Bridges Weekly Trade News Digest • Volume 12 • Number 29 • 10th September 2008

WTO Rules against Mexico in Olive Oil Dispute with EU

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A World Trade Organisation (WTO) dispute panel ruled largely in favour of the EU in its dispute over Mexican import duties on olive oil. The decision, made public on 4 September, upheld three of the claims made by the EU, but dismissed the EU’s other points.

Central to the dispute was Mexico’s countervailing duties of between 40 cents and 70 cents on imports of EU virgin and refined olive oil, which have been in place since 2005. Mexico imported 8,000 metric tons of olive oil - worth US$ 21 million - from the EU in 2006, the year that Brussels lodged its complaint with the WTO.

The WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement) allows Members to impose countervailing duties to counteract subsidies granted to imported products. But before imposing such duties, the importing country must first conduct an investigation that confirms both the existence and the amount of the subsidy, and that proves that the subsidised imports are harming domestic producers of the good.

In the decision announced last week, the panel found that the Mexican olive oil duties violated several provisions of the SCM Agreement. Specifically, the panel ruled that the original Mexican investigation exceeded the set time limit of 18 months, that Mexico failed to disclose sufficient non-confidential summaries and, finally, that Mexico was wrong to use trade data gathered over nine-month intervals, rather than full-year statistics, when determining the level of injury it had suffered because of the EU subsidies.

However, the panel rejected the EU’s six other arguments and another two were not addressed on the grounds of judicial economy. Among the claims dismissed, for instance, was the EU’s complaint that Mexico had violated trade rules by not inviting the EU for consultation before launching its investigation.

The panel also dismissed the EU’s request for a WTO ruling to oblige Mexico to repeal the import duties, recommending instead that Mexico comply with its obligations under the SCM Agreement.

Mexico had contended that the imposed duties were necessary because subsidised European imports - mainly olive oil from Greece, Italy and Spain - frustrated the formation of a domestic industry. According to Mexico, 94 percent of Mexican olive oil consumption was from subsidised EU imports.

However, the EU - which accounts for 80 percent of global olive oil production - argued that the subsidises targeted by the Mexican duty are being removed through reforms to the olive oil sector adopted by EU Agriculture Ministers in April 2004.

Unless Mexico or the EU launches an appeal, the WTO’s Dispute Settlement Body will adopt the panel report within 60 days.

EU figures currently value EU olive oil exports to Mexico at 33 million euros.

ICTSD reporting; “WTO Rules Largely Against Mexico in Olive Oil Fight,” REUTERS, 4 September, 2008; “Mexican Duties on EU Olive Oil are Illegal, WTO Rules,” BLOOMBERG, 4 September, 2008.

One response to “WTO Rules against Mexico in Olive Oil Dispute with EU”

Khaki Scott 12th September 2008 at 16:52
And what are Mexicans to do when U.S. and E.U. subsidized products drive all of the Mexican farmers and producers out of business? Will the U.S. and the E.U. send “relief supplies”? Will they take responsibility for what they have done to Mexican farmers and producers who face Mother Nature alone - without a government to ensure that they cannot fail? I suspect not.