Two WTO Rulings Favor U.S.

December 12, 2000

The World Trade Organization has issued two rulings in favor of the United States. One, by the appellate body, rejects a European Union appeal claiming that U.S. tariffs now in place in the bananas dispute violate WTO rules. The effect of that ruling is that the United States will not need to make any changes in the tariffs imposed on European imports in response the EU's WTO-inconsistent banana import regime.

United States Trade Representative Charlene Barshefsky also announced an appellate body ruling that affirms the findings of a WTO panel which concluded last July that Korea's import regime for beef discriminates against imports from the United States and other foreign suppliers. The appellate body also found that Korea did not compute its domestic support for beef in the manner required by the provisions of the WTO Agreement on Agriculture.

In the banana dispute, the EU's complaint addressed the U.S. announcement of March 3, 1999 that it would change bonding requirements on certain imports from EU countries. The United States took this step in order to ensure that it could, from that date, collect any duties that might be applied after a WTO arbitrator in the Bananas dispute completed a report on the level of harm to the U.S., which had been scheduled for March 2. Because the March 3 bonding requirements were a temporary measure in place only until WTO proceedings finished on April 19, 1999, no action by the United States is required. In fact, the Appellate Body concluded that the panel erred when it recommended that the United States bring into compliance a measure which no longer exists.

In addition to rejecting EU arguments relating to tariffs now in place, the Appellate Body also rejected EU arguments that the United States violated WTO procedural rules by not requesting separate panels to determine whether, and by how much, the EU banana regime harmed U.S. exports. The EU had argued that because only one panel considered both questions, current U.S. duties on bananas are inconsistent with WTO rules. The EU has presented this argument to several WTO adjudicatory bodies, including the Appellate Body; none have accepted it.

The United States had requested WTO dispute settlement consultations with Korea in February 1999 and requested the formation of a panel in April 1999. Earlier this year, that panel found that Korea's requirement that imported beef be sold in separate retail stores and other restrictions on the distribution of imported beef are inconsistent with Korea's obligations under GATT Article III:4 because they result in less favorable treatment for imported beef than is accorded to Korean beef. In practice, Korea's requirement that imported beef be sold in separate stores has excluded imported beef from approximately 90 percent of the 50,000 retail beef outlets in Korea.

The panel also concluded that Korea provided domestic subsidies to its cattle industry at levels that resulted in Korea's total support for agriculture being higher than permitted by its commitments under the WTO Agreement on Agriculture. Korea appealed the panel's findings, but the WTO appellate body dismissed all but two of Korea's arguments and sustained the findings of the panel regarding the discriminatory nature of Korea's retail distribution system for beef.

In addition, the appellate body affirmed the panel's conclusions that Korea must compute the level of domestic support in accordance with the provisions of the agreement on agriculture and had not done so. However, the appellate body found that the record before the panel did not permit a determination whether the level of domestic subsidies provided by Korea to agriculture in 1997 and 1998 were higher than permitted under the Agreement on Agriculture.