European Communities - Measures Affecting Butter Products

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European Communities - Measures Affecting Butter Products Dispute:(WT/DS72)

In June 1996, the European Communities ruled that New Zealand butter manufactured by the

AMMIX and spreadable butter‑making processes was not eligible for New Zealand’s countryspecific

tariff quota (CSTQ) for butter established by the EC’s WTO Schedule because it believed

that these butter products were not “manufactured directly from milk or cream” (one of the

conditions of the CSTQ).

The practical effect of the decision was that these two products would be levied by the EC at the

much higher out-of-quota tariff rate. New Zealand disagreed with the EC ruling. After extensive

bilateral discussions on this issue the EC confirmed that it would not alter its position. This left New

Zealand with no avenue for redress other than WTO dispute settlement.

New Zealand requested WTO consultations in March 1997. When consultations failed to resolve

the dispute, New Zealand requested an adjudicative panel which was established in November of

that year. The parties to the dispute (New Zealand and the EC) made written and oral submissions

to the Panel during 1998. Before the Panel’s Report was made public, New Zealand agreed to an

EC proposal to explore a settlement of the dispute. In February 1999, New Zealand requested a

suspension of the panel proceedings in order to allow settlement negotiations to take place.

Settlement negotiations were eventually successful, and in November 1999, New Zealand notified

the WTO that a mutually agreed solution to the dispute had been reached. As part of the

settlement, the EC has passed a regulation which clarifies that New Zealand exports of spreadable

and AMMIX butter do qualify for entry under New Zealand’s CSTQ for butter.

Source: http://www.mfat.govt.nz/Treaties-and-International-Law/02-Trade-law-and-free-tradeagreements/

0-EU-Butter.php

Foreword:

Ammix is one of the two commercial butter making processes used in New Zealand:

1. Fritz, developed from the traditional batch churning process of crystallised cream

2. in Ammix fresh milk fat is mixed with cream and salt and shock cooled to give rapid

crystallisation.

Source: http://nzic.org.nz/ChemProcesses/dairy/3B.pdf

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http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp2_e.htm

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The panel process

Here below the various stages a dispute can go through in the WTO Dispute Settlement

Mechanism.

At all stages, countries in dispute are encouraged to consult each other in order to settle “out of

court”. At all stages, the WTO director-general is available to offer his good offices, to mediate or to

help achieve a conciliation.

Steps of the WTO dispute settlement mechanism undertaken to solve the dispute WT/DS72:

“European Communities - Measures Affecting Butter Products”

1.Request for Consultations 24 March 1997

Complaint by New Zealand.

This request, dated 24 March 1997, is in respect of decisions by the EC and the United

Kingdom’s Customs and Excise Department,The Commission of the European Communities

(EC) has decided that New Zealand butter manufactured by the ANMIX butter-making

process and the spreadable butter-making is not "manufactured directly from milk or cream"

so as to be excluded from eligibility for New Zealand’s country-specific tariff quota

established by the European Communities’ WTO Schedule (annexed to General Agreement

on Tariff and Trade 1994 (theGATT1994)).

New Zealand alleges violations of Articles II, X and XI of GATT, Article 2 of the TBT

Agreement, and Article 3 of the Agreement on Import Licensing Procedures.

WTO SETTLEMENT MECHANISM: “MET”

With regular communication, dated 24 March 1997, from the Permanet Mission of New

Zealand to the Permanent Delegation of the European Commission and to the Dispute

Settlement Body (DSB), NZ requests Consultation in accordance with Article 4.4 of the DSU.

2.Request for the Establishment of a Panel 07 November1997

Request by New Zealand.

On 7 November 1997, New Zealand requested the establishment of a panel.

WTO SETTLEMENT MECHANISM: “MET”

After Consultation the WTO Dispute Settlement Mechanism contemplate the request for the

establishment of a Panel, regularely requested by NZ.

3.Constitution of the Panel Established 18 November 1997

WTO SETTLEMENT MECHANISM: “MET”

The DSB established a panel on 18 November 1997 by the second DSB meeting, as

prescibed by the WTO Dispute Settlement Mechanism.

4. Composition of the Panel 13 January 1998

Composition of the Panel was notified on 13 January 1998

WTO SETTLEMENT MECHANISM: “MET”

The parties to the dispute agreed on 13 January 1998 according to the to the WTO Dispute

Settlement Mechanis timeframe that requires the compositon to be agreed within maximum

30 days after Panel Establishment. (Christmas suspension of activity applyes).

The following Panel Composition was chosen:

Chairman: Mr. Attie Swart

Members: Mr. Robert Hudec

Ms. Claudia Orozco Jaramillo

The United States reserved its rights as a third-party to the dispute.

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5. Panel suspension of proceedings 18 February 1998

At the request of the complainants, dated 18 February 1998, the Panel agreed to suspend the

panel proceedings from 19 February 1998 until 30 March 1998, pursuant to Article 12.12 of the

DSU in order to explore whether it would be possible to reach a mutually agreed solution.

WTO SETTLEMENT MECHANISM: “MET”

During all stasges of the dispute settlement the WTO Dispute Settlement Mechanism pursue

mediation and conciliaton. The suspension of proceedings conforms to that.

6. Panel examination - not applicable

WTO SETTLEMENT MECHANISM: “NOT MET”

Normal procedure contemplate two meeting with the parties and one meeting with a third party

which is relevant to the dispute, according to Article 12 and 10 of the DSU. Those steps were not

fulfilled because of the Panel suspension of proceeding requested by NZ.

7. Interim review stage - Descriptive part of report - not applicable

Normal procedure of the WTO Dispute Settlement Mechanism contemplate these documents to be

sent to the parties for comment, but those

8. Panel Report 7 Dicember 1998

WTO SETTLEMENT MECHANISM: “NOT MET”

Due to administrative constraints, the Panel was not able to issue its report within six months. The

Panel submitted its interim report to the parties on 7 December 1998.

9. Panel suspension of proceedings 24 February 1999

On 24 February 1999, New Zealand requested the Panel to suspend its work in accordance with

Article 12.12 of the DSU until 25 March 1999 (WT/DS72/6). After that New Zealand asked for five

aditional suspension until November 1999.

WTO SETTLEMENT MECHANISM: “MET”

The suspension of proceedings conforms to the mediation and conciliation process advised at all

times during the dispute by the WTO Dispute Settlement Mechanism.

10. Mutually agreed solution 18 November 1999

In a communication dated 18 November 1999, the parties notified a mutually agreed solution to

this dispute.

The Panel tooke note of the mutually agreed solution between the parties to the dispute.

WTO SETTLEMENT MECHANISM: “MET”

The Mutually agreed solution is reached in compliance to the Article 12.7 of the DSU which

provides that "Where a settlement of the matter among the parties to the dispute has been found,

the report of the panel shall be confined to a brief description of the case and to reporting that a

solution has been reached."

11. Reporting of Mutually agreed solution 24 November 1999

Accordingly, the Panel concludes its work by reporting that a mutually agreed solution to this

dispute has been reached between the parties.

WTO SETTLEMENT MECHANISM: “MET”

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EXTRA STEP OF THE WTO DISPUTE RESOULUTION MECHANISM NOT APPLICABLE TO

DISPUTE WT/DS72:

In case a Mutually agreed solution was not met as for the case of the dispute WT/DS72 here

discussed, the WTO Dispute Settlement Mechanism would have relied on the Panel report and

allowed additional time for implementation, “Reasonable Period of TIme” (15 to 18 months).

a. Implementation : “Any Member can raise the issue of implementation at any time in the DSB.

Unless the DSB decides otherwise. The item remains on the DSB’s agenda until the issue is

resolved. At least ten days before each such DSB meeting, the Member concerned is required

to provide the DSB with a written status report of its progress in the implementation.

b. Surveillance: “The DSB must continue to keep under surveillance the implementation of the

recommendations or rulings it has adopted. This includes cases where compensation has been

provided or concessions or other obligations have been suspended but the recommendations to

bring a measure into conformity with (WTO) law have not been implemented (Article 22.8 of the

DSU).”

c. Non implementation: in case Implementation is not raised parties negotiate compensation

according to Article 22 of the DSU.

d. Retaliation: If not compensation is agreed upon, the DSU authorize retaliation when a country

does not comply with a ruling 30 days after the Reasonable Period of time Expires.

Source: www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c6s7p2_e.htm

Document released undertaking the WTO Dispute Settlement Mechanism to solve the dispute WT/

DS72 as above described:

1. Request for Consultations by New Zealand 24/03/1997

2. Request for the Establishment of a Panel by New Zealand 07/11/1997

3. Constitution of the Panel Established at the Request of New Zealand 18/11/1997

4. Note by the Secretariat 19/01/1998

5. Communication from the Chairman of the Panel 02/03/1998

6. Communication from the Chairman of the Panel 23/12/1998

7. Communication from the Chairman of the Panel 01/03/1999

8. Communication from the Chairman of the Panel - Addendum 29/03/1999

9. Communication from the Chairman of the Panel - Addendum 08/04/1999

10.Communication from the Chairman of the Panel - Addendum 18/05/1999

11. Communication from the Chairman of the Panel - Addendum 19/07/1999

12.Communication from the Chairman of the Panel - Addendum 08/10/1999

13. Notification of Mutually Agreed Solution 18/11/1999

14. Report of the Panel 24/11/1999

Source: https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=+wt/ds72/*)

&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true

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OBJECTIVES OF THE WTO DISPUTE SETTLEMENT MECHANISM

The World Trade Organization is a global institution which purpose is to ease international trade

around the World facilitating negotiations and agreements between Nations (ie regional trade

agreements, least-developed countries status).

The WTO purpose is to stimulate international growth and development while protecting stability

and promoting good governance among members and others nations.

International trade transactions involve an higer degree of uncertainty and risk than domestic

transactions. The WTO aim at reducing the risks involved in these transactions and solve disputes

that may arise in case of breach of agreements or when Goverments put into place trade measure

that violate set trade rules (i.e unfear subsidies & countervailing duties or technical barriers to

trade, regional trade agreements)

The main objective of the WTO dispute settlement mechanism is to be:

1. equitable,

2. fast,

3. effective,

4. mutually acceptable

The WTO Dispute Settlement Mechanism is a multilateral system of settling disputes that imply

abiding with set procedures and rules, and respecting judgement.The WTO’s procedure

underscores the rule of law, and it makes the trading system more secure and predictable.

Ruling is not longer’s the Nation’s ruling.The dispute can arise between two countries or more.

Also third groups of countries may declare they have an interest in the case and take part in the

process.

Source:http://www.wto.org/english/thewto_e/whatis_e/tif_e/utw_chap3_e.pdf

The fast resolution of disputes is a main goal for the WTO, in fact conciliation and mediation are

advised at all times by the DSB.

“The system is based on clearly-defined rules, with timetables for completing a case. First rulings

are made by a panel and endorsed (or rejected) by the WTO’s full membership. Appeals based on

points of law are possible.

However, the point is not to pass judgement. The priority is to settle disputes, through

consultations if possible. By January 2008, only about 136 of the 369 cases had reached the full

panel process. Most of the rest have either been notified as settled “out of court” or remain in a

prolonged consultation phase — some since 1995.”

Source:http://www.wto.org/english/thewto_e/whatis_e/tif_e/utw_chap3_e.pdf

TIMEFRAME FOR SETLEMENT PROCESS

For the WTO the faster resolution is the better.

Under GATT rules were set to solve disputes but the need for a more efficient, reliable and fast

way of solving disputes was neded. That was achieved through The WTO Dispute Settlement

Mechanism which uses a more structured process with a planned timetable and deadlines set at

different stages of the process. This more effective mechanism avoid stalls of the process and

assure a prompt settlement, minimizing the losses involved in long disputes.

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The approximate time for a dispute to settle through the WTO Dispute Settlement Mechanism

would approximately be 1 year if appeal doesn’t take place. The time increases up to 1 year and 3

moths in case of appeal. The agreed times are flexible and if a case is claimed to be urgent (ie in

case of perishable goods) the process is accelerated as much as possible.

Note: The 12 (no appeal) or 15 (appealed) months timing apply if is necessary to go through the

whole settlement process, when a Mutually Agreed Solution is not reached as advocated by the

DSU.

Source http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm

COOPERATION AND CONSULATION

Settling disputes is the responsibility of the Dispute Settlement Body which consists of all WTO

members.

First stage: consultation (up to 60 days). Before taking any other actions the countries in dispute

have to talk to each other to see if they can settle their differences by themselves. If that fails, they

can also ask the WTO director-general to mediate or try to help in any other way.

Second stage: the panel (up to 45 days for a panel to be appointed, plus 6 months for the panel to

conclude). If consultations fail, the complaining country can ask for a panel to be appointed. The

country “in the dock” can block the creation of a panel once, but when the Dispute Settlement Body

meets for a second time, the appointment can no longer be blocked (unless there is a consensus

against appointing the panel).

Source:http://www.wto.org/english/thewto_e/whatis_e/tif_e/utw_chap3_e.pdf

The Dispute Settlement Body has the sole authority to establish “panels” of experts to consider the

case, and to accept or reject the panels’ findings or the results of an appeal. It monitors the

implementation of the rulings and recommendations, and has the power to authorize retaliation

when a country does not comply with a ruling.

Panels are like tribunals. But unlike in a normal tribunal, the panellists are usually chosen in

consultation with the countries in dispute. Only if the two sides cannot agree does the WTO

director-general appoint them.

Panels consist of three (possibly five) experts from different countries who examine the evidence

and decide who is right and who is wrong. The panel’s report is passed to the Dispute Settlement

Body, which can only reject the report by consensus.

Panellists for each case can be chosen from a permanent list of well-qualified candidates, or from

elsewhere. They serve in their individual capacities. They cannot receive instructions from any

government.

Source: http://www.wto.org/english/tratop_e/dispu_e/ab_members_bio_e.htm

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• Final report: A final report is submitted to the two sides and three weeks later, it is circulated to all

WTO members. If the panel decides that the disputed trade measure does break a WTO

agreement or an obligation, it recommends that the measure be made to conform with WTO rules.

The panel may suggest how this could be done.

• The report becomes a ruling: The report becomes the Dispute Settlement Body’s ruling or

recommendation within 60 days unless a consensus rejects it. Both sides can appeal the report

(and in some cases both sides do).

RULING

The Uruguay Round agreement also made it impossible for the country losing a case to block the

adoption of the ruling. Under the previous GATT procedure, rulings could only be adopted by

consensus, meaning that a single objection could block the ruling. Now, rulings are automatically

adopted unless there is a consensus to reject a ruling — any country wanting to block a ruling has

to persuade all other WTO members (including its adversary in the case) to share its view.

Although much of the procedure does resemble a court or tribunal, the preferred solution is for the

countries concerned to discuss their problems and settle the dispute by themselves. The first stage

is therefore consultations between the governments concerned, and even when the case has

progressed to other stages, consultation and mediation are still always possible.

APPEAL AND ARBITRAL TRIBUNAL

Either side can appeal a panel’s ruling. Sometimes both sides do so. Appeals have to be based on

points of law such as legal interpretation — they cannot reexamine existing evidence or examine

new issues.

Each appeal is heard by three members of a permanent seven-member Appellate Body set up by

the Dispute Settlement Body and broadly representing the range of WTO membership. Members

of the Appellate Body have four-year terms. They have to be individuals with recognized standing

in the field of law and international trade, not affiliated with any government.

The appeal can uphold, modify or reverse the panel’s legal findings and conclusions. Normally

appeals should not last more than 60 days, with an absolute maximum of 90 days.

The Dispute Settlement Body has to accept or reject the appeals report within 30 days — and

rejection is only possible by consensus.

Source: http://www.wto.org/english/thewto_e/whatis_e/tif_e/utw_chap3_e.pdf

Even once the case has been decided, there is more to do before trade sanctions (the

conventional form of penalty) are imposed. The priority at this stage is for the losing “defendant” to

bring its policy into line with the ruling or recommendations. The dispute settlement agreement

stresses that “prompt compliance with recommendations or rulings of the DSB is essential in order

to ensure effective resolution of disputes to the benefit of all Members”.

In principle, the sanctions should be imposed in the same sector as the dispute. If this is not

practical or if it would not be effective, the sanctions can be imposed in a different sector of the

same agreement. In turn, if this is not effective or practicable and if the circumstances are serious

enough, the action can be taken under anoth- er agreement. The objective is to minimize the

chances of actions spilling over into unrelated sectors while at the same time allowing the actions

to be effective.

Source: http://www.wto.org/english/thewto_e/whatis_e/tif_e/utw_chap3_e.pdf


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