Bridges Weekly Trade News Digest • Volume 6 • Number 20 • 28th May 2002
‘US Steel’ Dispute Panel To Convene 3 June As Dispute Requests Increase
‘US Steel’ Dispute Panel To Convene 3 June As Dispute Requests Increase
The EC announced at a 22 May meeting of the WTO’s Dispute Settlement Body (DSB) that it would call for the establishment of a dispute panel to examine the steel safeguard tariffs imposed by the US on a range of steel imports at a special 3 June DSB session (see BRIDGES Weekly, 16 April 2002). Furthermore, Japan, Korea, and China are likely to join the steel dispute at the 3 June meeting should the US pass on its right to block these first panel requests. Also at the 22 May session, the US could not veto a second request for a panel against it in a dispute with Japan on certain US antidumping measures. In return, however, it initiated the establishment of a dispute panel against Japan on apple imports. Finally, in another dispute involving the US, India asked the DSB to establish a panel in regards to textile matters — another request that could be warded off by the US.
US blocks first EC panel request
At the 22 May meeting, the US blocked the EC’s first 7 May request (WT/DS248/12) for a panel to decide on the WTO compatibility of the US steel safeguard tariffs of up to 30 percent. Geneva-based US legal counsellor Steven Fabri, stated it was "regrettable" that the EC had decided to challenge them as they were "fully consistent" with WTO rules. In response, EC Ambassador Carlo Trojan said Brussels was "confident that the WTO will again rule against the abuse by the US of WTO safeguard provisions" as it had previously done in all six US safeguard cases brought to the global trade body.
According to Trojan, the US failed to meet the requirement of a "sudden, recent, sharp and significant increase in imports" as postulated by the Appellate Body (AB) in a 1999 safeguard dispute (WT/DS121/AB/R). Second, Trojan argued, the US "once again failed to separate and distinguish the injury caused by imports from the injurious effect of other factors" such as the so-called "legal costs". Thirdly, the safeguard measures imposed by the US to offset the alleged injury caused by imports were excessive such that the US would "simply make the rest of the world pay for the lack of restructuring of its steel industry." Lastly, Trojan complained about the US’s decision to exclude all imports from its North American Free Trade Agreement (NAFTA) partners, Mexico and Canada, from the applicability of its steel safeguard regime.
In parallel to the EC’s move, both WTO Members Japan and Korea announced on 22 May that they would join the steel dispute at a special meeting to be held on 3 June to address their individual first requests for the establishment of a trade panel. In addition, on 27 May, China lodged a similar request with the WTO to set up a dispute panel to look into the issue. Although the US could veto these first requests, trade sources consider it unlikely in that a panel would be established anyway by virtue of the EC’s second request. While any Member can stop a first dispute panel request, a second request automatically leads to the establishment of a panel. Moreover, WTO dispute settlement rules provide that multiple complaints on the same subject matter are usually to be merged to a single panel procedure.
For their part, Brazil and New Zealand requested consultations with the US on the steel issue (WT/ DS259/1 and WT/DS2581), thereby joining Norway and Switzerland who have asked for consultations but have not yet requested a panel.
EC, Japan to retaliate prior to final DSB ruling, others to wait
Japan as well as the EC has already notified their intent to retaliate against US exports under Article 8 of the Agreement on Safeguards "not earlier than 18 June" (see BRIDGES Weekly, 16 April 2002). China, Norway and Switzerland on the other hand, announced they would take retaliatory action only three years after the safeguard tariffs were put in place or after a binding DSB ruling on them. A third grouping of Australia, Brazil, Korea and New Zealand have delayed their notification to retaliate by formally agreeing with the US that their right to suspend concessions and other obligations be extended until 20 March 2005. Otherwise, Members need to impose their retaliatory measures within 90 day after the safeguard measure had been applied.
Members can only take recourse to retaliation under the Agreement on Safeguards if the Members concerned do not agree on adequate compensation and when the safeguard stems from a relative increase in imports. By definition, a relative increase in imports is when the domestic production-to- import ratio changes primarily because of a drop of domestic production (rather than due to an increase in imports). In cases of an absolute increase of imports, however, the right to retaliate cannot be exercised within the first three years after the application of the safeguard measure. Sources speculate that only a dispute panel will be able to settle whether the US steel case is one of a relative or absolute increase in imports.
Other panel requests put forward
For detailed information on all the actions taken at the 22 May DSB meeting, see http://www.wto.org/english/news_e/news02_e/dsb_22may02_e.htm.
"CHINA TARGETS US STEEL TARIFFS IN ITS FIRST WTO PANEL REQUEST," AFP, 27 May 2002; "Steel: US Blocks Establishment Of WTO Panel To Review Steel Tariffs; EU Will Renew Bid," WTO REPORTER, 23 May 2002; "US Blocks Panel On "Steel’," WTO NEWS, 22 May 2002; "Brazil To Take US To WTO Over Steel," AP, 17 May 2002; "Trade: EU Leads Charge At WTO Against US Wall Of Steel," TERRAVIVA-EUROPE DAILY, 23 May 2002; ICTSD Internal Files.