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TWN Info Service on WTO and Trade Issues (Apr17/11)
25 April 2017
Third World Network

       
DSB adopts panel ruling in China-EU poultry meat dispute
Published in SUNS #8447 dated 21 April 2017


Geneva, 20 Apr (Kanaga Raja) - The Dispute Settlement Body (DSB) of the World Trade Organisation (WTO) on Wednesday adopted the report of the panel in the dispute brought by China over measures imposed by the European Union affecting tariff concessions on certain poultry meat products.

Both the European Union and China decided not to appeal the panel's findings.

In other actions, the United States blocked a request for the establishment of a panel by India to examine whether its revised measures relating to the importation of poultry and other agricultural products are in compliance with the rulings and recommendations of the DSB.

India sought recourse to panel establishment under Article 21.5 of the Dispute Settlement Understanding (DSU) and a panel will be automatically established when the request comes up again before the DSB. (See separate article.)

In the China-EU poultry meat dispute, a dispute panel on 28 March handed down a ruling in favour of China that the European Union had failed to take account of "special factors" in allocating two tariff-rate quotas (TRQs) for poultry meat products exported by China after the EU had relaxed sanitary and phytosanitary restrictions on China in 2008.

In a somewhat mixed ruling, the panel, however, ruled against China on eight other TRQ issues it had raised against the EU.

On the two TRQ issues found in favour of China, both relating to processed duck, geese and guinea fowl meat, the three-member panel said that "China has demonstrated that the increase in imports from China over the period of 2009-2011 following the relaxation of the SPS measures in July 2008 was a "special factor" that had to be taken into account by the European Union when determining which countries had a substantial interest in supplying the products concerned."

The panel said on the two issues that the European Union had acted inconsistently with Article XIII:2(d) by not recognizing China as a Member holding a substantial interest in supplying the products under tariff lines 1602 39 29 and 1602 39 80 (processed duck, geese and guinea fowl meat) and by failing to seek agreement with China on the allocation of the TRQs for those particular tariff lines.

The panel however rejected all the other claims brought by China including that China has not demonstrated that the European Union acted inconsistently with Article XIII:1 of the GATT by allocating all or the vast majority of the TRQs to Brazil and Thailand.

It also found several other claims by China to be either outside the panel's terms of reference or not properly before the panel.

In its ruling, the panel concluded that, to the extent that the measures at issue are inconsistent with Article XIII: 2(d) and the chapeau of Article XIII:2 of the GATT 1994, they have nullified or impaired benefits accruing to China under the GATT 1994.

Having found that the European Union has acted inconsistently with its obligations under Article XIII:2(d) and the chapeau of Article XIII:2 of the GATT 1994, the panel recommended that the Dispute Settlement Body request that the European Union bring its measures at issue into conformity with its obligations under the GATT 1994. (See SUNS #8433 dated 30 March 2017.)

In its statement at the DSB, China said that it brought this dispute to address a situation that arose after certain SPS measures were adopted by the European Union in response to an outbreak of avian influenza in China.

From January 2002 through July 2008, imports of poultry products from China into the EU were prohibited pursuant to the SPS measures.

China pointed out that it did not challenge the WTO-consistency of the SPS measures themselves as part of this dispute.

Its concern was that the EU failed to take into account China's interests in its poultry market when it renegotiated tariff concessions involving these products based on import data compiled while imports of these products from China were banned.

In addition, the EU, based on the absence of imports from China due to the EU's import ban, allocated the majority of the tariff rate quotas (TRQs) opened as a result of the tariff renegotiation to Brazil and/or Thailand, because these WTO Members accounted for the majority of EU imports.

China considered that the approach to the tariff renegotiation and TRQ allocation adopted by the EU was inconsistent with the EU's obligations under Articles XXVIII and XIII of the GATT 1994 as well as Articles I and II of the same agreement.

According to China, the Panel found that the EU's allocation of two TRQ shares among supplying countries was inconsistent with the requirements of Article XIII:2.

Specifically, the Panel upheld China's claim that its increased ability to export poultry products to the EU following the end of the SPS measures in July 2008 was a "special factor" that the EU was required to take into account when determining which countries had a "substantial interest" in supplying the products concerned, or when determining the TRQ shares to be allocated to the category of "all other" countries that were not recognised as substantial suppliers (including China) pursuant to Article XIII.

China said that it is disappointed that the Panel did not find that the EU had violated its obligations with respect to the other claims in this dispute.

Overall, however, China said that it is pleased with the outcome and supports the adoption by the DSB of this important report.

In its statement, the EU welcomed the findings of the Panel. It maintained that the Panel rejected most claims made by China, and made some important systemic findings.

In particular, the Panel had rejected all claims by China under Article XXVIII of the GATT such as the claim that an importing Member is under a legal obligation to reappraise which WTO Member holds a principal or substantial supplying interest to reflect changes in import shares that have taken place following the initiation of the negotiations.

This ensures the legal certainty and predictability of WTO members which follow the procedures under Article XXVIII, it said.

Moreover, in relation to claims under GATT Article XIII, the Panel rejected China's claim that the EU acted inconsistently with Article XIII by failing to periodically (annually) update the initial TRQ allocations.

Such a finding would have been of concern beyond the management of this particular tariff rate quota as it would have imposed a very burdensome obligation on all WTO Members managing TRQs to periodically update all initial TRQ allocations, said the EU.

According to the EU, the Panel also rejected China's contention that the EU acted inconsistently with Article XIII by determining which countries had a substantial interest in supplying the products concerned on the basis of their share of imports into the EU, rather than on the basis of an estimate of what import shares would have been in the absence of the SPS measures restricting poultry imports from China.

The EU believes that these clear findings are of systemic importance and provide very useful guidance to Members in negotiating and managing TRQs.

In an intervention, Thailand welcomed the adoption of the panel report in the dispute. According to Thailand, this dispute concerns the modification of ten tariff lines in the EU's Schedule of Concessions.

These modifications were negotiated with Thailand and Brazil, which were determined by the EU to be Members with a principal supplying interest or a substantial supplying interest in the ten tariff lines.

The EU replaced the previously unlimited tariff concessions in these lines with tariff rate quotas. The total amounts of the tariff rate quotas and their allocation were determined by the EU by agreement with Thailand and Brazil, as appropriate.

Thailand said in this dispute, the Panel decided upon various complicated issues, including the procedures for the determination of Members with a principal supplying interest and a substantial supplying interest under GATT Article XXVIII negotiations, the rules for the allocation of tariff rate quotas under GATT Article XIII, and the relationship between these two provisions.

Many of these issues had never been examined before by a WTO panel, it said.

The EU's tariff rate quotas at issue in this dispute cover poultry meat products, which are important exports for Thailand, it noted.

According to trade officials, Brazil said it expects that its rights obtained in the negotiations with the EU will not be affected by the panel ruling both in terms of the overall size of its TRQ allocation as well as the administration of the quotas.

Meanwhile, under the agenda item of the Russian Federation's measures on the importation of live pigs, pork and other pig products from the European Union, the Russian Federation said that it intends to implement the rulings and recommendations of the DSB in accordance with its WTO obligations, and that it needs a reasonable period of time to do so.

APPELLATE BODY APPOINTMENTS

According to trade officials, the Chair of the DSB, Ambassador Junichi Ihara of Japan, reported on efforts to find consensus on the procedures for selecting two new Appellate Body members.

The second four-year term of Mr. Ricardo Ramirez Hernandez will expire on 30 June 2017, and the second four- year term of Mr. Peter Van den Bossche will expire on 11 December 2017.

The Chair recalled that consultations under his predecessor, Ambassador Xavier Carim of South Africa, revealed that several delegations supported one single selection process to fill both positions at the same time, while two delegations expressed a preference for two independent processes.

One delegation suggested that the DSB could start one selection process to fill the vacancy that will expire in June and that more time be given to addressing the second vacancy, he said.

According to trade officials, Ambassador Ihara said that he has continued the consultations but that as of today, he could only report that the talks will continue with the aim of finding a solution as soon as possible.

In view of the Appellate Body's increased workload, every avenue should be explored to ensuring its good function, he added.

The Chair said he would continue to consult with delegations so as to be able to submit a proposal regarding the appointments as soon as possible.

According to trade officials, a group of Latin American countries - Argentina, Brazil, Colombia, Chile, Guatemala, and Peru - said they were especially concerned that the selection process had not yet been launched for Mr. Ramirez's replacement.

The group of Latin American countries pointed out that his "seat" has traditionally gone to the Latin American region.

The group asked the Chair for more details as to why consensus could not be reached. It said that this unusual situation generates uncertainty for the candidates to the posts.

Canada also expressed concern over the delay. However, it did not agree that any Appellate Body post should be reserved for a particular member or region, as it would mean nationals from outside those regions would never have a chance to be appointed.

Australia likewise said merit, not origin, was the primary consideration for appointment.

According to trade officials, India, China, New Zealand and Russia also expressed concerns about the delay.

India called for clarification as to why delegations were insisting on a single or separate appointment processes.

The US said it looked forward to working with the Chair in filling these important positions.

 


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