(e) Rebuttal arguments made by the European Communities

4.196 The European Communities made the following arguments in rebuttal:

4.197 In its reply to the Panel's question on Article XIX, Korea correctly refers to the interpretative criteria set out in Article 31 of the Vienna Convention. ⁸⁵ Their application, to the extent that it is correct, does not however improve Korea's case.

4.198 When examining the text of the provisions to be interpreted, Korea, which seems to focus exclusively on that of the Agreement on Safeguards, reiterates the same basic position: because the "unforeseen developments" requirement was not repeated in the Agreement on Safeguards, it cannot be applied "in accordance with" that Agreement and therefore has been modified (hence repealed) by the "new package" of rules resulting from the Uruguay Round negotiations.

4.199 The European Communities submit that lack of repetition does not amount to modification or abrogation, certainly not in the current WTO system. The Appellate Body has reconstructed the relationship between GATT and the other Annex 1A Agreements and has set the threshold below which a Member cannot arbitrarily diminish its obligations under the WTO, notably under GATT.

4.200 The European Communities consider that lack of repetition rather means that the Agreement on Safeguards has not elaborated on this particular requirement, which did not need special "clarification and reinforcement" in accordance with the agreement's avowed objectives. The Agreement on Safeguards does not, by its terms, represent the exclusive source of the WTO safeguards regime and the "unforeseen developments" requirement remains in force elsewhere in the WTO system.

4.201 With respect to the provisions of the Agreement on Safeguards upon which Korea specifically relies the European Communities asserted that the full text of Article 2.1, which is referred to by Korea, can clarify its real meaning:

4.202 With respect to the object and purpose of the provisions in question, Korea, again focusing on the Agreement on Safeguards, equally fails to support its case.

4.203 Korea rightly recalls that the objectives of that Agreement are to "improve and strengthen the safeguard regime", and effectively summarizes them as "to introduce changes to the GATT regime that improve and strengthen the multilateral trading system". The European Communities argue that, Korea has not yet demonstrated, how elimination of a requirement for the imposition of safeguard measures would weaken, rather than strengthen, the multilateral safeguards regime and would "completely undermine" the abovementioned objectives. ⁸⁶

4.204 As to the "practice" of some WTO Members the European Communities first observes that in order to reconstruct the "object and purpose" of a treaty in terms of the Vienna Convention that practice is irrelevant. The "practice in the application of the treaty" is relevant under Article 31.3(b) of the Vienna Convention as an autonomous interpretative tool, not to identify object and purpose.

4.205 Furthermore the practice which is relevant under the Vienna Convention is the one "which establishes the agreement of the parties" on the interpretation or the application of a given treaty provision. Korea has instead only quoted implementing legislation of a few WTO Members. ⁸⁷ Moreover, that unilateral practice does not establish the agreement of all WTO Members on the alleged repeal or "disappearance" of the "unforeseen developments" requirement. Domestic implementing legislations of other Members expressly refer to that requirement. ⁸⁸

4.206 Last, the European Communities recalled that they are not challenging Korea's legislation per se, but rather the application of a safeguard measure in a specific case, and inasmuch as it understands that Korea's legislation does not require Korean authorities to violate Article XIX requirements the European Communities took no position on their conformity with that Article.

(i) The relationship between GATT and the other Annex 1A Agreements in the WTO system

4.207 The European Communities argue that the relationship between GATT and the other Annex 1A Agreements provisions has, on the one hand, been regulated in the WTO system itself, and, on the other hand, all the forms of this relationship have already been addressed in dispute settlement. Both WTO provisions and Panel and Appellate Body Reports make clear that as a rule GATT and the other Annex 1A Agreements apply cumulatively. It has also been made clear that to this effect it is not necessary that an Agreement in Annex 1A either repeat or specifically provide that a given provision of GATT is applicable although not repeated in its text. Thus, the rule is rather the opposite of that put forward by Korea in its First Written Submission.

4.208 The European Communities consider that already the Brazil - Dessicated Coconut Panel Report, upheld by the Appellate Body, supports their view that an express provision is not required, but rather that GATT and the Agreement on Safeguards"represent an inseparable package of rights and disciplines that must be considered in conjunction". ⁸⁹

On the status of GATT in the WTO system, the same Panel considered:

4.209 As the Appellate Body observed still in the Brazil - Dessicated Coconut case:

4.210 Thus, the Appellate Body recognized that in the relationship between GATT and the other goods agreements in Annex 1A, the prevalence of the latter is only to the extent of the conflict and that otherwise this entails no "supersession". This is otherwise consistent with the principle of effective interpretation of treaties, which was also recognized by the Appellate Body, according to which every provision should be given its meaning and effect.

4.211 In Brazil - Dessicated Coconut the Panel had already stated that failure to repeat a provision is not dispositive and does not allow a departure from cumulative application of GATT and other Annex 1A Agreements. ⁹² The Appellate Body in EC - Bananas made this point further clear when it had to decide whether both Article X:3(a) of GATT and Article 1.3 of the Agreement on Import Licensing Procedures applied to the European Communities import licensing procedures. ⁹³ Notwithstanding the fact that the Appellate Body found that "there are distinctions between [the] two articles" (that is, that the two provisions read differently), and at the same time that they have "identical coverage" ⁹⁴ (that is, regulate the same aspect of the same case in point), the Appellate Body did not consider that they conflicted and thus that the Interpretative Note to Annex 1A applied. As a consequence, it found that both Article X of GATT and Article 1.3 of the Agreement on Import Licensing Procedures were applicable. ⁹⁵

4.212 The European Communities submit that the hypothesis considered in the Appellate Body Report in EC - Bananas is different from the one at issue in the present dispute. In fact the Agreement on Safeguards and Article XIX of GATT do not overlap, in the sense that the "unforeseen developments" requirement is additional and therefore complementary to the matter regulated in the Agreement on Safeguards. In any event, even if these provisions overlapped, the EC - Bananas case law makes clear that the GATT provision is not eliminated by the system, but rather remains in force and is applicable cumulatively with the Agreement on Safeguards.

4.213 The Appellate Body in EC - Bananas also addressed the relationship between Article XIII of GATT and the Agreement on Agriculture, ⁹⁶ notably to decide "whether the provisions of the Agreement on Agriculture allow market access concessions on agricultural products to deviate from Article XIII of GATT". ⁹⁷ The European Communities had argued in this respect that concessions made pursuant to the Agreement on Agriculture prevailed over Article XIII of GATT, based on Articles 4.1 and 21.1 of the former agreement. ⁹⁸ The Appellate Body however upheld the Panel's conclusion that the Agreement on Agriculture "does not permit the European Communities to act inconsistently with the requirements of Article XIII of GATT." ⁹⁹

4.214 The European Communities submit that, likewise, the Agreement on Safeguards does not authorize Korea to act inconsistently with the requirements of Article XIX of GATT. Indeed the contrary is the case since Article 11.1(a) requires Members to apply measures "in accordance with this Agreement."

4.215 The reasoning of the Appellate Body sheds light as to what is required for finding a derogation from GATT in another Annex 1A Agreement. When reviewing Article 4.1 of the Agreement on Agriculture, the Appellate Body observed:

4.216 By this reasoning the Appellate Body set the standard which is required to find a derogation from GATT: unless express derogating terms are found in an Annex 1A Agreement, no action inconsistent with GATT is allowed, even if "pursuant to" an Annex 1A Agreement. This is exactly the opposite of what Korea proposes when arguing that failure to repeat the "unforeseen developments" requirement in the Agreement on Safeguards authorizes to disregard such requirement.

4.217 The Appellate Body went further and also provided genuine examples of derogation from GATT found in the Agreement on Agriculture, all of which are drafted in explicit terms, very different from those of the Agreement on Safeguards. The European Communities note that the Appellate Body considered that measures authorized under one of these derogations, the special safeguard clause, would otherwise have been inconsistent with both Article XIX and the Agreement on Safeguards.

4.218 In the light of the foregoing, the European Communities consider that the language of the Agreement on Safeguards is not explicitly derogating from GATT, and therefore the standard set out by the Appellate Body is not met in the present case. Accordingly, Korea is not allowed to "act inconsistently with the requirements of" Article XIX of GATT, even if its measure had been adopted "pursuant to", or "in accordance with", the Agreement on Safeguards.

4.219 The Appellate Body further considered ¹⁰¹ Article 21.1 of the Agreement on Agriculture, which expressly regulates the relationship with GATT in the following terms:

4.220 The European Communities submit that a different conclusion cannot be warranted in the present case. The provisions of the Agreement on Safeguards referred to by Korea do not even include language as strong as the one emphasized above ¹⁰², and aim more at restricting Members' conduct (Article 2.1, Article 11.1) or at setting out the general scope of the Agreement (Article 1) than at regulating the relationship with GATT.

4.221 In the light of the foregoing the European Communities reiterate that the Agreement on Safeguards does not include an express derogation from GATT. Therefore, it does not authorize WTO Members, including Korea, to act inconsistently with the requirements of Article XIX, and notably with the "unforeseen developments" requirement.

4.222 The fourth form of relationship between the provisions of GATT and those of other Annex 1A Agreements is one of conflict, not solved a priori by the system itself by a derogation rule. The General Interpretative Note to Annex 1A governs all cases not expressly regulated in the following terms:

4.223 The Appellate Body had most recently an opportunity to clarify the meaning of this criterion of relationship - conflict - in Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico. The Appellate Body made clear, in respect of dispute settlement provisions, that "[a] special or additional provision [laid down in a "covered agreement"] should only be found to prevail over a provision of the DSU in a situation where adherence to the one provision will lead to a violation of the other provision, that is, in the case of a conflict between them". "[i]t is only where the provisions of the DSU and the special or additional rules and procedures of the covered agreement cannot be read as complementing each other that the special or additional provisions are to prevail." ¹⁰³

4.224 In the EC view, it is precisely in terms of "prevalence" and "conflict" that the General Interpretative Note to Annex 1A to the WTO Agreement is drafted.

4.225 The European Communities maintain that Korea has not shown how Article XIX:1(a), to the extent that it requires that the increase in imports and the conditions thereof must result from "unforeseen developments", could be said to be in conflict with the provisions of the Agreement on Safeguards. Clearly, the drafters of Article XIX thought that it was possible to meet all these requirements, since they cumulated them in the same provision.

4.226 In a case where a conflict cannot be shown, the Appellate Body confirmed that special and additional provisions apply together with the basic GATT provisions and complement each other. ¹⁰⁴ Accordingly, it reversed the Panel's finding that Article 17 of the Anti-Dumping Agreement "provides for a coherent set of rules for dispute settlement specific to dumping cases ... that replaces the more general approach of the DSU." ¹⁰⁵

4.227 In summary, in the EC view, the relationship between GATT and other Annex 1A Agreements is exhaustively regulated in WTO rules, as interpreted in Panel and Appellate Body decisions. That relationship can be expressed in terms of cumulation (the normal situation); differences (speciality); express derogation (conflict solved a priori by the Drafters of the WTO Agreement); conflict. Only in the latter two hypotheses listed do the provisions of other Annex 1A Agreements prevail over those of GATT. The use of the term "subsumption" merely confuses the issue. If this term means derogation or conflict, then the Agreement on Safeguards prevails.If not, it does not. In the case of the Agreement on Safeguards and Article XIX of GATT no case of derogation or conflict has been identified and therefore Article XIX and the Agreement on Safeguards apply cumulatively. Korea has not demonstrated that a conflict exists, and therefore that it was justified in not examining whether the increase in imports of SMPP was the result of "unforeseen developments". Accordingly, the Panel should find that it violated Article XIX:1(a) of GATT as it did not proceed to that examination before imposing the safeguard measure on SMPP at issue in this dispute.

(f) Rebuttal arguments made by Korea

4.228 Korea makes the following rebuttal arguments:

4.229 Korea considers that the applicable law in this dispute is the Agreement on Safeguards. Korea considers that the provisions in Article XIX of GATT regarding "unforeseen developments" and "of the effect of the obligations incurred" are no longer part of the package of rights and obligations applicable to the imposition of safeguard measures. For the reasons set out in Paragraphs 4.170-4.195.

4.230 Korea expressed puzzlement with the EC statement that:

4.231 Korea noted that, under the EC logic, "unforeseen developments" or "of the effect of the obligations incurred" either exist or do not exist, are strictly within the "knowledge" of each Member, and do not need an investigation to be established. Under this articulation, presumably, the only basis for the Panel to find that Korea violated Article XIX of GATT is if the factors "do not exist." As an alternative argument, Korea respectfully submits that such factors exist:

To continue with Additional arguments by the European Communities

⁸⁵ Article 33 of the Vienna Convention on the Law of Treaties (1155 U.N.T.S 332) reads: "1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."

⁸⁶ Eliminating the "unforeseen developments" requirement would rather frustrate the other Agreement on Safeguards' objective to "re-establish multilateral control over safeguards and eliminate measures that escape such control." (see the Agreement on Safeguards, Preamble, para 2).

⁸⁷ The EC would note in respect of its domestic legislation, quoted by Korea as an example of derogation from Article XIX of GATT, that Article XIX is repeatedly recalled in the preamble of Council Regulation (EC) No 3285/94 of 22 December 1994, inter alia in the following terms: "Whereas the Agreement on Safeguards meets the need to clarify and reinforce the disciplines of GATT, and specifically those of Article XIX" (para 4 of the statement of reasons).

⁸⁸ See, e.g., Japan (WTO Doc. G/SG/N/1/JPN/2, 17 July 1995); Costa Rica (WTO Doc. G/SG/N/1/CRI/1, 30 March 1995); Norway (WTO Doc. G/SG/N/1/NOR/3, 2 February 1996); and also a more recent Member, Panama (WTO Doc. G/SG/N/1/PAN/1, 9 April 1998). That not all WTO Members accept that the "unforeseen developments" clause is no longer in force is clear when some of those Members ask other Members about the reasons for not including the requirement in their legislations and the implications thereof (See, e.g., WTO Doc. G/SG/Q1/IND/8, Follow-up Questions Posed by JAPAN regarding the Notification of INDIA, 25 September 1998).

⁸⁹ Panel Report, para 227, recalled in Appellate Body Report, p. 14 (emphasis added). The Panel concluded for the non-separability of Article VI of GATT and the SCM Agreement in para 257 of its Report.

⁹⁰ Panel Report, para 227.

⁹¹ See, Brazil - Measures Affecting Desiccated Coconut, WT/DS22/AB/R, 21 February 1997, p. 14 (italics in original, emphasis added).

⁹² Id., para 227.

⁹³ See, Appellate Body Report on EC - Bananas, 9 September 1997, WT/DS27/AB/R, paras 199 ff.

⁹⁴ Id., para 203.

⁹⁵ Id.

⁹⁶ Id., paras 153 ff.

⁹⁷ Id., para 155.

⁹⁸ Id., para 153.

⁹⁹ Id., para 158.

¹⁰⁰ Id., para 157 (italics in original, underlined added).

¹⁰¹ Id., para 155.

¹⁰² In the EC - Bananas case the United States argued that the language of the Agreement on Agriculture could not authorize a Member to act inconsistently the requirements of GATT, and is now arguing that mere failure to repeat the "unforeseen development" clause in the Agreement on Safeguards or the requirement to adopt measures "in accordance with" such agreement is sufficient to entail "subsumption" of Article XIX of GATT. The EC considered it difficult to see how these positions can be reconciled.

¹⁰³ See, Appellate Body Report on Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/AB/R, 2 November 1998, para 65 (italics in original, underlined added).

¹⁰⁴ The Appellate Body addressed another specific derogation clause embodied in the WTO system - namely Article 2.1 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("the DSU"), regulating conflicts between the DSU and specific dispute settlement rules procedures in the "covered agreements". As it found that the criterion laid down therein (the existence of a "difference" between general and special rules) was not met, it confirmed that general and special rules and procedures had to "apply together" (para 65 of the Report).

¹⁰⁵ See, the Appellate Body Report, para 68 (underlined added).