Bridges Weekly Trade News Digest • Volume 5 • Number 29 • 31st July 2001

Dispute Settlement Update: Aircraft, Anti-dumping, Shrimp-Turtle

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A WTO panel last Thursday, 26 July, issued yet another ruling in the ongoing aircraft subsidy saga involving Brazil’s regional aircraft maker Embraer and its Canadian rival Bombardier. WTO Members also held a Dispute Settlement Body (DSB) meeting on 24 July, addressing several requests for panels regarding the US anti-dumping policy on steel imports. During the meeting, Malaysia also announced it was going to file an appeal against a 15 June 2001 compliance ruling that declared the US’ import prohibition of certain shrimp and shrimp products were in conformity with its WTO obligations.

Canada - Brazil Aircraft Dispute

While Canada on 26 July declared itself victorious in the latest WTO panel ruling regarding its dispute with Brazil over aircraft subsidies, the panel in fact rejected the Canadian complaint that Brazil’s revised export financing programme (Proex) still was not in line with WTO law.

The panel said Canada failed to establish that the revised Proex programme did not comply with earlier WTO rulings in favour of Canada (see BRIDGES Weekly, 10 April 2001). The 253-page ruling thereby indicated a victory for Brazil, as its Proex programme was shown to be in compliance with the WTO following previous Canadian complaints that it provided illegal subsidies to Embraer, a major competitor with Canadian company Bombardier Inc. in the lucrative market for regional jet aircraft.

"This is a day to celebrate," Henrique Rzezinski, Embraer vice president in charge of international affairs, told a news conference in Sao Paolo, Brazil. "We won 100 percent, that’s 100 to zero, not even 99 to one, 100 to zero," he said.

But Canadian officials — pointing to the fact that the ruling outlines conditions under which the Brazilian regime would conform to WTO rules - - indicate that the decision represents a victory for Canada. Canadian International Trade Minister Pierre Pettigrew said the ruling obtained for Canada what it wanted: the requirement that Brazil apply Proex under international rules. "The WTO has given Brazil clear conditions that it must follow," Pettigrew said. "The ruling confirms the position that Canada has taken since the beginning of the dispute," he added. According to Pettigrews’ statement, the ruling also requires Proex to adhere to international trade obligations. These obligations include offering financing for no more than 10 years and covering no more than 85 percent of the deal, it said, while Proex had been offering loans for unlimited periods covering up to 100 percent of the value of the purchase. 24 July DSB

US anti-dumping policy on steel imports came under severe pressure from developed and developing countries alike in last Tuesday’s DSB meeting. Not only was a panel report issued which rejected a US appeal against Japan regarding steel imports, but several requests for panels in relation to US anti-dumping procedures in this area were granted. Further developments included an announcement from Malaysia that it would file an appeal against the latest WTO panel ruling in the so- called ’shrimp-turtle’ dispute.

Complaints rain on US steel anti-dumping measures

At the meeting, a panel report was circulated that upheld a prior ruling which had declared an increase of US duties on Japanese hot rolled steel illegal (see BRIDGES Weekly, 1 May 2001). The increased duties were put in place in June 1999 after US steel companies and steelworkers associations complained that Japanese steel was being "dumped" at below-market prices, making it impossible for US producers to compete. Additional duties were also imposed on steel from Brazil and Russia.

Furthermore, nine WTO Members — the largest coalition of complainants so far in WTO dispute settlement history — submitted a request on 12 July for the establishment of a DSB panel against the US over the so- called Byrd amendment to its anti-dumping law (see BRIDGES Weekly, 17 July 2001). The law, whose main beneficiary is the US steel industry, mandates US customs authorities to distribute, on an annual basis, the duties (termed offset duties) levied as anti-dumping measures or countervailing duties to the "affected domestic producers" for their "qualifying expenses."

The EU and other complainants — Australia, Brazil, Chile, India, Indonesia, Japan, Korea and Thailand — claim that the law punishes exporters to the US twice because first they are fined and then those fines are handed back to their competitors. Japan also underscored that the law works as an incentive to domestic producers to file complaints.

The US used its right to block this first request, but will almost certainly face an appointment of a panel when the issue is considered again at the next DSB meeting in September, since the request for a panel can only be blocked once by the defending party. Another development regarding the US anti-dumping policy on steel imports involved an Indian request for the establishment of a panel to rule on US anti-dumping measures on Indian steel plate imposed in February 2000. In its complaint, India charged that US duties imposed on cut-to-length steel plate violate the provisions of the WTO Anti- dumping Agreement.

Also in the area of anti-dumping measures, Brazil requested, and was granted, the appointment of a panel to look into EC anti-dumping duties on Brazil iron tube or pipe fittings. The panel now has six months to issue a ruling. In other matters, the DSB established a panel pursuant to a Peruvian complaint hindering sardine imports form Peru. The panel is expected to issue its ruling sometime in early 2002.

Shrimp-Turtle

Regarding the longstanding Malaysia-US dispute over the US import ban on shrimp captured with devices harmful to sea turtles (see BRIDGES Weekly, 19 June 2001), Malaysia at the meeting announced its intention to file an appeal against the latest WTO ruling in the case, which established that the US legislation now is in compliance with earlier panel reports. BRIDGES Weekly will report further on this issue at the next DSB meeting in September. . "US loses steel case appeal in WTO," BRIDGENEWS, 26 July 2001; "Canada Claims Victory in Latest WTO Ruling in Embraer Subsidy Dispute," COMTEX, 26 July 2001; "Canada claims WTO win in Brazil jet trade fight," REUTERS, 26 July 2001; "WTO Panel: Brazil Financing Legal," AP, 26 July 2001; "Trade: Three disputes sent to panel," THIRD WORLD NETWORK, 25 July 2001; "Malaysia Appeals Shrimp-Turtle Ruling," WTO REPORTER, 27 July 2001; ICTSD Internal Files.