US embassy cable - 05GENEVA2425

UNCLAS SECTION 01 OF 05 GENEVA 002425 
 
SIPDIS 
 
PASS USTR FOR ALLGEIER, FIELD, DWOSKIN, BRINZA, HIRSH 
EB/OT FOR CRAFT 
USDA FOR FAS/ITP/SHEIHK, MTND/HENKE, FAA/SE/WILSON 
USDOC FOR ITA/JACOBS 
 
E.O. 12958: N/A 
TAGS: EAGR, ETRD, WTRO, Trade 
SUBJECT:   DISPUTE SETTLEMENT BODY 
 
 
1.   SUMMARY: At its meeting on September 27, 2005, the WTO 
Dispute Settlement Body ("DSB") heard statements regarding 
the status of implementation from the United States in 
United States - Section 211 Omnibus Appropriations Act of 
1998; United States - Anti-Dumping Measures on Certain Hot- 
Rolled Steel Products from Japan; United States - Continued 
Dumping and Subsidy Offset Act of 2000; and United States - 
Section 110(5) of the US Copyright Act of 2000.  The DSB 
heard statements from Australia, Brazil, and Thailand in 
European Communities - Export Subsidies on Sugar, adopted 
the panel report in United States - Countervailing Measures 
Concerning Certain Products from the European Communities: 
Recourse to Article 21.5 of the DSU by the European 
Communities, and adopted the panel and Appellate Body 
reports in European Communities - Customs Classification of 
Frozen Boneless Chicken Cuts.  The DSB also approved the re- 
appointment of Messrs. Baptista, Lockhart, and Sacerdoti as 
members of the Appellate Body.  END SUMMARY. 
 
2.   The WTO Dispute Settlement Body met at 10 am on 
September 27, 2005, under the chairmanship of Ambassador 
Eirik Glenne (Norway) to consider the following agenda 
items: 
 
     (1)  Surveillance of Implementation of Recommendations 
Adopted by the DSB 
 
          A.   United States - Section 211 Omnibus 
Appropriations Act of 1998 
(WT/DS176/11/ADD.35) 
 
          B.   United States - Anti-Dumping Measures on 
Certain Hot-Rolled Steel Products from Japan 
(WT/DS184/15/ADD.35) 
 
          C.   United States - Continued Dumping and 
Subsidy Offset Act of 2 
(WT/DS217/16/ADD.20 - 
WT/DS234/24/ADD.20) 
 
          D.   United States - Section 110(5) of the U.S. 
     Copyright Act (WT/DS160/24/1DD.10) 
 
     (2)  European Communities - Export Subsidies on Sugar: 
     Implementation of DSB Recommendations and Rulings 
 
          A.   Communication from Australia, Brazil and 
Thailand (WT/DS265/32 - WT/DS266/32 - 
WT/DS283/13) 
 
     (3)  United States - Countervailing Measures 
Concerning Certain Products from the European 
Communities: Recourse to Article 21.5 of the DSU 
by the European Communities 
 
          A.   Report of the Panel (WT/DS212/RW) 
 
     (4)  European Communities - Customs Classification of 
Frozen Boneless Chicken Cuts 
 
          A.   Report of the Appellate Body (WT/DS269/AB/R- 
WT/DS286/AB/R) and Reports of the Panel 
(WT/DS269/R; WT/DS286/R) 
 
     (5)  Appointment of Appellate Body Members 
 
3.   The agenda was adopted without amendment.   The United 
States intervened on items 1, 3, and 4, per instructions 
(summarized below).  The complete text of all U.S. 
statements can be found on the website of the U.S. Mission 
in Geneva, us.mission.ch/press2005.html 
     (1)  Surveillance of Implementation of Recommendations 
Adopted by the DSB 
 
          A.   United States - Section 211 Omnibus 
Appropriations Act of 1998 
 
4.   The United States noted that several legislative 
proposals relating to Section 211 have been introduced in 
the current U.S. Congress and said that it is working with 
the U.S. Congress to implement the DSB's recommendations and 
rulings.  Regarding the EC's statements at the last DSB 
meeting, the U.S. failed to understand how its commitment to 
implement the DSB recommendations and rulings in this 
dispute and its efforts to comply could undermine the 
"authority" of the TRIPS Agreement.  To the contrary, these 
affirm Members' commitments to the TRIPS Agreement. 
 
5.   The European Communities noted that there are two 
disputes on the agenda for the present meeting in which the 
U.S. has failed to comply with its TRIPS Agreement 
obligations within the reasonable period of time for doing 
so.  As a main sponsor of that Agreement, the U.S. 
unwillingness to comply undermines the authority of that 
agreement.  Adoption of one of the four bills to repeal 
Section 211, which are pending before Congress, would 
resolve this dispute. 
 
6.   Cuba said that the June 30 agreement between the U.S. 
and EC in this dispute is a "shameful cave-in" on the part 
of the EC which allows the U.S. to continue to violate its 
WTO obligations by applying Section 211.  It called on the 
DSB to end its "complacent toleration of this flagrant lack 
of compliance" by the U.S. and encouraged the U.S. to repeal 
Section 211. 
 
7.   China regretted that the U.S.-EC agreement did not 
contain a deadline for implementation.  Implementation would 
be to the U.S. benefit.  It applauded the U.S. 
implementation in the 1916 Act dispute and urged the U.S. to 
use that momentum to bring its remaining WTO-inconsistent 
measures into conformity. 
 
8.   Canada said that as the aim of dispute settlement 
system is to secure a positive solution to a dispute that is 
mutually acceptable to the parties (DSU Article 3.7), Cuba's 
reference to the U.S.-EC agreement as "shameful" is a 
departure from how that system is conceived.  If Cuba 
considers that it has legitimate rights in this dispute, it 
can initiate a dispute on its own. 
 
9.   Cuba replied that it was not challenging the right of 
the parties to enter into an agreement no matter how 
shameful.  The U.S.-EC agreement was concluded behind closed 
doors and without consultations.  Cuba is aware of its 
rights. 
 
10.  The DSB took note of the statements and agreed to 
revert to this matter at its next meeting. 
 
          B.   United States - Anti-Dumping Measures on 
Certain Hot-Rolled Steel Products from Japan 
 
11.  The United States noted that as of November 23, 2002, 
U.S. authorities had addressed the DSB's recommendations and 
rulings regarding the calculation of anti-dumping margins at 
issue in this dispute.  It said that legislation has been 
introduced in the current U.S. Congress that would implement 
the remaining DSB recommendations and rulings with respect 
to the U.S. antidumping statute and that the House Ways and 
Means Committee is currently reviewing public comments on 
H.R. 2473 which it requested to be submitted by September 2. 
The U.S. Administration is working with Congress on the 
timely passage of such legislation. 
 
12.  Japan recalled that it has reserved its rights under 
DSU Article 22.2 and encouraged the U.S. to comply with its 
WTO obligations. 
 
13.  The DSB took note of the statements and agreed to 
revert to this matter at its next meeting. 
 
          C.   United States - Continued Dumping and 
Subsidy Offset Act of 2000 
 
14.  The United States said that the U.S. Administration 
proposed the repeal of the Continued Dumping and Subsidy 
Offset Act (CDSOA) in its budget proposal for FY2006 and 
that legislation that would repeal the CDSOA was introduced 
in the U.S. House of Representatives.  The Ways and Means 
Committee is reviewing public comments on whether to include 
that legislation in a broader trade bill and, on September 
9, an amendment to appropriations legislation was filed in 
the U.S. Senate which would prohibit the distribution of 
CDSOA funds unless they are not otherwise inconsistent with 
U.S. WTO obligations.  The United States will work with the 
U.S. Congress on legislation that would repeal the CDSOA and 
will confer with the complaining parties to reach mutually 
satisfactory solutions. 
 
15.  The European Communities recalled various recent 
Congressional initiatives with respect to the CDSOA and 
encouraged its repeal without delay. 
 
16.  Canada regretted that the retaliatory measures imposed 
by various Members were necessary so close to the Hong Kong 
Ministerial. It urged the passage of H.R. 1121 and welcomed 
an explanation of the amendment to Appropriations 
Legislation H.R. 2862. 
 
17.  Japan said that the proposed amendment to the U.S. 
Appropriations Legislation could have been a significant 
step, but understood that it was not introduced in the 
Senate.  Recalling that along with Canada, the EC, and 
Mexico, it is imposing retaliatory measures on the U.S., it 
called for a prompt repeal of the CDSOA. 
 
18.  Brazil said that the U.S. has shown no real progress on 
its implementation of the DSB's recommendations and rulings 
in this dispute and asked for an elaboration of the U.S. 
next steps with respect to the September 9 amendment. 
 
19.  The DSB took note of the statements and agreed to 
revert to this matter at its next meeting. 
          D.   United States - Section 110(5) of the U.S. 
Copyright 
 
20.  The United States noted that it will work with the U.S. 
Congress and confer with the EC to reach a mutually 
satisfactory resolution of this matter.  Noting it strong 
record of intellectual property rights protection, and other 
items on the agenda, the U.S. said that the EC was not in a 
position to "lecture" other Members about agreements being 
"one-way". 
 
21.  The European Communities replied that the U.S. was the 
only Member on the agenda which has twice failed to comply 
with its TRIPS Agreement obligations within the reasonable 
period of time established to do so; this was res ipsa 
loquitur.  The U.S. is doing little if anything to address 
the issue of "substandard" IP protection in the copyright 
field.  The self-proclaimed champion of IPRs seems 
"impotent" to live up to its TRIPS obligations.  The EC 
recalled that should the U.S. not work to resolve this 
matter it has reserved its right to reactivate arbitration 
on retaliation. 
 
22.  The DSB took note of the statements and agreed to 
revert to this matter at its next meeting. 
 
     (2)  European Communities - European Subsidies on 
     Sugar: Implementation of the DSB Recommendation   and 
     Rulings 
 
          A.   Communications from Australia, Brazil and 
Thailand 
 
23.  Australia recalled that while the DSB recommendations 
and rulings in this dispute require the EC to reduce its 
sugar exports, the EC's declassification of quota sugar to C 
sugar, which occurred during the implementation period, will 
actually increase EC sugar exports.  An implementation 
period does not serve as a "license to unilaterally waive" 
or an "open season for the non-application of" WTO 
obligations during that period.  The EC's actions, if 
replicated, would undermine the security and predictability 
of the WTO dispute settlement system and could destabilize 
the world sugar market.  Declassification is harmful, rather 
than necessary or conducive, to implementation. 
 
24.  Brazil reiterated that EC's obligations to reduce its 
sugar exports and stated that the EC's decision to 
declassify will have the opposite effect.  This action is in 
breach of Articles 3.3 and 21.1 of the DSU, Article XVI:4 of 
the Marakesh Agreement, and the principle of good faith. 
The RPT was not a carte blanche for the implementing Member. 
Referring to the agriculture negotiations, it noted the 
negative signal sent by the EC less than three months from 
the Hong Kong Ministerial. 
 
25.  Thailand stated that the EC's declassification decision 
increases its sugar exports (already in excess of levels 
permitted by the WTO) in the face of DSB recommendations and 
rulings requiring a decrease, which in turn will adversely 
affect world sugar prices.  The EC's action runs counter to 
its obligation to begin to implement the DSB's 
recommendations and rulings. 
 
26.  The European Communities stated that an "ambitious" 
proposal entailing a comprehensive reform of the EC sugar 
regime is currently being discussed in the EC Council and 
Parliament.  Until the new regime is in place, the EC must 
apply its existing rules which include requirements on the 
declassification of quota sugar.  While noting that its 
efforts to comply with the DSB's recommendations and rulings 
are underway, the EC insisted on a reasonable period of time 
to do so.  As defined by the DSU, implementation during that 
period is a legislative process involving the elimination of 
legal flaws and, in the present dispute, does not require a 
gradual reduction of WTO-inconsistent sugar exports to zero. 
Until the legislative process is complete, the old legal 
rules continue to apply. 
 
27.  The DSB took note of the statements. 
 
     (3)  United States - Countervailing Measures 
Concerning Certain Products from the European 
Communities: Recourse to Article 21.5 of the DSU 
by the European Communities 
 
          A.   Report of the Panel (WT/DS212/RW) 
28.  The European Communities discussed various aspects of 
the report, noting in particular the panel's finding that in 
a sunset review process involving privatization information, 
the investigating authority is obliged under the SCM 
Agreement to examine whether the privatization was at arm's 
length and fair market value.  Likewise, investigating 
authorities must take account of all the evidence placed on 
its record in making its determination of likelihood of 
continuation or recurrence of subsidization.  Refusal to 
consider new evidence is inconsistent with Article 21.3 of 
the SCM Agreement.  The EC did not, however, agree with the 
panel's findings with respect to "measures taken to comply" 
and privatization analyses being based on the companies as a 
whole.  The EC requested the adoption of the report. 
 
29.  The United States welcomed the panel's findings that: 
(1) certain shares in a French company at issue were not 
privatized at arm's length or for fair market value; and (2) 
investigating authorities need not reconsider the likelihood 
of continuation or recurrence of injury merely because the 
DSB's recommendations and rulings require reconsideration of 
the likelihood of continuation or recurrence of 
subsidization.  It questioned the panel's findings regarding 
the UK and Spanish reviews as they pertained to the 
application of the U.S. privatization analysis.  With 
respect to the UK review, it did not agree with the panel's 
finding that the U.S. should have considered certain 
evidence that was presented to it for the first time during 
the implementation of the DSB's recommendations and rulings. 
With these exceptions, the panel report was overall very 
positive and well-reasoned. 
 
30.  The DSB took note of the statements and adopted the 
panel report. 
 
     (4)  European Communities - Customs Classification of 
Frozen Boneless Chicken Cuts 
 
          A.   Report of the Appellate Body and Reports of 
the Panel 
 
31.  Brazil and Thailand commented on the report and called 
on the EC to implement immediately.  Thailand also noted 
that the panel and Appellate Body reports demonstrate that 
"the rule-based multilateral trading system works - and 
works well - for developing countries." 
 
32.  The European Communities said that while the Appellate 
Body accepted several of the EC's criticisms of the panel 
report, the Appellate Body ignored a number of the EC's 
arguments as well.  The EC did not support either the 
Appellate Body's explanation of the structure of Chapter 2 
of the Harmonized System or its findings on the object and 
purpose under Article 31(1) of the Vienna Convention on the 
Law of Treaties.  It found the Appellate Body's reasoning 
with regard to classification practice equally unpersuasive. 
Although the EC was satisfied with the Appellate Body's 
interpretation of the term "subsequent practice" found in 
Article 31(3)(b) of the Vienna Convention, that 
interpretation was undermined by the Appellate Body's 
application of Article 32 of the Convention.  For these 
reasons, the EC could not support the adoption of this 
report. 
 
33.  Japan commented on paragraph 199 of the Appellate Body 
report, noting that the Appellate Body's interpretation of 
Article 31(2)(a) of the Vienna Convention was unnecessary 
with respect to its deliberations on whether the Harmonized 
System was context for the purpose of analyzing the EC's 
schedule of tariff concessions. 
 
34.  The United States considered several aspects of the 
panel and appellate Body reports to be well-reasoned, 
agreeing with the panel's and Appellate Body's conclusions 
that two measures that post-dated the panel request were not 
within the panel's terms of reference.  It also appreciated 
the Appellate Body's approach on: (1) whether the EC's 
classification practice in this dispute could by itself 
constitute "subsequent practice" for the purposes of an 
analysis of context, as set forth in Article 31(3)(b) of the 
Vienna Convention; (2) whether classification practice and 
other acts of Members might be relevant for a panel's 
analysis in other ways, as supplementary means of 
interpretation under Article 32 of the Vienna Convention; 
and (3) whether and how panels should consider judgments of 
the domestic courts of a Member.   However, the United 
States found some of the discussion concerning "object and 
purpose" troubling, particularly the suggestion that panels 
could consider the object and purpose of individual treaty 
provisions, and the suggestion that "security and 
predictability" was itself an object and purpose of the WTO. 
 
35.  The DSB took note of the statements and adopted the 
panel and Appellate Body reports. 
 
     (5) Appointment of Appellate Body Members 
 
          A.   Decision by the DSB on the Reappointment of 
Appellate Body Members 
 
36.  Citing DSU Article 17.2, the Chairman said that Messrs. 
Baptista, Lockhart, and Sacerdoti had been appointed in 
December 2001 and that their terms would expire in December 
2005.  Having held consultations with Members over the past 
months, he noted that no delegation had objected to their 
continued membership and proposed that the DSB agree to 
their re-appointment. 
 
37.  Brazil thanked the chairman for his work on the re- 
appointment process and noted the general support for, and 
continued confidence in, these three Appellate Body members. 
 
38.  The Chairman proposed, and the DSB agreed, to reappoint 
Messrs. Baptista, Lockhart, and Sacerdoti each to a second 
four-year term as members of the Appellate Body. 
 
39.  Next meeting: The chair announced that the next regular 
meeting of the DSB would take place on Tuesday, October 18, 
2005.  The deadline for inscribing items on the agenda will 
be on Thursday, October 6.  The airgram will be issued on 
Friday, October 7. 
 
SHARK