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The report of the Panel on United States Sections 301-310 of the Trade Act of 1974 is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 22 December 1999 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report. An appeal shall be limited to issues of law covered in the Panel report and legal interpretations developed by the Panel. There shall be no ex parte communications with the Panel or Appellate Body concerning matters under consideration by the Panel or Appellate Body.
Note by the Secretariat : This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.
TABLE OF CONTENTS
GENERAL DESCRIPTION OF THE OPERATION OF SECTIONS 301-310
1.1 This proceeding has been initiated by a complaining party, the European Communities.
1.2 On 25 November 1998, the European Communities requested consultations with the United States under Article XXII:1 of the General Agreement on Tariffs and Trade 1994 ("GATT 1994") and Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Dispute ("DSU") with regard to Title III, chapter 1 (Sections 301-310) of the United States Trade Act of 1974, as amended (19 U.S.C., paragraphs 2411-2420)(WT/DS152/1). The United States agreed to the request. Dominica Republic, Panama, Guatemala, Mexico, Jamaica, Honduras, Japan, and Ecuador requested, in communications dated 7 December 1998 (WT/DS152/2), 4 December 1998 (WT/DS152/3), 9 December 1998 (WT/DS152/4, WT/DS152/5 and WT/DS152/6), 7 December 1998 (WT/DS152/7), and 10 December 1998 (WT/DS152/8 and WT/DS152/10) respectively, to be joined in those consultations, pursuant to Article 4.11 of the DSU. Consultations between the European Communities and the United States were held on 17 December 1998, but the parties were unable to settle the dispute.
1.3 On 26 January 1999, the European Communities requested the establishment of a panel pursuant to Article 6 of the DSU (WT/DS152/11).
1.4 In its panel request, the European Communities claims that:
1.5 The Dispute Settlement Body ("DSB") agreed to this request for a panel at its meeting of 2 March 1999, establishing a panel pursuant to Article 6 of the DSU. In accordance with Article 7.1 of the DSU, the terms of reference of the Panel were:
1.6 Brazil, Cameroon, Canada, Columbia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, Hong Kong (China), India, Israel, Jamaica, Japan, Korea, St. Lucia, and Thailand, reserved their rights to participate in the Panel proceedings as third parties. Cameroon later withdrew its reservations as a third party.
1.7 On 24 March 1999, the European Communities requested the Director-General, pursuant to Article 8.7 of the DSU, to determine the composition of the Panel. On 31 March 1999, the Director-General announced the composition of the Panel as follows:
1.8 The Panel had substantive meetings with the parties on 29 and 30 June 1999, and 28 July 1999.
II. FACTUAL ASPECTS
A. Basic Structure of Measures at Issue 1
1. Section 301(a)
2.1 Section 301(a) applies to any case in which "the United States Trade Representative determines under section 304(a)(1) that (A) the rights of the United States under any trade agreement are being denied" or "(B) an act, policy or practice of a foreign country (i) violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under, any trade agreement, or (ii) is unjustifiable and burdens or restricts United States commerce".2
2.2 According to Section 304(a)(1),
2.3 Section 301(a) also provides that if the USTR determines that one of these situations has occurred, "the Trade Representative shall take action authorized in [Section 301](c), subject to the specific direction, if any, of the President regarding any such action to enforce such rights or to obtain the elimination of such act, policy, or practice".4
2.4 According to Section 301(a)(2)(A), action is not required under Section 301(a) if the DSB adopts a report finding that United States rights under a WTO Agreement have not been denied or that the act, policy or practice at issue "(I) is not a violation of, or inconsistent with, the rights of the United States, or (II) does not deny, nullify, or impair benefits to the United States under any trade agreement".5
2.5 Section 301(a)(2)(B)(i) also provides that the USTR is not required to take action if "the Trade Representative finds that the foreign country is taking satisfactory measures to grant the rights of the United States under a trade agreement". The commitment of a WTO Member to implement DSB recommendations favourable to the United States within the period foreseen in Article 21 of the DSB has, for example, been determined by the USTR to be a "satisfactory measure" justifying a termination of the investigation without taking any action under Section 301.6
2.6 According to Section 301(a)(2)(B)(ii) and (iii), the USTR is not required to take action if the foreign country agrees to "eliminate or phase out the act, policy or practice"7 at issue or if it agrees to "an imminent solution to the burden or restriction on United States commerce",8 or "provide to the United States compensatory trade benefits that are satisfactory to the Trade Representative", when "it is impossible for the foreign country to achieve the results described in clause (i) or (ii)".9
2.7 Further, according to Section 301(a)(2)(B)(iv) and (v), the USTR is not required to take action when she finds that:
2.8 Section 301(a)(3) provides:
2. Section 301(b)
2.9 Section 301(b) applies to an act, policy or practice which, while not denying rights or benefits of the United States under a trade agreement, is nevertheless "unreasonable or discriminatory and burdens or restricts United States commerce".13
2.10 Section 301(d)(3)(B) provides examples of unreasonable acts, among them the denial of opportunities for the establishment of an enterprise, failure to protect intellectual property rights, export targeting, toleration of anti-competitive practices by private firms and denial of worker rights.14 "Discriminatory" acts, policies and practices are defined in Section 301(d)(5) as including those that deny "national or most-favoured-nation treatment to United States goods, services, or investment".15 If the USTR determines that an act, policy or practice is actionable under Section 301(b) and determines that "action by the United States is appropriate" the USTR shall take retaliatory action "subject to the specific direction, if any, of the President regarding such action".16
B. Scope of Authority to Take Action
2.11 Section 301(c) authorizes the USTR to "suspend, withdraw, or prevent the application of, benefits of trade agreement concessions", or "impose duties or other import restrictions on the goods of, and fees or restrictions on the services of, such foreign country for such time as the Trade Representative determines appropriate".17 If the act, policy or practice of the foreign country fails to meet the eligibility criteria for duty-free treatment under the United States' Generalised System of Preferences, the Caribbean Basin Economic Recovery Act or the Andean Trade Preference Act, the USTR is also authorized to withdraw, limit or suspend such treatment. In addition, the USTR may enter into binding agreements with the country in question.
2.12 Sections 301-310 of the Trade Act of 1974 provide a means by which U.S. citizens may petition the United States government to investigate and act against potential violations of international trade agreements.18 These provisions also authorize the USTR to initiate such investigations at her own initiative.19 The USTR is a cabinet level official serving at the pleasure of the President, and her office is located within the Executive Office of the President.20 The USTR operates under the direction of the President and advises and assists the President in various Presidential functions.21
2.13 According to Section 302, investigations may be initiated either upon citizen petition or at the initiative of the USTR. After a petition is filed, the USTR decides within 45 days whether or not to initiate an investigation.22 If the investigation is initiated, the USTR must, according to Section 303, request consultations with the country concerned, normally on the date of initiation but in any case not later than 90 days thereafter.23
2.14 Section 303(a)(2) provides that, if the investigation involves a trade agreement and a mutually acceptable resolution is not reached "before the earlier of A) the close of the consultation period, if any, specified in the trade agreement, or B) the 150th day after the day on which consultation commenced", the USTR must request proceedings under the formal dispute settlement procedures of the trade agreement.24
2.15 Section 304(a) provides that on or before the earlier of "(i) the date that is 30 days after the date on which the dispute settlement procedure is concluded, or (ii) the date that is 18 months after the date on which the investigation is initiated",25 "[o]n the basis of the investigation initiated under section 302 and the consultations (and the proceedings, if applicable) under section 303, the Trade Representative shall determine whether" US rights are being denied.26 If the determination is affirmative, USTR shall at the same time determine what action it will take under section 301.27
2.16 If the DSB adopts rulings favourable to the United States on a measure investigated under Section 301, and the WTO Member concerned agrees to implement that ruling within the reasonable period foreseen in Article 21 of the DSU, the USTR can determine that the rights of the United States are being denied but that "satisfactory measures" are being taken that justify the termination of the Section 301 investigation.
2.17 Section 306(a) requires the USTR to "monitor" the implementation of measures undertaken by, or agreements entered into with, a foreign government to provide a satisfactory resolution of a matter subject to dispute settlement to enforce the rights of the United States under a trade agreement.28
2.18 Section 306(b) provides:
2.19 Section 305(a)(1) provides that, "Except as provided in paragraph (2), the Trade Representative shall implement the action the Trade Representative determines under section 304(a)(1)(B), subject to the specific direction, if any, of the President regarding such action" "by no later than 30 days after the date on which such determination is made".30
2.20 According to Section 305(a)(2)(A), however, "the [USTR] may delay, by not more than 180 days, the implementation" of any action under Section 301 in response to a request by the petitioner or the industry that would benefit from the Section 301 action or if the USTR determines "that substantial progress is being made, or that a delay is necessary or desirable to obtain United States rights or satisfactory solution with respect to the acts, policies, or practices that are the subject of the action".31
III. CLAIMS OF PARTIES
3.1 In the light of the considerations set out above and of the general principles laid down in Article 3.7 of the DSU, the European Communities requests the Panel
to find that:
and this in both instances, irrespective of whether the procedures set forth in Articles 21.5 and 22 of the DSU have been completed; andSection 306(b) is inconsistent with Articles I, II, III, VIII and XI of the GATT 1994 because, in the case of disputes involving trade in goods, it requires the USTR to impose duties, fees or restrictions that violate one or more of these provisions; and
to rule on these grounds, that the United States, by failing to bring the Trade Act of 1974 into conformity with the requirements of Article 23 of the DSU and of Articles I, II, III, VIII and XI of the GATT 1994, acted inconsistently with its obligations under those provisions and under Article XVI.4 of the WTO Agreement and thereby nullifies or impairs benefits accruing to the European Communities under the DSU, the GATT 1994 and the WTO Agreement; and
to recommend that the DSB request the United States to bring its Trade Act of 1974 into conformity with its obligations under the DSU, the GATT 1994 and the WTO Agreement.
3.2 The United States requests that the Panel reject the EC's claims in their entirety, and find that:
TO CONTINUE WITH UNITED STATES SECTIONS 301-310 OF THE TRADE ACT OF 1974
1 The original text of the Sections 301-310 is attached hereto as Annex I.
2 Section 301(a)(1), 19 U.S.C. §2411(a)(1).
3 Section 304(a)(1), 19 U.S.C. §2414(a)(1).
4 Section 301(a), 19 U.S.C. §2411(a).
5 Section 301(a)(2)(A), 19 U.S.C. §2411(a)(2)(A).
6 The European Communities notes that the USTR terminated on this basis the original Section 301 investigation concerning the EC banana regime. (See Federal Register, Vol. 63, No. 204, October 22 1998, page 56688).
7 Section 301(a)(2)(B)(ii)(I), 19 U.S.C. §2411(a)(1)(B)(ii)(I).
8 Section 301(a)(2)(B)(ii)(II), 19 U.S.C. §2411(a)(1)(B)(ii)(II).
9 Section 301(a)(2)(B)(iii), 19 U.S.C. §2411(a)(1)(B)(iii).
10 Section 301(a)(2)(B)(iv), 19 U.S.C. §2411(a)(1)(B)(iv).
11 Section 301(a)(2)(B)(v), 19 U.S.C. §2411(a)(1)(B)(v).
12 Section 301(a)(3), 19 U.S.C. §2411(a)(3).
13 Section 301(b), 19 U.S.C. §2411(b).
14 Section 301(d)(3)(B), 19 U.S.C. §2411(d)(3)(B).
15 Section 301(d)(5), 19 U.S.C. §2411(d)(5).
16 Section 301(b), 19 U.S.C. §2411(b).
17 Section 301(c), 19 U.S.C. §2411(c).
18 Section 302(a)(2), 19 U.S.C. § 2412(a)(2).
19 Section 302(b), 19 U.S.C. § 2412(b).
20 See 19 U.S.C. § 2171(a), (b)(1) (1998).
21 See 19 U.S.C. § 2171(c)(1) (1998); Reorg. Plan No. 3 of 1979, 44 Fed. Reg. 69273 (1979); 19 C.F.R. § 2001.3(a) (1998).
22 Section 302(a)(2), 19 U.S.C. §2412(a)(2).
23 Section 303(a)(1), 19 U.S.C. §2413(a)(1)
24 Section 303(a)(2), 19 U.S.C. §2413(a)(2).
25 Section 304(a)(2), 19 U.S.C. §2414(a)(2).
26 Section 304(a)(1)(A), 19 U.S.C. §2414(a)(1)(A).
27 Section 304(a)(1)(B), 19 U.S.C. §2414(a)(1)(B).
28 Section 306(a), 19 U.S.C. §2416(a).
29 Section 306(b), 19 U.S.C. § 2416(b).
30 Section 305(a)(1), 19 U.S.C. §2415(a)(1).
31 Section 305(a)(2)(A), 19 U.S.C. §2415(a)(2)(A).