|español - français - português|
UNITED STATES - SAFEGUARD MEASURES ON
WORLD TRADE ORGANIZATION
1. The United States, Australia and New Zealand appeal certain issues of law and legal interpretations in the Panel Report, United States - Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia (the "Panel Report").1 The Panel was established to consider complaints by Australia and New Zealand with respect to a definitive safeguard measure imposed by the United States on imports of fresh, chilled and frozen lamb meat.2
2. On 7 October 1998, the United States International Trade Commission (the "USITC") initiated a safeguard investigation into imports of lamb meat.3 By Proclamation of the President of the United States, dated 7 July 1999, the United States imposed a definitive safeguard measure, in the form of a tariff-rate quota, on imports of fresh, chilled and frozen lamb meat, effective as of 22 July 1999.4 The factual aspects of this dispute are set out in greater detail in the Panel Report.5
3. The Panel considered claims by Australia and New Zealand that, in imposing the safeguard measure on imports of lamb meat, the United States acted inconsistently with Articles I, II, and XIX of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"), and with Articles 2, 3, 4, 5, 8, 11, and 12 of the Agreement on Safeguards.6
4. In its Report, circulated to Members of the World Trade Organization (the "WTO") on 21 December 2000, the Panel concluded:
5. As the Panel was of the view that it had addressed those claims and issues that it considered necessary to enable the Dispute Settlement Body ("DSB") to make sufficiently precise recommendations and rulings for the effective resolution of the dispute, the Panel exercised "judicial economy" and declined to rule on the claims made under Articles I and II of the GATT 1994, and under Articles 2.2, 3.1, 5.1, 8, 11 and 12 of the Agreement on Safeguards .8
6. The Panel recommended that the DSB request the United States to bring its safeguard measure on imports of lamb meat into conformity with its obligations under the Agreement on Safeguards and the GATT 1994.9
7. On 31 January 2001, 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 12 February 2001, the United States filed its appellant's submission.10 On 15 February 2001, Australia and New Zealand each filed an other appellant's submission.11 On 26 February 2001, Australia, New Zealand and the United States each filed an appellee's submission.12 On the same day, the European Communities filed a third participant's submission.13
8. On 26 February 2001, the Appellate Body received letters from Canada and Japan indicating that they would not be filing written submissions in this appeal. Canada14 stated that it "reserve[d] the right to intervene, as appropriate, during the oral hearing" and Japan indicated that it wished "to reserve its right to present its views at the oral hearing." On 6 March 2001, the Appellate Body Secretariat replied to Canada and Japan that the Division hearing this appeal wished to have clarification as to whether Canada and Japan wanted to attend the oral hearing simply as "passive observers" or to participate actively in the oral hearing. By their letters dated 9 March 2001, Canada stated that it wished to attend the oral hearing as a "passive observer", while Japan stated that it "would like to hear the arguments made by the parties to the dispute, and to intervene when necessary and [when] given an opportunity to do so by the Appellate Body."
9. On 9 March 2001, the Appellate Body Secretariat informed the participants and third participants that the Division hearing this appeal was "inclined to allow Canada and Japan to attend the oral hearing as passive observers, if none of the participants or third participants object." No such objection was received. On 14 March 2001, the Division hearing this appeal informed Canada, Japan, the participants and the European Communities, that Canada and Japan would be allowed to attend the oral hearing as passive observers, that is, to hear the oral statements and responses to questioning by Australia, the European Communities, New Zealand and the United States.
10. The oral hearing in the appeal was held on 22 and 23 March 2001. The participants and the European Communities, as third participant, presented oral arguments and responded to questions put to them by the Members of the Division hearing the appeal.
11. The United States appeals the Panel's finding that the United States acted inconsistently with Article XIX:1(a) of the GATT 1994 with respect to the issue of "unforeseen developments". In the view of the United States, the Panel erred in reading words into the text of Article XIX and thereby nullified the distinction between "conditions" for applying a safeguard measure, and "circumstances" which must be demonstrated as a matter of fact in order to apply a safeguard measure, in a manner that is inconsistent with the Appellate Body reports in Argentina - Safeguard Measures on Imports of Footwear ("Argentina - Footwear Safeguard ")15 and Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products ("Korea - Dairy Safeguard ").16
12. The United States emphasizes the fact that, according to the Panel, the United States breached Article XIX:1(a) of the GATT 1994 because the published report of the USITC (the "USITC Report") did not include a "conclusion" demonstrating the existence of unforeseen developments. However, Article XIX:1(a) contains neither the word "conclusion" nor any guidance as to how a Member should approach the issue of unforeseen developments. The Panel implied the "conclusion" requirement from an erroneous interpretation of Article 3.1 of the Agreement on Safeguards , which it viewed as relevant context for interpreting Article XIX of the GATT 1994. However, while the "context" of a provision may help to understand the meaning of a term, such "context " cannot serve as the basis for copying or reading an obligation from one provision of an agreement into another provision in a different agreement. Furthermore, even as context, Article 3.1 of the Agreement on Safeguards does not support the Panel's conclusion, since the scope of competent authorities' obligations to investigate "pertinent issues" and reach "reasoned conclusions" under that Article is bound by the scope of the investigation to be conducted under the Agreement on Safeguards. Neither Article 2.1, nor Article 4.2, nor any other provision in the Agreement on Safeguards suggests that, in addition to the requirements set out in that Agreement, competent authorities must also conduct an investigation and reach a "reasoned conclusion" on the issue of unforeseen developments. The United States emphasizes that such an obligation would elevate "unforeseen developments" into a "condition" additional to those explicitly set forth in Article 2.1 of the Agreement on Safeguards .
13. In the view of the United States, a panel's role is to consider whether the Member taking the safeguard action has demonstrated the existence of unforeseen developments as a matter of fact, and not whether the competent authorities presented those facts in their report, as a separate finding, a "reasoned conclusion", or in any other form. The United States invokes the practice of contracting parties under the GATT 1947 and the negotiating history of the Agreement on Safeguards in support of its position, and considers that the Report of the Working Party in Hatters' Fur suggests that specific developments in the marketplace leading to an injurious import surge will not normally be "foreseen" by negotiators at the time of making tariff concessions.17 The United States adds that, to the extent that the factual record in the instant case is clear and uncontested, the USITC's Report demonstrated the existence of unforeseen developments as a matter of fact.
14. The United States argues that the Panel erred in finding that the United States' definition of the domestic industry, which included growers and feeders of live lambs, as well as packers and breakers of lamb meat, was inconsistent with Article 4.1(c) of the Agreement on Safeguards . In the view of the United States, where there is both a continuous line of production and a coincidence of economic interests among various segments contributing to the production of a finished product, the term "producer" in Article 4.1(c) of the Agreement on Safeguards may properly be read to include the producers making the primary contribution to the value of the finished product. In this regard, the United States points out that most sheep and lambs are meat-type animals kept primarily for the production of meat, and that the value added by the growers and feeders of live lambs accounts for about 88 per cent of the wholesale cost of lamb meat in the United States. A definition of "domestic industry" that excluded the growers and feeders would, therefore, be artificial, and would render the determination of serious injury or a threat thereof meaningless. In support of its arguments, the United States relies on the term "producers as a whole" in the definition set forth in Article 4.1(c) of the Agreement on Safeguards and takes the position that this phrase allows the national competent authorities some flexibility to define "domestic industry" on the facts and circumstances of each case.
15. The United States suggests that the term "producer" must be construed in terms of how the competent authorities will conduct their injury analysis. Article 4.2(a) of the Agreement on Safeguards requires competent authorities to evaluate "all relevant factors" bearing on the situation of the industry. This requires an authority to analyze all aspects of the industry, which in some industries may include factors affecting the product in its raw stage. Limiting the definition of "producer" to only those processors contributing very limited value-added at the final stage of a continuous line of production would create an artificial "domestic industry" and improperly restrict the injury analysis. On the facts of this case, to limit the domestic industry only to breakers and packers would have required the USITC to examine only the portion of production responsible for approximately 12 percent of the value of the like product, and to ignore the effects of the imports of lamb meat on producers whose economic interests were closely intertwined with those of the breakers and packers and whose financial health was similarly likely to be affected by lamb meat imports.
16. The United States argues that, in its findings on this issue, the Panel relied on panel reports under the GATT 1947 that are not apposite to this case, and erroneously concluded that the United States' approach would allow competent authorities to devise an unfairly "open-ended" definition of the domestic industry. In fact, the USITC has developed principles that do effectively limit the inclusion of particular producers in the definition of the domestic industry, and, in applying its two-pronged test, the USITC has only rarely included both processors and growers in the same domestic industry. Finally, the United States contends that the Panel's determination that the United States violated Article 2.1 of the Agreement on Safeguards was based on its erroneous finding that the United States had violated Article 4 of the Agreement on Safeguards and should, for that reason, be reversed.
17. The United States requests the Appellate Body to reverse the Panel's finding that the USITC's data collection was inconsistent with Article 4.1(c) of the Agreement on Safeguards . The United States asserts that, before the Panel, Australia and New Zealand did not establish a prima facie case that the USITC's data collection was inconsistent with Article 4.1(c), as they did not make any such claim, and did not adduce any evidence or argument in support of such a claim. The United States also points out that none of the participants in the proceedings before the USITC argued that the data was biased or inaccurately portrayed the condition of growers.
18. The United States maintains that, in addition to basing its finding on a claim that neither complainant advanced, the Panel misinterpreted the provisions of the Agreement on Safeguards applicable to competent authorities' evaluation of the data collected in a safeguard investigation. Neither Article 4.1(c) nor any other provision of the Agreement on Safeguards imposes a standard of "representativeness" on competent authorities conducting safeguard investigations. The United States adds that the USITC acted consistently with the provisions of the Agreement on Safeguards that are relevant to the issue of data collection, namely, Articles 4.2(a) and 4.2(b), which simply require competent authorities to evaluate all factors of "an objective and quantifiable nature" having a "bearing" on the state of the industry, and to determine the existence of the causal link on the basis of "objective evidence". Lastly, the United States contends that the Panel's finding regarding Article 2.1 of the Agreement on Safeguards was based on its erroneous finding that the United States had violated Article 4 of the Agreement on Safeguards and should, for that reason, be reversed.
19. The United States submits that the Panel erred in finding that the USITC's causation analysis violated Article 4.2(b) of the Agreement on Safeguards . The Panel's analysis was, and was acknowledged by the Panel to be, nearly identical to the approach of the panel in United States - Definitive Safeguard Measure on Imports of Wheat Gluten from the European Communities ("United States - Wheat Gluten Safeguard ")18, which was reversed by the Appellate Body. The Panel found that the USITC had not acted consistently with Article 4.2(b) of the Agreement on Safeguards because it had failed to demonstrate that: (i) increased lamb meat imports were themselves a "necessary and sufficient" cause of serious injury to the U.S. lamb meat industry; and (ii) they alone accounted for a degree of injury that met the threshold of "seriousness" required under Article 4.2(a) and 4.2(b). In United States - Wheat Gluten Safeguard, the Appellate Body reversed that panel's finding "that increased imports 'alone', 'in and of themselves', or 'per se', must be capable of causing injury that is 'serious'".19 The Appellate Body found that Article 4.2(b) does not suggest that increased imports must be the sole cause of the serious injury, or that 'other factors' causing injury must be excluded from the determination of serious injury. This reasoning applies equally in this case, and, according to the United States, demonstrates that the Panel erred in its approach.
20. The United States is of the view that the factual findings made by the Panel are not sufficient to enable the Appellate Body to complete the analysis and determine whether the USITC properly applied the causation standard mandated by the Agreement on Safeguards . In particular, the Panel did not make factual findings necessary to determine whether the complainants had shown that the USITC failed to demonstrate a genuine and substantial cause-and-effect relationship between lamb meat imports and serious injury. Should the Appellate Body disagree, the United States submits that the USITC met the requirements identified by the Appellate Body in its Report in United States - Wheat Gluten Safeguard. The USITC first demonstrated that increased lamb meat imports were an important cause of threat of serious injury to the domestic lamb meat industry. In determining that imports were a no less important cause of the threat of serious injury than any other cause, the USITC analyzed all other relevant factors. Through this process, the USITC ensured that injury arising from other causes was not attributed to imports and that the evidence on which it established causation by increased imports reflected a genuine and substantial causal link. The United States adds that the Panel's further finding under Article 2.1 of the Agreement on Safeguards was based on its erroneous finding that the United States had violated Article 4 of the Agreement on Safeguards and should, for that reason, be reversed.
21. Australia requests the Appellate Body to uphold the finding of the Panel that the United States acted inconsistently with Article XIX:1(a) of the GATT 1994. The Panel interpreted Article XIX:1(a) of the GATT 1994 in a manner that gave meaning and effect to all the applicable provisions, including the clause "unforeseen developments", and correctly concluded that the USITC Report did not contain the required conclusion on "unforeseen developments". Should the Appellate Body reverse the Panel's interpretation of Article XIX of the GATT 1994, Australia requests the Appellate Body to complete the analysis and find that the United States failed to satisfy the "unforeseen developments" requirement in Article XIX:1(a) of the GATT 1994.
22. Australia points out that Article 11.1(a) of the Agreement on Safeguards requires Members taking safeguard action under Article XIX of the GATT 1994 to ensure that such measures conform with the provisions of the Agreement on Safeguards. Members applying safeguard measures must, therefore, satisfy the requirements of both Article XIX of the GATT 1994 and the Agreement on Safeguards, including Article 3.1 of the Agreement on Safeguards , which requires competent authorities to provide "reasoned conclusions" on "all pertinent issues of fact and law". The Appellate Body has held that "unforeseen developments" are "circumstances that must be demonstrated as a matter of fact". Therefore, Australia submits that Article XIX:1(a) of the GATT 1994, read in the context of Article 3.1 of the Agreement on Safeguards , requires competent authorities to reach a reasoned conclusion demonstrating the existence of "unforeseen developments".
23. Australia contests the United States' view that Members are only required to demonstrate the existence of unforeseen developments on an ex post facto basis in a WTO dispute settlement proceeding. This would allow an issue that was not investigated, examined or even considered by the USITC to be discerned from its report. Australia also rejects the United States' argument that the Panel's approach elevates the "unforeseen developments" requirement into an "independent condition" for the application of a safeguard measure. To satisfy the "conditions" imposed under Articles 2 and 4 of the Agreement on Safeguards , competent authorities must make a determination that includes an evaluation of "all relevant factors" and, as Article 4.2(c) explicitly provides, must also publish a "detailed analysis of the case under investigation as well as a demonstration of the relevance of the factors examined". On the other hand, Australia maintains, in order to satisfy the "unforeseen developments" requirement, competent authorities need only examine the existence of unforeseen developments based on the factual evidence before them at the time of the investigation, reach a conclusion based on that evidence that demonstrates the existence of "unforeseen developments" as a matter of fact, and present that conclusion, in some manner, in the published report.
24. Australia requests the Appellate Body to uphold the Panel's finding that the USITC's inclusion of growers and feeders of live lambs in the definition of producers of lamb meat was inconsistent with Article 4.1(c) of the Agreement on Safeguards. The United States' approach to defining the domestic industry has no support in Article 4.1(c) of the Agreement on Safeguards , interpreted in its context and in light of its object and purpose, or in previous panel decisions.
25. Australia believes that the meaning of "producer of a like product" is clear. The producers of an article are simply those who make that article. The term "as a whole" in Article 4.1(c) of the Agreement on Safeguards refers to the comprehensiveness of the investigation that must be conducted once the domestic industry has been identified, but does not go to the issue of how to define the scope of the domestic industry. Accepting the United States' standard would leave it to the discretion of importing Members to choose "how far upstream and/or downstream [in] the production chain of a given 'like' end product" they could go to define the "domestic industry".20 Australia adds that even if criteria such as vertical integration, continuous lines of production, economic interdependence or substantial coincidence of economic interests were relevant, the Panel made findings of fact which reveal that these criteria were not present in the United States' lamb meat industry.
26. Australia requests the Appellate Body to uphold the finding of the Panel with respect to the sufficiency of the data. Although the United States seeks to characterize this issue as one of data collection, the Panel's finding relates to the representativeness of the data rather than to data collection. Australia submits that the Panel correctly concluded that the data used by the USITC in making its determination was not sufficiently representative of "those producers whose collective output … constitutes a major proportion of the total domestic production of those products" within the meaning of Article 4.1(c) of the Agreement on Safeguards and that the USITC's determination was, as a result, inconsistent with Article 2.1 of that Agreement.
27. Before the Panel, Australia claimed that the safeguard measure imposed by the United States breached Article 4.2 of the Agreement on Safeguards and, therefore, also breached Article 2.1 of the Agreement on Safeguards . The inadequacy of the data was noted in Australia's submission, was also acknowledged in the USITC Report, and was reflected in the Panel Report. Thus, Australia did establish a prima facie case that the data relied upon by the USITC was not sufficiently representative of the domestic industry.
28. Contrary to the United States' assertion that the Agreement on Safeguards only requires that the factors evaluated be "objective and quantifiable", and bear on the state of the industry, Australia supports the reasoning of the Panel that Article 4.1(c) implicitly requires that the sample data used be sufficiently representative of the producers as a whole. The failure of the United States to consider sufficiently representative data means that the state of the "domestic industry" has not been properly evaluated. Furthermore, even if the Appellate Body reverses the Panel's finding under Article 4.1(c), and even accepting the test suggested by the United States, Australia maintains that relying on statistically invalid, incomplete or absent data, as the USITC did, cannot be objective or have any meaningful bearing on the factors that must be evaluated under Article 4.2(a) of the Agreement on Safeguards . Australia, therefore, submits that the USITC did not properly evaluate the relevant factors as required under that provision.
29. Australia contends that the Panel correctly found that the USITC's causation analysis did not comply with Article 4.2(b) of the Agreement on Safeguards , and that the Panel's findings are consistent with the Appellate Body Report in United States - Wheat Gluten Safeguard. The requirement that there be a "genuine and substantial relationship" of cause and effect between increased imports and the threat of serious injury implies more than a mere contribution to a threat of serious injury. The Panel's test of "necessary and sufficient cause" seeks to articulate such a standard, even if imports need not by themselves cause a threat of serious injury. Australia stresses that the Panel was careful to distinguish its "necessary and sufficient" test from a "sole cause" test.
30. Australia submits that, in any event, the United States failed to meet the causation standard set out by the Appellate Body in United States - Wheat Gluten Safeguard because the United States failed to demonstrate as a matter of fact that any threat of serious injury caused by other factors had not been attributed to imports. The USITC limited itself to examining other factors individually and simply considering whether each such factor was a "less important cause" of injury than imports. The USITC, however, failed to assess the aggregate effect of the factors other than increased imports, and failed to demonstrate that the injury caused by these other factors was not attributed to imports. Australia adds that, independently of whether the USITC met the obligation of non-attribution, it did not make a valid determination of whether a "causal link" existed between increased imports and the threat of serious injury. Specifically, since the USITC only found that increased imports were an important cause and a cause that was not less than any other cause, it did not ensure that the evidence on which it established causation reflected a "genuine and substantial relationship" of cause and effect.
2 Panel Report, paras. 1.1 - 1.10.
3 Ibid., para. 2.2; G/SG/N/6/USA/5, 5 November 1998.
4 "Proclamation 7208 of 7 July 1999 - To Facilitate Positive Adjustment to Competition From Imports of Lamb Meat", United States Federal Register, 9 July 1999 (Volume 64, Number 131), pp. 37387-37392; Panel Report, para. 2.6.
5 Panel Report., paras. 2.1 - 2.8.
6 WT/DS177/4 and WT/DS178/5, 15 October 1999 and WT/DS178/5/Corr.1, 29 October 1999. See, also, Panel Report, paras. 3.1 - 3. 4.
7 Panel Report, para. 8.1.
8 Ibid., para. 7.280.
9 Ibid., para. 8.2.
10 Pursuant to Rule 21 of the Working Procedures.
11 Pursuant to Rule 23(1) of the Working Procedures.
12 Pursuant to Rules 22 and 23(3) of the Working Procedures.
13 Pursuant to Rule 24 of the Working Procedures.
14 Canada and Japan reserved their rights to participate as third parties in the proceedings before the Panel; Panel Report, para. 1.10.
15 Appellate Body Report, WT/DS121/AB/R, adopted 12 January 2000.
16 Appellate Body Report, WT/DS98/AB/R, adopted 12 January 2000.
Report of the Intersessional Working Party on the Complaint
of Czechoslovakia Concerning the Withdrawal by the United States of a Tariff
Concession under the Terms of Article XIX, ("Hatters' Fur"),
GATT/CP/106, adopted 22 October 1951. The United States argues, on the basis of
this case, that the unforeseen character of relevant developments "will be
implicit in the result they have produced."
18 Panel Report, WT/DS166/R, adopted 19 January 2001, as modified by the Appellate Body Report, WT/DS166/AB/R.
19 Appellate Body Report, WT/DS166/AB/R, adopted 19 January 2001, para. 79.
20 Australia's appellee's submission, para. 111.