4.468  The European Communities also argues that the conclusion drawn by the United States from this article is also quite wrong (and in contradiction with the internal meeting report of 11 November 1993 by the US delegate, Mr. Andy Shoyer, cf. US Exhibit 23). The European Communities never considered the final version of Article XVI.4 of the WTO Agreement to be of limited impact because, as is clear from the developments the European Communities described in this proceeding and the internal meeting report of the United States, the European Communities always strove for and finally achieved substantial strengthening of what is now Article XVI:4 of the WTO Agreement.

4.469  The European Communities adds that when writing his article based on a conference held in Bruges in October 1994, Mr. Kuyper for obvious reasons could not be aware of the legal development that occurred in the India - Patents (US) case where the Appellate Body found that WTO Members are required to provide a sound legal basis in their domestic law in order to ensure conformity with the covered agreements.

4.470  The United States challenges the EC suggestion that it is somehow significant that Mr. Pieter-Jan Kuyper drew his conclusions concerning Article XVI:4 in the context of a discussion of the relations between the European Communities and its Member States, and that his statements concerning "the potential burden imposed on the European Communities" by the interpretation of Article XVI:4 that the European Communities now posits must be understood in this context. The European Communities appears to be arguing that Mr. Kuyper’s conclusions, and a panel’s, should depend on whether the defending party in a particular dispute is the United States or the EC. If the defending party is the EC, then the Superfund rule should continue to be applied (as Mr. Kuyper anticipated it would in 1995²⁷⁸), and the "burden on the European Communities" (i.e. the in dubio mitius principle, as the United States already argued) would be relevant. However, as the United States emphasised, the law must apply equally to all parties, and at all times. The Panel must reject the EC's self-serving, post hoc reassessment of its legal position on Article XVI:4 and its attempt to apply a double standard.

4.471  The United States further states that with respect to the EC’s argument that it always sought a "strengthened" Article XVI:4, the United States notes that what the European Communities sought is not what it actually got. In fact, as already discussed, in seeking a "strengthened" Article XVI:4, the European Communities on several occasions proposed language which would have unintentionally resulted in an obligation weaker than that found in VCLT Article 26. Moreover, as the United States pointed out, Mr. Kuyper as the legal adviser to the EC negotiators was unable to explain the difference between Article XVI:4 and VCLT Article 26 when Brazil and other delegations requested such an explanation towards the close of negotiations.

4.472  In response to the Panel's question as to what would be different in a legal universe without Article XVI:4, the United States claims that by definition, Article 1(a) and (b) are applicable only to the GATT 1994, and not to other WTO Agreements such as the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). Article XVI:4 therefore provides an overarching statement in the WTO Agreement, clearly applicable to all annexed agreements and not just the GATT 1994, that no measures are grandfathered. Article XVI:4 thus serves to remove any doubt which might have existed in its absence that all measures must be brought into conformity as from January 1, 1995.

4.473  The United States recalls its argument that it was precisely in this manner and for this purpose that the Appellate Body cited Article XVI:4 in India - Patents (US). In that case, India attempted to argue that it could delay changing its law as required by TRIPs Article 70.9 because of differences between the language of that provision and that of other TRIPs articles. Specifically, India claimed that while other TRIPs provisions explicitly required changes to domestic laws, Article 70.9 did not.²⁷⁹

4.474  The United States notes that the Appellate Body rejected this argument, stating at the outset of its discussion, "India's arguments must be examined in the light of Article XVI:4 of the WTO Agreement", and then quoting this provision.²⁸⁰ Article XVI:4 thus assisted in clarifying that India could not rely on claimed differences in agreement language to delay compliance.

4.475  According to the United States, beyond serving this overarching function of providing context for other agreement provisions, Article XVI:4 imposed an obligation on Members to review existing legislation at the time the Agreement was to enter into effect to make sure that existing laws, regulations and administrative procedures did, in fact, conform to the Members' WTO obligations, and where those laws did not, to bring them into conformity.

4.476  In response to the Panel's further question as to what would be the use and meaning of Article XVI:4 if no difference would exist, with or without Article XVI:4, the United States argues that in respect of the application ratione temporis of the WTO Agreement nor in respect of "grandfathering" or the removal of mandatory legislation, the United States states that Article XVI:4 does provide additional clarity with respect to the need to bring non-conforming measures into conformity as from January 1, 1995. The Appellate Body in India - Patents (US) found this provision useful in clarifying potential ambiguities in other provisions which might be read to permit delayed implementation. The provision also serves the useful function of establishing, under the umbrella of the WTO Agreement, that none of the annexed agreements – and not just the GATT 1994 – are subject to grandfathering.

4.477  The United States adds that through the provisions of Article XVI:4, the principles of Article 26 of the Vienna Convention on the Law of Treaties became legally binding on all Members of the WTO, even though not all Members are parties to the Vienna Convention.²⁸¹

4.478  The United States further argues that beyond this, another function of Article XVI:4 is suggested by comments by Frieder Roessler, formerly the Director of the Legal Affairs Division of the GATT Secretariat, who explained:

"There are similar provisions [to Article XVI:4] in the Tokyo Round Agreements on Anti-dumping and Subsidies²⁸², which have generally been interpreted as requiring the parties to these Agreements to adopt laws, regulations and procedures that permit them to act in conformity with their obligations under these Agreements.  The main function of these provisions was to permit the committees established under these Agreements to review the law of the parties and not merely the practices followed under that law ".²⁸³

4.479  The United States also asserts that likewise, the inclusion of Article XVI:4 makes clear that the laws of Members, and not just the application of these laws, may be the subject of reviews conducted in various WTO committees.

4.480  The United States further notes that in EC – Bananas III, the Appellate Body examined Article 4.1 of the Agreement on Agriculture, which provides:

"Market access concessions contained in Schedules relate to bindings and reductions of tariffs, and to other market access commitments as specified therein ".

4.481  The United States notes that the European Communities argued that Article 4.1 is a substantive provision, which, read in context of Article 21.1 of the Agreement on Agriculture (providing that the provisions of the GATT 1994 "shall apply subject to the provisions of this Agreement"), demonstrates that Schedules of concessions supersede the requirements of GATT 1994 Article XIII.²⁸⁴ Accordingly, the European Communities contended that the tariff rate quotas provided for in its Schedule would not be subject to Article XIII.²⁸⁵ The Appellate Body disagreed. It concluded, "Article 4.1 does no more than merely indicate where market access concessions and commitments for agricultural products are to be found".²⁸⁶ The Appellate Body went on, "If the negotiators intended to permit Members to act inconsistently with Article XIII of the GATT 1994, they would have said so explicitly".²⁸⁷

4.482  The United States claims that the Appellate Body's interpretation of Article 4.1 illustrates the fact that sometimes an agreement provision may serve a limited purpose, and that obligations should not be extracted from a provision unless the language explicitly supports that interpretation. Likewise, Article XVI:4 does not by its terms provide that there is an obligation to "provide security and predictability", and such an obligation must not be inferred merely to augment the utility of Article XVI:4.

4.483  The United States refers again to Professor Jackson's testimony at the Senate Finance Committee, in which he concludes, "There may need to be some alterations to some time limits, or transition measures, but the basic structure of 301 is not necessarily inconsistent with the Uruguay Round results", and that even when Section 301 is considered "in its current statutory form" (i.e. before the 1994 amendments), "the Executive appears to have the discretion to apply actions under Section 301 in a manner consistent with the proposed new rules of the Uruguay Round dispute settlement understanding".²⁸⁸ Professor Jackson thus considered that with only minor changes, Section 301 would be consistent with the WTO obligations of the United States. He clearly did not believe that any provision of the WTO Agreement or its annexes, including Article XVI:4, would require significant changes to the statute.

4.484  In response to the Panel's question as to the situation in which a Member can be found to be in breach of Article XVI:4, the United States argues that in precisely that manner set forth by the European Communities. There it asked the Panel to rule:

"on the basis of these findings [with respect to DSU Article 23 and GATT Articles I, II, III, VIII and XI] that the United States, by failing to bring the Trade Act of 1974 into compliance with the requirements of Article 23 of the DSU and of Articles I, II, III, VIII and XI of the GATT 1994, acted inconsistently with its obligations under those provisions and under Article XVI:4 of the WTO Agreement …". (emphasis added)   

4.485  In the view of the United States, in other words, the fact that a Member has not brought into conformity a measure inconsistent with its obligations in an annexed agreement would constitute a breach of Article XVI:4.  For example, the TRIPS Agreement obligates WTO Members to grant a term of protection for patents that runs at least 20 years after the filing date of the underlying protection, and requires each Member to grant this minimum patent term to all patents existing as of the date of application of the Agreement to that Member.  Under the Canadian Patent Act, the term granted to patents issued on the basis of applications filed before October 1, 1989 is only 17 years from the date on which the patent is issued.  The United States considers that by failing to bring this law into conformity with its obligations under the TRIPs Agreement, Canada has breached Article XVI:4.  The same conclusion could be drawn in the case of failure to implement other provisions of the TRIPS Agreement; failure to eliminate notified TRIMs by the end of the period provided in Article 5.2 of the TRIMs Agreement; or failure to fully implement the customs valuation obligations in the Valuation Agreement.

4.486  The European Communities emphasises that the US arguments are both new and incorrect, as can be seen already from the internal meeting report of 11 November 1993 by the US delegate contained in US Exhibit 23. This exhibit, in particular, shows that several Uruguay Round participants, including the European Communities, worked for a strengthening of Article XVI:4 of the WTO Agreement beyond the "natural obligation under int'l law" which finds its source in Articles 26 and 27 of the Vienna Convention on the Law of Treaties. This "natural obligation" is already incorporated into the WTO by virtue of Article 3.2, second sentence, of the DSU, which provides that "[t]he Members recognise that [the dispute settlement system] serves to … clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law". The US reply thus appears to be an attempt to go back on the achievements of the Uruguay Round.

4.487  The United States rebuts the EC argument that the principles of VCLT Article 26 have already been incorporated into the WTO through DSU Article 3.2, second sentence, and that Article XVI:4 therefore need not serve this purpose. However, DSU Article 3.2 provides for the dispute settlement system to clarify WTO provisions "in accordance with customary rules of interpretation of public international law". Article 26 is not such a customary rule of interpretation. As the Appellate Body explained in US – Gasoline and Japan – Alcoholic Beverages, these rules of interpretation are reflected in VCLT Articles 31 and 32, which, indeed, are entitled "General rule of interpretation" and "Supplementary means of interpretation", respectively.²⁸⁹ Inasmuch as Article 26 is not such a rule of interpretation, DSU Article 3.2, second sentence, may not be read to reference it.  Thus, the EC argument fails to undermine the United States point that Article XVI:4 made the principles of VCLT Article 26 binding on all WTO Members, even those Members not parties to the Vienna Convention.  It is worth noting that, during negotiations from 1991-1993, the United States negotiator explicitly brought to the attention of other delegations that the United States is not a party to the Vienna Convention.

4.488  The United States responds to the Panel's request to provide examples where the United States took steps in accordance with the US argument that Section 304 determinations have to be made within the 18 months time-frame but that their publications can wait completion of WTO procedure, and the Panel's question as to why the United States does not immediately publish a notice, e.g. before the end of WTO procedures, thereby assuring Members that it will await the completion of WTO procedures before making a final determination. The United States states that it cannot offer an example from the handful of Section 302 investigations which have taken place since January 1, 1995. Providing assurances is not an obligation under DSU Article 23; Article 23 itself helps to provide these assurances. In other words, the US commitment to comply with DSU Article 23, combined with the availability of effective dispute settlement procedures should the United States not comply, provides the very assurances to which the question refers.  Further, although not required to by any WTO obligation, the United States has gone beyond its WTO obligations in providing assurances in the form of US legal requirements to resort to dispute settlement procedures and to base determinations that US WTO agreement rights have been denied on DSB-adopted panel and Appellate Body findings. The European Communities has acknowledged that no such obligation to limit the exercise of discretion is provided for in Article XVI:4. Nevertheless, the United States has done so. It is for this reason that Professor Jackson concluded that Section 301 "is a constructive measure for US trade policy, and for world trade policy".²⁹⁰

4.489  The United States indicates that any delay in publishing or issuing a determination changes none of this. The United States remains subject to its international obligation to comply with DSU Article 23 (not to actually make proscribed determinations or take action), US law continues to require reliance on DSB-adopted findings, and the dispute settlement system remains available both as a deterrent to WTO-inconsistent action and for redress of any such action.  In the end, however, the question is not whether Sections 301-310 provide "adequate assurances", but whether Sections 301-310 command action inconsistent with DSU Article 23.  The timing of publication, or even of the determination itself, is not relevant to this question.  DSU Article 23 sets forth conditions applicable to "determinations to the effect that a violation has occurred" and to suspension of concessions.  No actual determination to the effect that a violation has occurred, and no actual suspension of concessions, is before this Panel.  And none is commanded by the statute which is before the Panel.   There is no basis in either the text of DSU Article 23 or Sections 301-310 for a finding that this statute violates that, or any other, WTO provision cited by the European Communities.²⁹¹

2. Section 304

(a) Overview

4.490  The European Communities claims that the USTR is required to proceed unilaterally when the results of the WTO dispute settlement procedures are not available within the time limits set out in Sections 301-310.²⁹²

4.491  The European Communities first notes that Section 304(a)(2)(A) provides in relevant part:

"The Trade Representative shall [determine whether the rights to which the United States is entitled under any trade agreement are being denied] [in the case of an investigation involving a trade agreement] on or before . . . the earlier of

1. the date that is 30 days after the date on which the dispute settlement procedure is concluded, or
2. the date that is 18 months after the date on which the investigation is initiated" .

4.492  The European Communities next states that Section 303 prescribes that the decision to initiate the investigation and the request for consultations in accordance with Article 4.3 of the DSU must normally take place on the same day. If there is a delay in the request for consultations, there is a corresponding extension of the 18-month time limitation.

4.493  The European Communities argues that Section 304(a)(2)(A) therefore mandates the USTR to make a determination 18 months after the request for consultations on the United States' denial of rights under a WTO agreement, even if the DSB has not adopted a report with findings on the matter within that time frame.

4.494  The European Communities further asserts that the text and the intent of Section 304 are that after a maximum of 18 months USTR must proceed with a determination of whether the rights of the United States have been denied, whether or not the WTO dispute settlement procedure is concluded at that time.

4.495  The European Communities points out that the text does not say anywhere that the determination must be negative if by the end of the 18 months the WTO procedure has not finished.

4.496  In the view of the European Communities, by providing explicitly that the determination must either be made 30 days after the end of the WTO procedure (in which case the result of that procedure can be taken into account) or by the end of 18 months (meaning that in certain cases the result of the WTO procedure cannot possibly be taken into account), whichever the earlier, the legislator has made clear its intention that in the latter case USTR must go ahead and make a substantive determination even though the "results" from the WTO are not yet available.

4.497 The European Communities then concludes that one must thus assume that, given the language of the law and its design, architecture and revealing structure, if the intent of the legislator were different, as the United States affirms, Congress would have said so explicitly.

4.498 The European Communities further claims that at the very least, the text is so unclear and ambiguous that economic operators and foreign governments perceive it as imposing upon the USTR an obligation to make a unilateral determination that US rights have been denied even in the absence of a WTO ruling. In that sense, the text does not provide a "sound legal basis" (for the implementation of Article 23 of the DSU) as required by the Appellate Body in the India – Patents (US) case.

4.499 The United State points out the numerous assumptions on which the EC argument rests. US Exhibit 10 is reproduced in part here, summarizes these assumptions. The United States argues that for each EC claim, all of the EC's assumptions must be correct for it to prevail, but none of them is correct.

US view on EC assumptions or miscalculations

4.500  In the view of the United States, the first set of EC assumptions relates to its claim that Section 304 mandates a violation of DSU Article 23.2(a). The European Communities argues that Section 304 requires the USTR to make a determination that US trade agreement rights have been violated within 18 months of initiation of a Section 302 investigation, while the DSU provides for a longer period for completion and adoption of panel and Appellate Body proceedings in some instances.

4.501  The United States challenges the EC assumption, its most fundamental assumption, that Section 304 requires the USTR to make an affirmative determination that US agreement rights have been denied even if the DSB has not adopted panel or Appellate Body findings to this effect. It is important to recognise that Article 23.2(a) does not prohibit determinations that a violation has not occurred, nor does it prohibit accurate descriptions of a process which is under way. Article 23.2(a) prohibits determinations that another WTO Member has violated its WTO obligations unless DSU rules and procedures have been followed. In other words, Article 23.2(a) relates only to a finding of a violation.

4.502  The United States notes that the European Communities makes absolutely no attempt to explain how Sections 301-310 mandate such a determination. The European Communities merely assumes that in determining "whether" US agreement rights have been denied, the USTR must make an affirmative determination. Unless the European Communities can explain why, under US law, this assumption is correct, it has failed to meet its burden with respect to this claim. The United States reiterates that the USTR is completely free to make any of a number of determinations, including a negative determination, if the DSB has not yet adopted panel or Appellate Body findings.

4.503  The United States notes that the European Communities also makes assumptions relating to the time frames in Section 301 and the DSU.   However, because Section 304 does not mandate an affirmative determination, these time frames  are simply not relevant to the Panel's decision.  Nevertheless, even were this not so, the 18-month time frame in the statute would not prevent the USTR from complying to the letter with DSU rules and procedures.  The EC's calculation of the time by which a panel may extend its proceedings is incorrect by one month.  Moreover, the European Communities ignores the fact that DSB meetings normally are held monthly and instead assumes that DSB meetings would not be held until the final day permitted under the DSU.  The European Communities also assumes that the United States would not attempt to affect the schedule of DSB meetings.  Finally, the European Communities ignores the fact that Sections 301-310 do not preclude the USTR from initiating dispute settlement proceedings before initiating a Section 301 investigation.   Thus, wholly apart from the fact that the European Communities cannot assume that the USTR will always make an affirmative determination, the time frames in the US statute do, in fact, permit the USTR to base her determination on adopted panel and Appellate Body findings.   The DSU time frames were negotiated with this 18-month time frame in mind, and the European Communities and others were well aware of this fact during the Uruguay Round.

4.504  The United States further indicates that Section 304(a)(1) of the Trade Act of 1974 does not command the authorities of the United States of America to violate the obligations found in the text of DSU Article 23.2(a).  It does not command the United States USTR to determine, within the meaning of Article 23.2(a), that another WTO Member is denying US trade agreement rights absent DSB recommendations and rulings to that effect. 

4.505  The United States recalls that the European Communities asked the Panel to find that Section 304(a)(2)(A),

"is inconsistent with Article 23.2(b) [sic] of the DSU because it requires the USTR to determine whether another Member denies rights or benefits under a WTO Agreement irrespective of whether the DSB adopted a panel or Appellate Body finding on this matter". (emphasis added)

4.506  The United States emphasised that the EC's formulation is wrong because it assumes that "whether" means "that". In requiring that she make a determination of whether US trade agreement rights have been denied, the statute does not command the USTR to conclude that such rights have been denied. In the absence of a concrete determination that another Member has violated its WTO obligations, or a command in the statute to make that specific determination, there is quite simply nothing for the Panel to examine against the requirements of Article 23.2(a). The closest the European Communities has come to arguing that Section 304(a)(1) mandates a determination of breach is its statement that the Section 304(a)(1) determination must be based on the results of the Section 302 investigation. But this is no argument at all, for the investigation won't be concluded without the DSB rulings and recommendations the USTR is required to seek under Section 303(a) and is required to rely on under Section 304(a)(1), a point the European Communities was willing to acknowledge. Section 304(a)(2)(A) is not inconsistent with DSU Article 23.2(a) because Section 304(a)(1) does not mandate a determination that a violation has occurred.

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

²⁷⁸ According to the United States, Mr. Kuyper’s reliance on the Superfund reasoning, like that of Mr. Roessler and Professor Jackson, highlights the importance of the Appellate Body’s conclusion that adopted panel reports "create legitimate expectations among WTO Members, and, therefore, should be taken into account where they are relevant to any dispute".  Appellate Body Report on Japan – Alcoholic Beverages, op. cit., p. 14.

²⁷⁹ Appellate Body Report on India - Patents (US), op. cit., para. 78.

²⁸⁰ Ibid., para. 79.

²⁸¹ The United States points out as an example that it is not a party.

²⁸² (Footnote in original) Article 16(6) of the Anti-Dumping Code and Article 19(5) of the Agreement on Subsidies and Countervailing Duties.

²⁸³ Frieder Roessler, The Agreement Establishing the World Trade Organization, in The Uruguay Round Results, A European Lawyers' Perspective 67, 80 (Jacques H.J. Bourgeois, Fr�d�rique Berrod & Eric Gippini Fournier eds. 1995)(emphasis added).

²⁸⁴ See Appellate Body Report on European Communities – Regime for the Importation, Sale and Distribution of Bananas ("EC – Bananas III"), adopted 25 September 1997, WT/DS27/AB/R, para. 20.

²⁸⁵ Ibid.

²⁸⁶ Ibid., para. 156.

²⁸⁷ Ibid., para. 157.

²⁸⁸ Jackson Testimony at 200.

²⁸⁹ The United States cites Appellate Body Report on US – Gasoline, op. cit., pp. 16-17; Appellate Body Report on Japan – Alcoholic Beverages, op. cit., pp. 10-12.

²⁹⁰ Jackson Testimony, op. cit., at 200.

²⁹¹ See also the parties' further arguments contained in Paragraphs 4.759-4.790 below.

²⁹² The European Communities notes that its complaint does not relate to those provisions of Sections 301-310 that are in conformity with the principles set out in Article 23.  This applies in particular to Section 303(a), according to which the USTR must resort to the DSU in cases involving a WTO agreement, as well as Section 304(a)(1)(A), according to which the USTR's determination of denial of United States' rights or benefits under a WTO agreement must be based not only on the investigation and the consultations with the country concerned but also on the WTO dispute settlement proceeding, and Section 301(a)(2)(A), according to which the USTR is not required to take action in a case in which the DSB has adopted a report confirming that the defendant Member does not deny United States' rights or benefits under a WTO agreement.