Bridges Weekly Trade News Digest • Volume 7 • Number 17 • 14th May 2003
Softwood Lumber Panel To Be Established
WTO GRANTS EU RETALIATORY POWER IN FSC CASE
On 7 May the WTO Dispute Settlement Body (DSB) authorised the EU to increase customs duties as a further step towards retaliatory sanctions against the US in the Foreign Sales Corporations (FSC) case. The EU had challenged the tax benefits through the FSC for major US exporting companies such as Boeing and Microsoft. A dispute settlement panel ruled the law illegal in 2001 and gave the EU the right to raise tariffs. The EU will now be able to impose countermeasures against the US, as it has the DSB authorisation and also has notified the full list of products on which such countermeasures can be levied. The US$ 4billion retaliation figure is a record high in WTO litigation.Shortly after the DSB approval, EU Trade Commissioner Pascal Lamy was quoted as saying that the EU will "review the situation in the autumn," and if there is no sign that compliance is on the way at that time, it would start the legislative procedure for the adoption of countermeasures by 1 January 2004. The US said it is taking action to amend its legislation in this regard.
ICTSD reporting; "EU granted permission to apply US$4 billion sanctions against US in FSC case but delays application, " WTO NEWS RELEASE, 7 May 2003; "EU sets fall deadline in tax dispute with US," REUTERS, 7 May 2003.
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On May 7, 2003, the Dispute Settlement Body approved the establishment of a panel on the United States – Investigation of the International Trade Commission in Softwood Lumber from Canada (WT/DS277, searchable at http://docsonline.wto.org). The request was the second one made by Canada in this regard, and the panel will be established despite objections from the US. The US had claimed that "objective facts had shown the threat of material injury for US industry" and Canada’s claim therefore lacked merit. At the same meeting, the EC and Japan reserved their rights to participate as third parties in the dispute.In this dispute, Canada challenges a decision by the US International Trade Commission allowing the application of anti-dumping and countervailing duties on Canadian softwood lumber. Canada asserts that the US is in violation of Article 3.1 of the WTO Anti-Dumping Agreement and Article 15.1 of the Subsidies and Countervailing Measures Agreement, by failing to base its threat of injury determination on positive evidence and by failing to conduct an objective examination of both the volumes of the dumped imports and the subsidised imports, and the effect of those imports on prices in the domestic market for like products, and the consequent impact of those imports on domestic producers of such products. The next step is the selection of individuals to serve on the panel, which has to be done within the next twenty days.
ICTSD reporting.