remedies. These officials also pointed to the easy availability in the
United States of trade lawyers, who could assist in bringing trade remedy
actions, as another factor.
Few Imposed Measures Although members notified the WTO that they imposed
1,405 trade remedy Were Challenged, but U. S. measures from 1995 through
2002, only a small percentage of these
Measures Were Challenged measures were challenged in the dispute
settlement system. Specifically, Most
WTO members challenged only 63 (4 percent) of the 1,405 measures, but
nearly one- half of these challenges involved U. S. trade measures. Over
the same period, as shown in figure 3, the United States imposed the most
trade remedy measures (239) and had the biggest number and share (29, or
12 percent) of its measures challenged by other WTO members. On the other
hand, India, the next biggest user of trade remedy measures, had none of
its 226 measures challenged. WTO members challenged 4 (2 percent) of the
EU*s 182 trade remedy measures and 7 (6 percent) of
Argentina*s 127 trade remedy measures.
Figure 3: Total Number of WTO Trade Remedy Measures Imposed and Number
Challenged, by Most Frequent Trade Remedy Users, 1995- 2002
Notes: Data on trade remedy measures imposed are the most recent available
from the WTO and are through December 2002.
Challenges to WTO members* sunset reviews are not included in these
figures. Sunset reviews are domestic agency reviews of whether to
terminate antidumping or countervailing duties after a certain period,
usually 5 years. The duties are terminated unless the authorities
determine, in a review, that the duties* elimination would likely lead to
a continuation or recurrence of dumping or subsidies and injury.
Domestic While the 25 WTO trade remedy rulings completed from 1995 through
2002 Determinations
generally rejected domestic agency determinations supporting trade
measures, the rulings upheld a vast majority of the trade remedy laws that
Generally Were
were challenged. The WTO rejected at least half of the domestic agency
Rejected, but Statutes
determinations in most of the 21 cases dealing with such determinations.
Were Upheld The WTO also rejected roughly the same proportion of U. S. and
non- U. S.
domestic determinations. The 21 rulings addressed issues ranging from
whether domestic agencies adequately justified imposing a trade remedy
measure to whether WTO members followed proper procedures in initiating
the disputes. Regarding WTO rulings on members* laws, only U. S.
laws were challenged during the period. The WTO upheld more than
threequarters of the U. S. laws challenged in 9 cases involving 13
challenges.
WTO Rejected Majority of The WTO made findings on a total of 175 domestic
agency determinations Domestic Determinations;
in 21 of the 25 trade remedy cases completed through 2002. As shown in U.
S./ Non- U. S. Rejection
figure 4, in 17 of the 21 cases the panels rejected 50 percent or more of
the Ratios Were Similar
domestic agency*s determinations* rejecting all determinations in 5 cases.
In all 21 cases, the WTO found at least one aspect of a measure to be
inconsistent with WTO requirements.
Figure 4: Number of Findings on Domestic Agency Determinations and
Percentage of Those Determinations Rejected by the WTO in 21 Completed
Trade Remedy Cases, 1995- 2002
Note: The WTO findings on domestic determinations range in importance from
how well the domestic agency justified imposing the trade remedy by
adequately establishing a causal link between the increased imports and
injury to domestic industry to whether the domestic agency followed proper
procedures by providing public notice of the initiation of its antidumping
investigation.
When comparing rulings among WTO members on domestic determinations, the
United States and other WTO members fared similarly. Overall, as shown in
figure 5, the WTO rejected almost the same proportion of the U. S. *s and
other WTO members* domestic determinations* 57 percent and 56 percent,
respectively.
Figure 5: Number (Percent) of Domestic Agency Determinations Upheld and
Rejected by the WTO, the United States Versus Other Members, in Completed
Trade Remedy Cases, 1995- 2002
All WTO Challenges to Although to date WTO members have challenged only U.
S. laws, the WTO
Trade Remedy Laws upheld a large majority of these laws. As shown in table
1, in the 13
Involved U. S. Laws, but instances (in 9 cases), in which WTO members
directly challenged U. S.
laws, the WTO upheld U. S. laws in 11 challenges and rejected U. S. laws
in 2 Most Laws Were Upheld
challenges. 16 16 In the 13 challenges to U. S. law, 3 were cases
challenging only laws, while 10 involved both laws and domestic agency
determinations.
Table 1: U. S. Trade Remedy Laws Challenged in WTO Dispute Settlement,
1995- 2002 Ruling Law challenged WTO dispute settlement case outcome
Sections 733( e) and United States * Antidumping Measures
Law upheld 735( a)( 3) of the Tariff Act of
on Certain Hot- Rolled Steel Products 1930
from Japan (DS 184) Section 771( 7)( c)( iv) of the
United States * Antidumping Measures Law upheld Tariff Act of 1930 on
Certain Hot- Rolled Steel Products
from Japan (DS 184) Sections 776( a) and 782( d)
United States * Antidumping and Law upheld and (e) of the Tariff Act of
Countervailing Measures on Steel Plate 1930
from India (DS 206) Section 751( b) of the Tariff
United States * Antidumping Duty on Law upheld Act of 1930 and
Dynamic Random Access Memory accompanying regulations Semiconductors
(DRAMS) of One Megabyte or Above Originating from Korea (DS 99)
Section 751( c)( 2) of the United States * Countervailing Duties on
Law upheld Tariff Act of 1930 Certain Corrosion- Resistant Carbon
Steel Flat Products from Germany (DS 213)
Sections 751( c)( 1)( A) and United States * Countervailing Duties on Law
upheld 752( b) of the Tariff Act of
Certain Corrosion- Resistant Carbon 1930
Steel Flat Products from Germany (DS 213)
Section 752( b)( 4)( B) of the United States * Countervailing Duties on
Law upheld Tariff Act of 1930 Certain Corrosion- Resistant Carbon
Steel Flat Products from Germany (DS 213)
Section 771( 5)( F) of the United States * Countervailing Measures Law
upheld Tariff Act of 1930 Concerning Certain Products from the
European Communities (DS 212) Sections 777A( e)( 2)( A) and
United States * Preliminary Law upheld (B) of the Tariff Act of 1930
Determinations With Respect to Certain and accompanying Softwood Lumber
from Canada (DS 236) regulations
Section 129( c)( 1) of the United States * Section 129( c)( 1) of the
Law upheld Uruguay Round Agreements
Uruguay Round Agreements Act (DS Act
221) Section 771( 5)( B)( iii) of the United States * Measures Treating
Law upheld Tariff Act of 1930 Export Restraints as Subsidies (DS 194)
Section 735( c)( 5)( A) of the
United States * Antidumping Measures Law rejected Tariff Act of 1930 on
Certain Hot- Rolled Steel Products
from Japan (DS 184) Section 801 of the Revenue
United States * Antidumping Act of 1916 Law rejected Act of 1916 a (DS
136/ 162)
Legend: DRAMS dynamic random access memory semiconductors URAA Uruguay
Round Agreements Act Source: GAO analysis of WTO panel and Appellate Body
reports. a The official name of the law is section 801 of the Revenue Act
of 1916; however, for purposes of this
report, we use the name of the law that the WTO used* the Antidumping Act
of 1916.
Addressing why only U. S. trade remedy laws were challenged, a U. S.
agency official said that U. S. laws tend to be more vulnerable because
they are more detailed than those of other members, and their language is
not
the same as the language in the WTO agreements. In contrast, according to
the official, some WTO members essentially take the language in the
relevant WTO agreement and make it their law. Rulings Resulted in
The 25 WTO trade remedy rulings completed from 1995 through 2002 did not
result in many changes to WTO members* laws, regulations, or Few Changes
to
practices. 17 However, the rulings more often resulted in the onetime
Members* Laws,
revision to, or removal of, trade remedy measures. The rulings affected a
Regulations, and
number of U. S. laws, regulations, practices, and measures; but for other
Practices but Caused
WTO members, no laws or regulations were affected, and only one practice
was subject to change. Furthermore, fewer foreign trade measures were
Numerous Changes to subject to removal or revision. Nonetheless, U. S.
officials told us that the
U. S. Measures rulings to date had not significantly impaired their
ability to impose trade
remedies. However, they told us they were concerned about the potential
for rulings to have a greater adverse impact in the future. In addition,
U. S. agencies said that, with few exceptions, the rulings did not
question U. S. methodologies for determining whether to impose remedies
but have
required them to provide fuller explanations and justifications for their
decisions.
Rulings Caused Few WTO rulings resulted in a small number of changes to
members* laws,
Changes to Members* Laws, regulations, and practices, with all but one of
those changes involving U. S. Regulations, or Practices
trade remedies. In the 14 completed trade remedy cases in which the United
States was the defendant, two U. S. laws, one regulation, and three
practices were changed or are subject to change, as shown in table 2. In
the 11 cases involving other WTO members, only one practice was subject to
change. 17 *Practices* refer to WTO members* uncodified methodologies and
procedures in investigating injury to domestic industry and in determining
the appropriate trade remedy measures, according to Commerce Department
officials.
Table 2: Impact of WTO Rulings on Members* Laws, Regulations, Practices,
and Measures, 1995- 2002
Measures Laws
Regulations Practices subject to subject to
subject to subject to
revision or Defendants
change change
change removal
United States 2 1 3 21 Other WTO members 0 0 1 7 Source: GAO analysis of
compliance action documents filed with the WTO by members, plus
information from U. S. agencies. Notes: The 21 U. S. measures were subject
to revision or removal in 9 cases. While 7 of those cases each involved 1
measure, 2 cases involved more than 1 measure* 1 case involved 12 measures
and 1 case involved 2 measures.
In 2 cases, WTO members technically removed the relevant measures in
response to other judicial bodies that made similar rulings to the WTO:
one case was in direct response to a North American Free Trade Agreement
(NAFTA) panel ruling, and the other was in response to U. S. domestic
litigation (see app. II, case summaries 7 and 9).
Specifically, the two U. S. laws subject to change are a section of the
Antidumping Act of 1916 and a section of the Tariff Act of 1930 18
involving calculation of the *all others* rate. 19 In the 1916 Antidumping
Act case, the WTO found the U. S. law to be in violation of GATT 1994 and
the WTO Antidumping Agreement because it authorized imposing fines,
imprisonment, and recovery of damages in response to the dumping of
products in the U. S. market* remedies that are not provided for in those
agreements. Both the U. S. Senate and the House of Representatives have
introduced legislation to repeal the 1916 Act. 20 The proposed change to
the Tariff Act of 1930 involves making calculation of the *all others*
rate consistent with the WTO Antidumping Agreement. The WTO granted the
United States until the end of December 2003 to comply, but so far
Congress has not addressed this change.
18 Sections 735( c)( 5) of the Tariff Act of 1930, codified at 19 U. S. C.
S: 1673d( c)( 5). 19 The *all others* rate is the rate used to calculate
antidumping duties for exporters and producers who are not individually
investigated. 20 While the House bill (H. R. 1073), introduced on March 4,
2003, and one of the Senate bills (S. 1155), introduced on May 23, 2003,
explicitly state that the repeal would not affect pending cases, another
Senate bill (S. 1080), introduced on May 19, 2003, would apply to any
pending cases on the date of enactment.
The one change to a U. S. regulation stemmed from a case involving U. S.
antidumping duties imposed on imports of Korean dynamic random access
memory semiconductors (DRAMS). To implement the ruling, the United States
replaced its regulatory standard for revoking an antidumping order* that
dumping was *not likely* to occur* with the standard in the WTO
Antidumping Agreement* that *continued imposition of the antidumping duty
is necessary to offset dumping.*
The three changes to U. S. practices involved a revision of the
*arm*slength* 21 methodology in antidumping cases and two privatization
methodologies that the Commerce Department used in countervailing duty
cases to calculate the extent to which the benefit of past subsidies are
passed on to private purchasers of state- owned enterprises. 22 The United
States revised its *arms- length* methodology to conform to the WTO
Antidumping Agreement by expanding the scope of sales to an affiliated
business that could be considered to be made in the ordinary course of
trade. Commerce revised its countervailing duty methodology to conform to
the Appellate Body*s first privatization decision, but the Appellate Body
later ruled that the revised methodology was also inconsistent with the
Subsidies and Countervailing Measures Agreement. Commerce revised its
methodology a second time 23 to reflect the Appellate Body*s finding that
an arm*s- length, fair market value sale of a subsidized, state- owned
entity to a private buyer creates a presumption that the privatized entity
no longer benefits from past subsidies. 21 The *arm*s- length* methodology
involves determining whether home market sales by an
exporter to an affiliated party are made at arm*s length, that is, in the
ordinary course of trade. 22 The privatization cases concern the issue of
whether past subsidies provided to a stateowned enterprise continue to
benefit the enterprise after it is sold to a private buyer. The two
relevant U. S. methodologies are commonly referred to as the *gamma* and
*same person* methodologies and are described by the Appellate Body in
paragraphs 12- 16 of
United States* Countervailing Measures Concerning Certain Products from
the European Communities, WT/ DS212/ AB/ R (see case summary 22 in app.
II). The U. S. Court of Appeals for the Federal Circuit rejected the gamma
methodology in Delverde, SRL v. United States, 202 F. 3d 1360, 1362- 63
(Fed. Cir. 2000). This occurred before the WTO
Appellate Body ruled in the first WTO privatization case* United States*
Imposition of Countervailing Duties on Certain Hot- Rolled Lead and
Bismuth Carbon Steel Products Originating in the United Kingdom, WT/
DS138/ AB/ R (see case summary 9 in app. II).
23 The final modification to the U. S. privatization methodology was
published in the Federal Register on June 23, 2003. 68 Fed. Reg. 37125.
Aside from the changes to U. S. laws, regulations, and practices, 1 case
resulted in a change to an EU practice. In that case, 24 the WTO ruled
that the EU*s practice of *zeroing* was not permitted under the WTO
Antidumping Agreement. Zeroing 25 in that case concerned the EU*s changing
negative dumping margins to zero when comparing dumping
margins of different models of like products* for example, comparing
dumping margins of high- end satin sheets with low- end polyester/ cotton
blend sheets.
Rulings Brought about In contrast to the relatively few changes in
members* laws, regulations, and
Increased Removals and practices, most of the rulings in the 25 completed
trade remedy cases 26 Revisions of Specific Trade
involved a case- specific removal or revision of a WTO member*s trade
Measures
remedy measure. More U. S. measures were affected than those of all other
members. In the 14 completed cases brought against the United States, 21
U. S. trade measures were subject to revision or removal, 27 while the 11
completed cases against other countries resulted in 7 trade measures being
subject to revision or removal, as shown in table 2.
24 European Communities* Antidumping Duties on Imports of Cotton- Type Bed
Linen from India, WT/ DS141/ AB/ R (see case summary 10 in app. II). 25
The dumping margin is the amount by which the imported merchandise is sold
below normal value. For example, if the export price is $200 and the
normal value is $220, the dumping margin is $20. This margin is expressed
as a percentage of the export price; in this example, the margin is 10
percent. The term *zeroing* is used to describe designating dumping
margins for non- dumped sales (i. e., sales made above the normal value)
as zero. Thus, if the export price is $220 and the normal value is $200,
the level of dumping (i. e., the amount by which normal value exceeds the
export price) is zero, not negative $20. By zeroing comparisons where the
export price exceeds normal value, dumping margins tend to be higher.
26 Four U. S. cases did not involve domestic agency determinations, and
thus did not concern trade measures; 3 directly challenged laws, and 1 was
found not to be properly before the WTO.
27 The 21 U. S. measures were subject to revision or removal in 9 cases.
While 7 of those cases each involved only 1 measure, 2 cases concerned
more than 1 measure. United States* Countervailing Measures Concerning
Certain Products from the European Communities,
WT/ DS212/ AB/ R, involved 12 measures, and United States* Antidumping
Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and
Strip from Korea, WT/ DS179/ R (see case summary 14 in app. II), concerned
2 measures.
Specifically, the United States reduced antidumping margins on measures in
response to 3 WTO rulings, 28 removed countervailing duty measures in 1
case as a result of domestic litigation, 29 and is revising countervailing
duty measures in 2 other cases. 30 And in 3 cases, the United States
removed, or allowed to expire, safeguard measures that the Appellate Body
found inconsistent with the WTO Safeguards Agreement. 31 By contrast,
other WTO members removed antidumping measures in 3
cases 32 and are due to remove or revise antidumping measures in 2 cases.
33 28 These cases were United States* Antidumping Measures on Stainless
Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea, WT/
DS179/ R; United States* Antidumping Measures on Certain Hot- Rolled Steel
Products from Japan,
WT/ DS184/ AB/ R (see case summary 15 in app. II); and United States*
Antidumping and Countervailing Measures on Steel Plate from India, WT/
DS206/ R (see case summary 19 in app. II).
29 See Delverde, SRL v. United States, 202 F. 3d 1360, 1362- 63 (Fed. Cir.
2000). 30 These cases were United States* Countervailing Duties on Certain
Corrosion- Resistant Carbon Steel Flat Products from Germany, WT/ DS213/
AB/ R (see case summary 23 in app. II), and United States* Countervailing
Measures Concerning Certain Products from the European Communities, WT/
DS212/ AB/ R (see case summary 22 in app. II).
31 These cases were United States* Definitive Safeguard Measures on
Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/ DS202/
AB/ R (see case summary 18 in app. II); United States* Definitive
Safeguard Measures on Imports of Wheat Gluten from the European
Communities, WT/ DS166/ AB/ R (see case summary 12 in app. II); and United
States* Safeguard Measures on Imports of Fresh, Chilled, or Frozen Lamb
Meat from New Zealand and Australia, WT/ DS177/ AB/ R and WT/ DS178/ AB/ R
(see case summary 13 in app.
II). 32 The cases were Guatemala* Definitive Antidumping Measures on Grey
Portland Cement from Mexico, WT/ DS156/ R (see case summary 11 in app.
II); Argentina* Definitive Antidumping Measures on Imports of Ceramic
Floor Tiles from Italy, WT/ DS189/ R (see case summary 16 in app. II); and
Mexico* Antidumping Investigation of High- Fructose
Corn Syrup (HFCS) from the United States, WT/ DS132/ R (see case summary 7
in app. II). In the latter case, Mexico actually removed its antidumping
measure pursuant to a panel ruling under the North American Free Trade
Agreement. The WTO panel had made similar rulings and recommendations
regarding Mexico*s compliance with the Antidumping Agreement. 33 These
cases are Egypt* Definitive Antidumping Measures on Steel Rebar from
Turkey, WT/ DS211/ R (see case summary 21 in app. II), and European Union*
Antidumping Duties
on Imports of Cotton- Type Bed Linen from India, WT/ DS141/ AB/ R (see
case summary 10 in app. II).
In addition, other members removed safeguard measures as a result of 2 WTO
rulings. 34 U. S. Officials Are
While U. S. officials told us that WTO trade remedy rulings had not yet
Concerned about the
significantly impaired the U. S. *s fundamental right and ability to use
its Potential Impact of WTO
trade remedies, they are concerned about the rulings* potential to do so
in Rulings on U. S. Ability to
the future. For example, Commerce Department officials said that
implementing the second Appellate Body ruling on privatization may have a
Impose Trade Remedy
substantial impact on similar proceedings in the future as well as
existing Measures
countervailing duty orders. In addition, U. S. officials expressed concern
about the potential negative ramifications of the WTO ruling in the EU bed
linen case. First, U. S. officials said that although the United States
did not change its *zeroing* practice as a result of the ruling against
the EU, they noted that the ruling could affect a current Canadian dispute
against the United States involving U. S. zeroing practices. 35
Furthermore, the EU has recently challenged 21 Commerce Department
antidumping determinations with regard to the U. S. * zeroing practice.
The EU alleged that U. S. application of its zeroing practice is
inconsistent with the WTO Antidumping Agreement and GATT 1994. The EU also
asserted that U. S. laws and regulations providing for this zeroing
practice appear to be inconsistent with those agreements. As shown by this
challenge, U. S. officials believe that when the WTO strikes down a
practice, there is significant potential for WTO members to challenge
similar practices of other members. Accordingly, these officials said they
are monitoring WTO rulings and recommendations in cases not
involving the United States in order to prepare for similar, potential
challenges against the United States.
34 These cases were Argentina* Safeguard Measures on Imports of Footwear,
WT/ DS121/ AB/ R (see case summary 5 in app. II), and Korea* Definitive
Safeguard Measure on Imports of Certain Dairy Products, WT/ DS98/ AB/ R
(see case summary 3 in app. II). 35 According to a Commerce Department
official, the WTO panel is due to issue an interim ruling in a case
involving a final dumping determination on softwood lumber from Canada in
September and a final ruling in December 2003. See United States* Final
Dumping
Determination on Softwood Lumber from Canada, WT/ DS264.
In the safeguards area, U. S. officials indicated that some WTO rulings 36
were confusing and extremely difficult to implement, particularly
regarding certain aspects of causation* the extent to which increases in
imports cause serious injury, or threaten serious injury, to domestic
industry. U. S. officials also said that they have had to increase the
level of detail they
provide in explaining their analyses and how they apply their
methodologies in safeguard investigations. For example, they cited
safeguard rulings dealing with *nonattribution,* an aspect of causation
requiring that injury to domestic industry caused by factors other than
increased imports not be attributed to increased imports. 37 U. S.
officials
said that these rulings could be viewed as calling for domestic agencies
to quantify the amount of injury due to increased imports versus the
amount due to other factors* a task they consider to be difficult, if not
impossible. Moreover, the officials said they would now have to expend
more resources in conducting safeguard investigations.
Two Standards of WTO panels use two standards of review in evaluating the
factual and legal
Review Apply to WTO determinations of WTO members* domestic agencies in
trade remedy cases. Article 11 of the WTO Dispute Settlement Understanding
applies to Trade Remedy Cases
all cases brought under the WTO dispute settlement system and calls for an
objective assessment of domestic agency determinations. The Appellate Body
has stated that in applying article 11, panels should not conduct a new
review of domestic agency fact- finding nor totally defer to domestic
agency determinations. Article 17.6 of the Antidumping Agreement applies
only to antidumping cases and is more specific and deferential than
article 11. Appellate body guidance on article 17.6 calls for panels first
to apply established international rules of treaty interpretation to
interpreting provisions of the Antidumping Agreement before deciding
whether to uphold a domestic agency*s interpretation. In the relatively
few number of instances in which the Appellate Body has considered
standard of review
36 In addition to the safeguard rulings in this study, a WTO panel in July
2003 issued a decision on challenges brought by a number of WTO members
against U. S. safeguards imposed on certain steel products. The panel
found against the United States on unforeseen developments and aspects of
causation, among other issues. See United States* Definitive Safeguard
Measures on Imports of Certain Steel Products, WT/ DS248- 49, 251- 54,
258- 59/ R.
37 The Appellate Body has found, with regard to the issue of
nonattribution, that members must separate and distinguish the injurious
effects of other factors from the injurious effects of increased or dumped
imports to comply, respectively, with article 4.2( b) of the Safeguards
Agreement and article 3.5 of the Antidumping Agreement.
issues, it has found that panels have generally interpreted and applied
both standards of review correctly. Finally, panel and Appellate Body
decisions generally discuss the standards of review, but the extent of the
discussion varies by trade remedy area, case, and issue. WTO Has Two
Principal
The standard of review that WTO panels and the Appellate Body apply in
Standards of Review
WTO dispute settlement cases refers to how they evaluate and defer to the
factual and legal determinations of domestic agencies of WTO members. 38
The two principal standards of review that WTO panels and the Appellate
Body use to evaluate these determinations are article 11 of the WTO
Dispute Settlement Understanding and article 17.6 of the WTO Antidumping
Agreement. 39 Article 11 applies to cases brought under all the WTO
agreements that are covered by the dispute settlement system and
supplements article 17.6 in antidumping cases. Article 17.6 only applies
to
cases brought under the Antidumping Agreement, which is the only WTO
agreement that has a specific standard of review. 40
38 In the 25 trade remedy cases we reviewed, panels and the Appellate Body
also resolved 13 direct challenges to U. S. laws. For many of these
challenges to laws, panels and the Appellate Body did not specifically
mention articles 11 or 17.6 or articulate any other standard of review for
evaluating whether the laws were consistent with WTO obligations.
39 Some experts view article 3.2 of the Dispute Settlement Understanding
as an additional standard of review. Under article 3.2, WTO members
recognize that the dispute settlement system serves both to preserve the
rights and obligations of WTO members under the WTO agreements covered by
dispute settlement and to clarify the provisions of those agreements in
accordance with customary rules of interpretation of public international
law. It also
provides that Dispute Settlement Body recommendations and rulings cannot
add to or diminish the rights and obligations provided in the WTO
agreements. Although panels and the Appellate Body have not specifically
identified article 3.2 as a standard of review, they frequently do refer
to it when interpreting provisions of WTO trade remedy agreements. 40 A
WTO ministerial decision adopted by the Uruguay Round Trade Negotiations
Committee in December 1993 states that the standard of review in article
17.6 *shall be reviewed after three years with a view to considering the
question of whether it is capable of general application.* This has not
been done. In addition, in the WTO countervailing duty case,
United States* Imposition of Countervailing Duties on Certain Hot- Rolled
Lead and Bismuth Carbon Steel Products Originating in the United Kingdom,
WT/ DS138/ AB/ R, the United States argued that article 17. 6 should also
apply to countervailing duty cases brought under the WTO Subsidies and
Countervailing Measures Agreement. Part of the U. S. argument was based on
a WTO ministerial declaration that called for *consistent resolution of
disputes arising from anti- dumping and countervailing duty measures.* The
Appellate
Body, however, rejected this position and found that article 11 was the
appropriate standard of review to apply in these disputes.
Article 11 Calls for an Article 11 obligates a panel to make an *objective
assessment of the matter
Objective Assessment before it, including an objective assessment of the
facts of the case and the
applicability of and conformity with the relevant* WTO agreement. 41 The
Appellate Body has interpreted this requirement to mean that panels should
neither conduct a new review of domestic agency fact- findings,
often referred to as a *de novo review,* nor totally defer to domestic
agency determinations. In rejecting both these extremes, the Appellate
Body has found that the panels are poorly suited to engage in new reviews
and cannot ensure an objective assessment by totally deferring to domestic
agency determinations. What the panels should do in safeguards cases,
according to the Appellate Body, is ascertain whether domestic agencies
have evaluated all relevant facts and provided an adequate, reasoned, and
reasonable explanation about how the facts supported their determinations.
42 Article17.6 Is More Specific
Article 17. 6 is more specific than article 11 and calls for more
deference to and Deferential than Article
domestic agency determinations. Article 17.6 is divided into two subparts*
11
factual and legal* and establishes standards of review for panel
evaluations of domestic agency determinations. Under the factual standard
of review in article 17.6( i), panels must determine whether domestic
agencies have properly established the facts and evaluated them in an
unbiased and objective manner. When a panel finds that the domestic agency
has performed this task, the panel cannot overturn the domestic agency*s
determination even if it might have reached a different conclusion. The
Appellate Body has stated that the panel*s obligation under the factual
standard in article 17. 6( i) closely reflects the obligation imposed on
panels under article 11. 43 Under the legal standard of review in article
17.6( ii), panels must apply
established international rules in interpreting provisions of the WTO
Antidumping Agreement. These rules are set forth in articles 31 and 32 of
41 Article 11 also obligates panels to *make such other findings as will
assist the Dispute Settlement Body in making* recommendations and rulings.
42 See Fresh Lamb Meat from New Zealand and Australia, above, paragraphs
97- 108.
43 In paragraphs 55 and 62 of United States* Antidumping Measures on
Certain Hot- Rolled Steel Products from Japan, WT/ DS184/ AB/ R, the
Appellate Body described the complementary interaction between articles 11
and 17.6, particularly regarding panel review of factual determinations of
domestic agencies.
the Vienna Convention on the Law of Treaties 44 and provide a method for
interpreting provisions of the Antidumping Agreement. When a panel applies
these rules and finds that there is more than one permissible way to
interpret a provision of the Antidumping Agreement, the panel must uphold
the domestic agency*s determination if it is consistent with one of the
permissible interpretations. The Appellate Body*s guidance to panels about
how they are to apply this standard is consistent with the sequence
implied above. Thus, panels should first use the international rules to
interpret the WTO provision in question, and only after completing this
task should panels then decide whether to uphold the domestic agency*s
legal determination. The Appellate Body has stated that application of the
international rules could give rise to at least two permissible
interpretations of some provisions of the Antidumping Agreement. 45
Appellate Body Generally
WTO members did not often challenge panel interpretations and Upheld
Panels* Treatment of
applications of the standards of review, and most challenges involved
Standards, but Treatment
article 11. In most instances, the Appellate Body upheld the panels* Was
Seldom Challenged
treatment of the standards. In the 14 instances in which the Appellate
Body specifically ruled on panel interpretations and applications of
standard of review, it found that the panels had correctly addressed the
standards in 11 instances* 9 involving article 11 and 2 involving article
17.6.
Panels/ Appellate Body As indicated above, panels have the responsibility
for applying the
Discuss Standard of Review standards of review in articles 11 and 17. 6
when evaluating determinations
in Cases, but Extent Varied of WTO member domestic agencies. The Appellate
Body*s function is to
review how panels have interpreted and applied these standards and to
uphold, modify, or reverse panel actions. For the most part, Appellate
Body
44 These provisions call for applying general and supplementary methods to
interpreting provisions of treaties and international agreements. Under
article 31, general rules for interpreting treaty provisions are first
applied, and supplementary methods under article 32 are used to (1)
confirm the meaning resulting from application of article 31 or (2)
determine the meaning when the interpretation under article 31 is
ambiguous or obscure or leads to an unreasonable result.
45 United States* Antidumping Measures on Certain Hot- Rolled Steel
Products from Japan, WT/ DS184/ AB/ R, paragraphs 59- 60. See also,
Thailand* Antidumping Duties on Angles, Shapes, and Sections of Iron or
Non- Alloy Steel and H- Beams from Poland,
WT/ DS/ AB/ R, paragraphs 125- 27 (see case summary 6 in app. II).
decisions in trade remedy cases have included longer and more detailed
discussions of standard of review than the panels. 46 Aside from
differences between the panels and the Appellate Body, the
extent to which standards of review are discussed vary by trade remedy
area, case, and issue. Thus, standards of review are discussed, at least
to some extent, in all safeguard and antidumping cases involving
determinations of domestic agencies but are not mentioned in a number of
countervailing duty cases. In many of the safeguard and antidumping cases,
the panels discuss article 11 or article 17. 6, respectively, at the
beginning of the case, indicating that they are the standards of review to
be applied in evaluating the domestic agency determinations involved,
though the
amount of introductory discussion varies from case to case. The standards
of review are sometimes also discussed, or alluded to, later in panel and
Appellate Body reports in connection with evaluations of particular
domestic agency determinations. These allusions to the standards of review
involve use of language from the standards themselves or interpretations
of the standards rather than any specific mention of them. For example, in
the safeguard cases, panels often invoke Appellate Body
guidance about what kind of domestic agency explanation is necessary* an
*adequate, reasoned, and reasonable explanation** without mentioning
article 11. Similarly, in antidumping cases, panels sometimes refer to the
requirement in article 17.6( i) to conduct an *unbiased and objective*
evaluation of domestic agency fact- finding without specifically
mentioning 17.6( i). Finally, for some issues, panels neither specifically
mention nor allude to standard of review provisions. Expert Views and U.
S.
How the WTO has interpreted and applied the standard of review in trade
Agency Positions on
remedy cases and how it has resolved important trade remedy issues are
highly controversial issues in the United States. Further, a number of
these Standard of Review important trade remedy issues are highly complex,
technical, and not easily
and Other Trade explained, as evidenced by their lengthy treatment in WTO
panel and
Remedy Issues Appellate Body reports. Accordingly, we decided to interview
a wide range
of WTO legal experts to obtain their views on these issues. 46 The
Appellate Body decisions in United States* Safeguard Measures on Imports
of Fresh, Chilled, or Frozen Lamb Meat from New Zealand and Australia, WT/
DS177/ AB/ R, and United States* Antidumping Measures on Certain Hot-
Rolled Steel Products from Japan, WT/ DS184/ AB/ R, contain the most
detailed discussions, respectively, of articles 11 and 17.6.
The most common concern identified by the experts with whom we spoke,
although a minority view, was about how the WTO was applying article 17.6(
ii) in antidumping cases. Notwithstanding this concern, overall a majority
of the experts believed that the WTO had not exceeded its authority in
applying the standard of review in the trade remedy cases we reviewed.
Commenting on more general issues surrounding the WTO trade remedy
rulings, almost all of the experts believed that the United States and
other WTO members have received the same treatment in trade
remedy cases. In addition, a majority of the experts who responded
concluded that WTO decisions generally have not added to obligations or
diminished rights of WTO members and that it was appropriate for the WTO
to interpret vague and ambiguous provisions in WTO agreements, sometimes
referred to as *gap filling.* However, a significant minority of
experts strongly disagreed with this view about WTO members* obligations
and rights and considered gap filling to be inconsistent with several
provisions of the Dispute Settlement Understanding. Regarding specific
rulings, a number of experts cited some safeguard rulings as confusing and
unclear. In contrast to the majority views expressed above, the U. S.
agencies most involved in trade remedy activities believed that article
17. 6( ii) has been improperly applied in some trade remedy cases, mainly
because the WTO has not applied article 17.6( ii) in a way that allows for
upholding permissible interpretations of WTO members* domestic agencies.
They also believed that in certain trade remedy cases, the WTO has found
obligations and imposed restrictions on WTO members that are not supported
by the texts of the WTO trade remedy agreements.
Significant Minority A common concern raised by a significant minority of
experts with whom
Expressed Concerns about we spoke was that the WTO was not properly
applying the legal standard of WTO Application of Article
review in article 17. 6( ii) of the Antidumping Agreement. Specifically,
these 17.6( ii)
experts maintained that Appellate Body guidance calling for panels to
first apply international rules in the Vienna Convention on the Law of
Treaties to interpret provisions of the Antidumping Agreement before they
evaluate the domestic agencies* legal determinations necessarily leads to
only one
interpretation. Consequently, panels never reach the point of applying the
part of article 17.6( ii) that allows for multiple permissible
interpretations and upholding an agency determination that is based on one
of these
interpretations. 47 In fact, while several experts mentioned specific
rulings in which panels or the Appellate Body had upheld domestic agency
determinations as permissible, it was unclear whether this was due to
these bodies going through the article 17.6( ii) analysis or solely
because they agreed with the domestic agency. In this regard, in the trade
remedy cases we reviewed, no expert pointed to a clear instance in which a
panel first applied the Vienna Convention, found several permissible
interpretations, and then upheld the agency determination because it was
consistent with one of them. 48 One expert, who was a former U. S.
negotiator in the Uruguay Round, stated that U. S. negotiators in the
round had not fully appreciated how application of the Vienna Convention
would limit the possibility of panels or the Appellate Body finding
multiple permissible interpretations of the Antidumping Agreement.
Some experts also believed that panels and the Appellate Body have not
applied the legal standard of review in article 17. 6( ii) in the
deferential way intended by the United States, as expressed in the U. S.
Statement of
Administrative Action (SAA) accompanying the U. S. Uruguay Round
Agreements Act. 49 The SAA describes article 17. 6 as a special standard
of review analogous to the deferential standard applied by U. S. courts in
reviewing actions by the Commerce Department and the ITC, commonly 47 Some
of these experts stated that by not applying part of article 17.6( ii),
panels and the Appellate Body are violating the principle that every
provision of a treaty or international agreement should be given effect.
48 In United States* Antidumping Measures on Certain Hot- Rolled Steel
Products from Japan, WT/ DS184/ R, on an issue involving calculation of
normal value, the Appellate Body upheld a U. S. determination as resting
on an interpretation of article 2.1 of the Antidumping Agreement that was,
in principle, permissible *following application of the rules of treaty
interpretation in the Vienna Convention.* Nevertheless, the Appellate Body
did not first set forth several permissible interpretations and then
uphold the United States determination because it was consistent with one
of them. In the April 2003 WTO panel report,
Argentina* Definitive Anti- Dumping Duties on Poultry from Brazil, WT/
DS241/ R, the panel appeared to go further in applying the article 17.6(
ii) process in finding permissible an Argentinean interpretation dealing
with the definition of *domestic industry.*
49 The SAA is an authoritative expression of the United States about the
interpretation and application of the Uruguay Round Agreements and the
Uruguay Round Agreements Act. Public Law No. 103- 465, 108 Stat. 4815,
codified at 19 U. S. C. S:S: 3512( d). H. R. Doc. No. 103- 316, at 818
(Vol. 1 1994).
referred to as the Chevron standard. 50 Thus, from the U. S. perspective,
article 17.6 was intended to ensure that WTO panels neither second- guess
the factual conclusions of domestic agencies, even when panels might have
reached a different conclusion, nor rewrite, under the guise of legal
interpretation, the provisions of the Antidumping Agreement. Majority Said
WTO Did Not Despite the concerns expressed above, the majority of the
experts with Exceed Its Authority in
whom we spoke indicated that the panels and the Appellate Body generally
Applying Standard of
had not exceeded their authority in applying the standards of review in
articles 11 and 17. 6 in the trade remedy cases we reviewed. 51 These
experts Review
indicated that panels and the Appellate Body had properly applied article
11 in safeguards and countervailing duty cases as well as the factual
standard of review in article 17. 6( i) in antidumping cases. Several of
this group even questioned whether article 11 was intended to be a
standard of review provision at all and, if it was, that it did not intend
the same level of
deference as article 17.6. 52 Majority support for how panels and the
Appellate Body applied the legal standard in article 17.6( ii) included
experts who thought the panels and the Appellate Body had generally
applied the article correctly and provided the right amount of deference,
those who believed the article was not particularly deferential, and those
who considered the article to primarily set forth a method for
interpreting provisions of the Antidumping Agreement rather than for
conferring deference. Finally, a number of experts, including a few with
divergent opinions about whether the legal standard in article 17.6( ii)
had been properly applied, stated that evaluation of panel and Appellate
Body decisions should focus on their substantive rulings and not the
technical issue of standard of review.
50 The Chevron standard or doctrine was established by the United States
Supreme Court in Chevron U. S. A., Inc. v. Natural Resources Defense
Council, Inc., 467 U. S. C. 837, 842- 45 (1984). Under the Chevron
doctrine, when a reviewing court determines that the law is clear on a
particular issue, the court as well as the agency must give effect to the
law. If, however, the law is silent or ambiguous, the court is to uphold
an agency*s interpretation when it is
reasonable, even if it is different from the interpretation of the law
that the court would have reached.
51 A majority of experts also agreed that, both in a WTO and domestic
political context, the United States has had the most concerns about how
standard of review has been applied in trade remedy cases.
52 This included one expert who was highly critical about how panels and
the Appellate Body had applied article 17.6( ii) in a number of instances
in antidumping cases.
A majority of experts also maintained that the United States was not
successful in getting the standard of review it wanted in the Antidumping
Agreement and that the SAA only expresses the U. S. *s view about the
intent of article 17.6. They pointed out that while the United States was
the main proponent for having a strongly deferential standard included in
the Antidumping Agreement, 53 numerous WTO members opposed the United
States on this issue. Although the experts agreed that the lack of written
negotiating history makes it difficult to determine how much deference
article 17.6 was intended to provide, a large number believed that the
language that was ultimately agreed to did not include the Chevron
standard. 54 Large Majority Said All WTO
Experts with markedly divergent views on other issues were in near Members
Were Treated the
unanimous agreement that the United States generally was being treated
Same in Trade Remedy
about the same as other WTO members in trade remedy cases. Although Cases
several experts pointed out that the United States was the most frequent
defendant and was losing more often than other WTO members, they believed
that the panels and the Appellate Body had ruled against other WTO members
with the same frequency and in the same or similar manner as they had for
the United States. Several experts also were emphatic in describing the
WTO as a plaintiff*s court in trade remedy cases and pointed out that in
nearly all trade remedy decisions and all the safeguards decisions we
reviewed, respondents were asked to take some action* for example, to
ensure that a safeguard measure was applied consistent with the Safeguards
Agreement. When asked why respondents usually lose trade remedy cases,
some experts cited a WTO free trade bias or bias against trade remedies as
the principal reason. 55 Several others said that WTO members only bring
trade remedy actions in the WTO that they are confident they can win. As
to why the United States was the most frequent defendant in trade remedy
cases, several experts mentioned the fact that the United States was the
biggest market as well as the biggest user of trade remedies. In addition,
several experts believed that some of the Commerce Department*s decisions
to impose trade remedy measures were unfounded.
53 The United States also wanted article 17.6 to apply to countervailing
duty cases. 54 Among other things, the U. S. *s draft language for article
17.6( ii) that incorporated the Chevron term *reasonable interpretation*
was changed to *permissible interpretation.*
55 A few of these experts viewed a bias toward liberalizing trade
positively and consistent with WTO agreement provisions.
Majority Said No New A majority of experts who responded to this issue
agreed that panels and
Obligations or Diminished the Appellate Body generally have not added to
the obligations or
Rights, but Minority diminished the rights of the United States and other
WTO members in trade Strongly Disagreed
remedy cases. They believed panels and the Appellate Body generally had
ruled appropriately in these cases, including the rulings on issues that
the experts cited most frequently as being important and controversial*
zeroing, facts available, 56 nonattribution, unforeseen developments, and
privatization. 57 A number of these experts believed that the panels and
the
Appellate Body had both the authority and the need to interpret vague or
ambiguous provisions, or to fill gaps, 58 in the trade remedy agreements
when no provision clearly deals with an issue. A number also cited article
3.2 of the Dispute Settlement Understanding, which calls for dispute
settlement to *clarify the . . . provisions of the [WTO] Agreements,* as
support for panel and Appellate Body interpretations of vague or ambiguous
provisions. Furthermore, a number stated that it is a common and accepted
practice for courts to interpret vague or ambiguous provisions of laws and
agreements, or to fill gaps, when the meaning of a legal provision is
unclear.
A significant minority of experts, however, strongly believed that panel
and Appellate Body findings on a number of important issues, including
those listed above, had added to obligations or diminished the rights of
the United States and other WTO members. For example, some in this group
believed that panels or the Appellate Body should have upheld the domestic
agency determinations on the antidumping issues of zeroing, facts
available, and nonattribution as permissible under the legal standard
of review in article 17. 6( ii). In addition, they contended that gap
filling was prohibited by articles 3.2 and 19.2 of the Dispute Settlement
Understanding, both of which preclude the Dispute Settlement Body from
56 Under the *facts available* provisions in article 6.8 and annex II of
the WTO Antidumping Agreement, domestic agencies are authorized to make
antidumping determinations on the basis of whatever facts are available to
them when the defending party fails to provide relevant facts within a
reasonable period of time or significantly impedes the investigation.
57 The Appellate Body ruled against respondents on nearly all of these
issues and, with the exception of zeroing, all involved cases in which the
United States was a respondent. 58 Not all of the experts agreed on the
meaning of *gap filling.* Some viewed the term negatively in that it led
to inappropriately adding obligations to WTO agreements, while others
agreed that it was synonymous with interpreting vague or ambiguous
provisions. When asked about which of several factors had influenced WTO
decisions, gap filling was among the most frequently cited by the experts.
adding to obligations or diminishing the rights of WTO members as provided
in the WTO agreements covered by dispute settlement. Furthermore, they
believed that the WTO had engaged in improper gap filling in its rulings
regarding the aforementioned issues, including privatization. They said
that WTO provisions on these issues were unclear and that privatization
was not specifically referred to in the Subsidies and Countervailing
Measures Agreement. Finally, some experts concluded that it was improper
for the panels and the Appellate Body to rule on issues that the
negotiating members had intentionally left unclear. They believed that the
proper way to deal with vague and ambiguous language in the WTO agreements
was through additional negotiations rather than through panel or Appellate
Body rulings.
Experts Believed Some A substantial number of experts stated that WTO
rulings on the safeguard
Safeguard Rulings Were issues of causation and unforeseen developments
were confusing and
Confusing and Unclear difficult to follow. This group included experts
with sharply divergent
views on other trade remedy issues. Specifically, these experts believed
that the lack of clarity in the rulings on the causation issue of
nonattribution has made it difficult for domestic agencies to implement
the rulings. Some in this group were concerned that the rulings seemed to
require a quantitative analysis of each factor causing serious injury to
domestic industry to ensure the factors were not being improperly
attributed to increased imports, 59 and several questioned whether
domestic agencies could perform this kind of analysis. The experts also
had
concerns about how domestic agencies could implement the Appellate Body
rulings on the issue of unforeseen developments. Specifically, they were
unsure how WTO members would show that increased imports causing serious
injury resulted from developments they had not foreseen when they made
tariff concessions or assumed other obligations under GATT. A few experts
were surprised that the Appellate Body had resurrected the GATT
requirement on unforeseen developments, which they thought had been
abandoned and had not been specifically included in
the Safeguards Agreement. 59 In the antidumping context, the Appellate
Body recognized that it might not be easy to separate and distinguish the
injurious effects of different causal factors but found that this was what
was intended by the nonattribution language in the Antidumping Agreement.
United States* Antidumping Measures on Certain Hot- Rolled Steel Products
from Japan,
WT/ DS184/ AB/ R, paragraph 228.
U. S. Agency Positions on In its December 2002 report to Congress, 60 the
executive branch concluded
Standard of Review and that, overall, the United States had fared well in
WTO dispute settlement, Other Trade Remedy Issues
including in a number of trade remedy cases. Nevertheless, the report
raised concerns about how the WTO had applied standard of review in trade
remedy cases and stated that some rulings were troubling in *their failure
to recognize that agreement terms may be susceptible of multiple,
reasonable interpretations among which WTO members may properly
choose.* The report specifically criticized the Appellate Body ruling in
United States* Antidumping Measures on Certain Hot- Rolled Steel Products
from Japan for how it had applied the legal standard of review in article
17. 6( ii).
The executive branch report also stated that in certain trade remedy
cases, the WTO had found obligations and imposed restrictions on WTO
members that were not supported by the texts of the WTO agreements. 61 The
report mentioned the rulings on facts available, unforeseen developments,
nonattribution, and several others as examples. The report qualified these
criticisms by stating that not all of the WTO findings it cited were based
on a problematical analytical approach or that the WTO would have
necessarily found in favor of the United States had the proper approach
been used. Nevertheless, the report emphasized that the problematic
findings were troubling due to their lack of grounding in the texts of the
negotiated agreements.
During the course of our work, the Commerce Department and ITC officials
reiterated these concerns. ITC officials indicated that they do not agree
that the WTO has properly applied standard of review in trade remedy
cases. Specifically, they stated that the WTO has applied article 17.6(
ii) of the Antidumping Agreement in a manner that raises a question about
whether the second sentence of the provision, requiring the WTO to uphold
domestic agency determinations that rest on permissible
60 The report was entitled Executive Branch Strategy Regarding WTO Dispute
Settlement Panels and the Appellate Body: Report to the Congress
Transmitted by the Secretary of Commerce, at 6- 10 (Dec. 30, 2002), and
was required by the Trade Act of 2002, Public Law No. 107- 210, S: 2105(
b)( 3), 116 Stat. 1016. The report was prepared by the Commerce Department
in consultation with the Secretary of State, the Secretary of the
Treasury, the Attorney General, and the U. S. Trade Representative.
61 In contrast, an EU and a WTO official we interviewed stated that
standard of review has been properly applied by the WTO in trade remedy
cases and that WTO rulings have not added to obligations or diminished
rights of WTO members.
interpretations of the Antidumping Agreement, has real meaning. In these
officials* view, the WTO has not allowed for more than one permissible
interpretation of the relevant provisions. In this regard, the United
States recently proposed that article 17.6 be considered as a topic for
discussion in the Negotiating Group on Rules in the ongoing WTO
negotiations. In its submission, the United States stated that panels and
the Appellate Body have not accepted WTO members* reasonable, permissible
interpretations of the Antidumping Agreement.
ITC officials also stated that in some instances, the Appellate Body had
ruled incorrectly on important issues and created new obligations, which
do not appear in and are unsupported by the plain language of the relevant
agreements. One example involved the Appellate Body findings on the
nonattribution provision of the Safeguards Agreement. The ITC also found
it particularly significant that the WTO had enunciated systemic
requirements for this issue, as well as unforeseen developments, 62 even
though they are not specifically covered by U. S. law. Agency Comments and
We requested comments on a draft of this report from the Secretary of Our
Evaluation
Commerce, the Chairman of the U. S. International Trade Commission, and
the U. S. Trade Representative (USTR). The Commerce Department and the ITC
provided written comments, which are reprinted in appendixes IV and V. We
obtained oral comments from USTR officials, including the Assistant
U. S. Trade Representative for Monitoring and Enforcement. The Commerce
Department had three areas of concern regarding our report. First, it
emphasized the potential future impact of WTO trade remedy rulings on the
U. S. *s ability to impose trade remedies, noting that this potential is
far more significant than these rulings* limited impact to date. Commerce
cited, in particular, the possible negative ramifications of two WTO
rulings. Specifically, it said that the ruling on privatization could
impact a significant number of U. S. countervailing duty orders, and that
as a result of the EU bed linen ruling, the EU has recently challenged
more than 20 U. S. antidumping investigations and reviews. As a result of
this increased emphasis, we modified the sections of this report that
present U. S. agency views on the potential future ramifications of WTO
decisions
62 In the recent panel report, United States* Definitive Safeguard
Measures on Imports of Certain Steel Products, WT/ DS248- 49, 251- 54,
258- 59/ R, the panel found against the United States on the issue of
unforeseen developments, among others.
on the U. S. *s ability to impose trade remedies. Second, Commerce raised
concerns regarding the composition of the group of legal experts we
consulted and our characterization of their views as *majority* and
*minority.* However, we believe that our methodology for selecting these
experts was sound (see app. I). In addition, we believe that our report
sufficiently addresses the concerns of the minority of experts.
Nevertheless, we have made modifications to the relevant sections of our
report to ensure that majority positions and minority concerns are
presented in a balanced manner. Finally, Commerce expressed concern that
we did not adequately address the executive branch*s views on the WTO*s
application of standard of review and other trade remedy issues. As a
result, we modified our report to give more prominent treatment to U. S.
agency positions.
The ITC had two main areas of concern regarding the report. First, the ITC
said that the report understated the full effect of WTO rulings on the
ability of the United States to impose and maintain trade remedy measures
in that the full effect of WTO rulings likely has not yet been realized,
citing for
example several systemic WTO requirements for safeguard determinations. In
response to this comment as well a similar comment from the Commerce
Department, we modified the relevant sections of the report as discussed
above and used examples that the ITC cited. Second, the ITC did not agree
that WTO panels and the Appellate Body have properly applied the standard
of review in article 17.6( ii) of the Antidumping Agreement. In
response to this concern, we have incorporated the ITC*s views in our
report.
In addition, we obtained technical comments from the Commerce Department
and the ITC, which we have incorporated into the report as appropriate.
For example, Commerce noted that we had included challenges to WTO
members* sunset reviews in some of our statistics on trade remedy
measures. As a result, we eliminated the sunset review challenges from our
statistics.
USTR provided technical comments such as clarification of certain
terminology. For example, USTR noted that the term *domestic
determination* usually connotes a final decision by the appropriate agency
as to whether dumping has occurred or whether increased imports have
caused injury or are threatening injury to domestic industry. Accordingly,
we clarified our definition in this report and made other technical
changes
as appropriate. USTR also noted that U. S. trade remedy measures had been
challenged more frequently than those of other WTO members in part
because U. S. trade remedy laws and investigations are more transparent.
We have added this point to our report.
We are sending copies of this report to interested congressional
committees, the U. S. Trade Representative, the Secretary of Commerce, and
the Chairman of the U. S. International Trade Commission. We will also
make copies available to others upon request. In addition, the report will
be available at no charge on the GAO Web site at http:// www. gao. gov.
If you or your staff have any questions about this report, please contact
me at (202) 512- 4128. Other GAO contacts and staff acknowledgments are
listed in appendix VI. Sincerely yours,
Loren Yager, Director, International Affairs and Trade
Appendi Appendi xes x I
Objectives, Scope, and Methodology The Ranking Minority Member of the
Senate Committee on Finance asked us to conduct a review of the World
Trade Organization*s (WTO) dispute settlement activity during the past 8
years, focusing on trade remedy disputes. Specifically, in this report we
(1) identified the major trends in WTO dispute settlement activity
concerning trade remedies; (2) analyzed the outcome of WTO rulings in
completed trade remedy cases; (3) assessed
the major impacts of these rulings on WTO members* laws, regulations, and
practices and on their ability to impose trade remedies; (4) identified
the standards of review for trade remedy cases and Appellate Body guidance
on how they should be applied; and (5) summarized legal experts* views and
U. S. agencies* positions on standard of review and other trade remedy
issues.
To identify the major trends in dispute settlement activity during the
last 8 years, we developed a database containing all members* requests for
consultation (complaints) filed from 1995 through 2002. We obtained the
data for the database from the WTO Web site, including data on each
request for consultation; data on the complainant( s), defendant, and
complaint date; and a short title. To determine which disputes related to
trade remedies, we examined the short titles of the cases; the initial
complaint filed with the WTO; and WTO documents, including the Update of
WTO Dispute Settlement Cases, January 2003. Our analysis of trade remedy
cases focused exclusively on cases brought under the WTO trade remedy
agreements* the Antidumping Agreement, the Agreement on Safeguards, the
Subsidies and Countervailing Measures Agreement, and parts of the General
Agreement on Tariffs and Trade 1994.
To obtain the number 198 for formal dispute settlement cases filed with
the WTO from 1995 through 2002, we combined multiple complaints against
one WTO member on the same law, measure, or action into one distinct case
for the purposes of our analysis. We did this because multiple WTO
members can file complaints against one member. For example, 9 WTO members
filed complaints regarding 1 U. S. steel safeguard measure imposed in
March 2002. As a result, the 276 separate complaints filed from 1995
through 2002 resulted in 198 distinct cases.
To determine which WTO members imposed the most trade remedy measures from
1995 through 2002, we used WTO data that were based on the notifications
filed with the WTO by each member. We excluded challenges to WTO members*
sunset reviews in our data on trade remedy measures in response to agency
comments. For antidumping and countervailing duty measures, we used
summary data that the WTO
Secretariat compiled. Department of Commerce officials noted that these
WTO data differ from Commerce*s data on U. S. antidumping and
countervailing measures and recommended that we use Commerce data.
However, because the WTO is the only source of comparable data on the
use of trade remedy measures by all WTO members, we ultimately used the
WTO data. For safeguards, we analyzed the information contained in the
annual reports of the WTO Committee on Safeguards. These reports included
information on both preliminary and definitive safeguard measures imposed.
To analyze the outcome of WTO rulings in the completed trade remedy cases,
we compiled statistics on panel and Appellate Body findings about whether
domestic agency determinations and members* laws were found to be
consistent or inconsistent with WTO trade remedy provisions. We defined
*completed* cases as those cases in which the Dispute Settlement
Body had adopted a panel or Appellate Body decision as of December 31,
2002. To analyze WTO findings about domestic determinations, for the most
part, we reviewed the concluding findings at the end of the panel and
Appellate Body reports. When several findings were included within a
single paragraph in the concluding findings, we generally counted each
finding separately. In the several instances in which concluding sections
of panel reports did not clearly indicate these findings, we obtained our
numbers by evaluating the full reports. For our statistics on findings
about domestic agency determinations, we did not distinguish between more
important issues* such as the causal relationship between increased
imports and injury to domestic industry* and those that seemed less
important* for example, notification requirements and certain evidentiary
issues. To analyze direct challenges to members* laws in the completed
cases, we analyzed the full panel and Appellate Body reports.
To assess the major impacts of the WTO rulings in the completed trade
remedy cases on members* laws, regulations, and practices, and on their
ability to impose trade remedies, we identified compliance actions taken,
or in the process of being taken, by WTO members as a result of the
rulings. First, we consulted the WTO Web site to find any and all official
documents filed in the completed trade remedy cases. WTO members and
relevant parties in the cases file such documents with the WTO to report
actions taken following the rulings and recommendations of adopted panel
and Appellate Body reports. Alternatively, some documents indicate only
agreements between the relevant parties for compliance actions to be
taken, or the status of any ongoing negotiations regarding compliance. For
cases where official documentation regarding compliance actions was not
found on the WTO Web site, we searched the Dispute Settlement Body
archives. We also consulted U. S. agency officials on the one case in
which the United States was the complainant. For the cases in which the
United States was the defendant, we also consulted officials from the
Commerce Department, the U. S. International Trade Commission (ITC), and
the U. S. Trade Representative (USTR). These officials provided us the
most up- to- date information on the status of bilateral negotiations and
U. S. intentions for certain completed cases where compliance information
was not yet publicly available. In addition, we monitored congressional
Web sites to glean information on the status of
legislation in cases involving challenges to U. S. laws. Finally, we
obtained copies of the changes to one U. S. regulation and two established
practices from the Federal Register.
For cases not involving the United States, for the most part, we did not
consult with foreign government officials. We relied primarily on official
documents that WTO members and relevant parties had filed with the WTO to
report their compliance actions and on pertinent comments from U. S.
agency officials.
To identify the WTO standards of review for trade remedy cases, we
analyzed the standards and obtained the views of legal experts, including
practitioners and academics (see below). To identify how the panels and
the Appellate Body were interpreting and applying the standards, we read
the panel and Appellate Body reports for the trade remedy cases completed
from 1995 through 2002 as well as Appellate Body reports for other
relevant WTO dispute settlement cases. In reading these reports, we
identified Appellate Body guidance on how the standards should be applied.
Finally,
we also read the provisions of the Vienna Convention on the Law of
Treaties that the Appellate Body had identified as pertinent to how one of
the standards should be applied.
To obtain and summarize legal experts* views on WTO standard of review and
other trade remedy issues, we conducted structured interviews with 18
legal experts, including practitioners, academics, and advisers on
WTOrelated trade remedy issues. In addition, we interviewed a current WTO
official and an European Union (EU) official; however, in response to
agency comments, we reviewed our decision rule on the composition of our
expert group and excluded the WTO official and EU representative from our
discussion of expert views, since we did not include U. S. agency
officials in this group.
To identify the legal experts for our study, we conducted literature
searches, read formal publications on WTO standard of review and trade
remedies, sought recommendations from other experts and the International
Trade Committee of the American Bar Association, and attended seminars on
issues surrounding standard of review and trade
remedies. Our main criteria for selecting the experts for our study were
that they (1) had past experience with WTO trade remedy cases; (2) had
been active in writing and/ or speaking about issues pertaining to WTO
dispute settlement, including standard of review and trade remedies; and
(3) constituted a mix of experts representing or affiliated with U. S.
domestic interests, foreign interests, or both. We did not choose experts
on the basis of their expressed views, because we did not believe that
this was
methodologically sound. To obtain the views of the experts, we conducted
structured interviews to ensure that we asked all of the experts the same
questions. We coded the answers to key survey questions to help us analyze
the experts* views and assess the frequency with which particular views
were held.
To write the case summaries, we consulted the WTO Web site and reviewed
the panel and Appellate Body reports for the 25 completed trade remedy
cases. We also reviewed the dispute settlement commentaries on the www.
WorldTradeLaw. net Web site.
We performed our work from September 2002 to July 2003 in accordance with
generally accepted government auditing standards.
Summaries of Completed WTO Trade Remedy
Appendi x II
Cases Between the inception of the World Trade Organization (WTO) in 1995
and December 31, 2002, the WTO ruled on 25 cases involving the trade
remedies of antidumping, countervailing duties (CVD), and safeguards.
Table 3 lists the cases in order of their WTO dispute case number. It is
followed by a brief summary of each case that includes information on the
case's outcome and major issues.
Table 3: WTO Trade Remedy Dispute Settlement Cases Completed Between 1995
and December 31, 2002 Circulation GAO case Case name:
WTO dispute date of panel or number Defendant * subject case number
Appellate Body report a 1 Brazil * Measures Affecting Desiccated Coconut
DS 22 02/ 21/ 1997 2 Guatemala * Antidumping Investigation Regarding
Portland Cement DS 60 11/ 02/ 1998
from Mexico 3 Korea * Definitive Safeguard Measure on Imports of Certain
Dairy DS 98 12/ 14/ 1999 Products 4 United States * Antidumping Duty on
Dynamic Random Access
DS 99 01/ 29/ 1999 Memory Semiconductors (DRAMS) of One Megabyte or Above
Originating from Korea
5 Argentina * Safeguard Measures on Imports of Footwear DS 121 12/ 14/
1999 6 Thailand * Antidumping Duties on Angles, Shapes, and Sections of
DS 122 03/ 12/ 2001 Iron or Non- Alloy Steel and H- Beams from Poland 7
Mexico * Antidumping Investigation of High- Fructose Corn Syrup
DS 132 01/ 28/ 2000 (HFCS) from the United States 8 United States *
Antidumping Act of 1916 DS 136/ 162 08/ 28/ 2000
9 United States * Imposition of Countervailing Duties on Certain Hot DS
138 05/ 10/ 2000 Rolled Lead and Bismuth Carbon Steel Products Originating
in the United Kingdom
10 European Union * Antidumping Duties on Imports of Cotton- Type Bed DS
141 03/ 01/ 2001 Linen from India 11 Guatemala * Definitive Antidumping
Measures on Grey Portland
DS 156 10/ 24/ 2000 Cement from Mexico 12 United States * Definitive
Safeguard Measures on Imports of Wheat
DS 166 12/ 22/ 2000 Gluten from the European Communities 13 United States
* Safeguard Measures on Imports of Fresh, Chilled, or
DS 177/ 178 05/ 01/ 2001 Frozen Lamb Meat from New Zealand and Australia
14 United States * Antidumping Measures on Stainless Steel Plate in
DS 179 12/ 22/ 2000 Coils and Stainless Steel Sheet and Strip from Korea
15 United States * Antidumping Measures on Certain Hot- Rolled Steel
DS 184 07/ 24/ 2001 Products from Japan 16 Argentina * Definitive
Antidumping Measures on Imports of Ceramic
DS 189 09/ 28/ 2001 Floor Tiles from Italy
(Continued From Previous Page)
Circulation GAO case Case name:
WTO dispute date of panel or number Defendant * subject case number
Appellate Body report a 17 United States * Measures Treating Export
Restraints as Subsidies DS 194 06/ 29/ 2001 18 United States * Definitive
Safeguard Measures on Imports of Circular
DS 202 02/ 15/ 2002 Welded Carbon Quality Line Pipe from Korea 19 United
States * Antidumping and Countervailing Measures on Steel
DS 206 06/ 28/ 2002 Plate from India 20 Chile * Price Band System and
Safeguard Measures Relating to
DS 207 05/ 03/ 2002 Certain Agricultural Products 21 Egypt * Definitive
Antidumping Measures on Steel Rebar from Turkey DS 211 08/ 08/ 2002
22 United States * Countervailing Measures Concerning Certain DS 212 12/
09/ 2002 Products from the European Communities (* Privatization*) 23
United States * Countervailing Duties on Certain Corrosion- Resistant
DS 213 11/ 28/ 2002 Carbon Steel Flat Products from Germany (* Sunset*) 24
United States * Section 129( c)( 1) of the Uruguay Round Agreements
DS 221 07/ 15/ 2002 Act 25 United States * Preliminary Determinations With
Respect to Certain
DS 236 09/ 27/ 2002 Softwood Lumber from Canada Source: GAO analysis of
WTO data.
a In cases that concluded with the adoption of the panel report, the
circulation date of the panel report is listed. In all other cases, the
circulation date of the Appellate Body report is listed.
GAO Case Number 1: Complainant: Philippines 1 Brazil * Measures
Defendant: Brazil Affecting Desiccated Coconut (DS 22)
Nature of Complaint In June 1994, Brazil initiated a countervailing duty
(CVD) investigation to determine whether imports of desiccated coconut and
coconut milk from
Cote d*Ivoire, Indonesia, Malaysia, the Philippines, and Sri Lanka had
been subsidized. Brazil imposed provisional CVDs on imports of desiccated
coconut from all of these countries except Malaysia in March 1995 and
final CVDs in August 1995.
The Philippines challenged the Brazilian CVDs under various provisions of
the General Agreement on Tariffs and Trade 1994 (GATT 1994) and the World
Trade Organization (WTO) Agreement on Agriculture. Brazil*s
principal argument was that none of the WTO provisions relied upon by the
Philippines applies in this case because the Brazilian subsidy
investigation was initiated on the basis of an application received prior
to the date the WTO Agreement entered into force.
Outcome The Appellate Body upheld the panel finding that GATT 1994
provisions on CVD investigations did not apply because this dispute
involved application
of a Brazilian CVD measure based on an investigation initiated prior to
January 1, 1995* the date on which the WTO Agreement entered into effect.
Accordingly, the Appellate Body upheld the panel*s finding that the
dispute was not properly before it. Compliance Action No compliance action
was necessary.
1 Canada, the EU, Indonesia, Sri Lanka, and the United States were third
parties in this case.
Tabl e 4: Case 1 * Major Case Issue and Panel/ Appellate Body Findings
Major case issue Panel findings Appellate Body findings
Whether GATT 1994 rules on CVD GATT 1994 rules on CVDs did not
Upheld the panel. investigations, particularly article VI, and the
apply to this dispute because the WTO Agreement on Subsidies and Brazilian
investigation that led to the CVDs may only be imposed in accord with
Countervailing Measures (SCM Agreement)
CVD measure was initiated prior to the article VI of GATT 1994 and the SCM
applied to the Philippines* challenge of Brazil*s WTO Agreement*s entering
into effect
Agreement. Article VI cannot be applied CVD measures on desiccated coconut
imports.
for Brazil. independently of the SCM Agreement.
The imposition of CVDs must comply Article 32. 3 of the SCM Agreement
clearly both with article VI of GATT 1994 and
states that for CVD investigations, the dividing the SCM Agreement.
Article 32.3 of the
line between the GATT 1947 system of SCM Agreement indicates that it only
arrangements and the WTO Agreement is to applies to CVD investigations
initiated be determined by the date on which the pursuant to applications
made on or
application was made for the CVD after the date of entry into force for a
investigation. The Tokyo Round SCM WTO member of the WTO Agreement.
Committee was to handle disputes arising out of CVD investigations
initiated pursuant to Pursuant to a GATT Tokyo Round SCM
applications made prior to the date the WTO Committee decision, the
Philippines
Agreement became effective. could have invoked the Tokyo Round SCM Code
dispute settlement provisions to resolve this dispute.
Source: GAO analysis of WTO panel and Appellate Body reports.
GAO Case Number 2: Complainant: Mexico 2 Guatemala *
Defendant: Guatemala Antidumping Investigation Regarding Portland Cement
from Mexico (DS 60)
Nature of Complaint Mexico challenged both the initiation of Guatemala*s
antidumping investigation of imports of grey portland cement from Mexico
and various decisions and conduct of the Guatemalan domestic authority
during the investigation. Guatemala*s principal claim was that Mexico*s
panel request did not identify any of the three measures listed in article
17.4 of the Antidumping Agreement (ADA), and therefore the panel should
not hear the claim.
Outcome The panel found that Guatemala had failed to comply with article
5.3 of the ADA by initiating the antidumping investigation on the basis of
insufficient evidence of dumping, injury, and casual link between dumping
and injury. The panel also found that the matters referred to in Mexico*s
panel request for establishment of a panel were properly before it. The
Appellate Body reversed the panel and determined that the dispute was not
properly before the panel because Mexico*s panel request did not identify
the measure it was complaining about. Consequently, it did not consider
the panel*s findings on article 5. 3.
Compliance Action After the Appellate Body effectively dismissed this
case, Mexico brought the case again with a new panel request (see our case
summary 11 of
Guatemala * Definitive Antidumping Measures on Grey Portland Cement from
Mexico, DS 156). The new panel considered many of the same issues that
were involved in this case.
2 Canada, El Salvador, Honduras, and the United States were third parties
in this case.
Tabl e 5: Case 2 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether article 17 of the ADA provides for a Article 17 of the ADA
provides for a Reversed the panel. coherent set of rules for dispute
settlement coherent set of rules for dispute specific to antidumping cases
that replaces the settlement specific to antidumping cases
Only when a provision of the DSU and a more general approach of the
Dispute that replaces the more general approach special or additional
provision of another Settlement Understanding (DSU).
of the DSU. WTO Agreement are mutually inconsistent can the special or
additional provision be read to prevail over the DSU provision.
Whether Mexico was required by article 6.2 of Mexico*s panel request did
not have to
Reversed the panel. the DSU and article 17 of the ADA to identify at
identify one of the three types of least one of the three antidumping
measures in
measures in article 17.4. In disputes under the ADA relating to the
article 17.4 in its panel request* definitive
initiation and conduct of an antidumping antidumping duties, acceptance of
a price
Article 17.4 is a *timing provision* investigation, members must identify
in undertaking, or a provisional measure.
establishing when a panel may be their panel requests one of the three
requested but not establishing the
measures listed in article 17.4 of the ADA. appropriate subject of a
request. A formalistic requirement that Mexico identify one of the three
types of measures identified in article 17.4 would undermine the status of
the special
dispute settlement rules in the ADA. Whether it was appropriate for the
panel to
Consistent with the authority in article Since the dispute was not
properly before make suggestions about how Guatemala might
19. 1 of the DSU, it was appropriate for the the panel, the Appellate Body
came to no deal with its substantive violation of the
panel to suggest that Guatemala revoke conclusions about whether the panel
was standards for initiation of an antidumping
its existing antidumping measure on right or wrong on this issue.
investigation.
imports of Mexican cement. Source: GAO analysis of WTO panel and Appellate
Body reports.
GAO Case Number 3: Complainant: European Union (EU) 3 Korea * Definitive
Defendant: Korea Safeguard Measure on Imports of Certain Dairy Products
(DS 98)
Nature of Complaint The EU challenged Korea*s imposition of a safeguard
measure on imports of skimmed milk powder preparations from the EU. The
safeguard
measure was in the form of a quantitative restriction on imports of these
dairy products. The EU argued that Korea*s safeguard measure was
inconsistent with various provisions of the Safeguards Agreement as well
as article XIX: 1 of GATT 1994. Generally, the EU contended that Korea had
not shown that increases in imports resulted from *unforeseen
developments,* had not examined all factors in its examination of serious
injury, and had not adequately considered the extent of application of the
safeguard measure. Outcome The Appellate Body upheld several panel
findings that Korea had acted
inconsistently with the Safeguards Agreement because of its determinations
regarding serious injury. The Appellate Body also reversed a panel finding
on the issue of *unforeseen developments.* Accordingly, it recommended
that Korea bring its safeguard measure into conformity with the Safeguards
Agreement.
Compliance Action Korea reported to the WTO that it had effectively
terminated the safeguard measure on imports of the dairy products on May
20, 2000. By lifting the safeguard measure, Korea considers that it has
implemented the
recommendations and rulings of the Dispute Settlement Body (DSB). 3 The
United States was a third party in this case.
Table 6: Case 3 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether Korea was required to examine if Korea was not required to examine
Reversed the panel. increases in imports were the result of
whether import trends under investigation *unforeseen developments* as
described in were the result of *unforeseen Although article XIX: 1( a)
does not article XIX: 1( a) of GATT 1994.
developments.* establish independent conditions for
application of a safeguard, *unforeseen The *unforeseen developments*
clause in developments* must be demonstrated as article XIX: 1( a) does
not provide an a matter of fact for a safeguard measure independent basis
for finding that a to be applied. safeguard measure violates WTO rules.
The Appellate Body could not decide whether Korea had violated article
XIX: 1( a) due to insufficient facts on the record.
Whether Korea was required by article 5.1 of the When members apply a
safeguard Upheld the panel finding that the first Safeguards Agreement to
ensure that the measure, they must (1) apply a measure
sentence of article 5.1 imposes an safeguard applied was not more
restrictive than no more restrictive than necessary to obligation on a WTO
member applying a necessary to prevent or remedy serious injury prevent or
remedy serious injury and
safeguard measure to ensure the and facilitate adjustment. facilitate
adjustment and (2) provide a measure is *commensurate with the reasoned
explanation about how
goals of preventing or remedying serious authorities reached a conclusion
that the
injury and of facilitating adjustment.* measure satisfied all requirements
of article 5.1.
Reversed the panel finding that article 5.1 requires members to explain
how it Korea violated article 5.1 by not including ensures these goals are
met when
in its recommendations and making recommendations about determinations an
explanation of how it application of a measure that is not a concluded
that the measure was
quantitative restriction. necessary to remedy serious injury and
facilitate adjustment of the industry.
Absent a factual record, the Appellate Body could not determine whether
Korea had violated the second sentence of
article 5.1. How the standard of review under article 11 of the
A panel should consider whether a Under article 11, a panel has a duty to
WTO DSU should be applied to evaluations domestic authority (1) examined
all facts
examine and consider all evidence under article 4.2 of the Safeguards
Agreement. in its possession (or facts it should have in
before it, not just evidence submitted by its possession) and (2) provided
an one or the other party, and to evaluate adequate explanation about how
facts
the relevance and probative force of each supported the determinations.
piece of evidence. Whether Korea*s finding that serious injury Korea
violated article 4.2( a) by not
Not appealed. occurred was consistent with article 4.2( a) of the
adequately examining all serious injury Safeguards Agreement.
factors. Source: GAO analysis of WTO panel and Appellate Body reports.
GAO Case Number 4: Complainant: Korea United States *
Defendant: United States Antidumping Duty on Dynamic Random Access Memory
Semiconductors (DRAMS) of One Megabyte or Above Originating from Korea (DS
99)
Nature of Complaint Korea challenged the U. S. *s failure to revoke an
antidumping order on Korean dynamic random access memory semiconductors
(DRAMS) of one megabyte or above. Korea contended that the U. S.
regulatory standard 4 under which it refused to revoke the antidumping
order with respect to two Korean producers violated the ADA. Korea also
challenged the Department of Commerce*s rejection of certain cost
information and its application of the de minimis 5 standard during the
administrative review of the antidumping order.
Outcome The panel found that the U. S. regulatory standard for revoking an
antidumping order was inconsistent with the ADA. However, the panel also
upheld several aspects of the U. S. *s application of its antidumping
laws. The panel recommended that the DSB request that the United States
bring its regulatory standard for revoking an antidumping order, and the
results of its third administrative review, into conformity with its
obligations under the ADA. The parties did not appeal the panel findings.
4 The regulatory provision in question deals with revocation of an
antidumping order based on the absence of dumping and should not be
confused with the regulatory provision dealing with *sunset reviews.*
5 De minimis refers to the level below which a dumping margin or subsidy
is considered to be negligible. Antidumping or CVD actions are terminated
in cases where the margin of dumping or level of subsidy is below the de
minimis level.
Compliance Action The United States took several compliance actions as a
result of the panel*s findings. The United States deleted the *not likely*
criterion from its
regulation and replaced it with a requirement that the Secretary of
Commerce consider *whether the continued application of the antidumping
duty order is otherwise necessary to offset dumping.* Using this modified
standard, the United States found that the continued application of the
dumping order was necessary to offset dumping and, accordingly, did not
revoke the antidumping order. Korea asserted that these actions failed to
comply with the DSB*s recommendations and rulings. During the compliance
panel proceeding, however, the United States revoked the antidumping order
as a result of the U. S. sunset review process, primarily because the
petitioner withdrew from the proceeding. The United States and Korea then
notified the DSB of a mutually agreedupon solution to the dispute, and the
compliance panel proceeding was terminated.
Table 7: Case 4 * Major Case Issues and Panel Findings Major case issues
Panel findings
Whether the U. S. regulatory standard for revoking an antidumping The U.
S. regulatory standard requiring a finding that it is *not likely* order,
requiring the United States to find that the foreign producer is
that the producer will sell the merchandise in the future at less than
*not likely* to sell products at less than foreign market value, a foreign
market value was inconsistent with article 11. 2. violates article 11. 2
of the ADA.
The *not likely* standard is not equivalent to the standard in article 11.
2 that requires the domestic authority to examine whether *injury would be
likely to continue or recur* if the dumping duty were removed.
Whether the U. S. rejection of certain cost data submitted by a The U. S.
rejection of the data did not violate the ADA. Korean firm violated
article 2. 2. 1.1 of the ADA relating to the calculation of costs.
Korea failed to establish that an objective and impartial investigating
authority could not properly have found that the data did not reasonably
reflect the costs associated with the production and sale of DRAMS.
Whether the de minimis standard for antidumping investigations in The de
minimis standard in article 5.8 does not apply to duty article 5.8 of the
ADA also applies to duty assessment procedures
assessments under article 9.3. under article 9.3.
Source: GAO analysis of the WTO panel report. a The term *foreign market
value* was later replaced with *normal value.*
GAO Case Number 5: Complainant: European Union (EU) 6 Argentina *
Safeguard
Defendant: Argentina Measures on Imports of Footwear (DS 121)
Nature of Complaint The EU challenged Argentina*s imposition of safeguards
on imports of EU footwear. The safeguard measure took the form of minimum
specific duties
on these imports. For several years prior to this EU challenge, Argentina
had maintained various measures regarding imports of footwear and other
clothing and textiles. The EU contended that the safeguard measure
violated article XIX: 1( a) of GATT 1994 and various provisions of the
Safeguards Agreement.
Outcome The Appellate Body upheld panel findings that Argentina*s
safeguard investigation and determinations of increased imports, serious
injury, and causation were inconsistent with articles 2 and 4 of the
Safeguards Agreement, and thus there was no legal basis for applying
safeguards. As a result, it recommended that the DSB request that
Argentina bring its safeguard measures into conformity with its
obligations under the Safeguards Agreement.
Compliance Action Argentina indicated to the WTO in February 2000 that it
intended to implement the DSB*s rulings and recommendations.
6 Brazil, Indonesia, Paraguay, the United States, and Uruguay were third
parties in this case.
Tabl e 8: Case 5 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether safeguard measures that meet the Safeguard measures that meet the
Reversed the panel*s conclusion, but in requirements of the Safeguards
Agreement
requirements of the Safeguards Agreement view of other findings did not
decide must also satisfy the requirements of article also satisfy the
requirements of article
whether Argentina demonstrated that XIX: 1( a) of GATT 1994 with respect
to
XIX: 1( a) of GATT 1994 on *unforeseen increased imports occurred as a
result of *unforeseen developments.* developments.*
*unforeseen developments.* The *unforeseen developments* clause
establishes certain *factual circumstances* that must be demonstrated in a
safeguard investigation.
Whether Argentina violated article 2 of the Argentina violated article 2
because Reversed the panel finding that it was Safeguards Agreement by
including imports
members of a customs union, like dealing with a safeguard measure applied
from MERCOSUR a countries in its
MERCOSUR, must apply a safeguard by MERCOSUR on behalf of a member
investigation of imports, injury, and causation,
measure to imports from all sources state. The safeguard was applied by
but excluding them from application of the considered in its analysis of
imports during
Argentina, not MERCOSUR. safeguards measure. the investigation. Upheld the
panel*s parallelism analysis and
concluded that Argentina could not impose safeguards only on non- MERCOSUR
sources on the basis of investigation of imports from all sources,
including imports
from MERCOSUR member states. Whether the panel correctly applied the
The task of a panel is not to conduct a de
The panel correctly stated and applied the proper standard of review in
article 11 of the novo review of Argentina*s investigation.
appropriate standard of review set forth in DSU to the EU claims under
articles 2 and 4
article 11. of the Safeguards Agreement.
The panel reviewed the full file and noted portions of the record relied
on by The panel did not conduct a de novo review Argentina.
of the evidence or substitute its analysis and judgment for that of the
Argentine authorities. Whether Argentina*s examination of increased
Argentina*s examination of increased Upheld the panel*s conclusions, but
imports, serious injury, and causation was imports, serious injury, and
causation were disagreed with the panel*s interpretation of consistent
with articles 2 and 4 of the
inconsistent with articles 2 and 4. the requirement in article 2.1 on
increased Safeguards Agreement.
imports. In its causation analysis under article 4.2( b), Argentina did
not adequately
It was not reasonable for the panel to consider factors operating within
the market
examine the trend in imports over a 5- year other than increased imports,
so that injury period. Article 2.1 requires that the increase caused by
these other factors could be
in imports must have been recent, sudden, identified and properly
attributed.
sharp, and significant enough, both quantitatively and qualitatively, to
cause or threaten to cause serious injury.
Source: GAO analysis of WTO panel and Appellate Body reports. a MERCOSUR
is a South American customs union composed of Argentina, Brazil, Paraguay,
and Uruguay. Bolivia, Chile, and Peru are associate members.
GAO Case Number 6: Complainant: Poland 7 Thailand *
Defendant: Thailand Antidumping Duties on Angles, Shapes, and Sections of
Iron or Non- Alloy Steel and HBeams from Poland (DS 122)
Nature of Complaint Poland challenged Thailand*s imposition of antidumping
duties on imports of certain Polish steel products. The final antidumping
duty was a percentage of a determined value of these products. Poland
contended that Thailand*s injury and dumping determinations were
inconsistent with various provisions of the ADA.
Outcome The Appellate Body affirmed the panel*s findings that Thailand had
violated the ADA with regard to Thailand*s findings about injury to
domestic industry and the causal relationship between dumped imports and
injury to
domestic industry. Although the Appellate Body also upheld the panel*s
application of the standard of review in article 17.6( ii) of the ADA, it
reversed a panel interpretation of article 17. 6( i). As a result of these
rulings,
the Appellate Body recommended that the DSB request that Thailand bring
its antidumping measure into conformity with its obligations under the
ADA.
Compliance Action Thailand reexamined aspects of the injury determination
that the panel and Appellate Body had found to be inconsistent with the
ADA and found that
the antidumping measure should be maintained. Subsequently, in December
2001, Thailand informed the WTO that it had fully implemented the DSB*s
recommendations. In January 2002, Poland and Thailand
7 The EU, Japan, and the United States were third parties in this case.
announced they had reached agreement that this case should no longer be on
the DSB*s agenda.
Table 9: Case 6 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether Thai authorities had sufficient Poland did not establish that the
contents of the Not appealed. evidence of dumping, injury, and the
application were insufficient to meet the causal link between them to
initiate an requirements of article 5.2. investigation under article 5.2
of the ADA.
Whether Thailand*s injury determination Confidential government documents,
which had Reversed the panel. was based on an *objective examination* not
been made available to the parties, could of the facts, as required by
articles 3.1 and
not be reviewed by the panel. Investigating authorities may rely on 17.6(
i) of the ADA, since it included
confidential information not shared with the evaluation of confidential
information that
Articles 3.1 and 17. 6( i) dictate that the parties. was not made
available to the parties. reasoning supporting an injury determination
must be formally or explicitly stated in the The *facts* referred to in
article 17. 6( i) documentary record of the investigation to
embrace all facts, confidential and which interested parties have access
and that nonconfidential, that are made available to the factual basis
relied upon by the authorities
the authorities of the importing member. must be discernible from those
documents.
Whether Thailand was required to The text of article 3. 4 is mandatory,
and each of Upheld the panel*s interpretation of article consider all of
the15 injury factors listed in the 15 individual factors listed must be
3.4 and its application of the standard of article 3.4 of the ADA in
making an injury evaluated. Therefore, Thailand acted
review in article 17.6( ii). determination.
inconsistently with article 3. 4 of the ADA. Since article 3.4 requires
consideration of all its listed factors, the panel could not
have found Thailand*s argument, that not all factors need to be
considered, a permissible interpretation under article 17.6( ii).
Whether Thailand was required to Thailand was not required to consider all
the Not appealed. consider all the factors listed in article 3.5
factors listed in article 3.5 since that list is of the ADA with respect
to demonstrating a
merely illustrative. casual relationship between dumped imports and injury
to the domestic industry.
Thailand had considered the factors raised by Poland. Source: GAO analysis
of WTO panel and Appellate Body reports.
GAO Case Number 7: Complainant: United States 8 Mexico * Antidumping
Defendant: Mexico Investigation of HighFructose Corn Syrup (HFCS) from the
United States (DS 132)
Nature of Complaint The United States challenged Mexico*s imposition of
antidumping duties on imports of two grades of high- fructose corn syrup
(HFCS) from the United States. The final antidumping measure imposed
duties of up to $175.50 per metric ton of imported HFCS and ordered the
collection of duties retroactive to the imposition of provisional duties.
The United States contended that both the initiation of the antidumping
investigation and the determination of threat of injury were inconsistent
with the ADA.
Outcome Although the panel upheld the way in which Mexico initiated its
antidumping investigation, it concluded that Mexico*s imposition of the
antidumping measure was inconsistent with various provisions of the ADA.
As a result, the panel recommended that the DSB request that Mexico bring
its antidumping measure into conformity with its obligations under the
ADA. The panel findings were not appealed.
Compliance Action Mexico revised its antidumping determination following
the panel report. 9 However, in a subsequent proceeding, Mexico again
concluded that the imports of HFCS constituted a threat of material injury
to the domestic sugar industry. As a result, the United States requested a
compliance review under article 21.5 of the DSU. In the article 21. 5
proceeding, the Appellate Body upheld panel findings that Mexico*s revised
determination
8 Jamaica and Mauritius were third parties in this case. 9 A North
American Free Trade Agreement (NAFTA) panel also found that Mexico failed
to establish a threat of material injury to the domestic injury.
was inconsistent with various provisions of the ADA. According to U. S.
officials, Mexico revoked the antidumping measure in May 2002.
Table 10: Case 7 * Major Case Issues and Panel Findings Major case issues
Panel findings
Whether Mexico had enough evidence of a threat of injury or of a A panel*s
role under the standard of review in article 17.6( i) is to causal link
between dumped imports and injury to initiate an examine whether an
unbiased and objective investigating authority antidumping investigation
as provided by article 5. 3 of the ADA.
evaluating the evidence and information before it could properly have
determined that sufficient evidence of dumping, injury, and causal link
existed to justify initiating the antidumping investigation. A panel*s
role is not to newly evaluate the evidence and information.
An unbiased and objective investigating authority could have found
sufficient evidence to justify initiation of an antidumping investigation
under article 5.3.
Under the standard of review in article 17.6( i), as well as article 17.
5( ii), in evaluating the consistency of the initiation with article 5.3,
a panel may only consider what was actually available to the investigating
authority at the time of initiation of the antidumping investigation.
Whether in reaching a determination that a threat of material injury A
threat of injury determination requires that the factors in both exists,
Mexico had to consider factors set forth in both articles 3.7
articles 3.7 and 3. 4 be considered. and 3. 4 of the ADA, which deal
respectively with threat of material injury and the impact of dumped
imports on the domestic industry.
The Mexican investigating authority*s determination of threat of material
injury failed to adequately address the factors set forth in article 3.4
of the ADA concerning the impact of dumped imports on the domestic
industry. Accordingly, its determination of threat of material injury was
inconsistent with the ADA.
Whether Mexico properly concluded in its final determination that Mexico
ignored possible effects of imports on the portion of the the relevant
domestic industry for purposes of its threat of injury domestic industry*s
production sold in the household sector and determination was Mexican
sugar producers, instead of the
ignored the effect of the household sector on the condition of the
industry as a whole.
domestic producers of sugar. Accordingly, Mexico failed to make a
determination of threat of material injury to the domestic industry as a
whole, consistent with the requirements of article 3 of the ADA. Source:
GAO analysis of the WTO panel report.
GAO Case Number 8: Complainants: European Union (EU), Japan 10 United
States *
Defendant: United States Antidumping Act of 1916 (DS 136/ 162)
Nature of Complaint Japan and the EU separately challenged section 801 of
the Revenue Act of 1916 (1916 Act) 11 as being inconsistent with article
VI of GATT 1994 and various provisions of the ADA. Section 801 of the 1916
Act allows for private claims against, and criminal prosecutions of,
parties that import or assist in importing goods into the United States at
a price substantially less than actual market value or wholesale price.
The Japan and EU challenges were to the law itself rather than to its
implementation.
Outcome The Appellate Body affirmed the panel conclusions that antidumping
legislation, including the 1916 Act, can be directly challenged, absent
any
particular application. It also upheld the panel findings that the 1916
Act itself was inconsistent with article VI of GATT 1994 and various
provisions of the ADA. Accordingly, the Appellate Body recommended that
the United States bring the 1916 Act into conformity with its obligations
under these agreements.
Compliance Action The United States continues to work to enact legislation
to implement the WTO ruling. Although a number of bills have been
introduced in the
Congress calling for repeal of section 801 of the 1916 Act, to date no
legislation has been passed. As of July 15, 2003, the latest bills were H.
R. 1073, introduced in the House of Representatives on March 4, 2003; S.
1080, introduced in the Senate on May 19, 2003; and S. 1155, introduced in
the Senate on May 23, 2003. The bills are somewhat different in that the
repeals under H. R. 1073 and S. 1155 would not affect pending cases,
whereas the S. 1080 repeal would apply to them.
10 India and Mexico were third parties in this case. 11 15 U. S. C. S: 72.
Table 11: Case 8 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether panels have jurisdiction to hear The panel had jurisdiction to
hear direct Upheld the panel. challenges of antidumping law, absent any
challenges to the 1916 Act. specific application of the law. GATT and WTO
case law firmly establish that members may directly challenge legislation.
Nothing is inherent in antidumping legislation that would
distinguish it from other types of legislation for these purposes.
Whether the 1916 Act constitutes a The 1916 Act is mandatory. Upheld the
panel. mandatory or discretionary law within WTO and GATT practice.
The discretion enjoyed by the United States The relevant discretion for
purposes of Department of Justice about whether to distinguishing between
mandatory and initiate a case is not the kind of discretion to
discretionary legislation is discretion vested transform the 1916 Act into
discretionary
in the executive, and not the judicial, branch legislation. of government.
Whether article VI of GATT 1994 and the These WTO provisions apply to the
1916
Upheld the panel. ADA apply to the 1916 Act. Act. Article VI and the ADA
apply to any specific
action against dumping. The civil and criminal proceedings and penalties
provided for in the 1916 Act are specific actions
against dumping. Whether the 1916 Act is inconsistent with
The 1916 Act violates various requirements Upheld the panel. article VI of
GATT 1994 and various
of article VI and the ADA. provisions of the ADA.
Article VI and the ADA limit permissible The 1916 Act violates article VI:
2 of GATT
responses to dumping to definitive 1994 by providing for imposition of
fines or antidumping duties, provisional measures, imprisonment or for
recovery of treble
and price undertakings. To the extent that damages.
the 1916 Act provides for civil and criminal proceedings and penalties, it
is inconsistent with these obligations. Source: GAO analysis of WTO panel
and Appellate Body reports.
GAO Case Number 9: Complainant: European Union (EU) 12 United States *
Defendant: United States Imposition of Countervailing Duties on Certain
Hot- Rolled Lead and Bismuth Carbon Steel Products Originating in the
United Kingdom (DS 138)
Nature of Complaint The United States imposed CVDs on imports of certain
hot- rolled lead and bismuth carbon steel products originating in the
United Kingdom, as a result of alleged subsidies 13 the British Government
granted to British Steel Corporation, a state- owned company, between 1977
and 1986. The British Government began the privatization of British Steel
in 1986 and completed it in 1988. The Commerce Department found the sale
to be at arm*s length for fair market value and consistent with commercial
considerations. Notwithstanding these factors, the Commerce Department
imposed CVDs
on these United Kingdom imports, initially in 1993 and in subsequent
annual reviews, on the grounds that a certain proportion of the subsidies
granted to British Steel had passed through to the new entities. The EU
claimed that the U. S. methodology 14 in calculating the amount of these
subsidies was inconsistent with several provisions of the WTO SCM
Agreement.
Outcome The Appellate Body upheld the panel finding that the financial
contributions provided to British Steel did not confer a benefit on the
new
12 Brazil and Mexico were third parties in this case. 13 The subsidies
principally were in the form of equity infusions. 14 This methodology is
commonly referred to as the *gamma* methodology.
owners. In doing so, the Appellate Body also upheld a panel finding that
faulted the Commerce Department*s methodology in presuming that a benefit
had been provided to the new owners. Accordingly, it found that the U. S.
CVDs were inconsistent with the SCM Agreement and recommended that the DSB
request that the United States bring its measures into
conformity with its obligations under that agreement. The panel suggested
that the United States take all appropriate steps, including revision of
its administrative practices, to prevent a violation of the SCM Agreement,
but the Appellate Body did not make this specific recommendation.
Compliance Action Prior to the issuance of the Appellate Body report, the
Commerce Department revoked the CVD measure in response to a request from
the U. S. industry. However, the Commerce Department changed its
methodology as a result of related domestic litigation. 15 15 See
Delverde, SRL v. United States, 202 F. 3d 1360, 1362- 1363 (Fed. Cir.
2000).
Table 12: Case 9 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether the panel should have applied the Article 11 is the standard of
review that
Upheld the panel. standard of review in article 17. 6 of the ADA to
should be applied in cases involving a dispute under Part V of the SCM
Agreement.
Part V of the SCM Agreement. Article The Decision on Review of Article
17.6, b 17. 6 only applies in cases brought
which provides that article 17. 6 shall be under the ADA.
reviewed after a period of 3 years with a view to considering its general
application, Ministerial Declaration on Dispute supports the conclusion
that the article 17. 6 Settlement under article VI of the ADA a standard
applies only to disputes arising is not mandatory and simply recognizes
under the ADA. the need for consistent resolution of antidumping and CVD
disputes but does not mandate any action.
Whether Commerce Department administrative The Commerce Department should
Upheld the panel. reviews should have examined whether a
have examined whether there was a benefit accrued to the new owners of
British benefit. Given changes in ownership leading to Steel.
creation of the new entity, the Commerce Irrebuttable presumption in U. S.
CVD Department was required to examine whether law that nonrecurring
subsidies pass
a benefit accrued to the new owners. through to a new owner violates the
SCM Agreement.
Disagreed with the panel*s view that the method for establishing the
existence of a benefit is always the same for the original investigation
and an administrative review. Whether a benefit was provided to the new
Because the privatization was done Upheld the panel. owners as a result of
the contributions made to through an arm*s length, fair market British
Steel.
value transaction, subsidies provided to British Steel did not constitute
a benefit to the new owners. Whether the panel exceeded its mandate by No
benefit was conferred. Upheld the panel. finding that no benefit was
conferred on the new owners of British Steel.
Panel acted within the scope of its DSU mandate to resolve this issue.
Source: GAO analysis of WTO panel and Appellate Body reports. a The full
name is the Ministerial Declaration on Dispute Settlement Pursuant to the
Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade
1994 or Part V of the Agreement on Subsidies and Countervailing Measures.
b The full name is the Decision on Review of Article 17.6 of the Agreement
on Implementation of Article
VI of the General Agreement on Tariffs and Trade 1994.
GAO Case Number 10: Complainant: India 16 European Union *
Defendant: European Union (EU) Antidumping Duties on Imports of Cotton-
Type Bed Linen from India (DS 141)
Nature of Complaint India challenged the EU*s imposition of antidumping
duties on imports of various types of cotton bed linens from India. Due to
the high number of domestic producers involved in its investigation, the
EU established a
sample of domestic producers consisting of 17 of the 35 companies
identified as the EU industry. The dumping duties that were imposed
differed in amount depending on the exporter in question. India argued
that the imposition of antidumping duties was inconsistent with various
provisions of the ADA. One of the principal issues involved the EU*s
practice of zeroing in calculating antidumping margins.
Outcome The Appellate Body affirmed the panel*s finding that the EU*s
practice of zeroing was inconsistent with the ADA. The Appellate Body also
reversed several panel findings and concluded that the EU had acted
inconsistently
with the ADA in calculating amounts for administrative, selling, and
general costs and profits in its investigation. As a result, the Appellate
Body recommended that the DSB request that the EU bring its antidumping
measure into conformity with its obligations under the ADA.
Compliance Action After the DSB adopted the Appellate Body report, the EU
established lower dumping margins for Indian imports of bed linens.
Although it also
concluded that dumped imports from India were still causing material
injury to the EU industry, the EU suspended application of the duties for
these imports. In a subsequent proceeding, the EU determined that there
was a causal link between dumped imports from India and material injury to
the EU industry, but the EU continued to suspend imposition of the
16 Egypt, Japan, and the United States were third parties in this case.
antidumping duties. Because India believed that the EU had not complied
with the recommendations of the DSB, it brought a proceeding under article
21. 5 of the DSU contesting compliance. Although the panel in the article
21.5 proceeding determined that the EU had implemented the recommendation
of the DSB, the Appellate Body reversed and found that the EU was still
acting inconsistently with the ADA. Accordingly, it recommended that the
DSB request that the EU bring its antidumping measure into conformity with
that agreement.
Tabl e 13: Case 10 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether the EU violated the ADA by converting The EU acted inconsistently
with article 2.4.2
Upheld the panel. negative dumping margins to zero in
of the ADA by calculating margins of dumping establishing overall margins
of dumping. through a methodology that included zeroing
The EU clearly identified cotton- type of negative price differences.
bed linen as the product under investigation. The dumping calculation can
only be for the product as a whole and not for individual
In determining a dumping margin for a transactions concerning that product
or product, article 2.4.2 refers to a discrete models of that product.
comparison of all comparable transactions. By not offsetting dumping By
using zeroing for some models, the EU
margins, the EU did not take into failed to carry out a comparison with
all account export transactions involving transactions, as required by
article 2.4.2.
models of cotton- type bed linen that were not dumped. This inflated the
margin of dumping.
Export transactions involving types or models falling within the scope of
a like product are *comparable export transactions* within the meaning of
article 2.4.2. Whether the panel failed to apply the legal
In accord with the provisions of the Vienna The panel applied the standard
of standard of review in article 17. 6( ii) of the ADA Convention
governing treaty interpretation,
review in article 17.6( ii). by not finding that the EU*s zeroing practice
was
the panel looked first to the ordinary meaning a permissible
interpretation.
of the phrase *a comparison of a weighted The panel viewed the EU
interpretation average normal value with a weighted
of article 2.4.2 of the ADA, allowing it to average of all comparable
export use zeroing, as impermissible. Thus, transactions* in article
2.4.2, in its context and
the panel was not faced with a choice in light of its object and purpose,
in among multiple permissible determining whether zeroing was permitted.
interpretations that, under article 17.6( ii), would have required it to
give deference to the EU interpretation.
Whether the EU*s methodology for determining The EU*s methodology was
consistent with
Reversed the panel. amounts for administrative, selling, and general
article 2.2.2( ii). costs and for profit, in constructing normal Method
for calculating amounts for value, was proper under article 2.2.2( ii) of
the
The method for calculating amounts for administrative, selling, and
general ADA.
administrative, selling, and general costs and costs and profits can only
be used if profits under article 2.2.2( ii) may be applied data relating
to more than one other where there is data for only one other exporter
exporter or producer are available. or producer. Source: GAO analysis of
WTO panel and Appellate Body reports.
GAO Case Number 11: Complainant: Mexico 17 Guatemala * Definitive
Defendant: Guatemala Antidumping Measures on Grey Portland Cement from
Mexico (DS 156)
Nature of Complaint In 1999, Mexico challenged Guatemala*s imposition of
an antidumping measure on imports of portland cement from Mexico. The
measure was in the form of an antidumping duty of 89. 54 percent that was
imposed on
these imports. In its challenge, Mexico contended that the initiation and
conduct of the antidumping investigation and the imposition of the measure
violated article VI of GATT 1994 and various provisions of the ADA.
Mexico*s challenge was a follow- up to an earlier Mexican challenge to
Guatemala*s imposition of antidumping duties on imports of the same
product (see case summary 2). Although the panel in that case ruled that
Guatemala had acted inconsistently with several provisions of the ADA and
recommended that Guatemala revoke the dumping order, the Appellate Body
reversed the panel and found that the dispute was not properly before the
panel. Outcome The panel determined that Guatemala did not properly
determine that there
was sufficient evidence to justify initiation of the antidumping
investigation. It also found that Guatemala did not properly determine
that the imports under investigation were being dumped, that the domestic
producer of cement in Guatemala was being injured, or that the imports
were the cause of the injury. Accordingly, it concluded that Guatemala had
acted inconsistently with various provisions of the ADA. Under the
authority provided in article 19.1 of the DSU, the panel recommended that
Guatemala revoke its antidumping measure on these imports. However, the
17 Ecuador, El Salvador, the EU, Honduras, and the United States were
third parties in this case.
panel rejected a Mexican request that the panel recommend that Guatemala
refund previously collected antidumping duties. The panel findings were
not appealed.
Compliance Action In December 2000, Guatemala informed the WTO that it had
removed the antidumping measures in question and complied with its
recommendations.
Table 14: Case 11 * Major Case Issues and Panel Findings Major case issues
Panel findings
Whether the panel should perform a de novo review of the evidence It is
not the panel*s role under article 17 to perform a de novo review under
the standard of review in article 17.6( i) of the ADA. of the evidence
that was before the investigating authority. The panel must determine
whether an unbiased and objective investigating authority evaluating the
evidence before it at the time of the investigation could properly have
made the determinations
Guatemala made. A panel is not to examine any new evidence that was not
part of the record of the investigation.
Whether Guatemala had sufficient evidence to justify initiation of An
objective and unbiased investigating authority could not have the
antidumping investigation, consistent with article 5.3 of the properly
determined that there was sufficient evidence of dumping ADA.
and threat of injury to justify Guatemala*s initiating an antidumping
investigation under article 5.3. Whether Guatemala informed the Mexican
exporter of the essential
Guatemala*s disclosing to Mexico the essential facts forming the facts
that would be taken into account in imposing the definitive
basis of its preliminary antidumping determination and offering to
antidumping measure, as required by various provisions in article
provide interested parties with copies of all information in its file 6.9
of the ADA.
were not sufficient to satisfy the requirements of article 6.9. Article 6.
9 is intended to allow exporters a fair opportunity to comment on the
important issues in an investigation after the record is closed to new
facts. An interested party will not know whether a particular fact is
important unless the investigating authority has
explicitly identified it as one of the essential facts. Whether Guatemala
was entitled to rely on the best information Guatemala was not entitled to
rely on the best information available. available, as permitted by article
6.8 of the ADA, for calculating
Guatemala did not act as an objective and impartial investigating normal
value because the Mexican exporter refused to cooperate authority in
finding that the Mexican exporter significantly impeded in the
investigation.
Guatemala*s investigation because it objected to Guatemala*s including
nongovernmental experts with a conflict of interest in its verification
team.
Although there are consequences under article 6.8 when interested parties
fail to cooperate with an investigating authority, they do not apply here
since the Guatemalan authority did not act in a reasonable, objective, and
impartial manner.
Source: GAO analysis of the WTO panel report.
GAO Case Number 12: Complainant: European Union (EU) 18 United States *
Defendant: United States Definitive Safeguard Measures on Imports of Wheat
Gluten from the European Communities (DS 166)
Nature of Complaint The EU challenged a United States safeguard measure
imposed on imports of wheat gluten 19 from the EU. The safeguard measure
consisted of a quantitative restriction on these imports for 3 years. The
United States excluded products from Canada, a U. S. NAFTA 20 partner, and
from certain
other WTO members from the application of the safeguard. The EU contended
that the safeguard measure violated provisions of the Safeguards Agreement
and GATT 1994. The EU complaints were directed at the U. S. *s serious
injury determination, its causation 21 analysis, and its findings about
the relationship between the members included in its investigation and
those covered by the safeguard measure. Outcome The Appellate Body found
that the U. S. *s safeguard measure was applied inconsistently with the
Safeguards Agreement and GATT 1994 and
recommended that the DSB request that the United States bring the measure
into conformity with those agreements. Although the Appellate Body upheld
part of the panel findings on serious injury, it reversed the panel
findings on another serious injury issue and on an important aspect of the
panel*s causation analysis. In addition, the Appellate Body agreed
18 Australia, Canada, and New Zealand were third parties in this case. 19
Wheat Gluten is a by- product of the industrial production of starch and,
among other things, is used to enrich protein in flours for bread, pasta,
etc. 20 The parties to NAFTA are Canada, Mexico, and the United States.
21 Causation in safeguards cases refers to whether increased imports cause
or threaten to cause serious injury to domestic industry.
with the panel that the United States inappropriately excluded imports
from Canada from its safeguard measure after including such imports in its
injury investigation.
Compliance Action The safeguard measure expired in June 2001.
Table 15: Case 12 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether the United States was required to The United States need only
consider Reversed the panel. examine only the relevant factors listed in
factors other than those in article 4.2( a) that article 4.2( a) of the
Safeguards Agreement
are clearly raised by the interested parties in The United States must
evaluate all relevant in evaluating serious injury to a domestic
the investigation. factors, not just those raised by interested industry.
parties. Whether the causation standard in article
Increased imports alone must cause serious Reversed the panel. 4.2( b) of
the Safeguards Agreement
injury. requires that increased imports alone cause Domestic authorities
must only find a causal serious injury to the domestic industry.
link between increased imports and serious injury that shows a genuine and
substantial relationship of cause and effect between the imports and
injury.
Whether the United States, consistent with Did not fully analyze this
issue. The United States did not adequately show article 4.2( b) of the
Safeguards Agreement,
that injury caused to the domestic industry adequately explained that
injury to the by increases in average capacity to produce domestic
industry from factors other than wheat gluten was not attributed to
increased
increased imports was not attributed to imports. increased imports.
Whether the United States properly The United States was not justified in
Upheld the panel. excluded Canadian imports from the
excluding imports from Canada from its safeguard measure after including
such
safeguard measure. Although the United States examined imports in its
investigation to determine
imports from Canada separately, it did not whether serious injury to the
domestic
The United States failed to consider whether establish that imports from
the other sources
industry had occurred. non- Canadian imports themselves caused satisfied
the conditions for application of a
serious injury. safeguard measure.
Whether the panel properly applied the The panel applied the standard of
review to
The panel properly applied article 11 to standard of review in article 11
of the DSU in
evaluating four factors. three factors, but violated article 11 evaluating
factors dealing with serious regarding the fourth factor** profits and
injury, as required by article 4.2( a) of the losses** by improperly
relying on Safeguards Agreement.
supplementary information the United States provided to the panel that was
not part of the domestic proceeding.
Source: GAO analysis of WTO panel and Appellate Body reports.
GAO Case Number 13: Complainants: Australia, New Zealand 22 United States
*
Defendant: United States Safeguard Measures on Imports of Fresh, Chilled,
or Frozen Lamb Meat from New Zealand and Australia (DS 177/ 178)
Nature of Complaint Australia and New Zealand challenged a U. S. safeguard
measure imposed on imports of fresh, chilled, and frozen lamb meat from
New Zealand and Australia. The measure was in the form of a tariff rate
quota 23 that was to span 3 years. The safeguard measure did not apply to
imports from Canada, Mexico, certain other U. S. trading partners, and
developing countries.
Australia and New Zealand contended that the safeguard measure violated
various provisions of the Safeguards Agreement and GATT 1994. Their
complaints were directed at U. S. findings about the definition of the
domestic lamb meat industry, the existence of serious injury, and the
causal relationship between increased imports and injury to the domestic
lamb meat industry. Outcome The Appellate Body found that the United
States safeguard measure was
applied inconsistently with the Safeguards Agreement and GATT 1994 and
recommended that the DSB request that the United States bring its measure
into conformity with those agreements. Although the Appellate Body upheld
a number of important panel findings* including those involving the
definition of the domestic lamb meat industry, serious injury, and a part
of the panel*s causation analysis* it reversed the panel*s
interpretation of the causation requirements in the Safeguards Agreement.
22 Canada, the EU, Iceland, and Japan were third parties in this case. 23
Tariff rate quotas consist of two different tariff rates. A lower rate is
applied to a certain quota amount of a product, and a higher tariff rate
applies to amounts that exceed that quota.
The Appellate Body also concluded that the panel incorrectly applied the
standard of review in article 11 in evaluating the U. S. *s determination
about the existence of a threat of serious injury. Compliance Action In
August 2001, the United States decided to end the application of the
safeguard measure on imports of lamb meat, effective in November 2001.
Table 16: Case 13 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether the United States violated article Found a violation.
Upheld the panel finding though it didn*t XIX: 1( a) of GATT 1994 by
failing to agree with all of the panel*s reasoning. demonstrate, as a
matter of fact, the
Investigating authorities must clearly existence of *unforeseen
developments*
examine the existence of *unforeseen Failure to address *unforeseen prior
to applying a safeguard measure.
developments* and come to a reasoned developments* is not surprising. U.
S. legal conclusion about it.
measures do not obligate it to examine them in its investigation into the
situation of a domestic industry. Whether the United States appropriately
Found the U. S. definition improper. Upheld the panel. defined the
domestic industry in its safeguard investigation by including growers
An enterprise can only be considered a Input products can only be included
in and feeders of live lambs.
producer of goods it actually makes. defining the domestic industry if
they are Growers and feeders of live lambs are
*like or directly competitive* with the end producers of live lambs, not
lamb meat. products.
Whether the panel appropriately interpreted The panel*s task was limited
to reviewing the
Upheld the panel*s interpretation of the and applied the standard of
review in article U. S. threat of injury determination and
standard of review, but found that the panel 11 in its evaluation of the
U. S. determination
examining whether the determination did not apply it properly in examining
that a threat of serious injury to the domestic provided an adequate
explanation of how
whether the United States provided a industry existed.
the facts supported it. The panel should not reasoned and adequate
explanation of how conduct a new review of the evidence.
the facts supported its determination that a threat of serious injury
existed.
Whether the U. S. examination of causation United States violated article
4.2( b) by Upheld the panel finding but reversed its was consistent with
article 4.2( b) of the
applying a *substantial cause* a standard interpretation that increased
imports alone Safeguards Agreement. and by failing to ensure that the
threat of
must cause, or threaten to cause, serious serious injury caused by other
factors was
injury. not attributed to increased imports.
Since the United States did not provide a Increased imports alone must be
sufficient meaningful explanation of the injurious to cause serious
injury.
effects of six factors it considered, it was impossible to determine
whether injury caused by those factors was attributed to
increased imports. Source: GAO analysis of WTO panel and Appellate Body
reports.
a The panel explained that under the U. S. standard, the U. S.
International Trade Commission examines whether imports are an important
cause of injury and no less important than any other single cause.
GAO Case Number 14: Complainant: Korea 24 United States *
Defendant: United States Antidumping Measures on Stainless Steel Plate in
Coils and Stainless Steel Sheet and Strip from Korea (DS 179)
Nature of Complaint Korea challenged several aspects of the U. S.
antidumping investigation and measures on imports of stainless steel plate
in coils (plate) and stainless steel sheet and strip (sheet) from Korea.
Specifically, Korea challenged the U. S. treatment of currency conversions
and of sales to U. S. companies that failed to pay for the imports due to
bankruptcy. Finally, Korea challenged the U. S. calculation of the dumping
margin.
Outcome The panel found several aspects of the U. S. investigation to be
inconsistent with the ADA. It found that the currency conversions in the
sheet investigation were inconsistent with the ADA, though it also found
that the conversions in the plate investigation were consistent with the
ADA. The panel also found the U. S. treatment of sales for which payment
was never received and its use of multiple averaging periods in its
calculation of dumping margins were inconsistent with the ADA.
Accordingly, the panel recommended that the United States bring its
antidumping duties on Korean steel plate and sheet into compliance with
the ADA. The panel findings were not appealed.
Compliance Action As of April 2003, the antidumping orders were still in
effect. According to officials from the Commerce Department, the United
States made some
revisions in its calculation of dumping margins in this case. 24 The EU
and Japan were third parties in this case.
Table 17: Case 14 * Major Case Issues and Panel Findings Major case issues
Panel findings
Whether the U. S. actions regarding currency conversions violated The U.
S. treatment of currency conversions in the stainless steel the ADA. plate
investigation complied with the ADA. However, in the sheet
investigation, the United States acted inconsistently with the ADA by
performing unnecessary currency conversions.
Whether the United States treatment of sales for which payment The United
States acted inconsistently with article 2.4 of the ADA was never received
due to a company*s bankruptcy violated article
by improperly adjusting for unpaid sales. 2.4 of the ADA.
Whether the U. S. use of multiple averaging periods for comparing The U.
S. *s use of multiple averaging periods in this investigation prices* by
dividing the period of investigation into two averaging was inconsistent
with the requirement of article 2.4. 2 to compare a periods to take into
account a major devaluation of the Korean *weighted average normal value
with a weighted average of all won* violated articles 2.4.2, 2.4.1, and
2.4 of the ADA. comparable export transactions.* However, the U. S. *s use
of multiple averaging periods was not inconsistent with article 2. 4. 1 or
the first sentence in the chapeau of article 2. 4 of the ADA.
Source: GAO analysis of the WTO panel report.
GAO Case Number 15: Complainant: Japan 25 United States *
Defendant: United States Antidumping Measures on Certain Hot- Rolled Steel
Products from Japan (DS 184)
Nature of Complaint Japan challenged the U. S. *s imposition of
antidumping duties on imports of hot- rolled steel products from Japan.
Japan claimed that certain provisions of U. S. antidumping laws,
regulations, and administrative procedures were inconsistent with the ADA.
For example, Japan challenged the U. S. *s application of *facts
available* and adverse facts as inconsistent with its ADA obligations.
Japan also challenged the U. S. *s statutory method 26 for calculating an
*all others* rate as inconsistent with the ADA.
Outcome The Appellate Body upheld panel findings of U. S. violations
relating to the use of facts available, adverse facts, calculation of all
other rates, and
application of the arm*s- length test. 27 The Appellate Body also reversed
the panel finding on the issue of nonattribution without specifically
finding against the United States on that issue. Although the Appellate
Body upheld a panel finding that United States law on captive production
was consistent with the ADA, it reversed the panel*s finding that the
United States had applied the law properly. As a result of the findings
against the United States, the Appellate Body recommended that the DSB
request that the United States bring its measures into conformity with the
ADA. The
25 Brazil, Canada, Chile, the EU, and Korea were third parties in this
case. 26 Section 735( c)( 5)( A) of the Tariff Act of 1930. 27 This test
relates to whether certain sales are *in the ordinary course of trade.*
The United States treated home market sales by an exporter to an
affiliated customer as within the ordinary course of trade so long as
prices to the affiliated customers were on average at least 99.5 percent
of the average prices charged to unaffiliated customers.
Appellate Body also made important statements about the standard of review
in article 17. 6 of the ADA. 28 Compliance Action In November 2002, the
United States completed a new antidumping
determination that implemented the recommendations and rulings of the DSB.
As a result of the changes made to the dumping margin calculations, the
dumping margins for all three companies and all others were reduced.
The United States also revised its rules regarding its arm*s- length test
to determine if sales are *in the ordinary course of trade.* The United
States continues work to implement the recommendations and rulings
regarding the U. S. antidumping statutory provision on the *all others
rate.* The United States and Japan agreed to extend the deadline for
implementation to December 2003, or until the end of the first session of
the next Congress, whichever is earlier. 28 The Appellate Body concluded
that there was no conflict between the factual standard of
review in article 17.6( i) and article 11, and that the legal standard of
review in article 17.6( ii) supplements rather than replaces article 11.
The Appellate Body also concluded that the second sentence of article
17.6( ii) presupposes that application of the rules in articles 31 and 32
of the Vienna Convention on the Law of Treaties could give rise to, at
least, two permissible interpretations of some ADA provisions.
Table 18: Case 15 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether the United States violated article The United States acted
inconsistently with
Upheld the panel, but on the basis of 6.8 and annex II of the ADA by using
facts
the ADA because an objective and modified reasoning. available instead of
certain information from unbiased investigating authority could not two
companies submitted after the have concluded the two companies failed to
expiration of the deadline for such
provide necessary information within a information.
reasonable period of time. Whether the United States violated article
The United States acted inconsistently with Upheld the panel. 6.8 and
annex II of the ADA by using certain the ADA by using certain adverse
adverse information because a company did
information because the use of adverse not provide information the United
States facts is only appropriate when a party does had requested.
not cooperate in an investigation. An unbiased and objective investigating
authority could not have found that the Japanese company failed to
cooperate. Whether the U. S. *s statutory methodology for U. S. law
governing calculation of a dumping Upheld the panel. calculating a dumping
margin for exporters
margin for all other exporters, and its and producers was not individually
application, was inconsistent with article investigated* the *all others
rate** and its
9. 4 of the ADA because it required application violated article 9. 4 of
the ADA.
consideration of margins that were based, in part, on facts available.
Whether the United States *captive The captive production law is not on
its face Upheld the panel with regard to the challenge production* law a
is, on its face, and, as or as applied inconsistent with the ADA.
to the captive production law, but reversed applied, inconsistent with the
ADA.
the panel with respect to its application. The U. S. International Trade
Commission (ITC) made an affirmative injury or threat of
The captive production provision does not injury determination whether
they applied
require an exclusive focus on the merchant the captive production
provision or not.
market, nor does it exclude an equivalent examination of the captive
market. The ITC provided no adequate explanation about why it failed to
examine the merchant market without also examining the captive market in a
comparable manner, and therefore acted inconsistently with articles 3.1
and 3.4 of the ADA.
Whether the U. S. *s application of the arm*slength U. S. application of
the arm*s- length test
Upheld the panel finding on the basis of test was inconsistent with
article 2.1
violated the ADA because it did not rest on modified reasoning. of the
ADA.
a permissible interpretation of the phrase *sales in the ordinary course
of trade.*
(Continued From Previous Page)
Major case issues Panel findings Appellate Body findings
Whether the U. S. *s reliance on downstream The United States acted
inconsistently with
Reversed the panel. sales between parties affiliated with an article 2.1
of the ADA by using in its investigated exporter and independent
calculation of normal value, certain Reliance by the United States on
purchasers to calculate normal value was
downstream sales made by an investigated downstream sales to calculate
normal value inconsistent with article 2.1 of the ADA. exporter*s
affiliates to independent
rested upon an interpretation of article 2.1 of producers. the ADA that,
in principle, is permissible following application of the rules of treaty
Normal value is to be determined on the
interpretation in the Vienna Convention. basis of the prices of sales made
by the investigated companies themselves, in the
ordinary course of trade. Whether the United States violated article
The United States did not violate article 3.5 Reversed the panel reasoning
without 3.5 of the ADA by failing to ensure that injury of the ADA because
it did not attribute
specifically finding against the United States. caused by factors other
than dumped
injury actually caused by other factors to imports was not attributed to
the dumped
dumped imports. Investigating authorities must separate and imports.
distinguish the injurious effects of other factors from the injurious
effects of dumped imports. Source: GAO analysis of WTO panel and Appellate
Body reports.
a Section 771( 7)( C)( iv) of the Tariff Act of 1930, as amended. This
provision distinguishes between the segment of the market consisting of
commercial shipments on the open market and the captive segment of the
market, which refers to internal transfers of the product that generally
do not enter the open market because the product is used by an integrated
producer to manufacture a downstream product. Domestic producers whose
production is captive, therefore, do not compete directly with
importers because their imports generally are not used in the captive
production of the downstream product. Japan argued that the captive
production provision ignores the fact that a significant part of the
domestic industry* captive production* is shielded or protected from the
effects of allegedly dumped imports.
GAO Case Number 16: Complainant: European Union (EU) 29 Argentina *
Definitive
Defendant: Argentina Antidumping Measures on Imports of Ceramic Floor
Tiles from Italy (DS 189)
Nature of Complaint The EU challenged Argentina*s imposition of
antidumping measures on imports of ceramic floor tiles from Italy. The
antidumping measures took the form of specific antidumping duties that
were based on the difference between the actual import price and a
designated minimum export price, whenever the former was lower than the
latter. The EU claimed that the antidumping measures were inconsistent
with various provisions of the ADA. Among other things, the EU maintained
that Argentina disregarded important information provided by exporters,
failed to allow for differences in physical characteristics between models
of tiles exported to Argentina and those sold in Italy, and did not inform
Italian exporters of important facts that formed the basis for the
decision to apply antidumping
measures. Outcome The panel found that Argentina acted inconsistently with
various
provisions of the ADA and upheld most of the EU claims. As a result, the
panel recommended that Argentina bring its antidumping measures into
conformity with its obligations under the ADA. The panel findings were not
appealed.
Compliance Action In May 2002, Argentina informed the DSB that on April
24, 2002, it had revoked the antidumping measure at issue in this case.
29 Japan, Turkey, and the United States were third parties in this case.
Table 19: Case 16 * Major Case Issues and Panel Findings Major case issues
Panel findings
Whether Argentina acted inconsistently with article 6. 8 and annex II
Argentina acted inconsistently with article 6. 8 and annex II of the of
the ADA by calculating dumping margins on the basis of facts ADA by (1) in
large part disregarding exporter information used for available and
disregarding, in whole or in part, information
determining normal value and export prices; (2) not informing the
submitted to the Argentine investigating authority by Italian tile
exporters why it rejected the information; (3) not providing exporters
exporters.
with an opportunity to provide further explanations of questions asked,
within a reasonable period; and (4) not giving, in any published
determinations, the reasons for rejection of evidence or information.
In applying the standard of review in article 17. 6( i), the panel found
that the Argentine authority failed to perform an objective and unbiased
evaluation of the facts by apparently deciding to disregard, in large
part, the information provided by the exporters.
Whether Argentina acted inconsistently with article 2.4 of the ADA An
objective and unbiased evaluation of the facts of this case would by
failing to make due allowance for physical differences affecting
have required Argentina to make additional adjustments for physical price
comparability between the various models of tiles exported to
differences affecting price comparability. Therefore, Argentina acted
Argentina and those sold domestically. inconsistently with article 2.4.
Whether Argentina acted inconsistently with article 6.9 of the ADA
Argentina violated article 6.9 by failing to inform the exporters of the
by failing to disclose to the exporters the *essential facts* under
*essential facts* under consideration. consideration that formed the basis
for the Argentina decision about whether to apply definitive antidumping
measures.
The exporters could not have been aware, simply by reviewing the complete
record of the investigation, that evidence submitted by petitioners and
derived from secondary sources, rather than from
facts the exporters submitted, would form the primary basis for the
determination of the existence and extent of dumping.
Source: GAO analysis of the WTO panel report.
GAO Case Number 17: Complainant: Canada 30 United States *
Defendant: United States Measures Treating Export Restraints as Subsidies
(DS 194)
Nature of Complaint Canada directly challenged a number of U. S. legal
measures 31 that it argued required the United States to treat export
restraints 32 as financial contributions, and thus potential subsidies, 33
in violation of the SCM Agreement. Canada argued that export restraints
could result in providing subsidies to other products that used or
incorporated the restricted product when the domestic price of the
restricted product was affected by
the restraint. Canada*s challenge was only to U. S. legal measures and not
to a particular instance in which an export restraint had been the subject
of a CVD investigation.
Outcome The panel found against Canada and concluded that U. S. CVD law is
not inconsistent with the SCM Agreement; U. S. law does not require that
export restraints be treated as financial contributions and thus
subsidies. In addition, the panel suggested that three of the legal
measures Canada contested could not be challenged independently of the
relevant U. S.
30 Australia, the EU, and India were third parties in this case. 31 Canada
challenged the following U. S. legal measures: Section 771( 5) of the
Tariff Act of 1930, codified at 19 U. S. C. S: 1677( 5), as amended by the
Uruguay Round Agreements Act; the U. S. *s Statement of Administrative
Action accompanying the Uruguay Round
Agreements Act; the Commerce Department*s preamble to CVD regulations; and
U. S. *practice* related to the treatment of export restraints. 32 For
purposes of this dispute, the panel considered an export restraint to be
*a border measure that takes the form of a government law or regulation
which expressly limits the quantity of exports or places explicit
conditions on the circumstances under which exports are permitted, or that
takes the form of a government- imposed fee or tax on exports of the
product calculated to limit the quantity of exports.*
33 Under article 1.1 of the SCM Agreement, the definition of a subsidy has
two elements: (1) a financial contribution, (2) which confers a benefit.
The parties agreed that an export restraint could confer a benefit.
statute. 34 To facilitate its analysis of the challenge to the U. S. legal
measures, the panel first concluded that export restraints, as defined in
the dispute, do not constitute financial contributions within the meaning
of the SCM Agreement. The panel findings were not appealed.
Compliance Action No compliance action was necessary. 34 These measures
were the Statement of Administrative Action, the preamble to the relevant
Commerce Department regulations, and the Commerce Department*s
administrative practice.
Tabl e 20: Case 17 * Major Case Issues and Panel Findings Major case
issues Panel findings
Whether export restraints can be considered *financial Export restraints,
as defined in this dispute, do not constitute contributions,* and thus
subsidies, within the meaning of article 1.1
financial contributions, and thus subsidies, within the meaning of of the
SCM Agreement (Definition of a Subsidy).
article 1.1. Export restraints in this case cannot be considered
governmententrusted or government- directed provision of goods.
Rejects U. S. approach that to the extent that an export restraint causes
an increased domestic supply of the restrained good* in effect, it is a
subsidy. Whether U. S. law requires the treatment of export restraints as
Section 771( 5) of the Tariff Act, as read in light of the Statement of
financial contributions, in conflict with article 1. 1 of the SCM
Administrative Action (SAA) accompanying the Uruguay Round Agreement.
Agreements Act and the preamble to the U. S. CVD regulations, does not
mandate the treatment of export restraints as financial contributions.
Section 771( 5) does not specifically address export restraints. The SAA
and preamble do not require the Commerce Department to interpret section
771( 5) as requiring that export restraints be treated as financial
contributions. Moreover, Canada did not show that the Commerce Department
practice required export restraints
to be treated as financial contributions. Source: GAO analysis of the WTO
panel report.
GAO Case Number 18: Complainant: Korea 35 United States *
Defendant: United States Definitive Safeguard Measures on Imports of
Circular Welded Carbon Quality Line Pipe from Korea (DS 202)
Nature of Complaint Korea challenged the U. S. imposition of a safeguard
measure on imports of certain line pipe from Korea. The safeguard measure
that was imposed was in the form of a duty increase for 3 years. The
measure applied to imports from all WTO members except Canada and Mexico.
Korea maintained that parts of the U. S. investigation as well as the
safeguard measure itself violated provisions of the Safeguards Agreement
and GATT 1994.
Outcome The panel and the Appellate Body found several aspects of the U.
S. safeguard measure to be inconsistent with provisions of the Safeguards
Agreement and GATT 1994. This included U. S. determinations about
causation. The Appellate Body also reversed several panel findings about
exclusion of certain WTO members from the safeguard measure and the extent
of application of the measure, which resulted in findings against the
United States. The Appellate Body also reversed the panel on one of its
injury findings, which resulted in upholding a United States
determination. As a result of the findings against the United States, the
Appellate Body recommended that the DSB request that the United States
bring its measure into conformity with the Safeguards Agreement and GATT
1994. Compliance Action In July 2002, the United States and Korea agreed
on several steps to
implement the recommendations of the DSB. They agreed that the United
States would increase the amount of imports exempt from additional 35
Australia, Canada, the EU, Japan, and Mexico were third parties in this
case.
tariffs, beginning in September 2002 and ending in March 2003. The measure
then expired in March 2003.
Table 21: Case 18 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether the United States improperly Korea failed to show that the United
States
Reversed the panel. excluded Canada and Mexico from had violated the
Safeguards Agreement by application of the safeguard measure after
excluding Mexico and Canada from the The United States violated articles 2
and 4
including them in its analysis of whether measure.
of the Safeguards Agreement by excluding serious injury occurred.
Canada and Mexico from the safeguard without providing a reasoned and
adequate explanation that imports from other sources by themselves
satisfied the conditions for applying the safeguard.
Whether the United States adequately The United States violated article
4.2( b) of
Upheld the panel. explained that the injury to the domestic
the Safeguards Agreement by not industry caused by factors other than
adequately explaining how it ensured that increased imports was not
attributed to
injury caused by other factors was not increased imports.
attributed to increased imports. The ITC*s *more important cause of
injury* standard does not satisfy the requirements of article 4.2( b).
Whether Korea made a prima facie case that Korea failed to make a prima
facie case. Reversed the panel. the United States imposed a safeguard
measure beyond the extent necessary to
The United States violated article 5.1 of the prevent or remedy serious
injury and to Safeguards Agreement by applying the line facilitate
adjustment.
pipe measure beyond the extent necessary. Whether U. S. determination of
*serious
The United States violated articles 3.1 and Reversed the panel. injury or
threat of serious injury* was
4. 2 (c) of the Safeguards Agreement by not consistent with articles 3.1
and 4.2( c) of the explicitly finding that increased imports
The ITC*s determination of serious injury or Safeguards Agreement.
either (1) have caused serious injury or (2) threat of serious injury was
consistent with threaten to cause serious injury. the Safeguards
Agreement.
Articles 3. 1 and 4.2( c) do not require a discrete determination either
of serious injury or threat of serious injury.
Source: GAO analysis of WTO panel and Appellate Body reports.
GAO Case Number 19: Complainant: India 36 United States *
Defendant: United States Antidumping and Countervailing Measures on Steel
Plate from India (DS 206)
Nature of Complaint India challenged several aspects of the U. S.
antidumping investigation for imports of steel plate from India.
Specifically, India challenged the U. S. rejection of certain sales
information and its reliance on facts available in its investigation.
India further challenged U. S. statutory provisions 37 governing the use
of *facts available* and the U. S. treatment of India as a developing
country.
Outcome The panel upheld the U. S. statutory provisions governing the use
of *facts available,* but found that the United States had not provided a
legally sufficient justification for rejecting some sales information
during its investigation. Accordingly, the panel recommended that the DSB
request that the United States bring its antidumping measure into
conformity with its obligation under the ADA. The panel also found that
the U. S. *practice* governing total facts available is not a *measure*
that can violate the ADA. The panel findings were not appealed.
Compliance Action In February 2003, the United States informed the DSB
that it had implemented the WTO*s ruling by issuing a second determination
regarding
antidumping duties imposed on imports of steel plate from India. Also in
February 2003, the United States and India came to an agreement regarding
the procedure to be followed if India believes that the United States has
not fully complied with the findings and recommendations of the DSB. 36
Chile, the EU, and Japan were third parties in this case. 37 Sections 776(
a) and 782( d) and (e) of the Tariff Act of 1930.
Tabl e 22: Case 19 * Major Case Issues and Panel Findings Major case
issues Panel findings
Whether the U. S. rejection of certain sales information and its The
United States acted inconsistently with article 6.8 and annex II reliance
completely on *facts available* violated article 6.8 and of the ADA
because it did not provide a legally sufficient justification annex II of
the ADA.
for rejecting certain sales data from the Indian producer and instead
relied entirely on *facts available* when calculating dumping margins.
Whether the U. S. statutory provisions governing the use of *facts U. S.
statutory provisions do not on their face require the available* are
inconsistent with article 6. 8 and annex II of the ADA. investigating
authority to act inconsistently with article 6.8 and annex II of the ADA.
Whether the United States failed to give *special regard* to India as
The United States did not act inconsistently with article 15 of the a
developing country under article 15 of the ADA. ADA because the article
imposes *no specific or general obligation* on members to take any
particular action when considering the application of antidumping measures
to developing country
members. Whether the U. S. *practice* related to *total facts available*
is a The U. S. *practice* is not a separate measure that can *measure*
that can violate the ADA. independently give rise to a WTO violation.
Source: GAO analysis of the WTO panel report.
GAO Case Number 20: Complainant: Argentina 38 Chile * Price Band
Defendant: Chile System and Safeguard Measures Relating to Certain
Agricultural Products (DS 207)
Nature of Complaint Argentina made two distinct challenges to Chilean
restrictions on imports of Argentine wheat, wheat flour, sugar, and edible
vegetable oils. Thus, Argentina challenged both Chile*s price band system,
39 which Chile applied to calculate tariff rates on these imports, and its
imposition of safeguard measures on these imports. In certain situations,
the use of Chile*s price
band system resulted in tariff rates higher than the bound tariff rate in
Chile*s WTO schedule. Chile also used its price band system to calculate
the safeguard measures it imposed on the Argentine imports. Argentina
claimed (1) that Chile*s price band system violated GATT 1994 and the WTO
Agreement on Agriculture and (2) that Chilean safeguards violated various
provisions of the Safeguards Agreement as well as GATT 1994. Argentina*s
safeguards challenges were directed at how Chile evaluated increases in
imports, the causal connection between imports and injury to Chile*s
domestic industry, and the scope of the safeguard measures.
Outcome With respect to the safeguards issues, the panel determined that
Chile had violated various provisions of the Safeguards Agreement and GATT
1994. Nevertheless, the panel did not make a recommendation regarding
removal of the safeguard measures because they had been removed before the
38 Australia, Brazil, Colombia, Costa Rica, Ecuador, El Salvador, the EU,
Guatemala, Honduras, Japan, Nicaragua, Paraguay, the United States, and
Venezuela were third parties in this case.
39 Under this system, the total amount of a tariff duty that was applied
to these Argentine imports was (1) an applied tariff rate of 8 percent and
(2) a specific price band duty that was determined for each import by
comparing a reference price with the upper or lower threshold of a price
band. These upper and lower price bands were calculated for each imported
product on the basis of certain international prices. The reference prices
were set for each product based on prices in certain foreign markets.
panel published its report. Although the panel findings on safeguards were
not appealed, the Appellate Body upheld panel findings that Chile*s price
band system was inconsistent with GATT 1994 and the Agreement on
Agriculture. As a result, the Appellate Body recommended that the DSB
request that Chile bring its price band system into conformity with its
obligations under the Agreement on Agriculture.
Compliance Action No action was required with regard to the safeguard
measures. Chile*s compliance with regard to its price band system involves
the WTO Agreement on Agriculture and is due by December 23, 2003.
Table 23: Case 20 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body Decisions
Whether the panel violated article 11 of the The duties called for under
Chile*s price
Reversed the panel finding with respect to the DSU by finding that the
duties resulting from band system are inconsistent with both second
sentence of article II: 1( b) because Chile*s price band system were
inconsistent the first and second sentences of article
Argentina had not made any claim under that with the second sentence of
article II: 1( b) of II: 1( b). sentence. GATT 1994.
Although the panel acted in good faith, by making a finding on a claim
that was not before it, it did not make an objective assessment of the
matter and, thus, acted inconsistently with article 11 of the DSU. In
making an objective assessment under article 11, a panel is also obligated
to ensure that due process is respected.
Whether Chile demonstrated that its Chile violated article XIX: I( a) by
failing
Not appealed. safeguard measures were applied as a result
to demonstrate that the safeguard of *unforeseen developments,* as
required by measures were applied as the result of article XIX: 1( a) of
GATT 1994.
*unforeseen developments.* *Unforeseen developments* is a circumstance
that must be demonstrated as a matter of fact.
Whether Chile showed sudden and recent Chile acted inconsistently with
articles Not appealed. increases in imports of products that justified
2.1 and 4.2( a) of the Safeguards imposing safeguard measures.
Agreement by failing to find a sudden and recent increase in imports of
products. Whether Chile limited its safeguard measures Chile violated
article 5.1 by not ensuring Not appealed. to remedying serious injury to
and facilitating that its safeguards were only applied to adjustment for
its domestic industry, as
the extent necessary to prevent or required by article 5.1 of the
Safeguards
remedy serious injury and facilitate Agreement.
adjustment. Chile*s use of the price band system to calculate safeguards
was improper.
Source: GAO analysis of WTO panel and Appellate Body reports.
GAO Case Number 21: Complainant: Turkey 40 Egypt * Definitive
Defendant: Egypt Antidumping Measures on Steel Rebar from Turkey (DS 211)
Nature of Complaint Turkey challenged Egypt*s imposition of antidumping
duties on imports of steel rebar from Turkey. The antidumping duties
imposed ranged from about 23 percent to 61 percent, depending on the
exporter. Turkey
contended that Egypt*s determinations of injury and dumping and the causal
relationship between the dumped imports and injury to domestic injury were
inconsistent with the ADA. A number of Turkey*s claims involved
questionnaires that the Egyptian investigating authority sent to
respondent companies requesting information about sales prices and the
cost of producing rebar. Outcome Although the panel upheld 19
determinations of the Egyptian investigating
authority, it found that Egypt had violated articles 3.4 and 6.8 of the
ADA. Accordingly, the panel recommended that Egypt bring its definitive
antidumping measure on imports of steel rebar from Turkey into compliance
with the ADA. The panel findings were not appealed.
Compliance Action In November 2002, Egypt and Turkey informed the WTO that
they had agreed Egypt would implement the DSB*s recommendations and
rulings by
July 31, 2003. In May 2003, Egypt reported to the WTO that it was
reexamining the dumping calculations of two Turkish companies, and the
general injury assessment, in light of this case.
40 Chile, the EU, Japan, and the United States were third parties in this
case.
Table 24: Case 21 * Major Case Issues and Panel Findings Major case issues
Panel findings
Whether the panel should engage in a new* de novo* review of The standard
of review in article 17. 6( i) of the ADA precludes a de the facts
submitted to Egypt. novo review by the panel. It was necessary for the
panel to undertake a detailed review of the evidence submitted by Egypt to
determine whether an objective and unbiased investigating authority could
have reached the determinations that Turkey challenged.
The panel would not consider evidence that was not before the Egyptian
investigating authority because this could be construed as a de novo
review. Whether Egypt appropriately resorted to *facts available* with
Egypt appropriately resorted to facts available with regard to three
regard to five Turkish exporters, as permitted by article 6. 8 and
Turkish exporters in calculating costs of production. An unbiased Annex II
of the ADA.
and objective investigating authority could have found that the three
exporters failed to provide the necessary information Egypt requested.
Egypt did not appropriately resort to facts available with regard to two
exporters. Although Egypt received information from the two exporters that
it had identified as being necessary to be provided, it
still found that the exporters had failed to provide the necessary
information. Egypt also did not inform the exporters of this finding and,
before resorting to the use of *facts available,* did not give the
exporters the required opportunity to provide further explanations.
Whether Egypt failed to evaluate all of the factors listed in article
Although Egypt gathered data on all of the factors listed in article 3.4
of the ADA, which deals with the examination of dumped
3.4, it failed to evaluate a number of these factors and thus acted
imports on the domestic industry.
inconsistently with that provision. Under the standard of review in
article 17.6( i) panels must determine whether an investigating
authority*s examination of the facts is objective and unbiased.
Source: GAO analysis of the WTO panel report.
GAO Case Number 22: Complainant: European Union (EU) 41 United States *
Defendant: United States Countervailing Measures Concerning Certain
Products from the European Communities (* Privatization*) (DS 212)
Nature of Complaint The EU challenged U. S. CVDs resulting from 12
investigations on imports of certain EU steel products. 42 The steel
products subject to these proceedings were formerly produced by state-
owned enterprises that had been privatized in arm*s- length transactions
for fair market value. The EU complained that the two methodologies 43 the
United States used to determine whether past subsidies continued to
benefit the privatized
company violated the SCM Agreement. In addition, the EU claimed that a
provision of U. S. countervailing law* section 771( 5)( F) of the Tariff
Act of 1930 44 *was, on its face, inconsistent with that agreement.
Outcome The panel found that where a privatization is at arm*s length and
for fair market value, the benefit from a prior subsidy to a state- owned
enterprise is not passed on to the privatized entity. The Appellate Body
affirmed the
41 Brazil, India, and Mexico were third parties in this case. 42 The 12
proceedings included 6 original investigations, 2 administrative reviews,
and 4 sunset reviews.
43 These are called the *gamma* and *same person* methodologies. The
Appellate Body had faulted the gamma methodology in United States*
Imposition of Countervailing Duties on Certain Hot- Rolled Lead and
Bismuth Carbon Steel Products Originating in the United Kingdom, WT/
DS138/ AB/ R. A United States Court of Appeals found this methodology to
be
inconsistent with United States law. Delverde, SRL v. United States, 202
F. 3d 1360, 1368- 69 (Fed. Cir. 2000). 44 19 U. S. C. S: 1677( 5)( F).
panel*s finding that the Commerce Department*s privatization methodologies
were inconsistent with the SCM Agreement but disagreed with the panel
reasoning that a fair market value sale of a government entity necessarily
extinguishes prior subsidy benefits. The Appellate Body reversed the panel
and found that section 771( 5)( F) of the Tariff Act of 1930 was
consistent with the SCM Agreement.
Compliance Action On June 23, 2003, the Commerce Department published in
the Federal Register its final modification to its privatization practice
45 in order to comply with the WTO*s rulings and recommendations. The
parties have agreed that the United States will use the new methodology in
the 12 disputed investigations and reviews by November 8, 2003, and in
future cases. In addition, Commerce is evaluating how many other CVD
orders might be affected by this new methodology. 45 68 Fed. Reg. 37125
(June 23, 2003).
Table 25: Case 22 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether the United States acted The United States violated the SCM
Upheld the panel. inconsistently with the SCM Agreement in 12 Agreement by
failing to determine CVD investigations and reviews by imposing
whether the new privatized producer and maintaining CVDs without
determining received any benefit from financial whether a subsidy benefit
continued to exist contributions previously provided to stateowned after
privatization at arm*s length and for fair
producers. Accordingly, the United market value.
States violated articles 14 and 19 of the SCM Agreement, which prohibit
imposition of CVDs where there has been no subsidization. Whether a
subsidy benefit that is derived Once an importing member determines
Reversed the panel finding on when a subsidy from a nonrecurring financial
contribution
that a privatization has taken place at benefit is extinguished by
privatization, but continues to exist following a transfer of
arm*s length and for fair market value, it upheld the panel finding that
*gamma* and ownership of a state- owned enterprise to a must conclude that
no benefit resulting *same person* methodologies are inconsistent new
private owner at arm*s length and for fair
from the prior subsidization continues to with the SCM Agreement. market
value.
accrue to the privatized producer. There is only a rebuttable presumption,
rather Both *gamma* and *same person* than an inflexible rule, that
benefits derived methodologies, which the Commerce from pre- privatization
financial contributions Department used to determine if a
expire following privatization at arm*s length subsidy benefit is
extinguished by and for fair market value. privatization, violate the SCM
Agreement.
*Same person* methodology impedes the Commerce Department from complying
with its obligation to examine whether a countervailable subsidy continues
to exist where the pre- and post- privatization entities are the same
legal person.
Whether section 771( 5)( F) of the Tariff Act of Section 771( 5)( F)
violates the SCM
Reversed the panel. 1930 allows the United States to exercise its
Agreement because it prohibits the discretion in a WTO- compatible manner.
Commerce Department from Section 771( 5)( F) does not mandate a method
systematically concluding that contrary to the SCM Agreement for
privatizations at arm*s length and for fair
determining the continued existence of a market value extinguish prior
subsidy subsidy benefit after a privatization. Therefore benefits. it does
not prevent the Commerce Department
from exercising a WTO- compatible discretion. Source: GAO analysis of WTO
panel and Appellate Body reports.
GAO Case Number 23: Complainant: European Union (EU) 46 United States *
Defendant: United States Countervailing Duties on Certain
CorrosionResistant Carbon Steel Flat Products from Germany (* Sunset*) (DS
213)
Nature of Complaint The EU challenged provisions of U. S. countervailing
law and regulations as well as application of the law and regulations to a
sunset review of a CVD order on certain imports of carbon steel from
Germany. The EU argued that, among other things, the United States had
acted inconsistently with the SCM Agreement by automatically self-
initiating the sunset review, by
failing to apply a 1 percent de minimis 47 standard of subsidization set
forth in the SCM Agreement, and by applying an improper standard to
determine whether a continuation or recurrence of subsidization was
likely.
Outcome The Appellate Body upheld the panel findings that U. S. laws*
regarding (1) the automatic self- initiation of sunset reviews and (2) the
obligation in the
SCM Agreement to determine the likelihood of continuation or recurrence of
subsidization in sunset reviews* were consistent with the SCM Agreement.
Nevertheless, with regard to the de minimis standard, the Appellate Body
reversed the panel 48 and found that the 1 percent de minimis standard
applied only to initial CVD investigations and not to sunset reviews of
CVD orders. Accordingly, it found that U. S. law setting
46 Japan and Norway were third parties in this case. 47 De minimis
subsidization is the level below which a subsidy is considered to be
negligible. CVD actions are terminated in cases where the level of subsidy
is below the de minimis level. 48 Although the panel*s majority found that
U. S. law was inconsistent with the SCM Agreement, in a rare dissent in
WTO dispute settlement cases, one panelist concluded to the contrary.
forth a de minimis subsidization threshold for sunset reviews below that
set forth for original investigations, as well as its application, was
consistent with the SCM Agreement. In an issue that was not appealed, the
panel found that the United States had acted inconsistently with the SCM
Agreement in the sunset review by failing to properly determine the
likelihood of the continuation or recurrence of subsidization. On the
basis of this finding, the Appellate Body
recommended that the United States bring its CVD measure into conformity
with the SCM Agreement. 49 Compliance Action The United States has agreed
to implement the panel*s finding on the
likelihood of continuation or recurrence of subsidization. Commerce
Department officials said that implementation would require the agency to
conduct a new sunset analysis with respect to this particular German steel
order, but would not require a regulatory change.
49 The United States Court of International Trade also found that the
Commerce Department*s determination of likelihood of subsidization was
inconsistent with U. S. law. AG Der Gillinger Huttenwerke v. United
States, 193 F. Supp. 2d 1339 (CIT 2002).
Table 26: Case 23 * Major Case Issues and Panel/ Appellate Body Findings
Major case issues Panel findings Appellate Body findings
Whether absence of an evidentiary standard for U. S. law does not violate
article 21. 3.
Upheld the panel. self- initiation of sunset reviews in U. S. CVD law is
consistent with article 21.3 of the SCM
Article 21.3 does not require that Agreement.
investigating authorities apply any evidentiary standard before they
selfinitiate sunset reviews. Whether the SCM Agreement requires that a 1
The1 percent de minimis standard in Reversed the panel. percent de minimis
standard of subsidization
article 11. 9 of the SCM Agreement be applied during sunset reviews.
applies to sunset reviews described in U. S. law is consistent with the
SCM article 21. 3.
Agreement because the 1 percent de minimis standard in article 11.9 is not
implied in article The 1/2 percent standard in U. S. CVD 21. 3. law
violates article 21. 3.
A finding that the de minimis standard of article 11.9 is implied in
sunset reviews would upset the delicate balance of rights and obligations
attained in negotiations. Whether U. S. CVD law and regulations
U. S. CVD law is consistent. Upheld the panel. mandate WTO- inconsistent
behavior regarding the obligation under article 21. 3 for an The language
of U. S. law is nearly The panel acted properly under article 11 of
investigating authority to determine the identical to article 21.3. Though
a U. S. the DSU in evaluating this issue. likelihood of continuation or
recurrence of
regulation imposes severe limitations subsidization in a sunset review. on
the Commerce Department*s ability
The panel properly applied the distinction to reach a new rate of
subsidization, it between mandatory and discretionary does not mandate
WTO- inconsistent
legislation. behavior.
Whether U. S. CVD law was properly applied The United States violated
article 21.3
Not appealed. regarding the Commerce Department*s of the SCM Agreement by
making an obligation to determine the likelihood of improper likelihood
determination.
continuation or recurrence of subsidization in a sunset review.
The Commerce Department*s decision regarding the rate at which
subsidization was likely to continue or recur lacked an adequate factual
basis. Source: GAO analysis of WTO panel and Appellate Body reports.
GAO Case Number 24: Complainant: Canada 50 United States * Section
Defendant: United States 129( c)( 1) of the Uruguay Round Agreements Act
(DS 221)
Nature of Complaint Canada directly challenged section 129( c)( 1) of the
U. S. Uruguay Round Agreements Act (URAA), claiming that it was
inconsistent with provisions of a number of WTO agreements. 51 Canada
specifically argued that section 129( c)( 1) of the URAA has the effect of
requiring the United States to act
inconsistently with or precludes the United States from complying with
various agreements.
Outcome Canada failed to establish that section 129( c)( 1) is
inconsistent with WTO rules. The panel findings were not appealed.
Compliance Action No compliance action was necessary. 50 Chile, the EU,
India, and Japan were third parties in this case. 51 Section 129 of the
URAA generally authorizes the U. S. Trade Representative (USTR) to request
the Commerce Department or the ITC to take actions not inconsistent with
WTO rulings in antidumping or CVD cases. Subsection 129( c)( 1) provides
that Commerce
Department determinations under section 129 shall apply to unliquidated
entries of merchandise that enter or are withdrawn from a warehouse for
consumption on or after the date on which USTR directs Commerce to
implement a WTO ruling.
Tabl e 27: Case 24 * Major Case Issue and Panel Findings Major case issue
Panel findings
Whether section 129( c)( 1) of the URAA requires the United States Section
129( c)( 1) does not mandate action that is inconsistent with to act
inconsistently with provisions of several WTO agreements
WTO rules, nor preclude action that is consistent with the rules. with
respect to unliquidated entries of merchandise occurring prior to the date
that the United States Trade Representative (USTR)
Section 129( c)( 1) does not apply to unliquidated entries occurring
directs implementation of a WTO ruling.
prior to the date that USTR directs implementation of a DSB ruling.
Section 129( c)( 1) only addresses entries that take place on or after the
implementation date.
Source: GAO analysis of the WTO panel report.
GAO Case Number 25: Complainant: Canada 52 United States *
Defendant: United States Preliminary Determinations With Respect to
Certain Softwood Lumber from Canada (DS 236)
Nature of Complaint Canada challenged the U. S. imposition of provisional
CVD measures on certain softwood lumber imports from Canada. Canada also
claimed that the U. S. law and regulations concerning expedited and
administrative reviews of CVD orders were, in several respects,
inconsistent with the SCM Agreement and Article VI of GATT 1994.
Outcome Although the panel upheld the United States on several issues,
including the direct challenges to U. S. law, it found that the
methodology the
Commerce Department used to determine the subsidy benefit was inconsistent
with the SCM Agreement. The panel also found that the Commerce
Department*s retroactive application of the provisional measure was
inconsistent with the SCM Agreement. Accordingly, it recommended that the
DSB request that the United States bring its provisional measure into
conformity with its obligations under that agreement. The panel
findings were not appealed. Compliance Action In November 2002, the United
States notified the DSB that the CVD
measures challenged by Canada were no longer in effect and that the
provisional cash deposits had been refunded. Canada, however, argued that
Commerce*s final determination was substantially unchanged and
subsequently brought another WTO complaint challenging that
52 The EU, India, and Japan were third parties in this case.
determination. The WTO panel*s decision in that case is due to be made
public around the time this report is issued. 53 53 United States* Final
Countervailing Duty Determination With Respect to Certain
Softwood Lumber from Canada, WT/ DS257.
Table 28: Case 25 * Major Case Issues and Panel Findings Major case issues
Panel findings
Whether Canadian provincial sales of timber from public lands Canadian
provincial stumpage programs by which standing timber was can amount to a
subsidy within the meaning of article 1 of the being supplied to tenure
holders is a provision of a good within the SCM Agreement, which defines a
subsidy for purposes of the
meaning of article 1.1( a)( l)( iii) of the SCM Agreement. agreement.
The Commerce Department*s determination that the provision of stumpage
constituted a financial contribution was not in violation of article 1.1.
Whether the U. S. *s use of U. S. rather than Canadian
By using U. S. stumpage prices to determine the benefit to the recipient,
stumpage prices to determine whether a benefit was provided the United
States acted inconsistently with article 14 of the SCM was consistent with
the SCM Agreement.
Agreement, which deals with calculation of subsidy benefits. U. S.
stumpage prices do not constitute the prevailing market conditions in
Canada. The United States provided no rationale consistent with article
14( d) for rejecting Canadian private stumpage prices as the basis for
calculating the benefit.
Whether the United States was required to determine whether The United
States acted inconsistently with article 1.1( b) of the SCM a benefit was
passed to downstream producers of lumber by Agreement by assuming that the
subsidy passed through to the unrelated upstream producers of log inputs.
producers of the lumber. The United States should have examined whether
certain lumber producers benefited from the financial contribution given
to tenure holders that do not own processing facilities or who sell logs
and lumber to the lumber producers. Whether the U. S. *s retroactive
application of the provisional
The U. S. *s retroactive application of the provisional measure in the
form measure was inconsistent with article 20.6 of the SCM of cash
deposits or bonds is inconsistent with article 20. 6 of the SCM Agreement.
Agreement since that provision allows only for retroactive application of
definitive duties, not preliminary duties.
Imposition of provisional measures, such as the requirement of a cash
deposit or the posting of a bond, is not necessary to preserve the right
to apply definitive duties retroactively.
Whether provisions of the U. S. Tariff Act of 1930 and The U. S. Tariff
Act and accompanying regulations do not preclude the accompanying
regulations a mandate action inconsistent with U. S. executive branch from
acting consistently with its obligations under articles 19 and 21 of the
SCM Agreement concerning articles 19 and 21 of the SCM Agreement with
respect to expedited and expedited and administrative reviews of CVDs.
administrative reviews. Legislation that merely gives the executive
authority discretion to act inconsistently with the SCM Agreement cannot
be challenged before a panel, independent of its actual application.
Source: GAO analysis of the WTO panel report. a The challenge was to
sections 777A( e)( 2)( A) and (B) of the Tariff Act of 1930 and 19 C. F.
R. S:S:
351.214( k) and 351. 213( b) and (k).
Appendi x III
Experts That GAO Interviewed for this Report Raj Bhala, Rice Distinguished
Professor, School of Law, University of Kansas Richard Cunningham, Senior
International Trade Partner, Steptoe & Johnson LLP
William Davey, Professor of Law, University of Illinois College of Law
James Durling, Partner, Willkie, Farr & Gallagher David Gantz, Professor
of Law and Director, International Trade Law Program, James E. Rogers
College of Law, University of Arizona
John Greenwald, Partner, Wilmer, Cutler & Pickering Gary Horlick, Partner,
Wilmer, Cutler & Pickering Robert Howse, Professor of Law, University of
Michigan School of Law John Jackson, Professor of Law, Georgetown
University Law Center Peter Lichtenbaum, Partner, Steptoe & Johnson LLP
Robert Lighthizer, Partner, Skadden, Arps, Slate, Meagher & Flom LLP
Mitsuo Matsushita, Professor Emeritus, Tokyo University, and Counsel,
Nagashima, Ohno & Tsunematsu law firm in Tokyo
Christopher Parlin, Counsel, Kaye Scholer LLP Joost Pauwelyn, Associate
Professor of Law, Duke University Law School John Ragosta, Partner, Dewey
Ballantine LLP Frieder Roessler, Executive Director, Advisory Center on
WTO Law Terence Stewart, Managing Partner, Stewart and Stewart Law Offices
Daniel Tarullo, Professor of Law, Georgetown University Law Center
Comments from the Department of
Appendi x IV
Commerce Note: GAO comments supplementing those in the report text appear
at the end of this appendix.
See comment 1. See comment 2.
See comment 3. See comment 4.
See comment 5. See comment 6.
See comment 7. See comment 8.
See comment 9.
The following are GAO*s comments on the Department of Commerce*s letter
dated July 14, 2003. GAO Comments 1. Our report presents data on changes
to WTO members* laws,
regulations, and practices that have resulted from WTO rulings through
December 2002. The data clearly indicate there have been few changes in
WTO members* laws, regulations, and practices to date.
2. In response to the Commerce Department*s (and the ITC*s) comment( s),
we modified our characterization of U. S. agency views on the impact of
WTO rulings on the U. S. *s ability to impose trade remedies. The sections
of this report that provide U. S. agencies* viewpoints now reflect the
agencies* increased emphasis on the potential future ramifications of WTO
decisions indicated by the Commerce Department (and ITC).
3. The Commerce Department states that our report*s presentation implies
that the impact of the WTO dispute settlement system on members* ability
to impose trade remedies must be small based on statistical information we
present. However, our report simply provides data on the number of WTO
members* measures that were notified to the WTO from 1995 through 2002 and
the number that were
challenged. Moreover, we have modified the report to reflect agency
concerns about the impact of the dispute settlement system on members*
ability to impose trade remedies.
4. While our report provides aggregate data on the number of trade remedy
measures imposed by all WTO members from 1995 to 2002, it was beyond the
scope of our review to analyze trends in the growth of these measures for
individual WTO members and reasons for the challenges to these measures.
5. While the Commerce Department raised concerns regarding the composition
of the group of legal experts we consulted, we believe that our
methodology for selecting these experts as outlined in appendix I is
sound. As noted, we selected individuals who were identified as leading
experts on WTO dispute settlement. These individuals* academics,
practitioners, and advisors on WTO- related trade remedy issues* have been
active in writing and/ or speaking about issues
pertaining to WTO dispute settlement. Moreover, the Commerce Department*s
assertion that we only included three experts
representing domestic petitioners* interests is incorrect. Although we did
not choose experts on the basis of their expressed views because we
believe that approach would have been methodologically flawed, our
information indicates that of the nine practitioners we interviewed, three
represent domestic petitioners, three represent foreign respondents, and
three represent both. Nevertheless, in responding to agency comments, we
reviewed our decision rule on the composition of the group of experts we
consulted. Subsequently, we excluded the
views of the current WTO official and the EU representative from our
discussion of expert views since we did not include current U. S.
officials in this group. However, we briefly noted the views of the
current WTO and EU officials. 6. While we believe that our report
sufficiently emphasizes the concerns
of the minority of experts regarding standards of review and the other
trade remedy issues discussed in this report, we have made modifications
to the relevant sections of our report to ensure that
majority positions and minority concerns are presented in a balanced
manner. 7. See comment 2. 8. In response to the Commerce Department*s (and
the ITC*s)
comment( s), we added a section to our report presenting U. S. agencies*
positions on WTO dispute settlement issues, including the executive
branch*s position as outlined in its December 2002 report to Congress.
9. In response to the Commerce Department*s comments, we have added
material to our report that discusses relevant aspects of the recent U. S.
submission to the WTO Negotiating Group on Rules.
Comments from the United States
Appendi x V
International Trade Commission Note: GAO comments supplementing those in
the report text appear at the end of this appendix. See comment 1.
See comment 2. See comment 3.
See comment 4.
The following are GAO*s comments on the U. S. International Trade
Commission*s letter dated July 14, 2003.
GAO Comments 1. In response to the ITC*s (and Commerce*s) comment( s), we
modified our characterization of U. S. agency views on the impact of WTO
rulings on the U. S. *s ability to impose trade remedies. The sections of
this report that provide U. S. agencies* viewpoints now reflect the
agencies* increased emphasis on the potential future ramifications of WTO
decisions.
2. In response to the ITC*s comments, we have added some discussion of the
safeguards issues that the ITC raises in the report*s section on expert
views and U. S. agencies* positions.
3. In response to the ITC*s comments, we have added some discussion of
their views on article 17. 6( ii) in the report*s section on expert views
and U. S. agencies* positions.
4. See comment 1.
Appendi x VI
GAO Contacts and Staff Acknowledgments GAO Contacts Elizabeth Sirois (202)
512- 8989 Nina Pfeiffer (202) 512- 9639 Richard Seldin (202) 512- 4094
Staff
In addition to those named above, Jason Bair, Josey Ballenger, Sharron
Acknowledgments
Candon, Martin De Alteriis, Rona Mendelsohn, Mary Moutsos, Mark Speight,
and Laura Turman made key contributions to this report.
(320154)
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Report to the Ranking Minority Member, Committee on Finance, U. S. Senate
July 2003 WORLD TRADE ORGANIZATION Standard of Review and Impact of Trade
Remedy Rulings
GAO- 03- 824
Contents Letter 1
Results in Brief 3 Background 7 Trade Remedy Cases Increased Over Time,
but Few Measures Were
Challenged 8 Domestic Determinations Generally Were Rejected, but Statutes
Were Upheld 12 Rulings Resulted in Few Changes to Members* Laws,
Regulations,
and Practices but Caused Numerous Changes to U. S. Measures 16 Two
Standards of Review Apply to WTO Trade Remedy Cases 22 Expert Views and U.
S. Agency Positions on Standard of Review and Other Trade Remedy Issues 26
Agency Comments and Our Evaluation 34 Appendixes
Appendix I: Objectives, Scope, and Methodology 37
Appendix II: Summaries of Completed WTO Trade Remedy Cases 41 GAO Case
Number 1: Brazil * Measures Affecting Desiccated
Coconut (DS 22) 43 GAO Case Number 2: Guatemala * Antidumping
Investigation
Regarding Portland Cement from Mexico (DS 60) 45 GAO Case Number 3: Korea
* Definitive Safeguard Measure on
Imports of Certain Dairy Products (DS 98) 47 GAO Case Number 4: United
States * Antidumping Duty on Dynamic
Random Access Memory Semiconductors (DRAMS) of One Megabyte or Above
Originating from Korea (DS 99) 49 GAO Case Number 5: Argentina * Safeguard
Measures on Imports of
Footwear (DS 121) 52 GAO Case Number 6: Thailand * Antidumping Duties on
Angles,
Shapes, and Sections of Iron or Non- Alloy Steel and H- Beams from Poland
(DS 122) 54 GAO Case Number 7: Mexico * Antidumping Investigation of
High- Fructose Corn Syrup (HFCS) from the United States (DS 132) 57 GAO
Case Number 8: United States * Antidumping Act of 1916 (DS
136/ 162) 60 GAO Case Number 9: United States * Imposition of
Countervailing
Duties on Certain Hot- Rolled Lead and Bismuth Carbon Steel
Products Originating in the United Kingdom (DS 138) 62 GAO Case Number 10:
European Union * Antidumping Duties on Imports of Cotton- Type Bed Linen
from India (DS 141) 65
GAO Case Number 11: Guatemala * Definitive Antidumping Measures on Grey
Portland Cement from Mexico (DS 156) 68 GAO Case Number 12: United States
* Definitive Safeguard
Measures on Imports of Wheat Gluten from the European Communities (DS 166)
71 GAO Case Number 13: United States * Safeguard Measures on Imports of
Fresh, Chilled, or Frozen Lamb Meat from New
Zealand and Australia (DS 177/ 178) 74 GAO Case Number 14: United States *
Antidumping Measures on
Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from
Korea (DS 179) 77 GAO Case Number 15: United States * Antidumping Measures
on
Certain Hot- Rolled Steel Products from Japan (DS 184) 79 GAO Case Number
16: Argentina * Definitive Antidumping Measures
on Imports of Ceramic Floor Tiles from Italy (DS 189) 83 GAO Case Number
17: United States * Measures Treating Export
Restraints as Subsidies (DS 194) 85 GAO Case Number 18: United States *
Definitive Safeguard
Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea
(DS 202) 88 GAO Case Number 19: United States * Antidumping and
Countervailing Measures on Steel Plate from India (DS 206) 91 GAO Case
Number 20: Chile * Price Band System and Safeguard
Measures Relating to Certain Agricultural Products (DS 207) 93 GAO Case
Number 21: Egypt * Definitive Antidumping Measures on
Steel Rebar from Turkey (DS 211) 96 GAO Case Number 22: United States *
Countervailing Measures
Concerning Certain Products from the European Communities (*
Privatization*) (DS 212) 98 GAO Case Number 23: United States *
Countervailing Duties on
Certain Corrosion- Resistant Carbon Steel Flat Products from Germany (*
Sunset*) (DS 213) 101 GAO Case Number 24: United States * Section 129( c)(
1) of the
Uruguay Round Agreements Act (DS 221) 104 GAO Case Number 25: United
States * Preliminary Determinations
With Respect to Certain Softwood Lumber from Canada (DS 236) 106
Appendix III: Experts That GAO Interviewed for this Report 109
Appendix IV: Comments from the Department of Commerce 110 GAO Comments 114
Appendix V: Comments from the United States International Trade Commission
116 GAO Comments 118
Appendix VI: GAO Contacts and Staff Acknowledgments 119 GAO Contacts 119
Staff Acknowledgments 119
Tables Table 1: U. S. Trade Remedy Laws Challenged in WTO Dispute
Settlement, 1995- 2002 15
Table 2: Impact of WTO Rulings on Members* Laws, Regulations, Practices,
and Measures, 1995- 2002 17 Table 3: WTO Trade Remedy Dispute Settlement
Cases Completed Between 1995 and December 31, 2002 41
Table 4: Case 1 * Major Case Issue and Panel/ Appellate Body Findings 44
Table 5: Case 2 * Major Case Issues and Panel/ Appellate Body Findings 46
Table 6: Case 3 * Major Case Issues and Panel/ Appellate Body Findings 48
Table 7: Case 4 * Major Case Issues and Panel Findings 51 Table 8: Case 5
* Major Case Issues and Panel/ Appellate Body Findings 53
Table 9: Case 6 * Major Case Issues and Panel/ Appellate Body Findings 56
Table 10: Case 7 * Major Case Issues and Panel Findings 59 Table 11: Case
8 * Major Case Issues and Panel/ Appellate Body Findings 61
Table 12: Case 9 * Major Case Issues and Panel/ Appellate Body Findings 64
Table 13: Case 10 * Major Case Issues and Panel/ Appellate Body
Findings 67 Table 14: Case 11 * Major Case Issues and Panel Findings 70
Table 15: Case 12 * Major Case Issues and Panel/ Appellate Body
Findings 73 Table 16: Case 13 * Major Case Issues and Panel/ Appellate
Body
Findings 76 Table 17: Case 14 * Major Case Issues and Panel Findings 78
Table 18: Case 15 * Major Case Issues and Panel/ Appellate Body
Findings 81
Table 19: Case 16 * Major Case Issues and Panel Findings 84 Table 20: Case
17 * Major Case Issues and Panel Findings 87 Table 21: Case 18 * Major
Case Issues and Panel/ Appellate Body
Findings 90 Table 22: Case 19 * Major Case Issues and Panel Findings 92
Table 23: Case 20 * Major Case Issues and Panel/ Appellate Body
Findings 95 Table 24: Case 21 * Major Case Issues and Panel Findings 97
Table 25: Case 22 * Major Case Issues and Panel/ Appellate Body
Findings 100 Table 26: Case 23 * Major Case Issues and Panel/ Appellate
Body
Findings 103 Table 27: Case 24 * Major Case Issue and Panel Findings 105
Table 28: Case 25 * Major Case Issues and Panel Findings 108
Figures Figure 1: Total Number of WTO Cases Versus Trade Remedy Cases
Filed per Year, 1995- 2002 9
Figure 2: Most Frequent Complainants and Defendants in WTO Trade Remedy
Cases, 1995- 2002 10 Figure 3: Total Number of WTO Trade Remedy Measures
Imposed
and Number Challenged, by Most Frequent Trade Remedy Users, 1995- 2002 11
Figure 4: Number of Findings on Domestic Agency Determinations
and Percentage of Those Determinations Rejected by the WTO in 21 Completed
Trade Remedy Cases, 1995- 2002 13 Figure 5: Number (Percent) of Domestic
Agency Determinations
Upheld and Rejected by the WTO, the United States Versus Other Members, in
Completed Trade Remedy Cases, 1995- 2002 14
Abbreviations
ADA Antidumping Agreement CVD countervailing duties DRAMS dynamic random
access memory semiconductors DSB Dispute Settlement Body DSU Dispute
Settlement Understanding EU European Union GATT General Agreement on
Tariffs and Trade HFCS high- fructose corn syrup ITC International Trade
Commission NAFTA North American Free Trade Agreement SAA Statement of
Administrative Action SCM Subsidies and Countervailing Measures URAA
Uruguay Round Agreements Act USTR United States Trade Representative WTO
World Trade Organization
This is a work of the U. S. government and is not subject to copyright
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a
GAO United States General Accounting Office
About a third of the cases filed in the WTO dispute settlement system from
1995 through 2002 challenged members* trade remedies, with the ratio of
such cases increasing over time. Although a relatively small proportion of
WTO members* trade remedy measures were challenged in the WTO, the United
States faced substantially more challenges than other WTO members. The WTO
generally rejected members* decisions to impose trade remedies in
the 25 trade remedy disputes resolved from 1995 through 2002. However, GAO
found that the WTO ruled for and against the U. S. and other members in
roughly the same ratios. Overall, WTO rulings resulted in few changes to
members* laws, regulations, and practices but had a relatively greater
impact on those of the United States. While U. S. agencies stated that WTO
rulings have not yet significantly impaired their ability to impose trade
remedies, they had concerns about the potential future adverse impact of
WTO rulings.
Of the legal experts GAO consulted, a majority concluded that the WTO has
properly applied standards of review and correctly ruled on major trade
remedy issues. However, a significant minority strongly disagreed with
these conclusions. U. S. agencies also said that the WTO has not always
properly applied the standards and has, in some cases, imposed obligations
on members that are not found in WTO agreements. Nonetheless, the experts
almost unanimously agreed that the WTO was not treating the United States
any differently than other members.
Total Number of WTO Trade Remedy Measures Imposed and Number Challenged,
by Most Frequent Trade Remedy Users, 1995- 2002
World Trade Organization (WTO) members rely on trade remedies in the form
of duties or other import
restrictions to protect their industries from injury due to unfair foreign
trade practices or unexpected import surges. There is congressional
concern that the WTO, created in 1995 to administer trade rules, is
interfering with this
ability. There is also congressional concern that the WTO is not treating
the United States fairly in resolving trade remedy disputes.
A congressional requester asked GAO to identify trends in WTO trade remedy
disputes since 1995, including the outcomes of these disputes and how they
affected members* ability to impose trade
remedies. The requester also asked GAO to discuss the standards of review
that the WTO applies when ruling on trade remedy disputes and to present
U. S. agencies* and legal experts* views on the WTO*s application of these
standards and related trade remedy issues.
In their comments on a draft of this report, the Department of Commerce
and the U. S. International Trade Commission stated that the report needed
to put more emphasis on U. S. agencies* concerns about the potential
adverse impact of WTO rulings on the U. S. *s use of trade remedies. The
U. S. Trade Representative provided only technical comments on the report.
GAO modified the report as appropriate.
www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 824. To view the full product,
including the scope and methodology, click on the link above. For more
information, contact Loren Yager at (202) 512- 4346 or yagerl@ gao. gov.
Highlights of GAO- 03- 824, a report to the
Ranking Minority Member, Committee on Finance, U. S. Senate
July 2003
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Appendix III
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Appendix IV
Appendix IV Comments from the Department of Commerce
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Appendix V
Appendix V Comments from the United States International Trade Commission
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Appendix VI
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