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UNITED STATES - DEFINITIVE
WORLD TRADE ORGANIZATION
1. The United States and the European Communities appeal certain issues of law and legal interpretations in the Panel Report, United States - Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities (the "Panel Report")1. The Panel was established to consider a complaint by the European Communities with respect to a definitive safeguard measure imposed by the United States on certain imports of wheat gluten.
2. On 1 October 1997, the United States International Trade Commission (the "USITC") initiated a safeguard investigation into certain imports of wheat gluten.2 By Proclamation of the President of the United States, dated 30 May 1998, the United States imposed a definitive safeguard measure, in the form of a quantitative restriction on imports of wheat gluten, effective as of 1 June 1998.3 Products from Canada, a partner with the United States in the North American Free-Trade Agreement ("NAFTA"), and certain other countries were excluded from the application of the safeguard measure.4 The United States notified the initiation of the investigation, the determination of serious injury, and the decision to apply the safeguard measure to the Committee on Safeguards.5 The factual aspects of this dispute are set out in greater detail in the Panel Report.6
3. The Panel considered claims by the European Communities that, in imposing the safeguard measure on imports of wheat gluten, the United States acted inconsistently with Articles I and XIX of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"), and with Articles 2.1, 4, 5, 8, and 12 of the Agreement on Safeguards.7
4. In its Report, circulated to Members of the World Trade Organization (the "WTO") on 31 July 2000, the Panel concluded that:
5. Having found the United States' safeguard measure to be inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, the Panel did not deem it necessary to examine the claims of the European Communities under Article XIX of the GATT 1994, and, in addition, under Article I of the GATT 1994 and Article 5 of the Agreement on Safeguards.11
6. The Panel recommended that the Dispute Settlement Body ("DSB") request the United States to bring its measure into conformity with the Agreement on Safeguards.12
7. On 26 September 2000, the United States notified the DSB of its intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel, pursuant to paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU"), and filed a Notice of Appeal pursuant to Rule 20 of the Working Procedures for Appellate Review (the "Working Procedures"). On 6 October 2000, the United States filed its appellant's submission.13 On 11 October 2000, the European Communities filed an other appellant's submission.14 On 23 October 2000, the European Communities and the United States each filed an appellee's submission.15 On the same day, Australia, Canada, and New Zealand each filed a third participant's submission.16
8. The oral hearing in the appeal was held on 3 November 2000. The participants and third participants presented oral arguments and responded to questions put to them by the Members of the Division hearing the appeal.
9. The United States argues, on appeal, that the Panel erred in finding the United States' causation analysis to be inconsistent with Article 4.2(b) of the Agreement on Safeguards. For the United States, the meaning of the word "cause", used in Article XIX:1(a) of the GATT 1994 and Articles 2.1, 4.2(a) and 4.2(b) of the Agreement on Safeguards, is "to bring about a result, whether alone or in combination with other factors - not 'to cause on its own.' The plain meaning of 'causal link' in Article 4.2(b), first sentence, is consistent with this understanding of 'to cause.'17 " The United States believes that the legal standard applied by the USITC satisfies this requirement.
10. The United States also maintains that the Panel did not examine adequately the meaning of the expression "under such conditions" in Article XIX:1(a) of the GATT 1994. Rather than attempt to isolate the causal effects of increased imports, the competent authorities should examine the effects of imports against the background of "the totality of attendant circumstances and existing state of affairs that lead imports to cause serious injury", "including factors that may have rendered a domestic industry more (or less) susceptible to injury."18 The United States adds that the need to consider the industry as a whole is supported by the fact that "serious injury" refers to an industry's overall condition, rather than to some subset of injury attributable solely to increased imports.
11. Thus, in the United States' view, Article 4.2 does not require the isolation of imports, which the United States contends would, in any event, involve "subjective" speculation.19 In its view, Article 4.2(b) requires the competent authorities to examine other causes of injury to ensure that their effects do not sever the causal link found to exist, after examining the totality of the circumstances, between increased imports and serious injury.20 The United States asserts that the negotiating history of the Agreement on Safeguards bears out this reading of Article 4.2(b).
12. The United States requests the Appellate Body to reverse the Panel's finding that the exclusion of Canadian products from the safeguard measure on wheat gluten is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards.
13. In the view of the United States, the Panel's finding that, under Articles 2.1 and 4.2 of the Agreement on Safeguards, "there is an implied symmetry with respect to the product that falls within the scope of a safeguard investigation and the product that falls within the scope of the application of the safeguard measure"21 (emphasis in original), is inconsistent with the text of the Agreement on Safeguards. Article 9.1 of the Agreement on Safeguards requires that imports from developing countries be excluded from the application of a safeguard measure, but does not provide for the exclusion of such imports from the investigation, or require any finding that the imports subject to the measure, "in and of themselves," cause serious injury. Furthermore, in Argentina - Safeguard Measures on Imports of Footwear ("Argentina - Footwear Safeguards"), the Appellate Body found that "Articles 2.1 and 4.1(c) … do not resolve the matter of the scope of application of a safeguard measure."22 (emphasis in original) The United States stresses that Argentina - Footwear Safeguards is distinguishable from this case because the USITC specifically examined the contribution of Canadian imports to the serious injury sustained by the industry and found that these imports played no significant role in that injury. The United States alleges that the Panel ignored legal provisions pertinent to the exclusion from safeguard measures of imports from partner countries in a free-trade area, namely Article XXIV of the GATT 1994 and footnote 1 of the Agreement on Safeguards. The United States also contends that the Panel failed to respect the requirement in Article 12.7 of the DSU to set out a "basic rationale" for its treatment of footnote 1.
14. The United States requests the Appellate Body to reverse the Panel's findings regarding notification and consultation. The United States contends that its notifications under Article 12.1, subparagraphs (a), (b) and (c) were submitted "immediately" because they provided the required information at a time that allowed Members to review them through the Committee on Safeguards, and allowed interested Members to request consultations. The United States also believes that it complied with Article 12.3 by providing full information on its serious injury finding and the nature of the proposed measure, and by conducting consultations before the final decision.
15. The United States argues that, while the Panel correctly recognized that Articles 8.1, 12.1, 12.2 and 12.3 are interrelated, it failed to recognize that Members may employ a variety of procedures to comply with the obligations imposed under these provisions. For example, Article 12.2 envisions a process whereby Members may submit pertinent information in the Article 12.1(b) notification, in the Article 12.1(c) notification, or in both. There is no requirement that an Article 12.1(c) notification be filed before consultations, as long as prior notifications supplied the necessary information. Similarly, there is no requirement to conduct consultations after the issuance of the decision to apply a safeguard measure, as long as sufficient information was available to conduct consultations at a stage in the process where those consultations would have meaning. Through its notifications, the United States supplied all of the information specified in Article 12.2, including all relevant details of the proposed measure. The United States considers that this information was sufficient to allow for adequate consultations under Article 12.3.
16. The European Communities argues that the Panel correctly concluded that the United States applied a test of causation that is not consistent with Article 4.2(b) of the Agreement on Safeguards. The European Communities considers that the Panel did not need to consider explicitly the meaning of the term "to cause" in interpreting Article 4.2(b), since the conclusions it reached on the meaning of Article 4.2(b) are consistent with the ordinary meaning of the terms "to cause", "have caused" and "the causal link", as these terms are used in Article XIX:1(a) of the GATT 1994, and in Articles 2.1, 4.1(a) and 4.1(b) of the Agreement on Safeguards. The European Communities adds that the Panel correctly found that the term "under such conditions" in Article XIX:1(a) of the GATT 1994 and Article 2.1 of the Agreement on Safeguards refers to the conditions of competition between imported and domestic products rather than, as the United States seems to allege, to the "other relevant factors" that have a bearing on the situation of the industry under Articles 4.2(a) and 4.2(b) of the Agreement on Safeguards.
17. The European Communities contends that the Panel correctly recognized that Article 4.2(b) of the Agreement on Safeguards requires that increased imports per se cause serious injury. As the Appellate Body found in Argentina - Footwear Safeguards, Article 4.2(b) sets out a causation analysis that is separate from, and subsequent to, the injury analysis to be undertaken pursuant to Article 4.2(a).23 Article 4.2(b) ensures that, when a Member is considering whether to suspend fair trade, it may do so if, and only if, the imports are shown to cause serious injury. The practical effect of the United States' interpretation of Article 4.2(b), however, would allow a safeguard measure to be imposed whenever there is serious injury and imports caused any injury. The European Communities submits that this cannot be the case, and adds that its own interpretation of Article 4.2(b) is consistent with the object and purpose of the Agreement on Safeguards, with the exceptional nature of safeguard measures, and with the negotiating history of the Agreement on Safeguards.
18. Lastly, the European Communities submits that, even if the causation standard used by the United States could somehow be considered to be in conformity with Article 4.2(b) of the Agreement on Safeguards, the United States in this case nevertheless acted inconsistently with that Article because the USITC undertook no examination whatsoever to ensure that injury caused by other factors was not attributed to imports.
19. As regards the Panel's findings on the exclusion of wheat gluten imports from Canada from the application of the safeguard measure, the European Communities submits that the Panel correctly interpreted Articles 2.1 and 4.2 of the Agreement on Safeguards as containing a "symmetry" implied by the terms "a product", "such product" and "the product concerned" in those provisions. Contrary to the argument of the United States, Article 9.1 of the Agreement on Safeguards is not inconsistent with the existence of such an "implied symmetry", but is rather the exception to the Agreement on Safeguards that proves the rule. The European Communities asserts that the Panel properly recognized that, as in Argentina - Footwear Safeguards, the United States could not exclude imports from Canada on the basis of a global investigation concerning injury and causation that included imports of wheat gluten from all sources. The European Communities highlights that the Panel made a factual finding that the United States had not demonstrated that imports were causing serious injury after the exclusion of imports from Canada and that, as a legal matter, the subsequent causation analysis applied by the USITC regarding imports from Canada did not satisfy the requirements of the Agreement on Safeguards
.20. The European Communities adds that Article XXIV of the GATT 1994 is not relevant in this case and that, in any event, the United States has failed to establish that it has satisfied the conditions laid down by the Appellate Body in Turkey - Restrictions on Imports of Textile and Clothing Products for the use of Article XXIV as a defence.24 Lastly, the European Communities considers that the Panel set out sufficient reasons for its conclusion that footnote 1 of the Agreement on Safeguards did not affect its conclusions in this case.
1. WT/DS166/R, 31 July 2000.
2. Panel Report, para. 2.2.
3. "Proclamation 7103 of 30 May 1998 - To Facilitate Positive Adjustment to Competition From Imports of Wheat Gluten", United States Federal Register, 3 June 1998 (Volume 63, Number 106), pp. 30359-30360; Panel Report, para. 2.7.
6. Ibid., paras. 2.1 - 2.10.
7. In its request for the establishment of a panel (WT/DS166/3, 4 June 1999), the European Communities also claimed that the United States had acted inconsistently with Article 4.2 of the Agreement on Agriculture. The Panel found that the European Communities had "abandoned" this claim: Ibid., para. 8.221.
8. Ibid., para. 9.1.
11. Ibid., para. 8.220.
12. Ibid., para. 9.5.
13. Pursuant to Rule 21 of the Working Procedures.
14. Pursuant to Rule 23(1) of the Working Procedures.
15. Pursuant to Rules 22 and 23(3) of the Working Procedures.
16. Pursuant to Rule 24 of the Working Procedures
17. United States' appellant's submission, para. 54.
18. Ibid., paras. 59 and 60.
19. Ibid., para. 73.
22. Appellate Body Report, WT/DS121/AB/R, adopted 12 January 2000, para. 112.