The report of the Panel on Chile - Price Band System and
Safeguard Measures Relating to Certain Agricultural Products is being circulated
to all Members, pursuant to the DSU. The report is being circulated as an
unrestricted document from 3 May 2002 pursuant to the Procedures for the
Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are
reminded that in accordance with the DSU only parties to the dispute may appeal
a panel report. An appeal shall be limited to issues of law covered in the Panel
report and legal interpretations developed by the Panel. There shall be no ex
parte communications with the Panel or Appellate Body concerning matters
under consideration by the Panel or Appellate Body.
Note by the Secretariat:
This Panel report shall be adopted by the Dispute Settlement Body
(DSB) within 60 days after the date of its circulation unless a party to the
dispute decides to appeal or the DSB decides by consensus not to adopt the
report. If the Panel report is appealed to the Appellate Body, it shall not be
considered for adoption by the DSB until after the completion of the appeal.
Information on the current status of the Panel report is available from the WTO
Secretariat
TABLE OF CONTENTS
I. INTRODUCTION
II. FACTUAL ASPECTS
- CHILE'S PRICE BAND SYSTEM
- Regulatory framework
- Workings of the PBS
- CHILE'S SAFEGUARD MEASURES
- Regulatory Framework
- Provisional and definitive safeguard measures
- Extension of the safeguard measures
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
IV. ARGUMENTS OF THE PARTIES
- ARGUMENTS RELATING TO CHILE'S PRICE BAND SYSTEM
- Procedural arguments
(a) Burden of proof
- Substantive arguments
(a) Infringement of Article II:1(b) of the GATT 1994
(i) Whether the application of the PBS has led to customs duties higher than
bound tariffs
(ii) Can the PBS as such lead to customs duties higher than bound tariffs
(iii) Article XIX as an exception to Article II of the GATT 1994
(b) Violation of Article 4.2 of the Agreement on Agriculture
(i) Whether the PBS is a measure prohibited under Article 4.2 and should
have been tariffied
(ii) Whether the PBS is a variable levy or a similar border measure
(iii) Distinction between variable levy or similar border measure and
ordinary customs duty
(c) Relation between Article II:1(b) of the GATT 1994 and Article 4.2 of the
Agreement on Agriculture
(i) Other issues of interpretation relating to Article 4.2 of the
Agreement on Agriculture
Relevance of the Chile-Mercosur Economic Complementarity Agreement No. 35
Prior knowledge, negotiating history and subsequent practice
Secretariat's advice
- ARGUMENTS RELATING TO CHILE'S SAFEGUARD MEASURES
- Procedural arguments
(a) Terms of reference
(i) Measures which are no longer in force
(ii) The decision on extension was not the subject of consultations
between the parties
(iii) Withdrawal of some of the extension measures
(b) Burden of proof
- Substantive arguments
(a) Compliance with the notification and prior consultation requirements
(b) Unforeseen developments
(c) Appropriate investigation
(d) Whether Chile failed to publish a report setting forth reasoned
conclusions and findings
(e) Like product
(f) Increase of imports
(i) Edible vegetable oils
Initiation of the investigation
Provisional safeguards
Definitive safeguards
Extension of the measures
(ii) Wheat flour
Initiation of the investigation
Provisional safeguards
Definitive safeguards
Extension of the measures
(iii) Wheat
Initiation of the investigation
Provisional safeguards
Definitive safeguards
Extension of the measures
(g) Evaluation of all relevant factors
Edible vegetable oils
Wheat flour
Wheat
(h) Threat of injury
(i) Causal link
(j) Whether Chile's safeguard measure was not limited to the extent
necessary to remedy injury and to facilitate adjustment
(k) Provisional measures
V. ARGUMENTS OF THE THIRD PARTIES
- BRAZIL
- COLOMBIA
- ECUADOR
- EUROPEAN COMMUNITIES
- GUATEMALA
- JAPAN
- PARAGUAY
- UNITED STATES
- VENEZUELA
VI. INTERIM REVIEW
VII. FINDINGS
- THE CHILEAN PRICE BAND SYSTEM
- Requested findings
- Amendment to Article
12 of Law 18.525 in the course of the panel proceedings
- Order of the Panel's analysis
- The Chilean PBS and Article 4.2 of the Agreement on Agriculture
(a) Is the Chilean PBS a measure of the kind which has been required to be
converted into ordinary customs duties?
(i) Is the Chilean PBS a border measure similar to those listed in footnote
1?
"Border measure"
"Similar to" a "variable import levy" or a "minimum import price"
Determination of the meaning of "similar to a variable import levy or a
minimum import price"
Application of the Panel's interpretation of "similar to a variable import
levy or a minimum import price" to the Chilean PBS
"Other than ordinary customs duties"
Determination of the meaning of "ordinary customs duties"
Application of the Panel's interpretation of "other than ordinary customs
duties" to the Chilean PBS
Conclusion
(ii) Is the Chilean PBS "maintained under balance-of-payment provisions
or under other general, non-agriculture specific provisions of GATT 1994 or
of the other Multilateral Trade Agreements in Annex 1A to the WTO
Agreement"?
(b) Other tools of interpretation
(i) "state practice"
(ii) Article 24 of Economic Complementarity Agreement No. 35 ("ECA 35")
between Chile and MERCOSUR
(iii) Negotiating history of Article 4.2
(c) Conclusion regarding Article 4.2 of the Agreement on Agriculture
- The Chilean PBS and Article II:1(b) of GATT 1994
- THE CHILEAN SAFEGUARD MEASURES ON WHEAT, WHEAT FLOUR AND EDIBLE VEGETABLE
OILS
- The measures at issue
- Preliminary issues
(a) The provisional safeguard measures
(b) The definitive safeguard measures and the extension of their period of
application
(c) Withdrawal of safeguard measures while the panel proceedings were
ongoing
- Published report (Article 3.1 of the
Agreement on Safeguards)
- Documents examined by the Panel to assess Chile's compliance with its
obligations under Article XIX of GATT 1994 and the Agreement on Safeguards
- Unforeseen developments (Article XIX:1(a) of GATT 1994 and Article 3.1 of
the Agreement on Safeguards)
- Definition of like or directly competitive product (Articles XIX:1(a) of
GATT 1994 and Articles 2.1, 4.1(a) and 4.2(c) of the Agreement on
Safeguards)
- Increase in imports (Articles XIX:1(a) of GATT 1994 and Articles 2.1 and
4.2(a) of the Agreement on Safeguards)
- Threat of serious injury and evaluation of all relevant factors (Article
XIX:1(a) of GATT 1994 and Articles 4.1(a), 4.1(b) and 4.2(a) of the
Agreement on Safeguards)
- Causal link (Articles 2.1 and 4.2(b) of
the Agreement on Safeguards)
- Measures necessary to remedy injury and facilitate adjustment (Article
XIX:1(a) of GATT 1994 and Articles 3.1 and 5.1 of the Agreement on
Safeguards)
- Appropriate investigation (Articles 3.1 and 3.2 of the Agreement on
Safeguards)
- Findings and reasoned conclusions (Article 3.1 of the Agreement on
Safeguards)
- Provisional measures (Article XIX:2 of GATT 1994 and Article 6 of the
Agreement on Safeguards)
- Notification and consultation (Article XIX:2 of GATT 1994 and Article 12
of the Agreement on Safeguards)
- Extension of the definitive safeguard measures (Article 7 of the
Agreement on Safeguards)
VIII. CONCLUSIONS AND RECOMMENDATIONS
I. INTRODUCTION
1.1 On 5 October 2000, Argentina requested consultations with
Chile pursuant to Article XXIII:1 of the General Agreement on Trade and Tariffs
1994 (the "GATT 1994") and Article 4 of the Understanding on Rules and
Procedures Governing the Settlement of Disputes (the "DSU") - insofar as it is
an elaboration of Article XXIII:1 of the GATT 1994 - as well as Article 14 of
the Agreement on Safeguards and Article 19 of the Agreement on Agriculture. This
request was related to the Chilean Price Band System (hereafter "the Chilean
PBS") and the imposition by the Chilean authorities of provisional and
definitive safeguard measures on imports of wheat, wheat flour and edible
vegetable oils.1
1.2 The consultations took place on 21 November 2000, but the
parties failed to reach a mutually satisfactory solution. On 19 January 2001,
Argentina requested the Dispute Settlement Body (the "DSB") to establish a
panel, pursuant to Article XXIII of the GATT 1994, Articles 4 and 6 of the DSU,
Article 19 of the Agreement on Agriculture and Article 14 of the Agreement on
Safeguards, in order to examine the Chilean PBS, its provisional and definitive
safeguard measures on imports of wheat, wheat flour and edible vegetable oils,
and the extension of those measures.2
1.3 At its meeting on 12 March 2001, the DSB established a
panel in accordance with Article 6 of the
DSU . At that meeting, the parties agreed that the Panel
should have standard terms of reference. The terms of reference of the panel
were, therefore, the following:
"To examine, in the light of the relevant provisions of
the covered agreements cited by Argentina in document WT/DS207/2, the matter
referred to the DSB by Argentina in that document, and to make such findings
as will assist the DSB in making the recommendations or in giving the
rulings provided for in those agreements."3
1.4 On 7 May 2001, Argentina requested the Director-General
to determine the composition of the panel, pursuant to paragraph 7 of Article 8
of the DSU. This paragraph provides:
"If there is no agreement on the panelists within 20 days
after the date of the establishment of a panel, at the request of either
party, the Director-General, in consultation with the Chairman of the DSB
and the Chairman of the relevant Council or Committee, shall determine the
composition of the panel by appointing the panelists whom the
Director-General considers most appropriate in accordance with any relevant
special or additional rules or procedures of the covered agreement or
covered agreements which are at issue in the dispute, after consulting with
the parties to the dispute. The Chairman of the DSB shall inform the Members
of the composition of the panel thus formed no later than 10 days after the
date the Chairman receives such a request."
1.5 On 17 May 2001, the Director-General accordingly composed
the Panel as follows:
Chairman:
|
Mr. Hardeep Puri
|
Members: |
Mr. Ho-Young Ahn
Mr. Michael Gifford
|
1.6 Australia, Brazil, Colombia, Costa Rica, the European
Communities, Ecuador, El Salvador, Guatemala, Honduras, Japan, Nicaragua,
Paraguay, the United States and Venezuela reserved their rights to participate
in the panel proceedings as third parties.
1.7 The Panel met with the parties on 12-13 September and
21-22 November 2001. It met the third parties on 13 September 2001.
1.8 The Panel submitted its interim report to the parties on
21 February 2002. On 28 February 2002, Chile submitted comments and requested
the revision and clarification of certain aspects of the interim report. Chile
also requested the Panel to hold a further meeting with the parties, pursuant to
Article 15 of the DSU and paragraph 16 of the Panel's Working Procedures. On 28
February 2002, Argentina submitted general comments to the interim report. An
Interim Review meeting was held with the parties on 14 March 2002. The Panel
gave the parties the opportunity to submit further comments the following day.
The Panel submitted its final report to the parties on 4 April 2002.
II. FACTUAL ASPECTS
2.1 The dispute concerns two distinctive matters: (A) Chile's
Price Band System ("PBS") and (B) Chile's provisional and definitive safeguards
measures on imports of wheat, wheat flour and edible vegetable oils, as well as
the extension of those measures.
-
CHILE'S PRICE BAND SYSTEM
1. Regulatory framework
2.2 Chile's regulations on its PBS are contained in Law
18.525 on the Rules on the Importation of Goods4, as amended. In particular,
Article 12 of Law 18.525 provides for the methodology for the calculation of the
price bands. This Article reads as follows:5
"For the sole purpose of ensuring a reasonable margin of
fluctuation of domestic wheat, oil-seeds, edible vegetable oils and sugar
prices in relation to the international prices for such products, specific
duties are hereby established in United States dollars per tariff unit, or
ad valorem duties, or both, and rebates on the amounts payable as
ad valorem duties established in the Customs Tariff, which could affect
the importation of such goods.
The amount of these duties and rebates, established in
accordance with the procedure laid down in this Article, shall be determined
annually by the President of the Republic, in terms which, applied to the
price levels attained by the products in question on the international
markets, make it possible to maintain a minimum cost and a maximum import
cost for the said products during the internal marketing season for the
domestic production.
For the determination of the costs mentioned in the
preceding paragraph, the monthly average international prices recorded in
the most relevant markets during an immediately preceding period of five
calendar years for wheat, oil-seed and edible vegetable oils and ten
calendar years for sugar shall be taken into consideration. These averages
shall be adjusted by the percentage variation of the relevant average price
index for Chile's foreign trade between the month to which they correspond
and the last month of the year prior to that of the determination of the
amount of duties or rebates, as certified by the Central Bank of Chile. They
shall then be arranged in descending order and up to 25 per cent of the
highest values and up to 25 per cent of the lowest values for wheat,
oil-seed and edible vegetable oils and up to 35 per cent of the highest
values and up to 35 per cent of the lowest values for sugar shall be
removed. To the resulting extreme values there shall be added the normal
tariffs and costs arising from the process of importation of the said
products. The duties and rebates determined for wheat shall also apply to
meslin and wheat flour. In this last case, duties and rebates established
for wheat shall be multiplied by the factor 1.56.
The prices to which these duties and rebates are applied
shall be those applicable to the goods in question on the day of their
shipment. The National Customs Administration shall notify these prices on a
weekly basis, and may obtain information from other public bodies for that
purpose."
2.3 Chile submitted a copy of Law No. 19.7726, amending
Article 12 of Law 18.525 at the second substantive meeting. Article 2 of Law No.
19.772, which entered into force on 19 November 2001, adds the following
paragraph to Article 12 of Law 18.525:
"The specific duties resulting from the application of
this Article, added to the ad valorem duty, shall not exceed the base
tariff rate bound by Chile under the World Trade Organization for the goods
referred to in this Article, each import transaction being considered
individually and using the c.i.f. value of the goods concerned in the
transaction in question as a basis for calculation. To that end, the
National Customs Service shall adopt the necessary measures to ensure that
the said limit is maintained."
2. Workings of the PBS
2.4 As a matter of practice, Chile's applied tariff rates are
significantly below its bound rate. In the case of wheat, wheat flour, and
edible vegetable oils, the applied rate can be increased by means of duty
increases provided through the operation of the PBS.7 In each case, the PBS
involves an upper and a lower threshold determined on the basis of certain
international prices. The bands for each product are determined once every year
through a Presidential decree when a table is published containing reference
prices and related specific duties. Chile also sets weekly "reference prices"
based on prices in certain foreign markets. A duty increase is triggered when
the "reference price", lies below the lower threshold of the band. The duty
increase is equivalent to the absolute difference between the lower threshold of
the band and the "reference price". Conversely, a tariff rebate is triggered
when the "reference price" lies above the price that determines the upper
threshold of the band. The rebate (which cannot be greater than the applied
ad valorem rate) is equivalent to the absolute difference between the
"reference price" and the upper threshold of the band.
2.5 Article 12 of Law No. 18.525 foresees the application of
specific duties expressed in US dollars per tariff unit or ad valorem
duties, or both, as well as rebates on the amount payable as specific or ad
valorem duties or both. For this purpose, Article 12 empowers the President
of the Republic of Chile to issue decrees determining the price bands annually.
These bands are calculated on the basis of average monthly prices observed for
the last 60 months on specific exchanges. In the case of wheat, the calculation
is based on Hard Red Winter No. 2, f.o.b. Gulf (Kansas Exchange), while for
oils, it is based on the price of crude soya bean oil, f.o.b. Illinois, on the
Chicago Exchange.8 As regards wheat flour, the price band for wheat is used to
calculate the duty or rebate, which is then multiplied by a factor of 1.56 to
obtain the specific duty or rebate for wheat flour.9 These average prices are
adjusted by the percentage variation in the external price index (IPE) drawn by
the Central Bank of Chile. After the prices have been readjusted, they are
listed in descending order, with up to 25 per cent of the highest and lowest
values being eliminated for wheat and edible vegetable oils. Tariff and
importation costs (such as freight, insurance, opening of a letter of credit,
interest on credit, taxes on credit, customs agents' fees, unloading, transport
to the plant and wastage costs) are added to those prices thus determined in
order to fix the lower and upper thresholds on a c.i.f. basis.
2.6 When a shipment of a product subject to the PBS arrives
at the border for importation into Chile, the customs authorities determine the
total amount of applicable duties as follows. The first step is to apply the
ad valorem duty. Afterwards, the so-called "reference price" applicable to
that given shipment has to be identified. This reference price is not the
transaction price but a price which is determined weekly (every Friday) by the
Chilean authorities by using the lowest f.o.b. price for the product in question
on foreign "markets of concern to Chile".10 In the case of edible oils, the weekly
reference price corresponds to the lowest f.o.b. price in force on the markets
of concern to Chile for any of the types of covered edible vegetable oils.
Unlike the prices used for the composition of the PBS, the reference prices are
not subject to adjustment for "usual import costs".11 The applicable reference
price for a particular shipment is determined in reference to the date of the
bill of lading. The reference price can be consulted by the public at the
offices of the Chilean customs authorities.
2.7 Once the customs authorities have identified the
reference price applicable to that given shipment, they proceed to levy the
duties. These will differ according to the position of the reference price as
regards the upper and lower thresholds of the price band. If the reference price
falls below the lower threshold, the customs authorities will levy an 8 per cent
ad valorem duty (MFN duty), plus an additional specific duty. This
additional specific duty will equal the difference between the reference price
and the lower threshold. If the reference price is between the lower and upper
thresholds, the customs authorities will only apply the 8 per cent ad valorem
duty. If the reference price is higher than the upper threshold, the customs
authorities will grant a rebate on the 8 per cent ad valorem duty equal
to the difference between the upper threshold and the reference price.
-
CHILE'S SAFEGUARD MAEASURES
1. Regulatory Framework
2.8 The Chilean regulatory framework for the conduction of
safeguards investigations and the eventual imposition of safeguards measures is
contained in Law No. 19.612 of 28 May 199912 and its implementing Decree No. 909
of the Ministry of Finance of 17 June 1999.13 Chile notified both legal
instruments to the WTO on 23 June 1999.14
2. Provisional and definitive safeguard measures
2.9 On 23 August 1999, the Ministry of Agriculture of Chile
filed a request before the National Commission in charge of investigating
distortions in the prices of imported goods (hereinafter "the Commission") to
initiate ex officio a safeguards investigation on products subject to the
PBS, that is, wheat, wheat flour, sugar and edible vegetable oils. The Chilean
Ministry of Agriculture also requested the Commission to recommend the
imposition of provisional safeguard measures. At its Session No. 181 held on 9
September 1999, the Commission decided to initiate a safeguards investigation
against imports of wheat, wheat flour, sugar and edible vegetable oils.15 Imports
of sugar, however, are not part of the present dispute. The decision to initiate
is contained in Minutes of Session No. 181 of the Commission. The notice of
initiation of the investigation was published in the Official Journal of the
Republic of Chile on 29 September 1999 and notified to the WTO on 25 October
1999.16 Accordingly, the investigation was initiated on 30 September 1999.
2.10 At its Session No. 185 held on 22 October 1999, the
Commission decided to recommend to the President of the Republic the imposition
of provisional safeguard measures. The Commission's recommendations are
contained in its Minutes of Session No. 185. Upon the recommendation of the
Commission, the President through the Ministry of Finance imposed provisional
safeguard measures on imports of wheat, wheat flour and edible vegetable oils by
Exempt Decree No. 339 of 26 November 1999.17 Chile made an advance notification of
these measures on 2 November 1999.18 The provisional safeguard measure consisted
of an ad valorem tariff surcharge, corresponding to the difference
between the general tariff added to the ad valorem equivalent of the
specific duty determined by the PBS and the bound tariff in the WTO for these
products.
2.11 At its Session No. 189 on 25 November 1999, the
Commission held a public hearing in order to receive the views of the interested
parties in the safeguards investigation. The arguments of the parties are
annexed to its Minutes of Session No. 189. At its Session No. 193 held on 7
January 2000, the Commission recommended the imposition of definitive safeguard
measures. The recommendations of the Commission are contained in Minutes of
Session No. 193. On 18 January 2000, Chile notified the WTO of the finding by
the Commission of threat of injury to its domestic industry for products subject
to the Chilean price band system, and of that Commission's recommendation to the
President of Chile to impose definitive safeguard measures.19
2.12 On 22 January 2000, Exempt Decree No. 9 of the Ministry
of Finance of Chile was published in the Official Journal, imposing definitive
safeguard measures for one year on imports of wheat, wheat flour and edible
vegetable oils. As in the case of the provisional measures, the definitive
measures consisted, for each import transaction, of an "ad valorem tariff
surcharge, corresponding to the difference between the general tariff added to
the ad valorem equivalent of the specific duty determined by the
mechanism set out in Article 12 of Law 18.525 [i.e., the PBS] - and its relevant
annual implementing decrees - and the level bound in the WTO for these
products".20
3. Extension of the safeguard measures
2.13 By Order No. 792 of 10 October 2000, the Chilean
Ministry of Agriculture requested the Commission to consider an extension of the
definitive safeguard measures imposed by Exempt Decree No. 9 of the Ministry of
Finance of Chile on imports of wheat, wheat flour and edible vegetable oils. At
its Session No. 222 held on 3 November 2000, the Commission decided to initiate
a procedure for the purpose of deciding whether to extend the definitive
safeguard measures. The notice of initiation was published on 4 November 2000.
At its Session No. 223 on 13 November 2000, the Commission held a public
hearing. The details of the hearing are contained in its Minutes of Session No.
223.
2.14 At its Session No. 224 held on 17 November 2000, the
Commission decided to recommend the extension of the definitive safeguard
measures established by Exempt Decree No. 9 of the Ministry of Finance. The
decision of the Commission is contained in Minutes of Session No. 224. Further
to this decision, the extension of the safeguard measures was imposed by Exempt
Decree No. 349 of the Ministry of Finance of 25 November 2000.21 This Decree
provides for an extension of the safeguard measures, as described in paragraph
2.12 above, for one year from the date of their expiry. In practice, they were
extended until 26 November 2001. Chile notified the WTO of the extension of the
measure on 11 December 2000.22
23
2.15 The extension measures for wheat and wheat flour were
withdrawn by Exempt Decree No. 244 of the Ministry of Finance published on 27
July 2001.24 The termination of these measures was notified to the WTO on 9 August
2001.25
III. PARTIES'REQUESTS FOR
FINDINGS AND RECOMENDATIONS
3.1 For the reasons put forward, Argentina requests
that the Panel:
� conclude that the Chilean PBS is inconsistent with
Article II.1(b) of the GATT 1994 and Article 4.2 of the Agreement on
Agriculture;
� find that the safeguards investigation and the
safeguard measures are inconsistent with Article XIX of the GATT 1994
and Articles 2, 3, 4, 5, 6 and 12 of the Agreement on Safeguards; and
� rule on all of the claims made so as to avoid any
unnecessary future proceedings if the findings are eventually
overturned, bearing in mind that the Appellate Body exercises procedural
economy.
3.2 In light of facts and law put forward, Chile
requests that the Panel:
� conclude that the PBS is in compliance with Article
II.1(b) of the GATT 1994 and Article 4.2 of the Agreement on
Agriculture;
� find that: (i) both the provisional and definitive
measures that are the subject of consultations and this procedure are
not in force; and (ii) the extension measures, the only ones in effect
at present, were not the subject of WTO consultations, and therefore
that the Panel should not rule on whether the measures in effect are
consistent with specific provisions of the WTO Agreements;
� in the event that the Panel considers that it can
rule on the consistency of the Chilean measures with Articles 2, 3, 4,
6, and 12 of the Agreement on Safeguards, as well as Article XIX of the
GATT 1994, conclude that these are in compliance with the aforementioned
Articles.
IV. ARGUMENTS OF THE PARTIES
-
ARGUMENTS RELATING TO CHILE'S PRICE BAND SYSTEM
1. Procedural arguments
(a) Burden of proof
4.1
Argentina refers to Article 3.8 of the DSU which
reads:
"In cases where there is an infringement of obligations
assumed under a covered agreement, the action is prima facie to
constitute a case of nullification or impairment. This means that there is
normally a presumption that a breach of the rules has an adverse impact on
other Members parties to that covered agreement, and in such cases, it shall
be up to the Member against whom the complaint has been brought to rebut the
charge."
4.2 As regards the alleged violation of Article II:1(b) of
the GATT 1994, Argentina claims that it has established a prima facie
case before the Panel by providing evidence and legal arguments that suffice
to demonstrate that the Chilean measure at issue (the PBS) is inconsistent with
Chile's obligations under Article II:1(b) of the GATT 1994. Consequently,
Argentina contends that Chile has acknowledged that it imposed duties in excess
of its tariff binding. Nor has it refuted the argument that the PBS potentially
violates Chile's commitments in its national schedule. As regards the alleged
violation of Article 4.2 of the Agreement on Agriculture, Argentina
claims that, by presenting legal arguments sufficient to demonstrate that the
Chilean measure under review (the PBS) is inconsistent with Chile's obligations
under Article 4.2 of the Agreement on Agriculture, since it is among the
"measures of the kind which have been required to be converted", it has once
again established a prima facie case before the Panel. Argentina contends
that, as in the case of Article II:1(b), Chile has not only failed to provide
any evidence or arguments to refute Argentina's claims, but on the contrary, it
has acknowledged that the PBS imposes a "levy" on "imports" which "varies"
according to the day of shipment.26
4.3
Argentina also claims that, given that Chile is
maintaining mandatory legislation contrary to the provisions of the Agreement,
there is a presumption of nullification or impairment of the rights accruing to
Argentina and it is therefore up to Chile to rebut the charge.27 Argentina further
alleges that the Chilean PBS does not qualify for any of the exceptions provided
for either in Article 5 (special safeguard provisions) or in Annex 5 of the
Agreement on Agriculture. As regards the special safeguard provisions in Article
5 of the Agreement on Agriculture, Argentina considers that the Chilean PBS does
not qualify for the Article 4.2 exception for two reasons: (i) the possibility
of invoking this special provision expired on 31 December 2000; (ii) even if the
provision were still valid, it would not apply, because Chile's Schedule does
not designate wheat, wheat flour and edible vegetable oils with the symbol "SSG"
(special safeguard) as required in Article 5.1.
4.4
Chile submits that Argentina has totally failed to
comply with its obligation to prove that the Chilean PBS constitutes a variable
levy or is otherwise inconsistent with Article 4.2 of the Agreement on
Agriculture.28
2. Substantive arguments
(a) Infringement of Article II:1(b) of the GATT 1994
4.5
Argentina makes two claims with respect to Article
II:1(b) of the GATT 1994:
4.6 The PBS as such violates Article II:1(b) of the GATT 1994
since its application has led Chile in specific cases to collect duties in
excess of the rates bound in its National Schedule No. VII
4.7 The PBS also violates Article II:1(b) of the GATT 1994
because, by its structure, design and mode of application, it potentially leads
to the application of specific duties in violation of the bound tariff of 31.5
per cent.29
(i) Whether the application of the PBS has led to customs
duties higher than bound tariffs
4.8
Argentina submits that the violation by Chile of its
obligations under Article II:1(b) of the GATT 1994 has been recognized by Chile
and proven in practice. In Argentina's view, whilst the possibility to exceed
the bound tariff is sufficient, in itself, to establish violation of Article
II:1(b), Chile has in fact imposed tariffs exceeding the bound rate since 1998
and has acknowledged doing so on several instances.30 In this regard, Argentina
refers to the meeting of the Committee on Agriculture of 24-25 June 1999 where
the representative of Chile stated that "in some cases, the applied tariff was
greater than the bound commitment."31
32 According to Argentina, this statement
constitutes an acknowledgement that Chile has violated its obligations under
Article II:1(b) of the GATT 1994.33 Argentina also refers to statements by Chile34
in the Dispute Settlement Body, to various documents relating to its safeguards
investigation35 as well as Chile's First Written Submission36 Additionally,
Argentina states that Chile has been systematically violating its WTO
commitments since 1998.37 Argentina claims that this repeated, successive and
consistent acknowledgement by Chile of its own violation, in particular during
the proceedings before this Panel, is more than sufficient for this Panel to
find that the PBS is inconsistent with Article II.1(b) of the GATT 1994.38 In
particular, Argentina contends that, contrary to what Chile claims39, Chile
imposed on Argentina effective ad valorem customs duties of up to 64.41
per cent for oils and 60.25 per cent for wheat flour, in violation of Article
II.1(b), as confirmed by the actual documentation processed by Chilean customs.40
Argentina considers that this confirms that violation is not merely a
theoretical possibility, but is something that actually occurred and that will
necessarily continue to occur if the system in force is maintained.41 If Chile
were to apply a specific duty whose ad valorem equivalent did not violate
its tariff binding, its acknowledgement, that "[t]he Government of Chile
therefore deliberately decided to allow the price band to operate at full
regime, failing to comply with its commitment"42 would, according to Argentina, be
absurd.43
4.9
Chile acknowledges that the total tariff applied to
imports of milling wheat has, on occasion, exceeded Chile's tariff binding under
the GATT 1947. Chile observes that with respect to the 1990-1995 period, this
happened during 1990 and 1991. Chile submits that the reasons why it exceeded
its tariff binding under the GATT 1947 can be found in the existence of
unforeseen circumstances which, at the time, caused a spectacular fall in the
price of imports of certain products included in the price band. Chile claims
that these circumstances were of so extraordinary a nature that Chile, at the
time, could not reasonably foresee that a situation in which it was forced to
exceed its tariff binding under the GATT 1947 - subsequently under the GATT 1994
- would recur. Chile stresses that these circumstances were not only
extraordinary for Chile, but for the other GATT contracting parties as well,
including Argentina and the third parties to this Panel. Indeed, Chile submits
these countries never filed a complaint to the effect that their rights under
the Treaty were being affected by the PBS nor did they challenge the system and
its operation during the Uruguay Round negotiations, in spite of their knowledge
that Chile had exceeded its bound tariff owing to force majeure.44
4.10
Argentina contends that Chile has not refuted
Argentina's allegations that it has actually exceeded its bound tariff, and
that, as its previous recognition in this respect in various WTO fora indicate,
Chile has not even tried to refute them. Argentina further submits that, added
to all this is the evidence that Chile itself has contributed to these
proceedings in its note dated 5 October 2001, in which its Permanent
Representative to the WTO provides a series of statistical tables as a
supplement to its reply to question 12(b) of the Panel. In Argentina's view,
these tables specifically show that in all of the monthly series for "other
wheat and meslin" (tariff heading 1001.90.00) from January 1998 to January 2001,
the Chilean Ministry of Finance itself confirms that Chilean Customs
systematically and continuously levied amounts ranging from 36.1 per cent to
67.1 per cent on average for the month of December 1999 on the totality of
imports from any WTO Member, exceeding its bound duty. Examining the same
submission by Chile with respect to edible vegetable oils, Argentina finds that
the figures indicate that the binding was systematically exceeded as from June
1999. Argentina submits that these figures reach as much as 70.8 per cent in
some instances, i.e. more than double Chile's binding under the WTO.45
(ii) Can the PBS as such lead to customs duties higher
than bound tariffs
4.11
Argentina claims that the PBS potentially violates
Article II:1(b) of the GATT 1994. Argentina argues that the obligation contained
in Article II:1(b) of the GATT has been clearly specified by GATT/WTO precedent.
In this regard, Argentina claims that it has been pointed out that, when a bound
tariff has been recorded in a Member's schedule, that bound tariff constitutes a
maximum limit of the duties that can legally be applied to products subject to
the binding or, in the circumstances of this case, the limit for the combination
of the normal customs duty and the specific duty applied in accordance with the
PBS.46 Furthermore, Argentina contends that the WTO obligation contained in
Article II:1(b) of the GATT is violated not only when, in a specific instance, a
higher rate than the bound tariff is in fact applied, but also when the
challenged measure is structured and designed in such a way as to make it
possible for situations to arise in which the bound tariff is exceeded.47 In
Argentina's view, the PBS, by its design, structure and mode of application, has
the capacity to cause Chile inevitably to violate its tariff binding.48
49
Argentina
states that, in cases in which the customs reference price for the day of
shipment is lower than a given level, the tariffs effectively applied by Chile
exceed the bound rate of 31.5 per cent.50 Argentina presents a mathematical
formulation of the working of the Chilean PBS which presumes that there are only
two relevant prices to be considered for the purposes of such an analysis, i.e.
the "transaction price" and the "reference price" and that these prices are, in
general, not equal. Argentina argues that its analysis51 shows that, when the
c.i.f. import price and the f.o.b. reference price for a given shipment are
below the price band floor beyond a point X (the "break even point"), the result
of applying the variable specific duty is to exceed the WTO bound ceiling. In
other words, Argentina explains, in order to demonstrate that the bound rate has
been exceeded, the specific duty must be converted into an ad valorem
tariff, for which purpose the c.i.f. import price appearing in the invoices is
used. Argentina argues that, at least in circumstances in which the reference
price and the c.i.f. invoice price are below the break even point, the bound
tariff (31.5 per cent) will be exceeded by the sum of the general tariff (8 per
cent) and the specific price band tariff converted into an ad valorem
rate.52 Argentina further submits that the bound level would also be violated in
either of the two following situations: if the transaction price were equal to
the mentioned break even price and the reference price were lower than both, or
if the reference price were equal to the break even price and the transaction
price were lower than both.53 Consequently, Argentina argues, the lack of a
so-called "cap system", added to the discretion allowed in fixing the reference
price, means that in a low international price scenario, the effective level of
ad valorem equivalents levied can exceed the bound level in Chile's
National Schedule for the products subject to the band.54
4.12 In reference to the above55, Chile states that
Argentina acknowledges that the duty may be, and generally has been lower, than
Chile's bound tariff and that, in fact, when international prices are high, the
PBS may lower the import duty even as far as zero.56
4.13 In Argentina's view, the mandatory nature of the
Law and the decrees establishing the specific duties leave no alternative to
Chile's customs officials but to levy the duty which, depending on the price of
the goods, could potentially - at a certain price level - lead to a breach in
Chile's WTO obligations. Argentina affirms that neither Chilean law nor its
implementing regulations impose any limit that could prevent this from
happening. Argentina further asserts that the Law as such, being mandatory,
necessarily leads - in accordance with the fluctuation of international prices -
to the violation of tariff commitments.57 Argentina considers that Article XVI:4
of the Marrakesh Agreement Establishing the World Trade Organization (the "WTO
Agreement") and GATT/WTO precedents confirm that legislative provisions as such,
however they may be applied in specific cases, can violate the provisions of the
GATT and the WTO.58 Argentina asserts that, regarding what Chile stated in the
DSB, it is important to point out that unilateral statements by Members in the
context of a dispute settlement proceeding have legal effects. In support of
this statement, Argentina cites the case United States - Sections 301-310 of
the Trade Act of 1974.59 According to Argentina, the acknowledgement by Chile
that the bound rate has been exceeded proves that even if Article 12 of Law
18.525 were to be interpreted as not being mandatory, but as granting
discretionary powers to the Executive, it would nevertheless have to be
considered inconsistent with Article II:1(b) of the GATT 1994.60
4.14
Chile argues that paragraph (a) of Article II:1 of
the GATT lays down a general prohibition on granting to imports treatment less
favourable than that provided in the Member's Schedule. Paragraph (b), Chile
says, "prohibits a specific kind of practice that will always be inconsistent
with paragraph (a): that is, the application of ordinary customs duties in
excess of those provided for in the Schedule".61 In Chile's view, Article II
simply acts as a ceiling for customs duties so that Members are obliged to
refrain from imposing import duties or other import charges that exceed the
tariff commitments a Member has fixed in its own Schedule. Chile contends
that specific tariff systems are not inconsistent with the obligations laid down
in Article II:1(b) of the GATT. In reference to the Appellate Body's ruling in
Argentina - Footwear (EC), Chile concludes that the sole fact that a PBS
imposes a specific import duty as well as an 8 per cent ad valorem duty
(and in some instances a reduced ad valorem duty), does not mean that the
Law is inconsistent with the obligation under Article II:1(b). As long as the
Chilean PBS involves the application of a tariff duty which, when translated
into ad valorem terms does not exceed Chile's commitment to 31.5 per
cent, the PBS, in Chile's view, is not inconsistent with the obligations under
Article II:1(b).62 Thus, Chile contends, so long as the rate of duty applied is
at, or below, the bound rate, Article II does not prohibit the application of
any rate of duty, whether expressed in specific or ad valorem terms, or
some combination of specific and ad valorem terms. Chile further claims
that Article II does not prevent a party from changing the rate of duty that is
applied, provided that the bound ceiling rate is respected.63
4.15 Argentina claims that, contrary to the above64, it in
no way it questions Chile's right to apply specific duties on its imports.
Argentina explains that what it is saying is that the PBS inevitably leads to
the possibility of levying duties in excess of Chile's tariff binding, and this
is in fact what happened.65 Argentina further clarifies that the Chilean
PBS is not a specific duty. In Argentina's view, we are not dealing with a
specific duty which constitutes an "ordinary customs duty" - a duty which, since
it does not result in the levying of duties in excess of the bound rate, would
not be the subject of a complaint by Argentina with respect to Article II:1(b)
of the GATT 1994. Argentina considers that the PBS is a surcharge whose
structure, design and mode of application potentially leads to a violation of
Chile's binding.66
4.16
Argentina considers that it is neither the
intentions or the declarations of Chile with respect to its readiness to obtain
a waiver nor the issue of whether or not it deliberately permitted the
full-scale application of the price band that the Panel should be evaluating.
Rather, in Argentina's view, what counts in determining consistency or
inconsistency is whether by its structure and design, the system could cause
Chile to impose customs duties in excess of its tariff bindings in its National
Schedule. Argentina submits that the example given starting with paragraph 29 of
Argentina's First Written Submission, presented in graphic form in Annex ARG-12,
shows how the application of a reference price - set by the implementing
authority at its own discretion - in certain conditions (drop in international
prices) necessarily leads, in relation to the transaction price, to the bound
tariff being exceeded. Argentina claims that exceeding the bound tariff is not
merely a theoretical possibility, but a practical fact. Argentina reminds that
this is illustrated in Annexes ARG-14 and 15, and was recognized by Chile
itself. It further affirms that it could not be otherwise, since the system does
not have any safety mechanism against such violation (Article II.1(b)).67
4.17
Chile clarifies that the price bands operate in
accordance with the law. Chile contends that the WTO Agreements, including
Schedule VII, were approved by the Chilean Congress as a Law and with the
hierarchy of an international treaty. Therefore, Chile explains, the WTO
Agreements override existing law to the extent there is a conflict, and cannot
be amended by future law. Chile argues that, from a legal point of view, the
system cannot automatically exceed the bound rate.68 In response to a question of
the Panel, Chile explains that, as both the legislation governing the price band
and the Marrakesh Agreement Establishing the WTO with its annexed Agreements,
are part of the Chilean legal order, the customs authorities are subject to that
order. Chile claims that there was no reason to presume that the duties
resulting from the application of the PBS would exceed the WTO tariff binding.69
To prevent this from happening again, it further explains, Chile has adopted a
new law that assures that the duties created under the PBS will not exceed
Chile's bound rates.70
4.18
Chile argues that its Government deliberately
decided to allow the price band to operate at full regime, failing to comply
with its commitment, in order to protect thousands of small-scale agricultural
producers with low incomes from an economic and social catastrophe. Chile adds
that its Government first informed its trade partners of the situation and
started informal consultations with the view to obtaining a waiver from Chile's
commitments under the WTO Agreements pursuant to Article IX of the WTO
Agreement. Chile claims that it adopted this course of action in order to give
temporary relief to producers who faced a financial crisis. According to Chile,
its major trade partners were opposed to the granting of such a waiver and
instead suggested that Chile should apply a safeguard or renegotiate the tariff
bound under Article XXVIII of the GATT 1994.71 Chile argues that this was when
Chile imposed a safeguard measure under Article XIX of the GATT and the
Agreement on Safeguards, which has been contested by Argentina. Chile then
claims that the above shows that Chile's failure to comply with its commitments
was not the result of the automatic functioning of the PBS but was the result of
a deliberate decision by its Government, which then did everything possible to
obtain the required legal backing in accordance with the WTO's relevant
provisions.72 Chile further argues that the situation at the root of the problem
was not of its but rather was due to the massive subsidization from some other
prominent countries.73
4.19 Argentina submits that Chile's argument to the
effect that Chile's failure to comply with its commitments was not the result of
the automatic functioning of the PBS but was the result of a deliberate decision
by its Government74, is incomprehensible because it is the system itself, by its
very structure and design, that automatically leads to the violation since it
lacks any safety mechanism against exceeding the bound rate. Argentina argues
that a customs official has no choice but to impose the duties established by
the system, regardless of whether the Chilean Government deliberately permits it
or not. And indeed, Argentina affirms, far from supporting Chile's attempt at
justification, the suggestion that this was the result of a deliberate decision
implies a further recognition that the Chilean Government maintains legislation
that is inconsistent with its WTO obligations.75 Argentina submits that the
continuation of the violation constitutes a flagrant breach by Chile of the
principle of pacta sunt servanda and of its international commitments and
that Chile is not meeting its WTO obligations in good faith.76 Whatever the case,
Argentina submits, the argument is irrelevant, since Chile has no way of
preventing the system, by its design and structure, from "automatically"
violating Article II.1(b) of the GATT 1994, regardless of whether it was
deliberate or not.77 In Argentina's view, the working of the PBS affects the
predictability of the tariff concessions negotiated by Chile during the Uruguay
Round and has been recognized as inconsistent with Article II:1(b) in various
GATT/WTO precedents.78
4.20 According to Chile, while the PBS formula may
appear complex, it is fully transparent and predictable. Chile submits that,
contrary to Argentina's claim79, there are no discretionary elements in the
calculation to enable manipulation of the duty or rebate by officials. Chile
argues that, contrary to assertions in some submissions, its PBS in no way
depends on or uses domestic prices, or transaction prices, or target prices of
any kind, to compute the duty or rebate. The objective of the system is to
moderate the effect on Chile's market of short-term violent fluctuations in the
international prices of these commodities. For this purpose, Chile claims, the
band follows over time the trend in international prices, and uses duties or
rebates.80 In its view, this series of monthly price averages (5 years means 60
monthly prices) is ranked, and the highest 25 per cent of the monthly prices is
disregarded, as well as the lowest 25 per cent of monthly prices. According to
Chile, this means that, in the descending list of average prices, the 16th
lowest monthly price and the 44th lowest monthly price constitute the f.o.b.
price for the ceiling and the floor, respectively. Chile explains that these two
f.o.b. prices are adjusted to present the band in terms of import cost. Such an
adjustment considers fixed and variable costs normally paid in import
transactions, such as transportation, unloading, customs duties, cost of opening
a letter of credit, interests, and ad valorem rate. For simplicity, Chile
explains, the annual decree that reports the band for each good contains a table
for a range of f.o.b. prices and their corresponding rebate or duty when they
fall outside the band. According to Chile, for the actual calculation of the
specific duty or rebate, the National Customs Authority reports on a weekly
basis the lowest price for the product quoted in a major commodity market
relevant for Chile. Chile explains that this price is the f.o.b. price to be
used in the table to determine the specific duty or rebate for all transactions
which shipment occurred in the same week. Chile maintains that when the exporter
decides to ship, he knows the duty or rebate. It is Chile's opinion that the
trends in international prices are necessarily transmitted to the band, though
smoothed over time. In this regard, Chile emphasizes that the band is determined
without regard to domestic or target prices, and without regard to the actual
transaction price, except in calculating the ad valorem (8 per cent)
duty.81
4.21
Argentina submits that Chile not only has not
refuted the formal demonstration submitted by Argentina of the potential
violation of the binding by the PBS or the arguments supporting that
demonstration but, that, on the contrary, it acknowledged this inconsistency of
the PBS with Article II:1(b) of the GATT 1994. Argentina refers to Chile's
replies to the Panel where, allegedly, Chile recognizes, in response to specific
questions, that the mode of calculation of the amount of the surcharge applied
by customs on top of the regular tariff of 8 per cent potentially leads to the
collection of an ad valorem equivalent in excess of the 31.5 per cent
binding.82 According to Argentina, it is therefore difficult to understand how
Chile can argue that when the WTO obligations entered into force it was unaware
that the PBS would cause it to exceed its tariff binding, given the system's
structure, design and mode of application.83
4.22 At the second substantive meeting, Chile
indicates that Chile's domestic measures have now been strengthened by Law
19.722 which makes explicit that there is such an automatic cap system that will
prevent recurrence of a breach of the binding in circumstances not justified
under WTO rules.84
4.23 Regarding the new legislation presented by Chile,
Argentina declares that it is not in position to confirm the precise content
of the Chilean exhibit given that Argentina does not have adequate information
to express a definitive view on this issue. On the other hand, Argentina argues,
the PBS has already caused nullification or impairment to Argentina and in this
regard Argentina wants to reserve its rights. Argentina submits that in case of
no ruling by the Panel, Chile could easily change its law. Additionally, in case
the Panel follows Argentina's suggestion and rules on the issues as reflected in
Argentina's request for the establishment of the Panel, the Panel's report will
have a normative value which Chile will have to take into account. Argentina
concludes that the new Chilean law, from Argentina's point of view, shows that
Chile acknowledges that its PBS violates Article II of GATT 1994.85
(iii) Article XIX as an exception to Article II of the
GATT 1994
4.24
Chile argues that Article XIX constitutes an
exception to the other WTO rules, including those in Article II of the GATT
1994.86 In particular, Chile contends that Article XIX explicitly provides that a
Member country "shall be free" to suspend an obligation or withdraw or modify a
concession where necessary to prevent or remedy serious injury.87 It submits that
Article XIX and the Agreement on Safeguards allow a temporary waiver of
concessions and the suspension of certain commitments. Chile claims that a
Member country that has adopted a safeguard measure under Article XIX and the
Agreement on Safeguards has not violated its commitments on tariff concessions
as long as the safeguard measure remains in force, which is currently the case
for Chile.88
4.25
Argentina submits that Chile's argument on Article
XIX of the GATT 1994 whereby this would provide Chile with a legal umbrella
enabling it to exceed the bound tariff, is erroneous from a legal point of view
and should be rejected by the Panel. Argentina does not deny that it is
theoretically possible, in applying a safeguard, to exceed the bound level,
since safeguards are applied as a temporary measure in emergency situations to
provide relief for the affected industry, subject to the requirements laid down
in the Agreement on Safeguards. However, Argentina goes on to explain that,
following the sequence of that Agreement, the bound rate may only legitimately
be exceeded once the requirements of the Agreement on Safeguards have been met,
and not in a case such as this one, where the bound level was exceeded before
the requirements for applying safeguards had been verified. Argentina contends
that the central issue in its claim in this respect is not the failure to comply
with Article XIX and the Agreement on Safeguards, but the violation of Article
II.1(b). It claims that the Panel will evaluate the consistency of the Chilean
safeguard measure with Article XIX and the Agreement on Safeguards at the
appropriate time. At this point, Argentina argues, the Panel is called upon to
rule on the inconsistency of the PBS with Article II.1(b). Argentina submits
that this is an independent claim, with a different and separate legal basis
from the safeguards claim, and happens to coincide for a limited period of time
with the period of application of the safeguards for certain products. As an
example, Argentina refers to the lifting by Chile of its safeguards on wheat and
wheat flour while maintaining its PBS which, by its design and structure,
potentially violates Chile's bound tariff. Argentina argues that, if one was to
follow Chile's argument, the safeguards would have to be maintained as long as
the PBS was in force, regardless of the requirements laid down in the Agreement
on Safeguards. Argentina further submits that, in case there should still be any
doubts, Chile acknowledged before the Committee on Safeguards itself that the
price bands as such were not safeguards.89
90
4.26 Argentina submits that safeguard measures are
emergency measures, which are applied only after each and every one of the
requirements laid down in Article XIX of the GATT 1994 and in the Agreement on
Safeguards has been met. Argentina contends that they are not measures that can
be applied to cover up or justify the violation of obligations arising from the
national schedules. In Argentina's view, it would be unthinkable for the Panel
even to consider such a possibility. Argentina submits that Chile is trying to
distort the content of the obligations imposed by Article XIX of the GATT 1994
and the Agreement on Safeguards.91
(b) Violation of Article 4.2 of the Agreement on
Agriculture
4.27
Argentina considers that the PBS, in addition to
violating the obligations contained in Article II:1(b) of the GATT 1994, is
inconsistent with Article 4.2 of the Agreement on Agriculture because by its
structure and design it lacks, as an instrument limiting access to markets, the
kind of transparency and predictability that only ordinary customs duties can
provide. Argentina submits that, in spite of the express prohibition contained
in Article 4.2 of the Agreement on Agriculture, Chile maintains a measure which
should have been tariffied and included in its Schedule.92
(i) Whether the PBS is a measure prohibited under Article
4.2 and should have been tariffied
4.28
Argentina argues that, prior to the negotiation of
the WTO Agreement on Agriculture, a number of countries used a wide variety of
non-tariff measures to limit imports of agricultural products. One of the most
important results of the negotiations was the agreement to "tariffy" these
measures - i.e. to prohibit the use of all non-tariff measures with respect to
agricultural products, and to require their replacement with bound tariffs. This
was achieved in Article 4.2 of the WTO Agreement on Agriculture.93 Argentina
claims that the scope of Article 4.2 of the Agreement on Agriculture is
all-inclusive and, therefore, no non-tariff measures of any kind can be
maintained. It explains that, although an illustrative list of non-tariff
measures is provided, in which variable levies are specifically included,
Article 4.2 of the Agreement on Agriculture also expressly covers "similar
border measures other than ordinary customs duties".94
4.29
Argentina claims that Chile could have tariffied its
non-tariff measures at the time of the Uruguay Round adopting a level of
protection higher than the current bound rate of 31.5 per cent. Since it did not
do so, it is in violation of Article 4.2 of the Agreement on Agriculture because
any variable duty applied on an agricultural product - regardless of its
"quantum" with respect to its binding - is inconsistent with Article 4.2, which
was designed precisely to avoid such a situation.95 Argentina submits that the
Chilean PBS fits perfectly into the category of measures that Article 4.2,
footnote 1, identifies as being as inconsistent with the obligations negotiated
under the Agreement on Agriculture.96 Argentina is therefore of the view that the
maintenance by Chile after the Uruguay Round of its mandatory legislation
imposing variable specific duties is inconsistent with its obligations under
Article 4.2 of the Agreement on Agriculture.97
4.30
Argentina submits that even if the PBS were not
considered a variable levy, it is a similar measure which should have been
tariffied by Chile. Article 4.2 of the Agreement on Agriculture expressly
prohibits the maintenance of "measures of the kind which have been required to
be converted into ordinary customs duties." Argentina argues that it is
precisely by reading the words "shall not maintain" and "of the kind" together
with the non-exhaustive list in the footnote that one arrives at the concept of
similar border measures that are not ordinary customs duties. Argentina explains
that this is what qualifies the PBS as something which should have been
tariffied in the Uruguay Round, which was not tariffied, which Chile continues
to maintain, and which it justifies by an interpretation of Article 4.2 and its
footnote that reduces the terms of the text to inutility (contrary to the
principle of effectiveness in treaty interpretation). Ultimately, Argentina
argues, both the text of the Article and the wording of the footnote aim to
cover a whole universe of measures which may not be identified and which do not
constitute ordinary customs duties.98
4.31
Chile considers that Argentina's argument that the
Chilean PBS was and is indisputably a variable levy, which not only might have
been tariffied but in fact had to be tariffied,99 is absurd and does not
correspond to the normal practice of negotiations among Members of the WTO. In
this regard, Chile argues that if there had been an intention to prohibit the
Chilean PBS, neither Argentina nor any other Member of the WTO put forward this
argument during the negotiations of the Agreement on Agriculture.100 Chile further
claims that Argentina's interpretation of Chile's obligations under the
Agreement on Agriculture differs totally from the interpretation which Argentina
itself has used in its actions and the interpretation of other Members of the
WTO when negotiating tariff schedules under the Agreement on Agriculture and
applying it. It considers that, for Argentina's argument to be valid, Argentina
would have to show not only that the Chilean price band is a "variable levy" or
"similar border measure", within the meaning of footnote 1, but also that
Article 4.2 prohibits such measures. Chile alleges that Argentina's argument
falls short on both points.101 In Chile's view, reading Article 4.2, including its
footnotes, in its context and in light of its object and purpose, it is clear
that Article 4.2 does not prohibit the Chilean PBS. Indeed, Chile explains,
Argentina and its supporters under Article 4.2 rely in their interpretation not
on the text that was negotiated and implemented, but rather on the agreement
that those countries appear now to wish they had negotiated.102
4.32
Chile submits that Article 4.2 is oddly phrased, and
the footnote uses terms such as "variable import levy" or "non-tariff measures
maintained by state enterprises" that are not defined and whose contours are not
immediately obvious. The text refers to "measures which have been required to be
converted into ordinary customs duties". In Chile's view, that text would
suggest that elsewhere in the WTO Agreements there is or was some provision that
requires the conversion and explains what has to be converted, but there is no
such provision elsewhere. However, Chile contends, the agreed Uruguay Round
tariff schedules, which were negotiated during and after the drafting of the
text of Article 4.2 and which entered into force at the same time as the
Agreement on Agriculture manifest the results of the "conversion" process.
Chile explains that these negotiations and the results of those negotiations are
relevant context in seeking to understand whether a particular measure is one of
the "kind which ha[s] been required to be converted into ordinary customs
duties." Chile notes that price band systems were not among the measures that in
the negotiations were required to be converted into ordinary customs duties.
Chile indicates that, while the European Communities did convert its variable
import levies into ordinary customs duties in the Uruguay Round negotiations,
the EC's conversion - and the acceptance of that conversion by other Members -
put in place a system that clearly still has a duty that varies by a formula.
Although the European Communities system is not at issue, Chile contends, that
system and its conversion was a central issue in the Uruguay Round negotiations,
and it is relevant in assessing the meaning of the less-than-crystal-clear words
of Article 4.2 that Members did not object to that system.103
4.33
Chile submits that, even if the contested law was
considered a variable levy or similar border measure, quod non, it is not
inconsistent with Article 4.2 of the Agreement on Agriculture. In Chile's view,
Article 4.2 prohibits "any measures of the kind which have been required to
converted into ordinary customs duties." Chile's price band mechanism is not a
measure of this type, and Chile is not barred from maintaining this measure.104
Chile argues that Article 4.2 does not prohibit measures that do not have to be
tariffied.105 In reference to the above tariffication argument by Argentina106, Chile
submits that the obligations in Article 4.2 relate only to non-tariff barriers
and that this is clearly stated in footnote 1, which specifically excludes
ordinary customs duties. According to Chile, the PBS only covers the payment of
customs duties. Moreover, Chile argues, it was not required to eliminate its PBS
nor to replace it by a bound duty system during the Uruguay Round. Chile claims
that it has maintained its PBS in an open and transparent fashion before, during
and after the Uruguay Round negotiations. Chile argues that, unlike the variable
levies in the EC, which were not bound and had to be replaced by bound duties,
the Chilean duties were bound at 35 per cent for the products affected by the
PBS, even before the Uruguay Round, and were quite openly bound at lower levels
as part of the Round after finalization of the Agreement on Agriculture. Hence,
in Chile's view, it was quite clear for the other Members at that time that
Chile was neither "tariffying" its PBS, nor eliminating or replacing it. On
these grounds, Chile considers that it is inexplicable why Argentina, more than
six years after the entry into force of the Uruguay Round Agreements, decided
that the Chilean PBS had suddenly become a variable levy that Chile should have
eliminated when the WTO Agreements entered into force.107
108
4.34 Chile considers that Article 4.2 is oddly phrased,
in that it appears to be cross-referencing some obligation or other agreement in
which measures had "been required" to be converted from measures of one type to
"ordinary duties". The odd syntax of Article 4.2, Chile claims, must be given
meaning. Chile notes that it would have been very easy, if negotiators had so
agreed, to write a prohibition of all non-tariff barriers. According to Chile,
however, that is manifestly not what was done, notwithstanding the current
arguments of Argentina and some third country participants. Indeed, to Chile's
regret in many respects, there is no such obligation or simple prohibition
elsewhere in the Agreement on Agriculture. Chile contends that the only place in
the Agreement in which tariffication is mentioned is in the agreed tariff
schedules of Members and in the Annex 5 reference to countries allowed to engage
in delayed tariffication.109
4.35
Chile claims that Argentina interprets Article 4.2
as containing a total prohibition against non-tariff barriers, including those
listed in footnote 1 and that such an interpretation is based on unsustainable
arguments, is excessively broad and is not justified in the light of the
principles of interpretation of treaties in the Vienna Convention on the Law of
Treaties (hereafter "the Vienna Convention"). In this regard, Chile refers to
Article 31 of the Vienna Convention and the principle of effectiveness, as
having been used by the Appellate Body. In this regard, Chile submits that
Argentina disregards the usual meaning of the terms of Article 4.2 in its
context and effectively ignores the qualifier that the measures that must not be
maintained or reverted to are "measures of the kind which have been required to
be converted into ordinary customs duties". Consequently, in Chile's view, not
only do all non-tariff measures of the kind described in footnote 1 not have to
be abolished, but only those of the kind that have been specified must be
converted into ordinary customs duties. Chile argues that the drafters did not
have the intention to include a total prohibition of non-tariff measures but,
instead, they introduce qualifying and limitative terms with the intention of
giving the Article the meaning that only measures of the kind which have been
required to be converted are prohibited.110
111
4.36
Chile explains that there is also no definition of
the "inclusive" terms of footnote 1, which is an odd mix of measures. Not all of
those measures are prohibited under any other rule of the WTO, though arguably
many were prohibited and many or most have been subject to abuses of various
sorts over the years. In these circumstances, Chile argues, it is particularly
important in trying to discern the meaning of Article 4.2 to examine the
contemporaneous practice in the tariff agreements of the Members and negotiators
in determining which measures were considered to be of the "type" which had to
have been converted, and which were not. Chile affirms that the intent cannot be
determined simply by looking at the bare words of individual "measures" listed
in footnote 1 to Article 4.2. For example, Chile explains that footnote 1 refers
to "non-tariff measures maintained through state-trading enterprises". Chile
considers that such a term, taken literally, could mean any action of a state
agency or state-owned enterprise. In Chile's view, however, it is obvious that
Members did not have to convert all their state enterprise activities into
tariffs, nor did they have to abolish those enterprises or activities or convert
them into ordinary customs duties. Chile claims that such a broad reading was
not intended derives knowledge from the contemporaneous conduct of the
negotiators. Similarly, Chile argues, it is evident that neither Chile, nor,
insofar as Chile is aware, any other Member was required or even urged to
"convert" a PBS. Chile contends that these measures were at all times openly and
transparently maintained, but, because they were not non-tariff barriers, they
were not required to be converted into some new form of ordinary duties.112
4.37 Chile notes that Article 4.2 is different from other
obligations not only in its peculiar syntax, which it claims must be given
meaning, but because the conversion process involved a privilege as well as an
obligation. Chile argues that measures that were properly subject to Article 4.2
were not simply required to be eliminated or modified, as in ordinary WTO rules,
but that, instead, the requirement was to change the form of the trade
restriction from a non-tariff barrier to a tariff barrier. Chile claims that,
together with the "requirement" to remove certain measures, came the right to
increase duties without compensation to other trading partners, even if the
duties had been bound at a lower level. Chile argues that the tariff rate quotas
that were allowed, at tariffs often enormously higher than previous bound rates,
have frequently proven to be scarcely less effective protection than the
non-tariff barriers they replaced. Chile claims that this element of privilege
was even greater, considering that many of the measures that were required to be
converted were at risk of being found inconsistent with GATT rules or losing
privileged waivers. Chile concludes that there was little or no incentive to
refuse to "convert" a measure, if that had been believed to be legally
"required", since conversion carried the privilege of substantially raising
duties on the "converted" product, without the need to compensate trading
partners, as is normally required under Article II and Article XXVIII. Chile
states that, having waited, Argentina is now saying that Chile must eliminate
the PBS because it is banned by Article 4.2, but it is also saying that it is
too late for Chile to get the offsetting benefit of increasing its tariffs.
Chile contends that such an argument cannot be sustained. Chile claims that the
reason why Chile did not convert its price band mechanism was and is that
Article 4.2 did not require such a conversion and certainly does not now require
simple elimination of the price band without tariffication. While Argentina and
others may have wanted to negotiate a ban that would have included price band
systems, that was not what was agreed.113
4.38
Chile submits that the unusual use of the present
perfect tense - "have been required" - can be easily understood in the context
of the agricultural negotiations during the Uruguay Round. Chile argues that
Article 4.2 logically refers to measures of the kind which, at the time the WTO
entered into force, "have been required" to be converted. This was not the case
for the price bands of Chile and other countries. In this regard, Chile claims
that it was not required and would not be required to convert its PBS because it
already operated as a tariff and not as a non-tariff measure, and was therefore
already subject to binding in accordance with Article II.114 Chile refers to
Article 31.3(b) of the Vienna Convention which provides that "Any subsequent
practice in the application of the treaty which establishes the agreement of the
parties regarding its interpretation shall be taken into account, together with
the context" when interpreting its terms. In this regard, Chile refers to the
interpretation by the Appellate Body of the "essence" of such subsequent
practice whereby this lies in a "'concordant, common and consistent' sequence of
acts or pronouncements which is sufficient to establish a discernable pattern
implying the agreement of the parties regarding its interpretation".115 Chile
considers that the subsequent practice supports Chile's position as regards
Article 4.2. In Chile's view, this subsequent practice convincingly shows that,
despite the Members' intention to reduce the number of non-tariff barriers and
other measures covered, their intention was not to prohibit all such measures.
Chile goes further to argue that the first evidence of State practice is
precisely the Chilean PBS which was implemented in the 1980s and is still in
place today. Chile notes that Argentina's first written submission does not
refer to any record of the negotiations of the Agreement on Agriculture that
proves that Chile was asked to convert its price bands into tariff measures.
Chile therefore concludes that the system was not a measure of the kind "which
have been required to be converted" in order to allow Chile to sign the WTO
Agreements. Chile submits that, in addition to the Chilean PBS, there are other
systems with duties that vary according to external factors and some that common
sense leads one to equate with variable levies, and which are not required to be
converted into a fixed tariff regime. In this regard, Chile refers to
Argentina's customs duty on sugar imports116 and to the EU current duty system on
imports of wheat and other cereals.117 In Chile's view, this evidence of practices
by States is not confined simply to countries that import agricultural products
but also includes major agricultural exporters. In Chile's opinion, it is
possible that many agricultural exporting countries might initially have wished
to prohibit all levies that fluctuated or varied for any reason and some Members
certainly envisaged the possibility of exerting pressure to impose this
interpretation of Article 4.2 during the tariff negotiations that accompanied
negotiations on the text of the Agreement on Agriculture. Nevertheless, Chile
argues, irrespective of the original negotiating goals of some of the Members,
the prohibition now claimed by Argentina was not agreed. Chile further notes
that the agricultural exporters did not wish to eliminate the Chilean PBS as a
whole because it is transparent and predictable and can result in the
application of duties lower than the bound tariff. Chile concludes by saying
that this evidence of State practice (and consequently of the general context of
Article 4.2) is "concordant, common and consistent" not only with the ordinary
meaning of the terms contained in Article 4.2, but also with the objective and
purpose of this Article.118
4.39
Chile contends that the object and purpose of the
Agreement on Agriculture is consistent with Chile's interpretation of Article
4.2. This object and purpose, Chile claims, can easily be seen in its
provisions, including the Preamble, and in the structure and outcome of the
negotiations on agriculture during the Uruguay Round. The Preamble to the
Agreement on Agriculture starts by indicating that Members have decided "to
establish a basis for initiating a process of reform of trade in agriculture in
line with the objectives of the negotiations as set out in the Punta del Este
Declaration". It continues by "Recalling" that the "long-term" objectives of the
process include "a fair and market-oriented agricultural trading system" and
"substantial progressive reductions in agricultural support and protection
sustained over an agreed period of time". One apparently more short-term
commitment is "to achieving specific binding commitments" in several areas,
including "market access". Chile also refers to the Punta del Este Ministerial
Declaration as it fixes the goals for the forthcoming negotiations on
agriculture.119 In Chile's view, it is obvious that the object and purpose of the
Uruguay Round negotiations was to reduce barriers to trade in agricultural
products, while at the same time acknowledging that it would be a long-term
process. It further notes that Article 20 of the Agreement on Agriculture
underlines this by calling for negotiations to continue the reform process and
stating that further commitments will be necessary to achieve the long-term
objectives envisaged in the Preamble. Argentina's interpretation of Article 4.2,
Chile claims, is not in harmony with this object and purpose. In this regard,
Chile argues that Argentina suggests that, Chile could have raised its tariff
protection for the products in question through tariffication, which is contrary
to Chile's decision to lower the tariff.120 Furthermore, it claims that Argentina
appears to believe that Chile should have applied a single invariable duty on
all imports. Chile contends that the result would undoubtedly be less
liberalization of trade than that currently existing under the PBS, in which the
tariff usually applied is much lower than the bound tariff that Chile has the
right to apply.121
4.40
Argentina submits that, contrary to what Chile
argues, Article 4.2 and its footnote No. 1 are not open to different
interpretations, as this would be contrary to the interpretation of treaties in
accordance with the Vienna Convention. In Argentina's view, an interpretation of
the text as well as the context, object and purpose of the Agreement indicates
that mechanisms such as the price band are clearly covered by the said Article .
In other words, even if the PBS were not considered to be a variable levy, it is
clearly a similar border measure regulated by Article 4.2 of the Agreement on
Agriculture which constitutes a "lex specialis" vis-�-vis the GATT
1994. Argentina considers that the determining criterion for the inclusion of
these mechanisms among the measures which have been required to be converted
into ordinary customs duties does not, and cannot be an exhaustive list of the
different schemes. Argentina contends that this is due to the obvious
impossibility of listing all of the measures which, by their nature, are
infinite, since they depend exclusively on human ingenuity in designing any
non-tariff barrier.122
4.41
Argentina argues that an intelligent interpretation
of Article 4.2 of the Agreement on Agriculture must also take account of the
principle of effectiveness (ut res magis valeat quam pereat), a
fundamental principle in the interpretation of treaties which forms part of the
general rule of interpretation laid down in Article 31 of the Vienna Convention.
Argentina submits that, in the framework of the WTO, this principle has been
upheld in the case US - Gasoline and has been recognized and applied
systematically in successive rulings of the Appellate Body.123 Argentina contends
that Article 4.2 of the Agreement on Agriculture would be without effectiveness
if one accepts Chile's interpretation that the PBS did not need to be tariffied
because Argentina did not challenge "the system and its operation during the
Uruguay Round negotiations".124 According to Argentina, applying the rule of
effectiveness to the interpretation of Article 4.2 of the Agreement on
Agriculture125 means ensuring that non-tariff measures - such as the Chilean price
band system - cannot be maintained or reverted to after the entry into force of
the Agreement. Consequently, Argentina argues, the only possible approach -
assuming an analysis based on the text, context, object and purpose of the
Agreement on Agriculture - is to analyse each case individually in terms of the
nature and the economic effects of the system as compared to the scenario of
ordinary customs duties, in order to determine which measures are covered by
footnote 1 to Article 4.2 of the Agreement on Agriculture. Argentina submits
that if the analysis of the nature and effects were not the right approach,
obligations such as "[M]embers shall not maintain, resort to or revert to �" and
the phrase in the footnote "� and similar border measures other than ordinary
customs duties �" would be pointless.126
4.42 As regards Chile's argument whereby the PBS is not a
variable levy, Argentina submits that anything that does not constitute
an ad valorem tariff, a specific duty or a combination of the two, cannot
under any circumstances qualify as an ordinary customs duty. Consequently, in
Argentina's view, in accordance with the Agreement on Agriculture, if a measure
does not come under one of that Agreement's exceptions, it is inconsistent.
Argentina explains that the wording of Article 4.2 reflects the scope and
complexity of the entire range of distortionary measures that Members must
dismantle, refrain from reverting to in the future or refrain from maintaining
where they are inconsistent with the new obligations negotiated under the
Uruguay Round. The diversity of non-tariff measures to be dismantled and the
possibility of some of them not being dismantled following the conclusion of the
Uruguay Round is expressed in the word "shall not maintain". Argentina argues
that, had there not been the possibility that some of the measures "which have
been required to be converted into ordinary customs duties" would remain in
force after the Uruguay Round, the text would merely have stated "� shall not
resort to, or revert to". In Argentina's view, the words "shall not maintain"
only make sense where there is a possibility that a measure could remain in
force. Argentina further argues that, at the same time, the fact that Chile has
bound tariffs for certain products such as wheat, wheat flour and pure vegetable
oils in no way means that the PBS does not have to be tariffied, i.e. converted
into an ordinary customs duty, since the Chilean bound tariff was 35 per cent127
before the Uruguay Round, and was brought down to 31.5 per cent for those
products. Neither Chile's schedule of bindings prior to the Uruguay Round -
National Schedule No. VII - nor its schedule resulting from the Uruguay Round,
records the variable levy that Chile has applied and continues to apply. This is
contrary to the clear requirement in Article 4.2, which prohibits the
maintenance of "measures of the kind" which have been required to be converted
into ordinary customs duties.128
4.43 Chile claims that there are logical economic policy
reasons why the price band system or other systems with "duties that vary" were
not prohibited under Article 4.2. Chile submits that the only trade restrictive
effect of the price band system is caused by the imposition of a duty. Since
under the rules of the GATT, Chile's obligation is to respect its tariff
binding, Chile could honour this obligation by applying its duty at the bound
level of 31.5 per cent at all times. Instead, Chile applies a price band system
in which the applied duty is usually below the bound rate, and can even be zero.
Chile refers to Argentina's argument that the Chilean PBS has additional
restrictive effects other than the duties because of the system's alleged
complexity and lack of transparency and predictability. Chile notes that its
system for varying the duties applied within the bound cap is still less
restrictive of trade than if Chile applied its duties at the bound rate. Chile
contends that there is no requirement that a duty system be simple and there is
no prohibition on variation, so long as the bound level is respected.129
4.44
Chile submits that it is not arguing that the only
measures prohibited by Article 4.2 are those that were in fact converted into
ordinary customs duties. Chile contends that the fact that PBS duties were not
converted and were not requested to be converted is another supporting
indication that the Chilean PBS is not a measure of the kind that had been
required to be. Chile submits that, where the scope of a term is in doubt, as is
the case with the term "variable import levies", it is particularly important to
examine context and negotiating history. Chile also notes that it had no
incentive to maintain a measure that could be converted, because the conversion
process included the right to raise bound duties to account for the price
effects of those non-tariff barriers that had to be converted.130
4.45
Chile submits that, in the event that the Panel had
any doubts over the correct interpretation of Article 4.2, the legal principle
in dubio mitius, which the Appellate Body has endorsed, would suggest
that vagueness and ambiguity should not be resolved against Chile, but rather
against the complaining party that seeks to invalidate Chile's long standing
system. Chile submits that the principle of in dubio mitius holds that
"[i]f the meaning of a term is ambiguous, that meaning is to be preferred
which is less onerous to the party assuming an obligation, or which interferes
less with the territorial and personal supremacy of a party, or involves less
general restrictions upon the parties."131 Chile considers that its PBS is
consistent with Article 4.2 by any reasonable interpretation, applying the rules
of interpretation of the Vienna Convention, but this interpretive principle
lends further force to that conclusion.132
4.46
Argentina contends that Chile erroneously invokes
the principle of in dubio mitius to deprive the obligation contained in
Article 4.2 of the Agreement on Agriculture of its content, when that principle
- as defined by the Appellate Body133 - is only relevant as a supplementary means
of interpretation, to which there is no need to resort in this case.134 Argentina
explains that Chile does this by shifting the responsibility for requiring it to
convert its system into a tariff to the complainant. It adds that the obligation
not to maintain a measure that is incompatible with its WTO obligations rests
with Chile (Article XVI.4 of the WTO Agreement). Argentina having provided
sufficient evidence to prove that the Chilean PBS is a "variable levy" or a
"similar measure", in the absence of any rebuttal by Chile, there is no reason
to resort to a supplementary means of interpretation (in dubio mitius)
when Article 31 of the Vienna Convention suffices to clarify the meaning of the
provision (Article 4.2 of the Agreement on Agriculture: prohibition to
maintain), and to apply it to the facts of the case. In other words, the PBS is
included among the "measures of the kind" which have been required to be
converted into ordinary customs duties precisely because it is a "variable levy"
or "similar measure".135
(ii) Whether the PBS is a variable levy or a similar
border measure
4.47
Argentina argues that the term "variable levies"
means "complex systems of import surcharges intended to ensure that the price of
a product on the domestic market remains unchanged regardless of price
fluctuations in exporting countries".136 With this definition in mind, Argentina
considers that the Chilean PBS unquestionably applies variable levies on imports
of wheat, wheat flour and edible vegetable oils. Argentina explains that, when
the Chilean customs reference price is lower than the floor of the price band,
the shipment is subject to a variable specific duty (in addition to the customs
duty normally applied) amounting to the difference between the price band floor
and the f.o.b. reference price provided by customs for the day on which the bill
of lading of the imported goods in question was issued. The percentage of such
duties applied to each shipment would vary according to the c.i.f. price.137 The
nature of the PBS as a variable tariff, in Argentina's view, is recognized by
the WTO Secretariat's 1997 Report on Trade Policy Review of Chile, where it is
said that "[t]he price stabilization mechanism works as a variable levy since
the duty imposed on these goods varies according to their import price."138
139 Argentina further submits that Chile itself has admitted that its system imposes
a "levy" on "imports" which "varies" according to the day of shipment.140
Consequently, Argentina claims, it is a variable import levy.141
4.48
Argentina initially argues that, since, in the PBS,
a specific duty is a variable which depends on the relationship between domestic
prices and export prices, the system defines the specific duty (variable in
accordance with the f.o.b. reference price of the day) to be applied for each
shipment. According to Argentina,this results in a different tariff for each
shipment that was sought to be eliminated via the tariffication process of the
Uruguay Round for agricultural products. It is Argentina's view that, under the
PBS, Chile imposes more than "ordinary customs duties". Argentina alleges that,
on shipments whose price is below the floor of the price band, Chile imposes a
border adjustment measure which is a form of variable tariff. Argentina argues
that, regardless of what a Member might choose to call its border adjustment
measure, that measure is prohibited if it is anything other than "ordinary
customs duties".142
4.49
Chile argues that the Agreement on Agriculture does
not contain any definition of what is meant by variable levy nor is there any
definition elsewhere in the WTO. Chile considers that it is apparent that it is
not sufficient simply to say that any levy that varies is a "variable levy",
because all levies in one sense or another vary. In Chile's view, a uniform
specific duty varies when measured in ad valorem terms, and an ad
valorem duty by definition produces a different specific rate of duty,
dependent on the value of a product.143 Chile further claims that the definition
used by Argentina144 is based on a commentator's views and does not actually
support Argentina's position either. Chile argues that its price band mechanism
does not keep the domestic market price unchanged, nor is it intended or
designed to do so. Rather, it continues, Chile's system is designed to moderate
the effect of fluctuations in international prices on the Chilean market.145 Chile
submits that, in its PBS, the critical variable is the difference between world
prices at the time of shipment and world prices over the last five years.
Chile's domestic price plays no role in this formula, nor does the actual
transaction price of the product make any difference. Chile concludes that price
competition is possible, not only between products of different countries
imported into Chile, but also between imports and Chilean products.146
4.50 In response to the above argument by Argentina147, Chile
argues that the tariff does vary according to the date of export, but does
not vary according to the shipment (for example, even if the transaction prices
are different, two shipments exported on the same date will have to pay the same
import duty in Chile). Chile further argues that nowhere is it stated that a
tariff measure becomes a "variable levy" simply because the tariff level varies
frequently.148 Chile also indicates that Argentina omitted to mention certain
critical aspects of the texts in question and their application.149 As regards
Argentina's argument that the WTO itself has recognized that the PBS is a
variable levy,150 Chile claims that the referred to report by the Secretariat for
the Trade Policy Review Mechanism (TPRM) only contains the opinions and
statements of the Secretariat, not those of the WTO, and reminds Argentina that
the opinions in the TPRM may not be used in dispute settlement procedures. In
addition, Chile indicates that, in the statement quoted by Argentina, the
Secretariat does not assert that the Chilean PBS is a variable levy but that it
"works as" a variable levy, because the levy varies according to the import
price.151
4.51 In response to Chile's argument that domestic prices are
not used, Argentina argues that nonetheless it is not within the WTO's
competence per se to provide for mechanisms which regulate or moderate
fluctuations in international prices.152 On the contrary, Argentina considers that
the primary objective of the WTO is confined - as regards access mechanisms - to
the promotion of transparent, non-distortionary, predictable systems that
contribute to the liberalization of trade. And indeed, the PBS is the very type
of mechanism which, since it lacks transparency and is distortionary and
unpredictable, conflicts with the Uruguay Round commitment not to maintain
"measures of the kind". In Argentina's view, all systems of variable levies have
similar characteristics and a similar objective, i.e. to preserve the domestic
market, to a greater or lesser extent, from the evolution of the international
market. As instruments, these mechanisms provide a minimum threshold of
protection which in some instances, as in the case of the bands, is virtually
impassable in situations where prices drop. Argentina argues that, here, it is
of little importance whether the threshold parameters are fixed on the basis of
a domestic target price or on the basis of representative averages from
international markets over the past years. According to Argentina, what is
important is to ensure that these mechanisms have the same transparency,
predictability and consequent effective access level as "ordinary customs
duties" would have provided".153
4.52
Chile submits that imports can in fact enter the
Chilean market at prices below the price band floor. According to Chile, there
are two situations in which this can happen: (i) Since the specific duties are
calculated in the middle of the year and are applied during the following year,
there are import cost components that can change during that period. For
example, Chile explains, international freight costs for the products may
decrease, sometimes rather sharply. Chile further alleges that, in some cases,
specific tariff headings are shipped at special prices, using ships that are
heading for Chile in any case, with or without cargo. Chile explains that,
similarly, there are trade operations carried out in better conditions than
those foreseen when establishing the weekly reference price, which means that
the import cost is also below the estimated price band floor. (ii) The effective
import price may possibly be lower than the reference price determined for the
date of a particular import and, consequently, the product may be charged a
lower specific duty upon entry, remaining below the price band floor.154
4.53 Chile considers that, going beyond the
incontrovertible fact that Chile applies a price band, it is essential to
understand that the PBS imposes a duty that varies only according to the date on
which the export took place, in accordance with the prevailing price on
international markets, and in relation to the levels of the same price over the
previous five years. Chile claims that the duty does not vary according to the
amount of the transaction or the corresponding invoice and does not change
either according to the domestic market price. Consequently, it is Chile's view
that the PBS does not in any way resemble a variable levy such as those imposed
by the old European Communities system for several years prior to the entry into
force of the Agreement on Agriculture; it is not similar either to minimum
import price schemes, which occasionally utilize duties in order to force a rise
in low import prices until they are comparable to the minimum domestic landed
price fixed. Chile contends that the differences between the PBS and the old
European Communities system are more than semantic. According to Chile, the PBS
does not act as a non-tariff barrier to prevent the import of goods whose price
is lower than the price under the band nor to force an increase in this price
until it reaches a certain domestic level.155
4.54
Argentina claims that Chile's submission makes a
partial and erroneous interpretation of the definition of a variable levy156
provided in Argentina's submission.157 Argentina asserts that the definition in
fact covers various elements that could be examined separately and that must be
interpreted as a single whole. The definition begins by recognizing that a
variable levy implies "complex systems of import surcharges". Argentina argues
that, in the specific case of the Chilean PBS, two elements of the definition
apply: complexity, and the imposition of variable levies in addition to
the general tariff. Moreover, any PBS presupposes the application of a levy in
addition to the general tariff (i.e. a surcharge) which varies, not with respect
to the transaction value but in accordance with some type of mathematical
relationship between the reference price fixed arbitrarily and some threshold
price or parameter. These elements alone are evidence enough of the complexity
of the system. Argentina explains that the third element of the definition,
namely ensuring "that the price of a product on the domestic market remains
unchanged", needs to be interpreted intelligently and in accordance with the
text of the definition (and the ultimate purpose of the provisions of the
Agreement on Agriculture). Specifically, in a low international prices scenario,
the distortionary effect of the Chilean PBS is reflected, in particular, in the
artificial change in the competition situation on the domestic market owing to
the fact that once the reference price of the system has been activated, the
domestic market becomes, to a large extent, impervious to price signals from the
international market.158
4.55
Chile submits that, if the term "variable levy" had
been intended to have the broad meaning urged by Argentina and certain third
parties, it is impossible to explain why Argentina would maintain a sugar import
system that is not distinguishable in any relevant way from the Chilean system
that Argentina is challenging. Further, Chile argues, it is impossible to
reconcile this attempt to stretch the meaning of "variable levy" with the
position adopted by WTO Members, including Argentina, Brazil and the United
States, in the Uruguay Round negotiations after the text on the Agreement on
Agriculture had been agreed. Recalling that Chile's system has been openly and
transparently in effect since 1983, Chile adds, it is inexplicable why WTO
Members raised no objection to the Chilean PBS and similar PBSs of other
countries without demanding tariffication or change. Chile explains that Members
accepted the system of the European Communities which clearly continues to levy
duties that vary with the difference between European Communities and world
prices. Chile contends that it is not arguing that a failure to challenge an
illegal measure at the first opportunity means that a WTO Member forfeits the
right ever to challenge that measure. However, Chile does contend that - in
interpreting a term of art like "variable levy" that is not defined in the
Agreement, -it is highly relevant to examine the conduct of the negotiators at
the time of the negotiations and in the implementation of those negotiations.
Chile submits that this context uniformly supports the view that the Chilean PBS
is not a variable levy within the meaning of footnote 1.159
4.56
Chile contests Argentina's suggestion that an
element of the test to determine whether a given import duty is a forbidden
variable levy might be the frequency or degree of changes in the tariff and the
complexity of the system.160 Chile contends that, aside from being vague and even
illogical, none of Argentina's suggested rules, definitions and tests is set out
in the Agreement on Agriculture or any other WTO agreement, and none of these
suggestions has any legal status. Chile submits that nothing in the WTO
prescribes how frequently an applied tariff can be changed or on what basis, so
long as the binding is respected. Chile considers that its system in fact is
transparent, and changes in the duty from week to week are normally modest,
based on a formula utilizzing objective criteria. However, Chile adds, neither
Article 4.2 nor its footnote requires that Chile's system meet these tests.161
4.57
Chile considers that an analysis of the relevant
provisions of the WTO according to the principles laid down in the Vienna
Convention shows that the Chilean PBS does not constitute a variable levy nor
any other form of non-tariff barrier within the meaning of Article 4.2.162 Chile
alleges that its PBS does not come within the scope of footnote 1 to Article 4.2
of the Agreement on Agriculture. In Chile's view, this is obvious because
footnote 1 does not include PBS. This omission, in Chile's view, cannot be
attributed to the fact that the concept of price bands was not understood at the
time of the negotiations on the Agreement on Agriculture since, on the contrary,
price bands were widely used in Latin America in 1994 and continue to be used
today. Chile claims that the negotiators in the WTO, Argentina in particular,
undoubtedly knew of such regimes and specifically decided not to include them
within the list of measures covered by footnote 1.163 Chile submits that the price
band is a specific tariff that fluctuates according to external factors. In
Chile's view, variable import levies are measures that were habitually used in
Europe, particularly in the EC, to oblige the price of imported products to rise
up to the level fixed by the EC. Chile explains that, typically, and sometimes
exclusively, there were no bound tariffs for products subject to variable levies
in the EC. According to Chile, the purpose of variable levies was in fact to
erect a virtually insurmountable barrier against imported products compared with
European like products so that exporters were unable to compete with the prices
in the European Communities and thereby undermine the EC's domestic price
support system.164 On those grounds, Chile claims that its PBS is nothing more than
an ordinary customs duty, with a rate that is adjusted to reflect the trend in
current world prices compared with world prices in the past. It further deduces
that a more competitive supplier would not lose his opportunity to win a larger
share of the market by offering lower prices, as was the case with the variable
levy schemes in Europe.165
4.58
Chile argues that, in reference to the example of
the EC's variable levies, unlike PBSs or other ordinary duties, a variable levy,
like other typical non-tariff barriers, removes any incentive to compete on
price in the products concerned. Chile submits that the special scope of
application of Article 4.2 reflects the consensus that existed among those
taking part in the negotiations on agriculture in the Uruguay Round that it was
necessary to discourage non-tariff barriers because they are less transparent
and give a higher and more unconditional level of protection than tariffs. Chile
claims that its PBS, however, imposes a specific tariff on certain agricultural
products. It further explains that, even though the duty applied varies, it does
not change according to the import price or the domestic market price in Chile,
but compensates for the difference between a representative global price and a
price fixed in the same way corresponding to the previous five years, deducting
maximum and minimum prices.166
4.59
Argentina submits that, the first step, according to
the procedure for interpretation laid down by the Vienna Convention , would be
to produce a textual definition of the concept of "variable levy", a definition
which, in Argentina's view, does have its importance as a means of defining the
scope of the obligations, and ensures that the literal meaning incorporates the
economic and commercial reality that the words are supposed to reflect.
Argentina contends that a variable levy can be defined textually as a customs
charge in the form of a levy, duty or fee which varies over time - in other
words, a duty applied by customs with an in-built pattern of variation based on
extraneous factors and which is designed to increase or reduce the isolation of
the domestic market. According to Argentina, in GATT/WTO terms, and from a legal
point of view based on a textual interpretation, the parameters defining the
variation of a levy must be extraneous to the transaction price or the physical
characteristics of the product, which are the elements of "ordinary customs
duties" par excellence. Argentina claims that an interpretation of the
words of Article 4.2 such as the one mentioned in the previous paragraphs is
supported by the Article's context, Article 4.1, and the title of the Article,
which refer, respectively, to the national schedules as the instrument in which
the commitments must be specified, i.e. the result of the tariffying and the
market access, which is ultimately what is affected by systems such as the PBS -
illegal under Article 4.2 because their effects are reflected in the greater or
lesser isolation they cause. Argentina submits that, if it is argued that a
textual and contextual basis is not sufficient to define a variable levy, one
should turn to the object and purpose of the provision, in accordance with
Article 31 of the Vienna Convention, i.e. making the rules and disciplines of
the GATT/WTO in the agricultural sector more effective.167
168
4.60 Argentina furthermore does not agree with Chile's
argument whereby it assimilates all variable levies with those applied by the
European Communities "at the time the negotiations were held".169 Argentina argues
that Chile's extensive comparison and contrast of its price band system with
that of the European Communities does not alter the fact that Chile's measure is
a variable levy which, like the EC's measure, is specifically designed to ensure
that local producers remain isolated from price competition from more efficient
foreign producers.170 Argentina claims that Chile, in differentiating its system
from the one applied by the European Communities (which would seem to be the
only definition that Chile accepts of a variable levy), defines its PBS exactly
as Argentina defines a variable levy in paragraph 53 of its first written
submission. In that paragraph, Argentina states, elaborating on the definition
of variable levies in paragraph 52, that it considers a variable levy to be "a
duty which varies in accordance with the export market price." Argentina argues
that, similarly, Chile maintains that "the Chilean PBS, however, imposes a
specific tariff on certain agricultural products. Even though the duty applied
varies, it does not change according to the import price or the domestic market
price in Chile, but compensates for the difference between a representative
global price (the price of hard red winter No. 2 f.o.b. from the Gulf
(United States)) and a price fixed in the same way corresponding to the previous
five years �".171 Argentina submits that this Chilean definition coincides
precisely with Argentina's definition of a variable levy. It further argues that
this definition by Chile reinforces the concept of variability of the levy. In
reference to paragraph 38 of Chile's written submission, Argentina claims that
Chile recognizes firstly that the levy varies, and secondly, that it varies at
least in accordance with Argentina's second observation concerning the concept
of a variable levy, i.e. in accordance with the export market price.172
4.61
Argentina contends that the test for determining
whether a PBS is or is not a measure of this kind begins with an analysis of the
characteristics in order to determine to what extent the particular
characteristics of variable levies (i.e. variability, application at the border,
and existence of determining extraneous factors) contributes to the objective of
ensuring greater or lesser isolation of the domestic market. Argentina argues
that, even if it were argued that the Chilean PBS is any way different from a
variable levy, it cannot be denied that it comprises the elements that are
common to that type of levy. Argentina claims that absolute identity is
certainly not required; what is required is a resemblance or similar nature, in
other words the mechanisms, structures and mode of application must resemble
each other. In Argentina's view, it is important to see whether the measure
under examination, in this case the Chilean PBS, fits with the final objective
of Article 4.2 of the Agreement on Agriculture and its footnote in particular,
and with the objective of tariffication of agriculture in general, in conformity
with the Agreement - i.e. to enhance transparency through the establishment of
tariffs that discipline agricultural trade and to improve the predictability of
such trade through "specific binding commitments" in the area of "market
access". Argentina submits that, if upon examining the most common elements of a
variable levy the PBS were considered to lack absolute identity and therefore
fall outside that category, the economic effects of the PBS surely constitute a
clear basis for determining the degree of "similarity" of the measure within the
meaning of footnote 1 to Article 4.2 of the Agreement on Agriculture.173
4.62
Chile submits that its PBS is not a "similar border
measure" because neither by its operation nor in its context is it similar to
the non-tariff barriers described in footnote 1, but rather it corresponds to
the category of measure which, in accordance with this footnote, fall outside
its scope174 Chile considers that footnote 1 makes explicit that "similar border
measures" do not include ordinary customs duties. Chile submits that the
Chilean price band mechanism restricts trade only through duties, and that these
duties do not operate as a minimum price system or other non-tariff barrier.
Rather, Chile explains, the PBS, like other ordinary duties, allows price
competition.175 Chile notes that, although the Agreement on Agriculture does not
define "ordinary customs duties", it is obvious that the PBS falls within the
term because it only imposes duties. In Chile's view, the system is subject to
the obligations in Article II of the GATT 1994, in the same way as all the other
products subject to a bound tariff as such. Chile argues that no waivers are
envisaged and conformity with the WTO Agreement is not due to any
agriculture-specific provision. Chile claims that, consequently, the most
reasonable interpretation of the text of footnote 1 is that the PBS is outside
the scope of the measures covered by the obligations in Article 4.2.176
4.63
Argentina argues against Chile's statement that "the
price band system � corresponds to the category of measure which, in accordance
with this footnote, fall outside its scope".177 Argentina contends that Chile fails
to identify the characteristics which would enable the PBS to be covered by the
exceptions in footnote 1 of Article 4.2 of the Agreement on Agriculture. It is
Argentina's understanding that Article 4.2 of the Agreement on Agriculture and
footnote 1 thereto expressly prohibit Members from maintaining, resorting to or
reverting to "any measures of the kind which have been required to be converted
into ordinary customs duties", establishing a limited number of exceptions in
the case of "special safeguard provisions" (Article 5), "special treatment with
respect to paragraph 2 of Article 4" (Annex 5), and "measures maintained under
balance-of-payments provisions or under other general, non-agriculture-specific
provisions of GATT 1994 or of the other multilateral trade agreements in Annex
1A to the WTO Agreement." In Argentina's view, the Chilean PBS does not meet the
requirements for being considered as a special safeguard measure under Annex 5
or Article 5 of the Agreement on Agriculture nor, clearly, is it a measure "�
maintained under balance-of-payments provisions". Nor can the PBS be covered by
the third hypothesis "� other general, non-agriculture-specific provisions of
GATT 1994", since the Chilean PBS is applied exclusively in the agricultural
sector. Thus, Argentina contests Chile's argument with respect to the PBS that
"no waivers are envisaged and conformity with the WTO Agreement is not due to
any agriculture-specific provision."178 Consequently, Argentina rejects Chile's
argument that " � the most reasonable interpretation of the text of footnote 1
is that the price band system is outside the scope of the measures covered by
the obligations in Article 4.2."179
180
4.64 In Chile's view, a "minimum import system" or a
"variable levy" might be considered a non-tariff measure insofar as the systems
could operate to exclude low-priced goods and preclude price competition.
However, Chile adds, it must be conceded that a prohibitive tariff has similar
effects, but clearly is not prohibited by Article 4.2. Thus, Chile concludes,
given the imprecision of the language of Article 4.2, it may be necessary, as
with other measures, to examine which of such measures were considered to be of
the type that required conversion into ordinary customs duties in the Uruguay
Round. Chile is not aware of any objective test of "similarity" within Article
4.2 or elsewhere in the WTO. In Chile's view, it seems probable that the
category of "similar border measures" was intended to capture measures that were
the same as those "required to be converted", but which were simply labelled
differently. Given the vagueness of the terms for those measures specifically
named and given the apparent absurdity of a literal or dictionary approach,
Chile considers that it is evident that a cautious approach is necessary, and
that it would be prudent to decide cases as narrowly as possible, rather than
attempting on the basis of a single dispute to enunciate broad rules not written
in the text and not agreed by the negotiators.181
4.65
Argentina contends that the essential features that
determine whether a measure is a "variable levy" or a "minimum import price"
basically relate to the effects of the measure. Argentina considers that the
basic effects of a variable levy or minimum import price, as well as any other
non-tariff measure within the meaning of Article 4.2 of the Agreement on
Agriculture, are lack of transparency and predictability and consequent
nullification or impairment of market access. In Argentina's view, the degree of
similarity must once again be analysed in terms of undesired economic effects
(mentioned in the reply to question 6(a)) which are present to a greater or
lesser degree in the case of all "measures of the kind which have been required
to be converted into ordinary customs duty", whether those listed specifically
in footnote 1 to Article 4.2 of the Agreement on Agriculture or those covered by
the concept of "similar border measures other than ordinary customs duties".182
4.66
Chile agrees that the mere fact that a duty may or
does vary does not mean that the duty is a prohibited variable levy. In Chile's
view, were the rule otherwise, a Member could never change its applied rate of
duty and indeed would have to offer guarantees that the applied rate would not
vary, independent of any binding. Obviously, Chile adds, there is nothing in any
WTO rule to suggest that whether a measure is a variable levy depends on the
scope and frequency of variation. Chile contends that, if it is accepted that
the purpose of Article 4.2 is to address non-tariff barriers, then it might be
considered that the defining characteristic should be whether the measure has
the effect of a quantitative limitation, in the way a minimum import price
system can effectively prevent imports of goods below a certain price. However,
Chile affirms, it must be conceded that there is no such test in the language of
the Agreement, and it is easy to demonstrate that the negotiators of the
Agreement on Agriculture allowed conversion into ordinary duties in a way that
is often prohibitive of any imports not within the preferential tariff rate
quota. Chile considers that, in such circumstances, it may be that the European
Communities are correct to say that the dispositive issue, at least in the case
of a measure whose restriction is accomplished through a customs duty, is
whether there is a ceiling binding, in which case the frequency, scope or
criteria for variability are irrelevant under Article 4.2.183
4.67
Argentina submits that an infringement of Article
4.2 of the Agreement on Agriculture is not contingent on whether or not the
bound tariff has been violated. It further states that if, as Chile claims, the
variability of a measure were irrelevant as long as the bound level was not
exceeded, Article 4.2 of the Agreement on Agriculture and its footnote would
lose their effectiveness in that the obligation would be limited exclusively to
the application of "cap" mechanisms to the different variable levy schemes,
making their mandatory tariffication as stipulated in Article 4.2 of the
Agreement on Agriculture unnecessary and rendering their operation immutable. In
Argentina's view, there is no legal justification whatsoever for such an
interpretation, which would in any case be absurd from an economic standpoint.
Argentina is of the opinion that Chile cannot disregard the value of certainty
in economics and trade and the inconvenience of having to deal with such
volatile access mechanisms as variable levies. Indeed, it says, the use of the
PBS is yet another factor of uncertainty, and compared with ordinary customs
duties which, as already stated184, are not subject to the variability of the
system at issue, it would add to the cost of any commercial planning scheme.185
4.68
Argentina submits that Chile has recognized that the
category "similar border measures" was included in footnote 1 to Article 4.2 of
the Agreement on Agriculture for the purposes of disciplining similar measures
to those which have been required to be converted, but which were labelled
differently.186 Argentina contends that this is exactly what the price band system
is. In Argentina's view, it is therefore contradictory for Chile to maintain, on
the one hand, that it is unaware of the existence of a similarity test for
categorising a measure as one of those which must be tariffied, while on the
other hand recognizing what that category includes.187
4.69
Argentina further contends that the only alternative
for defining whether a measure such as the PBS is a variable levy or a similar
border measure is to analyse the effects of the measure. Argentina submits that
this is so clear that Chile itself recognized it in its reply to question 6 of
the Panel, in which it states that a variable levy is a non-tariff measure
"insofar as the system operates to exclude low priced goods and preclude price
competition."188 In Argentina's view, this means that Chile upholds Argentina's
economic impact analysis criterion.189 As also upheld by Chile190, Argentina adds, the
PBS is designed to moderate the effects of international price fluctuations. It
is implemented through a system which avoids or moderates the effects of the
transmission191 of those prices to the domestic market, using as a trigger price or
a reference price for the application or calculation of the specific duties the
"lowest f.o.b. price for the product quoted in a major commodity market relevant
for Chile".192 According to Argentina, this shows that Chile expressly recognizes
that the PBS has effects other than those of an ordinary customs duty. Argentina
claims that this is because unlike the PBS, both ad valorem tariffs and
specific tariffs or a combination of the two always result in direct
transmission to the domestic market of changes in international prices.193
4.70 In Argentina's view, the most important aspects
of variable levies and other similar measures that are inconsistent with Article
4.2 are those that relate to the effect of their application, i.e. lack of
transparency, lack of predictability and consequent impairment. The Chilean
system incorporates all three of these characteristics, so that even if it is
not a variable levy, it at least constitutes a similar border measure.194 According
to Argentina, this is important because, in economic terms, these measures, as
opposed to ordinary customs duties result in undesirable effects. Argentina
explains that the PBS used by Chile is activated when the reference price fixed
by the implementing authority falls below a certain threshold parameter,
commonly known as the floor of the price band. According to Article 1 of the
decrees establishing the duties, the reference price is the lowest f.o.b. price
recorded for a given date in international markets representative of the
product. Argentina submits that the lack of clarity surrounding the methodology
for fixing the reference price, as illustrated in the paragraph of Chile's
submission containing a brief description of the system195, is evidence of the lack
of transparency in implementing the system.
4.71 As regards the lack of predictability, Argentina
contends that this is due to the fact that the level of the levies is not
determined according to the transaction price, but according to a reference
price of which the exporter has no knowledge until shortly before the
transaction takes place, since it is fixed at short intervals (on a weekly
basis). According to Argentina, this implies that a transaction price on the
market may, on a given date, be subject to a relatively low effective duty,
while on a subsequent date a higher effective duty, or even one that violates
the WTO bound level, may be applied for the same transaction value. Argentina
submits that this fact, although sufficient in itself to establish a violation
of Article 4.2, added to the fact that the PBS does not have any safety
mechanism (cap) to ensure that the bound level is not exceeded, illustrates that
the unpredictability in case of a significant fall in prices is total for the
purposes of efficient commercial planning With a cap, the unpredictability would
be partial. Argentina claims that, even assuming that the bound level is not
exceeded, the variability of the system increases with the liberalization of
trade in the sector. Consequently, Argentina concludes, we end up with an absurd
commercial situation in which the lower the customs duty, the lower the level of
predictability, since the level of variability of the system increases.
Argentina's view is that, contrary to what Chile claims in its first submission,
the Chilean PBS is distortionary, since the more competitive the price, the
higher the relative level of levies applied to each shipment. As a demonstration
of this statement, Argentina refers to its Annex ARG-37 which contains a chart
illustrating the relationship between the monthly average reference price fixed
by Chilean customs and the corresponding prices of edible vegetable oils of
Argentine origin. Argentina submits that this is particularly true for a
producer like Argentina whose prices are perfectly correlated with international
prices. Moreover, although Argentina is an efficient producer, the fact is that
the reference prices fixed by the Chilean authorities for almost all of the most
important products in terms of commercial value traded by Argentina are below
the f.o.b. quotations for shipments from Argentina. In other words, Argentina
affirms, the Chilean PBS ensures that the more efficient the exporter, the
greater the relative impact of tariff duties. In its view, this sort of
"competitive penalization" is even more regressive when international prices are
low.196
4.72
Argentina argues that the variability of the PBS
makes any effective commercial planning impossible owing to the unpredictability
factor. Argentina affirms that this is clearly reflected by a simple statistical
indicator such as the standard deviation coefficient, i.e. the ratio between the
standard deviation and the arithmetic mean, for the total effective level (as a
percentage over the transaction value) of duties applied to imports, measured on
the basis of monthly averages. Argentina explains that it has made an analysis
of the PBS variability on the basis of Chilean statistics for wheat products and
soya bean oil - in the case of wheat, for 1996/1997 and in the case of soya bean
oil, for the period 1996/1998. These years were selected because in none of
them, with the exception of 1998 for milling wheat, was the bound level of 31.5
per cent exceeded (or if so, only marginally). Argentina submits that the
comparison made on this basis reveals that for crude soya bean oil, the
deviation coefficient amounted to 28.5 per cent and 31.7 per cent for the years
1996 and 1997 - i.e. the variation of the total effective level of duties for
that product was, with respect to the arithmetic mean, 31.5per cent as a monthly
average for the mentioned period. With respect to milling wheat, the indicators
were 153.5 per cent, 27.5 per cent and 15.5 per cent respectively for 1996, 1997
and 1998. In other words, the variation of the total effective level of duty for
that product was, with respect to the arithmetic mean, 65.5 per cent on average.
These levels of variation, amounting to practically one-third against the annual
average in the case of oils and two-thirds in the case of milling wheat, result
exclusively from the operation of the PBS, since the effective level of ordinary
customs duties by definition does not vary, or if so, it varies with a frequency
that is totally predictable. Argentina explains that, if one adds to these
considerations the fact that, as explained at length in previous submissions,
the system lacks transparency, that the duties resulting from the PBS are fixed
at very frequent intervals (one week) and that the potential range of variation
is of 31.5 per cent ad valorem, only an extraordinarily audacious and
broad interpretation of the Agreement on Agriculture could include a system of
this nature among the "ordinary customs duties".197
4.73
Chile submits that, while Argentina has objected to
the frequency and degree of changes that Chile makes to its applied duties and
to the alleged complexity and lack of predictability and transparency of those
changes, none of those considerations change the character of the duties from
"ordinary customs duties". Further, far from being prejudicial to trade, it is
clear that, relative to maintenance of the duty at the bound ceiling rate, the
price band system duties result in less restrictive rather than more restrictive
treatment of imports.198
4.74
Chile disagrees with Argentina's claim that its PBS
affects trade security and predictability199 by stating that the Chilean formula is
totally transparent and on the day a product is shipped the duty is known.200
(iii) Distinction between variable levy or similar border
measure and ordinary customs duty
4.75 In Argentina's view, the criteria for
distinguishing between a "variable levy" or "similar border measure", within the
meaning of Article 4.2 of the Agreement on Agriculture, and an "ordinary customs
duty", are based on the fact that the application of an ordinary customs duty is
determined by the transaction price - ad valorem duty - or the physical
characteristics (weight/volume) - specific duty - or a combination of the two.
Ultimately, Argentina concludes, it is the economic effects - deriving from the
features of a variable levy or a similar border measure - which result in their
being given a legal status distinct from "ordinary customs duties".201
4.76
Argentina affirms that the term "ordinary customs
duties" within the meaning of Article II:1(b) of the GATT 1994 cannot at the
same time be considered "a measure of the kind which have been required to be
converted into ordinary customs duties" within the meaning of Article 4.2 of the
Agreement on Agriculture. Argentina considers that, in addition to listing
certain cases, by exclusion footnote 1 to that Article clearly defines "measures
of the kind which have been required to be converted into ordinary customs
duties" as "similar boarder measures other than ordinary customs duties". In
Argentina's view, the meaning of the term "ordinary customs duties" under
Article II:1(b) of the GATT 1994 and Article 4.2 of the Agreement on Agriculture
is the same. Argentina explains that there are no legal grounds whatsoever in
the texts of the WTO Agreements for contending that the same term, "ordinary
customs duties", must be interpreted differently. Argentina concludes that, in
the absence of any clear indication to the contrary, we must assume that the
identical terms reflect identical concepts. Argentina claims that "ordinary
customs duties" are those which by their nature are perfectly predictable and
transparent, and which owing to their total permeability to the international
market ensure competition in the domestic market. Argentina further specifies
that "ordinary customs duties" are ad valorem tariffs, specific duties or
a combination of the two. Argentina clarifies that a measure " � of the kind
which has been required to be converted into ordinary customs duties" can never,
by definition, constitute an "ordinary customs duty". Otherwise, Argentina adds,
one would be depriving Article 4.2 of the Agreement on Agriculture of its
effectiveness.202
4.77 In Argentina's view, "ordinary customs duties" in
the meaning of the first sentence of Article II:1(b) of the GATT 1994 are those
which, in their different forms (ad valorem duties, specific duties or a
combination of the two), set the maximum effective protection level permitted at
customs.203 Argentina contends that the concept of "ordinary customs duties"
applies to the means of levying customs duties which provide a degree of
certainty, stability and predictability. It further affirms that, under Article
II:1(b) of the GATT 1994, other duties or charges are merely those that do not
constitute "ordinary customs duties", such as the other duties or charges which
appear in columns 6 and 8 of the national schedules, as appropriate. "Other
duties or charges of any kind" within the meaning of Article II:1(b) of the GATT
1994, Argentina explains, cannot be considered as "similar border measures other
than ordinary customs duties". Argentina argues that the bound duty level for
what is considered to be "other duties and charges of any kind" is the rate
registered in that column. Consequently, Argentina concludes, that level is the
one to be considered in determining inconsistency with Article II:1(b) of the
GATT 1994, without prejudice to the consistency of other duties or charges with
other obligations under the GATT 1994.204
4.78 In Argentina's view, these levels of variability
are more akin to exchange quotations than to ordinary customs duties which, by
their nature do not vary (or at least vary in a totally predictable manner as in
the case of specific duties) and do not cause isolation from the international
market. Argentina stresses that the above estimates were made (with the
exception of 1998 for milling wheat) on the basis of the bound level not being
exceeded. Obviously, it concludes, the indicators are even more eloquent in the
case of series in which Article II:1(b) of the GATT 1994 was violated.205
4.79
Chile submits that there is no definition of
"ordinary" customs duties or of "other" duties and charges in any of the WTO
Agreements including the WTO Understanding on the Interpretation of Article
II:1(b). However, in Chile's view, it is not necessary for the resolution of
this dispute to develop a comprehensive rule for determining what assessments
might be "ordinary customs duties" as opposed to "other duties or charges".
Chile asserts that the tariffs resulting from the PBS are collected in the same
way and at the same time as other ordinary Chilean duties. Chile claims that it
has never listed the additional specific duties or the rebates from the ad
valorem duty as "other duty or charge", nor have any Members so treated the
Chilean PBS. In this dispute, Chile contends, Argentina's complaint is that the
PBS can result in a breach of Chile's bindings, not that the PBS is an "other"
charge that would be illegal in any manifestation or amount because it was never
scheduled as an "other" charge in accordance with the Uruguay Round
Understanding on the Interpretation of Article II:1(b). Chile submits that, if
the duties from a PBS could be regarded as an "other" duty or charge as opposed
to an ordinary customs duty, then Chile could have escaped any liability for any
of the system's mandatory effects merely by scheduling the PBS as an "other"
charge or duty, since Article II:1(b) and the Understanding permit "other"
duties or charges at any level, if they are the result of a mandatory system
properly scheduled as an other duty or charge. Had Chile attempted to do so, it
is certain, in Chile's view, that other Members would have challenged that
action in the WTO, and doubtless would have succeeded. However, Chile considers
that it properly never sought to claim that the PBS was an exempt other duty or
charge.
4.80
Chile considers that the measures listed in the
footnote to Article 4.2 are non-tariff measures, and therefore are unlikely to
involve "other duties or charges", except as an incidental aspect of the
non-tariff barrier. It is conceivable, Chile argues, that a minimum import price
system, which is one of the measures prohibited by Article 4.2, could be
enforced through a measure that might be considered an "other duty or charge"
under Article II:1(b).206 Chile notes that Article II has always prohibited new or
higher "other" duties and charges on bound products, but the Understanding on
Article II:1(b) created a more transparent and effective mechanism for
enforcement in regard to such charges. Chile contends that the prohibition
regarding other duties and charges for products subject to a binding is such
that, even if ordinary duties are applied at a rate below the bound rate, no new
or higher "other duty or charge" than that in effect on the scheduled date (or
pursuant to mandatory scheduled legislation) can be imposed on that product,
even if the amount involved would not, when added to the ordinary duty applied,
exceed the bound ordinary rate. In Chile's view, it is clear that in this
dispute Argentina has never complained that the PBS per se was an illegal
"other duty or charge," but rather has complained that the PBS can result in
ordinary duties in excess of the bound rate. Chile adds that its schedule is
consistent with this interpretation, in that the price band system was not
listed as an "other duty or charge".207
4.81
Chile submits that Argentina's suggested tests of
what is a permissible "ordinary customs duty" are not logical and would not
achieve the objectives of freer trade in agriculture. Chile argues that many, if
not most, protectionist non-tariff barriers are simple, transparent and highly
predictable whilst perfectly legal sanitary and phytosanitary measures and many
legal activities of state enterprises are far from transparent, simple or even
predictable. Chile considers that the degree of prejudice or trade restriction
caused by a duty is clearly not the basis for determining its legality. Chile
submits that a high duty applied at a high bound rate is legal, but damaging. It
further submits that the tariff rate quotas that Members were permitted to adopt
remain highly restrictive and prejudicial to the interests of export nations.208
4.82 Chile notes that the United States, as a third party
in the dispute, in response to the Panel questions has introduced argument for
the first time that the duties resulting from the price band system should be
considered "other" duties or charges" under Article II:1(b) and that these
duties should therefore be regarded as prohibited by the terms of Article
II:1(b) and the Understanding on the Interpretation of Article II:1(b).209 Chile
considers that it is correct that other duties and charges are flatly prohibited
unless scheduled in accordance with the Understanding. However, Chile submits,
the PBS is and always has been treated as an ordinary customs duty, subject to
the binding, and not an "other duty or charge."210 In Chile's view, it is clear
that all Members up to now have treated the PBS duties as ordinary customs
duties rather than "other" duties. Chile contends that neither Argentina nor any
other WTO Member (including the United States) has made this argument in the
nearly 20 years that Chile has maintained the price band system, and, of course,
Chile has never treated the price band system as an "other " duty or charge.
Chile submits that, had Chile inscribed the price band duties as an "other" duty
or charge within six months of entry into force of the Uruguay Round, then Chile
would have had the right pursuant to the Understanding to maintain the price
band system duties at any level, since Article II allows such "other" duties at
the level required by mandatory legislation that has been scheduled. Chile
concludes that, in that case, other WTO Members would surely have immediately
challenged Chile's attempt wrongly to obtain beneficial treatment for the PBS by
pretending that the PBS was an exempt "other duty".211
4.83
Chile argues that the Panel has ample basis to
reject the U.S. argument. In its view, in the absence of a definition of an
"ordinary customs duty" in the text of the WTO Agreements, the United States
attempts to invent one to serve its argument. Chile submits that the United
States bases its argument first on an English language dictionary of the word
"ordinary", which the dictionary defines as "regular, normal customary or
usual." In response to Panel questions, Chile points out that, in Spanish, the
terms used instead of ordinary or "ordinario" is "propiamente dicho". Chile
submits that the slightly different translation is indicative of a term of art,
though admittedly neither "ordinary" nor "propiamente dicho" is instructive
without considering the other elements of interpretation called for in the
Vienna Convention. Chile contests the United States' statement, allegedly
without authority, that what should be "regular, normal, customary or usual" is
the form of the customs duty. Chile considers that Article II:1(b) and
the Understanding do not speak of "forms" of customs duties and that the
"authority" claimed by the United States for this proposition is a baffling
reference to a Uruguay Round negotiating proposal that called for agreement to
express tariff equivalents in ad valorem or specific terms.212 Chile submits
that, even if the United States' argument were accepted that ordinary duties are
ad valorem, specific or a combination, the Chilean duty would still meet
the United States' definition of ordinary, since the Chilean duty is a
combination of an ad valorem and a specific duty. In the Chilean PBS, the
PBS duty, while calculated according to the PBS formula, is a specific duty per
unit of volume or weight of the product, which is added to (or rebated from) the
ad valorem duty. Chile concludes that unsupported United States (and
Argentine) assertions aside, there is nothing in the Article II:1(b) that limits
how a specific or ad valorem rate may be set, so long as the bound rate
is respected.213 Chile also contests the United States' argument whereby the
Chilean PBS is not an ordinary customs duty in the sense of Article II on
grounds of an alleged "lack of transparency and definiteness." Chile argues that
there is nothing in Article II that supports fabrication of such a test, which
is itself rather lacking in transparency and definiteness.214 Chile further argues
that the test is also illogical, since other duties now must be transparent, and
definite in the sense of the limitations on level provided in Article II. Chile
contends that it would be circular at best to say that by inscribing the nature
and level of other charges, those "other" duties then become ordinary duties.
Chile further quotes an official "Foreign Trade Barriers" Report of the United
States Trade Representative for 2001, in which the USTR treats the PBS as part
of the ordinary customs duties of Chile. Chile argues that it is rather
remarkable that a country like the United States with a significant export
interest and who was certainly a major participant in the Uruguay Round
negotiations would only claim to discover in the autumn of 2001 that, come to
think of it, those price bands have been flatly illegal for years.215
4.84 In Chile's view, a measure that is already a
bound "ordinary customs duty" subject to the provisions of Article II:1(b)
cannot be considered a measure "of the kind which have been required to be
converted" into an ordinary customs duty in the sense of Article 4.2. Chile
considers that the term "ordinary customs duties" has the same meaning in
Article 4.2 of the Agreement on Agriculture as it has in Article II:1(b) of the
GATT. Chile notes that the term "ordinary" in the English language of both
Article II and Article 4.2 is expressed in the same way in the Spanish and
French texts of those Articles, even though the choice of terms in Spanish and
French "propiamente dichos" and "proprement dit" does not follow
the usual dictionary translation into Spanish or French of the English word
"ordinary".216 Chile alleges that, in addition to illustrating the hazards of a
simple dictionary approach to treaty interpretation, this identical somewhat
unusual translation in both Articles is further indication of the intent that
the terms have the same meaning. It should be noted, Chile adds, that the term
"ordinary customs duties" does not, by itself, carry the connotation in Article
II that the duties are already or necessarily bound, but rather is something
that can be bound pursuant to Article II. However, in Article 4.2, it appears
from context that a measure that was "converted" into an ordinary customs duty
was intended to mean made into a bound ordinary customs duty.217
1 WT/DS207/1.
2 WT/DS207/2.
3 WT/DS207/3.
4 Law 18.525, Official Journal of the Republic of Chile, 30
June 1986.
5 Consolidated version of Law 18.525, Official Journal of the
Republic of Chile, 30 June 1986 as amended by Law No. 18.591, Official Journal,
3 January 1987 and by Law No. 18.573, Official Journal, 2 December 1987. This
consolidated text was included in Annex CHL-2 to Chile's First Written
Submission (footnotes omitted).
6 Official Journal of the Republic of Chile, 19 November 2001.
7 As indicated in paragraph 2.3 above, Chile has informed the
Panel that pursuant to Law 19.772 effective on 19 November 2001, the combination
of the applied ad valorem rate and the PBS duty increase are capped at
the bound ad valorem rate. Prior to that, the combination did at times
surpass the bound rate.
8 See Chile's response to question 10 (CHL) of the
Panel.
9 Article 12 of Law 18.525 and its amendment stipulates that
the duties and rebates applicable to wheat flour shall be the same as for wheat,
adjusted by a conversion factor of 1.41. This conversion factor was raised to
1.56 by Law 19.446 (extended by Law 19.604) (see Annex ARG-2).
10 With respect to wheat, these "markets of concern" include
Argentina, Canada Australia and the United States. See Chile's response
to question 9(c) (CHL) of the Panel.
11 See Chile's response question 9 (CHL) of the Panel.
12 Official Journal of the Republic of Chile, 31 May 1999.
13 Official Journal of the Republic of Chile, 25 June 1999.
14 Document G/SG/N/1/CHL/2 of 24 August 1999 containing Law
19.612 and Law 18.525 (as amended by Law 19.612) as well as Decree 909/99 of the
Ministry of Finance.
15 The products concerned by the investigation procedure and the
application of safeguard measures are: wheat, classified under tariff heading
1001.9000; wheat flour, classified under tariff heading 1101.0000; sugar,
classified under tariff headings 1701.1100; 1701.1200; 1700.9100 and 1701.9900;
and edible vegetable oils, classified under tariff headings 1507.1000;
1507.9000; 1508.1000; 1508.9000; 1509.1000; 1509.9000; 1510.0000; 1511.1000;
1511.9000; 1512.1110; 1512.1120; 1512.1910; 1512.1920; 1512.2100; 1512.2900;
1513.1100; 1513.1900; 1513.2100; 1513.2900; 1514.1000; 1514.9000; 1515.2100;
1515.2900; 1515.5000 and 1515.9000.
16 Document G/SG/N/6/CHL/2 of 2 November 1999.
17 Exempt Decree No. 339 of 19 November 1999, published in the
Official Journal of the Republic of Chile, 26 November 1999.
18 Document G/SG/N/7/CHL/2 of 10 November 1999.
19 Document G/SG/N/8/CHL/1 of 7 February 2000.
20 Exempt Decree No. 9 of the Ministry of Finance.
21 Published in the Official Journal on 25 November 2000.
22 Document G/SG/N/14/CHL/1 of 22 December 2000.
23 Chile stated that the extension measure for edible vegetable
oils expired on 26 November 2001 (Exempt Decree No. 559 from the Ministry of
Finance).
24 See Chile's response to question 16 (ARG, CHL) of the
Panel.
25 Document G/SG/N/10/CHL/1/Suppl. 3 of 16 August 2001.
26 Argentina refers to para. 38 of Chile's First Written
Submission.
27 See Argentina's First Written Submission, para. 61.
28 See Chile's First Written Submission, para. 43.
29 See Argentina's Second Oral Statement, para. 4.
30 See Argentina's First Written Submission, para. 46.
31 Argentina quotes a Note by the Secretariat. Summary Report of
the Meeting held on 24-25 June 1999, G/AG/R/19 (25 August 1999), para. 9.
32 See Argentina's First Written Submission, para. 38.
33 See Argentina's First Written Submission, para. 39.
34 See Argentina's First Written Submission, paras.
39-42.
35 Argentina refers to Order 850 of the Ministry of Agriculture
of Chile and Order 662 of the same Ministry.
36 Argentina refers to paras. 24, 25 and 26 of Chile's First
Written Submission.
37 See Argentina's First Written Submission, para. 5.
38 See Argentina's First Oral Statement, para. 5.
39 Argentina refers to para. 23 in fine of Chile's First
Written Submission.
40 See Argentina's First Written Submission, para. 47,
and Annex ARG-15.
41 See Argentina's First Oral Statement, paras. 7-8.
42 Argentina quotes para. 25 of Chile's First Written
Submission.
43
See Argentina's First Oral Statement, para. 9.
44
See Chile's response to question 12(c) (CHL) of the
Panel.
45
See Argentina's Rebuttal, paras. 18-21 and Annex
ARG�40.
46
See Argentina's First Written Submission, para. 23.
47 See Argentina's First Written Submission, para. 25.
48 See Argentina's First Oral Statement, para. 4.
49 See Argentina's First Written Submission, para. 27.
50 See Argentina's First Written Submission, para. 28.
51 See Argentina's First Written Submission, paras. 29-30
and Annex ARG-12.
52 See Argentina's First Written Submission, para. 31.
53 See Argentina's Rebuttal, para. 25.
54 See Argentina's Rebuttal, para. 26.
55 Chile refers to para. 28 of Argentina's First Written
Submission.
56 See Chile's First Written Submission, para. 19.
57 See Argentina's First Written Submission, para. 32.
58 See Argentina's First Written Submission, para. 36 and
footnote 25.
59 WT/DS152/R, paras. 7.118 and 7.125.
60 See Argentina's First Written Submission, para. 43 and
footnote 25.
61 See Chile's First Written Submission, para. 21.
62 See Chile's First Written Submission, para. 23. See
also para. 23 of Chile's First Oral Statement.
63 See Chile's First Oral Statement, para. 24.
64 Argentina refers to paras. 22 and 23 of Chile's First Written
Submission.
65 See Argentina's First Oral Statement, para. 7.
66 See Argentina's Rebuttal, paras. 23-24.
67 See Argentina's First Oral Statement, paras. 15-17.
68 See Chile's First Oral Statement, para. 63.
69 See Chile's response to question 12 (CHL) of the
Panel.
70 See Annex CHL-7.
71 See also Chile's First Oral Statement, para. 30.
72 See Chile's First Written Submission, para. 25.
73 See Chile's First Oral Statement, para. 30.
74 See Argentina's First Oral Statement, para. 9, which
refers to para. 25 of Chile's First Written Submission.
75 See Argentina's First Oral Statement, para. 13.
76 See Argentina's Rebuttal, paras. 29-30.
77 See Argentina's First Oral Statement, para. 14.
78 See Argentina's First Written Submission, para. 31.
79 Chile refers to para. 16 of Argentina's First Oral Statement.
80 See Chile's First Oral Statement, paras. 10-11.
81 See Chile's First Oral Statement, paras. 12-18.
82 See Argentina's Rebuttal, para. 28 which refers to
Chile's response to question 10(k) of the Panel.
83 See Argentina's Rebuttal, para. 28 which refers to
Chile's response to question 12(a) of the Panel.
84 See Chile's Second Oral Statement, para. 11.
85 See Argentina's response to question 45 (ARG) of the
Panel.
86 See Chile's First Written Submission, para. 26.
87 See Chile's First Oral Statement, para. 28.
88 See Chile's First Written Submission, para. 26.
89 Argentina refers to Document G/SG/Q2/CHL/5 of 27 September
2000, p. 6, response to question 19. See Argentina's First Oral
Statement, paras. 18-22 and footnote 7.
90 See Argentina's First Oral Statement, paras. 18-22.
91 See Argentina's Rebuttal, para. 32.
92 See Argentina's Rebuttal, paras. 34-35.
93 See Argentina's First Written Submission, para. 49.
94 See Argentina's First Written Submission, para. 51.
95 See Argentina's First Written Submission, paras.
57-58.
96 See Argentina's First Written Submission, para. 59.
97 See Argentina's First Written Submission, para. 57.
98 See Argentina's First Oral Statement, paras. 39-40.
99 Chile refers to paras. 57-58 of Argentina's First Written
Submission.
100 See Chile's First Written Submission, para. 42.
101 See Chile's First Written Submission, para. 30.
102 See also Chile's First Oral Statement, paras. 34-36.
103 See Chile's Rebuttal, paras. 28-29.
104 See Chile's First Oral Statement, para. 50.
105 See Chile's First Written Submission, paras. 30-31.
106 Chile refers to para. 49 of Argentina's First Written
Submission.
107 See Chile's First Written Submission, paras. 33-35.
108 See para. 4.97 below.
109 See Chile's First Oral Statement, paras. 51-52.
110See Chile's First Written Submission, paras. 54-56.
111 Chile cites the Appellate Body report on US - Gasoline
(WT/DS2/AB/R) adopted 20 May 1996, DSR 1996:I,3, p.17.
112 See Chile's First Oral Statement, paras. 53-56.
113 See Chile's First Oral Statement, paras. 57-61.
114 See Chile's First Written Submission, para. 57.
115 Chile refers to Japan - Alcoholic Beverages (Appellate
Body report, Japan - Taxes on Alcoholic Beverages ("Japan - Alcoholic
Beverages II"), WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted on 1
November 1996, DSR 1996:I, 97), p. 13.
116 Chile refers to Decree No. 797/92 of 19 May 1992 of the
Argentine Ministry of the Economy, Public Works and Services (Official Journal
of 21 May 2001).
117 Chile refers to the Commission Regulation (EC) No. 1249/96 of
28 June 1996 on rules of application for Council Regulation (EEC) No. 1766/92 on
cereal sector import duties.
118 See Chile's First Written Submission, paras. 58-65.
119 See para. 68 of Chile's First Written Submission.
120 Chile refers to para. 57 of Argentina's First Written
Submission.
121 See Chile's First Written Submission, paras. 66-70.
122 See Argentina's Rebuttal, paras. 38-39.
123 See Argentina's Rebuttal, para. 40 and footnote 26.
124 Chile's response to question 12(d) of the Panel.
125 Argentina cites the following: "The rule of effectiveness
merely means that a treaty clause must be interpreted in such a way as to enable
it to 'display its practical or useful effects', or in more modern terms, to
fulfil its object and purpose." Conf. Diaz de Velasco, Instituciones de Derecho
P�blico, Ed. Tecnos, 1996, p. 188.
126 See Argentina's Rebuttal, paras. 41-43.
127 See Argentina's First Oral Statement, para. 29, which
refers to para. 24 of Chile's First Written Submission.
128 See Argentina's First Oral Statement, paras. 25-29.
129 See Chile's Rebuttal, paras. 35-36.
130 See Chile's Rebuttal, para. 37.
131 Chile quotes the Appellate Body report on EC - Hormones
(WT/DS26/AB/R, WT/DS48/AB/R) adopted on 13 February 1998, footnote 268 (DSR
1998:I, 135).
132 See Chile's Rebuttal, para. 38.
133 Argentina refers to the Appellate Body report on EC -
Hormones (WT/DS26/AB/R, WT/DS48/AB/R) adopted on 13 February 1998, footnote
268, (DSR 1998:I, 135).
134 See Argentina's Second Oral Statement, para. 28.
135 See Argentina's Second Oral Statement, para. 29.
136 Argentina is using a definition provided in Goode, Walter,
Dictionary of Trade Policy Terms (Centre for International Economic Studies,
University of Adelaide, 1997), p. 250. See Argentina's First Written
Submission, para. 52.
137 See Argentina's First Written Submission, para. 54.
138 Argentina quotes the Trade Policy Review Body, Trade Policy
Review of Chile, Report by the Secretariat, WT/TPR/S/28 (7 August 1997), para.
38.
139 See Argentina's First Written Submission, para. 55.
140 Argentina refers to para. 38 of Chile's First Written
Submission.
141 See Argentina's Rebuttal, para. 49.
142 See Argentina's First Written Submission, para. 56.
143 See Chile's First Oral Statement, para. 38.
144 See Argentina's First Written Submission, para. 52.
145 See Chile's First Oral Statement, para. 40.
146 See Chile's First Oral Statement, para. 43.
147 Chile refers to para. 56 of Argentina's First Written
Submission.
148 See Chile's First Written Submission, para. 40.
149 See Chile's First Written Submission, para. 32.
150 Chile refers to para. 55 of Argentina's First Written
Submission.
151 See Chile's First Written Submission, para. 39. See
also para. 41 of Chile's First Oral Statement.
152 Argentina refers to para. 36 of Chile's First Oral Statement.
153 See Argentina's Rebuttal, paras. 60-62 and Annexes
ARG-41 and ARG-42, and Argentina's Second Oral Statement, para. 19 and footnote
14.
154 See Chile's response to question 46 (CHL) of the
Panel.
155 See Chile's First Written Submission, paras. 37-38.
See also para. 42 of Chile's First Oral Statement.
156 See para. 4.48 above.
157 Argentina refers to para. 37 of Chile's First Written
Submission.
158 See Argentina's First Oral Statement, paras. 29-33.
159 See Chile's First Oral Statement, paras. 44-47.
160 Chile refers to paras. 30-33 of Argentina's Oral Statement.
161 See Chile's Rebuttal, paras. 24-25.
162 See Chile's First Written Submission, para. 43.
163 See Chile's First Written Submission, para. 44.
164 In footnote 35 to its First Written Submission, Chile refers
to the definition of variable levy as a duty under the European Community's
Common Agricultural Policy by Merritt R. Blakeslee & Carlos A. Garcia, The
Language of Trade: A Glossary of International Trade Terms 167-168 (3rd. ed.
1999).
165 See Chile's First Written Submission, para. 45.
166 See Chile's First Written Submission, para. 49.
167 Argentina refers to the Preamble to the Agreement on
Agriculture speaks of "� correcting and preventing restrictions and distortions
in world agricultural markets".
168 See Argentina's Rebuttal, paras. 45-47.
169 See First Written Submission by Chile, para. 49.
170 See Argentina's Rebuttal, para. 48.
171 Argentina refers to para. 49 in fine of Chile's First
Written Submission.
172 See Argentina's First Oral Statement, paras. 33-37.
173 See Argentina's Rebuttal, paras. 55-57.
174 See Chile's First Written Submission, para. 46.
175 See Chile's First Oral Statement, para. 48.
176 See Chile's First Written Submission, para. 47.
177 Argentina refers to para. 46 of Chile's First Written
Submission.
178 Argentina refers to para. 47 of Chile's First Written
Submission.
179 Argentina refers to para. 47 of Chile's First Written
Submission.
180 See Argentina's Rebuttal, paras. 79-83.
181 See Chile's response to question 6 (ALL) of the Panel.
182 See Argentina's response to question 6 (ALL) of the
Panel.
183 See Chile's response to question 8 (ALL) of the Panel.
184 See Argentina's Rebuttal, paras. 69 and 70.
185 See Argentina's Second Oral Statement, para. 21.
186 Argentina refers to Chile's response to question 6 (ALL) of
the Panel.
187 See Argentina's Rebuttal, paras. 58-59.
188 See Argentina's Rebuttal, para. 52.
189 See Argentina's Second Oral Statement, para. 19.
190 Argentina refers to para. 11 of Chile's First Written
Submission.
191 Argentina refers to para. 18 of Chile's First Written
Submission.
192 Argentina refers to para. 17 of Chile's First Written
Submission.
193 See Argentina's Rebuttal, paras. 53-54.
194 See Argentina's First Oral Statement, para. 38.
195 Argentina refers to para. 15 of Chile's First Written
Submission.
196 See Argentina's First Oral Statement, paras. 41-51.
197 See Argentina's Rebuttal, paras. 64-69.
198 See Chile's Rebuttal, para. 17.
199 Chile refers to para. 31 of Argentina's First Written
Submission.
200 See Chile's First Written Submission, para. 50.
201 See Argentina's response to question 8 (ALL) of the
Panel.
202 See Argentina's response to questions 1 and 2 (ALL) of
the Panel.
203 In this regard, Argentina quotes para. 5.4 of the Panel
report in European Economic Community - Regulation on Imports of Parts
and Components, adopted on 16 May 1990, BISD 37S/132.
204 See Argentina's response to question 3 (ALL) of the
Panel.
205 See Argentina's Rebuttal, paras. 70-71.
206 Chile refers to paras. 88-89 of the Panel report in EEC -
Programme of Minimum Import Prices, Licences and Surety Deposits for Certain
Processed Fruits and Vegetables, adopted on 18 October 1978, BISD 25S/68.
207 See Chile's response to question 3 (ALL) of the Panel.
208 See Chile's Rebuttal, paras. 26-27.
209 Chile refers to United States' responses to question 3(b) and
3(c) (ALL) of the Panel.
210 See Chile's Rebuttal, para. 8.
211 See Chile's Rebuttal, para. 10.
212 See Chile's Rebuttal, paras. 11-12.
213 See Chile's Rebuttal, para. 13.
214 See Chile's Rebuttal, para. 14.
215 See Chile's Second Oral Statement, paras. 16-17.
216 Chile refers to Robert Collins French-English, English-French
Dictionary 472 (Beverly T. Atkins et al., 2nd ed. 1987). The Oxford Spanish
Dictionary 1390 (Beatriz Galimberti Jarman et al., eds., 1994).
217 See Chile's response to questions 1 and 2 (ALL) of the
Panel.