4 October 1978

3.12. As to whether the minimum import price system for tomato concentrates was "necessary to the enforcement" of the intervention system for fresh tomatoes, he argued that where the tomato concentrates industry was not in a position to market its production throughout the year at a price level corresponding at least to cost prices resulting from the existence of intervention prices, the quantities normally used by the preserves industry would be subject to intervention. He further argued that, since the quantities used by the tomato concentrates industry represented about 20 per cent of total Community tomato production, such production was therefore of basic importance for the equilibrium of the fresh tomato market.

3.13. He argued that, as a result of the operation of the intervention system for fresh tomatoes, the Community canning industry could not purchase tomatoes for processing at a price below the intervention price. Indeed, he argued the domestic canning industry had to enter into contracts with producers at prices above the intervention price because the producer could always argue that, in any case, he could secure this price level. Therefore, he argued, the cost price for the Community canner was directly affected by the system applied in the market for the fresh produce, independently of the question of whether there was any real intervention at a given moment, because it was the continuing existence of the intervention price throughout the season that ensured maintenance of the price at that level. Consequently, he argued, it had to be possible to maintain the domestic price for tomato concentrates within the Community at a minimum level because imports represented about 80 to 85 per cent of Community production.

3.14. In addition, he argued, prices for tomato concentrates fluctuated considerably on the international market and changes in the volume of production occurred yearly in response to these changes in economic circumstances. He further argued that, as a result of these fluctuations, it had been possible to establish production of tomato concentrates in countries which had not previously produced this product and, that as this new production reached the market, a surplus situation was created and prices could fall to extremely low levels. He drew the Panel's attention to an FAO analysis of trends in this market which showed the amplitude of such fluctuations and also that it would be highly beneficial if the tomato concentrate market could be stabilized further. He stated that the Community intended to promote price stabilization in its own market, thus contributing to a general stabilization in the interest of all producers and consumers alike. He also noted that 99.9 per cent of the Community's imports were effected under this régime without creating any problems for Community suppliers.

3.15. In summary, he argued that the functioning of the Community market for fresh tomatoes implied a sound market situation for tomato concentrates. But, he argued, as the international market was subject to such fluctuations that it was not possible to guarantee an adequate domestic price level, and in view of existing regulations regarding fresh tomatoes, it was necessary to take action in order to ensure the proper operation of intervention measures which had a restrictive effect on domestic marketing. He stated that the minimum import price system had been selected on the grounds that it was a more flexible measure than, for instance, quantitative restriction, and made it possible to attain the desired objective.

3.16. With regard to the provisions of Article XI:2(c)(i), the representative of the European Communities argued that the Community system fell within the purview of this paragraph because of the intervention system for fresh tomatoes limited the marketing and production of tomato concentrates as follows:

3.17. The representative of the United States argued that, in order to qualify for the exemption offered by Article XI:2(c)(i), there had to be a domestic restriction on the production or marketing of the fresh product which the unlimited importation of the still fresh and perishable product would make ineffective and he charged that this was not the case in the Community. He argued that the Community intervention system for fresh tomatoes in no way restricted production and was not aimed at removing temporary surpluses. He noted that internal Community support measures for tomatoes were limited strictly to the fresh product and that there was no provision for any domestic support measures or domestic production or marketing restrictions for processed tomato products. He argued that the internal support system for fresh tomatoes basically relied on producer organizations to withhold produce from the commercial market when prices fell to a low level, but that the producer organizations were not obliged by the Community legislation to withhold supplies from the market to support prices, they were merely entitled to do so. He noted that, if the price at which they withheld produce from the market did not exceed a maximum level established by the Community, the member States had to compensate them for any financial losses incurred.

3.18. He argued that the purpose of withholding supplies from the market was to provide support to market prices and producer incomes and was not intended to restrict production or remove temporary surpluses. In fact, he argued, to the extent that the system was effective, it acted to maintain or encourage production by cushioning producers against the price effects of over-production. He noted that the Community's production of fresh tomatoes had been at least sustained during the previous ten years with a slight upward tendency.

3.19. He drew attention to the interpretation of the word "restrict" in the Analytical Index⁷ and argued that, given the fact that the impact of the Community's intervention scheme was on, at the most, 1 per cent of production, it was clear that even if the intent was to restrict production, which he argued it obviously was not, it would not be effective under this system. In this regard, he also noted the Analytical Index interpretation that "the essential point was that the restrictions on domestic production could be effectively enforced and the Sub-Committee recognized that unless this condition were fulfilled, restrictions on imports would not be warranted".⁸

3.20. He noted that there were no internal restrictions on sales of tomato concentrates and no evidence that internal sales of tomato concentrates had ever been restricted during periods when withdrawals of fresh tomatoes were occurring. He argued that if the Community did not consider internal sales of tomato concentrates to be competitive with domestic fresh tomatoes, then it was not logical to argue that imports needed to be restricted.

3.21. In summary, he argued that there was clearly no system of restriction, nor any enforcement leading to a restriction, in production in the Community's intervention system for fresh tomatoes in accordance with the provisions of Article XI:2(c)(i) and, that production had in fact not been restricted and had indeed tended to increase over the previous ten years.

3.22. With respect to the provisions of Article XI:2(c)(ii), the representative of the European Communities stated that intervention prices for fresh tomatoes were fixed at relatively low levels (emergency prices about one half the cost of production) and that, where market prices fell below such levels, provision had been made for the withdrawal of products from the market by producer organizations such as co-operatives. He argued that, in their capacity of representing the producers, those organizations always had to make use of that facility, which had until now moreover relieved the member States of having to make use of their similar rights of intervention. He stated that all such withdrawals were financed by the Agricultural Guidance and Guarantee Fund. With regard to the utilization of these withdrawals, he stated that the regulation concerned provided that these would be distributed free of charge, either in the fresh state or in the form of concentrates, to charitable organizations or school canteens, or would be destroyed.

3.23. He stated that, during the 1975/76 season, 136,000 tons of fresh tomatoes or 2.81 per cent of total Community production, representing 20,600 tons of tomato concentrates, were withdrawn from the market and, during the 1976/77 season, when production was adversely affected by bad weather, withdrawals amounted to 21,000 tons (the total production figure was not yet available), which represented 3,500 tons of tomato concentrates. He further stated that, it should be underlined that any concept linked to quantitative limitation could not be related to past production, but to potential production which was extremely difficult to quantify, although such quantification should in principle be beyond dispute, given that the intervention price was fixed at a level corresponding to one half of production costs.

3.24. The representative of the United States noted that the actual quantities of fresh tomatoes withdrawn from the market had been very small, having exceeded one half of 1 per cent of production in only three of the previous nine years and having exceeded 1 per cent only once since 1967. He noted that the very small quantity of fresh tomatoes normally withdrawn from the market could be due to the fact that in Italy, which accounted for 75 per cent of Community tomato production, producer organizations did not play a significant rôle. He noted that co-operatives were the main vehicle for carrying out whatever support measures might be implemented but that, according to the Community's 1976 Agricultural Situation Report, only 5 per cent of Italian vegetable production was marketed through co-operatives in 1975.

3.25. He further noted that the Community support system provided for the possibility of direct purchases of fresh tomatoes by the member States when market prices dropped to distress levels, but that member States rarely availed themselves of this possibility, probably because of the difficulty in disposing of a perishable product like fresh tomatoes. He also noted that tomatoes withheld from the market under the Community support system could not be put back into normal trade channels but, he argued, in most cases they were simply allowed to rot.

3.26. In summary, he argued that there was no indication that the operation of the minimum import price for tomato concentrates worked in any way to facilitate the removal of a "temporary surplus of the like domestic product ... by making the surplus available to certain groups of domestic consumers free of charge or at prices below the current market level", as required in Article XI:2(c)(ii).

3.27. With regard to the definition of the term "like product" as found in Article XI:2(c)(i) and (ii), the representative of the United States drew attention to the interpretation⁹ in the Analytical Index which stated that this term did not mean a competing product and reference was made to the following definition of the League of Nations: "practically identical with another product". He noted that in another discussion of this term, John Jackson, in his treatise on the law of GATT, commented on the concept of "like product" as follows:

"It appears that when used in Article VI and in Article XI, paragraph 2(c), 'like products' is very narrowly defined. This may be because these provisions are exceptions to GATT obligations and therefore should be more narrowly construed."¹⁰

3.28. He argued that there was no indication from any of the interpretations of Article XI:2(c) that the term "like product" in that Article could refer to an article industrially processed from the domestic fresh primary product and stored in a non-perishable form. He argued that all interpretations of this Article concluded that it had to be either practically identical with the domestic product or, as stated in Article XI:2(c)(i) and (ii), a directly substitutable product, neither of which was applicable to tomato concentrate, which was an industrially processed product derived from fresh tomatoes.

3.29. With regard to the provisions of the last sub-paragraph of Article XI:2, the representative of the European Communities argued that, as regards the volume of trade, the method used to fix the minimum import price for tomato concentrates had been arranged to allow trade to be conducted normally. He argued that the criteria applied for the determination of the minimum price (domestic cost of production, average import prices and prices on the main world markets) had led to the minimum price being fixed at the level of the normal price for trade, and would have to permit the realization of an equitable level of trade.

3.30. He further argued that the fact that the need to ensure harmonious and normal development of competition with third countries was taken into account in the regulation concerning the management of the price system, indicated that the Community ensured that this side of its obligations would be respected. In such circumstances, he argued, the minimum price system would not be able to affect the relationship between total imports and total domestic production. He stated that no factual verification of this assertion could be drawn from the figures then available because the system had been enforced only since September 1975.

3.31. Lastly he noted that, whereas the Community was a major world producer of tomato concentrates, the Community production trend had been unchanged from the previous ten years with output of about 150,000 to 180,000 tons, in contrast with the situation among other major producers.

3.32. In summary, the representative of the European Communities argued that prices for tomato concentrates in the Community market were affected by the intervention system applied in the fresh tomato market which showed that the provisions concerned fell well within the requirements of Article XI, paragraph 2(c)(i) and (ii), which authorized import measures necessary to the enforcement of measures which operated to restrict the quantities of a domestic product being marketed or to remove a temporary surplus by making this surplus available to certain groups of domestic consumers free of charge. In conclusion, he stated the Community opinion that the system of minimum import prices with security deposit which it had established was inconsistent with the provisions of the General Agreement.

3.33. With regard to the minimum import price and associated additional security, the representative of the European Communities argued that a measure within the purview of Article XI, as was the case in the view of the Community in this instance, could not be inconsistent with other provisions of the General Agreement. He argued that it was not acceptable to view a measure, which was said to be of a non-tariff nature under Article XI, as a violation of Article VIII. He further argued that this would be the case, in particular, if one considered paragraph 2 of Article XI, which authorized exceptions from the provisions of paragraph 1. He argued that, logically, an exception authorized under paragraph 2 of Article XI could not be regarded as a violation of another provision of the General Agreement because such an exception would otherwise have no meaning whatsoever.

3.34. With regard to the additional security to enforce the minimum import price, he argued that this was the most flexible measure to ensure that the minimum import price would be respected. He argued that this instrument could not operate without a risk for the importer if the minimum price was not respected and, that the risk in this case was the possible forfeiture of the security.

3.35. He further argued that paragraph 2 of Article XI authorized the application of more rigid measures such as quotas or minimum prices combined with a prohibition to import below a fixed minimum price. He argued that the sole fact that the Community, rather than apply more rigid measures, limited itself to the strict minimum by introducing the security deposit concept, certainly could not be a violation of the General Agreement.

3.36. He argued that the import certificate and associated security system for the specified products was an administrative formality and was not an instrument which operated to modify the economic circumstances of trade. He stated that import certificates were issued automatically and unrestrictedly upon request.

3.37. He further argued that these certificates were essential to enable the Community to follow the evolution of import volumes for these products because the Community had no other practical possibility to achieve this. He stated that accurate and prompt knowledge of the evolution of trade at a centralized level was, for any contracting party, an extremely useful and necessary instrument of policy and noted that systems, as sophisticated as the capabilities of each country allowed, existed in all contracting parties and that these systems often required resort to considerable physical equipment. In the Community, he argued, the situation was such that import certificates for these products provided the most adequate means.

3.38. He argued that there was no GATT provision prohibiting the imposition of administrative formalities and that, in this case, these were reduced to the essential minimum in accordance with the provisions of Article XIII.

3.39. The representative of the United States noted that Article VIII:1(a) stated that all charges and fees imposed on the importation of articles "shall be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection" to domestically produced products.¹¹ He argued that it was clear that the import security deposit schemes used to enforce the licence system for the specified products and the minimum import price for tomato concentrates were imposed as protection for domestic products and, therefore, were contrary to the provisions of Article VIII:1(a).

3.40. He further argued that, if importation did not take place and the security deposit was forfeited, this charge imposed as a penalty for not importing, would be a charge, "in connection with" importation, in violation of Article VIII:1(a). He argued that, in most cases, where the product was en route or did not meet the quantity requirement, the product would subsequently be imported under a new licence, with a new security deposit. Where this happened, he argued, there would be two additional charges on or in connection with importation, i.e. the forfeited security deposit and concomitant administrative expenses and the costs of the new security deposit with concomitant administrative expenses.

3.41. He further noted that Article VIII:1(c) exhorted the contracting parties to minimize the incidence and complexity of import and export formalities and to simplify import documentation and requirements. He argued that, while there may have been no affirmative obligation to decrease such complexities, there was inherent in this Article a duty not to increase such administrative burdens which acted as restrictions on trade.

3.42. The representative of the European Communities argued that the lodging of a security at the time of filing the application for a certificate was an integral part of the import certificate system because the security was necessary so that certificates would be representative of the actual volume to be imported in order that it would be possible to follow the evolution of trade. He argued that the security was a guarantee that the security was released. He argued that the question of two securities never arose for any operation not carried out by the importer, since the latter needed only one certificate for each operation.

3.43. He argued that the financial cost of the security, which was in the form of a banker's guarantee, could not be regarded as an additional levy, but only as an administrative cost item which in fact was a very small amount compared with the cost of other administrative formalities required for any import, and certainly lower than the cost of import formalities in the United States where customs clearance procedures were particularly burdensome.

3.44. The representative of the United States noted that Article VIII:3 stated that "no contracting party shall impose substantial penalties for minor breaches of customs regulations or procedural requirements".¹² He argued that the substantial penalty of forfeiture of all or part of a security deposit, if an article was imported below the minimum import price, if the product was not imported within seventy-five days or, if the total amount of the product was not imported, imposed a substantial penalty for minor breaches of procedural requirements and worked to inhibit importation in violation of the provisions of Article VIII:3.

3.45. He charged that Article VIII was clearly violated by the cumulative effect of the Community system which led to uncertainty and had caused the complete elimination of the normal commercial practice of long-term contracting. He further charged that this system also hampered market development activities and disrupted the forward planning of exporters, processors and growers. He noted that the normal six-month or one-year contract was no longer feasible in light of the risks inherent in the seventy-five day validity licence, which involved strict quantity and, in regard to tomato concentrates, price requirements.

3.46. He claimed that, in addition, access was uncertain because of the possibility that import licences could be restricted or suspended at any point of time. He noted the Community contention that the licence itself increased the certainty that no safeguard action could be taken against the product and the assurance that a licence, once issued, would not be revoked, but stated that he was unable to find any statement in any regulation to this effect. He further noted that in one case, Greece, licences already issued had been revoked while goods were in transit and wondered what might occur with respect to countries where no special relationship existed, and particularly, where there were no regulations setting forth the guarantee that licences would not be revoked. Irrespective of this question, he argued that a degree of certainty for seventy-five days was not equivalent to a long-term contract which represented an actual sale six-months to one year in the future and which provided legal remedies if the contract was not fulfilled, which had been the normal commercial practice for the products in question before this system was implemented.

3.47. The representative of the European Communities argued that criticizing the licensing system, because of its seventy-five day validity on the grounds that, beyond such a period it created an uncertainty for the operator, in that it halted the practice of long-term contracting, was unjustified. Nowhere in the world, he argued, including the United States, was there an import system guaranteeing to operators that measures taken in pursuance, for instance, of Article XIX, would not be applied for any specified period of time. He noted that, in theory, an importer could obtain a licence seventy-five days before the importation was expected to take place and, in fact, in such a case, the importer would undertake an obligation to import. However, he noted, the importer would receive, with the licence issued, an absolute guarantee regarding the realization of the importation concerned, leaving him moreover some margin of flexibility by permitting a 5 per cent variation in either direction from the quantity stated on the certificate, without reimbursement of the security being affected.

3.48. With regard to the criticism that this commitment by the importers constituted an additional obstacle, he stressed that, in practice, this was only a facility afforded to the importer. He argued that it was clear that an importer would not apply for a licence before he had entered into a contract with an exporter and, in this case, the obligation to import could not normally be regarded as involving any risk. However, he argued, if an importer wanted to have more freedom, he had every possibility to obtain a licence at the time when the goods were approaching the frontier and, at this stage, the obligation to import resulting from the licence, which had been criticized by the United States, was no longer meaningful as such.

3.49. He concluded with the argument that the certificate with security deposit system was indeed an additional administrative formality, but that it was not inconsistent with the GATT provisions and was limited to the strict minimum necessary to permit meaningful surveillance, and in no way constituted an obstacle to trade.

3.50. The representative of the United States argued that the seventy-five day validity limit for a licence, the commitment to import exactly the quantity stated in the licence, and the uncertainty caused by the arbitrary ability of member States to suspend import licences clearly were contrary to the provisions of Article VIII. He noted the Community allegation that the cost of the security deposit was simply the cost of an administrative service within the meaning of Article VIII, and was used as a statistical tool. He argued that the licence was not merely a statistical tool but a permit to import a specified quantity within a limited time period. He argued that, while the cost of a bank guarantee might be minimal, assuming an importer could qualify for such a guarantee and did not have to post the actual security deposit, the threat that the entire security deposit might be forfeited, if the conditions in the licence were not clearly met, went far beyond the intent of Article VIII and imposed an additional charge in violation of Article II.

3.51. The representative of Australia supported the United States' argument that the charges relating to the provision of the required security deposits appeared to be inconsistent with the provisions of Article VIII.

3.52. The representative of the United States noted that licensing systems used for surveillance, with potentially restrictive consequences, had been used in instances when there was another justification for the restriction, i.e. balance of payments. However, he argued, those uses had been severely criticized. He argued that even in balance of payments and other cases involving the use of trade measures, which had come before GATT Panels and Working Parties, the CONTRACTING PARTIES had scrutinized in great detail the mechanics of licensing systems and import deposit schemes and had insisted that those systems not be prolonged beyond a time when there was a justification for import restrictions under some other Article of GATT.

3.53. The representative of the European Communities noted that references had been made to previous scrutinies, by GATT Working Parties, of measures such as licensing systems and/or import deposit schemes, showing that the Working Parties insisted that those systems be eliminated as promptly as possible. However, he pointed out that in some cases these were not opinions expressed by the CONTRACTING PARTIES but by certain members of the relevant Working Parties. Moreover, he argued that it seemed preferable to base the reasoning on the text of the General Agreement itself.

3.54. In addition, he argued, these views related to exceptional import and export measures which were introduced by contracting parties because of serious temporary difficulties, in particular balance-of-payments reasons. He argued that these measures were being represented to the CONTRACTING PARTIES, by the applying countries, as being of an essentially temporary nature and were, therefore, of an altogether different type from the measures which were being examined by this Panel. He further argued that, in these circumstances, it was not surprising that some members of the Working Parties had expressed the wish that the elimination, which had been expected or announced, by the countries imposing the measures, be achieved as promptly as possible. This, he argued, would not be regarded as the general view of the CONTRACTING PARTIES that all import or export measures imposed by any contracting party consistently with its obligations under the General Agreement be eliminated as promptly as possible.

3.55. The representative of the United States noted that Article II:1(b) of the General Agreement stated that products included in bound Schedules of concessions shall be exempt from all other duties or charges of any kind imposed on or in connection with importation in excess of those imposed on the date of the agreement.¹³ He further noted that there were exemptions from this sub-section, including those for internal taxes consistent with Article III, Countervailing Duty or Anti-Dumping Fees, and other fees or charges commensurate with the cost of services rendered.

3.56. He argued that the minimum import price system for tomato concentrates operated as a charge on imports and not merely as a price below which the product could not be imported. He further argued that, for both tomato concentrates and the other specified products subject to the licensing system, charges in excess of the bound levels were levied through lost interest, debt servicing, and clerical and administrative costs associated with the provision of security deposits and also, to a much greater extent, through the forfeiture of security deposits if the importation did not occur within the seventy-five day validity of the licence or, if the minimum import price for tomato concentrates was not respected. He charged that, for tomato concentrates, even if the c.i.f. price, increased by the customs duty, was only slightly below the minimum import price, the entire security deposit was forfeited with the result that the product could be charged an amount far in excess of the bound rate. He argued that all of these charges should be considered as charges imposed on or in connection with importation in excess of those allowed in Article II:1(b). In this connection, he noted that the language in this Article was considered to be all inclusive¹⁴, leaving no flexibility for small charges or variable charges.

3.57. He argued that these security deposits related neither to the cost of services rendered nor to the enforcement of any legitimate system of import administration. He also argued that there was no provision to be found in the Regulations for the refund of the deposits, making it impossible to calculate the likely cost of debt servicing, thus creating an element of unpredictability which served as a barrier to trade.

3.58. The representative of Australia argued that the requirement for, and the direct and indirect costs of securing security deposits, and the more substantial cost resulting from any security deposit forfeitures, constituted charges on imports of a kind specifically proscribed by Article II:1(b), in that they were charges other than ordinary customs duties which were not levied or leviable at the time the items were bound.

3.59. He further argued that, even if these charges were not of a type proscribed by Article II:1(b), there remained the objection that these measures resulted in the total level of charges levied exceeding the levels bound in the Community's GATT Schedule. In the case of canned peaches and canned pears, he argued that the level of customs duties levied on importation into the Community was already equivalent to the bound rate which the Community had undertaken not to exceed. Therefore, he argued, if that bound level was exceeded, no matter how small the margin may have been, then a contractual commitment would have been breached and the exporting countries' rights would have been impaired.

3.60. The representative of the European Communities noted the United States arguments that the minimum import price and associated additional security system, as well as the import certificate and associated security system, were in breach of Articles II and XI at the same time because, the minimum import price and import certificate securities operated as charges on imports, and because the minimum import price and the import certificate operated as restrictions on importation and as import barriers. He recalled that the General Agreement made a clear distinction between the measures referred to in each of these Articles. He noted that Article II dealt only with tariff matters, and Article XI dealt only with non-tariff measures. He argued that, in view of the different nature of these matters, the United States position was self-contradictory to the extent that it attempted to identify the minimum import price system and the import certificate system as both tariff and non-tariff measures.

3.61. With regard to the minimum import price and associated additional security, he repeated the arguments presented in paragraphs 3.33, 3.34 and 3.35 with respect to Article VIII, to the effect that a measure within the purview of Article XI, as was the case in the Community view in this instance, could not be inconsistent with other provisions of the General Agreement.

3.62. He admitted that the security could be forfeited in certain cases but, in actual fact, forfeiture was highly improbable, in view of the nature of the system which resulted in operators complying with the minimum price obligation. He stated that, from 1 September 1975 to February 1977, there had been forfeitures in only seventeen cases, representing only 0.15 per cent of total Community imports of tomato concentrates during that time period and moreover, there was no case that had concerned any import from the United States. He argued that such forfeitures should not be viewed as an additional levy but rather as part of the minimum import price system in the sense that it was a penalty intended to discourage importers from infringing the obligation to comply with the minimum import price requirement. He further argued that this was in line with any administrative practice followed, where non-compliance with an obligation of this kind had to be sanctioned and the fact that this penalization had financial implications could not be sufficient reason to deviate from a correct appreciation of the legal situation.

3.63. He argued, in a similar manner, that the import certificate and security system for the specified products was an administrative formality which was in accordance with the provisions of Article VIII and therefore, could not at the same time be considered to be inconsistent with the provisions of Article II.

3.64. The United States representative noted that the Community Regulations in question provided an exemption from the security deposit which enforced the minimum import price for tomato concentrates to any country which guaranteed that its duty paid price on import into the Community would not be below the minimum. He argued that such a provision amounted to conditional most favoured nation (MFN) treatment inconsistent with the provisions of Article I¹⁵ of the General Agreement since it removed one of the requirements for the guaranteeing countries while leaving a burden on other countries. He maintained that only countries with State trading or central marketing organizations could benefit from this provision since it involved a guaranteed price which was only possible in a controlled price economy.

3.65. The representative of the European Communities noted that the Community provision concerned did not make any distinction based on the economic system, or any other factor, between third suppliers and, that the possibility to guarantee that the minimum price would be respected was open to all, unconditionally. Consequently, he argued that this provision was fully compatible with the most favoured nation clause of Article I of the General Agreement.

3.66. He noted further that, from a practical and factual point of view, it was not true that only countries with State trading or controlled price economies could benefit from an exemption from the security. He stated that in other agricultural sectors, where common market organizations comprised strictly identical provisions, the Community could demonstrate that many supplying countries with liberal economies, i.e. without State trading organizations or controlled price economies, had provided guarantees that minimum prices would be respected, and that these guarantees operated to the mutual satisfaction of both parties.

3.67. He accepted that there were supplying countries which did not have the necessary administrative machinery to meet the requirement to provide an adequate price guarantee, but he argued that such countries were not justified in inferring that requiring such a guarantee was a violation of the most favoured nation clause of Article I.

Article XXIII

3.68. The representative of the United States noted that Article XXIII¹⁶ stated that any contracting party which believed that a benefit accruing to it directly or indirectly under the GATT was being nullified or impaired, or that the attainment of any objective was being impeded as a result of the application by another contracting party of any measure whether or not it conflicted with the provisions of the General Agreement, or the existence of any other situation, could attempt to get redress for the nullification or impairment. He claimed that the CONTRACTING PARTIES had, in the past, reacted favourably to those complaining countries who could show that regulations, licensing systems, import deposits and other obstacles were unjustified impediments to trade, not taken on a temporary or emergency basis. He argued that these Community regulations were definitely not for emergency or temporary use but were used to protect domestic producers to the detriment of countries with whom trade concessions on the products involved had been negotiated and thereby nullified or impaired those concessions through violations of the spirit and letter of the GATT. He noted that the major products of concern to the United States in this case were bound, including tomato concentrate which was subject to the minimum import price.

3.69. He argued that the cumulative effect of these regulations was to directly and indirectly burden and restrict the trade involved. He claimed that there was not only a direct financial cost arising from the import licence with security deposit requirement but also, an additional administrative burden with an associated cost factor and element of unpredictability imposed on traders, which did not exist when the products were bound in the Community Schedule. He argued that these points inhibited trade and, individually and collectively, impaired the value of the binding.

3.70. He argued that the minimum import price for tomato concentrates operated in such a way as to levy an additional charge, which raised the price of the imported product, thus increasing protection above the level permitted by the concession rate of duty and violating the provisions of Article II of the GATT. He further argued that such a charge was also an impairment of a trade concession within the meaning of Article XXIII. He also argued that the provisions of Article II assumed access at the negotiated bound level unconditionally and that the condition of a minimum import price on a bound item was, in itself, an impairment, apart from and in addition to the noted charges.

3.71. He recalled that after Uruguay invoked Article XXIII against fifteen countries in 1961, the Panel appointed by the CONTRACTING PARTIES to examine the cases in question, reported that:

Accordingly, he stated, the Panel recommended, in each case where a measure was clearly maintained in contradiction with the provisions of the General Agreement, that the measure in question should be removed. He noted that among the measures which the Panel recommended should be removed were the permit requirements of Belgium, although the Belgian Government had stated that the permits were granted automatically, free of charge, and with no distinction between sources of supply. He also noted that, in the case of beef meats, it was stated that the permit could be used to administer a quota if one were enforced, although at the time in question such quota restrictions were not applied.

3.72. He recalled that the Panel had considered that, in so far as it had not been established that the Belgian measures regarding import permit requirements and such quotas as might exist were being applied consistent with the provisions of the General Agreement, it had to proceed on the assumption that their maintenance could nullify or impair the benefits accruing to Uruguay under the Agreement. he further recalled that the Panel had therefore concluded that the CONTRACTING PARTIES should recommend to the Government of Belgium that it give immediate consideration to the removal of such measures.¹⁸

TO CONTINUE WITH PROGRAMME OF MINIMUM IMPORT PRICES

⁷ This interpretation, on page 55, Analytical Index, Third Revision reads:

"(iii) "restrict". "The Sub-Committee agreed that in interpreting the term 'restrict' for the purposes of paragraph 2(c), the essential point was that the measures of domestic restriction must effectively keep domestic output below the level which it would have attained in the absence of restrictions."" (Havana Reports, p. 89, para. 17)

⁸ This interpretation, on page 56, Analytical Index, Third Revision, reads:

"(v) Domestic subsidies on agricultural or fisheries production. "The Sub-Committee agreed that it was not the case that subsidies were necessarily inconsistent with restrictions of production and that in some cases they might be necessary features of a governmental programme for restricting production. It was recognized, on the other hand, that there might be cases in which restrictions on domestic production were not effectively enforced and that this, particularly in conjunction with the application of subsidies, might lead to misuse of the provisions of paragraph 2(c). The Sub-Committee agreed that members whose interests were seriously prejudiced by the operation of a domestic subsidy should normally have recourse to the procedure of Article 25 [XVI] and that this procedure would be open to any member which considered that restrictions on domestic agricultural production applied for the purposes of paragraph 2(c) were being rendered ineffective by the operation of a domestic subsidy. The essential point was that the restrictions on domestic production should be effectively enforced and the Sub-Committee recognized that unless this condition were fulfilled, restrictions on imports would not be warranted."

(Havana Reports, p. 90, para. 22)

To meet this point and also to ensure that paragraph 2(c) should apply only when there was a surplus of production the word "effectively" was inserted after "operate" in the Charter. No corresponding change has been made in the General Agreement."

(Havana Reports, p. 90, para. 23)

⁹ This interpretation on page 57, Analytical Index, Third Revision, reads:

"(i) "like product". It was agreed that the definition of this phrase should be left to the ITO. It was stated, however, that in this Article the term did not mean a competing product. Reference was made to the following definition of the League of Nations: "practically identical with another product"."

(EPCT/A/PV/41, p. 14; EPCT/C.II/36, p. 8)

¹⁰ Jackson, John, World Trade and the Law of GATT, Bobbs, Merrill, 1969, page 263.

¹¹ Article VIII:1 reads:

¹² Article VIII:3 reads:

¹³ Article II:1(b) reads:

¹⁴ Jackson, John World Trade and the Law of GATT, Bobbs, Merrill 1969, page 209.

¹⁵ Article I:1 reads:

¹⁶ Article XXIII reads:

¹⁷ Basic Instruments and Selected Documents, Eleventh Supplement, page 100, paragraph 15.

¹⁸ This conclusion, on page 108, Basic Instruments and Selected Documents, Eleventh Supplement, reads:

Agreements  |  Disciplines | Trade Policy Developments | Countries | Disclaimer Home | What's New | SiteMap | Resources | Search