RESTRICTED
WORLD TRADE WT/DSB/M/22
28October 1996
ORGANIZATION(96-4495)
DISPUTE SETTLEMENT BODY
27September 1996
MINUTES OFMEETING
Held intheCentre William Rappard
on27September 1996
Chairman: Mr.Celso Lafer (Brazil)
Page
1. Brazil -Export financing programme foraircraft 1
- Request byCanada fortheestablishment ofapanel 1
2. European Communities -Measures affecting livestock andmeat(hormones) 4
- Request byCanada fortheestablishment ofapanel 4
3. Proposed nominations fortheindicative listofgovernmental andnon-governmental
panelists 4
4. Poland -Import regime forautomobiles 4
- Mutually agreed solution 4
5. 1996 Annual Report oftheDSB 5
- Announcement bytheChairman 5
1. Brazil -Export financing programme foraircraft
- Request byCanada fortheestablishment ofapanel (WT/DS46/2)
TheChairman drew attention tothecommunications from Canada andBrazil contained in
documents WT/DS46/2 andWT/DS46/3 respectively, thelatter having beencirculated attherequest
ofBrazil.
Therepresentative ofCanada recalled thatinJune1996, Canada hadrequested consultations
withBrazil pursuant toArticle 4oftheAgreement onSubsidies andCountervailing Measures (SCM),
regarding certain export subsidies granted under Brazil 'sPrograma deFinanciamento àsExporta ções
(PROEX). Therequest forconsultations hadbeencirculated on21June1996. Theconsultations held
on22and25JulyinGeneva, while helpful inproviding abetter understanding oftheoperation of
PROEX, hadnotresolved allCanada 'sconcerns. Initscommunication, dated 16September, Canada
hadsought theestablishment ofapanel under Article XXIII oftheGATT 1994, Articles 4and30
oftheSCM Agreement andArticles 4and6oftheDSU. Atthepresent meeting, Canada requested
thatapanel beestablished immediately inaccordance withArticle 4.4oftheSCM Agreement and
thatthecasebetreated onanaccelerated basisinaccordance withArticle 4.12oftheSCM Agreement.WT/DSB/M/22
Page2
Therepresentative ofBrazil saidthathisGovernment wasconcerned byCanada 'sdecision
torequest apanel toexamine Brazil 'sPROEX. During theconsultations onthismatter, Brazil had
expressed itswillingness inaconstructive spirit tosubmit allrelevant information which would enable
Canada tounderstand thescope andoperation ofPROEX. Ithadalsobeenmade clear thatBrazil
didnotconsider PROEX asasubsidy, certainly notaprohibited subsidy. Despite theCanadian
interpretation ofPROEX asasubsidy, Brazil wasnevertheless covered bytheprovisions ofspecial
anddifferential treatment fordeveloping-country Members contained intheSCM Agreement. During
theconsultations, Brazil hadalsoexpressed concerns regarding certain aspects ofCanadian export
incentives foraircraft.
Canada 'srequest raised anumber ofissues which could besummarized asfollows: (i)inits
request forconsultations contained inWT/DS46/1, Canada hadincluded areference toArticle 27of
SCM Agreement, buthadwithdrawn suchreference fromitsrequest fortheestablishment ofapanel.
InBrazil 'sview, Article 27oftheSCM Agreement wasintrinsically related totheapplication ofArticle
3ofthatAgreement, asexplained indocument WT/DS46/3; (ii)initsrequest fortheestablishment
ofapanel, Canada hadinvoked Article 4oftheSCM Agreement which provided fortheimmediate
establishment ofapanel andhalved theordinary time-periods applicable under theDSU. Thismeant
theadoption of"fast-track" procedures forthesettlement ofthisdispute. However, initsrequest for
apanel, Canada hadalsoincluded references toArticles XVIandXXIII ofGATT 1994. While Article
4oftheSCM Agreement provided for"fast-track" procedures, itsscope waslimited onlytoissues
raised under Article 3oftheSCM Agreement. There wasnoprovision for"fast-track" procedures
withregard toArticle XVIandXXIII issues. Consequently, Canada should notinvoke Articles XVI
andXXIII ofGATT 1994 ifitwasseeking "fast-track" procedures under Article 3oftheSCM
Agreement. Therefore, Brazil wasnotinaposition toaccept theestablishment ofapanel under the
legalframework proposed byCanada.
Therepresentative ofJamaica saidthathisdelegation hadexamined therequest byCanada
andtherecent communication circulated attherequest ofBrazil inWT/DS46/3. Heasked whether
apanel would beestablished under theSCM Agreement andnotunder Article XVIofGATT 1994.
Healsoasked whether standard terms ofreference would beusedbythispanel. Finally, heasked
ifthenature ofthemeasures taken byBrazil would besignificantly different from those taken inthe
context oftheOECD 'sDevelopment Assistance Committee inrespect ofexport credits fortrade.
Therepresentative ofCanada saidthattheprocedures tobefollowed byaMember challenging
aprohibited subsidy weresetoutinArticle 4oftheSCM Agreement. Inparticular, Article 4.4of
theSCM Agreement required theimmediate establishment ofapanel ifconsultations didnotresult
inamutually agreed solution. Furthermore, Articles 12.2and12.3oftheDSU clearly provided for
thedemonstration ofgood faithandflexibility withregard totheestablishment oftime-frames bya
panel, inconsultation withtheparties. Asthiswasessentially aprohibited subsidy issue, Canada
believed thatitwasappropriate atthepresent meeting toestablish apanel under theaccelerated
procedures setoutinArticle 4oftheSCM Agreement. ForMembers uncertain astohowtheprovisions
ofArticle 4would apply inthiscase,Canada suggested attheveryleast, abifurcation ofthetime-frames
withregard totheissues tobeexamined bythepanel. InCanada 'sview, theprohibited subsidy issue
must bedecided upon first, inaccordance withthemandatory language ofArticle 4.12oftheSCM
Agreement, which expressly prescribed thatthepanel should ruleontheprohibited subsidy issue on
anexpedited basis, namely, halfthetime-frame prescribed under theDSU. Other issues could then
beexamined bythepanel within thenormal time-frame.
Inaspirit ofcooperation andflexibility, Canada waswilling todiscuss withBrazil theinclusion
ofArticle 27oftheSCM Agreement intheterms ofreference forthispanel. However, Canada wished
tomake itclearthateachMember hadtherighttohaverecourse toanyrelevant provision oftheWTO
Agreement inresponse toarguments made byanother Member inthecontext ofdispute settlementWT/DSB/M/22
Page3
under theDSU. Canada believed thatBrazil 'srequest fortheinclusion ofArticle 27oftheSCM
Agreement intheterms ofreference must notbeseenasanindication thatparties toadispute had
theobligation tolistalltheprovisions oftheWTO towhich recourse could bemade indefending a
challenge. With regard toJamaica 'sreference totheOECD Export Credit Consensus andBrazil 's
comment onCanada 'sexport incentives foraircraft, shepointed outthattheissuebefore theDSBwas
Brazil 'ssubsidies under PROEX.
Therepresentative ofBrazil saidthattwocompletely different issues wereatstake, namely,
theestablishment ofapanel andthepossible terms ofreference ofthepanel. With regard tothe
establishment ofapanel, hisdelegation firmly believed thattheinvocation oftheprovisions ofArticle
4oftheSCM Agreement related onlytoArticle 3ofthatAgreement. However, thecurrent request
fortheestablishment ofapanel covered much wider scope since itasked thepanel todetermine that
PROEX wasinconsistent withtheSCM Agreement, inparticular Article 3aswellasArticle XVIof
GATT 1994 andthattheoperation ofthisprogramme nullified andimpaired thebenefits accruing to
Canada under theWTO Agreement. Brazil, which believed thatthiswasanimportant issue oflaw
andprecedent, could notaccept thatArticle 4which onlyrelated toArticle 3,beusedtoestablish the
"fast-track" approach withregard totheestablishment ofapanel which would alsoberequested to
ruleonissues beyond Article 3oftheSCM Agreement.
With regard totheestablishment oftheterms ofreference, Brazil hadcirculated document
WT/DS46/3 because Canada hadwithdrawn thereference toArticle 27oftheSCM Agreement which
wasthelegalbasisforspecial anddifferential treatment infavour ofdeveloping countries. Indefining
theterms ofreference ofthepanel Article 27oftheSCM Agreement should beseriously considered.
Therepresentative ofCanada saidthathercountry believed thatthisdebate hadhighlighted
thefactthatfurther discussion wasrequired withregard tothequestion oftiming aswellasthejoint
operation ofdifferent dispute settlement mechanisms under theintegrated WTO Dispute Settlement
Understanding. Thisissuewould certainly ariseagain inthefuture should anyMember wishtoexercise
itsrighttorequest thatapanel examine anissuecovering bothprohibited subsidies andanother aspect
ofanyWTO Agreement. Given thatCanada didnotwantthediscussion ofthese broader issues to
delay consideration oftheconcrete caseathand, itwaswilling topropose acompromise bywithdrawing
from itsrequest forapanel thetwosections (bandc)thatfelloutside Articles 3and4oftheSCM
Agreement: i.e.,theGATT 1994andinparticular Article XVIthereof, andnullification andimpairment
ofbenefits accruing toCanada pursuant totheWTO Agreement. Given thattheamended request would
nowdealonlywithaquestion ofconsistency ofPROEX withtheSCM Agreement, andinparticular
Articles 3and4thereof, Canada reiterated itsrequest fortheestablishment ofapanel atthepresent
meeting under theaccelerated procedures setoutinArticle 4.Itdidsowiththeunderstanding that
thispanel would notprejudice anysubsequent important discussions ontiming andthejointoperation
ofdispute settlement mechanism under theintegrated WTO system.
Therepresentative ofBrazil appreciated thatCanada recognized thatitsrequest wasofawider
scope thanthatwhich would guarantee a"fast-track" approach. However, foraproper functioning
oftheDSB, itwould beagoodprecedent toaccept thewithdrawal oftherequest andthatCanada should
present anewrequest indicating thelimits andtheterms ofreference therein.
Therepresentative ofCanada saidthatherdelegation wasdisappointed thatitsrequest foran
accelerated procedure hadraised some procedural concerns andthattheoffers made inaspirit of
compromise hadnotmetwiththeagreement oftheDSBMembers. Theonlycourse ofaction now
opentoCanada wastosubmit areformulated request fortheestablishment ofapanel under Article
4oftheSCM Agreement forconsideration bytheDSBatitsmeeting on16October. Consequently,
considering thesedevelopments, Canada waswithdrawing itsrequest forapanel atthepresent meeting
andwould re-submit anewrequest tobeconsidered bytheDSBatitsmeeting tobeheldon16October.WT/DSB/M/22
Page4
TheDSBtooknoteofthestatements andagreed withCanada 'sdecision thatitsrequest for
apanel inWT/DS46/2 bewithdrawn andthatanewrequest forapanel onthismatter becirculated
andconsidered bytheDSBatitsnextregular meeting.
2. European Communities -Measures affecting livestock andmeat(hormones)
- Request byCanada fortheestablishment ofapanel (WT/DS48/5)
TheChairman drew attention tothecommunication from Canada contained indocument
WT/DS48/5.
TherepresentativeofCanadasaidthatinJuly1996,herGovernmenthadrequestedconsultations
withtheEuropean Communities regarding certain measures prohibiting theimportation oflivestock
andmeat from livestock thathadbeentreated withcertain substances having ahormonal action1.
Unfortunately, theconsultations hadnotresolved thedispute andthemeasures were stillinforce.
These measures wereunjustified andwerenotconsistent withtheCommunities 'obligations under the
WTO. Consequently, Canada wasrequesting theestablishment ofapanel.
Therepresentative oftheEuropean Communities saidthatthesubject matter concerning this
particular request forapanel wasnotnew. However, itwasthefirstoccasion onwhich therequest
fortheestablishment ofapanel hadappeared ontheagenda oftheDSB. Hisauthorities therefore
wished tohavefurther timetoconsider some oftheimplications, including procedural implications
ofaccepting Canada 'srequest forapanel. Hehoped therefore thattheDSBwould revert tothismatter
atitsnextregular meeting.
Therepresentative ofCanada saidthatherdelegation regretted theCommunities 'decision not
toagree totheestablishment ofapanel especially considering thattherewasalready apanel established
onthismatter. Canada therefore requested thatthismatter beincluded ontheagenda oftheDSBmeeting
tobeheldon16October.
TheDSB tooknoteofthestatements andagreed torevert tothismatter atitsnextregular
meeting.
3. Proposed nominations fortheindicative listofgovernmental andnon-governmental panelists
(WT/DSB/W/36)
TheChairmandrewattentiontodocumentWT/DSB/W/36containingadditionalnamesproposed
byMembers forinclusion ontheindicative listinaccordance withArticle 8.4oftheDSU. Heproposed
thattheDSBapprove thenames contained therein.
TheDSBsoagreed.
4. Poland -Import regime forautomobiles
- Mutually agreed solution (WT/DS19/2)
TherepresentativeoftheUnitedStates,speakingunder"OtherBusiness",recalledthediscussion
which hadtaken place intheDSBonArticle 3.6oftheDSU regarding thenotifications ofmutually
agreed solutions. Pursuant tothatprovision anyMember could raise anypoint relating tothose
1WT/DS48/1WT/DSB/M/22
Page5
notifications. Hisauthorities sought clarification onthenotification byPoland andIndia circulated
inWT/DS19/2 regarding Poland 'simport regime forautomobiles. Paragraph 1ofthatcommunication
described animport quota thatPoland hadestablished astheprinciple element ofthesolution. His
authorities sought clarification whether thisimport quota wasbeing implemented asatariffratequota.
Thedocument seemed tosuggest that,butitwasnotclearhowthisimport quota would beimplemented.
Thisraised some concerns about theconsistency ofthesolution withWTO obligations. Hetherefore
requested Poland toclarify thatpoint.
Therepresentative ofPoland saidthathiscountry together withIndia hadacted inaccordance
withArticle 3.6oftheDSUandhadnotified amutually agreed solution. Hethanked theUnited States
foritsinterest inthismatter andasked theUnited States tomake awritten request. Theshort answer
totheUnited States 'question wasintheaffirmative. HisGovernment wasready toprovide amore
detailed written answer atalaterdate.
TheDSBtooknoteofthestatements.
5. 1996 Annual Report oftheDSB
- Announcement bytheChairman
TheChairman, speaking under "Other Business", saidthattheworkonthe1996Annual Report
oftheDSBwasunderway. Herecalled hisstatement made totheGeneral Council atitsmeeting on
18July1996, onanassessment ofthework oftheDSBsince January 1995. Hethensubmitted his
preliminary ideasontheAnnual Report. Itshould befactual andstress thattheDSBhadbeenanactive
body. Hebelieved thattheapplication oftheDSUhadbeenpositive andthatasaresult ofcodification
andprogressive development oftheGATT system, ithadoffered boththelegalpossibility through
thepanels andappellate bodyroute, aswellasthepossibility ofnegotiated solutions. Thissimultaneous
double approach hadbeenpositive forthemultilateral trading system. Inthesummary conclusions
oftheAnnual Report itwould bepointed outthattheDSU provisions hadbeeninvoked byboth
developed anddeveloping countries which would show thatinthisareatheUruguay Round andthe
Marrakesh Agreement hadbeenapplied inatrulyuniversal manner consistent withtheideaofaglobal
multilateral trading system. Thiswasapositive dimension ofthefirsttwo-year experience oftheWTO.
Therepresentative ofJamaica saidthathisdelegation hadappreciated theChairman 'sstatement
made attheGeneral Council meeting on18July1996. Jamaica supported thecontent andtoneof
thisstatement. Itbelieved thatinpreparing theAnnual Report oftheDSBthefollowing points should
betaken intoaccount. Thedispute settlement system wasneither static norrigid, butwasanevolving
system which required careful monitoring andreview. Thegapsought tobetaken upnotonacase-by-
casebasis inindividual panels, butinthecontext ofthisoverseeing body.
Inanassessment oftheimplementation oftheDSU itwasnotenough tostatethattheDSU
wasoneofthegreatest successes oftheUruguay Round ofthemultilateral trading system. TheDSU,
likeallother agreements, waspositive andcontributed tosecurity andpredictability intherule-based
multilateral trading system. However, itstruesuccess hadtobemeasured intheresults notinthe
provisions themselves ascontained intheUnderstanding. Aspartofthepredictability andsecurity,
intrinsic andexplicit intheevolution oftheGATT-system hadbeentheintroduction ofequity which
wasanimportant element ofcommon lawtoprovide procedural dueprocess andconsequential due
process. Equity asaconsequence ofspecial anddifferential treatment inPartIVoftheGATT was
acodification ofthisprinciple. Hisdelegation didnotwishsuchanimportant principle tobeoverlooked.
Therefore itwasnecessary toidentify thegapsastheyemerged intheimplementation oftheDSU.WT/DSB/M/22
Page6
Whenmaking"systemic"challengesintheWTOsystem,itwasnecessarytomakethedistinction
betweenthe"systemic"natureoftheWTOagreementsandtheintegrateddisputesettlementmechanisms.
Inthepast,negotiating history constituted animportant pillar onwhich panels based their
work. IntheWTO, thenegotiating history, ifstillapplicable, should beavailable inatransparent
manner toenable common interpretation. Inrecent cases, forexample inthedecision oftheAppellate
Body, negotiating history apparently didnotcount asbeing ofthesame importance asinthepast.
There wasapresumption intheWTO thatonecould beaco-complainant, butnotaco-respondent
asreflected intheDSU. Itwaspossible tojoinacomplainant asaninterested party inanissue but
interest inanissue onthedefendant 'ssideallowed forthird-party status only, withlessprocedural
ordueprocess rights. Itwasimportant toidentify thisgap,analyze itanddecide howitwould be
dealt withinthedispute settlement system. Inrespect ofworking procedures, itwasimportant to
elaborate onprocedural ordueprocess rights inthecontext ofthespirit oftheDSU. Thiswasrelated
tothird-party rights.
TheDSBhadbroughtincreasingpredicabilityandsecurityincludingfortheso-calleddeveloping
countries: i.e,sometimes inmatters ofprinciple itwasdifficult tosaywhether acountry wasamajor
orasmall trading partner, whether developed ordeveloping. Ifonewastoapply rulesandprinciples
andlawthanallshould understand thattheystood equal before thelawwithout distinction between
developed anddeveloping countries. Hebelieved thatitwasimportant thattheWTO continued the
practice oftheGATT which waspragmatic andconciliatory, seeking toresolve disputes rather than
totakeupmattersinaverylegalisticmanner.Otherwise,theWTOanddisputesettlementwouldbecome
ageneral agreement onlitigation. Thisshould beavoided.
Something resembling acredential committee hadnever beeninstituted intheGATT andit
should notbeinstituted intheWTO. Ifeachdelegation 'scredentials weretobeinspected astowho
wasorwasnotamember, thenitwaseverybody 'sright toquestion eachother. Thiswasnota
constructive waytooperate intheWTO. However, inhispersonal view hedidnotbelieve thatit
wasintheinterest ofthedispute settlement system forprivate lawyers tobepresent andlitigate. A
pragmatic solution should befound withrespect totheroleofexperts within individual delegations.
Withregard tothird-party participation therewasnoreference toobservers intheDSUanditsworking
procedures. Therefore, itwould notbeappropriate todescribe asobserver anyMember present in
apanel. They should either bedescribed asthirdparties orbythename-plates oftheircountries.
Another related point wastheautomaticity intheestablishment ofpanels. Although agreat
stepforward, itwasimportant thatautomaticity should notsimply leadtostandard terms ofreference
where thiswould beinappropriate, given thecomplexity ofthecomplaints made. Inrequest forthe
establishment ofpanels thereshould beanindication foreither standard orspecial terms ofreference.
With regard tothetime-frames, hesupported Canada 'sstatement thattiming andjointoperation of
disputesettlementmechanismrequiredfurtherconsideration.Theabove-mentionedpointswouldrequire
constructive consultations soastoavoid overstating thesuccess ofthedispute settlement system without
identifying thegapsthatmight militate against thebestinterest ofMembers.
Therepresentative ofMexico saidthattwoissues werebeing confused. Onewasthetreatment
ofgapsintheDSUandtheotherwasanexplicit reference tocaseswithimplicit references tothebanana
panel which wascurrently underway. Mexico believed thatalltheissues referred tobyJamaica had
beendealtdirectly bythepanel. Itdidnotagree thatallJamaica 'sproposals wererelated tothebanana
case.
Therepresentative ofJamaica clarified thathisintention wasnottotakeupmatters which were
currently before thepanel. However, some ofthose matters wereofageneric nature andshould notWT/DSB/M/22
Page7
beidentified asunique toanysingle panel. These werenotproposals, butmerely identifications of
some issues thatneeded consideration.
TherepresentativeofMexicothankedfortheclarificationandunderstoodthattheissuesidentified
byJamaica would beexamined oncethebanana panel hadconcluded itswork.
Therepresentative ofNorway thanked Jamaica forraising points ofsubstance, butwished
torecall hisdelegation 'sprevious intervention wherein theattention hadbeendrawn tothefactthat
substantive issues should notberaised under "Other Business" since Members could notbeprepared
inadvance todiscuss suchmatters Theissues raised would havebeenmorecarefully studied ifMembers
hadbeenadvised previously.
TheChairman recalled thatinaccordance withtheDecision ontheApplication andReview
oftheUnderstanding onRules andProcedures Governing theSettlement ofDisputes, theMinisterial
Conference would beinvited tocomplete afullreview ofdisputes settlement rulesandprocedures under
theWTO. After justtwoyears some problems hademerged which needed examination anddiscussion.
Nevertheless itwaswisetogivetheDSBandtheDSUthebenefit offouryears ofpractice, afterwhich
Members could consider thereview oftheDSU.
TheDSBtooknoteofthestatements.