8.129 The European Communities agrees with the proposition that the term "like products" must be construed narrowly in the context of the SCM Agreement. Nevertheless, the European Communities consider that the definition of "like product" contained in footnote No 46 of that SCM Agreement already embodies such a narrow interpretation. An even narrower interpretation of the definition itself is unwarranted. ⁴⁶⁴

8.130 It is true that, within the category of passenger cars, there are virtually limitless variations in respect of factors such as size, weight, engine type, cylinder capacity, engine power, transmission system, equipment, body design, colour, etc. ⁴⁶⁵ Nevertheless, those variations do not affect the essential similarity of all passenger cars nor prevent them from being "like" products.

8.131 Any attempt to define two or more sub-categories of "like products" within the category of passenger cars on the basis of any of those criteria would unavoidably yield arbitrary results. First of all, it would require to make a necessarily arbitrary choice among all possible criteria, the only alternative being to combine several criteria simultaneously at the risk of multiplying ad infinitum the categories of "like" products. Furthermore, in respect of many of those criteria (e.g. size or cylinder capacity), there is a full continuum of products. Drawing a line within that continuum would be arbitrary, regardless of where the line is drawn. Thus, for instance, a distinction between "large" and "small" passenger cars would be arbitrary because there would always be more "likeness" between the smallest large car and the largest small car than between products at either end of each of the two categories.

8.132 If, despite the above, the Panel took the view that not all passengers cars are "like products", the European Communities submit that, at the very least, the Opel Optima and the Peugeot 306 must be considered as being "like" the Timor S-515. The table below contains an exhaustive comparison of their physical characteristics. That comparison confirms beyond doubt that the Timor S-515 and the European Communities models concerned, albeit not alike in all respects, have closely resembling characteristics. The European Communities also has submitted sales brochures of the Timor S-515, the Peugeot 306 and the Opel Optima.

8.133 Should the Panel take the view that it is necessary to distinguish two or more "segments" within the category of passenger cars, the European Communities would refer the Panel to the classification made in the DRI Reports. According to the DRI Reports, the models of passenger cars sold in Indonesia between 1994 and 1997 may be classified into four segments, as follows:

According to the DRI Reports, no model was sold within Segment A ("Utility Class").

8.134 Indonesia cannot reasonably deny that the Timor and the EC cars, and in particular the Opel Optima and the Peugeot 306, have closely resembling physical characteristics. For that reason, Indonesia is forced to emphasize the importance of what it terms "non-physical characteristics". (See Section VIII.B.3). These include a long list of vague and essentially subjective criteria, such as "brand reputation", "status", "quality", "reliability", etc. which cannot be properly measured and compared. If the Panel upheld Indonesia's view that two vehicles which have closely resembling physical characteristics may nevertheless not be "like" because of differences in factors such as "quality" or "brand reputation", it would be opening the door to all kinds of arbitrary and abusive distinctions. An examination of prior Panel reports shows that alleged differences regarding non-physical characteristics have never been regarded as determinant for a like product determination. For instance, in the 1987 case on Japan - Taxes on Alcoholic Beverages⁴⁶⁶, Japan claimed that high quality Scotch whisky was not "like" domestic Japanese whisky of inferior quality. The Panel rightly ignored those arguments and concluded that all whisky was "like". In relative terms, there is no more difference between a Mercedes and a Timor than between a premium brand of malt Scotch whisky and a Japanese brand of second grade whisky made by adding water to a concentrate.

8.135 To be precise, the European Communities' position is that cars which have closely resembling physical characteristics do not become "unlike" simply because of alleged differences in so-called "non-physical characteristics."

8.136 "Riding comfort" is determined by the physical characteristics of a car. The same is true of "quality". "Reputation for quality" is one of the factors which make up the "brand image of a product." It is obvious that "brand image" may influence consumers' choices. In the European Communities' view, however, mere differences in brand image do not suffice to make two products "unlike". Moreover, this criterion is largely subjective, cannot be accurately measured, and may change over time. For instance, by definition new entrants lack an established "brand image". Thus, on Indonesia's construction, a subsidizing Member could always claim that subsidies for the establishment of a new domestic industry cannot cause "serious prejudice" to imports.

8.139 Obviously, this definition provides only general guidance, and a case-by-case analysis is necessary to determine whether a particular product is "like" another. In this regard, the guidance provided by the Appellate Body in connection with the application of the "like product" concept for purposes of the WTO agreements is particularly apt: ⁴⁶⁷

Factors which should be considered in applying a case-by-case analysis include "a product�s end-uses in a given market, consumers� tastes and habits, which change from country to country, and the product�s properties, nature and quality." ⁴⁶⁸

(a) The passenger cars that the United States would have sold in Indonesia are comparable to the Timor.

8.140 With this analytical framework in mind, let us now turn to an analysis of specific passenger cars of US motor vehicle manufacturers. Because of the National Motor Vehicle programme, there currently are virtually no passenger cars of US manufacturers that are imported and sold in Indonesia. ⁴⁶⁹ However, the passenger cars that were imported and sold in Indonesia prior to the introduction of the National Motor Vehicle programme were "like" the Timor Kia Sephia sedan. In addition, the passenger cars that, but for the National Motor Vehicle programme, would have been imported and sold in Indonesia are "like" the Timor Kia Sephia sedan.

8.141 Prior to the introduction of the National Motor Vehicle programme, General Motors sold two passenger cars under its "Opel" brand that easily can be considered as "like" the Timor Kia Sephia sedan. These are the Opel Optima and the Opel Vectra.

8.142 The Opel Optima and the Timor Kia Sephia both fall within "Segment C" of the motor vehicle market (lower medium class passenger cars). ⁴⁷⁰ Moreover, as set out in Table 23, below, the specifications for the Optima and the Timor Kia Sephia are quite comparable. The size and weight of the two cars are virtually identical, while the Optima has a slightly bigger engine.

8.143 With respect to the Opel Vectra, while it is positioned slightly higher in the market than the Optima or the Timor Kia Sephia⁴⁷¹, in terms of specifications, as set out in Table 23, it is not all that dissimilar to the Timor Kia Sephia. The Vectra is slightly larger than the Timor Kia Sephia (e.g., the Vectra is about 100mm longer than the Timor Kia Sephia), and has a more powerful engine. However, both cars share the same end-uses; i.e., to transport passengers.

8.144 Turning to Ford, Ford had well-advanced plans to import and sell Ford Escorts in Indonesia, plans that Ford had to abandon in light of the National Motor Vehicle programme and the introduction of the heavily subsidized Timor Kia Sephia sedan. Like the Timor Kia Sephia, the Escort falls in Segment C of the passenger car market. ⁴⁷² A comparison of specifications, as set forth in Table 23, confirms the similarities between the Escort and the Timor Kia Sephia and the fact that the Escort is "like" the Timor Kia Sephia. The Timor Kia Sephia is a little bit longer (65mm) and a little bit higher (44mm) than the Escort, while the Escort is a little bit wider (183mm) and has a slightly larger engine (1597cc versus 1498cc for the Timor Kia Sephia).

8.145 The following table demonstrates that the Timor Kia Sephia, the Opel Optima, and the Ford Escort are quite comparable in terms of specifications: ⁴⁷³

8.146 Finally, with respect to Chrysler, Chrysler had plans to import and sell its Neon passenger car in Indonesia. The table below presents a comparison of the specifications of the Neon and the Timor Kia Sephia. The data show that the Chrysler Neon closely resembles the Timor Kia Sephia, and, thus, can be considered a "like product" to the Sephia. The Neon is only 4 mm longer, 16 mm wider, and 5 mm taller than the Sephia, and is only 54 kilogrammes heavier. Also, although the Neon has a larger engine, both the Neon and the Timor Kia Sephia fall within the C segment, and, thus, in the view of the industry, compete for the same customers. ⁴⁷⁴ As such, the Neon can safely be considered as "like" the Timor Kia Sephia.

8.147 The specifications for the Chrysler Neon that would have been sold in Indonesia but for the National Car Programme are as follows:

8.148 To summarize, the passenger cars that US manufacturers did import and sell in Indonesia, as well as the passenger cars that they would have imported and sold in Indonesia, can be considered as "like products" to the Timor Kia Sephia. While none of these US passenger cars is "identical" to the Timor Kia Sephia, identity between motor vehicles is not required under the SCM Agreement. If identify of products were required, it is difficult to fathom how there ever could be a serious prejudice dispute (or a countervailing duty proceeding, for that matter) involving motor vehicles or any other type of consumer good, where slight variations in models or products are made for the very purpose of distinguishing products in competition with one another. Instead, under the SCM Agreement, it is enough that one product has "characteristics closely resembling" those of the subsidized product. The Opel Optima and Vectra, the Ford Escort, and the Chrysler Neon each satisfy this standard.

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⁴⁶⁴ Indonesia�s claim that the notion of "like product" should be construed even more narrowly in the context of an exception granted in favour of developing Members is simply non-sensical. The notion of "like product" is an objective one and cannot have different meanings depending on the GDP level of the subsidising country Member.

⁴⁶⁵ Some of the criteria enumerated by Indonesia as being relevant for a like product determination are too subjective (e.g. "reputation") or vague (e.g. "quality" or "ride and contort") for being measurable. Price is not relevant for a like product determination, especially when as in the present case one of the products concerned benefits from a huge subsidy, and the imported products are subject to the payment of very high import duties. As noted by the Panel Report on Japan - Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, adopted on 10 November 1987, BISD 34/119:

⁴⁶⁶ Panel report on Japan - Customs Duties. Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages adopted 10 November 1987, BISD 34S/83, 118.

⁴⁶⁷ "Japan - Taxes on Alcoholic Beverages," WT/DS8/R, Report of the Appellate Body, adopted 1 November 1996, p. 22.

⁴⁶⁸ Id., p. 21, citing to Report of the Working Party on Border Tax Adjustments, BISD 18S/97, para. 18.

⁴⁶⁹ See AV/13, p. 3 (Question 6) and Attachment 8 (Question 6).

⁴⁷⁰ See McGraw-Hill World Car Industry Forecast Report, February 1997, pp. 284-85, included as Annex 1 to AV/2. Cars falling within a particular market segment will roughly be of the same size, be in the same price range, and share the same target customers.

⁴⁷¹ The Vectra falls within "Segment D" (upper medium class) of the passenger car market. Id.

⁴⁷² See McGraw-Hill World Car Industry Forecast Report, February 1997, pp. 284-85, included as Annex 1 to AV/2.

⁴⁷³ Source: US companies.

⁴⁷⁴ Id.