US IGNORES 'RESTRAINT', RAISES NEW DISPUTES...
by Chakravarthi Raghavan
Geneva, 6 June 2000 -- The United States has sought separate consultations at the WTO with the Philippines, Argentina, Brazil and Romania over their failures in implementation of accords, where transition periods have expired, but are covered by the post-Seattle call of the General Council to all parties for 'exercise of restraint' pending satisfactory resolution of these issues.
The restraint call came in the General Council in December 1999, when the Council met to pick up the pieces shattered by the Seattle debacle.
And in May this year this issue figured again -- when various procedural and other compromises to deal with these issues, including those relating to agreements where the transition periods have expired, under the overall guidance of the General Council, and address other implementation issues through the mechanism of Special General Council meetings.
At an informal General Council meeting on 2 May, Brazil had raised the question in terms of the US administration advising Congress that it would be pursuing cases against Brazil and several others, when the US had tried to explain away the notifications to Congress as only measures in pursuance of the statutory requirements.
The compromise package that evolved at that meeting was adopted by the General Council at its formal sessions on 5 and 8 May.
All WTO meetings are held in private, and informals are open only to members. Hence outsiders do not know whether the views and comments at the informals, sometimes purveyed by delegations or trade officials to media, have in fact been recorded at formal meetings and how.
Only when the formal minutes of these meetings are circulated (to members, but not to the public or media), would members be able to see how far these have been reflected.
But the impression left on other delegations at the time was that the US would continue to exercise restraint and not pursue the disputes at the WTO.
However, in the last week of May, the US has officially sought bilateral consultations with these countries, a necessary first step before invoking the Dispute Settlement Body for naming panels.
In a separate action, the European Union has sought consultations with the US over the recent amendments for a 'carousel approach' to secure compliance of trading partners to US trade rights -- for rotation of sanctions every six months against a range of products from the EC to force the EC to comply with the US demands on the banana regime and the beef hormone disputes.
The US imposed sanctions, up to the level of trade damage authorized by the DSB, against the EU in both these disputes. It first announced a large list of products, whose total import value was several times the damage claimed by the US as due to EC restrictions. The arbitrators scaled down the damages claimed and authorized the US withdrawal of equivalent sanctions. On that basis, the US then chose from this large list, products whose import value would total up to the amount of sanctions authorized by the WTO/DSB and imposed them.
But nearly six months of sanctions has not forced the EC to yield.
In the banana case, the EC claims that it is having talks with various banana exporting interested parties to find a solution acceptable to all. In the beef hormone case, it has conducted new expert studies to make a scientific assessment of safety considerations -- while the US sanctions remain in force. And some of the new studies suggest that some of the growth hormones used to raise cattle may have some carcinogenic and other effects.
But finding that the trade sanctions has not persuaded the EC to change, Congress (after intense lobyying by the owner of the chiquita banana TNC and the beef industry) has ordained a carousel approach -- varying every six months the list of products for trade sanctions, in the hope that this would create collective pressures. This amendment to S.306 of the US trade law was made by Congress as part of the recently enacted trade law for preferential, but conditional, duty free and limited-quota-free market-opening treatment for Central American, Caribbean and sub-Saharan African countries. The EC has now challenged this provision in the law, arguing that this is a violation of the WTO/DSU provisions relating to authorization by the DSB of sanctions, and as a practical matter means that all the US scheduled market access commitments in its WTO schedules could be modified by the US at will, and thus have a chilling effect on the market place, affecting the security and predictability of the multilateral trading system.
The US complaints and request for consultations in areas relating to the implementation and transition periods issues are:
1. Against Brazil, dated 31 May, over Brazil's industrial property law (to give effect to the TRIPS agreement) making 'local working' of a patent a requirement for exclusive patent rights. The US complains against Brazil's law requiring local working, by providing for compulsory licensing if a patent is not worked in Brazil, and defining 'failure of the patent to be worked' as "failure to manufacture or incomplete manufacture of the product" or "failure to make full use of the patented process".
These provisions in the US view, violate Brazil's TRIPS obligations.
2. A second, separate dispute against Brazil is over Brazilian decree and related statutes and regulations under which Brazil uses minimum import prices for customs valuation purposes. The US charges that Brazil uses this verification system - along with non-automatic import licensing procedures - to prohibit or curtail imports of products with values below the determined minimum prices.
This, the US contends, is a violation of the Customs Valuation Agreement, of GATT 1994, of the Agreements on Import Licensing, Textiles and Clothing and Agriculture.
3. A complaint against the Philippines relates to the TRIMS agreement relating to the Philippines measures under the Philippines Motor Vehicles Development Program (MVDP), including the Car Development Program, the Commercial Vehicle Development Program and the Motorcycle Development Progress. Under these measures, certain manufacturers located in the Philippines and meeting certain requirements are entitled to import parts, components and finished vehicles at a preferential tariff rate. The import licenses of foreign manufacturers for parts, components and finished vehicles are conditioned on compliance with these requirements.
The US claims that these violate obligations under Art.III:4, III:5 and XI:1 of the GATT 1994, Articles 2.1 and 2.2 of the TRIMS Agreement and Article 3.1(b) of the Subsidies and Countervailing Agreement.
4. The complaint against Argentina is over its legal regime governing patents, data protection and other related matters. The US complains that Argentina is violating its TRIPS obligations by failing to protect against unfair commercial use of undisclosed test or other data submitted to the government for market approval of chemical or pharmaceutical products; for improperly excluding from patentability micro-organisms; by failure to provide effective provisional measures like preliminary injunctions, for preventing infringement of patent rights; for denial of exclusive rights for patents, such as protection of products produced by patented processes and rights of importation; failure to provide safeguards for compulsory licensing granted on basis of inadequate working; improperly limiting the authority of its judiciary in shifting burden of proof in civil proceedings on patents; and placing limitations on certain transition patents so as to limit the exclusive rights conferred, and denying patent applicants the right to amend the applications to claim enhanced protection.
5. The complaint against Rumania is over minimum import prices set for meat, eggs,fruits and vegetables, clothing, footwear and certain distilled spirits. These, the US claims, are violations of the Customs Valuation Agreement, of GATT 1994, Agreement on Agriculture and Agreement on Textiles and Clothing.
Under the DSU, Art.4.3, when consultation is sought, the other side must respond within 10 days, and good faith consultations must be held within 30 days. In the event of failure on either count, the issue can be taken to the DSB for panel reference, as also (under 4.7) in cases where consultations yield no results within 60 days. This effectively means a minimum period of 60 days after which the party raising the dispute can seek a panel. (SUNS4683)
The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.
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