3.25 The United States maintained that, regardless of the Waiver, imposition or maintenance of the Section 22 import fee on refined sugar did not violate Article II, because the maximum import duty on raw and refined sugar was not currently bound under the General Agreement. The United States recalled that ever since the original tariff concessions made at Annecy in 1949, the duty on raw and refined sugar had been subject to the terms of the Headnote which provided that the bound rates "shall be effective only during such time as Title II of the Sugar Act of 1948 or substantially equivalent legislation is in effect in the United States ...". At that time, the Headnote became part of the United States Schedule of concessions under Article II:1(b) which provides that tariff bindings are subject to "terms, conditions or qualifications set forth in [the] Schedule" of each contracting party. The Sugar Act of 1948, including Title II, expired on 31 December 1974 and was not replaced by similar legislation. Accordingly, the tariff binding on raw and refined sugar had not been in effect since that date and would not come into effect unless legislation substantially equivalent to Title II of the Sugar Act of 1948 is enacted by the United States.

3.26 The EEC claimed that the argument advanced by the United States regarding the status of its tariff concessions on sugar was contradicted by the finding of the panel which had examined the United States restrictions on import of sugar. The EEC recalled that with regard to the scope of the words "terms, conditions or qualifications set forth in that Schedule", the panel stated the following:

It was thus clear that the terms, conditions or qualifications could only refer to commitments additional to the tariff commitment and therefore could not limit over time the tariff reduction commitment. That panel also noted that provisions which might have a practical effect on tariff concessions may be incorporated in the Schedule of concessions "provided that the results of such negotiations should not conflict with other provisions of the Agreement" (L/6514, paragraph 5.5). Obligations under Article II therefore could not be limited by a condition that was not consistent with the General Agreement.

3.27 The United States replied that the validity of the Headnote as a term, condition or qualification to the United States concessions on sugar duties had not been examined by the report of the panel referred to by the EEC (L/6514). That panel did not find that the Headnote was invalid, but merely that the Headnote could not serve as a legal justification for measures inconsistent with Article XI. It did not examine, or make findings on, the status of United States tariff bindings on raw and refined sugar. Moreover, the passage quoted by the EEC from that Panel confirmed that it was a legitimate practice to put limits to a tariff concession, so long as these limits were not inconsistent with any article of the General Agreement other than Article II. For instance, contracting parties could and did provide tariff concessions seasonally, or for a limited time, or contingent on implementation of concessions by others. The United States recalled that with regard to the meaning of the phrase "terms, conditions or qualifications," the preceding paragraph of the same Panel report cited by the EEC had stated:

Accordingly, the term, condition, or qualification limiting the United States' tariff concession on ordinary customs duties on imports of sugar to the duration of Title II of the Sugar Act of 1948 was permitted by Article II and did not conflict with any other provision of the General Agreement.

3.28 The EEC stressed that a waiver granted under Article XXV did not alter the status of the waived measure, notably as regards its compatibility or incompatibility with the General Agreement. In the EEC's view, waiving obligations did not signify bringing them into conformity. The obligation laid down, in the event that a measure was inconsistent with the General Agreement, that it must be eliminated or modified so as to make it compatible. A waiver of obligations was only signified exemption from having to ensure such compatibility. Thus, in the present case, the United States had simply been exempted from having to bring itself into conformity with the General Agreement when applying illegal measures, provided that such measures complied with the Waiver. The EEC added that this above mentioned point is supported by both the history and the letter of the Waiver. With regard to the history, it was recalled that the Netherlands were authorized by the CONTRACTING PARTIES to apply a withdrawal of concessions afterwards the Waiver was granted on the basis of recommendations submitted by working parties on the annual examination of the Waiver (BISD 4S/99). This authorization was due to the non-conformity of United States import restrictions with the Article XI.

3.29 The EEC considered that this view had been endorsed by the report of the panel established pursuant to the recourse by Uruguay to Article XXIII which stated that "It may be noted in this connection that the status of a measure (that is, whether or not it is consistent with GATT) is not affected by a waiver decision taken subsequently" (BISD 11S/100). Therefore, irrespective of whether the measures adopted under the Waiver were compatible or incompatible with the Waiver itself, those measures constituted a case of nullification or impairment of benefits accruing under the General Agreement. This was also made clear in the text of the Waiver by two declarations in which affected contracting parties maintain their rights to have recourse to Article XXIII, and in which the CONTRACTING PARTIES "regret that circumstances make it necessary for the United States to continue to apply import restrictions which, in certain cases, adversely affect the trade of a number of contracting parties, impair concessions granted by the United States and thus impede the attainment of the objectives of the General Agreement" (BISD 3S/35).

3.30 The United States stated that Article XXV:5 was an essential part of the GATT system for furthering trade liberalization. Even the earliest proposals for the Havana Charter provided for analogous provisions, because the drafters recognized that waivers provided a measure of flexibility indispensable if it were to be possible to accommodate the problems of individual contracting parties in a multilateral agreement. The United States argued that Article XXV:5 gave the CONTRACTING PARTIES almost unlimited power to waive the obligations of the General Agreement, subject only to the voting requirement and the requirement that the circumstances be extraordinary and not covered elsewhere in the General Agreement. This power was not qualified by any requirement that the waiver be temporary. The CONTRACTING PARTIES had chosen on a number of occasions to grant waivers with no expiry date. The waiver power was supreme, and could only be exercised or reconsidered by the CONTRACTING PARTIES. For instance, the 1956 Decision on Guiding Principles for Waivers of Article I and other important GATT obligations (BISD 5S/25) stated that "any decisions granting a waiver would include procedures for future consultations or action taken under the waiver". In other words, dispute settlement concerning the operation of a waiver could extend to any action taken under the waiver, but could not decide whether the waiver itself was to be maintained, because that question was within the exclusive competence of the CONTRACTING PARTIES.

3.31 The United States rejected the EEC's interpretation of the Netherlands-United States dispute on dairy quotas, and argued that a closer examination of this dispute, on the contrary, supported the United States view of the effect of waivers on remedies. The United States recalled that in 1951, the CONTRACTING PARTIES found that tariff concessions granted by the United States in 1947 on certain dairy products had been nullified or impaired by imposition of import quotas under Section 104 of the Defense Production Act of 1950. The CONTRACTING PARTIES also found that the import restrictions in question constituted an infringement of Article XI (BISD II/16). In 1952, the CONTRACTING PARTIES confirmed both findings, recommended that the United States Government secure the repeal of Section 104, and authorized the Netherlands to retaliate (BISD 1S/31,32). These findings would seem to indicate that the evidence established the elements of both an Article XXIII:1(a) "violation" complaint and an Article XXIII:1(b) "non-violation" complaint. By 1953, Section 104 had been repealed, but substantially equivalent import quotas had been adopted pursuant to Section 22. The CONTRACTING PARTIES did authorize continued retaliation by the Netherlands but did not make additional findings and did not recommend that the United States eliminate the Section 22 quotas (BISD 2S/28). In 1954, the reasoning behind the 1953 resolution became apparent. The CONTRACTING PARTIES, in reauthorizing retaliation by the Netherlands, noted only that tariff concessions had been impaired; the CONTRACTING PARTIES made no finding that the Section 22 dairy import quotas were inconsistent with Article XI (BISD 3S/46). In reauthorizing retaliation subsequent to the grant of the Waiver, the CONTRACTING PARTIES relied on the recommendations of the Working Parties examining the Section 22 annual reports, which recognized the same impairment of tariff concessions (BISD 4S/31, 99; 5S/28, 142; 6S/14,157; and 7S/23, 128). The history of this dispute shows that the CONTRACTING PARTIES considered the "violation" case, i.e. the infringement of Article XI, to have terminated upon the repeal of the Defense Production Act even though substantially similar import restrictions had been adopted under Section 22. It is clear that the Section 22 quotas were not found to be inconsistent with Article XI. What remained of the Netherlands' dispute was the "non-violation" case, which presumably satisfied all of the criteria that had been identified in 1950 by the panel examining the Australian Subsidy on Ammonium Sulphate (BISD II/188) and in 1952 by the panel examining the Treatment by Germany of Imports of Sardines (BISD 1S/53). Clearly, the consistency or inconsistency with the GATT of the Section 22 measures would not have been relevant under a "non-violation" theory of nullification or impairment. Moreover, the Waiver granted in 1955 would not have resolved the Netherlands' claim under Article XXIII:1(b) or mandated the termination of retaliation.

3.32 The United States referred to the passage that the EEC had cited from a footnote to the report of the Panel on the Uruguayan Recourse, and stressed that the question raised by this footnote was not the nature of the measures taken but the nature of any claim raised under Article XXIII. If conduct within the limits of a waiver were still to give rise to a valid claim under Article XXIII:1(a), then the Waiver and Article XXV:5(a) would be a nullity. For this reason the United States had argued that in order to avoid an interpretation that throws two GATT provisions in conflict, the only Article XXIII claim possible was a claim under Article XXIII:1(b) or (c). The documentary record also indicated that the drafting of this footnote was prompted by the ambiguous legal position taken by Germany, which had obtained a waiver but still insisted that its import restrictions were legally sheltered under the Torquay Protocol. The United States argued that, read literally, this footnote dealt only with the situation in which a measure was put in place and a waiver was granted afterwards. So it was not relevant to the Section 22 measures on sugar, which started well after the Waiver. Moreover, the footnote was incorrect in implying that all waivers provided explicitly for recourse to Article XXIII: in fact, only nine of over two hundred waivers so provided. As for the declaration of regret cited by the EEC, this referred to "certain cases", and so by implication, there were certain other cases in which Section 22 measures did not cause nullification or impairment. Thus, the EEC's conclusion that all Section 22 measures nullify and impair benefits was completely unwarranted. Moreover, the declaration of regret related to restrictions which were in effect at the time of the Waiver, and the Section 22 measures on sugar did not begin until long afterward.

3.33 The EEC disagreed with the way in which the United States interpreted the waiver power under Article XXV. The EEC recalled that at the tenth session of the CONTRACTING PARTIES, the Executive Secretary of the GATT, at the request of the CONTRACTING PARTIES, had given his opinion as to the applicability of this Article. He stated in particular that: "The words 'in exceptional circumstances not elsewhere provided for in this Agreement' are clearly designed to limit the use of the waiver provision to individual problems to which the Agreement as written does not provide an adequate solution and where an amendment would result in a modification both broader in its application and more permanent than is required" (L/403). In the EEC's view, this opinion rules out the possibility of the Waiver being permanent or constituting a kind of amendment or substantive modification of the text of the Agreement. On the contrary, as a waiver was a clause providing an exception to the application of the General Agreement, the exception must be interpreted narrowly in accordance with the interpretation of exceptions recently confirmed by a panel report (L/6513) adopted by the CONTRACTING PARTIES.

3.34 The United States answered that it had not claimed that the Waiver was an amendment to the text of the Agreement. The note by the Executive Secretary supported the United States interpretation that the Waiver power saved the CONTRACTING PARTIES from having to amend the General Agreement to deal with a pressing problem of one or a few contracting parties. However, before and after the note cited by the EEC, the practice of the CONTRACTING PARTIES was in fact to grant waivers of indefinite duration in certain cases; the note listed a number of such waivers. The United States also argued that it was inappropriate to require that waivers be interpreted narrowly. A waiver was not the same as an exception to the General Agreement; the rationale, basis and procedures for waivers were fundamentally different. Any contracting party could freely avail itself of the exceptions in the GATT, but to obtain a waiver, it had to undergo rigorous examination of its case and obtain support from a two-thirds majority of the CONTRACTING PARTIES. Waivers were a fundamental exercise of the decisional powers of the CONTRACTING PARTIES acting on a case-by-case basis. The provisions of each waiver were determined by the CONTRACTING PARTIES, and to narrow them after the fact would be to impose limits on the powers of the CONTRACTING PARTIES. There had been waivers, such as the GSP Waiver, which could be described as having been intended to be applied broadly.

3.35 The United States stressed that the Waiver provides recourse to Article XXIII, but limits such recourse to "affected" contracting parties. This was consistent with the general practice of waivers granted under the General Agreement under which compensation for contracting parties whose trade is negatively affected has been viewed as an essential part of any waiver, except those cases where it was found expressly that a waiver would have no, or negligible, effects on trade.

3.36 Therefore, the United States argued that before even considering whether or to what extent nullification or impairment had occurred, a panel dealing with a claim under the Waiver must determine whether the complaining party was an "affected contracting party" with respect to each product for which nullification or impairment had been alleged. Because of the extraordinary nature of waivers, and the fact that they were an expression of the will of the CONTRACTING PARTIES, the burden should be on the complaining party to show it was "affected" commercially. Thus, the EEC would have to come forward with a positive showing of real commercial effect which was caused by the Waiver and not by extraneous factors. However, the EEC's sugar exports had not been affected by actions taken under the Waiver in the sugar area. The effects claimed by the EEC on its sugar trade related to the quota maintained under the Headnote, not Section 22 measures. With regard to refined sugar, the EEC, a high-cost producer of sugar, maintained sugar prices well above United States prices, and could only export to the United States market with export subsidies or by dumping. EEC exports of sugar to the United States increased even after imposition of the Section 22 fees in 1977. In 1978, the United States imposed a countervailing duty to offset subsidies, and from 1979 onward, EEC sugar entirely lost its place in the United States market to other, non-subsidizing exporters. Thus, any effect on EEC exports of refined sugar was caused by its own export subsidies and the GATT-consistent countervailing duty, not the imposition of Section 22 fees on sugar in 1977. Also, the United States provided statistics indicating that EEC exports to the United States under tariff headings subject to the Section 22 import limitations on sugar-containing products had actually increased following imposition of those measures.

3.37 The United States recalled that the Section 22 Waiver provided that affected contracting parties are to have recourse to the appropriate provisions of Article XXIII. Non-specific recourse under Article XXIII as a whole was inconsistent with present GATT practice in the field of dispute-settlement, which stressed clarity and specificity in defining the scope and rules of disputes. Recourse to Article XXIII:1(a) was also not appropriate in the case of measures within the scope of any waiver. In this instance, while Article XXIII:1(a) spoke of "the failure of another contracting party to carry out its obligations under this Agreement", the Waiver decision of 1955 stated that "the obligations of the United States under the provisions of Articles II and XI of the General Agreement are waived to the extent necessary to prevent a conflict with such provisions". By process of elimination, therefore, the only complaint that could be raised against conduct that had thus been authorized by the CONTRACTING PARTIES was a non-violation nullification or impairment complaint under Article XXIII:1(b) or (c). The United States referred to a recent analysis by the Secretariat stating that since the purpose of waivers is precisely to authorize action that would otherwise be inconsistent with the Agreement, the reference in waivers to recourse to Article XXIII was presumably a reference to Article XXIII:1(b) or (c). Moreover, the 1979 Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance (L/4907) provided that if a contracting party claims that measures which do not conflict with the provisions of the General Agreement have nullified or impaired benefits accruing to it under the General Agreement, it would be called upon to provide a detailed justification. The elements of a non-violation case were well known to the EEC; as the EEC had failed to come forward with the required information, the United States concluded that the EEC had also failed to show nullification or impairment under Article XXIII:1(b) or (c).

3.38 The EEC considered that the United States interpretation that under the Waiver recourse to Article XXIII was limited to "affected" contracting parties was mistaken. The report of the Working Parties set up to examine the United States request for a waiver stated: "The right of other contracting parties to have recourse to the provisions of Article XXIII (...) applies to the Decision as a whole" (BISD 3S/144). This statement pointed to the right of recourse to Article XXIII without any possibility of limiting it by a restrictive interpretation to affected parties. Moreover, the text of the Waiver itself provides that the Waiver "shall not preclude the right of affected contracting parties to have recourse to the appropriate provisions of Article XXIII" (BISD 3S/35). This wording did not limit the right of recourse but preserved it, notably in the case of measures that were not consistent with the General Agreement. So long as these measures remained in force, the use of the term "affected" was not intended to limit recourse to Article XXIII to certain contracting parties. The term was there to specify the cases in which contracting parties were entitled to obtain the authorization to suspend concessions provided for in Article XXIII:2.

3.39 The EEC also recalled that the CONTRACTING PARTIES, when granting the Waiver, had formally noted that the measures taken under the Waiver constituted, in certain cases, a nullification or impairment of benefits under the General Agreement. A contracting party therefore no longer had to prove them, nor did a panel have to determine them. However in the present case compensation could be envisaged because the measures maintained under the Waiver remained illegal measures for which the obligation to bring them into conformity with the General Agreement had been suspended. This was explicitly recognized in the Annex to the 1979 Understanding which states: "The provision of compensation should be resorted to only if the immediate withdrawal of the measures is impracticable and as a temporary measure pending the withdrawal of the measures which are inconsistent with the General Agreement" (BISD 26S/216). In these circumstances, in the EEC's view, the Panel had only to recommend the extent to which authorization for the suspension of concessions or some other measure, such as compensation, should be envisaged. The EEC also pointed out that the United States have not demonstrated that the measures taken under the Waiver do not constitute, in the present case, a nullification or impairment of benefits accruing under the General Agreement.

3.40 The United States also recalled that the declaration of regret mentioned by the EEC stated that measures existing at the time of the Waiver decision constituted nullification or impairment in certain cases. By inference, there were some cases in which no nullification or impairment was found. Thus, a blanket conclusion of nullification or impairment was unwarranted, especially in the case of sugar, since there were no Section 22 measures in the sugar area at the time of the declaration of regret. The United States noted that the statement quoted by the EEC from the Annex of the 1979 Understanding only referred to the situation when measures were found to be "inconsistent with the General Agreement", that is a complaint under Article XXIII:1(a). However, as the United States had already pointed out, a dispute under Article XXIII:1(a) concerning measures within the scope of a waiver granted by the CONTRACTING PARTIES was a contradiction in terms. The United States maintained that the only dispute that could be raised concerning measures within the scope of a waiver was a dispute under Article XXIII:1(b) or (c), under which the United States agreed that, if non-violation nullification or impairment were established, it might have an obligation to pay compensation. However, the United States noted that the EEC had avoided invoking such provisions of Article XXIII:1 and it had failed "to provide a detailed justification" as provided for in such cases by paragraph 5 of the Annex of the 1979 Understanding (BISD 26/216). The United States recalled the Panel decision on the EEC complaint against certain aspects of a bilateral arrangement between the United States and Japan concerning trade in semiconductors in which that Panel rejected a non-violation claim because evidence submitted by the EEC was simply insufficient (L/6309, paragraphs 69, 131).

4.1 Argentina recalled the serious economic and social consequences, in particular for its regional economies, which had followed the imposition by the United States of restrictive sugar import quotas as from May 1982. Argentina's receipts from sugar exports to the United States market dropped from US$210 million in 1981 to US$14 million in 1987. In terms of volume, United States sugar imports declined from roughly 5 million short tons on average for 1979/81 to about 1 million short ton in 1988. At the same time Argentina's share declined from an average of about 300 thousand short tons in 1977/81 to 29 thousand short tons in 1988. While a larger global quota had been announced for 1989 (1.2 million short tons), this remained a seriously depressed level.

4.2 Argentina considered that the quantitative restrictions imposed by the United States on sugar imports were contrary to the provisions of Article XI and did not fulfil the conditions laid down by that Article for maintaining such restrictions. Furthermore, these restrictions could be justified neither by reference to the Headnote nor to the Waiver. As sugar was an item on which a binding was negotiated by the United States, if the hypothesis of a possible application of unlimited restrictions under the Headnote or under the Waiver were accepted, the United States, in contradiction with the criterion of reasonable expectation, would have the right to reduce its imports to zero. The concessions granted would then be totally meaningless. The mere possibility that a contracting party could unilaterally modify a concession, besides jeopardising the reliability of the benefits expected from the concession, would give the contracting party which granted the concession an advantage with respect to other contracting parties that complied strictly with the rules of the General Agreement.

4.3 Moreover, Argentina maintained that as part of the conditions for the grant of the Waiver, the United States had referred to positive steps taken to reduce 1955 crop supplies by lowering support price levels or imposing marketing quotas at minimum levels permitted by its legislation. The United States had also expressed its intention to continue to seek a solution to the problem of surpluses of agricultural commodities. The quantitative restrictions which had reduced sugar imports from 3.7 million short tons in 1955 to 1.2 million short tons in 1987, while sugar production in the United States rose from 4.3 million short tons to 6.7 million short tons during the same period, did not appear, therefore, to be consistent with the conditions of the Waiver.

4.4 Australia noted that the terms of reference of the Panel encompassed restrictions maintained by the United States on the importation of agricultural products justified by the United States under both the Headnote and the Waiver. However, having recalled that the issue of the conformity with the General Agreement of quotas maintained under the Headnote by the United States on imports of raw and refined sugar had been recently settled (L/6514), Australia confined its submission to arguing certain aspects of the restrictions justified under the Waiver.

4.5 Australia maintained that the CONTRACTING PARTIES were fully aware that the granting of the Waiver in 1955 would result per se in the nullification or impairment of benefits to other contracting parties. This was reflected in both the wording of the Decision of the CONTRACTING PARTIES and of the report of the Working Party which examined the United States request for the Waiver by making explicit references to the right of contracting parties to have recourse to Article XXIII.

4.6 Australia further maintained that nullification or impairment of benefits accruing to other contracting parties because of the imposition by the United States of import restrictions under the Waiver occurred regardless of whether or not the import restrictions involved were being applied strictly in accordance with the Waiver and its conditions and procedures. This was explicitly provided for under Article XXIII:1(b). Moreover, the specific reference to Article XXIII in the text of the Decision was a recognition that the granting of the Waiver disturbed the balance of benefits accruing to the United States and other contracting parties under the General Agreement. This also meant, in Australia's view, that contracting parties taking action under Article XXIII against restrictions imposed by the United States pursuant to Section 22 did not need and were not obliged to prove nullification or impairment, as this was already established. The only thing to be decided in such cases would be the extent of the nullification or impairment suffered by the contracting party involved and the extent to which authorization would be given to suspension of concessions or other obligations, as allowed for in Article XXIII. Australia asked the Panel to make a finding endorsing this interpretation.

4.7 Canada maintained that the restrictions applied by the United States on sugar and sugar-containing products contravened Articles II and XI of the General Agreement and that they were inconsistent with the conditions and assurances of the Waiver granted in 1955 pursuant to Article XXV:5. It was Canada's view that in seeking to justify these restrictions as an exception under Article XXV:5, the United States accepted that they would otherwise contravene Articles II and XI of the General Agreement. Canada also noted that the Waiver had no effect on contracting parties' rights with respect to other GATT articles, including in particular Articles XIII or XXIII.

4.8 Canada recalled various actions on sugar imports implemented by the United States under its domestic legislation. In particular, Canada referred to import prohibitions imposed in 1983 under Section 22 on certain sugar-containing products falling under TSUS headings 155.75, 156.45, 183.01 and 183.05 and to quotas imposed in 1985 under the same authority on imports of all sugar-containing products not already subject to import prohibition provided for in TSUS headings 156.45, 183.01 and 183.05. Canada noted that the United States had sought to justify its action on these products with respect to its obligations under the General Agreement as falling within the terms of the Waiver. Canada pointed out that, as an exception to the application of the General Agreement, waiver provisions must be given narrow interpretation and that the burden of proving application of the exception lay with the party relying on its provisions. It was Canada's view, therefore, that the burden was on the United States to establish that it had followed all of the conditions and assurances attached to the Waiver with respect to action taken on sugar and sugar-containing products and that the United States could not do so. In particular, Canada stressed that these actions had been taken without proper notification, consultation or transparency, and had been maintained in spite of evidence that the measures introduced should be terminated.

4.9 Canada further argued that the granting of the Waiver was to be interpreted in light of the representation and circumstances leading to the Decision of 1955. Canada maintained that the intention of contracting parties was neither to amend the General Agreement by incorporating Section 22 nor to maintain its provisions in perpetuity. Rather the intention was to waive, only to the extent necessary, certain obligations in view of the particular problem created where larger than normal imports were generated in response to and supported by United States price support programmes. In Canada's view, the measures maintained by the United States on sugar and in particular those on sugar-containing products, which were in place to support quotas on sugar (which had been found by a previous panel to have no valid GATT justification) were an abuse of the Waiver provisions and an attempt to extend those provisions to an extent never intended by the CONTRACTING PARTIES in 1955.

4.10 Canada considered that with respect to fees applied to sugar, the United States had failed to fulfil its assurances given in 1977. Domestic production rose from 5.9 million short tons in 1982 to 7.3 million short tons in 1987 while imports had fallen dramatically from 6.1 million short tons in 1977 to 1.3 million short tons in 1987. In view of the United States assurances and pursuant to the condition of the Waiver that restrictions be removed or relaxed when changed circumstances made doing so possible, Canada argued that the fees applied to sugar should be terminated. For the same reasons the United States could not justify the imposition of quotas under Section 22 for sugar.

4.11 Canada argued that insofar as the imposition of restrictions on sugar could not be justified under the Waiver, then subsequent Section 22 action could not be justified as necessary to support the United States sugar price support programme under the Waiver. The 1983 import prohibition on sugar-containing products was taken without notification and without the opportunity to consult. Moreover the United States had not shown that the action was necessary to support United States price support programmes. In addition, Canada argued that while the 1955 Waiver permitted restrictions in certain circumstances, it did not permit the use of prohibitions. The United States could not justify its prohibitions on sugar-containing products under the Waiver. Canada argued that the import restrictions introduced in 1985 were imposed without notice and were applied to products containing minimal amounts of sugar, the import of which could not conceivably have been considered to be undermining the United States sugar programme. Canada considered that the CONTRACTING PARTIES, in granting the Waiver, did not intend that it would allow for the restriction of imports of manufactured grocery products. Canada also considered that the United States lack of transparency, given their refusal to release a subsequent USITC investigation although Canada has requested access to this report, was an abuse of the conditions of the Waiver and of the assurances given by the USA and contrary to the intent of the Waiver. Canada also stressed that any resolution of the complaint should be on a MFN basis.

4.12 Chile considered that the Panel offered a very useful opportunity to examine whether the maintenance of the Waiver was justified. Chile shared many of the views contained in the last draft report of the Working Party set up to examine the annual report by the United States under the Waiver (Spec(88)14/Rev.4). Reference was made in that report to, inter alia, the fact that the circumstances in which in 1955 the Waiver was granted had changed; the adverse effects of the Waiver on agricultural trade and on the GATT system; and its very long duration. Chile recalled that its position of principle concerning waivers under Article XXV:5 was that these should be of limited duration; indefinite duration gave rise to virtually permanent privileges, thus impairing the balance of rights and obligations among contracting parties.

4.13 Moreover, Chile considered that while the Waiver had the effect of allowing the United States to maintain measures that were incompatible with the General Agreement, that did not in any way change the incompatible character of such measures. In other words, the maintenance of these measures would be a prima facie case of injury which, ipso facto, might lead to authorization by the CONTRACTING PARTIES to suspend concessions or obligations or recommend some other appropriate measures for restoring the balance of rights and obligations between the United States and other affected contracting parties.

4.14 Japan considered that import restrictions imposed by the United States under the Waiver had the same adverse effects on trade as other trade restrictive measures. Japan recognized that the Waiver had an indefinite duration and an unspecified coverage of product, but argued that the CONTRACTING PARTIES had granted it on the ground that restrictions should be either relaxed or removal promptly when the circumstances requiring such restrictions no longer existed. However, the Waiver had been maintained for as long as over thirty years without being reviewed.

4.15 Japan maintained that this situation could not be considered as normal either from the viewpoint of promoting international trade which should be conducted on the basis of equity, or from the viewpoint of maintaining the credibility of the GATT system. Japan was aware that the United States was prepare to discuss the issue of the Waiver in the course of the Uruguay Round. However, Japan's view was that in the light of the various problems involved in the Waiver, the United States should relinquish it on its own initiative so as to place all its trade restrictive measures presently allowed by the Waiver on the same ground as the similar trade restrictive measures maintained by other countries, and then take part in the joint work of finding new GATT rules and disciplines for agricultural trade.

TO CONTINUE WITH UNITED STATES - RESTRICTIONS ON THE IMPORTATION OF SUGAR AND SUGAR-CONTAINING PRODUCTS APPLIED UNDER THE 1955 WAIVER AND UNDER THE HEADNOTE TO THE SCHEDULE OF TARIFF CONCESSIONS

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