(c) Relation between Article II:1(b) of the GATT 1994 and
Article 4.2 of the Agreement on Agriculture
4.85
Chile points out that all parties to the dispute
agree that "ordinary customs duties" has the same meaning in Article 4.2 and its
footnote as in Article II:1(b) of the GATT 1994. It further states that
Argentina, however, never faces up to the contradiction in the Argentine
position under Article II:1(b) and Article 4.2. Chile explains that, under
Article II:1(b), Argentina complains that the PBS duties have resulted and could
result in a breach of Chile's bindings - the bindings on ordinary customs
duties. Under Article 4.2, however, to avoid conceding that the Chilean PBS
duties are ordinary customs duties exempt from Article 4.2, Argentina attempts
to invent a new definition of what is an ordinary customs duty as opposed to a
"variable import levy" or "similar" measure. The Argentine definitions, however,
are simply fabricated by Argentina, without foundation in the text of the
Agreement, and without logic and coherence as a matter of treaty interpretation.218
4.86
Chile submits that Argentina's complaint under
Article II:1(b) properly treats the PBS duties as "ordinary customs duties",
even though Argentina has tried to ignore the implications of its own claim.
Chile argues that Argentina's claim under Article II of the GATT is that the PBS
duties and the ad valorem duties can potentially result in total applied
rate of duty above the bound rate. Chile contends that, if Argentina had
considered, erroneously, that the price band duties were an "other" duty or
charge, then Argentina would have claimed that the price band duties were flatly
prohibited, regardless of whether the binding is breached. The reason is that
Article II:1(b) unconditionally prohibits "other" duties and charges that have
not been scheduled, without regard to whether those "other" duties and charges,
when added to ordinary customs duties, would result in a breach of the binding
on ordinary customs duties. Because the PBS duties are ordinary duties, Chile
naturally has never scheduled the price band duties as an other duty or charge.
In Chile's view, it is puzzling that Argentina asserts in paragraph 24 of its
second submission that the price band duties are not an ordinary customs duty
but rather a "surcharge" (sobretasa) - a term not used in Article
II:1(b). However, it adds, even in paragraph 24, Argentina does not claim that
the PBS duties are therefore prohibited under Article II:1(b), as would be the
case if they were unscheduled "other" duties or charges. Rather, Argentina
simply argues that the "sobretasa" together with the ad valorem
duty can potentially result in a breach of the binding.219
4.87
Chile submits that the nature of Argentina's
complaint and argumentation under Article II:1(b) demonstrates that, for
purposes of Argentina's complaint under Article II:1(b), Argentina regards the
PBS duties as ordinary customs duties. Chile argues that if Argentina considered
PBS duties to be "other" duties, then it would make no sense for Argentina to
concede that the PBS duties do not necessarily breach the binding, but rather
are only "potencialmente violatorio".220 Likewise, there would have been no
need for Argentina in its first submission to set out an elaborate formula for
determining when the PBS duties would have the effect of breaching the 31.5 per
cent binding because under Article II:1(b) and the Understanding, "other" duties
or charges are prohibited at any level, if they were not properly and timely
inscribed in a Member's schedule. Chile affirms that it is transparent in its
schedule that Chile made no attempt to list the PBS duties as other duties or
charges, because, of course, the PBS duties are ordinary customs duties and have
always been so treated.221
4.88
Argentina, in reference to the above argument by
Chile to the effect that it did not register its PBS because the duties
resulting from it were "ordinary customs duties", states that, in fact, Chile is
merely recognizing that while the resulting duties could be ordinary customs
duties222, the PBS as such cannot, since it does not have any limit as to the
duties it is capable of imposing and varies over a wide range - both above and
below the bound level - with a frequency that makes it incomparable to ordinary
customs duties.223 Argentina explains that what counts under Article 4.2 of the
Agreement on Agriculture, which is a lex specialis vis-�-vis
Article II:1(b) of the GATT 1994, is that the price band system, as its name
suggests, is a "system" (a series of elements which interact to produce a
result) and not an "ordinary customs duty". Argentina submits that the PBS, by
its very nature - "variable levy" or "similar measure" - is one of the "measures
of the kind" which have been required to be converted into "ordinary customs
duties". It contends that it is the system that was required to be converted
(the PBS) that is inconsistent with Article 4.2 of the Agreement on Agriculture,
and not the duties resulting from that system. Chile itself has said that
"Chile's price band system duties are not variable import levies within the
meaning of Article 4.2 of the Agriculture Agreement".224 Regardless of the status
of the duties resulting from the application of the PBS, Argentina submits, the
system as such has been shown by Argentina to be "a variable levy" or similar
measure within the meaning of Article 4.2 of the Agreement on Agriculture.225
4.89
Argentina submits that the obligation contained in
the first part of Article II:1(b) of the GATT 1994 is a separate obligation and
different from the obligation laid down in Article 4.2 of the Agreement on
Agriculture.226 It further explains that Article 4.2 of the Agreement on
Agriculture prohibits certain measures involving restriction of market access
independently of any breach of Article II:1(b) of the GATT 1994 (Schedules of
Concessions).227 It will later specify that Article 4.2 of the Agreement on
Agriculture is lex specialis vis-�-vis Article II:1(b) of the GATT
1994.228
4.90
Chile considers that the prohibitions in Article 4.2
apply without regard to whether the measures breach a tariff binding. In Chile's
view, for example, it is obvious on the face of the Agreement that one of the
main purposes of Article 4.2 was to prevent a Member who had had the privilege
of converting a non-tariff measure into an often prohibitively high tariff from
then proceeding to restore that or some other non-tariff barrier at a later
date. However, Chile argues, a measure that could violate Article II of the GATT
1994 is not likely to be a non-tariff measure prohibited under Article 4.2,
unless the measure has non-tariff components as well.229
4.91
Argentina argues that the only way of evaluating
whether a measure which was maintained is inconsistent with Article 4.2 of the
Agreement on Agriculture, particularly if it is a measure similar to those
listed in footnote 1, is by analysing its economic effects as compared to
ordinary customs duties. Consequently, Argentina submits, not having been
tariffied and the results of the process not having been included in the
corresponding schedule, failing a waiver or renegotiation of the commitments,
the price band system is clearly in violation of Article 4.2 of the Agreement on
Agriculture, even without exceeding the bound level.230 Argentina further claims
that Chile itself admits that Article 4.2 of the Agreement on Agriculture can be
violated without violating Article II:1(b) of the GATT 1994.231
4.92
Argentina does not agree with the argument developed
by the European Communities whereby a measure that would meet the test set out
by the Appellate Body in Argentina - Footwear, Textiles and Apparel, and
would therefore not be contrary to Article II of GATT 1994, would not be subject
to any further obligation in Article 4.2 of the Agreement on Agriculture. The
European Communities consider that such a conclusion would stand even if the
measure in question resulted in the application of a "duty that varies" -
inasmuch as this "variation" is maintained below the ceiling written in the
Member's tariff binding. Thus, in the European Communities' view, the decisive
element which distinguishes an "ordinary customs duty" from a "variable levy" is
the existence of a ceiling in the tariff binding. Argentina considers that the
European Communities are trying to link different obligations laid down in
different agreements. In Argentina's view, Article II:1(b) of the GATT 1994 lays
down the obligation to refrain from levying "ordinary customs duties" in excess
of the bound duties set forth in the national schedules. On the other hand,
Argentina explains, Article 4.2 of the Agreement on Agriculture lays down the
obligation to change all "measures of the kind which have been required to be
converted into ordinary customs duties", as well as the obligation to refrain
from maintaining, resorting to, or reverting to any measures of the kind set
forth in the non-exhaustive list in the footnote. Argentina notes that, at the
same time, the difference between the application of specific duties - in the
case cited by the European Communities (violation of the bound level, Article
II:1(b) of the GATT 1994) - and the Chilean PBS (Article 4.2 of the Agreement on
Agriculture) lies in the total predictability and transparency for the purposes
of commercial planning in the first case (application of specific duties with a
ceiling), and the total absence of predictability and transparency for the
purposes of commercial planning in the second case (application of a variable
duty or similar measure). Argentina concludes that the European Communities'
interpretation of the obligations under Article 4.2 of the Agreement on
Agriculture deprives of its effectiveness a provision that was painstakingly
negotiated by Members. As stated in Article 21 of the Agreement on Agriculture,
Argentina submits, the obligations under the GATT 1994 apply with respect to
agricultural trade to the extent that the specific Agreement concluded on
agriculture does not provide otherwise.232 Argentina explains that the Members
agreed, in the case of agriculture, that a certain kind of measures would be
"required to be converted into ordinary customs duties", i.e. tariffied with a
view to eliminating their distortionary effects and lack of transparency and
predictability. These effects, Argentina asserts, which distinguish the
"measures of the kind" that must be tariffied from "ordinary customs duties",
are independent of any ceiling.233
4.93 In Chile's view, the above argument of the
European Communities may be correct, although it would note that Chile has
pointed out several bases for concluding that the Chilean PBS is not prohibited
by Article 4.2, so it is not necessary to resolve the issue whether the
existence of a binding by itself is sufficient to make a duty that varies not a
prohibited measure under Article 4.2. While it is obvious that the mere
existence of a binding on a product does not permit resorting or reverting to a
prohibited non-tariff barrier on such product, Chile contends, the European
Communities' distinction is salient for a measure whose only protection is
achieved via a duty, where the degree of variation does not add any protection
greater than that achieved if the duty were applied at the bound level. Chile
believes that the logic behind accepting the European Communities' argument lies
in three points: First, as Argentina has conceded, not every duty that varies is
banned, since that would imply a rule that countries cannot change their applied
rates, even to reduce them, even if bound rates are respected. Chile's annual
reduction of its applied rates would become a prohibited variable levy, by such
an absurd test. Argentina arguments notwithstanding, there is nothing in the WTO
establishing rules about degree, frequency or predictability of variations.
Second, the most important objective characteristic of the "conversion" of the
European Communities' variable levies appears to be the binding of duties, and
the European Communities' conversion was subject to ample discussion and
negotiation by all parties before the WTO agreements went into force. It thus
would seem to Chile that the European Communities were entitled to think all
parties understood its conversion to be adequate. Indeed, Chile explains, the
only complaints about the European Communities' conversion were that the levy
did not vary enough. Chile considers that, while the European Communities'
system is certainly not at issue in this dispute, it is reasonable to look at
the practice of such a major Member, and the attitude of other Members toward
that practice in establishing how it would implement the obligations even before
the entry into force of the WTO agreement. Third, and most important, varying
the applied rate below the bound level is less, not more protective than a
perfectly legal system in which the applied rate is simply maintained at the
bound level. According to Chile, while Argentina has tried to suggest that the
variability of a duty is an additional barrier to trade, Argentina has no
evidence for that proposition. Chile submits that it is undeniable that every
Member has a right to apply its duties at all times at the level of its
bindings. Chile claims that, in theory and in fact, it is impossible to see how
it can be less advantageous to trade of other countries if instead of constantly
applying duties at the bound rate, a Member maintains a system in which the
duties assessed are usually less than the permissible bound rate, at least so
long as the ceiling binding is honoured or an appropriate exception invoked. In
Chile's view, the variation of the applied rates below the bound rates may mean
that Members cannot rely on always having the benefit predictability of the
voluntary benefit of lower rates than the tariff binding, but Members have no
right to such lower rates in any event. Thus, Chile concludes, it is reasonable
to assert that, in the case of measures whose only protective effect is through
a duty, there is no basis for complaint about a duty that varies, so long as the
ceiling binding and other obligations such as MFN are respected.234
(i) Other issues of interpretation relating to Article
4.2 of the Agreement on Agriculture
Relevance of the Chile-Mercosur Economic Complementarity
Agreement No. 35
4.94
Chile refers to Article 24 of its Economic
Complementarity Agreement ("ECA") No. 35 with Mercosur after the Uruguay Round
where it is stated that the parties, Mercosur (including Argentina) and Chile
recognize the existence of the PBS and establish certain rules to the effect
that Chile will not add new products to the system nor modify it with the
intention of imposing more stringent restrictions. Chile claims that, according
to the principles of international law, therefore, Argentina recognized and
accepted the existence of the system that it is now trying to contest in a
different legal framework.235 In response to a question by the Panel, Chile
clarifies that, by "the principles of international law", it means any
collection of standards which, although not necessarily a treaty or a
conventional source of rights and obligations, governs and determines
international relations between States and other subjects of international law.
In this particular case, Chile adds, it was referring to the following
principles: the principle of good faith: "good faith shall govern the relations
between states", as well as the performance of treaties concluded by them.
According to Chile, Argentina is one of the States that participated in the
Uruguay Round negotiations, and when the trade agreements were adopted, although
it definitely knew of the PBS, it never suggested, in this forum, that it be
eliminated, modified or replaced by a system of the bound duties. Chile submits
that it is hardly in a position to do so since Argentina itself has its own PBS
with respect to sugar imports. Subsequently, during the negotiation of ECA 35
between Mercosur and Chile, Argentina, although aware of the existence of the
PBS and its technical aspects, did not suggest or require its elimination,
modification or replacement by Chile with a system of bound duties. Even more
importantly, Chile claims, the PBS was one of the trade issues that was
expressly discussed and negotiated between Chile and members of Mercosur. Chile
submits that the parties expressed their explicit and unequivocal acceptance of
the price band and its technical aspects by including in Article 24 of ECA 35236 a
provision which directly mentions the system. Nevertheless, Chile adds, four
years later Argentina itself tried to challenge the very system whose
consistency with the WTO it had already accepted internationally, under a
different legal framework. In Chile's opinion, this international behaviour
clearly contradicts the principle of good faith which should govern
international relations and the performance of treaties that have been
negotiated, signed and ratified.237
4.95
Chile further mentions the principle of pacta
sunt servanda: every treaty in force is binding upon the parties to it and
must be performed by them in good faith. According to Chile, this principle has
a natural, complementary and explicit link with the principle of good faith, and
hence the above remarks fully apply. Chile contends that Argentina and the other
members of Mercosur undertook, in ECA 35, to respect the PBS unless Chile,
following the entry into force of the Agreement, were to include new products,
to modify the mechanisms or to apply them in such a way as to undermine
Mercosur's market access conditions. Although none of the above has occurred,
Chile stresses, Argentina has challenged the system, using a different legal
framework to do so. Under the rules of international law on interpretation of
treaties, Chile explains, ECA 35 constitutes an additional relevant context for
interpreting the conformity of the PBS with the WTO and its Agreements. In
conclusion, Chile asserts, the conduct of Argentina and the other participants
in the negotiation of ECA 35 suggests that all of the Mercosur member countries
viewed the PBS as a legitimate measure that was permitted under the WTO and
required disciplines under ECA 35 so that the member countries of Mercosur could
obtain a benefit beyond what they had already obtained as Members of the WTO as
a result of Chile's tariff concessions. According to Chile, this is obvious,
since if members of Mercosur had felt that the entire PBS was illegal under the
WTO Agreement on Agriculture (as Argentina is now claiming in this dispute),
then it would have been unnecessary and indeed pointless to negotiate
limitations, as they did, on the use of the system under the ECA. Chile
indicates that it does not claim or even attempt to argue that Argentina is not
entitled to submit its complaint before the WTO on the basis of its new theory
that the PBS is illegal under Article 4.2 on the Agreement on Agriculture
(although Chile obviously considers that this theory is absolutely without
merit). What Chile does maintain is that Argentina's prior conduct - both during
the Uruguay Round negotiations and during the negotiation of ECA 35 - shows that
Argentina did not, and does not, understand Article 4.2 to be a rule that
prohibits the PBS, but on the contrary, it understands that Article to be a rule
which permits the PBS. In Chile's view, this understanding constitutes a
relevant context under the rules of international law for interpreting the
meaning of Article 4.2. Chile clarifies that it is not asking the Panel to
decide on the interpretation of ECA 35, as this would not be within its
jurisdiction and competence. What Chile has done, it explains, is to introduce
this Agreement merely as yet another element in the relevant context
substantiating Chile's understanding of the interpretation of Article 4.2 in
relation to its PBS. Chile further clarifies that it is not suggesting that the
interpretation of WTO rules depends on who the parties to a dispute are. In
Chile's view, the ECA is a relevant context because it shows that prominent
Members of the WTO, including those that are parties to this dispute, negotiated
another agreement immediately following the negotiation of the WTO Agreements,
on a basis which suggests that they understood the WTO Agreements did not, and
do not, prohibit the Chilean PBS.238
4.96
Argentina rejects the above argument that it bases
its claim on a "new theory that the PBS is illegal under Article 4.2 of the
Agreement on Agriculture".239 Argentina is not aware of the existence of different
theories concerning the obligations under Article 4.2 of the Agreement on
Agriculture. Argentina assumes that there are measures that are either
consistent or inconsistent with the provisions of the Agreement on Agriculture
in general, and measures that are inconsistent with Article 4.2 of the Agreement
on Agriculture in particular. Consequently, Argentina submits that all that is
needed is to apply the Vienna Convention to the interpretation of the scope of
the obligations.240 Argentina contends that, in its international relations and in
respect of treaties it has concluded with other States, it acts in conformity
with the general principles of public international law. Argentina submits that,
contrary to what Chile has claimed241, in bringing its complaint concerning the
inconsistencies of the PBS with Article 4.2 of the Agreement on Agriculture
before the WTO, Argentina acted in conformity with the principle of good faith
and the principle of pacta sunt servanda. However, Argentina submits,
Chile's conduct in maintaining provisions under its domestic legal system which
violate Article XVI.4 of the Marrakesh Agreement Establishing the WTO after
accepting the covered agreements is contrary to the principle of good faith in
the fulfilment of agreements and in the actions of States, particularly when
Chile has recognized that it has done this "deliberately".242
4.97
Chile clarifies that the ECA 35 did not deal
directly with the issue of whether the PBS was or was not, for the purposes of
the WTO, an ordinary customs duty or some other kind of duty, charge or tax.
However, it is clear that none of the parties considered that the duties under
the PBS were "other duties" under the WTO, since Chile did not include them as
such in its tariff schedule, and the other Members did not attack them as such
under the WTO.243 It further clarifies that it has never said that Argentina's
acceptance of the price band in ECA 35 was an exception to the WTO. Chile
explains that what it has said is that Argentina, through WTO, wants to upset
the balance of rights and obligations assumed under their bilateral agreement,
since Argentina made Chile pay to retain the price band in the bilateral
agreement as if Argentina also considered the price band valid under WTO.244
4.98
Argentina considers that Chile's argument that
Argentina recognized and accepted the existence of the [price band] system245 in
the framework ECA 35 ignores the essence of the WTO obligations contained in the
"covered agreements" whose "enforcement" is achieved through the DSU. In this
respect, Argentina submits that WTO precedent makes it clear that it is the
commitments assumed under the WTO and not the bilateral agreements that
constitute the relevant obligations of a Member under that Agreement. In other
words, there are different legal frameworks: in one of them, the WTO, paragraph
4 of Article XVI lays down the obligation for Members to bring all of their
legislation into conformity with the WTO Agreements, while in another,
completely different framework - the regional Latin American Integration
Association (LAIA) - relations between Mercosur and Chile are governed by ECA
35, which covers an ambitious agenda and in which the provisions cited by Chile
could be given any number of meanings, as has been recognized by Brazil, another
member of ECA 35, in its third party submission.246 Argentina submits that a simple
reference to the PBS in the framework of a regional agreement can in no way be
understood as a waiver of WTO obligations. Argentina declares that if a Member
could be released from its WTO obligations and could obtain a sort of immunity
against scrutiny of its measures on the basis of provisions to which it has
adhered in other legal frameworks, such as regional agreements, the very basis
of the multilateral trading system would be affected.247
4.99
Argentina submits that each international treaty is
an independent legal instrument and should therefore be considered as a
self-sufficient entity based on the principle of pacta sunt servanda.
Argentina stresses that the ECA 35 does not have an auxiliary or complementary
nature with respect to the WTO agreements: the ECA 35 does not clarify,
complement, amend or modify the agreements covered by the Marrakesh Agreement.
Argentina further submits that Chile is wrong to invoke ECA 35 in its defence in
that ECA 35 does not say that Argentina "recognized and accepted" the Chilean
PBS. On the contrary, Argentina contends, as Chile itself admits, the ECA 35 is
the result of negotiations which led to the application of certain restrictions,
albeit insufficient, to the PBS.248 Argentina claims that, as Chile recognizes, the
ECA 35 requires Chile to refrain from increasing the market distortions caused
by the PBS by not adding new products or making it more stringent and more
restrictive of trade. In Argentina's understanding, far from accepting the PBS,
Mercosur, through the ECA 35, tried to limit and restrict it. Argentina
concludes that Chile's249 comments ultimately lead to the conclusion with respect
to the ECA 35 that by permitting the PBS to operate at full regime, making the
system more restrictive, in spite of Mercosur's attempts to impose limits on the
system, Chile has in fact violated ECA 35, the very Agreement behind which it is
now trying to hide.250
4.100 According to Argentina, WTO Members cannot opt
to disregard their WTO obligations simply because they have signed less
restrictive agreements. A contrario, Argentina argues, if one was to
consider, for the sake of argument, that we are not dealing with two separate
and distinct legal frameworks, as Argentina contends, and if ultimately,
although nothing prevented Argentina from filing a complaint with the WTO, the
ECA 35 served as a context for the analysis of the inconsistency of the Chilean
price band system vis-�-vis Article 4.2 of the Agreement on Agriculture,
in Argentina's view, it would have to begin by pointing out that Chile
explicitly recognizes that the "ECA No. 35 did not deal directly with the issue
of whether the price band system was or was not, for the purposes of the WTO, an
ordinary customs duty or some other kind of duty, charge or tax � ".251 Argentina
further argues that, if ECA 35 were even considered an "additional relevant
'context, Chile itself has also recognized that it did not include the PBS' as
such in its tariff schedule"252 either in the WTO, or in the Annex and Additional
Notes to ECA 35. Argentina considers that, "if the ECA 35 did not 'deal directly
with the issue', and if there is an opinion to the effect that the PBS does not
constitute another duty", and if Chile also failed to include the PBS as such in
its tariff schedule and in the Annexes and Additional Notes to ECA 35, it is
difficult to see how ECA 35 can serve as a context for the interpretation of
obligations under Article 4.2 of the Agreement on Agriculture. Argentina further
argues that if the Panel were to consider that the ECA 35 provides a guide,
because Chile itself excluded the PBS from its tariff schedule and because it
takes the view that no preferences - the very purpose of ECA 35 - are applicable
to the price band system, this reinforces the idea that the PBS is not a tariff
- in WTO terms, "an ordinary customs duty" - but rather, it is what Argentina
has been claiming it to be from the beginning of these proceedings, i.e. a
"variable levy" or a "similar border measure" which is inconsistent with Article
4.2 of the Agreement on Agriculture.253
Prior knowledge, negotiating history and subsequent practice
4.101
Chile submits that the PBS has been in effect since
1983, having been established by law, and that the system is used by some
countries of the Andean Community and was used by some Central American
countries. It explains that, throughout the late 80s and early 90s, the World
Bank encouraged countries, at least in Latin America, to convert their
quantitative restrictions to price bands, which are more market oriented
schemes. Chile contends that Argentina has a system similar to Chile's price
band for imports of sugar that considers an additional duty that is the result
of the difference of two prices; one called �Gu�a de Base� which is the result
of the average international prices of the last eight years and the other called
�Gu�a de Comparaci�n� which is the London price.
4.102
Argentina considers that Chile's vague and general
argument concerning the existence of PBSs in Latin America is irrelevant in
justifying the kind of violation resulting from the Chilean PBS. Argentina is of
the view that Chile's statement is not based on any concrete evidence of the
existence of several PBSs in the region, and even if there were several, their
mere existence would not suffice to make the Chilean system consistent with WTO
rules - that, after all, is the subject of this proceeding.254 It further argues
that the prior existence of the Chilean PBS and its subsequent maintenance
following the entry into force of the Agreement on Agriculture does not preclude
the fact that the system was contrary to Article 4.2 and its footnote. In
Argentina's view, Article 28 of the Vienna Convention clearly states that the
"provisions [of a treaty] do not bind a party in relation to any act or fact
which took place � before the date of entry into force of the treaty with
respect to that party." In this regard, Argentina considers that there was no
possibility of filing a complaint prior to the entry into force of WTO
Agreements on 1 January 1995. Argentina therefore concludes that Chile's
argument that neither Argentina nor any other Member filed a complaint
previously is without foundation. On the other hand, Argentina adds, as from the
entry into force of the Agreements - i.e. the date on which the Members assumed
the positive obligation to bring their domestic regulations into conformity with
the system (pursuant to Article XVI.4 of the WTO Agreement) and to put an end to
any measure that is inconsistent with the system - the Chilean measure has been
liable to questioning under the DSU, not only as a result of previous rules, but
because of what is expressly stipulated in Article 4.2 of the Agreement on
Agriculture itself, since Chile has continued to maintain a measure which should
have been converted into a regular customs duty. Argentina submits that this
provision must be interpreted in the light of Article XVI.4 of the WTO
Agreement, which also lays down an obligation for Members to act, in the
following terms: "Each Member shall ensure the conformity of its laws,
regulations and administrative procedures with its obligations as provided in
the annexed Agreements." Argentina considers that the fact that prior to the
complaint filed by Argentina there had not been any other complaints lodged by
Argentina or any other Member of the WTO does not lead to a presumption that the
PBS is consistent with Article II.1(b) of the GATT 1994 or with Article 4.2 of
the Agreement on Agriculture since there is no WTO rule precluding Argentina's
right to file a complaint for violation of both Article 4.2 and Article II.1(b)
of the GATT 1994. If there had been such a rule, Argentina submits, it would
have been up to Chile to include it in these proceedings as a legal basis for
its general assertions.255
4.103
Chile agrees that there is no doctrine of estoppel
in the WTO nor any other rule or practice in the WTO that provides that a
measure cannot be challenged if its removal was not specifically addressed in
negotiations or if the challenge is not made within some specific period after
entry into force. However, Chile contends that Argentina misunderstands Chile's
argument. Chile argues that there is no evidence that PBS were considered
measures that had to be converted into ordinary customs duties, while the
context of other parts of the WTO agreement, the negotiating history, and
subsequent practice all support Chile's view that the PBS duties are not
prohibited.256 Chile further indicates that, under Article 32 of the Vienna
Convention, the negotiating history is a valid tool for interpretation in case
of doubt. Chile insists that Chile's negotiators recall that both the
Secretariat and other delegations confirmed orally that the price band system
was not a measure requiring conversion to ordinary duties, and claims that
neither Argentina nor any interested party has offered any evidence to the
contrary. Chile also stresses that subsequent practice supports Chile's view
that the price band system is not a measure prohibited by Article 4.2. Chile
mentions that Argentina has a sugar import duty system that Chile is confident
Argentina would not maintain if it believed the validity of any of the
interpretations it asserts against Chile. Chile submits that, while it might be
argued that Chile's system or that of other Andean countries, or Argentina's
sugar system is too small in its effects to be worth a challenge, the same could
hardly be said of the EC's system. In Chile's view, the reason that PBS or the
systems of the European Communities or Argentina were not challenged in the WTO
has nothing to do with forbearance. Rather, it is because these measures are
ordinary customs duties that are subject to the disciplines of Article II:1(b),
but are not prohibited by Article 4.2.257
4.104
Argentina asserts that following the end of the
Uruguay Round, "subsequent practice" (within the meaning of Article 31 of the
Vienna Convention ) - if any - relevant to define the content of the provisions
of the text of Article 4.2 of the Agreement on Agriculture, which are not
ambiguous, is the practice of the Members of the WTO. In this sense, Argentina
submits, the only existing practice within the WTO, provides precisely the
opposite outcome to what Chile has submitted before this Panel. Argentina quotes
paragraphs 47 and 48 of document WT/L/77, containing the Report of the Working
Party on the Accession of Ecuador to the WTO and indicates that the excerpt
clearly shows that the overwhelming majority of WTO Members has agreed, within a
formal context (that is, during the discussions leading to the accession of
Ecuador to WTO) - reflected in a WTO official instrument - that PBSs are
incompatible with WTO rules. Argentina concludes that this is the only relevant
WTO practice258 in the sense of Article 31.3(b) of the Vienna Convention , since it
reflects the opinio juris of all WTO Members and not that of isolated
Members.259
4.105 In response to a question by the Panel, Chile
indicates that it believes that the text and context leave no ambiguity that the
Chilean PBS is not a measure prohibited by Article 4.2. However, it adds,
if the Panel is in doubt, the negotiating history and state
practice are legitimate supplementary interpretive aids, and these all support
Chile's position that Article 4.2 does not prohibit the Chilean PBS. Chile
contends that there are four elements of this practice: first, the existence of
similar measures to those of Chile in other countries (including Argentina and
the European Community); second, the absence of "conversion" except by binding
of the duty by any other Member having such a measure; third the absence of any
challenge of such measures under Article 4.2, and fourth, the initiation of
dispute settlement challenges of the European Community's system in 1995-1997 by
Canada, the United States, Thailand and Uruguay under provisions of the GATT
1994 and the Ccustoms Valuation Agreement, but never on grounds of a violation
of Article 4.2. Chile submits that this practice, like the negotiating history
and the tariff negotiations, does not by itself prove that the negotiators of
Article 4.2 did not intend to prohibit duties that vary in the sense of the
Chilean, Andean, Argentine or European Communities system. However, it argues,
the practice, context and negotiating history all support the logical reading of
Article 4.2, i.e. that the Article does not prohibit the Chilean PBS, at least
so long as it operates within a system of bound ordinary customs duties.260
4.106 In response to a question by the Panel as regards
Argentina's reference to the Working Party Report on Ecuador's accession to the
WTO, Chile submits that it includes the comment that "some members of the
working party" thought that Ecuador's price band system was contrary to WTO
rules. However, it argues, the discussion in paragraphs 42 to 48 of the Working
Party Report does not reveal any general agreement that Ecuador's system was
inconsistent with WTO rules. Chile submits that, even among those who voiced the
view that Ecuador's system was inconsistent with the WTO, there does not even
appear to have been agreement on what rules might be infringed, and in no case
is there a specific reference to Article 4 of the Agreement on Agriculture.
Chile contends that it is recorded that one Member thought that Ecuador should
tariffy under the Agricultural Agreement. On the other hand, it explains, it is
also noted that members of the Working Party who questioned Ecuador's system
thought that it should either be eliminated or brought into conformity with WTO
rules, which implies that even these Members, or at least some of them, thought
that price bands per se are not illegal. Chile claims that Ecuador itself
ultimately committed to phase out its price band system over time "in order to
comply with the provisions of the WTO Agreement on Agriculture." The Working
Party took note of that commitment, but taking note of such a commitment, Chile
argues, does not constitute acceptance that eliminating the price band system
was required by the WTO. Chile submits that it is well known that it is a normal
part of the accession process for existing Members to request an acceding
Members to undertake changes in policies and practices, even if such changes are
not required by the general rules of the WTO.261
Secretariat's advice
4.107
Chile claims that it has received advice from the
GATT Secretariat according to which the PBS would not be inconsistent with its
obligations under either the GATT or the draft Agreement on Agriculture then
under negotiation. Chile qualifies this statement by explaining that, during the
80s and the beginning of the 90s, i.e. during the Uruguay Round negotiations,
the World Bank encouraged various countries, at least in Latin America, to
convert their quantitative restrictions into price bands, which are mechanisms
that permit competition. Chile claims that, on at least one occasion, during a
seminar for Central American countries, in response to the concern that had been
expressed over the maintenance of these mechanisms, a letter was presented
originating in the GATT Secretariat arguing that it was not necessary to tariffy
price bands since they were unrelated to the domestic price - provided the price
bands were maintained within the bound levels.262 Chile later clarifies that it was
not a participant in the seminar (though some Chileans were present in their
capacity as consultants or representatives of intergovernmental organizations)
and that, since the letter was not addressed to Chile, Chile has been unable to
get a copy of the said letter. It further adds that the date of the seminar is
equally unclear but it could have taken place in 1993.263 Chile further claims that
the advice given in that letter was subsequently endorsed orally by the
delegations with which Chile was engaged in direct negotiations (United States,
European Communities and New Zealand, among others) as well as in oral opinions
provided by the Secretariat prior to the conclusion of the Uruguay Round.264
4.108
Argentina responds that Chile has not submitted any
documentary evidence regarding the above alleged advice by the Secretariat.
Secondly, the Chilean argument in paragraph 31 of its second written submission
refers simply to an oral confirmation rather than to a letter, and speaks not
only of the Secretariat but of other delegations that allegedly stated that
there was no need to tariffy the PBS. Argentina can merely state that evidence
that has not been brought cannot be refuted, and takes the view that the Panel
cannot accept the Chilean argument that evidence that has not been brought can
be an additional tool for interpretation under Article 32 of the Vienna
Convention .265 Argentina contends that, in view of Chile's alleged "letter � from
an authority of the GATT Secretariat arguing that it was not necessary to tariffy price bands", the value of the report by the Secretariat in the 1997
Trade Policy Review of Chile takes on particular importance. That report,
Argentina explains, is an institutional opinion by the WTO Secretariat, and it
recognizes that "the [Chilean] price stabilization mechanism works as a valuable
levy �".266 Argentina further indicates that the Trade Policy Review Mechanism
(TPRM) undeniably provides for a thorough examination of the trade policies of
Members and the extent to which they have adapted or failed to adapt to GATT/WTO
rules. It claims that there can be little doubt as to its relative weight and
value in trying to understand whether the PBS constitutes a variable levy or a
similar border measure, since unlike the elusive mention of an alleged letter
that Chile has not identified or submitted during these proceedings, it
represents a respectable technical opinion, made available to all WTO Members in
the form of a report.267
4.109
Chile contends that the above-mentioned statement
by the TPRM does not represent a legal conclusion let alone a conclusion under
Article 4.2. Further, the Secretariat did not say that the price band system is
a variable levy but that it "works as" a variable levy, because the levy varies
according to the import price. In Chile's view, statements in the TPRM are not
supposed to be used in dispute settlement, under explicit WTO rules.268
-
Arguments relating to Chile's Safeguard Measures
1. Procedural arguments
(a) Terms of reference
(i) Measures which are no longer in force
4.110
Chile notes that Argentina requested consultations
with Chile on 5 October 2000 under the WTO's dispute settlement procedure
concerning the consistency of the provisional and definitive safeguard measures
applicable to imports of wheat, wheat flour and edible vegetable oils. Chile
states that the provisional measures ceased to have effect on 22 January 2000,
the date on which the definitive measures on the same products entered into
force. The Chilean authority decided to extend the safeguard measures as of 26
November 2000269 for a period of one year from the date of their expiry.270 Chile
contends that, although the mechanism for applying the extension measures is the
same as that determined in the previous decree on definitive measures, this does
not constitute grounds for asserting that this is the same measure that has been
extended over a period of time as though they were one and the same. Chile
submits that these new extended measures are the result of the receipt of new
information, interested parties were given a hearing, which concluded with a
recommendation on extension, and this was adopted under a new decree. Chile
argues that the Chilean authorities might not have decided on an extension. If
that had been the case, Chile affirms, the definitive measures would have ceased
to have effect simply because the time-limit had been reached as according to
Chilean legislation, the maximum duration of a safeguard measure, (including the
period of the provisional measure) is one year, without prejudice to extension,
which also may not exceed one year.271 Chile explains that an extension cannot take
effect automatically, it requires a new decision adopting it, which constitutes
a new measure, meaning that it is a new measure whether or not it is
substantially identical to the definitive measure that preceded it.272
4.111
Chile submits that when, on 19 January 2001,
Argentina requested the establishment of a panel on this dispute, neither the
provisional nor the definitive measures were in effect. Chile argues that, if it
is presumed that the Chilean provisional and definitive safeguard measures were
inconsistent with certain provisions of the Agreements, then the objective of
the dispute settlement mechanism invoked by Argentina should be to conclude that
the measures must be withdrawn by Chile. Chile refers to the line of reasoning
adopted by the Appellate Body in the dispute United States - Import Measures
on Certain Products from the European Communities when it determined that a
panel erred in recommending that the DSB request the Member to bring into
conformity with its WTO obligations a measure which the Panel found no longer
existed.273 For these reasons, Chile considers that Argentina should have respected
the provision in Article 3.7 of the DSU: "Before bringing a case, a Member shall
exercise its judgement as to whether action under these procedures would be
fruitful."274
4.112
Chile refers to Argentina's statement whereby it
"requests the Panel to rule on all of the claims made so as to avoid any
unnecessary future proceedings if the findings are eventually overturned,
bearing in mind that the Appellate Body exercises procedural economy".275 Chile
submits that the application of the principle of judicial economy by a panel
means that it is not necessary to address all the claims made by the parties but
only those that must be addressed in order to resolve the matter, in which case
a finding is necessary to enable the DSB to make sufficiently precise
recommendations and rulings to allow prompt compliance by a Member with those
recommendations and rulings.276 Chile wonders how would it be possible for the
Panel to recommend that Chile bring its provisional and definitive safeguard
measures into conformity if such measures are not being applied. Hence, Chile
requests the Panel to find that the provisional safeguard measures (adopted
under Decree No. 339, published on 19 November 1999) and the definitive
safeguard measures (adopted under Decree No. 9, published on 22 January 2000)
were not in effect so it is not possible to make a recommendation that Chile
bring these measures into conformity with its WTO obligations.277
4.113
Argentina considers that the provisional and
definitive safeguard measures, even though they may have been repealed following
their extension in some cases (specifically, in the case of wheat and wheat
flour), require a specific ruling by the Panel because they form part of its
terms of reference. Argentina argues that, since they come under the Panel's
terms of reference, the Panel is required, under Article 7.1 of the DSU, to
examine them, in the light of the relevant provisions in the Agreement, as part
of the matter referred to the DSB. Argentina contends that the fact that the
definitive measure was repealed is irrelevant for the purposes of a ruling,
since Chile explicitly recognized that it resorted to safeguards "to obtain the
required legal backing in accordance with the WTO's relevant provisions".278
Argentina submits that safeguard measures may only be applied in accordance with
procedures of the Agreement on Safeguards and in conformity with the strict
standards established therein. It considers that Chile's recognition that it
only sought to "obtain the required legal backing" is in fact a negation of the
multilateral commitment to apply safeguards only in conformity with the
provisions of the Agreement on Safeguards.279 In Argentina's view, no
interpretation of the Safeguard Agreement, however broad, would enable it to
conclude that the "extension" is a new safeguard measure. Argentina contends
that extension is not a notion that exists independently of other provisions of
the Agreement on Safeguards. Argentina further submits that the Agreement must
be interpreted as a single whole, and not as a series of separate articles.
Argentina argues that when a Member, by a resolution or some other
administrative act, decides to "extend" an existing measure, it is not
converting it into a new measure.280
4.114
Argentina argues that Chile continues to apply a
safeguard measure on oils for precisely the same reason it applied all of its
previous measures (including their extensions), i.e. because there was a PBS
that was inconsistent with the WTO and caused it to violate its tariff binding.
Argentina claims that, as long as the PBS is in force, the same situation can
recur. In Argentina's view, if there is no ruling by the DSB establishing the
inconsistency of the safeguard measures, the situation could recur, since the
attempt at ex-post facto justification will have escaped the scrutiny of
the DSB. Argentina submits that it is this very possibility of reintroducing
measures for the same reasons that caused them to be adopted originally that has
led to consistent rulings on repealed measures both prior to the WTO and under
the WTO.281
(ii) The decision on extension was not the subject of
consultations between the parties
4.115
Chile claims that Argentina, when requesting
consultations under the WTO dispute settlement procedure, only identified the
provisional and definitive safeguard measures applied to certain goods subject
to price bands. Chile indicates that the consultations were held on 21 November
2000 but, when requesting the establishment of a panel, as noted in its
communication of 19 January 2001282, Chile explains that Argentina nonetheless
included in its request the provisional measures, the definitive measures and
the decision to extend the safeguards. Chile notes that Argentina included in
its request Chilean measures (the extension of the safeguards) that were not the
subject of prior discussion during a WTO consultation procedure and this was
recognized by Argentina itself in its request for the establishment of a panel.
Chile considers that such recognition does not constitute sufficient grounds in
terms of a WTO Member's obligation to respect the DSU. Chile submits that this
is not a minor question nor simply a formality, but concerns respect for a basic
guarantee of due process in the defence of the interests of a Member of the WTO.283
4.116
Chile recalls that, on 1 February 2001, at the
first meeting of the DSB at which Argentina requested the establishment of a
panel, Chile drew attention to this anomaly284 and Argentina replied that "the
subject of the extension of the measure was included in the request for
consultations since there was a legal similarity between the original measure
and the subsequent extension thereof".285 Subsequently, Chile continues, at the DSB
meeting on 12 March 2001286, Argentina again requested the establishment of a panel
and mentioned the various consultations held by the parties287, which, combined
with its theory of the "legal similarity" of the definitive measures and the
extension, intimate that Chile tacitly accepted that the extension measure was
included in the consultations. Chile explains that the DSB decided to establish
a panel with the standard terms of reference contained in Article 7 of the DSU288
to examine the matter brought up by Argentina in its communication requesting
the establishment of the panel. Chile questions whether these terms of reference
could allow examination of another matter that was not included in the
consultations. Chile further questions whether the DSB, with its terms of
reference, can disregard certain provisions in the DSU that require a panel only
to consider a matter that has previously been discussed in valid consultations
at the WTO. Chile submits that, like all WTO Members, it is seeking to resolve
the dispute with Argentina in good faith and considers that its good faith
cannot lead to neglect of important provisions in the DSU that guarantee proper
defence.289
4.117
Argentina submits that, contrary to what Chile
maintains, the then possible extensions of the definitive measures were in fact
discussed during the consultations held with Chile. In this regard, Argentina
claims that, between 5 October 2000 when Argentina requested consultations, and
21 November 2000 when the consultations were actually held, Argentina learned
that the Chilean Ministry of Agriculture had requested the extension of the
measures (3 November 2000), after which, on 13 November 2000, Argentina
participated in the hearing before the Commission. Subsequently, Argentina
explains, on 17 November 2000, the Argentine Mission in Geneva transmitted to
the Chilean Mission a written questionnaire in which some of the questions
referred to the extension of the definitive measures.290 Argentina argues that,
even if the extension of the definitive measures were not considered to have
been properly addressed, this would not prevent them from being rightly subject
to the jurisdiction of the Panel, as was recently confirmed by the Appellate
Body.291
4.118
Chile argues that the DSU states the following: the
dispute settlement system is a central element in providing security and
predictability to the multilateral trading system (Article 3.2); no solution to
a dispute should nullify or impair benefits accruing to any Member (Article
3.5); any request for consultations (to be valid in the WTO) must be submitted
in writing and identify the measures at issue, the reasons and basis for the
complaint and, lastly, be notified to the DSB (Article 4, paragraphs 2 and 4);
the intervention of a panel may only be requested within a period calculated
from the date of receipt of the request for the holding of consultations
(Article 4, paragraphs 7 and 8); and the request for establishment of a panel
must refer to the consultations (Article 6.2). It further argues that, in the
report of the Appellate Body in Brazil - Export Financing Programme for
Aircraft, it is stated that: "Articles 4 and 6 of the DSU � set forth a
process by which a complaining party must request consultations, and
consultations must be held, before a matter may be referred to the DSB for the
establishment of a panel."292 Chile explains that it has met with Argentina on a
number of occasions in order to find a comprehensive solution to this dispute.
Nevertheless, it says, this does not mean that, quod non, Argentina had
called for valid consultations in the WTO on the extension measures because it
did not request such consultations in writing and made no notification to the
WTO to this effect.293 Chile submits that, for a question to be considered as
properly addressed in a consultation proceeding under the WTO, the measure at
issue first has to be identified in writing, and that document must be notified
to the DSB. Chile submits that Argentina never submitted a written request for
consultations with Chile, nor provided the DSB notification thereof, in which it
mentioned the extension measures at issue. Chile considers that, if due process
is to be guaranteed, it is essential that the DSU requirements with respect to
the formalization of a claim under the dispute settlement system be respected,
since this is what enables a Member to whom a claim is addressed to lay the
foundations for its defence on the basis of the indications contained in the
written request for consultations.294
4.119
Chile submits that, in this particular case, the
extension measures contain the same provisions as the definitive safeguard
measures. In this respect, there is similarity, which Chile does not deny.
Nevertheless, Chile argues, the extension was the result of a new request that
gave rise to a new process, with a public hearing, and to subsequent
determinations based on the evidence considered on that occasion. Chile contends
that, even though the content of the final measure (extension) is identical to
that in the previous measure, the new measure only exists because the competent
Chilean authority formally had to issue a new administrative act that completed
and validated the extension, otherwise the previous measure would have expired,
and nothing more. Chile submits that the situation would have been different if
the original measure had been automatically extended within a specified period
without any interested party contesting it, as this would have lent weight to
the Argentine theory of an alleged "legal similarity", but quite clearly this is
not the case.295
4.120
Argentina argues there are absolutely no legal
grounds for accepting, as a possible interpretation of Article 6.2 of the DSU,
that the extensions of Chile's definitive measures lack a legal identity with
the safeguard measures, nor does such a suggestion make any sense. In
Argentina's view, the fact that they were extended through a new decree is the
logical result of the fact that the definitive measure had an expiry date.
Otherwise, Argentina affirms, it would have violated various paragraphs of
Article 7 of the Agreement on Safeguards (7.1, 7.2, 7.3 and 7.6). Argentina
contends that the legal identity of the measure is confirmed by the fact that
the same authority issued the extension, through the same Commission, because
the measure applies to the same products and because the measures apply exactly
the same remedy.296
4.121
Argentina claims that to agree on the issue raised
by Chile would be to negate "due process", to the detriment of Argentina, by
restricting access to jurisdiction. It considers that the security and
predictability of the multilateral trading system would be seriously undermined
since this could lead to a situation in which a safeguard measure which is
extended will never be subject to scrutiny by the DSU.297
4.122
Argentina argues that, given that under the
Safeguards Agreement, "extension" is not an independent notion, it goes without
saying that if the definitive measure is inconsistent, that inconsistency does
not cease with the extension of the measure. Argentina points out that if the
original measure had been repealed, and if Exempt Decree No. 349 adopting the
extension had been a new measure, Chile's way of proceeding would still be
inconsistent with Article 7.5 of the Agreement on Safeguards which prohibits new
measures from being reintroduced until a specified period of time has elapsed.298
4.123
Chile submits that Argentina is attempting to
establish an innovative theory resting on the existence of a legal identity
between the extension measures and the definitive safeguard measure and in this
way make up for its failure to refer to these extensions anywhere in its request
for consultations under the DSU. Accordingly, Chile adds, it states that this
identity exists because the extensions were adopted by the same authority,
through the same Commission, that they apply to the same products and that they
apply the same remedy. Chile contends that these elements on which Argentina
bases its theory of legal identity do not prove that identity. According to
Chile, the construction of Article 7.2 points to the contrary of Argentina's
argument, i.e. that extensions, from a substantive point of view, are measures
that are distinct from the definitive measures. Indeed, an examination of the
paragraph reveals that the reference to Articles 2, 3, 4 and 5 merely imposes
procedural or formal requirements in circumstances for which the substantive
aspects are laid down in the paragraph itself and consist in the competent
authority finding that a safeguard measure continues to be necessary to prevent
or remedy serious injury and that there is evidence that the industry is
adjusting.299
(iii) Withdrawal of some of the extension measures
4.124
Chile informs that, following this First Written
Submission, the extension measures for wheat and for wheat flour were withdrawn
by Exempt Decree No. 244 of the Ministry of Finance published on 27 July 2001.
On these grounds, Chile submits that there is no point, from the legal point of
view, in the Panel issuing recommendations on the consistency of these measures
with the WTO obligations contained in the WTO Agreements, having found that the
measures are no longer in force. Chile submits that, as stipulated in Article
3.7 of the DSU, "[t]he aim of the dispute settlement mechanism is to secure a
positive solution to a dispute", and "[i]n the absence of a mutually agreed
solution, the first objective of the dispute settlement mechanism is usually to
secure the withdrawal of the measures concerned if these are found to be
inconsistent with the provisions of any of the covered agreements." Thus, Chile
argues, where a panel concludes that a measure is inconsistent with a covered
agreement, it recommends that the Member concerned bring the measure into
conformity with that agreement. This is stipulated in Article 19.1 of the DSU,
which goes on to say that the panel may suggest ways in which the Member
concerned could implement the recommendations. Chile argues that the entire
reasoning behind Article 19.1 presupposes the existence of a measure, one that
is in force. According to Chile, if the measure does not exist, the panel does
not have the authority to ask that a Member be recommended to bring the measure
into conformity with a provision of the WTO Agreements, much less suggest ways
in which the recommendation could be implemented.300
4.125
Argentina, on the contrary, considers that a ruling
by the Panel on the inconsistency of the safeguard measures, even those that
were recently repealed, would in fact have practical consequences in that as
long as the price band system remains in force there is a possibility that these
measures could be re-introduced - i.e. as long as the same reasons that caused
them to be adopted in the first place remain.301 Argentina refers to Chile's
explicit acknowledgement that it resorted to safeguards "to obtain the required
legal backing"302 and submits that this constitutes a negation of the multilateral
commitment to apply safeguards only in conformity with the Agreement on
Safeguards and Article XIX of the GATT 1994 and demonstrates that as long as the
price band system exists, there will be a risk of the situation recurring.
Argentina contends that Chile continues to apply safeguard measures for the same
reason that it applied the previous measures, i.e. because of a price band
system that is inconsistent with the WTO and which, by its structure, design and
mode of application causes it to violate its binding.303
4.126
Chile considers that the above argumentation is
fundamentally at odds with the foundations of the WTO dispute settlement system,
in that it presumes that a WTO Member is acting in bad faith with the intention
of taking advantage of the system. In Chile's view, this argument disregards the
nature of the dispute settlement system, the aim of which is to "secure a
positive solution to a dispute", clearly preferring a "solution mutually
acceptable to the parties to a dispute".304
(b) Burden of proof
4.127
Argentina alleges that each one of Chile's
violations of the GATT 1994 and the Agreement on Safeguards, establish prima
facie presumption that the safeguard measures applied by Chile are in violation
of their obligations under those Agreements. Hence, according to the general
rules of application of the burden of proof, it is up to Chile to demonstrate
that it has not violated them. Argentina submits that Chile has not supplied a
single argument to refute that presumption but that, on the contrary, it has
recognized that the safeguard measures were inconsistent with its WTO
obligations.305
4.128
Chile submits that, in every statement made before
this Panel, Argentina has based the above argument on a serious error of law. In
Chile's view, Argentina considers that in a prima facie presumption, what
is presumed is the violations committed by a Member of its obligations under the
Agreements covered by the dispute. However, Chile argues, according to Article
3.8 of the DSU, this clearly is not the case: Chile contends that what is
presumed is not the violations or inconsistencies, but something quite
different, the nullification or impairment of the benefits accruing under the
covered agreements that these inconsistencies may cause with respect to the
Member or Members bringing the complaint. Chile stresses that the consequences
of this error of law committed by Argentina are not insignificant. In this
regard, Chile submits that, if the fact to be presumed were the violation of the
obligations laid down in the WTO Agreements, the mere presentation of claims and
arguments would suffice to establish the presumption, and there would be no need
to submit precise, concordant and complete evidence to the Panel of the
irrefutable truth of these claims. Chile further submits that this would of
course be inadmissible under the DSU, since it would free the complaining Member
from the obligation and burden of proving the facts on which its arguments rest,
and the report of the Panel would be based on mere presumption. In addition,
Chile contends that Argentina has neither produced nor brought before the Panel
sufficient, precise and concordant evidence to establish irrefutably that Chile
violated its obligations under Article XIX of the GATT 1994 and the Agreement on
Safeguards. Consequently, Chile argues, Argentina can hardly be presumed to have
suffered nullification or impairment of the benefits accruing to it under those
Agreements as a result of Chile's safeguard measures. Chile submits that it has
submitted complete and sufficient evidence during these proceedings of the full
consistency of its measures with the mentioned Agreements. Chile objects to
Argentina's statement to the effect that Chile recognized that its safeguard
measures were inconsistent with its obligations under the WTO. Chile claims that
Argentina has clearly taken a hypothetical statement out of its context in order
to use it for its own purposes since this statement was made by Chile in
connection with its position on the Panel's lack of jurisdiction to rule on
measures that were not in force, and not with any violation of or inconsistency
with a covered agreement.306
4.129
Argentina argues that this prima facie presumption
exists because of the proofs submitted in these proceedings and not - as Chile
argues - by a mere presentation of claims and arguments in connection with
Article 3.8 of the DSU, which Argentina has not argued.
2. Substantive arguments
4.130
Argentina claims that Chile initiated the
safeguards investigation on imports of vegetable oils, wheat and wheat flour in
order to provide a legal justification for its PBS. According to Argentina, the
safeguards case served to confirm that the PBS violated Chile's obligations
under the WTO, since Chile acknowledged that, under that system, it exceeded its
bound tariff. Given the true objective behind its investigation, Argentina
argues, it comes as no surprise that the Commission (i.e. the competent Chilean
authority) was unable to comply with any of the requirements of the Agreement on
Safeguards.307 In particular, Argentina submits that the Chilean investigation to
impose definitive safeguard measures and the identical extension of those
measures on imports of edible vegetable oils, wheat and wheat flour, is
inconsistent with Article XIX of the GATT 1994 and with Articles 2, 3, 4, 5, 6
and 12 of the Agreement on Safeguards.
4.131
Chile submits that the object and purpose of the
investigation initiated by Chile for the application of the provisional
safeguard measure, the definitive measure and subsequently the extension
thereof, as well as the adoption of those measures, was not in any way to
provide a legal justification of its price band system. The object and purpose
of the measures was to enable Chile to readjust, temporarily, the balance
between itself and, without distinction as to origin, other exporting countries,
in respect of the level of concessions, in the wake of unexpected and
unpredicted developments as a result of which imports of agricultural products
under the band genuinely and substantially threatened to cause serious injury to
the domestic industry producing like or directly competitive products. These
unexpected developments essentially consisted of an unusual and unpredicted
persistence of very low international prices which affected agricultural
products, including those covered by the price band, and which, in their turn,
had such an impact on import trends that Chile was faced with a threat of
serious injury to the domestic industry in question.308 Chile submits that it is
not correct to state, as Argentina does, that the purpose of the safeguard
measures is to justify the PBS as such because the purpose of a safeguard is to
give the domestic industry temporary protection and, in Chile's particular case,
this is limited to a period that may not exceed one year. Chile submits that it
could hardly try to "justify" a longstanding permanent mechanism known to all
Chile's trade partners - including Argentina - which had been notified to the WTO and appeared in many free trade agreements - including one signed with
Argentina - by means of a temporary safeguard measure for such a limited period.309
(a) Compliance with the notification and prior
consultation requirements
4.132
Argentina claims that Chile violated Article XIX.2
of the GATT 1994 and Article 12.1(a) of the Agreement on Safeguards by failing
to comply with the notification requirements laid down in Article 12.1(a) and
12.2 and by not holding prior consultations with Members having a substantial
interest as exporters of the product concerned, as required by Article 12.3 and
12.4.
4.133
Argentina claims that the Appellate Body has
already ruled on the criteria for the application of Article 12.1(a) that must
be met in order to comply with the text.310 In Argentina's view, Chile's conduct
does not, however, comply with the provisions of Article 12.1 of the Agreement
on Safeguards nor with the Appellate Body's conclusions on application of this
Article . Argentina explains that this can be seen simply by comparing the date
on which the Committee on Safeguards was notified of the initiation of the
investigation and the date on which the initiation effectively commenced.
Argentina indicates that the notification was in fact made on 25 October 1999,
whereas the investigation was initiated on 30 September 1999.311 In view of this,
Argentina argues that it is obvious that Chile did not comply with the
requirements in Article 12.1(a) of the Agreement on Safeguards. This means that
the requirement on "immediacy", which must be met if the notification is to be
considered as having been made in due form, was not respected. Argentina says
that the result was that the Committee on Safeguards and the Members of the WTO
were not given sufficient time to examine the notification.312
4.134 As regards the infringement of Article 12.2 of the
Agreement on Safeguards, Argentina argues that it is clear that the
elements which the Appellate Body considers to be minimum requirements for the
notification were not present as far as the product and the definition of
domestic industry are concerned, and there was no analysis of the factors.313
314 Argentina argues that Chile did not submit any argument to rebut the fact that
its notification did not contain "all pertinent information".315
4.135
Argentina claims that Chile violated Article 12.3
and 12.4 of the Agreement on Safeguards. It did not give Argentina, which is a
substantial supplier of wheat, wheat flour and edible vegetable oils, the
opportunity to hold consultations, either immediately after the imposition of
the provisional measure or prior to the application of its definitive measure.
Argentina argues that Chile failed to comply with these requirements in the
Agreement on Safeguards inasmuch as the date of application of safeguard
measures was 26 November 1999 whereas the notification to the Committee on
Safeguards was dated 1 December 1999. It should also be noted that Argentina had
to request the consultations indicated in the last sentence of Article 12.4.316
317
4.136 Reading Argentina's claim regarding notifications and
consultations318, Chile submits that Argentina only referred to the
following measures by Chile: (a) notice of initiation of the investigation in
1999; (b) the provisional measure; and (c) the definitive measure adopted in
January 2000. Chile argues that this clarification is necessary because, if
Argentina wishes the Panel to make a concrete ruling, it should have made clear
to which Chilean notifications it was referring and in what way it considered
that these violated the actual provisions of the WTO Agreements, which Argentina
does not specify at all. If the Panel should rule on the conformity of the
timing of Chile's notification of initiation of the procedure, (rather than the
provisional and definitive measures, which were not yet in effect), Chile
recalls that a recommendation by the Panel may only refer to the conformity of
the measure as regards Chile's obligations under the WTO Agreements.
Consequently, Chile argues, the Panel cannot conclude, as Argentina indicates -
that "Chile's conduct does not, however, comply with the provisions of Article
12.1 of the Agreement on Safeguards nor with the Appellate Body's conclusions on
application of this Article ."319 Chile submits that, when the DSB adopts findings
by the Appellate Body in the context of a specific dispute, it does so in order
to require a WTO Member to bring the disputed measures into conformity with its
obligations under certain provisions of the WTO Agreements. Consequently, Chile
contends, Argentina's assertion that "Chile's conduct does not comply � with the
Appellate Body's conclusions" in the text mentioned above can only constitute
Argentina's own opinion, but not a recommendation by the Panel. Chile then
refers to Argentina's statement that "Chile's notification did not provide 'all
pertinent information', in violation of Article 12.2 �".320 Chile argues that, as
Argentina does not specify to which Chilean notification it refers, Chile is
obliged to assume, by reading the next paragraph in the submission, that the
measures in question are only the provisional and definitive measures. In this
context, Chile emphasizes that the extension measure was not the subject of a WTO consultation procedure. Chile submits that Argentina tries to restrict the
scope of the Agreement on Safeguards so that measures are only adopted on the
basis of definition of a like product321, but not including directly competitive
products. In any event, Chile points out that Article 12.2 refers to "all
relevant information" on the one hand and, on the other, specifically states
"precise description of the product involved". Chile argues that this precise
description of the product is the identification of the product (like or
directly competitive) to which the safeguard measure applies. According to
Chile, all Chile's notifications determine quite clearly which products are the
subject of the procedure and, subsequently, the measures.322
4.137
Chile explains that it notified the WTO Committee
on Safeguards of its intention to apply a provisional measure on 2 November
1999.323 It further explains that this provisional measure was eventually applied
as of 26 November 1999. Chile affirms that it complied with the requirement to
notify the intended measure before it was adopted, as called for by Article 12.4
of the Agreement on Safeguards and, at the same time, gave the Members of the WTO the opportunity to examine the measure, as required by Article XIX:2 of the
GATT. Chile contends that Argentina's assertion that, on 1 December 1999, Chile
notified the provisional measure adopted on 26 November 1999324 is not relevant
because, as already stated, Article 12.4 requires notification of the intention
to adopt a provisional measure before it is imposed, which Chile did. Chile
further adds that it subsequently notified the decree by which the provisional
measure was adopted, something that Article 12.4 does not require. Chile also
refers to Argentina's statement that Chile "did not give � the opportunity to
hold consultations, � immediately after the imposition of the provisional
measure � ."325 Chile disagrees with this Argentine reasoning because it goes
beyond the actual requirements in Article 12.3 in relation to Article 12.4 of
the Agreement on Safeguards. According to Chile, Article 12.4 of the Agreement
on Safeguards in fact deals exclusively with the obligations to notify and
consult with regard to those provisional safeguard measures referred to in
Article 6 of the Agreement on Safeguards. Chile submits that, when Argentina
claims that it "had to request the consultations indicated in the last sentence
of Article 12.4"326, this appears to suggest - although it is not expressly stated
- that Chile should have indicated in its notification that it would give
sufficient opportunity to hold consultations. Chile claims that this assumption
is not admissible because it is not a requirement of the Agreement on
Safeguards. The last part of Article 12.4 provides that "Consultations shall be
initiated immediately after the measure is taken", and here the imperative tone
is directed both at the Member imposing the provisional measure and any other WTO Member interested in holding consultations, so responsibility in this
respect does not only lie with the notifying Member. Chile submits that it has
always been ready to hold consultations with any Member who shows an interest
and understands that, in the light of the provisions in the Agreement on
Safeguards, notification to the Committee on Safeguards suffices to show its
willingness to hold consultations with any party that so requests. Chile submits
that the Agreement on Safeguards does not provide for an obligation to "offer
consultations" which must be performed by providing a written statement to that
effect to WTO Members.327
4.138 As regards Chile's claim that by merely notifying the
measures, it had complied with its obligation under the provisions of Article 12
to offer to hold consultations, Argentina contends that the obligation to
provide adequate opportunity for consultations both prior to and following the
adoption of the measure to be a separate obligation under the Agreement.
Argentina submits that Chile violated the above-mentioned Articles by failing to
indicate expressly its readiness to offer these consultations. Argentina
considers that there are no grounds for considering that the mere notification
of measures is tantamount to offering to hold consultations.328
4.139 In response to the above argument, Argentina
recalls that Article XIX.2 of the GATT 1994 expressly stipulates the following:
"Before any contracting party shall take action � it shall give notice in
writing to the CONTRACTING PARTIES � and shall afford the CONTRACTING PARTIES
and those contracting parties having a substantial interest � an opportunity to
consult with it in respect of the proposed action." Argentina contends that this
clearly shows that the obligation to notify and to offer consultations are two
different obligations for which, contrary to what Chile has claimed, mere
notification is not equivalent to offering consultations. Indeed, Argentina
adds, the obligation to "afford � an opportunity" does not constitute and cannot
constitute, "an obligation of immediate availability", as Chile contends, nor
can it be considered to have been met merely because "Chile was � ready to hold
consultations".329
(b) Unforeseen developments
4.140
Argentina claims that Chile has infringed Article
XIX:1(a) of the GATT 1994 and Article 3.1 of the Agreement on Safeguards by not
identifying or making any findings with respect to unforeseen developments
justifying the imposition of safeguard measures.
4.141
Argentina explains that, pursuant to Article
XIX:1(a), safeguard measures (emergency measures) shall be taken as a result of
unforeseen developments. In this regard, Argentina refers to various examples of
the Appellate Body's interpretation of the concept of "unforeseen developments".330
Argentina submits that, as established by the Appellate Body in US - Lamb331,
the requirement of increased imports resulting from "unforeseen developments" is
a fundamental characteristic of a safeguard measure because it lies at the
beginning of a "logical continuum" of events justifying the invocation of a
safeguard measure.332 In Argentina's view, for a Member to apply a safeguard
measure in a manner consistent with its WTO obligations, it must, before
applying the measure, have demonstrated as a matter of fact that as a
result of unforeseen circumstances there has been an increase in imports
which causes or threatens to cause serious injury to the domestic industry, and
that consequently, the adoption of an emergency measure is justified. This
demonstration of fact and of law, and the findings and reasoned conclusions,
must be included in the report of the competent authority in accordance with
Article 3.1 of the Agreement on Safeguards.333 Argentina claims that neither the
investigation conducted by the Commission, nor the WTO notifications, reveal
that Chile demonstrated, as a matter of fact, that the safeguard measure in
question was applied, inter alia, "as a result of unforeseen
developments".334
4.142
Chile points out that the reason why the Commission
recommended the application of safeguards on products subject to price bands was
the continued existence of unusually low prices over a period that could not be
considered transitory. Chile contends that the unforeseen developments
correspond to this special situation of global prices. Chile submits that the
level of the bound tariff had been exceeded on previous occasions, but only for
very short periods that did not justify the introduction of changes. On this
occasion, Chile argues, the period was much longer and made it necessary to find
a solution. Chile submits that keeping the band within the bound tariff would
result in the serious injury explained in the submission. In Chile's view, the
unforeseen development in this case is the continued existence of very low
international prices for much longer periods, which greatly exceeded the
forecasts by experts. Chile argues that a fall in international prices to such
low levels over such a long period is unusual and unpredictable, especially in
the case of products whose price fluctuates considerably. Chile submits that the
trend in international prices of wheat (hard red winter No. 2, Gulf, and
Argentine bread wheat), and soya bean oil (Illinois crude soya bean oil and
Buenos Aires crude soya bean oil) show marked and persistent decreases between
1997 and 2000.335
4.143
Argentina submits that the fall of international
prices was not an unforeseen development, nor was it unexpected or unusual. In
Argentina's view, the creation of the price band system in 1986 clearly shows
that Chile knew of, and had even tried to regulate, the alleged negative effects
of these economic developments (variations in international commodity prices).
Argentina concludes that the developments that led to the application of the
safeguards were not unforeseen developments under the terms of Article XIX.1(a)
of the GATT 1994.336
4.144
Chile notes that the purpose of the price bands has
always been simply to moderate the strong short-term fluctuations in
international prices of the products subject to the system, and not to
compensate for medium- and long-term trends in those prices, so that the "fall
in international prices to such low levels and for such a long period � " was a
development that could not reasonably be foreseen.337
However, Chile argues, the
preliminary question of fact which led Chile to adopt its safeguard measures was
not these short-term fluctuations; quite to the contrary, it was the continued
persistence of very low international prices over a long period of time. Chile
submits that it is these developments that were obviously entirely unforeseen,
and that Chile was not reasonably in a position to foresee. In Chile's view,
these circumstances therefore fall outside the object and scope of the price
band system.338
4.145 As regards Argentina's claim that there is no mention
of unforeseen developments as a preliminary question in the Minutes of the
Commission, Chile submits that the relevant examination and finding is
recorded in the last part of the penultimate paragraph on page 3 of the Minutes
of Session No. 193.339 Argentina affirms that none of the Commission records even
mention unforeseen developments.340
(c) Appropriate investigation
4.146
Argentina claims that Chile has infringed
paragraphs 1 and 2 of Article 3 of the Agreement on Safeguards on the grounds
that the competent Chilean authorities did not conduct an appropriate
investigation.
4.147
Argentina submits that it did not have the
opportunity to participate fully in the investigation. In this connection
Argentina stresses that it did not have access to any public summary of any
confidential information on which the Chilean authorities may have relied.341
Argentina states that Chile failed to conduct an appropriate investigation
because none of the Minutes of the Commission contain any reference suggesting
that the information submitted by the Argentine exporters was analysed.342
4.148 As regards Argentina's argument that it did not have
the opportunity to participate fully in the investigation, Chile argues
that for it to be relevant, Argentina should have explained to the Panel the
reason why it did not have the opportunity to participate in the investigation
conducted by the Chilean authorities. Chile issued a Law (and regulations)
giving the competent authority powers regarding safeguards. This Law was
published in full in the Chilean Official Journal in May 1999 and the relevant
regulations were published in the Chilean Official Journal in June 1999. These
two notifications, which were public, are acknowledged by Argentina in its first
written submission.343 In addition, Chile argues, all this Chilean legislation was
notified to the WTO on 23 July 1999, as can be seen from document
G/SG/N/1/CHL/2, as Argentina acknowledges in its first written submission. Chile
further submits that the safeguards investigation into goods subject to price
bands was initiated in accordance with the notice published by the investigating
authority in the Chilean Official Journal on 29 September 1999, which clearly
showed that the investigation was initiated on 30 September 1999. This fact is
recognized by Argentina in its first written submission.344 On 29 October 1999, the
Government of the Argentine Republic became party to the investigation,
submitting a document setting out its position and requesting to take part in
the public hearing. During the procedure, the Chilean investigating authority
held a public hearing on 25 November 1999, as can be seen from the Minutes of
Session No. 189. The notice of a public hearing was published in the Official
Journal and was contained in Chile's notification to the WTO.345 On 23 November
1999, in a letter from the Technical Secretariat, the Embassy of Argentina was
given confirmation of the public hearing and asked to confirm whether it would
attend, which Argentina did on 24 November. The Argentine Embassy in Chile took
part in the hearing and presented its arguments. Its charg� d'affaires ad
interim, a Minister and two Counsellors were present. A representative of
the Argentine Milling Industry Federation and a representative of the Chamber of
the Argentine Oil Industry (CIARA) also participated. Furthermore, Chile states,
when the investigating authority decided to examine the request for an extension
of the safeguard measures, it announced in the Official Journal346
that a public
hearing would be held on Monday, 13 November 2000.347 Chile submits that the
following took part in the public hearing before the investigating authority and
put forward their arguments: the Argentine Embassy in Chile, represented by a
Minister and a Counsellor; the Attorney for Molinos R�o de la Plata (Argentine
oil exporter); the Argentine Cereals Exporters Center; and the Executive
Director of the Argentine Milling Industry Federation.348 Chile therefore argues
that the foregoing shows that Argentina had sufficient opportunity to
participate in the proceedings of the investigating authority.349
4.149
Chile contests Argentina's argument whereby, in the
investigation, the Chilean Authority based itself on confidential information.
Chile points out that the investigating authority collected information and
reached its conclusions on the basis of all the information gathered in the
public record, that besides the information of the petition, contains the
information and opinions rendered by the interested parties to the investigation
- public hearing included - and the information gathered from other sources such
as the Chilean Customs Service, the Central Bank of Chile and sectorial
information from official sources (Office of Agricultural Studies and Policies
(ODEPA).350 According to Chile, there are thus no non-confidential summaries of
confidential information because there was no confidential information
discussed. Consequently, Chile submits, the situation envisaged in paragraph 1
of Article 3 of the Agreement on Safeguards did not exist, as Argentina claims.
Chile adds that the information on these products is fully available to the
public through an official body, the Office of Agricultural Studies and Policies
(ODEPA), which keeps public statistics for the agricultural sector that are used
by the Commission. Chile claims that Argentina also had an opportunity for
access to the relevant file, which contained the submissions by other interested
parties, and examined and obtained copies of all the information it requested.351
(d) Whether Chile failed to publish a report setting
forth reasoned conclusions and findings
4.150
Argentina claims that Chile has infringed Articles
3.1 and 4.2(c) of the Agreement on Safeguards on the grounds that the competent
Chilean authorities did not publish a report setting forth their reasoned
conclusions and findings reached on issues of fact and law.
4.151 According to Argentina, Articles 3.1 and 4.2(c)
lay down very specific requirements concerning the content of the determination
that the competent authorities must publish. Article 3.1 stipulates that "...
the competent authority shall publish a report setting forth their findings and
reasoned conclusions reached on all pertinent issues of fact and law." whilst
Article 4.2(c) refers to Article 3.1, and lays down the additional requirement
that the "competent authorities shall publish promptly, in accordance with the
provisions of Article 3, a detailed analysis of the case under investigation as
well as a demonstration of the relevance of the factors examined". Argentina
submits that the Appellate Body in Argentina - Footwear (EC)352 and US -
Wheat Gluten 353 has ruled that the national authorities must explain how they
arrived at their conclusions, based on the information and that the findings of
the competent authorities must be contained in the decision itself.354
4.152
Argentina submits that the verb "to publish"
implies "to make public" through a report, published in some official medium,
setting forth the investigating authority's findings of fact and law in
accordance with Article 3.1 of Agreement on Safeguards. The Agreement on
Safeguards uses the verb "publish" instead of referring to a "public" document.
There may be documents which by their nature are "public", and hence accessible
to anyone, but which are not "published" in any medium - an act designed to
facilitate consultation of the said document.355
4.153
Argentina argues that the Chilean Commission did
not publish any report showing that it had examined all of the relevant
information and including either a demonstration of the critical circumstances
justifying the provisional measure or an examination of the relevant information
and of the conclusions with respect to increase in imports, like product,
domestic industry, analysis of factors, threat of serious injury, causal link
and unforeseen circumstances, either for the provisional measure or for the
definitive measure, as required by Articles 2 and 4 of the Agreement on
Safeguards. In Argentina's opinion, the findings of law of the Commission
(Minutes of Session Nos. 181, 185, 193 and 224) serving as a basis for its
investigation and its conclusions merely cite numbers and figures relating to
imports and economic and financial indices of the "industries". Argentina
submits that all of the information supplied is taken directly from the Ministry
of Agriculture's application for the initiation of an investigation, but was
apparently never verified by the Commission and there was never the slightest
confirmation of its accuracy.
4.154 In fact, Argentina claims, the Commission never
submitted any review or analysis of the documentation backing its estimates, nor
did it seek out any evidence that might shed doubt on its information or
seriously consider the arguments of the parties in evaluating the imports or the
state of the domestic industry. On these grounds Argentina submits that the
Commission of Chile infringed Articles 3.1 and 4.2(c) of the Agreement on
Safeguards, and failed to provide a reasoned and adequate explanation of how the
facts support their determination. Argentina contends that neither the
investigation conducted by the Commission, nor its findings and conclusions of
fact and of law can back any safeguard measure, either provisional or definitive
- as originally applied - or their identical extension.356 In particular, Argentina
stresses that the Minutes of the Commission which according to Chile constitute
the public official report do not contain any report demonstrating the existence
of critical circumstances justifying the provisional measures, nor do they
contain an examination of the relevant information and the conclusions
concerning increased imports, the like product, the domestic industry, the
analysis of the factors, the threat of serious injury, causality and unforeseen
developments, either in the case of the provisional measures or in the case of
the definitive measures, as required by Articles 3.1 and 4.2(c) of the Agreement
on Safeguards.357
4.155
Chile submits that, to make the procedure
consistent with the provision of the Agreement on Safeguards, what the
Commission does is to make the Minutes public, placing them at the disposal of
the interested parties once the decree or the excerpt from the resolution, as
appropriate, has been published.358 Chile explains that the examination made by the
investigating authority, as a whole, as well as its findings359 and
recommendations, are contained in the respective records, which are public.
Chile contests Argentina's claim that the investigating authority did not
publish any report containing its findings and submits that all the Minutes of
its sessions are public and that any interested party may obtain a copy of the
records.360 In this regard, Chile indicates that the Commission published prior
notice in the Chilean Official Journal of both the initiation of the
investigation and the various public hearings conducted throughout the course of
the investigation. As a result, Chile continues, Argentina had the opportunity
to become an interested party to the investigation and thus was able to fully
participate in all public hearings related to the safeguard measures. Chile
further states that, although Argentina claims that the Commission violated the
Agreement on Safeguards by not publishing a single document, the Commission did
in fact make available to the public all Minutes from the case which contained
the Commission's complete "findings and reasoned conclusions reached on all
pertinent issues of fact and law." Moreover, Chile argues, contrary to
Argentina's allegations, the data on which these findings were based were all
verified with the official records of the National Customs Service, the Central
Bank, Reuters and official publications of ODEPA361, thereby ensuring the accuracy
of the data. Chile also indicates that the Commission made available all Minutes
in this case to the public which include the Commission's findings of both fact
and law. Chile contends that although the Commission did not publish one
consolidated report, nothing in Article 3 of the Agreement on Safeguards
requires that the findings to be all contained in one document as opposed to a
series of documents.362
4.156
Chile further submits that, by stating that
"apparently" no verification was done, Argentina highlights the weakness of its
argument. Moreover, the word "appearance" is alien to the concept of "findings
of fact and of law". Chile submits that, in any case that comes before it, the
Chilean authority must verify the information submitted and, in this particular
case, it verified the information with the official records of the National
Customs Service, the Central Bank and the sectoral information in official
sources such as those published by the Office of Agricultural Studies and
Policies (ODEPA), which are widely known in Chile, so Argentina's assumption
that the authority did not take the trouble to carry out a responsible
verification of the information in question is without foundation. Chile argues
that Argentina notes the existence of "incomprehensible" differences in data but
that these are simply the result of the revision and verification of the
information between the time the investigation was initiated and the time the
measures were adopted because there were marginal corrections to the information
on oil imports on the basis of official information from the National Customs
Service.363
4.157
Argentina argues that the law establishes seven
members of the Commission, two of whom are members of the Central Bank.
Moreover, Law 19.612 stipulates that the approval of three quarters of the
members of the Commission is required for decisions on safeguards. Argentina
submits that, when the Commission of Chile voted to recommend the application of
provisional and definitive safeguard measures, the relevant legal Minutes
(Minutes of Session Nos. 185 and 193) reveal that the "majority" of the members
of the Commission approved the decision, with the representatives of the Central
Bank abstaining. Argentina argues that, if one checks the attendance of these
sessions as established in the records, given the abstention of the Central Bank
representatives, these measures appeared not to have met the requirement of
approval by the competent Chilean authority as provided for in Chile's own
legislation.364
4.158
Chile365 points out that Law No. 19.383, published in
the Official Journal of 5 May 1995, introduces an amendment to Article 11 of Law
No. 18.525 to allow the participation of a representative of the Ministry of
Agriculture in the Commission. Consequently, there are eight, not seven, members
of this Commission; Chile assumes that Argentina based its argument on an old
text of the Chilean Law, an issue that is relevant because the current Chilean
law was duly notified to the WTO on 23 July 1999.366 Regarding the quorum for
attendance and voting at sessions Nos. 185 and 193, Chile notes that on both
occasions the eight members were present and that the respective votes were
taken with the sole abstention of the two members representing the Central Bank,
which means that six out of eight members voted in favour of the measure,
representing 75 per cent or three quarters. Chile also notes that this is an
essential requirement of Chilean law when a proposed safeguard measure exceeds
the bound tariff and that these three quarters also constitute a "majority", as
shown by the records. Chile therefore considers that the statements by the
complainant have no foundation, and this is confirmed by the lack of conviction
with which Argentina claims in this connection, that the Chilean measures
"appeared not to have met" the legal requirement.367
4.159 In response to a question from the Panel, Chile
explains that the Commission gathers together all of the information submitted
by the interested parties both during the public hearing and in the course of
the investigation, and prepares a technical report, which is examined during a
final meeting of the Commission (to take place within 90 days of the initiation
of the investigation), after which the Commission decides whether or not to
recommend the application of definitive measures.368
4.160
Argentina claims that, although Chile asserts that
it is a condition for all safeguards investigations, a technical report was not
prepared prior to the recommendation to apply provisional measures, or another
one prepared prior to the recommendation to apply definitive measures.369 Argentina
further claims that, despite the above, Chile had already replied that the
Minutes of the Commission "constitute the only official report of the
investigating authority". Argentina considers that this contradiction suggests
that in the present case, these technical reports were not prepared, or that
they do not form part of the official report of the investigating authority.370
4.161
Chile, in reference to Argentina's statement that
the Minutes constitute the only official report of the investigating authority
and that they do not appear to have met any of the requirements for resorting to
the application of measures371, considers that it should be borne in mind that the
Commission bases its recommendations on all of the information gathered and
evaluated in the course of the investigation. Chile explains that, for each
stage of the investigation, the Commission receives a technical report prepared
by its Technical Secretariat, in addition to the public Minutes which contains
all of the information gathered during the process, including the public
versions of confidential information. The technical report is a supporting
document which helps the Commission in making decisions and summarizes the
information pertaining to the case. This report, together with the initial
application and all of the documents supplied by the other interested parties
and the information gathered by the Technical Secretariat itself throughout the
investigation, including the information from the public hearing, makes up the
information used by the Commission as a basis for its decisions. The technical
report is classified as restricted since it is an internal working document, and
above all because it is not binding vis-�-vis the decisions taken by the
Commission.372
4.162
Argentina states that in spite of what Chile
argues, the Commission based its recommendations on all the facts analysed
during the investigation, and that argument does not alter the fact that the
only Chilean official report does not contain the requirements set forth in the
Agreement on Safeguards.
4.163
Chile states that the report is also restricted
because it includes all of the confidential information contributed by the
interested parties as such, on condition that it will not be disclosed. Chile
indicates that this explains why the report is not placed at the disposal of any
of the interested parties in the procedure. In the case at issue, Chile adds,
although there was no confidential information, the non-binding nature of the
report vis-�-vis the final recommendation of the Commission was
maintained, and hence, the report was not made available to the parties. Chile
adds that this report does not constitute the document containing the findings
and reasoned conclusions reached on issues of fact and law whose publication is
required under Article 3.1 of the Agreement on Safeguards. The report required
under that Article, as stated, is made up of the Minutes of the Commission.
Chile explains that these Minutes contain its recommendations and the findings
of fact and law supporting those recommendations. Chile further submits that, as
part of the investigation process, the Technical Secretariat, an entity which
assists the Commission - i.e. the investigating authority - in its work, assumes
an active investigative role, establishing and verifying the accuracy and
relevance of the evidence submitted, gathering additional information,
clarifying different elements and supplementing the information provided by the
parties with information available from other sources. Consequently, Chile
submits, the Commission plays a pro-active role in verifying the information
supplied by the parties and supplementing it where necessary.373
218 See Chile's Second Oral Statement, para. 23.
219 See Chile's Second Oral Statement, paras. 13-14.
220 Chile refers to para. 21 of Argentina's Oral Statement.
221 See Chile's Rebuttal, paras. 18-20.
222 Argentina refers to para. 20 in fine of Chile's
Rebuttal.
223 See Argentina's Second Oral Statement, para. 14.
224 Argentina refers to Chile's Rebuttal, title preceding para.
23.
225 See Argentina's Second Oral Statement, para. 15.
226 See Argentina's Rebuttal, para. 13.
227 See Argentina's response to question 4 (ALL) of the
Panel.
228 See Argentina's Second Oral Statement, para. 15.
229 See Chile's response to question 4 (ALL) of the Panel.
230 See Argentina's Rebuttal, paras. 50-51.
231 Argentina refers to Chile's response to question 4 (ALL) of
the Panel.
232 Argentina refers to Article 21 of the Agreement on
Agriculture and quotes para. 353 of the Panel report in Korea - Measures
Affecting Imports of Fresh, Chilled and Frozen Beef (WT/DS161/R, WT/DS169/R)
adopted on 10 January 2001, as modified by the Appellate Body report, as
follows: "the provisions of the GATT 1994 apply to market-access commitments
concerning agricultural products, except to the extent that the Agreement on
Agriculture contains specific provisions dealing with the same matter."
233 See Argentina's response to question 5 (ALL) of the
Panel.
234 See Chile's response to question 5 (ALL) of the Panel.
235 See Chile's First Written Submission, para. 36.
236 Chile quotes Article 24 of ECA 35 which reads as follows: "In
using the PBS foreseen in its domestic legislation for the import of goods,
Chile undertakes, in the framework of this Agreement, not to include new
products or to modify the mechanisms or apply them in such a way as may
undermine Mercosur's market access conditions."
237 See Chile's response to question 13 (CHL) of the
Panel.
238 See Chile's response to question 13(a) (CHL) of the
Panel.
239 Argentina refers to Chile's response to question 13(a) (CHL)
of the Panel.
240 See Argentina's Rebuttal, paras. 36-37.
241 Argentina refers to Chile's response to question 13(a) (CHL)
of the Panel.
242 See Argentina's Rebuttal, paras. 84-85.
243 See Chile's response to question 13(a) (CHL) of the
Panel.
244 See Chile's First Oral Statement, para. 65.
245 Argentina refers to para. 36 of Chile's First Written
Submission by Chile.
246 Argentina refers to p. 4 of Brazil's Third Party Submission.
247 See Argentina's First Oral Statement, paras. 59-61.
248 Argentina refers to para. 36 of Chile's First Written
Submission.
249 Argentina refers to para. 25 of Chile's First Written
Submission
250 See Argentina's Rebuttal, paras. 86-91.
251 Argentina refers to Chile's response to question 13(c) of the
Panel.
252 Argentina refers to Chile's response to question 13(c) of the
Panel.
253 See Argentina's Rebuttal, paras. 92-96.
254 See Argentina's First Oral Statement, para. 58.
255 See Argentina's First Oral Statement, paras. 52-57.
256 See Chile's Second Oral Statement, para. 30.
257 See Chile's Rebuttal, paras. 30-34.
258 Argentina adds as defined by the Appellate Body on Japan -
Alcoholic Beverages II (WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R) adopted on
1 November 1996 (DSR 1996:I, 97).
259 See Argentina's response to question 41 (ARG) of the
Panel.
260 See Chile's response to question 42 (CHL) of the
Panel.
261 See Chile's response to question 42 (CHL) of the
Panel.
262 See Chile's response to question 14 (CHL) of the
Panel.
263 See Chile's response to question 40 (CHL) of the
Panel.
264 See Chile's response to question 14 (CHL) of the
Panel.
265 See Argentina's Second Oral Statement, para. 28.
266 Argentina refers to the Trade Policy Review Body, Trade
Policy Review of Chile, Report by the Secretariat, WT/TPR/S/28 (7 August 1997),
para. 38.
267 See Argentina's Rebuttal, paras. 76-78.
268 See Chile's First Written Submission, para. 39,.
See also para. 41 of Chile's First Oral Statement.
269 Exempt Decree of the Ministry of Finance No. 349, published
on 25 November 2000.
270 See Chile's First Written Submission, paras. 74-78.
271 Chile refers to Law No. 18.525, Article 9. Law notified in
Document G/SG/N/1/CHL/2.
272 See Chile's First Written Submission, paras. 79-82.
273 Chile refers to document WT/DS165/AB/R, para. 81.
274 See Chile's First Written Submission, paras. 83-88.
275 Chile refers to para. 266 of Argentina's First Written
Submission.
276 Chile refers to the Appellate Body report on United States
- Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New
Zealand and Australia ("US - Lamb") (WT/DS177/AB/R, WT/DS178/AB/R)
para. 191, adopted on 16 May 2001.
277 See Chile's First Written Submission, paras. 89-91.
278 Argentina refers to Chile's First written submission, para.
25 in fine.
279 See Argentina's First Oral Statement, paras. 65-67.
280 See Argentina's First Oral Statement, paras. 82-85.
281 See Argentina's First Oral Statement, paras. 67-69 and
footnote 19; Argentina's Second Oral Statement, para. 36 and footnote 28.
282 Chile refers to WT/DS207/2.
283 See Chile's First Written Submission, paras. 92-94.
284 Chile refers to WT/DSB/M/98, para. 83.
285 Ibid., para. 84.
286 Chile refers to WT/DSB/M/101.
287 Ibid., para. 52.
288 Ibid., para. 57.
289 See Chile's First Written Submission, paras. 95-97.
290 See Argentina's First Oral Statement, paras. 78-80.
291 See Argentina's Second Oral Statement, para.37 and
footnote 32.
292 Chile refers to WT/DS46/AB/R, adopted on 20 August 1999,
para. 131.
293 See Chile's First Written Submission, paras. 98-100.
294 See Chile's response to question 30(a) (ARG, CHL) of
the Panel.
295 See Chile's First Written Submission, paras. 101-103.
296 See Argentina's First Oral Statement, paras. 75-76.
297 See Argentina's First Oral Statement, para. 77.
298 See Argentina's First Oral Statement, paras. 88-89.
299 See Chile's Second Oral Statement, paras. 56-60.
300 See Chile's response to question 16 (ARG, CHL) of the
Panel.
301 See Argentina's Rebuttal, para. 102.
302 Argentina refers to para. 25 in fine of Chile's First
Written Submission.
303 See Argentina's response to question 16 (ARG, CHL) of
the Panel.
304 See Chile's Rebuttal, paras. 41-42.
305 See Argentina's Rebuttal, paras. 100-101.
306 See Chile's Second Oral Statement, paras. 48-52.
307 See Argentina's First Written Submission, para. 76.
308 See Chile's Second Oral Statement, paras. 43-45.
309 See Chile's First Written Submission, paras. 120-122.
310 Argentina refers to the Appellate Body report on US -Wheat
Gluten, (WT/DS166/AB/R) adopted on 19 January 2001, paras. 105 and 106.
311 Argentina refers to Chile's notification to the Committee on
Safeguards, dated 25 October 1999, G/SG/N/6/CHL/2.
312 See Argentina's First Written Submission, paras.
253-257.
313 Argentina refers to the Appellate Body report on Korea -
Definitive Safeguard Measure on Imports of Certain Dairy Products (Korea -
Dairy), WT/DS98/AB/R adopted on 12 January 2000, paras. 107, 108 and 109.
314 See Argentina's First Written Submission, para. 258.
315 See Argentina's Second Oral Statement, para. 40 and
footnote 34.
316 Argentina refers to its notification to the Committee on
Safeguards, dated 28 December 1999, G/SG/20.
317 See Argentina's First Written Submission, paras.
259-265.
318 Chile refers to paras. 253-265 of Argentina's First Written
Submission.
319 Ibid., para. 255.
320 Ibid., para. 263.
321 Ibid., para. 263.
322 See Chile's First Written Submission, paras. 212-216.
323 Chile refers to G/SG/N/7/CHL/2.
324 Chile refers to para. 265 of Argentina's First Written
Submission.
325 Chile refers to para. 264 of Argentina's First Written
Submission.
326 Ibid., para. 265.
327 See Chile's First Written Submission, paras. 217-221.
328 See Argentina's First Oral Statement, para. 110.
329 See Argentina's Second Oral Statement, para. 40.
330 See Argentina's First Written Submission, para. 78.
331 Argentina refers to the Appellate Body report on US - Lamb
(WT/DS177/AB/R, WT/DS178/AB/R) adopted on 16 May 2001, paras. 71-74.
332 See Argentina's First Written Submission, para. 79.
333 See Argentina's First Written Submission, para. 83.
334 See Argentina's First Written Submission, paras.
80-82.
335 See Chile's First Written Submission, paras. 141-144.
336 See Argentina's First Oral Statement, para. 95.
337 See Chile's Rebuttal, para. 67.
338 See Chile's Second Oral Statement, para. 65.
339 See Chile's Second Oral Statement, para. 66.
340 See Argentina's Second Oral Statement, para. 42.
341 See Argentina's First Written Submission, paras.
84-86.
342 See Argentina's Rebuttal, para. 109.
343 Chile refers to para. 66 of Argentina's First Written
Submission.
344 Ibid., para. 68.
345 Chile refers to G/SG/N/6/CHL/2.
346 Chile refers to the Official Journal of 4 November 2000.
347 Chile submits that this was notified to the WTO on 9 November
2000 in document G/SG/N/10/CHL/1/Suppl.2.
348 Session of the Commission on Distortions No. 223 of 13
November 2000.
349 See Chile's First Written Submission, paras. 126-133.
350 See Chile's response to question 17 of the Panel.
351 See Chile's First Written Submission, paras. 134-137.
352 WT/DS121/R, adopted 12 January 2000, as modified by the
Appellate Body report.
353 WT/DS166/R, adopted 19 January 2001, as modified by the
Appellate Body report.
354 See Argentina's First Written Submission, paras. 87-94
and footnotes 50 and 51.
355 See Argentina's response to question 18 (ARG, CHL) of
the Panel.
356 See Argentina's First Written Submission, paras.
91-94.
357 See Argentina's Rebuttal, para. 106.
358 See Chile's response to question 18 (ARG, CHL) of the
Panel.
359 Chile refers to para. 92 of Argentina's First Written
Submission.
360 Chile refers to Annex 6 to its First Written Submission.
361 See Chile's response to question 17 of the Panel.
362 See Chile's First Oral Statement, para. 72.
363 See Chile's First Written Submission, paras. 145-150.
364 See Argentina's First Written Submission, footnote 54.
365 Chile refers to footnote 54 of Argentina's First Written
Submission.
366 Chile submits that the updated text of its Law was notified
to the WTO in document G/SG/N/1/CHL/2.
367 See Chile's First Written Submission, para. 139.
368 See Chile's response to question 17 (CHL) of the
Panel.
369 Argentina refers to Chile's response to question 17 of the
Panel.
370 See Argentina's Rebuttal, para. 108.
371 Chile refers to paras. 91 and 92 of Argentina's First Oral
Statement
372 See Chile's Rebuttal, paras. 60-62.
373 See Chile's Rebuttal, paras. 63-65.