V. ARGUMENTS OF THE THIRD PARTIES
5.1 The main arguments of those third parties to these
proceedings which have submitted their commentaries to the Panel, i.e., Brazil,
Colombia, Ecuador, the European Communities, Guatemala, Japan, Paraguay, the
United States and Venezuela are as follows:
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Brazil
5.2 Brazil submits that an examination of the Chilean PBS, as
well as of the detailed Argentine explanation of how the system operates can
give the impression that it is a very complex mechanism, devised with an almost
scientific zeal. However, in Brazil's view, the PBS is, at heart, very simple.
If one discards all the tables, measurements and equations, Brazil argues, what
is left is a weekly reference price that determines the additional duty that
will tax imports of wheat, wheat flour, vegetable oils and sugar. Brazil
explains that this weekly reference price, which is fixed by the Chilean
Government, substitutes for the transaction value contained in the invoice.
According to Brazil, an element that is very clear, and that is not contested by
Chile in its first submission to the Panel, is that the price band system has
allowed for the violation of Chile's bound tariffs for the products under
consideration, as well as for sugar.
5.3 Brazil argues that, in theory, Chile is correct in
claiming that the adoption of safeguards could legally justify the violation of
bound rates. The point is that in the current case, the violation of bound
tariffs occurred before the safeguards were even envisaged. Moreover, it remains
to be seen whether the safeguards were justified. Brazil contends that, in case
they are found not to be justified, Chile will have automatically incurred a
violation of Article II.1 of GATT 1994. Brazil further stresses that the current
design of the price band system allows for violations of the bound rates. Brazil
agrees with Argentina that the Chilean price band system is suspiciously similar
to what Article 4.2 of the Agreement on Agriculture sought to eliminate: it
operates as a variable levy that is modified weekly; it includes reference
prices which are not allowed under Article 4.2, if they constitute minimum
prices; it also contains elements of the modality of special safeguards provided
for in Article 5.1(b) of the Agreement on Agriculture. According to Brazil, the
problem, as Argentina rightly pointed out, is that Chile does not have the legal
right to use such an instrument. It may be argued that as long as Chile does not
violate its bound tariff the operation or characteristics of its price band
system are irrelevant and that the claim under Article 4.2 is useless. Brazil
notes, however, that the objective of the Chilean system is to create exactly
the type of barrier that Article 4.2 of the Agreement on Agriculture sought to
eliminate.
5.4 Brazil submits that Chile's argument to the effect that
the PBS is an ordinary customs duty is a surprising affirmation because, at the
regional level, Chile argues exactly the contrary: since the surtax that results
from the operation of the price band system is not a tariff, tariff preferences
are not applicable. Brazil points out that this difference in interpretation is
currently one of the difficulties in the tariff negotiations concerning sugar.
Brazil adds that Chile's reference to the ECA 35, which includes Brazil, can
also be used as an example of misuse, by Chile, of a line of reasoning that
could be summarized as "since you did not complain before, you cannot complain
now". Brazil cannot find any provisions in the WTO Agreements that impose
time-limits or expiration dates on Argentina's right to claim a violation of
Article II.1 of GATT 1994 and of Article 4.2 of the Agreement on Agriculture in
the current dispute. In addition, Brazil notes that the language in ECA 35 that
refers to the price band system can be read in different ways and that Chile's
reading does not stress the fact that the system can be questioned if it has a
negative impact on trade.
5.5 In response to a question by the Panel, Brazil submits
that a duty cannot at the same time be considered an "ordinary customs duty" and
"a measure of the kind which have been required to be converted into ordinary
customs duties". In Brazil's view, the term "ordinary" refers to customs duty as
such: it can be an "ad valorem" tax, a specific duty or a combination of
both. It further explains that the term "ordinary" is used to qualify a general
import tax that is not "all other duties or charges of any kind". Brazil notes
that, in the case of agricultural products, and, in particular, those affected
by the Chilean PBS, Article II can not be read independently from Article 4.2 of
the Agreement on Agriculture. Brazil contends that a Member may have an
additional tax that applies to all imports, like a "statistics tax", or an
administrative tax, that applies to all imported products. It could even be a
flat tax, with no relation to the value of the import transaction. In Brazil's
view, the distinction should be made between "ordinary customs duties" and
"other" duties, which are not "customs duties" in nature; the text in
Article II:1(b) establishes a parallel between "customs duties" and "duties or
charges" which are not properly characterized as "customs duties". These are, it
explains, simply "imposed on or in connection with the importation". Brazil
considers that this distinction is also apparent in the structure of the
Schedule of Concessions, since these "other" duties must be recorded in the
appropriate column of the Schedule. Finally, Brazil points out that the
Understanding on the Interpretation of Article II:1(b) of the GATT 1994 creates
legal obligations concerning "other duties and charges" that are different from
those regarding "ordinary" customs duties.
5.6 Brazil submits that the objective of Article 4.2 of the
Agreement on Agriculture is to guarantee tariffication, or, to follow the line
of inquiry of the Panel, to guarantee that Members would simplify matters by
resorting solely to "ordinary customs duties" and, therefore, in order to comply
with that Article,"similar border measures other than ordinary customs duties"
should have been, converted into "ordinary customs duties". In Brazil's view,
the measures listed in the footnote of Article 4.2 of the Agreement on
Agriculture are the ones which "have been required to be converted into ordinary
customs duties". "Other duties and charges" were not required to be converted
into "ordinary customs duties" in the Uruguay Round since they could have been
consolidated into the appropriate column of the Schedule. Therefore, Brazil
submits, "similar border measures" as referred to in the footnote of Article 4.2
of the Agreement on Agriculture is distinct from "other duties or charges of any
kind" mentioned in Article II:1(b) of the GATT 1994. Since the end of the
Uruguay Round, however, they fall within the prohibition of Article II:1(b),
last sentence. Brazil submits that a violation would exist if these "other
duties or charges of any kind" had not been recorded in the Schedule of
Concessions or had been raised or changed in such a way as to violate
commitments recorded in the column reserved for "Other Duties and Charges".
5.7 Brazil explains that a variable levy is a duty that is
modified in accordance to criteria related to "various values in different
instances or at different times" based on exogenous factors (such as historical
and current world prices), as determined by any specific mechanism by a Member.
According to Brazil, the objective of this measure is to control prices of
imports in order to meet or approach a domestic target price that isolates the
domestic production marketing from international current prices. Brazil affirms
that the PBS is a good example of a variable levy. On the other hand, Brazil
argues, a minimum import price is a price, other than the transaction
value of the imported product, which is the minimum price at which a product can
enter a market. It can be used to calculate the duty to be applied or to trigger
the operation of the variable levy. Brazil submits that the term "include" in
footnote 1 to Article 4.2 of the Agreement on Agriculture indicates that the
list is illustrative and not exhaustive.
5.8 As regards Chile's claim that the PBS is a type of
measure that is used in all Latin America, Brazil fails to see the relevance of
such an affirmation since, in its view, the fact that a measure is of widespread
use does not make it legal. Brazil explains that one of the main justifications
put forward by those that defend the maintenance of the price band system in
Chile is the supposed existence of widespread subsidization by other WTO Members
for the agricultural products protected by the system. Brazil contends that the
price band system, apart from the Chilean explanation concerning supposed "price
stabilization" needs, is justified internally as a means to counter agricultural
subsidies. In Brazil's view, the main problem here is that by doing so Chile
treats equally countries that foster their exports by means of export subsidies
and those that do not. In the case of sugar, for instance, the main suppliers
for the Chilean markets are Guatemala, Argentina and Brazil, countries widely
known for not subsidizing their exports. Brazil submits that if it is Chile's
intention to counter agricultural subsidies, the WTO provides a wide range of
more selective and accurate measures in order to do so.
5.9 Brazil is of the view that the safeguards were used by
Chile as an ex post facto justification for a violation of bound rates
and as a means to justify new violations. Brazil submits that Chile itself
recognizes that safeguards were resorted to as a second best option as a means
to legalize the violation of the bound rates. In Brazil's view, this should be
sufficient to invalidate the measures, since there is a clear violation of the
procedures contained in the Agreement on Safeguards. Brazil contends that it
would certainly be very convenient if every time a Member decided to violate its
bound tariffs it could simply apply safeguards a posteriori as a means of
obtaining legal justification. Brazil argues that this kind of procedure,
though, was certainly not in the minds of the drafters of the Agreement on
Safeguards, who were trying to avoid the proliferation of the so-called grey
area measures that existed before the conclusion of the Uruguay Round. Brazil
further submits that the Agreement on Safeguards calls for very special
situations and for the respect of clearly stipulated procedures and that this is
even more applicable if one considers measures to protect agricultural products,
which were some of the favourite targets of grey area measures.
5.10 As regards price stabilization, Brazil stresses that
Articles 2 and 4 of the Agreement on Safeguards make no direct reference to such
issues. It submits that safeguards were not devised to deal with the objective
of guaranteeing the stabilization of prices of certain agricultural products. As
regards Chile's reference to the lack of justification for questioning a measure
no longer in place, Brazil submits that, although it respects the importance of
the principle contained in Article 3.7 of the DSU, it is concerned with the
possibility that if the measures applied by Chile are left unexamined, they
could lead to similar measures against the same products or other goods. Brazil
submits that if the safeguards were applied incorrectly and unjustifiably, this
should be known; otherwise, Members could have an incentive for maintaining an
illegal measure up to the moment when a panel was convened.
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Colombia
5.11 Colombia is convinced that the Chilean PBS is consistent
with Article 4 of the Agreement on Agriculture. Colombia suggests that the Panel
conducts a legal analysis linking the two measures in question, namely the
imposition of the safeguard and the application of the price band system. In its
opinion, the consistency of the measures applied by Chile should be analysed
using a combined approach that establishes a close relationship between the two,
given that Chile has used the PBS as a mechanism for applying the safeguard
measure which is also an issue in this dispute.
5.12 Colombia submits that, in examining the consistency of
the measures applied by Chile with the latter's commitments in the WTO, the
Panel must make an interpretation that links Articles 4 and 21 of the Agreement
on Agriculture, Articles II and XIX of the General Agreement, and the Agreement
on Safeguards. In Colombia's view, such an analysis would enable the Panel to
distinguish between two different scenarios for the PBS, namely its application
in normal circumstances and its use as a safeguard measure. In normal
circumstances, and as mentioned above, price bands are consistent with Article 4
of the Agreement on Agriculture.
From a systemic perspective, Colombia argues, it is crucial to
take account of each and every one of the elements set forth in Article XIX of
the GATT when analysing the consistency of the safeguard measure applied by
Chile. In addition to the points mentioned by Argentina in its written
submission, another factor needs to be considered, namely the "effect" of the
obligations incurred by a contracting party under the General Agreement. In
Colombia's view, the term "effect" specified in Article XIX implies that a
Member making use of a safeguard measure must be able to demonstrate that,
within the period defined by it for analysing the other requisite variables,
imports to its territory complied with the obligations under the GATT, which
obviously also include tariff concessions. Colombia considers that this
requirement must be fulfilled in addition to the provision of evidence regarding
unforeseen developments and factors relating to trends in imports, serious
injury and the causal link. Colombia submits that the fact that Chile has
exceeded the bound level implies that the safeguard measure applied fails to
meet one of the essential requirements of Article XIX of the General Agreement,
which is that the trend in imports, the injury and the causal link should result
precisely from a scenario under which tariffs are lower than or at least
equivalent to the bound level. Colombia submits that the safeguard measures
applied by Chile are inconsistent inasmuch as they establish the use of a PBS, a
mechanism that does not guarantee that the safeguard is applied exclusively to
the extent necessary to remedy the injury.
5.13 According to Colombia, the process of determining
whether the Chilean PBS is consistent with Article 4 of the Agreement on
Agriculture would certainly require prior demonstration that, as a result of the
Uruguay Round, these systems were tariffied because they were classified as
variable levies or as border measures other than customs duties. Colombia
disagrees with Argentina's interchangeable use of the terms "variable levies"
and "variable tariffs" since it believes them to mean different things. Colombia
explains that considering that the PBS does not correspond to the definition of
variable levies, (a special term used in the Agreement on Agriculture that is
not equivalent to variable tariffs) but on the contrary fall within the
definition of customs duties, they are consistent with Article 4 of the
Agreement on Agriculture. Colombia is of the opinion that a ruling on the
inconsistency of the Chilean PBS with Article 4 of the Agreement on Agriculture
would imply that this type of mechanism has been classified as a variable levy
and that therefore any tariff undergoing change within a specified period of
time would fall within this category.
5.14 Colombia considers that to be able to answer the
question of whether the Chilean PBS is consistent with Article II of the GATT,
the Panel first needs to examine the normal operation of the price band system
and determine whether its structure includes factors that would make it possible
to exceed the bound tariff. As a second step, Colombia explains, the Chilean
measure might be found to be consistent if it could be regarded as a safeguard
that meets the requirements of Article XIX of the GATT - in which case it would
be possible to exceed the bound level. Should the Panel find that the Chilean
safeguard was not applied in accordance with all the requirements set forth in
Article XIX and the Agreement on Safeguards, Colombia argues, the price band
system would be inconsistent with Article II of the General Agreement.
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Ecuador
5.15 Ecuador emphasizes that both the Argentine and Chilean
assessments of the issue should be understood in the light of the close
interrelationship between the application of the Chilean price band system and
the application of safeguards. In Ecuador's view, only the question of the
consistency of the Chilean measure as a whole has been brought before this Panel
and, therefore, the Panel should only rule on the consistency or inconsistency
of the Chilean measure in question with the WTO rather than conduct a conceptual
analysis of the PBS.
5.16 Ecuador considers that PBSs can be operated differently
from the one implemented in Chile and remain consistent with WTO rules, that is
to say, respecting bound tariff levels and other commitments under Article II of
the GATT 1994 as well as the market access commitments referred to in the
Agreement on Agriculture, specifically under Article 4. According to Ecuador,
PBSs do not necessarily constitute variable tariffs as described in the footnote
to Article 4 of the Agreement on Agriculture, especially if such systems are
applied in a transparent and predictable manner with the simple aim of
counteracting major swings in the international prices of a limited number of
agricultural products, thereby guaranteeing acceptable domestic production
conditions. If PBSs are used as tariff measures, Ecuador argues, they do not
require tariffication in order to be consistent with Uruguay Round provisions.
Moreover, Ecuador argues, GATT-WTO regulations allow the tariff levels
applicable to imports to be altered provided that they do not exceed the maximum
levels and that the market access conditions bound in Members' schedules are
guaranteed. Ecuador further submits that the implementation of PBSs also treats
all Members to which the MFN tariff applies without distinction, and applies
equally to all goods classified under the same tariff subheading which reach
port within a period of time determined sufficiently in advance and with
sufficient predictability, independently of the country of origin, the import or
export agent and the customs value of the product. Ecuador concludes that this
is clearly a tariff system and it will not therefore have had to be tariffied
since it complies with the letter and spirit of Article 4 of the Agreement on
Agriculture. In Ecuador's view, any PBS based on the relevant international
agricultural product prices is as predictable as regards the applicable tariffs
as any other tariff-setting system, in that the tariff payable depends on the
customs value of the goods. It is Ecuador's opinion that a tariff-setting system
which clearly establishes the mechanism for modifying tariffs and furnishes
adequate and timely information on such changes should be considered predictable
as regards the application of such tariffs. Moreover, Ecuador adds, if such a
mechanism for modifying tariffs is disassociated from the domestic market
conditions of the importing country and precludes discretionary intervention by
the competent authorities, the system is also highly transparent.
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European Communities
5.17 In the European Communities' view, the most important
question that the Panel should address first, is whether the extension of
Chile's definitive safeguard measure is properly before it. The European
Communities consider that the Chilean safeguard measure which is in force (the
definitive measure, as extended) is not a separate measure from the one on which
consultations were held, and in any event is properly before the Panel in
accordance with the relevant provisions of the DSU. The European Communities
fully agree with Chile that no DSB action can to any extent modify the
provisions of the DSU, including those concerning consultations prior to dispute
settlement. It is the view of the European Communities that abidance by those
provisions has however to be reviewed also in the light of the other WTO
provisions relevant in each particular case. The European Communities contend
that the issue of whether the extension of a definitive safeguard measure under
the Agreement on Safeguards constitutes the continuation of the original
measure, or rather a different measure, should be examined first of all in the
light of Article 7 of the Agreement on Safeguards, containing specific
indications in this respect. The European Communities submit that the language
of Article 7.1, specifically the reference to one period of duration, already
suggests that an extension is not separate from the original measure, and that
the only effect of an extension is to change its duration or in other words
extend "the period". Further, it adds, Article 7.2 dictates the conditions for
such extension to be decided, and allows Members to extend a definitive
safeguard measure. According to the European Communities, the reference in the
wording to the measure (in force) in the singular indicates that, in the mind of
the drafters of the Agreement on Safeguards, Article 7.2 was not to regulate the
adoption of a new and separate measure, but simply refers to the possibility of
modifying "the period" of the same measure. In the same vein, the last sentence
of Article 7.4 refers to "[a] measure extended under paragraph 2". The European
Communities submit that this is further supported by Article 7.3 which, by
determining the total duration of safeguard relief, that provision makes a
reference, on the one hand, to the "provisional measure", and, on the other
hand, to the initial application and extension of a (same) safeguard measure.
The European Communities point out that Article 7 includes the above language
notwithstanding the fact that in order to authorize extensions it requires the
collection and evaluation of new data. Thus, the European Communities argue, the
fact that the extension is the result of the evaluation of different data
compared to the original definitive measure does not affect the categorization
of the extension, contrary to Chile's contention. The European Communities
conclude that, even if, the continued duration of the measure requires a new
expression of will on the part of the domestic authorities, in the light of the
clear wording of Article 7 this alone is not sufficient to make the relevant
decision a new "measure". The European Communities submit that if Chile was
correct in arguing that the extension of its definitive safeguard measure
constitutes a separate measure from the one originally taken on 20 January 2000,
by the very adoption of such alleged separate measure Chile would be in breach
of Article 7.5 of the Agreement on Safeguards since it clearly results from the
wording of this provision that a WTO Member cannot apply two "separate" measures
in a row on the same product or products. As a last remark on this issue, the
European Communities recall the obligation of progressive liberalization set out
in Article 7.4 of the Agreement on Safeguards which provides that if one and the
same definitive measure is extended, the period of extension is also subject to
the "progressive liberalization" obligation. The European Communities argue that
if a Member could at pleasure categorise the extension of a definitive measure
as a separate measure, simply based on its domestic legislation, it could
effectively extend the duration of safeguard relief at full level by a series of
allegedly "separate" measures and thus easily escape the obligation of
progressive liberalization.
5.18 The European Communities submit that even if the
extension were a separate measure, it would still be properly before the Panel.
The European Communities explain that Chile relies on several provisions of the
DSU as well as on certain Appellate Body pronouncements which, in their view, do
not support Chile's contention. As to the DSU, the European Communities agree
with Chile when it points out that pursuant to Article 3.4 DSB recommendations
and rulings aim at a satisfactory solution of a dispute, and that pursuant to
Article 3.3 a dispute arises when a Member's rights are nullified or impaired by
a measure taken by another. In the European Communities' view, there appears
however to be little doubt that all Chilean measures referred to by Argentina in
its request for Panel establishment were "taken". Likewise, the European
Communities argue, it is correct that under Article 3.7 of the DSU the main aim
of the dispute settlement mechanism is to secure a positive solution to a
dispute, preferably through the removal of a measure found to be inconsistent
with the WTO. Chile does not dispute, however, that the extension of the
definitive safeguard measure is in force - so that, if required by WTO rules, it
could be removed. As regards the Appellate Body pronouncements referred to by
Chile, the European Communities submit that they also do not support Chile's
objection. Chile first refers to Brazil - Aircraft in support of
essentially a "due process rights" defence and, in this case, does not support
Chile's claim that review of the extension by the Panel would violate such
rights. The European Communities submit that, as in that case, the extension of
the definitive safeguard measure at issue in the present dispute concerns the
same "matter" and, as Chile expressly admits, corresponds exactly to the
original definitive measure, apart from the duration. According to the European
Communities, it is thus clear that the matter and the applicable regime for
which the establishment of the panel was requested are the same as those on
which consultations were held. The European Communities contend that the
responding party's rights of defence are therefore in no way impaired. The
European Communities explain that Chile further refers to the Appellate Body
report in United States - Import Measures on Certain Products from the
European Communities.548 However, the European Communities explain, the
application of the very criteria laid down by the Appellate Body in that report
would confirm that the extension of Chile's definitive safeguard measure at
issue in this dispute is not a separate and distinct measure from the one on
which the parties held consultations.
5.19 Further to receiving the news that the Chilean safeguard
measure, as extended, was terminated as far as imports of wheat and wheat flour
are concerned, the European Communities note that, in its view, the Panel is
entitled to continue its review of Chile's safeguard measure, as extended,
including the parts of such measure which have been terminated. The European
Communities assume that in any event, those products continue to be subject to
the price band system as such.
5.20 The European Communities recall that domestic
authorities are under a duty to evaluate all facts before them or that should
have been before them in accordance with the WTO safeguards regime.549 In the
European Communities' view, this broad obligation of the domestic authorities is
paralleled by a broad review that panels are called to exercise on safeguard
measures. The European Communities submit that the Panel is not limited in its
review by the "record of investigation".
5.21 The European Communities submit that all the basic
requirements for the adoption of safeguard measures must be met and demonstrated
before a safeguard measure is taken, and all must be accounted for in the
report of the competent authorities. The general issue raised by Chile's
measure, as extended, is that in a number of respects Chile's competent
authorities failed to properly examine and evaluate, or to examine and evaluate
at all, whether the requirements for the adoption of a safeguard measure were
met. The European Communities submit that this consideration applies in the
first place to the decisions (Exempt Decrees) of the Ministry of Finance, which
Chile identified as its "measures" in its notifications to the WTO. In its view,
those measures themselves simply establish the type and duration of the
safeguard relief accorded, and contain no reference or analysis whatsoever of
the underlying justifications. The same consideration largely applies to the
Recommendations of the Commission. The European Communities add that the decrees
establishing the provisional measure, the definitive measure and the extension,
include no reference to either of those Recommendations or to the Minutes of the
Commission's investigation. Rather, each of those decisions refers to a
different document (oficio reservado) of the Commission's President. The
European Communities submit that it has not had the benefit of examining such
oficios reservados and it is not clear to the Community whether the
Recommendations reprinted in the Minutes of the meetings of the Commission of
Distortions actually correspond to the "official communications" referred to in
the Decrees or not. If they do not, the European Communities cannot see how
those Recommendations may be examined as relevant basis for the decrees.
5.22 The European Communities submit that the safeguard
measure taken and identified by Chile does not include any "demonstration as a
matter of fact" that certain circumstances constituted "unforeseen
developments". The same applies to the Recommendations of the Commission
reprinted in the Minutes of its meetings. The fact that Chile submits before the
Panel that the time extension of the downwards price trends on the international
markets constitutes such "unforeseen development" is not capable of redressing a
flaw in the competent authorities' determinations. The European Communities
explain that the imports analysis of Chile's authorities seems to have taken
into account not only the actual increase in imports observed, but also the fact
that the operation of the price band system has contained a greater increase. In
the view of the European Communities, the "threat of increased imports" is not
the standard laid down in the WTO safeguard regime.
5.23 As regards Chile's analysis of the domestic industry,
the European Communities submit that, as a matter of principle the fact that an
analysis of the competitive relationship between some of the products subject to
the safeguard measure may have been conducted for the adoption of the price band
system does not absolve Chile from fulfilling the requirements of the WTO
safeguard regime and conduct an investigation in accordance with those
requirements. As regards Chile's analysis of the serious injury or threat
thereof caused by the increased imports, the European Communities submit that
even assuming that the Recommendation in Minutes of Session No. 193 forms part
of Chile's safeguard measure, the factors which must be examined under Article
4.2(a) of the Agreement on Safeguards are disposed of in a few lines per type of
imported product under investigation, simply stating the conclusions at which
the Commission arrived without any further explanation or elaboration. Moreover,
this does not address the issue of whether other "relevant factors" may have
existed and possibly be brought to the attention of the domestic authorities.
There are even fewer indications as concerns the causal relation between the
increased imports and the serious injury or threat thereof.
5.24 As regards the PBS, the European Communities take the
view that assessing the violation of Article II:1(b) of GATT 1994 is sufficient
for the Panel to conclude that, by adopting and maintaining its price band
system, Chile has violated its WTO obligations. By its structure and design,
that system takes away the predictability as to the maximum amount of Chile's
tariff protection, which the other WTO Members thought they had achieved by
negotiating tariffs with Chile. What is more, it alters the balance of
concessions carefully achieved through the Uruguay Round.
5.25 The European Communities submit that Article 4.2
prohibits the maintenance, after the entry into force of the WTO Agreement, of
pre-Uruguay Round measures "which have been required to be converted into
ordinary customs duties" (i.e. to be "tariffied"). It also prohibits the
introduction ex novo of the same types of measures, as well as their
re-introduction. In the European Communities' view, given that the obligations
in Article 4.2 concern measures that had to be converted into ordinary customs
duties, it necessarily follows that measures which already fall within the
definition of "ordinary customs duties" do not need "conversion". As a result,
the European Communities argue, measures that are "ordinary customs duties" in
the sense of Article II:1(b), as interpreted by the Appellate Body, are not
caught by the obligations of Article 4.2 of the Agreement on Agriculture. The
European Communities contend that a measure that would meet the test set out by
the Appellate Body in Argentina - Textiles and Apparel, and would
therefore not be contrary to Article II:1(b) of GATT 1994, would not be subject
to any further obligation in Article 4.2 of the Agreement on Agriculture. This
conclusion stands even if the measure in question resulted in the application of
a "duty that varies" - inasmuch as this "variation" is maintained below the
ceiling written in the Member's tariff binding. Thus, the European Communities
submit, the decisive element which distinguishes an "ordinary customs duty" from
a "variable levy" is the existence of a ceiling in the tariff binding. The
European Communities consider that the term "variable import levies" does not
include all "duties which vary" or all duties which vary according to certain
parameters.
5.26 In response to a question from the Panel concerning the
concept of ordinary customs duties, the European Communities explain that, under
GATT 1947, there seems to have been no agreement among the contracting parties
that the clause "ordinary customs duties" would be limited to particular types
of duties. The only indication in connection with that clause in the Analytical
Index to the GATT turns on a formal distinction, namely on whether a certain
duty is or is not inscribed in the columns of a contracting party's Schedules.
The European Communities refer to Argentina - Textiles and Apparel where
the Appellate Body further clarified that the only limit imposed by Article
II:1(b) on the WTO Members relates to the maximum amount of tariff
protection that they are allowed to apply once they have a binding in their
Schedules. The European Communities explain that the Appellate Body excluded
that, other than the requirement of an upper limit on the amount of duties,
Article II:1(b) of GATT 1994 imposes any other limit, notably on the type of
duty that can be indicated in the column "ordinary customs duties". The European
Communities submit that, even under GATT 1947, it had been noted, in respect of
variable duties:"[i]t is obvious that, if any such duty or levy is imposed on a
�bound' item, the rate must not be raised in excess of what is permitted by
Article II of the Agreement."550 In the European Communities' view, it is clear
that this position can only be correct if it is first assumed that variable
levies may fall within the scope of Article II of GATT 1994.
5.27 In practice, the European Communities explain, the types
of duties inscribed by the contracting parties to GATT 1947 in the column
"ordinary customs duties" of their Schedules have greatly varied, including,
inter alia, forms of duties commonly designed as "specific duties", "ad
valorem duties", "mixed" duties, and also tariff quotas. The European
Communities submit that it should however be clear that categories like
"specific duties", or "ad valorem" duties are not given legal relevance
in Article II:1(b) of the GATT 1994, and are not in any way mandatory under such
provision. Accordingly, they do not in any way limit the liberty of WTO Members
as to the device, the mention of which, in the column "ordinary customs duties"
of their Schedule, indicates how those Members ensure that they will not
exceed their bindings. The European Communities in particular disagree that
certain basic, if not simplified, definitions set out for the purposes of
economic theory may be of great assistance in identifying the content of legal
obligations agreed upon by sovereign WTO Members, if those Members did not
incorporate such definitions in the legal texts which they agreed.
5.28 In the European Communities' view, the Chilean PBS is a
measure that falls and can be reviewed under Article II:1(b) of GATT 1994 as an
ordinary customs duty. The European Communities submit that the Chilean PBS does
not always result in the application of an additional, or "supplementary" duty
to the one recorded in the "ordinary customs duty" column in Chile's Schedule.
Quite to the contrary, it argues, there are cases in which, depending on the
import prices, the "ordinary" duty is returned in full or in part. Therefore,
the European Communities argue, the PBS seems more a mechanism for the
application of Chile's "ordinary customs duty" rather than a separate and
supplementary duty.
5.29 As regards the difference between "ordinary customs
duties" and "other duties and charges", the European Communities explain that
Article II:1(b) also provides with respect to "other duties and charges" that
they cannot exceed a given amount, but gives no indication as to whether certain
"types" of duties would or would not be considered as "other duties and
charges". The European Communities submit that the similarity of language
compared to that used for the "ordinary customs duties" suggest that the second
sentence of Article II:1(b) has to be read similarly to the first sentence, that
is, as only embodying an obligation not to exceed the amounts of "other
duties and charges" provided for in their domestic legislation. The European
Communities contend that, in practice, the expression "other duties or charges"
in Article II:1(b) has been deemed to cover measures such as stamp duties,
statistical fees, revenue fees.551 As for the Understanding on Article II:1(b) of
GATT 1994, while obliging Members to record their "other duties and charges" in
their Schedule, on penalty of losing their right to apply such "other duties and
charges"552, the European Communities explain, it does not limit the types of
duties that can be scheduled as "other duties and charges". The European
Communities conclude that the difference between "ordinary customs duties" and
"other duties and charges" is mainly based on a formal criterion (that is, where
in a Member's Schedule a "duty or charge" is recorded), but is not based on a
difference in the types of duties that fall under one or the other category.
5.30 The European Communities consider that, as the principal
obligation in the second sentence of Article II:1(b) is to refrain from imposing
"other duties and charges" in excess of those provided for in domestic
legislation (and, after the entry into force of the Understanding on Article
II:1(b) of GATT 1994, in excess of those recorded in a Member's Schedule), these
measures are also characterized by a ceiling. It concludes that, as such, they
cannot be assimilated to the measures referred to in footnote 1 to Article 4.2
of the Agreement on Agriculture, including the measures "similar" to those
expressly listed in the first part of the footnote The European Communities
further explain that, given that a separate obligation not to exceed the level
of "other duties and charges" is laid down in Article II:1(b) compared to that
laid down for "ordinary customs duties", there is a separate ceiling for such
"other duties and charges". In the European Communities' view, the basic
obligation not to exceed the ceiling has not been changed by the Understanding
on Article II:1(b) of GATT 1994, which simply adds, for reasons of transparency,
that the ceiling must be recorded in the Schedules.
5.31 The European Communities consider that the obligation in
Article 4.2 of the Agreement on Agriculture is not "independent" of the one in
Article II:1(b) of GATT 1994 insofar as the interpretation of Article 4.2 is
concerned. In fact the latter provision employs the same language "ordinary
customs duty", which also appears in Article II:1(b), without any specific
definition of such term being provided either in the Agreement on Agriculture or
elsewhere in the WTO Agreement. The European Communities submit that the term
"ordinary customs duty" is only found in one provision of GATT 1994, namely
Article II and concludes that it is therefore to that provision and to its
interpretation given over time that one must turn to understand the content of
the main obligation in Article 4.2. The European Communities admit that it is
nonetheless correct that there is a distinct and additional obligation in
Article 4.2 of the Agreement on Agriculture, thus an added value compared to
Article II:1(b) of GATT 1994. The European Communities explain that that
obligation is the obligation to "tariffy" and not to revert, maintain or resort
to measures that were required to be "tariffied". In fact, Article II of GATT
1994 does not provide an obligation to eliminate certain forms of import
protection other than tariff protection, nor to limit tariff protection by
binding maximum amounts for agricultural products. The European Communities
explain that it merely imposes, if and when a Member has decided
to place a maximum limit on its right to tariff protection by inscribing a
binding in its Schedule, that such a Member cannot come back on its decision
(except of course by fulfilling the requirements in Article XXVIII of GATT
1994). According to the European Communities, if a Member had not "tariffied"
and then applied a variable import levy, it will in certain cases violate
Article 4.2 of the Agreement on Agriculture without, however, simultaneously
violating Article II:1(b) of GATT 1994.
5.32 As regards footnote 1 to Article 4.2 of the Agreement on
Agriculture ("similar border measures other than ordinary customs duties"), the
European Communities contend that this residual list is important because it
indicates that the list of measures which had to be "tariffied" (and which
cannot be reintroduced, maintained or introduced) is not exhaustive and because
it implies that the measures expressly listed in footnote 1 share some common
feature (which in turn also has to be shared by non-listed measures in order for
these measures to fall under the residual clause), and that the obligation to
"tariffy" all those measures has a single rationale. The European Communities
submit that, setting aside "variable import levies", all measures listed in the
first part of footnote 1 have in common the effect of eliminating price
competition, and of preventing imports. This indeed is the effect of
quantitative import restrictions, but also of minimum import prices,
discretionary import licensing, non-tariff measures through state trading
enterprises, voluntary export restraints. The European Communities recall that
this feature was also highlighted in the debates on "variable levies" under GATT
1947. In fact, "variable import duties" were criticized under GATT 1947 where
they had the capacity of always perfectly offsetting the difference in prices
between imports and domestic products, thus, the capacity of always
eliminating imports' price competitive advantage vis-�-vis domestic
products, ultimately operating like a quantitative restriction. The European
Communities submit that these effects, however, are only characteristic of
variable levy systems which can "fluctuate" freely, without any upper limit. In
fact only in that case will a variable levy system allow exactly to offset
import prices lower than domestic prices and thus operate like a quantitative
restriction. By contrast, the European Communities argue, a variable import levy
with an upper limit will not ensure perfect equalization of imports' and
domestic products' prices in every case. There will still be the possibility of
imports at a price level with respect to which the application of the highest
possible duty within the upper limit does not fully eliminate the price
differential compared to domestic products. Therefore, the European Communities
conclude, the reference, in footnote 1 to Article 4.2 of the Agreement on
Agriculture, to "variable import levies" to be tariffied, must be read as a
reference to variable levy systems which have the characteristic of eliminating
price competition between imports and domestic products and of operating as
import restrictions - which, in turn, means variable levy systems characterized
by the absence of any upper limit to the maximum duty that may result from their
application. According to the European Communities, Chile's price band system
does not always result in the perfect equalization of prices of imports and
domestic products. In fact, the European Communities explain, because there is a
band, there is an upper limit beyond which the duty resulting from the
application of the system cannot increase any further - no matter how low the
import price. Therefore, the European Communities submit, in certain cases of
particularly low import prices (thus of particularly strong price competition),
the duty cannot offset exactly the price differential with domestic prices.
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Guatemala
5.33 Guatemala declares that it shares Argentina's view that,
inasmuch as the price band system implies the application of a tariff that
exceeds the 31.5 per cent commitment by Chile or there is a risk that this will
occur, the price band system is inconsistent with obligations under Article
II.1(b) of the GATT 1994. As regards Chile's argument that the very low bound
tariff, together with the drastic fall in international prices for many
agricultural products, explain to a large degree why Chile was forced to resort
to the safeguards, Guatemala submits that this clearly shows that Chile departed
from the legitimate object and purpose of the safeguard measure. As regards
Chile's acknowledgement that it deliberately decided to allow the price band to
operate at full regime, failing to comply with its commitment, Guatemala
concludes that Chile improperly used this safeguard measure as a tool to provide
a temporary solution to its violations of the WTO Agreements and thereby
invalidate all the action taken by the Chilean authority.
5.34 Guatemala considers that, even though Chile is trying to
make the Member affected and all Members of the WTO responsible for monitoring
Chile's compliance with the Agreements, putting forward in its defence
acquiescence and estoppel, what is certain is that such a form of defence has
not been accepted in our dispute settlement system, according to which every
Member of the WTO is empowered to question measures by other Members that
violate the WTO Agreements. Furthermore, Guatemala adds, according to Article
XVI:4 of the Agreement Establishing the WTO "Each Member shall ensure the
conformity of its laws, regulations and administrative procedures with its
obligations as provided in the annexed Agreements".
5.35 In general, Guatemala considers that both the imposition
of the safeguard measure and its extension fail to comply with some of the
provisions of the Agreement on Safeguards. As regards the concept of "unforeseen
developments" in Article XIX of the GATT 1994, Guatemala submits that it implies
a pressing need for action that was possibly not foreseen or expected and this
must be proved by the competent authority. In Guatemala's view, this concept
per se must be assessed. In Guatemala's reading of the Appellate Body
precedents, the Appellate Body appears to suggest two circumstances that must be
taken into account when demonstrating the unforeseen developments, namely, an
examination of the changes that may be considered an unforeseen development and
an explanation of that interpretation. In this case, Guatemala declares not
seeing an indication that the Chilean authority demonstrated the existence of an
"unforeseen development" as required by Article XIX of the GATT 1994. Moreover,
it adds, we cannot see in which part of the administrative file or with which
resolution the Chilean authority complied by indicating that it had taken into
account the unforeseen development, as required by Chilean legislation itself in
Article 17 of the Regulations on the Application of Safeguard Measures (Decree
No. 909). Hence, Guatemala supports Argentina's claim that the Government of
Chile acted inconsistently with Article XIX of the GATT by not having
demonstrated, prior to application of the safeguard measure, as a matter of
"fact" the existence of an "unforeseen development".
5.36 Guatemala considers that Article 3.1 of the Agreement on
Safeguards lays down an obligation that goes beyond the mere fact of making a
file available to the public. It claims that simply examining a file does not
allow interested parties to know which questions of fact and law were analysed
by the competent authority when setting forth its findings and conclusions.
Guatemala notes that the Chilean authority did not comply either with the
obligation to provide copies to interested parties. Hence, Guatemala considers
that the Government of Chile acted inconsistently with Articles 3.1 and 4.2(c)
of the Agreement on Safeguards inasmuch as the Chilean authority did not comply
with the obligation to publish a report or detailed analysis and simply provided
access to the public file or furnished "copies" thereof.
5.37 Guatemala contends that the first thing that the Chilean
authority should have done prior to imposing a safeguard measure was to
determine whether imports of a particular product had affected domestic
producers of products that were "like" or "directly competitive" with that
imported product. Moreover, in this particular case, the investigating authority
should have carried out such an analysis for each of the products subject to the
safeguard measure, namely, wheat, wheat flour and edible vegetable oils. In
Guatemala's opinion, even if the price band system operating in Chile took into
account each agricultural product and its corresponding like or directly
competitive products, this does not absolve the Chilean authority from carrying
out its own analysis in order to comply with Article XIX.1(a) of the GATT 1994
and Articles 2.1, 4.1(c) and 4.2 of the Agreement on Safeguards. Guatemala
contends that it could not find in any part of Chile's submission "references"
that would allow it to find in the Minutes the analysis carried out by the
Commission. Furthermore, Guatemala submits, it is a matter for concern that none
of the Minutes in the file (Minutes of Session No. 181 of 9 September 1999,
Minutes of Session No. 185 of 22 October, Minutes of Session No. 193 of 7
January 2000, and Minutes of Session No. 224 of 17 November 2000) contain this
analysis. Accordingly, Guatemala supports Argentina's claim that the Government
of Chile acted inconsistently with Article XIX.1(a) of the GATT 1994 and
Articles 2.1, 4.1(c) and 4.2 of the Agreement on Safeguards. In Guatemala's
view, the Minutes do not mention any analysis of the like or directly
competitive product that should have been carried out by the competent authority
pursuant to the aforementioned Articles. Likewise, and as a result of the
foregoing, Guatemala considers that the Chilean authority could not have
determined which products constituted the domestic industry because the entire
evaluation which the Chilean authority made in relation to this concept is
inevitably wrong and cannot be remedied.
5.38 As regards the increased imports requirement, Guatemala
considers that the periods examined by Chile do not allow any proper conclusions
to be drawn regarding the trend in imports. In this regard, Guatemala explains
that the Chilean authority sometimes evaluated short-term trends and in other
instances evaluated data corresponding to long-term trends. In Guatemala's view,
evaluating data in isolation or placing emphasis on some data corresponding to a
particular number of years while at the same time leaving aside other data for
more recent periods can indubitably lead to errors. Far from showing that there
was an increase in imports, Guatemala contends, the Chilean authority recognizes
that, in recent periods, there has been a decrease in imports of products
affected by the safeguard measure. Guatemala further submits that the competent
authority did not carry out a serious analysis in order to determine that the
"alleged increase" in imports was taking place "under such conditions" as to
cause or threaten to cause serious injury. Guatemala therefore supports the
claim by the Government of Argentina that the Government of Chile acted in a
manner inconsistent with Article XIX.1(a) of the GATT 1994 and Articles 2.1 and
4.2(a) of the Agreement on Safeguards.
5.39 Guatemala points out that Argentina claims that the
determination by Chile of the existence of threat of injury is inconsistent with
Article 4.2(a) because the Chilean authority did not properly evaluate "all
relevant factors", as required by that Article . Guatemala agrees that the
Chilean authority did not evaluate "all relevant factors" since it could not
find in the Commission's Minutes any kind of evaluation of the relevant factors
set out in Article 4.2. of the Agreement on Safeguards. Although it is true
there are isolated data or a straightforward list of some of these factors,
Guatemala submits, this does not mean that the Chilean authority complied with
its obligation "to evaluate" these factors, as required by Article 4.2.
Guatemala further submits that Article 4.2 imposes on the Chilean authority the
obligation to provide a reasoned and adequate explanation of its determination.
In the Commission's Records, however, Guatemala finds no kind of explanation
that would allow it to understand the analysis and the criteria used by the
Chilean authority in order to understand how such factors confirmed its
determination.
5.40 Guatemala supports Argentina's claim that the Chilean
authority failed to comply with its obligations under Article XIX.1(a) of the
GATT 1994 and Articles 2.1 and 4.2(b) of the Agreement on Safeguards for the
following reasons: (i) in document G/SG/Q2/CHL/5 of 27 September 2000, Chile
indicates that the cause of the injury was the significant fall in international
prices. This statement can be found in several parts of the administrative file.
In Guatemala's view, the Chilean authority was obliged to examine "other
factors", which were referred to by various parties during the administrative
proceedings. However, Guatemala contends, the file does not contain any analysis
by the Chilean authority showing that it examined these "other factors"
mentioned during the procedure. (ii) the Chilean authority did not make a
"determination" within the meaning of Article 4.2(b) because it did not manage
to establish the existence of a causal link between the increased imports and
the injury or threat of serious injury. In Guatemala's view, the Chilean
authority did not undertake an evaluation of the "other factors" and therefore
was not empowered to determine or to ensure that the alleged injury or threat of
injury was attributable to the increased imports. Guatemala concludes that the
Chilean authority could not find that the "alleged increase in imports" was the
cause of the injury or threat of injury.
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Japan
5.41 Japan is concerned with the consistency of Chile's
measures with relevant WTO rules on several points. Japan indicates that there
is a possibility that taxes or surcharges in excess of Chile's bound tariff rate
agreed in the Uruguay Round may be imposed under this PBS on its face. Japan
further indicates that it is not necessarily clear whether the following basic
requirements for applying safeguard measures are fulfilled so that, as the
Chilean Government insists, such measures are justified: (a) the demonstration
of the existence of unforeseen developments; (b) the proof of a causal link
between increase of imports and serious injury; and (c) the proper definition of
"like or directly competitive products" and "domestic industry." In this regard,
Japan argues that, although the existence of a directly competitive relationship
between materials (primary products) and final products (in this case, wheat and
wheat flour) seems not to be demonstrated, producers of the both products are
included in the "Domestic Industry" in the meaning of Article 4.1(c) of the
Agreement of Safeguards.
5.42 Furthermore, Japan notes that the Agreement on
Safeguards does not allow a Member to adopt safeguard measures before the
investigation. In any event, Japan submits, careful consideration is called for
in order to ensure that the measures inconsistent with Article II:1(b) of the
GATT 1994 are not justified as measures taken under the Agreement on Safeguards.
5.43 Japan is of the view that Article 4.2 of the Agreement
on Agriculture does not regulate the tariff level but prohibits certain forms of
border measures other than ordinary customs duties, except as otherwise provided
for in Article 5 and Annex 5 of this Agreement. Thus, Japan considers, insofar
as a measure does not fall into such measures so regulated by Article 4.2, the
measure does not give rise to violation under Article 4.2 of Agreement on
Agriculture.
5.44 According to Japan, since Chile made tariff concessions
for wheat, wheat flour and edible vegetable oils in the Uruguay Round, Article
II:1(b) of the GATT 1994 does not allow Chile to levy ordinary customs duties in
excess of those set forth and provided for in Chile's Schedule of Concessions.
While Article II:1(b) of the GATT 1994 also provides for "other duties or
charges", if the "specific duty" based on the Chilean PBS is not set forth as
"other duties or charges" in the Schedule, Japan is of the view that it is
inconsistent with Article II:1(b) of the GATT 1994 to the extent that the
applied rate inclusive of the added "specific duty" exceeds the bound rate of
concessions.
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Paraguay
5.45 Paraguay considers that when a bound tariff has been
recorded in a Member's Schedule, this tariff constitutes the maximum limit of
duties that can legally be applied to the products bound. Paraguay agrees with
the Appellate Body's statement in Argentina - Textiles and Apparel
553 regarding the structure and form of the measure inasmuch as it considers that,
although in certain cases the implementation of Chile's price band system does
not violate its obligations under the Agreements, on other occasions the system
jeopardizes the rights of other Members, and so automatically becomes
inconsistent with the Agreements. Paraguay refers to Chile's statement to the
effect that the sharp and sustained fall in international prices of the
agricultural products made it no longer possible to maintain the system without
exceeding the level of bound duties and declares that this appears to suggest
that Chile had failed to comply with its obligations under Article II of the
GATT 1994.
5.46 Paraguay also claims that Chile has not provided any
solid legal grounds for its statement that the PBS is not a variable import levy
nor a similar border measure within the meaning of footnote 1 and that it does
not come under the scope of Article 4.2 but is rather a specific tariff that
fluctuates according to external factors. Paraguay is of the opinion that, even
though it is not specifically mentioned in the text, Chile's price band system
is one of the measures which the drafters of Article 4.2 of the Agreement on
Agriculture, and in particular of footnote 1, were seeking to prevent.
5.47 As regards Chile's safeguard measures, Paraguay finds
that, if the PBS was fully applied in Chile in order to maintain a stable
domestic price, away from the fluctuation of products in global markets, the
argument that the rapid fall in global prices had caused or threatened to cause
serious injury to Chilean producers is inconsistent. Paraguay declares that, by
recognizing that the measures in force in Chile are being analysed by this
Panel, it is tacitly concluding that they are merely an extension of the
original measure, and that Chile's argument that the extension is a different
measure is out of place because neither the nature nor the characteristics of
the original measure have altered - there has merely been an extension of the
implementation period. Paraguay further submits that Chile adopted the safeguard
measures after it had infringed its bound tariffs by applying the price band
system. In Paraguay's view, this means that it used the safeguard measures as a
mechanism for legalizing those violations, contrary to both the objective and
nature of such measures. At the same time, Paraguay considers that Chile has not
acted in accordance with Article XIX of the GATT 1994, since it failed to
demonstrate the existence of unforeseen developments prior to applying the
safeguard measure. Paraguay further submits that Chile has not convincingly
demonstrated injury or threat of injury caused by increased imports. Paraguay
considers that such injury or threat thereof can be imputed to other factors,
for example international product prices, and this is clearly proscribed in
Article 4.2(b) of the Agreement on Safeguards.
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United States
5.48 The United States disagrees with the interpretation of
Article 4.2 of the Agreement on Agriculture advanced in Chile's first
submission. According to the US, Chile's argument is two-fold: (1) the price
band regime is not a "variable import levy" within the meaning of Article 4.2
and, therefore, is not proscribed by Article 4.2 and (2) even if it is a
variable levy, the system was not "required to be converted into ordinary
customs duties" during the Uruguay Round tariffication exercise and, hence, is
not in violation of Article 4.2. As regards the second argument, the United
States considers that it raises a fundamental interpretive issue regarding
Article 4.2. According to the US, Chile effectively reads Article 4.2 as only
prohibiting Members from using "any measures that have been converted into
ordinary customs duties." According to this argument, if an agriculture-specific
non-tariff barrier existed at the time of the Agreement on Agriculture's entry
into force, but was not "converted" into a tariff at that time by a Member, then
the measure must not "have been required to be converted" and, accordingly,
falls outside the scope of Article 4.2's prohibition. The United States submits
that this strained reading of Article 4.2 ignores key parts of the text as well
as the object and purpose of the provision. The United States explains that,
read according to its ordinary meaning, Article 4.2 imposes a general
requirement to eliminate and refrain from using or readopting any
agriculture-specific non-tariff barriers and to use a system of tariff-only
protection. Therefore, the United States argues, if the Chilean PBS is a
variable import levy, it (and all other variable import levies) is
prohibited by the express language of Article 4.2 and its accompanying footnote,
regardless of whether Chile actually tariffied the levy in its Schedule of
tariff commitments. In the United States' view, Chile's interpretation of
Article 4.2 fails to give all of the terms of that provision "meaning and
effect" and does not read those terms according to their ordinary meaning. One
phrase that Chile quotes but then disregards is "of the kind." The United States
claims that, according to its ordinary meaning, "kind" refers to a "class, sort,
or type," indicating that Article 4.2 prohibits general classes, sorts, or types
of non-tariff measures, not simply those particular, country-specific measures
that were actually tariffied in the Uruguay Round. According to the US, Chile's
interpretation not only denies meaning to the phrase "of the kind," it also
renders inutile the verb "maintain." The United States submits that if the only
measures that Article 4.2 prohibits are non-tariff barriers that were, in
fact, tariffied in the Uruguay Round, then the language in Article 4.2 that
Members shall not "revert to" such measures would suffice. Thus, Chile's reading
contravenes the general rule of treaty interpretation that no terms of a treaty
(in this case, "maintain" and "resort to") shall be reduced to redundancy or
inutility. The United States argues that the requirement that a Member shall not
"maintain" a prohibited measure contemplates that there could be some measures
"which have been required to be converted into ordinary customs duties" that
were not, in fact, converted. The United States submits that such measures,
even if they had not been converted, would still be prohibited and actionable
under Article 4.2.
5.49 The United States also disagrees with Chile's assertions
that its measures are immunized from challenge because (1) its price band system
has not previously been challenged and (2) other Members allegedly use similar
measures. The United States submits that, according to paragraph 3 of the
Marrakesh Protocol, there is no waiver of Members' rights to challenge Chile's
variable import levy merely because Chile submitted its Schedule for
multilateral examination. The United States further submits that Chile's (or
other Members') use of WTO-inconsistent measures does not rise to the level of
"subsequent practice" that establishes the parameters of Article 4.2's
prohibition.
5.50 As regards Chile's second argument, the United States
submits that Chile's price band regime clearly falls within the ordinary meaning
of the term "variable import levies" as used in footnote 1 to Article 4.2 when
interpreted in light of its context, object and purpose. The price band
mechanism varies the import levy assessed depending on the relationship between
historical and current world prices. Chile has not offered any interpretation of
the ordinary meaning of "variable import levy" that demonstrates that its price
band regime is not encompassed by this term. However, the United States does not
fully subscribe to Argentina's definition of a variable import levy as an import
surcharge that "ensures" that the domestic market price "remains unchanged
regardless of price fluctuations in exporting countries." In the US' view,
variable import levies may be effected through a number of possible mechanisms,
which may or may not "ensure" a specific domestic price. It further adds that a
variable levy, however it is designed, prevents or ameliorates price variability
in the domestic market caused by movements in import prices. The United States
argues that Chile's price band regime does exactly that by calculating the
import levy as the difference between a present "target" price and a current
world price.
5.51 The United States defines a variable levy as an
"assessment, duty, or tax" that has "different values in different instances or
at different times" as determined by an administrative, formulaic mechanism.
This mechanism, it explains, defines parameters based on any number of exogenous
factors, such as a target price (e.g., historical world prices) and a current
price (e.g., a reference price), to set the levy. The levy at any particular
point in time is determined on the basis of those exogenous factors so as to
prevent or ameliorate price variability in the domestic market caused by
movements in import prices. The United States also defines a minimum import
price as a similar mechanism whereby the price of each import shipment is
compared to an officially established "minimum import price," often based on an
internal domestic support price. The United States explains that where the
declared value (i.e., transaction value) of the specific shipment is lower than
the minimum import price, a penalty, additional charge, or duty is often then
assessed, which may be equal to the difference between the minimum import price
and the declared value.
5.52 The United States claims that Chile's argument to the
effect that its price band mechanism cannot be a variable levy because it is not
identical to the EC's pre-Uruguay Round variable levy regime actually
serves to highlight the price band system's operation as a variable import levy.
The United States explains that the main distinctions that Chile points to are
that its system uses a moving five-year average "band" of past world prices to
establish a minimum (and maximum) target price, whereas the EC's prior variable
levy system used an internal European Communities price to set the target price,
and that the price band system uses a current international reference price,
whereas the European Communities system used a shipment-specific invoice price.
The United States submits that these are distinctions without a difference since
how Chile sets its target price and current price does not fundamentally
distinguish its regime. Rather, the United States argues, it is the fact that
the levy varies based on exogenous factors, such as world prices, not the
particular factors used to determine the levy amount, that defines the price
band mechanism as a variable levy. The United States adds that another
distinction Chile draws is that, unlike the prior European Communities variable
levy regime, the price band system permits low-cost foreign producers to compete
on the basis of price. The United States contends that, while it is technically
true that the system does not completely eliminate price competition, this does
not fully capture the economic impact of Chile's price band regime. The United
States explains that, when international prices decline, the variable levy
assessed under Chile's price band regime exacts a higher duty, on an ad
valorem basis, on low-cost goods than it does from high-cost goods. Thus,
the United States argues, the prohibition on variable import levies in Article
4.2 serves to eliminate the disproportionate impact of these measures on
low-cost producers. The United States contends that Chile's definition of
"ordinary customs duty" would also capture the EC's prior variable import levy,
which was a specific duty that fluctuated, in part, on the basis of external
world price factors. Thus, Chile's definition cannot be accepted as it does not
distinguish the very European Communities measure that Chile has conceded is a
prohibited "variable import levy." The United States submits that the term
"ordinary customs duties" is generally recognized to refer to specific duties
that are based on a physical quantity or measure of imported product or ad
valorem duties that are based on a fixed percentage of the value of the
imported product. It concludes that such ordinary customs duties do not vary
based on world and/or domestic prices.
5.53 The United States submits that, even if the Panel were
to conclude that Chile's price band mechanism is not a "variable import levy,"
the price band regime is a "similar border measure" that is prohibited under
footnote 1 to Article 4.2. The United States contends that, due to the
similarities in both structure and effect between Chile's price band system and
measures recognized by Chile as being variable import levies, the Chilean regime
must at least be a prohibited "similar border measure."
5.54 In response to a question from the Panel, the United
States submits that, pursuant to the customary rules of interpretation of
international law, which are reflected in Article 31(1) of the Vienna
Convention, the duty of a treaty interpreter is to determine the meaning of a
term in accordance with the ordinary meaning to be given to the term in its
context and in light of the object and purpose of the treaty. Accordingly, the
term "ordinary" should be defined in accordance with its ordinary meaning in its
context in Article II:1(b). The United States explains that the dictionary
definition of "ordinary" is "belonging to the regular or usual order or course;
. . . occurring in the course of regular custom or practice; regular, normal,
customary, usual."554 The United States indicates that, in its context as an
adjective of "customs duty," the term can be understood to refer to those types
of customs duties that have been the customary, usual types of customs duties
used by Members. The United States submits that the regular, normal forms of
customs duties used in international trade (both now and at the time of the
Uruguay Round) are the ad valorem duty and the specific duty (or compound
rates based on combinations of the two). It contends that a review of Members'
domestic tariff schedules (including Chile's) would reveal that the "regular,
normal, customary, usual" forms of customs duties expressed therein are ad
valorem or specific duties. The United States notes that this understanding
of "ordinary customs duties" was apparently expressed during the process of
tariffication in the Uruguay Round in which border measures other than ordinary
customs duties were converted into tariff equivalents.555 Thus, "ordinary customs
duties" are ad valorem and/or specific customs duties inscribed in a
country's domestic tariff schedule with a rate expressed for each individual
tariff heading.556
5.55 Finally, the United States notes that Chile's domestic
tariff schedule confirms that the levy imposed through Chile's price band
mechanism is not an "ordinary customs duty." It explains that for all Chilean
products, even those on which it imposes price bands, under the column labelled
"duties," the Chilean tariff schedule shows only an ad valorem
rate. For products subject to price bands, however, the product description
following the tariff number indicates a footnote. The United States points out
that the footnote text discloses that an additional "specific duty" is imposed
(no rate is specified) and refers to the decree then in effect. However, it
adds, such decrees only establish the price band mechanism, that is, a list of
international reference prices with the corresponding additional duty to be
charged. The United States submits that an importer seeking to ascertain what
duty would be imposed on imports would also have to know the Chilean customs
authority's weekly determination of the current international reference price.
Thus, it concludes, the rate of customs duty imposed through the price band
mechanism is neither disclosed by Chile's national tariff schedule nor disclosed
by the decree establishing the price band mechanism. The United States indicates
that this complicated levy mechanism differs importantly from "ordinary customs
duties" in its lack of transparency and definiteness.
5.56 In response to a question by the Panel, the United
States suggests that the category of "all other duties and charges of any kind"
in Article II:1(b) of GATT 19994, second sentence cannot usefully be defined
"positively". It submits that the very use of the term "all other" means that
this category of duties and charges must be described "negatively," that is, in
terms of what it is not. According to the US, this category consists of all
import duties and charges "of any kind" that are not "ordinary customs
duties." The United States further notes that "all other" duties or charges are
generally prohibited under Article II:1(b), second sentence, and the
Understanding on the Interpretation of Article II:1(b) of the GATT 1994 unless
they have been separately inscribed in a Member's Schedule in accordance with
the Understanding. The United States also indicates that it is conceivable that
some "similar border measures" within the meaning of footnote 1 to Article 4.2
of the Agreement on Agriculture might in some circumstances be considered "other
duties or charges of any kind" within the meaning of Article II:1(b), second
sentence, of GATT 1994, provided that any such measure constitutes a duty or a
charge and is imposed "on or in connection with the importation" of a product.
However, it explains, the Understanding on the Interpretation of Article II:1(b)
of the GATT 1994 requires such a "similar border measure" that is an "other duty
or charge" to be inscribed in a Member's Schedule. In this regard, the United
States considers it relevant to note that Chile has not recorded any such "other
duty or charge" for wheat, wheat flour, or edible vegetable oils. The United
States is of the opinion that a Member generally may not impose an "other duty
or charge" at all unless it is bound in the Member's schedule. It explains that
if such a duty or charge is omitted from a Schedule a Member may not
subsequently add such duties or charges to its Schedule.
5.57 In response to a question by the Panel, the United
States indicates that it considers it neither essential nor necessarily helpful
to designate a degree of similarity that is required to be met in order for a
measure to qualify as a "similar border measure." The notion of degree of
similarity is, the United States believes, intrinsic to the term itself and is
to be taken into account in the determination of whether something is "similar"
or not similar. The United States notes that the plain text of footnote 1 does
not further modify the term similar, e.g., "very similar" or "somewhat
similar." The United States explains that the ordinary dictionary meaning of
"similar" is "having a marked resemblance or likeness; of a like nature or
kind."557 Thus, it contends, a measure at issue should "resemble" the mechanics,
structure, and operation of a listed measure. The United States submits that
whether the measures share sufficient characteristics with each other to qualify
as being "similar" to each other is a matter that must be determined on a
case-by-case basis according to a Panel's best judgement. The United States
argues that in interpreting the term "similar border measures," it is important
to look to the object and purpose of Article 4.2 and footnote 1. Article 4.2
prohibits any and all measures that have been required to be converted
into ordinary customs duties, regardless of the degree to which such measures
disadvantage imports. The United States considers that two of the goals of
Article 4.2's tariffication process were the achievement of transparency in
import barriers and the advantage of fixed tariffs for the promotion of trade in
agricultural products. Thus, in the US' view, when determining whether a measure
is a "similar border measure," it is enough that the measure is similar to a
listed measure in its mechanics, structure, and operation, regardless of its
efficacy. Finally, the United States notes that footnote 1 states that "these
measures include" the listed measures and "similar border measures."
Thus, it concludes, the identified measures and "similar" border measures of
footnote 1 are not an all-inclusive list of the measures that have been required
to be converted into ordinary customs duties. According to the US, measures that
are not "similar" to the specifically listed measures could still be prohibited
by Article 4.2.
5.58 The United States agrees with Argentina's claim that
Chile's price band system, as implemented through laws, regulations, and
"complimentary provisions and/or amendments," is inconsistent with Article
II:1(b) of the GATT 1994. The United States argues that Chile concedes in its
First Submission that the price band system will result in a breach of its
tariff bindings if international prices are sufficiently low but seeks to excuse
the breach on the basis that its Government consciously took the decision to
allow the price bands to operate in full trespassing the bound rate The United
States submits that this concession should itself suffice for the Panel to find
a breach of Article II. The United States notes that the deliberateness of the
breach is irrelevant because Article II is concerned not with good or bad
intentions but with the "treatment" accorded to the commerce of another Member.
The United States concludes that because violations of Chile's bound rates may
occur and have occurred precisely because of the "structure and design" of the
price band system, such as Chile's failure to cap the specific duties that could
be applied to particular shipments, the price band system is inconsistent with
Chile's obligations under Article II. The United States further submits that the
price band system is mandatory, does not impose any ad valorem cap on the
duties that can be collected on a particular shipment, and continues in effect
to this day. Thus, it argues, regardless of the operation or legal status of
Chile's safeguard measures, Chile continues to apply measures that are
inconsistent with its tariff bindings under Article II.
5.59 In response to a question by the Panel, the United
States disagrees with the implied assertion in the European Communities' oral
statement to the effect that a measure that is not inconsistent with Article II
of GATT 1994 cannot be prohibited under Article 4.2 of the Agreement on
Agriculture. According to the United States, the statement of the European
Communities suggests that Article II would delimit the "scope of Article 4.2"
but this reverses the proper order of the analysis. The United States is of the
opinion that Article 4.2 must be interpreted first as the lex specialis
applicable to "measures of the kind which have been required to be converted
into ordinary customs duties" that are applied to agricultural products. The
United States concludes that because price bands are a "variable import levy" or
"similar border measure", they are prohibited under the terms of that provision,
which makes no reference to the existence of a tariff binding. The United States
explains that Article II:1(b) allows a Member to assess ordinary customs duties
not in excess of the level bound in its Schedule. However, it argues, the levies
assessed by the Chilean PBS are not "ordinary customs duties." Therefore, the
United States concludes, the European Communities' assertion that the Chilean
price bands are being "maintained" under Article II of GATT 1994 cannot be
credited. The United States further indicates that, contrary to the EC's
assertion that a tariff binding is all that separates a variable import levy
from an ordinary customs duty, the Agreement on Agriculture draws a marked
distinction between the two. The United States explains that Article 4.2 sets
the scope of its prohibition as "measures of the kind which have been required
to be converted into ordinary customs duties," and footnote 1 identifies one
such measure as the "variable import levy." Thus, in its view, any valid
interpretation of Article 4.2 must make sense of that distinction.
5.60 In response to a question by the Panel, the United
States considers that Members have the right to alter their ordinary customs
duties on items so long as those duties do not exceed the relevant tariff
binding. It clarifies that this is different, however, from a variable levy,
where the value of the levy is not set and then altered in succession. The
United States submits that because the variable levy mechanism creates
impediments to trade regardless of whether a tariff binding is exceeded, Members
agreed in the Agreement on Agriculture to refrain from maintaining, resorting
to, or reverting to variable import levies and similar border measures.
5.61 As regards Chile's safeguards measures, the United
States submits that competent authorities must base their determination
concerning increased imports on objective (i.e., unbiased) data and that they
should consider carefully data from the more recent past in the context of
examining the entire period of investigation. The United States claims that both
Argentina and Chile appear to be relying in their submissions on information
that was not in the Minutes compiled and considered by the Chilean competent
authorities. In the United States' view, such extra-record information should
not be considered by the Panel in this dispute. The United States explains that
the review of the serious injury determination of a competent authority is to be
conducted based on the information that was before the authority at the time of
its investigation. The United States submits that by relying on new information
that was never before the Chilean competent authorities, both Argentina and
Chile would have this Panel become another authority before which evidence could
be submitted on the underlying facts. The United States is of the opinion that,
in that case, the process would be exactly the de novo review which has
been condemned by the Appellate Body. The United States further submits that, in
considering Argentina's claims regarding Chile's provisional safeguard measure,
the Panel should keep in mind that Article 6 of the Agreement on Safeguards
places a special obligation on a party imposing a provisional safeguard - that
there be "clear evidence that increased imports have caused or are threatening
to cause serious injury". The United States explains that "clear" means
"[e]asily seen (lit. & fig.); distinctly visible; intelligible,
perspicuous, unambiguous; manifest, evident."558 Thus, the United States argues, if
the Panel concludes that the evidence upon which Chile relied for its
provisional measure was ambiguous, the Panel should find that measure to be
inconsistent with the Agreement on Safeguards. The United States points out
that, in performing this evaluation, the Panel should note that the Article 6
standard is different from, and distinctly higher than, the standard Article 4
requirements for imposition of a definitive safeguard measure. In this regard,
the United States submits that mixed evidence might be sufficient to support a
definitive safeguard measure, but still be insufficient to support a provisional
measure.
5.62 The United States further argues that Chile is mistaken
in treating the extension as an entirely new measure. However, it adds, Article
7.2 also establishes that Articles 2 through 5 regulate the procedures used in
an extension proceeding. The United States explains that Article 7.2 itself
provides the substantive standard, which conflicts in important ways with the
substantive requirements of Articles 2 through 5. Thus, the United States
concludes, Argentina errs in arguing that Chile was obligated to satisfy the
substantive requirements of Articles 2.1 and 4.2 of the Agreement on Safeguards
that imports be increasing before extending its safeguard measures.
-
Venezuela
5.63 Venezuela agrees with Argentina that preservation of the
commitments made within the framework of tariff negotiations is a key element of
the multilateral system and that the principle of predictability and certainty
of tariff concessions granted has been recognized in a number of precedents as a
fundamental part of the structure of the GATT/WTO system. Venezuela does not
however agree with those who interpret Members' obligations under Article
II:1(b) of the GATT 1994 as requiring a constant tariff. Venezuela is of the
opinion that, provided that the ceiling established by the bound tariff in
Members' respective Schedules of commitments is not exceeded, the fluctuation in
either direction and with greater or lesser frequency of the tariff actually
applied to imports does not constitute a violation of Article II:1(b) of the
GATT 1994, nor does it affect the predictability or certainty of the tariff
concessions.
5.64 Venezuela is of the opinion that, to settle this
dispute, the Panel needs to take into consideration what was meant by variable
levies at the time of the negotiation of the Agreement on Agriculture. Venezuela
believes that the term "variable levy" in footnote 1 to Article 4.2 of the
Agreement on Agriculture refers to levies designed to cover the difference
between the price of imports at the border and an official price below which
foreign goods cannot be admitted. This implies, it argues, a different tariff
for each import, even where applied to identical products at the same time.
Venezuela considers that there are significant differences between these
"variable levies" and the variable duties resulting from PBS. These differences,
it explains, relate to both the objectives and nature of these two types of
measures: whereas the objective of the variable levies which in our opinion are
proscribed by footnote 1 to Article 4.2 of the Agreement on Agriculture was to
"insulate" the domestic market from fluctuations on the international market,
the objective of PBSs is to stabilize domestic prices by in fact passing on the
trends in the international prices of the products concerned for a specific
period. Venezuela stresses that particularly low international prices might lead
to a tariff increase up to the bound level in each Member's schedule of
commitments, but high international prices can lead to a tariff reduction.
5.65 In response to a question by Argentina, Venezuela
stresses that PBSs may be set up differently from the one used by Chile, and may
be compatible with WTO rules. It is Venezuela's understanding that the Chilean
PBS, as it currently operates, can in certain circumstances result in the
application of specific duties to products subject to the system. Specific
duties, Venezuela explains, consist in a specific amount collected for a given
quantity (unit/kilo/litre) of the imported good, and are not based on the value
of the good. Thus, it concludes, as Argentina in fact points out in its
question, the transaction value is not used to determine the amount of the
specific duties. Venezuela submits that specific duties are permitted under WTO
rules, and are applied by certain Members, to agricultural goods in particular.
5.66 In response to a question by the Panel regarding the
definition of ordinary customs duty, Venezuela explains that the Kyoto
Convention defines customs duties as "the duties laid down in the Customs tariff
to which goods are liable on entering or leaving the Customs territory".
Venezuela further explains that the term "ordinary", as translated into Spanish
("propiamente dicho"), means "as such", which amounts to repeating the
above definition. Venezuela indicates that a distinction must be made between
duties and charges such as those involved in paying a service (freight,
insurance, customs service fee), and ordinary customs duties, which are fiscal
contributions collected by Customs on goods from another country. Venezuela
explains that what distinguishes an "ordinary customs duty" from a "variable
duty" is not the existence of a bound "ceiling" or maximum applicable level
according to each party's schedule. In Venezuela's opinion, a customs duty is
valid in the WTO as long as it does not exceed the indicated "ceiling", while
the "variable levy", which is prohibited by the footnote to Article 4.2 of the
Agreement on Agriculture, is a levy which involves a different tariff for each
import transaction, even for identical products at the same time.
5.67 In response to a question by the Panel, Venezuela
explains that "similar border measures other than ordinary customs duties"
within the meaning of footnote 1 to Article 4.2 of the Agreement on Agriculture
cannot be considered "other duties or charges of any kind" within the
meaning of Article II:1(b), second sentence, of GATT 1994. Venezuela contends
that the obligations established by the two Articles are different.
VI.
INTERIM REVIEW
6.1 The Panel issued its interim report on 21 February 2002.
On 28 February 2002, Chile provided comments and requested the revision and
clarification of certain aspects of the interim report. Chile also requested
that the Panel hold a further meeting with the parties pursuant to Article 15 of
the DSU and paragraph 16 of the Panel's Working Procedures. Argentina provided
general comments in a letter dated 28 February 2002. The Panel held a meeting on
14 March 2002. Both parties made oral statements and were given the opportunity
to provide written statements by close of business the next day.559
6.2 With regard to paragraphs 7.3 to 7.8 of the interim
report, Chile argued that a distinction must be drawn between Articles 1 and 2
of Law 19.722. According to Chile, Article 2 is the provision that expressly and
conclusively states that the total of the specific duties resulting from
application of the price band system and the general ad valorem
(most-favoured-nation) tariff may not exceed the bound tariff. Chile submits
that this provision does not require any further implementation as it is a law
and as such applies in Chile as of its publication in the Diario Oficial de
la Rep�blica de Chile, which occurred on 19 November 2001. Chile argues that
the case of Article 1 of this Law is different in that it has to be implemented
by the customs authorities, who took an active part in the elaboration,
discussion and drafting of this Law. This implementation took effect at the same
time as the publication of the Law, in the form of Exempt Resolution No. 4326,
published in the Diario Oficial de la Rep�blica de Chile on the same date
as Law 19.722, i.e. 19 November 2001. Argentina responded that Chile did not
inform the Panel about the existence of Exempt Resolution No. 4326 prior to the
interim review meetings, and that Argentina could therefore not have been aware
of this Exempt Resolution.
6.3 We note that Chile did not request any specific action by
the Panel in this respect and, taking note of the late submission of this
evidence by Chile, we consider that no changes to the interim report are
warranted by Chile's comments.
6.4 With respect to paragraphs 7.17, 7.18 and 7.19, Chile
argued that the Panel is mistaken in attributing to Chile the argument that the
fact that the PBS was not challenged or that there were no requests to tariffy
the measure, either during or after the Uruguay Round negotiations (particularly
on the Agreement on Agriculture), means that the PBS cannot be challenged or
considered a measure prohibited by Article 4.2. According to Chile, it had
argued that the absence of any challenge or request, before, during or after the
negotiations is valid evidence in support of Chile's position regarding the
correct interpretation of Article 4.2. Chile therefore requests the Panel to
reformulate or delete these paragraphs. Argentina considered that the Panel had
correctly understood and reflected Chile's arguments, and cited a passage in
Chile's rebuttal submission which it considered to confirm this understanding.
6.5 In paragraph 7.17 we summarize Chile's interpretative
argument regarding Article 4.2 as follows:
Chile argues that the phrase "of the kind which have
been required to be converted" and the illustrative list in footnote 1
contain two separate conditions to be met for a measure to be prohibited
under Article 4.2: only those measures listed in footnote 1 which
effectively "have been required to be converted into ordinary customs
duties" would be prohibited under Article 4.2. Chile argues that no other
Member has ever requested Chile to "tariffy" its PBS during the Uruguay
Round negotiations, and that, therefore, its PBS is not a measure "of the
kind which [has] been required to be converted into ordinary customs
duties".
In paragraph 7.18, we state that such an interpretation
"would imply that Members decided to forego their right to challenge
measures which had not been specifically identified and converted at the end of
the Uruguay Round" (emphasis added).
6.6 We note that in para. 56 of its first submission, Chile
states,
In its arguments, 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, 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. If the intention of those who drafted Article
4.2 had in fact been as Argentina argues, it would have been extremely
easy for them to draw up an obligation to prohibit "all measures of the
kind listed in footnote 1". But they did not do this; and anyone
interpreting the treaty cannot disregard the drafters' decision to
include, in its place, 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. (emphasis added)
6.7 In light of the above, we are of the view that we have
accurately summarized Chile's arguments. Chile appears to be arguing that we
examined their position as an estoppel argument. We recognized explicitly that
Chile was not doing this in paragraphs. 7.79 and 7.100 and footnote 654 of this
report.
6.8 With respect to paragraphs 7.28 to 7.32 of the interim
report, Chile considered that the text did not accurately reflect Chile's
arguments. In Chile's view, it has made it clear that its argument is that a
measure which is a customs duty as such cannot be considered a measure which,
according to Article 4.2 of the Agreement on Agriculture, would have to be
converted. Chile argues that it never claimed that Article 4.2 was confined to
measures prohibited under Article XI of GATT 1994, nor did Argentina or the
third parties to this dispute. According to Chile, "[t]he Panel should not
explicitly or implicitly misinterpret the points of view of the parties or third
parties", and therefore requested the Panel to reformulate or delete these
paragraphs. Argentina considered that the Panel had correctly understood and
reflected Chile's arguments.
6.9 In para. 7.28 of the interim report, we stated,
As a preliminary matter, we note Chile's statement that
"the obligations in Article 4.2 only relate to non-tariff barriers"560
whereas "the PBS only covers the payment of customs duties".561
Although Chile concedes that there is no such test in the language of the
Agreement on Agriculture, it also asserts that "it might be considered
that the defining characteristic should be whether the measure has the
effect of a quantitative limitation".562 Thus, Chile appears563 to argue that
Article 4.2 was not meant to prohibit measures taking the form of duties
levied by customs authorities, but only "non-tariff barriers" or
quantitative restrictions. Along those lines, "similar border
measures" would need to have the effect of a quantitative restriction.
(emphasis added)
6.10 In addressing Chile's comments, we first recall that
Chile explicitly made the argument at one point in its submissions that "it
might be considered that the defining characteristic should be whether the
measure has the effect of a quantitative limitation". Thus, by complaining about
the way the Panel has summarized its argument, while not withdrawing the quoted
statement, Chile must be drawing a distinction between measures whose defining
characteristic is that they have the effect of a quantitative limitation, on the
one hand, and quantitative restrictions, on the other. In the absence of any
explanation by Chile, however, as to what such difference could be, we have
proceeded by verbatim quoting Chile, while at the same time juxtaposing this
argument with Chilean statements which could suggest a different path of
reasoning. The issue, however, is of considerable importance for the purpose of
interpreting Article 4.2 and must therefore be addressed in any event.
6.11 In light of Chile's comments, we have amended the third
sentence of paragraph 7.28.
6.12 Similarly, we have also amended the second sentence of
paragraph 7.29.
6.13 With respect to paragraph 7.39 of the interim report,
Chile argued that the Panel mistakenly describes the structure and operation of
the Chilean PBS as "rather complex". In Chile's view, the PBS is not complex at
all. Argentina recalled that Chile itself, in its first written submission, had
stated that "the price band formula may appear complex", and considered that the
Panel's conclusion corresponds to an objective analysis.
6.14 We have reviewed the descriptions provided by the
parties, including their answers to many questions by the Panel, and in light of
this do not consider that Chile's comments in this respect warrant any changes
to the interim report.
6.15 In the same paragraph, Chile claims that the Panel
incorrectly states that the Chilean customs authorities determine the total
amount of duty applicable. According to Chile, this is not correct because the
calculation is made by the customs agents, which are private service
organizations that provide services to importers, who must use such agents in
their dealings with the customs authorities. The calculation made by these
individuals may be subject to revision by the authorities, in the same way as
annual income tax declarations. Argentina responded that this factual
information was not provided by Chile until the interim review meeting and
should therefore not be taken into account by the Panel. According to Chile, the
information was not provided earlier because the Panel never put a question to
Chile regarding this matter.
6.16 In the second sentence of paragraph 7.39 of the interim
report, we stated,
When a product covered by the Chilean PBS arrives at
the border for importation into Chile, Chilean customs authorities will determine the total amount of applicable duties. (emphasis added)
6.17 We note that the factual correction proposed by Chile is
based on new information not presented to us before the interim review.
According to Chile, the use of the term "determine" in the interim report is not
correct, because the calculation of the applicable duties is made by
private customs agents and then revised by the customs authorities. Since
the customs authorities may revise the "declared" duties, however, it appears to
us that it is the customs authorities who, at the end of the day, determine
the total amount of applicable duties, "in the same way as annual income tax
declarations". Nonetheless, as we wish our description of the operation of the
Chilean PBS to be as accurate as possible, we have changed the second sentence
of paragraph 7.39.
6.18 With respect to paragraph 7.41 of the interim report,
Chile argues that the Panel did not take account of the facts and the evidence
put forward by Chile to the effect that its PBS is legally subject to Chile's
tariff binding within the WTO for products covered by the system. According to
Chile, by disregarding this fact, the Panel fails to recognize that it is
perfectly possible for the import cost of a product subject to the PBS to be
lower than the band's lower threshold. Argentina responds that the Panel is not
even addressing the bound level of Chile in paragraph 7.41 of the interim
report, since it has analyzed the PBS as challenged by Argentina in these
procedures. The bound level of Chile is by no means part of the Panel's argument
in paragraph 7.41. Argentina therefore concludes that Chile's comments are of no
relevance and are not related to the Panel's findings.
6.19 In paragraph 7.7 of our report, we state that "[w]e can
only assess the relevance of the change introduced by Chile to the
WTO-consistency of its PBS after having determined what Chile's obligations are
with respect to its PBS under the provisions of GATT 1994 and the Agreement on
Agriculture included in Argentina's request for establishment." We therefore
agree with Chile that, in line with this reasoning, we should assess the
relevance of the cap introduced by Chile in the course of the proceedings. We
consider, however, that the change introduced by Chile is of limited relevance
to our findings, and does not detract from their validity. We have amended
paragraph 7.41 accordingly.
6.20 Chile stated that it could agree, in general terms, with
the content of original footnote 599 of the interim report (new footnote 607 of
the final report). According to Chile, however, the last sentence is inaccurate
because, even though the published price for markets of concern is always taken
into account, the individual prices of trade transactions are not considered.
Consequently, in Chile's view, there may be imports from one of these markets at
prices lower than the published prices (perhaps because of payment terms, the
need to sell, the time of sale, etc.). Argentina recalled that Chile did not
respond to part (b) of question 46 of the Panel, which specifically requested:
"In this connection, have goods entered the Chilean market at prices below the
lower level end of price band? If so, please identify as many instances as
possible, and provide supporting documentation". Argentina also posited that in
terms of the PBS mechanics, the freight is far from being an element of any
operational significance. According to Argentina, the irrelevance of the
eventual freight variations is clearly reflected in the example provided by
Chile itself in its answer to question 46, which shows an import cost
differential, in percentage terms, of less than 2 % (US$ 213/US$210). Argentina
considered that it forcefully proved the insulation effects of the PBS in
exhibit ARG-41. According to Argentina, the referred exhibit shows that for a
period of 24 months the weekly reference price set by the Chilean authorities
was systematically lower than the weekly average f.o.b. quotations in Argentina.
Therefore, Argentina argues, it can hardly be argued, as Chile did, that the
entry of imports at costs below the lower end of the PBS could be of any
significance, either in terms of import cost differential or in volume.
6.21 Much like the situations already discussed in the
footnote, Chile has merely described a situation where the Chilean authorities
relies on a published price and, therefore, may mistakenly not accurately
identify the true lowest price. We decline to further amend this footnote.
6.22 According to Chile, original footnote 602 of the interim
report (new footnote 611 of the final report) is correct, but incomplete. Chile
considers that if the trend continued for a further year, this would be
reflected in the band for the following years because the new year would be
incorporated in the system for five years. According to Chile, this shows that
market trends are incorporated, although in an attenuated form. With reference
to paragraph 7.43 of the interim report, Chile reiterated that an Argentine
exporter can export at an f.o.b. price lower than the reference price, if it is
an Argentine price, because this is fixed on the basis of the prices published
for the market as a whole, but many transactions take place at varying levels,
either higher or lower. Taking into account the comments in the preceding two
points, Chile requested the Panel to clarify why, in its opinion, despite the
examples cited by Chile, which are not hypothetical but have occurred in
practice, there can be no imports at f.o.b. prices lower than the reference
price. In Argentina's view, the content of footnote 611 and the development of
paragraph 7.43 are self-explanatory and require no further elaboration.
6.23 In light of Chile's comments, and in line with our
changes to paragraph 7.41, we have changed paragraph 7.43.
6.24 With respect to paragraph 7.44 of the interim report,
Chile argued that exporters do not encounter problems in finding out exactly
what the reference price is at any given time. Chile claims that (1) since 1997,
information on the reference price has been given on the web page of the
National Customs Service; (2) any exporter's representative or customs agent in
Chile has been able to consult the Customs Service directly; (3) this
information is regularly transmitted to the Customs Chambers, composed of the
various customs agents. Argentina reiterated that the Panel's finding that the
PBS is characterized by a lack of transparency and predictability is based on an
objective analysis of the evidence and facts submitted, as well as on the
analysis of the way the PBS operates.
6.25 We note that we addressed Chile's first argument, raised
only in its comments on the descriptive part, in paragraph 7.44 and footnote
604. We further note that the second and third arguments, both related to the
role of private customs agents, have been raised for the first time by Chile
during the interim review. Notwithstanding the novel character of these
arguments, we have changed the second sentence of paragraph 7.44.
6.26 With respect to the same paragraph, Chile argued that it
is incorrect to state that no regulation or legislation provides that the
relevant date is the date of the bill of lading because this is contained in the
last paragraph of Article 12 of Law 18.525. Argentina pointed out that it does
not arise from the paragraph under discussion that the Panel had concluded this,
particularly considering that the Panel has quoted the full text of Article 12
of Law 18.525 in the descriptive part of the interim report, paragraph 2.2.
6.27 We agree with Chile that the text of the interim report
required clarification in this respect, and have changed the fifth and sixth
sentences of paragraph 7.44.
6.28 With respect to paragraph 7.46, Chile argued that it
would appear that the Panel wishes its conclusion on similarity to be a question
of fact, which, in Chile's view, is quite clearly wrong. What is a question of
fact is the operation of the PBS. The degree of similarity and how such
similarity is assessed or determined is obviously a question of law. Argentina
noted that in the Panel's consideration of the fact of whether the PBS
constitutes a measure similar to those listed in footnote 1 to Article 4.2 of
the Agreement on Agriculture, the Panel defined - as a factual matter - the PBS
as a hybrid instrument sharing the characteristics of both a variable levy and a
minimum import price.
6.29 In consideration of Chile's comment, we consider that
the interpretation of what constitutes a "variable import levy", " minimum
import price" and "similar" border measure is, of course, a matter of law.
Whether or not an existing border measure, however, is, in fact, similar to a
variable import levy or minimum import price, requires an assessment of the
factual evidence submitted. Such an assessment is simply an application of the
law, as interpreted by us, to the facts of this case. Our determination of
whether or not a particular measure is "similar to" any of the measures listed
in footnote 1 is roughly analogous to a determination of whether two products
are "like" or "directly competitive or substitutable" in the context of Article
III of GATT 1994. We therefore decline to make the requested change.
6.30 Regarding the conclusions on other means of
interpretation and specifically in relation to ECA 35 and the regulation laid
down therein, Chile argued that Article 24 of ECA 35 constitutes recognition
that both parties have the same understanding concerning the scope and content
of the Agreement on Agriculture and, in consonance with this understanding, both
parties agreed to this provision in good faith. Chile requested that, if the
Panel considers that this provision does not reflect such an understanding, it
clarifies what, in its view, is the meaning of this provision. Argentina
considered that Chile's request of clarifications from the Panel about Article
24 of the ACE 35 is not appropriate, since the Panel itself has made its rulings
and Chile has made no specific comments about the paragraphs of the Interim
Report addressing this matter. Consequently, the Panel should not consider
Chile's comments to this paragraph.
6.31 We take note of Chile's arguments but fail to see what
changes, if any, Chile considers are warranted by its comment. In our view, our
conclusions in this regard are explained sufficiently and we decline to make any
changes in this regard.
6.32 With respect to paragraphs 7.112, 7.113 and 7.124, Chile
requested the Panel to clarify what it means by "to secure a positive solution"
to the dispute and how making findings on measures that have expired would
fulfil this objective, "as it is not mentioned in any part of the interim
report". Argentina considered that the Panel has clarified what it understands
by "to secure a positive solution" to the dispute and why the making of findings
regarding "expired" measures would meet this objective.
6.33 We fail to see the relevance of Chile's comments as they
relate to paragraphs 7.112 and 7.113. In paragraph 7.115, we conclude that we do
not find it necessary to make findings regarding the provisional safeguard
measures in order to "secure a positive solution to the dispute", a phrase drawn
verbatim from Article 3.7 of the DSU. Chile's comment as regards paragraph 7.124
is addressed below.
6.34 With respect to paragraphs 7.124 and 7.125, Chile
considered that it has demonstrated that, following the entry into force of Law
19.722, the specific duties resulting from the PBS would no longer exceed the
bound tariff, so the situation could not recur. Chile asked how findings by the
Panel on these measures will help in reaching a prompt settlement of the overall
dispute or a positive solution thereof. Argentina considered that Chile's
comment on the sense of making findings regarding expired safeguard measures is
clearly explained by the Panel both in paragraph 7.125 and in paragraphs 7.6 and
7.7 relating to the relevance of Law 19.722 to analyze the consistency of the
Chilean measures vis-�-vis WTO obligations. Argentina considered that this is
strengthened by the Panel's conclusion of the partial identity between the
Chilean PBS and the safeguard measures.
6.35 We consider that we have clearly explained in paragraph
7.125 of our report why making findings on the withdrawn definitive safeguard
measures is in our view necessary to ensure a prompt settlement of the overall
dispute.
6.36 With respect to paragraphs 7.116 to 7.120, Chile claimed
that the Panel confines itself to citing extracts from the text of Article 7 to
support its position that an extension is not a measure distinct from the
definitive safeguard measure, but merely an extension of the duration of that
measure. According to Chile, nowhere does the Panel give consideration to the
textual and substantive arguments put forward by Chile in support of the
opposite view. Chile requested the Panel to explain why it only cited certain
paragraphs of Article 7 to substantiate its conclusion, and why it did not
undertake a more in-depth analysis of Article 7 for this purpose, as Chile
argued in its submissions. Argentina responded that the Panel starts paragraph
7.116 by mentioning and specifically considering the two objections made by
Chile, and, thus, that the Panel did consider those objections. Argentina also
argued that Chile did not identify what those arguments of text and substance
are that have not been considered by the Panel. According to Argentina, Chile
limits itself to make a general comment with no specific detail about the
arguments that in its view are missing.
6.37 We take note of Chile's comments, but consider that our
report sets out in sufficient detail why we consider that Chile's arguments in
this respect cannot be endorsed. We therefore decline to change these
paragraphs.
6.38 With respect to paragraphs 7.131 and 7.179, Chile
claimed that the Panel did make use of the Minutes of Session No. 224 to reject
previous records and to make comments that go beyond a finding of inconsistency
with the WTO rules. According to Chile, paragraph 7.179 is "one example".
According to Chile, the Panel specifically uses the minutes of session No. 224
to link the drop in production in the period mentioned in this paragraph to
drought and thus reject the minutes of session No.193, because they do not
contain any analysis of injury caused by other factors. Argentina considered
that the Panel can use the Minutes of Session No. 224 as factual evidence, as
suggested by Chile itself, and that the Panel has done so in order to clarify
and complement the minutes of session No. 193, taking into account its complete
lack of data.
6.39 In commenting on Chile's arguments, we first note that
Chile refers to paragraph 7.179 as only "one example", but does not provide any
other such "examples". The one concrete example given by Chile to support its
allegation that the Panel does not adhere to the rule it sets out in paragraph
7.131 concerns a subsidiary finding by the Panel on causation, where the Panel
has already found on other grounds that the CDC failed to establish a proper
causal link (see paragraphs 7.176 and 7.177). In paragraph 7.179, the Panel,
addressing a particular argument by Argentina, finds that the CDC should have
examined the other factor, i.e. drought, to which Argentine exporters had drawn
its attention during the investigation. Argentina had raised the argument and
adduced evidence showing that the competent authorities must have been aware of
the possible impact of the drought factor. It was the failure by the CDC to
investigate or evaluate this factor which we find fault with.564 The minutes of
session No. 224 are therefore merely used as an observation on our
earlier finding, consistently with paragraph 7.131, not as a basis for our
finding. To avoid any misunderstanding in this respect, we have changed
paragraph 7.179.
6.40 With respect to paragraph 7.128, Chile claimed that the
Panel does not conform to the usual meaning of the word "publish" and, by
analogy, refers to the publication requirement in the Anti-Dumping and Subsidies
Agreements of the WTO. According to Chile, in no part of its arguments does the
Panel explain the reasons why this usual meaning does not reflect the real scope
and meaning of the obligation to publish required by Article 3.1, nor why,
referring to context in determining such a meaning, the WTO Anti-Dumping and
Subsidies Agreements apply. Argentina considered that the Panel made use of the
methods of interpretation in compliance with the DSU in order to make findings
regarding the obligations contained in Article 3.1 of the Safeguards Agreement.
6.41 In our view, the explanation in paragraph 7.128 is
sufficient. We refer both to the dictionary meaning of the term and, in
accordance of Article 31 of the Vienna Convention, the context provided by the
WTO Agreement and its annexes. We therefore take note of Chile's comments, but
consider that they do not warrant any change to paragraph 7.128.
6.42 With respect to paragraphs 7.171 and 7.172, Chile stated
that it cannot understand how the Panel could find that the Minutes of the CDC
do not indicate whether the data used to determine the threat of injury were, or
were not, based on the most recent past and on data for the entire investigative
period. According to Chile, it is obviously not necessary for the Minutes to
state explicitly and specifically the commencement and the end of the period
within which the data were collected when this is clear from the context of the
Minutes and its considerations and conclusions. Chile requests the Panel to
explain why it considered that the data relating to the most recent past should
have been indicated in explicit and specific terms by the investigating
authorities, without meeting the obligation in Article 4.2(a) of the Agreement
on Safeguards, when this can be clearly derived from the Minutes, and on what
legal grounds the Panel based its conclusion. Argentina responded that if the
CDC neither provided in its minutes the data of the most recent past, nor
analyzed them in the context of all the investigative period - which was not
even determined -, Chile cannot expect the Panel to conclude that it did comply
with its obligations under Article 4.2(a) of the Agreement on Safeguards.
6.43 In consideration of Chile's argument, we observe that we
can only determine whether data for the most recent past have been used, if the
published report indicates what the period of examination is in the first place.
Contrary to Chile's allegation, in our view this is not clear "from the context
of the Minutes". We therefore consider that no change to our report is warranted
in this respect.
6.44 Also as regards paragraph 7.172, Chile argued that it is
not clear what led the Panel to conclude that the CDC's projection of what would
have occurred if the PBS had not been fully applied did not suffice to
substantiate its determination of threat of injury. Chile stated that it fails
to understand how the Panel reached this conclusion, bearing in mind that the
factor analysed is not injury already caused but the threat of injury. According
to Chile, the foregoing indicates that, following the Panel's line of reasoning,
the Panel focused on actual injury rather than on threat of injury. Chile
acknowledges that when the safeguards were adopted, the PBS was operating and
sometimes, as Chile has acknowledged, the bound tariff was exceeded. In Chile's
view, however, this does not detract from the fact that it is perfectly
legitimate for the CDC to have estimated what would occurred in the domestic
industry in the absence of this situation (exceeding the binding), precisely
because the safeguard justifies exceeding the threshold in the WTO. According to
Chile, by forecasting what would have occurred in the absence of unrestricted
operation of the PBS, the CDC did not fail to extrapolate from current trends
but, quite the contrary, based its determination of threat of injury on these
trends. According to Argentina, the threat of injury claimed by Chile was not
backed by a projection of the future condition of the industry based on recent
data in the context of the investigation period, but based on the hypothesis of
the injury that would be produced if the measure were to be removed, reasoning
that is contrary to the prescriptions of Article 4.1(b) and Appellate Body
precedents.
6.45 We consider that our report leaves no doubt that we were
addressing Chile's argument regarding the presence of a threat of injury,
not actual injury. We agree with Argentina that Chile's argument in its interim
review comments requires a hypothesis of the state of the industry in the
absence of the PBS. We do not see how use of a hypothesis in any form is
sufficient to satisfy the requirements of the Agreement on Safeguards. We
therefore do not consider that Chile's comments warrant any change to our
report.
6.46 As regards the quotation from Chile's reply to question
7(b) from the Panel in paragraph 7.173, Chile claimed that this is only given in
part as the reply did not solely refer to the situation that would have occurred
if a measure already adopted were withdrawn, but also to the situation that
would have occurred if an initial measure had not been adopted. Argentina
considered that the Panel used Chile's answer to question 7(b) in an adequate
manner.
6.47 The paragraph of Chile's answer which we did not quote
in the report reads:
Similarly, in the process of determining whether or
not the conditions for adopting an initial safeguard measure have been
met, it is also possible to consider what would happen if a measure,
then in force, were withdrawn, given that when a safeguard measure,
whether provisional or definitive, is adopted, there has to be a need to
prevent or remedy serious injury. (emphasis added)
6.48 Quite clearly, and contrary to Chile's assertion, this
paragraph does not address "the situation that would have occurred if an
initial measure had not been adopted". On the contrary, its proposition is to
envisage what would happen if an existing measure were to be withdrawn. We
consider that the last sentence of paragraph 7.173 explicitly rejects this
argument presented by Chile. In any event, as noted above, we do not see how it
advances Chile's position if the investigating authorities had substituted one
hypothesis for another.
6.49 With respect to paragraph 7.185, Chile pointed out to
the Panel that the fact of using an Appellate Body report (US - Line Pipe)
which has not yet been adopted "appears to indicate on the Panel's part
excessive zeal to determine inconsistency of the safeguards adopted by Chile
with Article XIX:1(a) of the GATT and Article 5.1 of the AS." Argentina
responded that the Panel used as a legal precedent for the interpretation of the
obligation contained in article 5.1 of the Safeguards Agreement, the Appellate
Body report in Korea - Dairy. Argentina considered that the Panel quotes
the referenced Appellate Body report with the purpose of additionally
pointing out that Chile did not refute the prima facie case presented by
Argentina only once it had determined the inconsistency of Chile's safeguard
measures with Article 5.1 of the Safeguards Agreement. In addition, Argentina
recalls that the report was adopted by the DSB on 8 March 2002.
6.50 We note that the Appellate Body report on US - Line
Pipe referred to in our report was, in fact, adopted by the DSB on 8 March
2002. Moreover, we consider that Chile's comments would not, in any event, have
warranted any change to our report. We noted the US - Line Pipe decision
as further support for a conclusion we reached independently. In our view, we
would have been remiss in our duties to do otherwise.
6.51 With respect to the interim report's section on the
extension of the safeguard measures, Chile made three comments. Firstly, if the
Panel determines that this claim does not come within its terms of reference,
Chile does not understand the purpose and object of the Panel's finding of
inconsistency, whether indirect or implicit, as clearly shown in paragraph
7.198, and why the Panel did not rather simply declare that it had no mandate to
reach a finding on this aspect. Secondly, taking into account Chile's comments
that the definitive safeguard measures and the extension measures are identical
measures, Chile requested that, if the Panel insists on making findings of
indirect inconsistency with Article 7 of the Agreement on Safeguards, even
though this issue is outside its Terms of Reference, it should review the
findings on the basis of the arguments put forward by Chile but disregarded by
the Panel. Thirdly, Chile did not find any argument in the Panel's analysis that
explains the reasons it took into account when determining that a definitive
safeguard measure, assuming that it is inconsistent with the Agreement on
Safeguards, cannot be "remedied" through an extension. In Chile's view, if the
Panel, despite the fact that it has no mandate on this issue, also puts forwards
arguments and makes an indirect finding of inconsistency of the extension of the
Chilean safeguard measures with Article 7 of the Agreement on Safeguards, it
must legally substantiate its arguments and findings. Chile therefore requested
the Panel to revise this section on the basis of the arguments put forward.
Regarding Chile's three comments on this issue, Argentina agreed with the Panel
that the inconsistency of a definitive measure cannot be "cured" with the
extension of the same measure. In Argentina's view, the Panel has analyzed in
extenso and concluded that the extensions of safeguard measures are not new
measures different to the definitive measure. Therefore, and in agreement with
the finding of inconsistency of the definitive measures with different
provisions of the Safeguards Agreement, there is no other way for the Panel but
to conclude that "[s]uch inconsistency cannot of course be 'cured' by a decision
to extend their duration".
6.52 In consideration of Chile's comments, we note that in
paragraph 7.198 we stated:
If the definitive safeguard measures are inconsistent
with Chile's obligations under the Agreement on Safeguards, such
inconsistency can of course not be "cured" by a decision to extend their
duration. On the contrary, the decision to extend their duration must, by
definition, be tainted by inconsistency as well. We recall, however,
that Article 7 of the Agreement on Safeguards, which sets out the
conditions for an extension, is not within our Terms of Reference. We will
therefore refrain from making any finding regarding the consistency of the
decision to extend the safeguard measures' duration with Article 7 of the
Agreement on Safeguards. (emphasis added)
6.53 Consequently, we clearly and explicitly refrained from
making any finding of inconsistency with Article 7, considering that such a
claim is not within our Terms of Reference. For the same reasons, we did not
present any conclusion regarding the consistency of the extension of the
definitive safeguard measure in Section VIII of our report.
548 The European Communities refer to the Appellate Body report
on United States - Import Measures on Certain Products from the European
Communities ("US - Certain EC Products"), (WT/DS165/AB/R)
adopted on 10 January 2001, Chile's First Written Submission, para. 87.
549 The European Communities refer to the Panel report on
Korea - Dairy, (WT/DS98/AB/R) adopted on 12 January 2000, as modified by the
Appellate Body report, paras. 7.30-31, 7.54.
550 The European Communities refer to the Contracting Parties to
the General Agreement on Tariffs and Trade, Questions Relating to Bilateral
Agreements, Discrimination and Variable Taxes, Note by the Executive
Secretary, L/1636, 21 November 1961, p. 3, para. 7 (also excerpted in
Analytical Index to the GATT, 1995, Vol. I, p. 72).
551 The European Communities refer to the Analytical Index to
the GATT, 1995, Vol. I, p. 78.
552 The European Communities refer to the Understanding on the
Interpretation of Article II:1(b) of the General Agreement on Tariffs and Trade
1994, paras. 3, 7.
553 Appellate Body report on Argentina - Textiles and Apparel
(WT/DS56/AB/R) adopted 22 April 1998, DSR 1998:III, 1003, para. 62.
554 The United States refers to The Oxford English Dictionary,
p. 912 (2d edition).
555 The United States refers to the Framework Agreement on
Agriculture Reform Programme, Draft Text By the Chairman, Multilateral Trade
Negotiations, The Uruguay Round, Group of Negotiations on Goods, Negotiating
Group on Agriculture, MTN.GNG/NG5/W/170, 11 July 1990, p. 8.
556 The United States refers to the GATT Analytical Index,
� II.A.2(3), p. 78 (1995 ed.).
557 The United States refers to The Oxford English Dictionary,
p. 490 (2d edition).
558 The United States refers to The New Shorter Oxford English
Dictionary, vol. 1, p. 414 and explains that the entry for the adjective
"clear" contains 15 definitions. The quoted text is the definition most clearly
applicable to "evidence."
559 At the beginning of the meeting, Chile complained that the
Panel had impaired Chile's rights of defense and due process, by (1) not having
postponed the first substantive meeting with the parties as requested by Chile;
(2) having given insufficient time for preparation of written comments on the
interim report; (3) having one Panel member participating in the interim review
meeting through a telephone link, rather than through physical presence; and (4)
organizing a session of limited duration as a result of a Panel member's
scheduling constraints.
The Chairman of the Panel responded to Chile's comments at
the meeting that the Panel had shown maximum flexibility towards both parties
throughout the proceedings and had always tried to accommodate requests for
schedule modifications by both parties and in agreement with both parties.
Indeed, all requests made by the parties at the organizational meeting were met.
With regard to the postponement of the first substantive meeting, the Chilean
request was received only about a week in advance. The Panel and Secretariat
expended considerable efforts to accommodate the request but were unable to find
another time feasible for all the Panelists and the parties. It should also be
noted that there were fourteen third parties whose interests needed to be taken
into account. With respect to the time provided for written comments on the
interim report, we note that the time accorded was consistent with Appendix 3 to
the DSU. Furthermore, Chile did not request an extension. Regarding the use of
teleconference, this was not the first time this has been used in panel
proceedings and is related to the constraints imposed by Article 8.1 of the DSU
as regards the individuals eligible to serve as panelists, who, given their
required seniority or expertise, may be expected to face scheduling conflicts
more than once. Regarding the limited duration of the interim review meeting, it
should be noted that an inquiry was made of Chile as to whether they could start
the meeting one hour earlier, but Chile felt unable to accommodate that request.
In any event, the Chairman also indicated the Panel's readiness to hold an
additional session should Chile so desire. Chile did not react to the Chairman's
comments and suggestion.
560 (original footnote) Chile's First Written Submission, para.
33. Chile's reply to Panel question 6. Emphasis added.
561 (original footnote) Ibid. Emphasis added.
562 (original footnote) Chile's response to Panel question 8.
Emphasis added.
563 (original footnote) Chile has also argued 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's first submission, para. 59. Emphasis added.
564 It should be recalled that, according to the Appellate Body
in US - Wheat Gluten, "the competent authorities - and not the interested
parties - [are required] to evaluate fully the relevance, if any, of 'other
factors'", and "where the competent authorities do not have sufficient
information before them to evaluate the possible relevance of [�] an 'other
factor', they must fully investigate that 'other factor' [�]"Appellate Body
report, US - Wheat Gluten, para. 55.