|
|
espa�ol - fran�ais - portugu�s |
Search
|
UNITED STATES - MEASURES TREATING
(Continuation) 5.96 For Canada, the US argument that government actions are countervailable
where they are the so-called "functional equivalent" of financial contributions
listed in (i) through (iii) is similarly flawed. "Functional equivalence" and
"conceptual similarity" are unbounded concepts that eliminate the textual
limitations imposed in Article 1.1(a)(1) and introduce a level of subjectivity
and hence uncertainty into the definition of financial contribution that the
drafters could not possibly have intended.
5.97 Finally, Canada states, the fourth and fifth elements of Article
1.1(a)(1)(iv) confirm that the expansive interpretation that the United States
urges for that provision is not warranted by the text. In Canada's view, those
elements make clear that subparagraph (iv) does not open the definition of
subsidy to encompass government regulatory actions that are not financial
contributions within subparagraphs (i) through (iii), but rather is designed to
ensure that a government cannot escape subsidy disciplines by entrusting or
directing a private body to make a financial contribution that the government
normally would have made directly.
5.98 For Canada, the US hypothetical example of pineapples in Shangri-La is a
telling illustration of why an export restraint does not come within the text of
Article 1.1(a)(1)(iv). Under the ordinary meaning of the words "entrust or
direct", the hypothetical export restraint does not in Canada's view "entrust or
direct" a private body to provide pineapples to the juice industry, it simply
prevents the exportation of those pineapples. Moreover, Canada maintains, the
producers, who already "provide pineapples" without government direction, may
choose to continue to do so to the same extent, or make other economic choices.
Similarly, in the example, pineapple producers do not act as a collective, but
make individual and probably varying decisions. Finally, Canada argues, the US
claim that an export restraint on pineapples is the "functional equivalent" of
ordering the growers to sell to the juice industry at "less than adequate
remuneration" is nothing less than a claim that if there is a price effect, an
export restraint may be presumed to be a financial contribution.
5.99 Put differently, Canada states, this is an assertion that a benefit can
"confer" a financial contribution. However, as the Appellate Body explained in
Canada - Aircraft, a financial contribution must cause or lead to the benefit
that is conferred, and not the reverse. A benefit cannot cause or lead to a
financial contribution.
5.100 For Canada, its view of the text of the subsidy definition is borne out by
the object and purpose of the SCM Agreement. Canada notes the Appellate Body
statement in United States - Import Prohibition of Certain Shrimp and Shrimp
Products: "It is in the words constituting [a] provision, read in their context,
that the object and purpose of the states parties to the treaty must first be
sought." As such, Canada argues, the United States has not only mischaracterized
the object and purpose of the SCM Agreement, it has also deprived the text of
Article 1.1 of its true meaning by beginning and basing its entire analysis on
such a view.
5.101 In Canada's view, while one of the purposes of the SCM Agreement is to
discipline certain forms of government action that may distort international
trade, this is not the only object and purpose of the Agreement. Another purpose
of the Agreement is to discipline the use of countervailing duty measures, hence
its title "Agreement on Subsidies and Countervailing Measures". While discipline
in regard to both of these "purposes" has now been achieved through the
Agreement, Canada maintains, the fundamental question under the Agreement
remains: "What forms of government action are subject to these disciplines?"
5.102 Canada notes that the United States' first written submission begins with
an excerpt from the "Statement Made by the Delegation of Canada at the Meeting
Held on 28-29 June 1988." Canada asserts that the United States has, however,
quoted only selectively from Canada's statement, and that when considered in the
context of the full statement, which is found in a section entitled "Parameters
for the scope and application of countervail"62 , it is clear that Canada is
speaking to the question of why, in Canada's view, disciplines on countervail
were needed in the SCM Agreement.
5.103 With this in mind, Canada agrees that the SCM Agreement disciplines the
use of trade-distorting subsidies. However, Canada maintains, the Agreement does
so by defining the concept of a subsidy, by specifying what kinds of subsidies
are prohibited, actionable, or non-actionable and by setting out the rules on
how countervailing measures are to be applied against actionable subsidies.
Accordingly, it is clear that the Agreement not only creates disciplines on the
use of subsidies, but also creates disciplines on when countervailing measures
may be imposed. This balance was an integral part of arriving at the negotiated
result.
5.104 Finally, Canada argues, the United States claims that the Canadian
interpretation of Article 1.1 of the SCM Agreement would "make circumvention of
obligations by Members too easy." Yet for Canada, whether an export restraint
constitutes circumvention of the SCM Agreement turns on whether export
restraints are covered by the SCM Agreement. If they are not covered, then
maintaining an export restraint would not constitute circumvention. Therefore in
Canada's view, the US argument is circular because it assumes the conclusion it
desires to prove.
3. The United States' Arguments Regarding the "Economics" of Export Restraints
are Misplaced
5.105 Canada notes that the United States first asserts that there is "no
question that economically, and in the vernacular, export restraints are
regarded as subsidies" because they can have price effects. Such an assertion in
Canada's view assumes that a potential economic effect determines whether there
is a financial contribution under Article 1.1(a)(1). For Canada, whatever the
United States may think a subsidy is in the "vernacular" is not relevant to the
meaning of the definition of subsidy in the SCM Agreement, and none of the
sources relied on by the United States addresses whether an export restraint
comes within the meaning of the text of Article 1.1 of the SCM Agreement.
5.106 More specifically, Canada argues, the United States alleges that when
faced with an export restraint, a domestic producer has only one economic choice
and that is to sell the restrained good to domestic purchasers of that good.
From an economic perspective, in Canada's view, this is simply incorrect. It
does not inevitably follow that an export restraint will force a domestic
producer of the restrained good to sell into the domestic market. Furthermore,
as Commerce itself recognized in Anhydrous and Aqua Ammonia from Mexico, it does
not necessarily follow that a reduction in the price of the restrained good, if
any, in the domestic market for that good after the imposition of an export
restraint, will be caused by that export restraint63.
5.107 In the view of Canada this same mistaken approach to economics underlies
the points that the United States tries to make through its hypothetical
discussion of the pineapple industry in Shangri-La that is prohibited from
exporting. As presented by the United States, a pineapple grower in Shangri-La
would have no choice but to sell pineapples to the domestic pineapple juice
industry, which for Canada is simply not true. Pineapple growers could make a
number of different choices in response to a restraint on the export of
pineapples. Growers might switch to growing another fruit or other crop that the
land is suited to. They could choose to become integrated producers and produce
pineapple juice products with their own and/or others' production or they could
supply pineapples to other end users or make other choices. While Canada
acknowledges that an export restraint limits a domestic producer's ability to
export the restrained good, it maintains that it is not true that an export
restraint "requires" or "forces" a producer of the restrained good to sell it to
particular users of that good at lower prices. As such it does not "entrust or
direct" these producers.
5.108 Thus, in Canada's view, the United States is wrong in asserting that an
export restraint is the "functional equivalent" of ordering producers of a
restrained good to sell the restrained good to domestic users of that good. For
Canada, this does not necessarily follow either economically, or from a textual
analysis of the wording of Article 1.1(a)(1)(iv) of the SCM Agreement. As such,
the efforts of the United States to broaden the plain meaning of Article
1.1(a)(1)(iv) of the Agreement beyond any reasonable interpretation of those
words must in Canada's opinion fail.
D. FIRST ORAL STATEMENT OF THE UNITED STATES
5.109 The United States argues that the WTO does not regulate opinions and WTO
dispute settlement does not deal with "thought crimes." Instead, the WTO
regulates - and WTO dispute settlement deals with - measures taken. With respect
to the subject matter of this dispute, the United States maintains, relevant
measures would be either (1) the imposition of countervailing duties in a manner
inconsistent with the SCM Agreement, or (2) the enactment of a law, regulation
or procedure that mandates domestic authorities to impose countervailing duties
in a manner inconsistent with the SCM Agreement. The United States notes that
Canada does not allege the former, and asserts that the United States has not
done the latter.
5.110 The United States argues that it is bad enough that Canada seeks to enjoin
the DOC from expressing tentative opinions, but to make matters worse, Canada
seeks to obtain its injunction by asking the Panel to rule entirely in the
abstract that never, under any set of circumstances present or future, can an
export restraint constitute a subsidy under Article 1.1 of the SCM Agreement.
5.111 In the view of the United States, Canada's extraordinary request for an
advisory opinion has dangerous implications for the WTO dispute settlement
system. The United States indicates that it has no hesitation in addressing the
substantive issues raised by Canada, but feels compelled to address the broader
systemic issues first.
5.112 The United States maintains that it is not seeking to deny Canada any of
its rights, but that it is simply faced with a situation where the United States
has not taken any measures that impair Canada's WTO rights. The United States
argues that should it ever take such measures, Canada's right to challenge such
actions is fully preserved.
5.113 In the view of the United States, there is a well-established method by
which the Panel can dismiss Canada's attempt to have panels get into the
business of regulating Members' opinions and issuing authoritative
interpretations. That method is to apply the mandatory/discretionary doctrine.
5.114 The United States notes that Canada does not dispute the continuing
validity of the mandatory/discretionary doctrine or the US interpretation of
that doctrine. Instead, the United States argues, Canada advances the factually
inaccurate argument that the various documents it has cited require the DOC to
treat export restraints as subsidies (or financial contributions).
Alternatively, Canada makes the novel argument that even if these documents do
not require that the DOC treat export restraints as subsidies (or financial
contributions), the Panel cannot make that finding until it first makes a
ruling, in the abstract, that an export restraint can never, under any set of
circumstances present or future, constitute a subsidy under Article 1.1 of the SCM Agreement. For the United States, Canada is wrong on both counts.
5.115 With respect to Section 771(5), the United States maintains, Canada has
consistently acknowledged that Section 771(5), on its face, does not require the
DOC to treat export restraints as subsidies (or financial contributions). Thus,
there appears to be agreement that Section 771(5) does not mandate WTO-inconsistent action.
5.116 Turning to the SAA, the United States argues that Canada alleges that the
United States has attempted to misportray that document's status. In the view of
the United States this is not the case, as set forth in paragraph 75 of the US
Request.
5.117 The United States asserts that its disagreement with Canada is not with
the SAA's status (although the United States does disagree that it is a
"measure" in its own right), but rather with what the SAA means. In the view of
the United States, the only way one can read the SAA is as a decision by
Congress and the Administration to refrain from deciding exactly what types of
measures previously falling under the rubric of "indirect subsidies" could be
considered as subsidies under the new definition set forth in Section
771(5)(B)(iii) of the Tariff Act and Article 1.1(a)(1)(iv) of the SCM Agreement.
5.118 As a matter of US law, the United States asserts, the Preamble is at most
a non-binding statement by the DOC regarding its views at the time concerning
the scope of Section 771(5)(B)(iii). The United States recalls that the DOC did
not promulgate a regulation dealing with indirect subsidies in general, or
export restraints in particular. While the DOC expressed the view in the
Preamble that export restraints might qualify as subsidies in appropriate
circumstances, it did not definitively say that they do or otherwise bind itself
to that view.
5.119 The United States notes that Canada cites a handful of cases - none of
which involve the DOC's regulations or even the US countervailing duty law - for
the proposition that agency statements in preambles to notices of final rules
are always binding on the agency. However, for the United States each of these
cases is either distinguishable or does not support the proposition for which it
is submitted, as demonstrated by US Exhibits 26-29. Of particular significance
to the United States is the fact that the Preamble was not included in the Code
of Federal Regulations. This is because, the United States maintains, pursuant
to the regulations governing the Code of Federal Regulations, the DOC did not
intend the Preamble to have legal effect.
5.120 The United States argues with respect to the DOC Preamble that it was
perfectly consistent with notions of transparency and good government for the
DOC to express its tentative thinking on the issue of indirect subsidies, and
that it would be a perverse result if the Panel were to penalize a Member for
demonstrating greater transparency with respect to its thinking.
5.121 Like tribunals around the world, the United States notes, the DOC in a
given case may cite a variety of materials to justify its determination,
including such things as prior DOC determinations and law review articles, none
of which are binding on the DOC. Thus, the DOC's citation to the Preamble does
not, in the view of the United States, confer binding status on the Preamble.
5.122 In the US view, Canada's definition of "practice" constantly shifts, with
Canada now saying that by "practice" it means "an administrative commitment or
policy to adhere to a particular legal view and to apply a particular
interpretation or methodology." Under any of the definitions used by Canada, the
United States maintains, "practice" does not bind the DOC so as to require it to
treat export restraints as subsidies (or financial contributions).
5.123 In the view of the United States, Canada seems to argue that even if the
measures it has identified do not individually give rise to a WTO violation,
they do when considered together. However, the United States argues, Canada does
not explain how this conclusion is justified on the basis of any provision in
the DSU or any other WTO agreement.
5.124 The United States argues that Canada amazingly argues that the Panel
should make an authoritative interpretation of Article 1.1 first before dealing
with the mandatory/discretionary doctrine. However, in the view of the United
States, Canada's discussion of GATT and WTO panel reports on this point does not
support its position. In none of the cases discussed does it appear that the
respondent requested a preliminary ruling. The United States asserts that there
is nothing in the DSU or this Panel's Working Procedures that limits preliminary
rulings in the manner suggested by Canada, and that in addition, none of the
cited cases expressly holds that a Panel must decide substantive issues first
before invoking the mandatory/discretionary doctrine.
5.125 The United States maintains that there is a fundamental difference between
the cases invoked by Canada and this case. In the cases cited by Canada, the
panels were asked to opine on discrete measures maintained by the respondent,
which is not the case here. In this dispute, according to the United States, the
measures really at issue include not only the documents challenged by Canada,
but an unidentified number of current and future export restraints. In the US
view, the Panel cannot do what Canada asks it to do without opining in the
abstract, and without any facts before it, that there never has been and never
will be an export restraint capable of satisfying the definition of a subsidy in
Article 1.1 of the SCM Agreement.
5.126 If the Panel finds - as the United States thinks it must - that the
measures in question do not require what Canada says they do, for the United
States that should be the end of the matter; anything else the Panel might say
would be dicta.
5.127 The United States argues that Canada currently says that "practice" does
not consist of individual determinations in particular countervailing duty
cases, but instead consists of the DOC's institutional state of mind, which
Canada describes as an "administrative commitment or policy." The DOC's state of
mind does not constitute a measure "taken" within the meaning of the DSU
according to the United States. In addition, the DOC's state of mind could not
violate any of the provisions invoked by Canada.
5.128 For the United States, Article 1.1 is a definitional provision. Thus,
strictly speaking, US "practice" - whatever that is defined to be - cannot
violate Article 1.1. The United States maintains that Article 10 does not apply
here, because Canada says it is not challenging the actual imposition by the
United States of countervailing duties under Section 771(5) as the result of a
finding that an export restraint is a subsidy, and that Articles 11, 17 and 19
of the SCM Agreement are inapplicable here for the same reason as is Article 10.
The United States notes that Canada has not challenged - and the United States
has not even taken - "specific action" under Section 771(5) with respect to an
export restraint, and the DOC's state of mind cannot constitute "specific
action." Therefore, according to the United States, Article 32.5 of the SCM
Agreement also is inapplicable.
5.129 The United States maintains that with respect to Article 32.5, the US
statute, regulations, and procedures are fully in conformity with the SCM
Agreement. An "administrative commitment or policy" is not within the scope of
Article 32.5. In the US view, the same conclusion holds for Article XVI:4 of the
WTO Agreement. There can be no breach of Article 32.5 or Article XVI:4 absent a
law, regulation or procedure that mandates a violation of some other provision
of the SCM Agreement.
5.130 The United States strongly objects to paragraph 40 of Canada's Response in
which, the United States maintains, Canada attempts to portray the United States
as having failed to comply with DSB rulings. The United States asserts that in
no case has a WTO panel determined that the United States has failed to
implement a DSB ruling, and under Article 23 of the DSU, Canada cannot make such
a determination unilaterally.
5.131 According to the United States, Canada essentially asserts that "practice"
- however it is defined - should be regarded as a measure taken because one
should presume that WTO Members will act in bad faith. The United States notes
that the Appellate Body has explained that such a presumption is not allowed.
5.132 In the view of the United States, for the reasons set forth in the US
Request, Canada's claims regarding "practice" should also be dismissed due to
Canada's failure to comply with Articles 4.7 and 6.2 of the DSU. Accepting for
purposes of argument the equitable doctrine of "prejudice" that the Appellate
Body and panels have grafted on to the requirements of the DSU, the United
States submits that it has been prejudiced. Moreover, the United States
maintains that there is prejudice to it and the WTO dispute settlement system
when the notification and consultation requirements are treated in a pro forma
way that precludes a thorough and accurate description of what the complainant
is challenging.
5.133 The United States notes, in regard to why the SAA and the Preamble are not
measures, that neither document has any independent legal effect under US law.
5.134 With respect to the question of whether either document is within the
Panel's terms of reference, the United States notes that in its Response, Canada
does not even attempt to explain how one could possibly read its panel request
as encompassing the SAA and the Preamble as independent measures. Moreover, at
two DSB meetings, the United States recalls that it expressed its belief that
Canada had substituted Section 771(5) for the SAA and the Preamble as the
challenged measure, and Canada did not challenge the accuracy of the US
assessment.
5.135 The United States argues that it demonstrated in its first submission that
an export restraint is capable of satisfying all of the elements of subparagraph
(iv) of Article 1.1(a)(1) of the SCM Agreement. Whether a particular export
restraint practice fulfilled all of the elements for a subsidy is something that
could only be determined on the basis of a case-specific analysis of actual
evidence. Here, in the US view, it is enough to say that Canada has failed to
demonstrate that never, under any set of circumstances, could an export
restraint practice satisfy all of the elements.
5.136 The United States maintains that a reading of its first submission
demonstrates that the United States has engaged in a thorough textual analysis
of subparagraph (iv). However, the object and purpose of the SCM Agreement is
relevant to the interpretation of subparagraph (iv), and it is relevant that
Canada's interpretation is inconsistent with that object and purpose, as well as
with the common understanding of what is and is not a subsidy.
5.137 The United States argues that it has not said that all government
interventions that distort international trade qualify as subsidies. Rather, it
has emphasized that any government intervention would have to meet all of the
definitional elements of an actionable subsidy.
5.138 According to the United States, the European Communities' "slippery slope"
argument is without merit, because in the examples given, it is difficult to see
where there would be a financial contribution. Moreover, in the 10 years since
the DOC's determination in Leather from Argentina, the United States argues, the
"parade of horribles" has not taken place.
5.139 At paragraph 90 of Canada's first submission, the United States recalls,
Canada states that an export restraint does not qualify as a subsidy because
"[i]t involves no transfer of financial resources by a government to producers
of goods." Thus, the United States does not agree that it has mischaracterized
Canada's position. Rather, Canada is advancing the same net cost to government
position that has been repeatedly rejected.
5.140 Finally, the United States asserts, it has been suggested that export
restraints can never constitute subsidies because, even though they may limit a
producer's opportunities and can reduce the price the producer charges for an
input (as Canada has conceded in this case), they do not force producers to sell
their goods domestically to targeted customers at pre-determined prices or in
pre-determined quantities. According to this line of argument, the United States
notes, there is no government "direction" because the producer's freedom of
action is limited, but a pre-determined sale or price is not mandated.
5.141 For the United States, this argument is fatally flawed for several
reasons. First, there is no requirement in the text of subparagraphs (iii) or
(iv) of Article 1.1(a)(1) that the price or quantities at which goods are
provided to the subsidized party be specified. Second, there is no requirement
that the beneficiaries of the subsidy practice at issue must be "targeted
customers", although it may well be that a particular export restraint practice
could satisfy such a requirement. Third, there is no support for the proposition
that in order for a subsidy to exist, the government must determine exactly the
scope and extent of the benefit it wishes to confer and the class of
beneficiaries at the time of the government action; the Panel in Canada - Dairy
rejected this argument. Fourth, it is irrelevant to say that producers who would
otherwise export may be able to adapt to modified market conditions, such as by
doing something else. With respect to the US hypothetical regarding pineapple
growers, the United States believes that it has been conceded that if the
government directed pineapple growers to sell at a fixed price or in
pre-determined quantities to juice processors, an indirect subsidy would exist.
However, in this scenario, the United States maintains, pineapple growers also
would be free to leave the pineapple growing business, enter the juice
processing business, or engage in a totally different business (for example,
growing bananas). The United States fails to see how the theoretical ability to
adapt in this scenario would not preclude a finding of an indirect subsidy, but
it would preclude such a finding in the scenario where the government direction
does not specify precise prices or quantities.
5.142 Moreover, the United States asserts, there may be circumstances where a
producer, faced with an export restraint, has no other option but to sell to the
domestic processor, such as where the export restraint applies to a raw
material. In other words, there may be situations where engaging in another
business is not an option. In the US view, this is a factual question that has
to be decided case-by-case on the basis of evidence, rather than speculation.
5.143 In summary, the United States argues, Canada has failed to carry its
burden of proof; Canada has failed to demonstrate that an export restraint can
never constitute a subsidy. However, the Panel does not even need to get this
far in its analysis according to the United States, because the focus of
Canada's challenge is on opinions, not measures. The United States maintains
that while it might be tempting to address the substantive, abstract issue posed
by Canada, to do so would distort the purpose and role of WTO dispute
settlement. Thus, the United States submits that the proper outcome in this case
is for the Panel to simply find that none of the measures cited by Canada
require the DOC to treat an export restraint as a subsidy (or a financial
contribution).
63 See Canada's
First Written Submission at para. 19, footnote 8. |
|