Bridges Weekly Trade News Digest • Volume 7 • Number 30 • 4th September 2003
DSB Update: Lumber, Quarantine Laws, Biotech And Sugar
Both the US and Canada recently claimed victory in a dispute over US import duties on Canadian softwood lumber. In the latest of series of rulings under the WTO dispute settlement body (DSB), a panel ruled that logging fees set by Canadian provincial governments constituted a "financial contribution" to the Canadian lumber industry (see also BRIDGES Weekly, 15 May 2003 and BRIDGES Weekly, 28 May 2003). The panel’s ruling implies that under WTO law, the provincial stumpage fees were a government subsidy.
Richard Mills, spokesperson for the US Trade Representative’s Office, termed the ruling as a victory for both the US lumber industry and the environment, saying that the ruling touched on the most important aspect of the case. John Allan, president of the British Columbia Lumber Trade Council considered it a win for Canada, because the WTO panel agreed that cross-border comparisons for calculating subsidies "are invalid under international trade rules" and urged Washington to change its method for calculating the countervailing duties imposed in the case to conform with international law.
The US had slapped permanent anti-subsidy and anti-dumping duties of 27.2 percent on Canadian softwood. Canada sells about US$ 6 billion of spruce, pine and other softwood lumber to the US, which accounts for about one-third of the US market for construction timber. Ottawa has challenged the duties as illegal under both the WTO and the North American Free Trade Agreement. Mills declared that "there is no longer any question that the US can impose countervailing duties against softwood lumber exports from Canada," adding that the argument now is over the size of the fine. He further stated the US would review the entire decision before determining whether to appeal the points it lost.
Australian quarantine laws sparks EC request for WTO panel
The DSB meeting on 29 August also saw the EC requesting a panel to rule on the legality of Australian quarantine measures, which have been applied to a large number of EC agricultural products. While Australia maintains that these measures are in place to protect its citizens from potential exposure to plant and animal diseases, the EC considers them inappropriate and without scientific justification. According to the EC, pork exports have been especially targeted. The EC request follows three months of formal bilateral consultations, the first stage in the dispute settlement process. The talks were unsuccessful, prompting the EC request. EC Trade Commissioner Pascal Lamy stated that the EC would "continue to use WTO procedures to ensure that Australia lives up to its legal obligations and to its own rhetoric on open trade in agriculture". Australia — a member of the Cairns group of agriculture exporters — is a vocal advocate of agricultural trade liberalisation, and critical of EC farm protectionism.
The same DSB meeting also saw the establishment of a WTO panel following a request by the Philippines on Australian measures affecting its imports of fruits and vegetables (see BRIDGES Weekly, 17 July 2003). China, the EC, Ecuador, India, Thailand and the US reserved their third-party rights. Two other panels were set up on ‘high profile’ cases. The first was in response to complaints from the US, Canada and Argentina to examine the legality of the EC’s policy over imports of genetically modified (GM) foods. On the second request of the US, the panel was established at the 29 August DSB meeting (see BRIDGES Weekly, 21 August 2003).
The second panel was established to address complaints from Australia, Brazil and Thailand over EC subsidies to sugar producers, which the complainants contend are unfair and keep out competitive sugar producers from export markets. The EC had blocked an earlier request for the establishment of a panel on 21 July (see BRIDGES Weekly, 28 July 2003 and BRIDGES Weekly, 17 July 2003 ).
ICTSD reporting; "EU Asks WTO to Examine Australia’s Quarantine Regime on Farm Products, "WTO REPORTER, 3 September 2003; "US, Canada say WTO lumber ruling a victory," REUTERS, 29 August 2003; "WTO Panel To Rule On EU Biotech Import Ban, Sugar Subsidy," AP, 29 August 2003.