|Short title||Full Title|
|Brazil – Aircraft(Article 22.6 – Brazil)||Decision by the Arbitrators, Brazil – Export Financing Programme for Aircraft – Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS46/ARB, 28 August 2000.|
|Canada – Aircraft Credits and Guarantees (Article 22.6 – Canada)||Decision by the Arbitrator, Canada – Export Credits and Loan Guarantees for Regional Aircraft – Recourse to Arbitration by Canada under Article 22.6 of the DSU and Article 411 of the SCM Agreement, WT/DS222/ARB, 17 February 2003|
|EC – Bananas III (Ecuador) (Article 22.6 – EC)||Decision by the Arbitrators, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS27/ARB/ECU, 24 March 2000, DSR 2000:V, 2243|
|EC – Bananas III (US)(Article 22.6 – EC)||Decision by the Arbitrators, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS27/ARB, 9 April 1999, DSR 1999:II, 725.|
|EC – Hormones (Canada) (Article 22.6 – EC)||Decision by the Arbitrators, European Communities – Measures Concerning Meat and Meat Products (Hormones) – Original Complaint by Canada – Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS48/ARB, 12 July 1999, DSR 1999:III, 1105.|
|EC – Hormones (US) (Article 22.6 – EC)||Decision by the Arbitrators, European Communities – Measures Concerning Meat and Meat Products (Hormones) – Original Complaint by the United States– Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS26/ARB, 12 July 1999, DSR 1999:III, 1135.|
|Korea –Dairy||Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, 3|
|US – 1916 Act(EC)(Article 22.6 – US)||Decision by the Arbitrators, United States – Anti-Dumping Act of 1916, Original Complaint by the European Communities – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS136/ARB, 24 February 2004|
|US – Certain EC Products||Panel Report, United States – Import Measures on Certain Products from the European Communities, WT/DS165/R and Add.1, adopted 10 January 2001, as modified by the Appellate Body Report, WT/DS165/AB/R, DSR 2001:II, 413|
|US – Certain EC Products||Appellate Body Report, United States – Import Measures on Certain Products from the European Communities, WT/DS165/AB/R, adopted 10 January 2001, DSR 2001:I, 373|
|US – FSC (Article 22.6 – US)||Decision by the Arbitrator, United States – Tax Treatment for "Foreign Sales Corporations" – Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS108/ARB, 30 August 2002|
|US – Section 110(5) Copyright Act (Article 25.3)||Award of the Arbitrators, United States – Section 110(5) of the US Copyright Act – Recourse to Arbitration under Article 25 of the DSU, WT/DS160/ARB25/1, 9 November 2001, DSR 2001:II, 667|
(a) is a non-permissible specific action against dumping or a subsidy, contrary to Articles VI:2 and VI:3 of the GATT 1994, Article 18.1 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (hereafter the "Anti-Dumping Agreement") and Article 32.1 of the Agreement on Subsidies and Countervailing Measures (hereafter the "SCM Agreement");
(b) is inconsistent with certain provisions of the Anti-Dumping Agreement and SCM Agreement, so that the United States has failed to comply with Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization (hereafter the "WTO Agreement");
(c) pursuant to Article 3.8 of the DSU, to the extent that it is inconsistent with provisions of the Anti-Dumping Agreement and the SCM Agreement, nullifies or impairs benefits accruing to the complaining parties3 under those Agreements;
(a) the amount of offset payments attributed to duties collected on products from Brazil; and
(b) a share of the balance of total offset payments less the offset payments attributed to duties collected on products from other Members that are authorized by the DSB to suspend concessions or other obligations in this dispute.
(a) a Requesting Party cannot suspend concessions or other obligations based on the nullification or impairment suffered by other WTO Members; and consequently offset payments for products other than the Requesting Parties' products that are subject to anti-dumping or countervailing duty orders are outside the scope of the arbitration proceeding with respect to that Requesting Party;
(b) the Requesting Parties failed to specify the level of suspension and the level of nullification or impairment in such a way that allows the Arbitrator to determine equivalence; and consequently each party must provide the information necessary to enable the Arbitrator to make the determinations called for under the DSU in relation to that party; and
(c) the proposition that a Requesting Party may establish a new level of suspension each year is inconsistent with Article 22 of the DSU; and is consequently outside the scope of the arbitration proceeding for any party requesting to proceed in that manner.
(a) the request under Article 22.2 must set out the specific level of suspension (i.e. a level deemed equivalent to the nullification or impairment caused by the WTO-inconsistent measure, pursuant to Article 22.4 of the DSU); and
(b) the request must specify the agreement and sector(s) under which concessions or other obligations would be suspended, pursuant to Article 22.3 of the DSU.
"11. The duty that rests on all parties to produce evidence and to collaborate in presenting evidence to the arbitrators – an issue to be distinguished from the question of who bears the burden of proof – is crucial in Article 22 arbitration proceedings. The EC is required to submit evidence showing that the proposal is not equivalent. However, at the same time and as soon as it can, Canada is required to come forward with evidence explaining how it arrived at its proposal and showing why its proposal is equivalent to the trade impairment it has suffered. Some of the evidence – such as data on trade with third countries, export capabilities and affected exporters – may, indeed, be in the sole possession of Canada, being the party that suffered the trade impairment. This explains why we requested Canada to submit a so-called methodology paper."29
(a) a violation is a form of nullification or impairment;
(b) the notion of "benefit" under Article XXIII of GATT 1994 and the DSU encompasses rights under the WTO Agreement;
(c) Brazil has a right under the WTO Agreement to expect that the CDSOA should not exist. As a result, Brazil, together with the other Requesting Parties in this case, have the right to suspend concessions or other obligations up to the full amount of disbursements under the CDSOA.
"If any contracting party should consider that any benefit accruing to it directly or indirectly under this agreement is being nullified or impaired [...] as a result of
(a) the failure of another contracting party to carry out its obligations under this Agreement, or
(b) the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or
(c) the existence of any other situation,
The contracting party may, with a view to the satisfactory adjustment of the matter, make written representations or proposals to the other contracting party or parties which it considers to be concerned."
"In cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. This means that there is normally a presumption that a breach of the rules has an adverse impact on other Members parties to that covered agreement, and in such cases, it shall be up to the Member against whom the complaint has been brought to rebut the charge."
"When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding."
"The review of the level of nullification or impairment by Arbitrators from the objective benchmark foreseen by Article 22 of the DSU, is a separate process that is independent from the finding of infringements of WTO rules by a panel or the Appellate Body. As a result, a Member's potential interests in trade in goods or services and its interest in a determination of rights and obligations under the WTO Agreements are each sufficient to establish a right to pursue a WTO dispute settlement proceeding. However, a Member's legal interest in compliance by other Members does not, in our view, automatically imply that it is entitled to obtain authorization to suspend concessions under Article 22 of the DSU."52
"If it is assumed, then, that copyright holders exploit their exclusive rights by granting licences for the use of their works, one of the benefits which arises from those rights consists of the licensing royalties which right holders would receive. Thus, exclusive rights such as those set forth in Articles 11bis(1)(iii) and 11(1)(ii) will normally translate into economic benefits for copyright holders.
In their submissions to the Arbitrators, the parties have focused on this type of benefit accruing to copyright holders. The Arbitrators concur with the parties that, for purposes of these arbitration proceedings, the relevant benefits are those which are economic in nature.53 This is consistent with previous decisions of arbitrators acting under Article 22.6 of the DSU.54 Moreover, like the parties to this dispute, the Arbitrators will proceed on the assumption that the licensing royalties realizable by copyright holders constitute an adequate measure of the economic benefits arising from Articles 11bis(1)(iii) and 11(1)(ii)."
"In the event a party to the dispute requests arbitration under paragraph 6 of Article 22 of the Dispute Settlement Understanding ("DSU"), the arbitrator shall determine whether the countermeasures are appropriate."58
"We recall that Article 22.4 of the DSU provides as follows:
'The level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the nullification or impairment.'
The drafters have explicitly set a quantitative benchmark to the level of suspension of concessions or other obligations that might be authorized. This is similarly reflected in Article 22.7, which defines the arbitrators' mandate in such proceedings as follows:
'The arbitrator acting pursuant to paragraph 6 … shall determine whether the level of such suspension is equivalent to the level of nullification or impairment….' (footnote omitted)
As we have already noted in our analysis of the text of Article 4.10 of the SCM Agreement above, there is, by contrast, no such indication of an explicit quantitative benchmark in that provision. It should be recalled here that Articles 4.10 and 4.11 of the SCM Agreement are 'special or additional rules' under Appendix 2 of the DSU, and that in accordance with Article 1.2 of the DSU, it is possible for such rules or procedures to prevail over those of the DSU. There can be no presumption, therefore, that the drafters intended the standard under Article 4.10 to be necessarily coextensive with that under Article 22.4 so that the notion of 'appropriate countermeasures' under Article 4.10 would limit such countermeasures to an amount 'equivalent to the level of nullification or impairment' suffered by the complaining Member. Rather, Articles 4.10 and 4.11 of the SCM Agreement use distinct language and that difference must be given meaning."59
"Thus, as we interpret Article 4.10 of the SCM Agreement, a Member is entitled to act with countermeasures that properly take into account the gravity of the breach and the nature of the upset in the balance of rights and obligations in question. This cannot be reduced to a requirement that constrains countermeasures to trade effects, for the reasons we have set out above."
"[T]he presumption of nullification or impairment, as provided in Article 3.8 of the DSU, by no means provides evidence of the level of nullification or impairment sustained by the Member requesting authorization to suspend obligations."61
(a) one is the establishment of the existence of nullification or impairment by panels and the Appellate Body. This is where Article 3.8 of the DSU plays its role by providing that the existence of a violation creates a presumption of nullification or impairment of a benefit; and
(b) a separate and subsequent process where a Member requests the authorization to suspend concessions or other obligations and an arbitrator, under Article 22.6 of the DSU, is requested to determine the level of the benefit nullified or impaired.
· A current market value share for each source of the products;
· An ad valorem measure of the CDSOA distribution that actually affected production;
· An estimate of the elasticity of substitutability as between products produced in the United States and imports (the elasticity of substitution);
· An estimate of the price sensitivity of supply for each product (the elasticity of the United States' supply, complaining party import supply, and rest-of-the-world import supply); and
· An estimate of the market demand elasticity.
· "An estimate of the decrease in US domestic shipments"; and
· "An estimate of changes in foreign trade partner exports to the United States, specifically breaking out the gain to the individual complaining party, the exemption of whose duty payments from CDSOA served as the basis for the particular counter factual estimation."
· the disbursements are untied, hence there is no requirement to expand production with these payments86;
· there is no link between "qualifying expenditures" under the CDSOA and the expansion of production;
· the unpredictability of the disbursements makes it difficult for beneficiary firms to rely on the expenditures in a commercially meaningful way;
· offset payments reflect a small fraction of production, hence they cannot have a discernable impact on trade.
Reduction in imports [SEE IMAGE IN SOURCE DOCUMENT] (1)
M = volume of imports
[SEE IMAGE IN SOURCE DOCUMENT]M = change in the volume of imports
Pm = the price of imports
Q = the volume of domestic shipments
Pq = the price of domestic goods
[SEE IMAGE IN SOURCE DOCUMENT]= change in the price of domestic goods
Table 1: Estimated Level of Nullification or Impairment Revised Pursuant to the Model Proposed by the United States
|Model results||No production data adjustments||Total nullification and impairment||Model results||No production data adjustments||Total nullification and impairment||Model results||No production data adjustments||Total nullification and impairment|
Source: United States
• the elasticity of substitution (h), which is the first term and can be expressed as: [SEE IMAGE IN SOURCE DOCUMENT] (2)
• the total value of the payments expressed as a margin of the price reduction on domestic production financed by payments (S), the second term in the equation and can be expressed as: [SEE IMAGE IN SOURCE DOCUMENT] (3)
• the ratio of the value of imports to the value of domestic shipments in the markets in question: (R), the third term in the equation and can be expressed as [SEE IMAGE IN SOURCE DOCUMENT] (4)
"elasticities of substitution specific to the products benefiting from the CDSOA payments would be higher than the aggregated average GTAP or NAIC data because CDSOA disbursements typically relate to commodities and commoditised manufactured products, for which preference of buyers is largely determined by price. Moreover, it is generally acknowledged in the economic literature that the more disaggregate the sample the higher the estimated substitution elasticity. Therefore the Requesting Parties consider that an elasticity drawn from the upper end of the GTAP range (5.2) is justified as typical degree of price sensitivity".94
Table 2: Aggregate Trade Effect Coefficient for Products Estimated by the United States
|Product||Exporter||Year||Aggregate trade effect coefficient|
|Ball bearings||EC, Japan||2001||0.77|
|Ball bearings||EC, Japan||2002||0.74|
|Ball bearings||EC, Japan||2003||0.70|
|Stainless steel butt-welded pipe fittings||EC, Japan, Republic of Korea||2002||0.67|
|Stainless steel butt-welded pipe fittings||EC, Japan, Republic of Korea||2003||0.91|
|Top of the stove stainless steel cookware||Republic of Korea||2001||1.39|
|Top of the stove stainless steel cookware||Republic of Korea||2002||1.40|
|Top of the stove stainless steel cookware||Republic of Korea||2003||1.41|
Source: Estimated using data supplied by the United States. The coefficient is calculated for each product, exporter and year by dividing the estimated total reduction in trade by the value of the disbursement. The numerator is the sum of the loss in imports of exporters under active orders and those not under active orders.
Trade effect = (value of disbursements)*[(pass-through)*(import penetration)*(elasticity of substitution)]
Reduction in imports [SEE IMAGE IN SOURCE DOCUMENT] (6)
Where, a, is a parameter which reflect the value of the pass through effect of the disbursement.
Chart 1: Distribution of CDSOA Disbursements by 3-Digit
North American Industry Classification, 2001-2003
[SEE IMAGE IN SOURCE DOCUMENT]
"[P]ass through relates to the degree to which a company uses a subsidy it receives to lower the price of the product that it exports. At one extreme the company may choose to apply the full amount of the subsidy to the price of its products, thereby lowering its price. At the other, it may choose not to lower the price of the product."107
Table 3: Summary of Trade Effect Coefficient Values by Elasticity
and Pass-Through, 2001-2003
Amount of disbursements under CDSOA for the most recent year112 for which data are available relating to anti-dumping or countervailing duties paid on imports from Brazil at that time, as published by the United States' authorities.
(a) Suspension of concessions or other obligations expressed as a duty on an undetermined quantity of trade rather than as a suspension of concessions and tariff surcharges on a determined value of trade;
(b) Suspension of concessions or other obligations by some of the Requesting Parties so as to cover the total amount of disbursements under the CDSOA; and
(c) Determination of a variable level of suspension of concessions or other obligations.
(a) either Brazil will have to take appropriate steps to ensure that the total value of United States trade subject to the proposed additional duties does not exceed the total value of trade determined to constitute the level of nullification or impairment, or
(b) if and when it submits a revised request for authorization to suspend concessions or other obligations to the DSB further to this arbitration, Brazil will have to propose other forms of suspension of concessions or obligations that are less likely to have effects on trade exceeding the identified level of nullification or impairment in terms of value of United States exports to Brazil.
Amount of disbursements under CDSOA for the most recent year for which data are available relating to anti-dumping or countervailing duties paid on imports from Brazil at that time, as published by the United States' authorities.
would be consistent with Article 22.4 of the DSU.
"The suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached. …"