Bridges Weekly Trade News Digest • Volume 9 • Number 30 • 14th September 2005

First Public WTO dispute Settlement Hearing Under Way

For the first time in its ten-year history, the WTO this week opened up the proceedings of a dispute settlement meeting to the public. The 12-13 September proceedings in the long-standing beef hormones dispute among the EU, the US and Canada were broadcast through closed-circuit television to an audience consisting mainly of trade negotiators, non-governmental organisation (NGO) representatives, media and academics at the WTO in Geneva.

Over the years, the WTO has been criticised for its lack of openness, not just to the public but also to some extent toward its own Members. The dispute settlement process has been at the centre of the debate on greater organisational transparency. The hormone panel’s 2 August announcement that it had accepted the parties’ joint request to open up the hearing thus represented a historic shift in policy (see BRIDGES Weekly, 7 September 2005).

On the first day of the hearing, the EU, the US, and Canada each acknowledged the importance of the day, emphasising the benefits that increased transparency would bring to Members that have never participated in a WTO dispute, as well as to the general public’s understanding of the WTO and the dispute settlement system. The three have long supported the principle of making dispute settlement meetings public, albeit only so long as doing so is acceptable to all parties in a dispute. The 14 September meeting among the disputing parties and the third parties in the case — Australia, Brazil, China, Chinese Taipei, India, Mexico, New Zealand, Norway — was closed, as not all of the latter were willing to open it to the public.

EU attempting to have retaliatory sanctions lifted

The issue before the panel is a complaint brought by the EU against continued trade sanctions by the US and Canada on certain EU exports, worth USD 116.8 million and USD 11.6 million respectively. The challenged sanctions were authorised in 1999 by the Dispute Settlement Body after the Appellate Body in 1998 (WT/DS26/AB/R and WT/DS48/AB/R) found that an EU ban on hormone treated meat exports from the US and Canada violated the WTO Agreement on Sanitary and Phyto-sanitary Measures (SPS).

The EU argues it adopted measures in 2003 to come into compliance with the 1998 Appellate Body ruling, and that the continued sanctions therefore violate WTO law. The US and Canada counter that the authorisation to retaliate still applies, arguing that the EU has not proven that it is in compliance with the ruling. To this charge, the EU responds that the US and Canada should then file a case charging non-compliance against the EU, rather than merely continuing their sanctions. It would then be left to a WTO panel to determine whether the EU is in fact complying with its obligations.

The Systemic Issue of the Case and the WTO

In the parties’ arguments lies an important systemic issue. No WTO panel has ever had to rule on the procedures for removing previously authorised sanctions. This panel will have to determine where the burden of proof lies — whether Members should have to file a compliance or a non-compliance case in order to determine if and when authorised sanctions should be lifted. This is an important clarification of Members’ rights and obligations under the DSU.

The US and Canada have thus far not been willing to file a non-compliance case against the EU under the relevant article of the DSU (Article 21.5). Instead, they contend that the EU should prove its compliance. Moreover, the EU’s compliance should be confirmed multilaterally, such as through the adoption of a WTO panel report recommending the suspension or revocation of their right to retaliate. The US and Canada argue that the EU has submitted no arguments or evidence proving its compliance, but merely states that it is in compliance.

The EU, on the other hand, claims that the US and Canada, by refusing to file a case to determine whether the EU is indeed in compliance, have made a unilateral ‘de facto’ determination that it is not. Since WTO rules require such determinations to be made multilaterally by the DSB, the EU is arguing that the US and Canada are in violation of WTO law. Continuing to send the ball back and forth, the latter two claim that the EU’s case has no legs, since it has neither removed its WTO-inconsistent ban on hormone treated meat nor established that the measures it implemented in 2003 brought it into compliance with the 1998 ruling. Moreover, the US and Canada charge that the EU’s notification to the DSB that it was in compliance with the ruling was in itself a unilateral action.

The Course of the Meetings

The first scheduled meetings focused more on procedural and systemic issues than on the substantive SPS and science issues linked to the case. In the first session on 12 September, the parties made oral statements on the basis of their written submissions, laying out their claims and arguments. On 13 September, the parties and the panel were given the chance to ask questions and seek clarification about previously-made statements and submissions.

The panel appeared to explore the parties’ possibilities within the DSU to resolve the dispute. It asked the EU if its present case was tantamount to a case filed against the US and Canada under the DSU Article for non-compliance cases — since, in seeking the removal of US and Canadian sanctions, it was essentially implying that it was in compliance with previous WTO rulings. The EU rejected this, maintaining that its complaint was against the US and Canada’s unilateral determination of its guilt. The panel also asked the US and Canada why they had not used the DSU mechanism and filed a case against the EU charging non-compliance, in the interest of quickly solving the matter. The US and Canada argued that they were not obligated to do so under the DSU, with the US specifying that it was for the Members to determine the most efficient way of solving such cases.

Relatively few people attended the WTO’s first open dispute settlement hearing. Up to 400 people were permitted to observe the meetings, but only 100 sat in on the first day. By the end the second day, a mere 20 people remained.

Outcome eagerly anticipated

The open hearing will continue on 15 September with parties asking any remaining questions and making their final statements. In light of the fact that the parties’ statements and the questions posed by the panel are now a matter of public record, trade dispute observers are awaiting the panel’s report with particular anticipation.

ICTSD reporting.