4.118  According to the European Communities, the only possible way for a panel to "marry" the limitation of the "existing legislation" clause of the PPA with the need to control the implementation of the broadly-defined discretionary legislation was, in cases such as the "Superfund", to obtain promises or commitments concerning the exercise of the discretionary power in the future.

4.119  In the EC's opinion, there is no reason for a WTO panel to follow the legal path of the US - Superfund panel under the new WTO rules. In fact, in the present case, given the new legal environment after the entry into force of the WTO Agreements and in particular of Article XVI:4 of the Marrakech Agreement, and given also the public policy statement contained in the Statement of Administrative Action made by the highest representative of the executive branch of the US government and approved by its legislative branch, a simple statement to the Panel in a meeting behind closed doors without revoking the Statement of Administrative Action in this regard would clearly be insufficient to lift the uncertainty created by the Statement of Administrative Action.

4.120  In the view of the United States, Section 304(a)(1) requires that determinations under that section be made "on the basis of the investigation initiated under Section 302 and the consultations (and the proceedings, if applicable, under section 303)".  The "proceedings" under Section 303 are dispute settlement proceedings.⁸⁸ Moreover, such proceedings would be "applicable" in any case involving a trade agreement, since Section 303 requires that dispute settlement procedures under a trade agreement be invoked in any case involving a trade agreement, if no mutually acceptable resolution has been achieved. ⁸⁹

4.121 The United States indicates that its Administration has, in the Statement of Administrative Action approved by Congress, provided its "authoritative expression … concerning its views regarding the interpretation and application of the Uruguay Round agreements, … for purposes of domestic law".⁹⁰ The Statement of Administrative Action must, by law, be treated as the authoritative expression concerning the interpretation of the statute in any judicial proceeding.⁹¹ The Statement of Administrative Action at page 365-366 provides that the USTR will:

• invoke DSU dispute settlement procedures, as required under current law;
• base any section 301 determination that there has been a violation or denial of U.S. rights under the relevant agreement on the panel or Appellate Body findings adopted by the DSB;
• following adoption of a favorable panel or Appellate Body report, allow the defending party a reasonable period of time to implement the report's recommendations; and
• if the matter cannot be resolved during that period, seek authority from the DSB to retaliate.⁹²

4.122  The United States explains that it is an established principle of US statutory construction that the administering agency's interpretation of a statute is entitled to deference if the statute is "silent or ambiguous with respect to [a] specific issue". Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43.  In such circumstances, the court must uphold the agency's interpretation as long as it is based upon a "permissible construction" of the statute.  Ibid.   The agency's interpretation need not be the "only possible construction", Sullivan v. Everhart, 494 U.S. 83, 89 (1990), nor must it be the construction the court would have selected in the first instance.  Chevron, 467 U.S. at 844.  A court errs by substituting "its own construction of a statutory provision for a reasonable interpretation made by [the agency]".  Ibid.  The court's duty is not to weigh the wisdom of the agency's legitimate policy choices.  Suramerica de Aleaciones Laminadas, C.A. v. United States, 966 F.2d 660, 665 (Fed. Cir.. 1992).  Thus, under US law, the USTR's interpretations of its authority to undertake multiple determinations, determinations other than violation/non-violation determinations, or termination of investigations would receive such deference in a US court – to the extent such determinations would be subject to judicial review at all.⁹³   Likewise, the USTR's interpretation of Section 304(a)(1) as requiring her to rely on DSB-adopted findings in determining that US WTO agreement rights have been denied would be accorded such deference.

4.123  The United States indicates that it is not merely offering assertions of its legal authority.   Rather, these interpretations are reflected in longstanding practice, in investigations predating this case and predating the WTO.   Under US law, these interpretations would be entitled to deference, and, in examining whether the statute commands WTO-inconsistent action, the Panel is required to examine the meaning of the statute as it would be interpreted under US law.⁹⁴

4.124  The United States further argues that another legal basis for US interpretations of statutory provisions is the US principle of statutory construction known as legislative ratification.   As the US Supreme Court has stated, this principle provides that Congress is presumed to be aware of an administrative or judicial interpretation of a statute and to adopt that interpretation when it re-enacts a statute without change.  Lindahl v. Office of Personnel Management, 470 U.S. 768, 783, citing Albemarle paper Co. v. Moody, 422 U.S. 405, 414 n.8 (1975).

4.125 The United States also states that the multiple determinations in Oilseeds predated the WTO, and the fact that Congress did not amend the statute to prevent such determinations when other amendments were made in 1994 supports the view that the Administration's interpretation is permitted.  Similarly, the USTR's practice of applying Sections 301-310 to make determinations other than simple "yes/no" determinations on whether agreement rights have been denied, and to terminate Section 302 investigations before making a determination, predates 1994.   Exhibit 13 describes examples of this long-standing practice since 1988, though it predates 1988 as well.  And, although Congress amended section 301 in 1994, it did not amend it to undermine the USTR's interpretation or application of Sections 301-310, even though it was fully aware of how it was being applied.

4.126  The European Communities disagrees with the US introduction of an entirely new defence at this late stage. The European Communities stresses the fact that the new US arguments are very similar to those submitted by India in the India - Patents (US) case. They were rejected by the panel and the Appellate Body at the request of the US as a complainant in that case.⁹⁵

4.127  The European Communities further states that the quotation of the AB report in India - Patents (US), paragraph 65 [in fact 66], is incorrect. The Appellate Body did not state that "the Panel is required to examine the meaning of the statute as it would be interpreted under US law".  Rather, the correct quotation, which has an entirely different meaning, is the following:

"… as in the case cited above before the Permanent Court of International Justice, in this case, the Panel was not interpreting Indian law "as such"; rather, the Panel was examining Indian law solely for the purpose of determining whether India had met its obligations under the TRIPS Agreement".

4.128  The United States rebuts the EC argument that the US response raises a new defense, and that allegedly similar arguments were rejected in India – Patents (US).  Both of the EC’s contentions are incorrect.  First, the United States has not raised a new defense.  The US discussion of judicial deference under U.S. law was directly responsive to the Panel’s request for the textual or other legal basis which permits the USTR to make multiple determinations –  a factual issue in this dispute.  While the textual basis for the USTR’s interpretation is sufficiently clear, the doctrine of judicial deference would serve as an additional basis under US law were a US court to consider the statutory language ambiguous. 

4.129  The United States also contends that the EC’s references to India – Patents (US) fail to support its position.  The Appellate Body, in paragraphs 65-66 of its report in India – Patents (US), emphasizes that it was necessary in that case to examine Indian law to determine its compliance with India’s international obligations.   Domestic law consists not only of statutory provisions, but of domestic legal rules concerning the interpretation of those provisions or, in the case of India – Patents (US), domestic rules concerning conflicts between laws.  In India – Patents (US), the Appellate Body examined "the relevant provisions of the Patents Act as they relate to the 'administrative instructions'" at issue in that case⁹⁶; in other words, the Appellate Body examined whether there was any support under Indian law for India’s assertion that unpublished, unwritten administrative instructions would prevail over a conflicting statute explicitly mandating a WTO violation.   India in that case failed to provide sufficient evidence that, under Indian law, the instructions would prevail.

4.130  In the US view, the doctrine of judicial deference to an agency’s interpretation of its statute is part of U.S. law, though it would only become relevant in this dispute were the panel to conclude that there was some ambiguity as to whether a particular provision of Sections 301-310 commanded specific actions violating a WTO obligation.  In fact, as the U.S. has explained throughout this proceeding, the statute contains no such ambiguity.  On its face, the U.S. statute does not command violation determinations in the absence of DSB-adopted findings, and in fact requires that any such determinations be based on the results of WTO proceedings.⁹⁷

4.131  According to the United States, however, should the Panel find the statute ambiguous, the US Executive Branch interpretation of the statute is of great importance under US law. First, many Executive Branch determinations are not subject to judicial review. As already noted, if this were the case with respect to Section 301 determinations, the USTR interpretation would be definitive under US law. Second, even if a US court were to review such determinations, and even if that court were to conclude that the statutory language is ambiguous, it would be required under US law to interpret that language in light of the Chevron standard of judicial deference.

4.132  The United States recalls again that the burden in this dispute lies with the European Communities. As already discussed, the European Communities failed to establish that US law commands the USTR to take actions which violate Article 23, failed to establish that US rules of statutory interpretation permit the European Communities and this Panel to interpret "whether" to mean "that", and failed to establish that it is permissible to disregard entire sections of the statute providing the USTR with discretion to delay or not take action. Likewise, in its latest submission, the European Communities failed to establish that the Chevron deference standard may, under US law, be disregarded.

4.133  The United States points out that the last paragraph on page 366 of the Statement of Administrative Action does not relate to a situation in which the United States is seeking redress for the denial of US WTO rights, and thus is not covered by DSU Article 23, nor is it otherwise within the terms of reference of this dispute. As described in the preceding paragraphs on page 366, there will often be cases not involving WTO rights, or involving a mixture of actions only some of which are covered by WTO rules.  Moreover, this paragraph describes the fact that, even before establishment of the WTO and its strengthened dispute settlement procedures, the United States infrequently expressed its intention to take retaliatory action, and such action was often a response to a trading partner's decision to obstruct dispute settlement proceedings.  The statement that the Administration will not be "more reluctant" to impose sanctions given the DSU should be read in that context.

4.134  In response to the Panel's question as to the US statement that "[t]he last paragraph on page 366 of the Statement of Administrative Action does not relate to a situation in which the United States is seeking redress for the denial of U.S. WTO rights ", the United States maintains that it is clear from their context that neither the last paragraph on page 366 nor the first full paragraph on page 367 relate to situations in which the United States is seeking redress for denial of US WTO rights.  The Statement of Administrative Action at pages 365-67 addresses three situations in which Section 301 may be invoked: (1) cases involving a WTO Member and its denial of US WTO rights; (2) cases involving a WTO Member and non-WTO rights; and, (3) cases involving non-WTO Members or WTO Members to which the United States does not apply the Uruguay Round Agreements pursuant to Article XIII of the WTO Agreement.

4.135  The United States also explains that the last paragraph on page 365 deals with the first type of case, that is, situations involving the denial of US rights under the WTO Agreement.  The following paragraph, the first full paragraph on page 366, introduces the discussion of the second type of case, those involving WTO Members but not US WTO rights.  Each of the first four paragraphs on page 366 explicitly clarifies the types of situations in which a case may involve a WTO Member, but not a US WTO right.   The next two paragraphs (those addressed in the question, the last on 366 and the first on 367) follow directly on that discussion and are part of the section of the Statement of Administrative Action discussion relating to situations not involving a US WTO right.  Finally, the last paragraph of this section of the Statement of Administrative Action, the second full paragraph on page 367, addresses the third type of case, that is, cases not involving WTO Members or cases involving WTO Members as to which the United States does not apply the Uruguay Round Agreements.  The organization of the discussion in the Statement of Administrative Action thus follows precisely the three types of cases for which Section 301 may be applicable.

4.136  In the view of the United States, the statement in the first paragraph on page 367 may be reconciled with the earlier bullet points on pages 365-366 of the Statement of Administrative Action, and are logical, only if understood as referring to two different types of cases, those involving US WTO rights and those which do not. The paragraph on page 367 should not be read so as to produce an illogical result.

4.137  With respect to the substance of these paragraphs, the United States reiterates again that the last paragraph on page 366 emphasises the infrequency with which the United States took action under the GATT 1947 which had not been authorized, as well as the fact that such situations often involved efforts by a losing party (generally the European Communities) to obstruct multilateral dispute settlement proceedings.

4.138  According to the United States, with respect to the first paragraph on page 367, the statement only provides that the prospect of counter-retaliation by a trading partner would not enter into the consideration of whether to take action against that partner in a case not involving the denial of US WTO rights by that partner.  The listed cases are provided only as illustrations of this point.  None of this says anything about the factors which would be taken into consideration in deciding whether and how to take action when a US WTO Agreement right is not involved, factors such as the US desire to comply with its international obligations.  Again, the paragraphs indicate that even under the GATT 1947, the instances in which action was taken were infrequent.

4.139  The United States states that because these paragraphs do not relate to situations involving US rights under the WTO Agreement, on that basis alone they are irrelevant to an examination of whether Sections 301-310 are inconsistent with DSU Article 23.  Article 23 deals only with situations in which Members "seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements".⁹⁸ However, even were the statements in the paragraphs on pages 366-367 somehow relevant to Article 23, they would not be relevant to the analysis of whether the European Communities has demonstrated that the law itself, Sections 301-310, command the USTR to violate specific US WTO obligations.  The mere existence of the statements is no substitute for the analysis the European Communities has consistently failed to provide on precisely how specific requirements in Sections 301-310 mandate actions inconsistent with specific textual obligations in the WTO provisions set forth in the terms of reference. 

4.140  The United States finally notes that the statements speak to no more than the possibility of WTO-inconsistent action, a possibility which other WTO Members have repeatedly made a reality through not only their initial decisions to create and implement WTO-inconsistent measures, but in their decisions to disregard DSB rulings and recommendations with respect to these measures.   Neither the United States nor any other WTO Member is entitled to bring a successful WTO challenge against another Member because of the mere possibility that it may, in the future, breach its WTO obligations.  There must be a measure which does in fact, currently breach a specific WTO obligation, or at the least legislation which commands such a breach in the future.

4.141 The European Communities criticises the United States for introducing a new argument by asserting that the Statement of Administrative Action, at pages 365-367 "addresses three situations …". The European Communities recalls its argument: irrespective of the allegations made by the US concerning its views on the interpretation of the Statement of Administrative Action (and this latest attempt has no more support in the text of the Statement of Administrative Action than the previous ones), the examples provided at page 367 of the Statement of Administrative Action are clearly within the scope of the WTO Agreements and thus defeat also the latest US argument in this respect.

4.142  The United States reiterates that the only logical reading of the statements at pages 366-67 is that they apply only to cases not involving a US WTO right, that this conclusion also follows from the organization of the Statement of Administrative Action, and that the statements refer to no more than hypothetical possibilities, as it already argued.

4.143  The United States contends that the European Communities has brought an essentially political case.  The European Communities and several third parties have attempted to leave the impression that the United States is an implacable foe of the Dispute Settlement Understanding and of multilateral determinations of WTO Agreement rights.  They hope through these accusations to raise doubts among the panel about how the Trade Representative could be expected to exercise her discretion under Sections 301-310.  However, beyond the lack of relevance of these accusations to the legal question of whether Sections 301-310 mandate a WTO violation, they are quite simply untrue.  The United States was an early and strong supporter of the creation of the Dispute Settlement Understanding and of the fundamental improvements in dispute settlement procedures which have established the credibility of the new system:  the negative consensus rule, strict deadlines and virtually automatic panel establishment, adoption of reports, and authorization to suspend concessions upon non-implementation.

4.144  The United States points out that it has brought 49 disputes to the WTO under its multilateral procedures and has defended itself in 28 others.  In five cases, a US measure was found inconsistent with US obligations.  The United States not only committed to bring its measure into compliance with DSB rulings and recommendations in each of these cases, it did in fact bring its measure into compliance in three cases, and the reasonable period of time has yet to expire in the remaining two.  The US commitment to multilateral dispute settlement procedures is thus evident in the US role in developing those procedures, in the active US use of those procedures, and in US compliance with multilateral decisions when those decisions have been adverse.

4.145  In the view of the United States, when stripped of political arguments, it is clear that the European Communities is attempting in this case to challenge a statute based on statutory provisions which do not exist.  The European Communities cannot meet its burden in this case by assuming such provisions into existence.   The United States therefore respectfully requests that this Panel reject the EC’s speculative arguments in their entirety.⁹⁹

4.146  The European Communities, in response to the Panel's question whether Sections 301-310 would be rendered consistent with US obligations under the WTO, assuming that the panel were to find that Sections 301-310 leave sufficient discretion to the USTR to allow it to meet its WTO obligations, claims that this question is of a highly hypothetical nature, and – as the Panel is aware – the European Communities disagrees with the hypothesis that is underlying the question.

4.147 According to the European Communities, its complaint concerns Sections 301-310 as such. The European Communities recalls in this context that both parties agree that the question of how the USTR enforces Sections 301-310 is irrelevant in this proceeding.

4.148 In the view of the European Communities, in order to address the EC's complaint, the Panel needs to answer the question of whether Sections 301-310, by their terms or expressed intent, mandate WTO-inconsistent determinations or actions, whether they provide the USTR with a sound legal basis for the implementation of the United States' WTO obligations and whether they make certain ("ensure") the conformity with WTO obligations within the meaning of Article XVI:4 of the WTO Agreement.

4.149 The European Communities contends that any (hypothetical) reassuring statement by the United States' executive authorities could not change the terms and expressed intent of Sections 301-310 nor could it create a sound legal basis for WTO-consistent actions in US law nor could it bring Sections 301-310, as such, into conformity with WTO law. Such a statement could only relate to the intentions of the current administration on the enforcement of Sections 301-310.¹⁰⁰

4.150 In the present case, the European Communities considers that the statute compels the executive branch of the US government to act in contradiction with the US WTO obligations or, in any case, creates a legal situation which is biased against compatibility with those obligations. As the European Communities has explained, this legal situation, created by Sections 301-310 as such, is highly detrimental to the multilateral trading system.

4.151 It is the EC's understanding of the US internal legal order that no statement of the executive authorities of the United States, however it would be formulated and by whomever it would be made, could do away with the constraints under which the executive branch of the US government finds itself under the US Constitution which imposes on the executive authorities to act in accordance with statutory requirements enacted by the US Congress. In addition, under US law these statutory requirements take precedence over any international obligation contracted by the United States under the Uruguay Round agreements pursuant to Section 102(a) of the Uruguay Round Agreements Act of 1994.

4.152 The European Communities recalls once more that the US representative, during the first substantive meeting with the Panel, could not exclude the possibility of a legal challenge before the US domestic courts concerning the implementation of Sections 301-310.

4.153  The European Communities reiterates that the situation of the present case is not comparable to the situation that was addressed by the ICJ in the Nuclear Tests Case where the French President and certain highly ranked French representatives made public statements on behalf of the French Republic that were not in contradiction with any piece of domestic legislation.

4.154  In rebuttal, the United States points out that the European Communities attempts to make much of the fact that, in US courts, US law would prevail in the event of a conflict with the Uruguay Round Agreements.  For example, the European Communities cites Professor D.W. Leebron for this proposition.  However, the European Communities fails to quote Professor Leebron's conclusion on page 232 of the very same work cited in footnote 27 that, "Nothing, however, in those provisions [that is, the provisions of Section 301] requires the President or the USTR to act in violation of the Uruguay Round Agreements".  In other words, because there is no conflict between Sections 301-310 and the WTO Agreement, it does not matter which would prevail in the event of a conflict.   In fact, were there actually a conflict, that is, if a US law mandated a violation of the WTO Agreement, there would be a WTO violation regardless of whether a US court would apply US law.  The EC's discussion of US law on when actual conflicts are present is thus completely irrelevant to the Panel's analysis.

TO CONTINUE WITH UNITED STATES – SECTIONS 301-310 OF THE TRADE ACT OF 1974

⁸⁸ The United States notes that Section 303(a)(2) provides that if dispute settlement consultations under a trade agreement have not resulted in a mutually acceptable resolution, the Trade Representative shall request "proceedings" under the "formal dispute settlement procedures provided under such agreement".

⁸⁹ Ibid.

⁹⁰ Statement of Administrative Action, op. cit., p. 1.

⁹¹ The United States refers to 19 U.S.C. � 3512(d) as stating that "[t]he statement of administrative action approved by Congress under section 3511(a) of this title shall be regarded as an authoritative expression by the United States concerning the interpretation and application of the Uruguay Round Agreements and this Act in any judicial proceeding in which a question arises concerning such interpretation or application".

⁹² Statement of Administrative Action, op. cit., pp. 365-366 (emphasis added).

⁹³ The United States points out that if, in fact, these determinations were not reviewable, the USTR's interpretations would be definitive.

⁹⁴ The United States refers to Appellate Body Report on India – Patents (US), op. cit., para. 65.

⁹⁵ Ibid., para. 69, "… like the Panel, we are not persuaded that India's "administrative instructions" would prevail over the contradictory mandatory provisions of the Patents Act".

⁹⁶ Appellate Body Report on India – Patents (US), op. cit., para. 66.

⁹⁷ The United States again states that this US legal requirement goes beyond what the EC asserts are a Member's WTO obligations: "[I]t would be inappropriate to interpret Article XVI:4 of the WTO Agreement so extensively as to require WTO Members to include specific language in their domestic law precluding WTO-inconsistent action".

⁹⁸ DSU, Article 23.1.

⁹⁹ With regard to Statement of Administrative Action, see further the US arguments shown below (in particular, in paras. 4.534-4.536) and the corresponding EC arguments.

¹⁰⁰ The European Communities recalls in this context the rulings of the panel on India - Protection for Pharmaceutical and Agricultural Products, and states that  the assurances that the Indian government had given to the United States regarding its interpretation and application of the Indian Patent Act, the fact that no mail box application had been rejected by the Indian authorities and that the Indian government had informed the Parliament that it would treat the mailbox applications in a WTO-consistent manner were not considered to be relevant to the panel's finding that the Indian mailbox system lacked a sound legal basis in the domestic law of India.  The European Communities refers to Panel Report on India – Protection for Pharmaceutical and Agricultural Products ("India – Patents (US)"), adopted 2 September 1998, WT/DS50/R, paras. 4.5 and 4.6.

In the EC's view, the United States sought in that case an amendment of the Patents Act to achieve greater legal security for its intellectual property right holders notwithstanding the assurances by the executive authorities.  It would be very surprising for the WTO's membership if one standard were applied to domestic law when the United States is a complainant and another when it is a defendant.