K. Thailand

1. Introduction

5.324 Thailand states that as Member of the World Trade Organization and trade partner of the United States, it has substantial systemic interest in the present case.

5.325  In Thailand's view, the crux of the systemic issue here is multilateralism as basis of international trade, a principle all Members of this Organization adhered to. This principle is embodied in the preamble of the Agreement Establishing the World Trade Organization (WTO Agreement), defining its very object and purpose, which is to "develop an integrated, more viable and durable multilateral trading system".⁶¹²

5.326  Thailand goes on to state that in addition to this serious systemic concern, it has been in the past target of decisions and determinations made under Sections 301-310 of the Trade Act of 1974. In 1989, Thailand was placed by the US Government on the "Priority Watch List" (PWL), and in 1991 was named "Priority Foreign Country" (PFC) pursuant to the "Special 301" procedure. In 1994, after some intense negotiations and changes in Thai domestic laws and regulations, Thailand was moved back to the PWL. Thailand was subject in 1990 to a GATT litigation⁶¹³ brought pursuant to a petition filed under Section 301 procedure. Also, In December 1991 and in March 1992, the USTR determined under Sections 301-310 that Thailand's acts, policies and practice related to copyright and patent protection were "unreasonable" and "a burden on US commerce". The matters were dropped by the United States only after Thailand agreed to carry out changes to the relevant Thai legislation.

5.327  In response to the Panel's question, Thailand states that its experience serves to illustrate Thailand's interest in the case at hand. The fact that these events took place in the context of the GATT does not affect Thailand's legal arguments in the present case, which is valid for both the GATT and the WTO contexts.

5.328  Thailand underlines the situation where the United States made determinations and/or took actions under the Trade Act of 1974 independently from the GATT dispute settlement procedure. This pattern of US unilateral acts can still happen under the WTO system, since the provisions of the Trade Act 1974 mandating the US Government to do so are still in force after the United States became Party to the WTO Agreement.

5.329  Thailand argues that the US Government has moreover indicated, upon becoming WTO Member, its intention to use its authority under the Trade Act of 1974 to enforce US rights vis-�-vis the other WTO Members out of the WTO, if it unilaterally considers that the matter at hand does not "involve a Uruguay Round Agreement".⁶¹⁴ This has been confirmed in 1999 by the US President's Executive Order re-instituting the "Super 301 authority" and "Title VII authority".⁶¹⁵

5.330   Thailand reiterates that these cases of US unilateral acts establish a pattern of violation of the US obligations under the WTO Agreement, and should be taken into account by the Panel in its deliberation.

5.331   Thailand strongly believes that, in a true multilateral trading system, no WTO Member can be judge and jury in its own dispute. The Dispute Settlement Body (DSB) must be the exclusive forum for settling disputes between WTO Members relating to their WTO rights and obligations, and the DSU must provides the exclusive rules and procedures for such settlement.

2. Legal Arguments

5.332  Thailand submits, on the basis of the following, that the United States has acted inconsistently with Article XVI:4 of the WTO Agreement, by failing to ensure the conformity of its Trade Act of 1974 with its obligations as provided in Articles 1, 3, 22 and 23 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU); and that consequently the panel should recommend that the DSB request the United States to bring its Trade Act of 1974 into conformity with its obligations under the WTO Agreement.

5.333  Thailand reserves its rights with regard to any other points at issue which are not discussed herein.

5.334  Thailand argues that under Section 304(a)(2)(A), in the case of investigation involving a trade agreement, the USTR is required to determine whether the rights to which the United States is entitled under the trade agreement are being denied on or before the earlier of (i) the date that is 30 days after the date on which the dispute settlement procedure is concluded, or (ii) the date that is 18 months after the date on which the investigation is initiated. Under Section 303(a)(1), the USTR is required to request consultations with the foreign country concerned on the date on which an investigation is initiated under Section 302. The combined effect of these two provisions is that the USTR is required to make the determination at the latest 18 months after the request for consultations made by the United States.

5.335  In the view of Thailand, under the DSU, WTO dispute settlement proceedings can take under normal circumstances as long as 19 months (9 months and 300 days) from the beginning of the consultation process to be concluded. This breaks down as follows:

Note: In this scenario, the period from the date of establishment of the panel to the date of the adoption of the AB report is 9 months and 210 days, and does not exceed the maximum time frame as provided in DSU Article 20.

5.336   Thailand contends that both Sections 304(a)(2) and 303(a)(1) use the term "shall". They mandate the USTR to determine whether the US WTO rights are being denied before the conclusion of the normal WTO dispute settlement proceedings. The USTR is thus required to act inconsistently with DSU Article 23.2(a).

5.337   Thailand challenges the US allegation that the USTR may request WTO dispute consultations prior to initiating a Section 302 investigation, "thereby allowing for the DSB adoption of panel and Appellate Body findings within the 18-month period provided for under Section 304(a)(2)(A)". This argument, however, must be rejected. The term used by Section 303(a)(1) leave no room for any other understanding or interpretation: WTO consultations must ("shall") be requested by the USTR on the same date as that on which the relevant investigation is initiated under Section 302.⁶¹⁶ The USTR simply cannot violate this US domestic law provision.⁶¹⁷

5.338  Thailand also rebuts the US further allegation that the USTR has "broad discretion to issue any of a number of determinations which would not remotely conflict with article 23.2(a)".  Thailand submits, on the contrary, that the content of the determination is secondary. What counts is the possibility, on the domestic legal plane, for the USTR to determine the WTO inconsistency of another Member. This possibility is in itself a violation of DSU Article 23.2(a). Such determination, moreover, is mandatory for the USTR. Sections 304(a)(2)(A) and 303(a)(1), consequently, are inconsistent with DSU Article 23.2(a). 

5.339  Thailand further argues that where an Arbitration under DSU Article 22.6 determines that there is no nullification or impairment of US benefits under the WTO Agreement or that the US-proposed retaliation measure exceeds the actual level of nullification or impairment, Sections 306(b) and 305(a) still mandate the USTR to take action inconsistent with DSU Articles 22.7 and 23.2 (c).

5.340   Thailand contends that Section 306(b)(2) mandates the USTR to determine, within 30 days after the expiration of the reasonable period of time under the DSU, what retaliatory action "the US shall take under Section 301(a)" against a Member implementing a recommendation made pursuant to the DSU. Section 305(a)(1) requires the USTR to implement such action within 30 days after the determination is made.

5.341 Thailand further alleges that Section 306(b)(2) and Section 305(a)(1) remain mandatory⁶¹⁸ for the USTR even in the case that an arbitration is appointed under DSU Article 22.6 to consider the level of suspension of concessions or other obligations proposed, and that such arbitration determines that there is no nullification or impairment of US benefits under the WTO Agreement, or that the US-proposed retaliation measure exceeds the actual level of nullification and impairment. In this case, the USTR is required by Section 305(a)(1) to implement the action already determined under Section 306(b)(2), notwithstanding the content of the arbitrator's decision.⁶¹⁹

5.342 Thailand adds that it has supplied the Panel with the rationale supporting its legal opinion. Thailand, however, is not in a position, nor is it entitled, to give the Panel the rationale or the motive behind the USTR's reduction of the level of retaliation into conformance to the Arbitrators' decision in Banana III case..

5.343 Thailand contends that the legality of the said USTR's act, vis-�-vis the US Trade Act of 1974, depends on the meaning of the relevant provisions of the legislation, which under the US constitutional system can only be ascertained through an authoritative, judicial, interpretation of those provisions.

5.344 In the view of Thailand, if, in accordance with an authoritative interpretation under the US legal system, the USTR's act mentioned above is found to be inconsistent with the Trade Act of 1974, then it is the Act itself that is in violation of the WTO Agreement.

5.345 According to Thailand, since it is the United States that invokes the exceptions under Section 301(a)(2) to justify its claim, the onus of proof rests with the United States.

5.346 Thailand further argues that Section 306(b)(2) and Section 305(a)(1) therefore violate DSU Article 22.7 which provides that suspension of concessions and other obligations must be "consistent with the decision of the arbitrator". They also violate DSU Article 23.2(c) which requires the retaliating party to "follow the procedures set forth in Article 22 to determine the level of suspensions of concessions or other obligations".

5.347 Thailand recalls the US allegation that the exceptions set forth in Section 301(a)(2) allow the USTR to act consistently with an Article 22.6 Arbitrators' decision. Section 301(a)(2)(A) provides that the USTR is not required to take action in any case in which "the Dispute Settlement Body � has adopted a report �" (emphasis added) that the rights of the United States under a trade agreement are not being denied or that US trade agreement benefits are not being denied, nullified or impaired.

5.348 In the view of Thailand, Section 301(a)(2)(A), however, is not applicable to the case at hand. The decision of an arbitrator appointed under DSU Article 22.6 is not, and cannot be considered as, a "report" in the sense of Section 301(a)(2)(A); and the DSU does not require such arbitrator's decision to be "adopted" by the Dispute Settlement Body. This has been confirmed by the recent WTO practice in the EC � Bananas III case, where the DSB agreed to grant, pursuant to the US request, authorization to suspend concessions and related obligations under GATT 1994, consistent with the decision of the Arbitrators, without adopting the said decision.⁶²⁰

5.349  Thailand recalls that the United States also invokes other exceptions under Section 301(a)(2) to justify its claim that the USTR may act consistently with an Article 22.6 Arbitrators' decision reducing the level of US-proposed retaliation or denying the US the right to retaliate. These are exceptions when the USTR finds that action would have an adverse impact on the US economy or would cause serious harm to national security.⁶²¹ The United States, however, fails to establish that, according to the authoritative (judicial) interpretation of these provisions under the US legal system, these exceptions are applicable to the case (of a decision by an Article 22.6 arbitrator reducing the level of US-proposed retaliation or denying the United States the right to retaliate). The US claim is merely based on an interpretation by the US Government of Section 301. In the US domestic legal system, as in any known legal system, the Judiciary is by no means bound by the Executive Branch interpretations of legal provisions. The applicability of these provisions is all the more questionable here because of their imprecise terms. Section 301(a)(2)(B)(iv), in particular, is limited to "extraordinary cases" only.

5.350  Thailand adds that ascertaining the meaning of the Trade Act of 1974 provisions, in accordance with the authoritative interpretation under the US legal system,⁶²² is not only within the mandate of the Panel, but also fundamental for carrying out this mandate, which is to determine the conformity, or non-conformity, of this legislation with the US obligations under the WTO Agreement.

5.351  Thailand further argues that the Trade Act of 1974 is a legislation that empowers and mandates the US Government to act in a certain manner within the limits and scope provided therein. Because its terms are vague as to the extent of the power given the US Executive, one must be all the more cautious about its interpretation. In particular, the panel should not base its deliberation on the US Executive's own interpretation of this legislation, at least to the extent involving judgment of the legality of US Government's acts vis-�-vis the legislation itself. In any State of law, a power conferred to State officials is not without limit or purpose. It is impossible to prevent Abus de pouvoir or exces de pouvoir if one is judge of one's own acts. Nemo jus sibi dicere potest - No one can declare the law for himself/herself.

5.352  In the view of Thailand, in the absence of authoritative interpretation, i.e. if the United States fails to establish what it claims, there is a doubt as to whether the Trade Act of 1974 is consistent with the WTO Agreement. In view of the vagueness of this Legislation's terms, doubts deprive the other Members from predictability and security, the very objective of the DSU,⁶²³ and cannot be permitted under the WTO system.

5.353  Thailand further states that the same argument is valid for rejecting the US claim regarding the discretion granted the US President under Section 301(a)(1) to "direct" the USTR action. Again, the United States fails to establish that, according to an authoritative interpretation of this provision under the US law, the discretion granted the US President allows him or the USTR to act inconsistently with Section 306(b)(2) and 305(a)(1).

5.354  Thailand also contends that it would be insufficient for the United States to invoke in this respect Section 305(a)(2) regarding the possibility for the USTR to delay, in certain cases, the implementation of action by up to 180 days. What is violating the US obligations here is not the timing of such implementation, but the action to be implemented itself.

5.355  Thailand further contends that the Trade Act of 1974 provides for determinations to be made and actions to be taken against a WTO Member without recourse by the United States to the DSU rules and procedures. This is the case when the US Government unilaterally considers that the matter at issue falls outside the scope or the disciplines of the WTO Agreement.⁶²⁴

5.356  In the view of Thailand, the WTO dispute settlement system is a "central element in providing security and predictability to the multilateral system", and "serves to preserve the rights and obligations of Members" under the WTO Agreement.⁶²⁵ The rules and procedures of the DSU "shall apply to consultations and the settlement of disputes between Members concerning their rights and obligations" under the WTO Agreement.⁶²⁶ Members seeking "the redress of a violation of obligations or other nullification or impairment of benefits" under the WTO Agreement "shall have recourse to, and abide by, the rules and procedures" of the DSU.⁶²⁷ The ordinary meaning of these provisions in their context is clear: the DSU provides the exclusive rules and procedures for settling all disputes concerning the rights and obligations of WTO Members.

5.357  Thailand notes that in accordance with the above provisions, any dispute between WTO Members regarding a determination whether a matter concerns the rights and obligations of a WTO Members falls under the scope of the DSU, and must be settled in accordance with the DSU rules and procedures. Sections 301, 304 and 305, however, mandate⁶²⁸ the USTR to determine unilaterally that a matter does not involve WTO rights and obligations, and mandate action to be taken by the USTR on that basis irrespective of the rules and procedures of the DSU.

5.358  Thailand argues that Sections 301, 304 and 305 consequently deprive the WTO Members of any security or predictability they might legitimately expect from a rules-based multilateral trading system. This leads to a paradoxical situation: for a unilaterally alleged non-violation of WTO obligations, a Member may see their WTO rights violated by the most powerful Member of the WTO on the basis of a domestic legislation of the latter, without the protection of the DSU rules and procedures. A protection that would have been available had the concerned Member been in violation of their WTO obligations. In this case, the Member will have no alternative but to challenge the US sanction measure before the DSB. The process is, however, time-consuming, and in any case much damage will have already been done.

5.359  Thailand concludes that the Trade Act of 1974 is thus not only inconsistent with DSU Articles 1.1, 3.2 and 23.1, but also at variance with the very object and purpose of the WTO Agreement

5.360  Thailand emphasizes that the types of action prescribed by Section 301(c) constitute violations of the WTO rights of the target country. In the case of disputes involving trade in goods, in particular, the USTR is mandated by Sections 301, 304 and 305 to impose duties, fees or restrictions that violate the GATT 1994 provisions, including Articles I, II, III, VIII and XI thereof. As already demonstrated above, where the United States unilaterally determines that the matter falls outside the scope or the disciplines of the WTO Agreement, Sections 301, 304 and 305 mandate the USTR to implement these WTO-inconsistent actions irrespective of the DSU proceedings, and in the absence of an authorization by the DSB. Sections 301, 304 and 305 are therefore inconsistent with Articles 22.6, 22.7 and 23.2(c) of the DSU.

5.361   Thailand, in response to the Panel's question as to whether an official US statement binding in international law that the US government will not exercise its discretion in a way contrary to WTO rule remove the WTO inconsistency of Sections 301-10 on the assumption that the USTR and the President have the direction to avoid determinations and actions contrary to WTO rules in all circumstances, and that, nevertheless, Sections 301-310 were found inconsistent with WTO rules, states that in this scenario, Sections 301-310 are "found to be inconsistent with WTO rules". Since these provisions are of legislative nature, an official US Government statement will not remove the inconsistency. As Member of the WTO, the US must, under international law, bring Sections 301-310 into conformity with the WTO Agreement by either amending them or abolishing them.