PANELS TO ADJUDICATE TWO DISPUTES IN GATT.

Mar 14, 1985

PANELS TO ADJUDICATE TWO DISPUTES IN GATT.

GENEVA, MARCH 12 (IFDA/CHAKRAVARTHI RAGHAVAN)— The GATT Council Tuesday agreed to name panels in respect of two disputes, one between Canada and the U.S.A., and the other between the European Community and Canada.

The Canadian-U.S. dispute referred to U.S. quantitative restrictions, announced in January, against imports of certain products containing sugar - like sweet cocoa, pancake flour and other flour mixes, frozen cakes, croissants, etc.

While agreeing to a panel, the U.S. however justified its actions as entirely within the ambit of the permanent waiver secured by it in the 1950's, in respect of the U.S. agricultural adjustment act, from its GATT obligations.

The EEC complaint against Canada related to the actions of its provincial liquor boards that impose sale prices and other restrictions on imported alcoholic beverages, on the ground these violated Canadian obligations under article two (bound tariff schedules) and article three (equal treatment for domestic and imported products).

The Canadian representative told the Council that the federal authorities had already taken up the issue with provincial authorities to find a solution, but that they would not object to the formation of a panel.

A contentious issue before the Council, and on which no decision could be reached and the subject was postponed to a future meeting, was over the U.S. complaints about the Community's preferential trading arrangements with Mediterranean countries and its effect on U.S. exports of citrus fruits and products.

The dispute goes back to 1982, and resulted in a panel being formed and reporting on it.

In a lengthy report, the panel side-stepped the issue of validity or otherwise of the EEC’s preferential arrangements, but took a view based solely on an appreciation of commercial damage, if any, to the U.S.

The panel found that only in the cases of fresh oranges and lemons, the U.S. had suffered commercial damage because of the preferential duty favouring the Mediterranean countries (Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Spain, Tunisia and Turkey).

The EEC was asked to limit the adverse effects to the U.S. by reducing the most-favoured-nation tariff applied by the Community to the products.

The U.S., noting that the panel had not dealt with the legal issues of conformity of the EEC preferential arrangements with GATT obligations, had given a finding based on purely commercial damage. The Community thus should have no objection to adopting the report.

The EEC however strongly opposed the panel's finding, underlining that its stand was not based on the impact on the EEC, but on the implications in respect of customs unions or free trade arrangements governed by article XXIV of GATT, as also the provisions under chapter four of GATT for special and preferential arrangements to be granted by industrial countries in favour of the Third World.

After considerable exchanges between the U.S. and EEC, and with a number of countries (mainly those having one kind or another of preferential arrangements with the EEC) supporting the Community view, and others for adoption of the panel report, the Council put off further consideration to the next meeting.

This was on the view of Austria and some others that the issues raised went beyond commercial damages between U.S. and EEC, an raised some fundamental GATT issues that had to be carefully considered.

Another controversial panel report before the Council, also relating to an U.S.-EEC dispute, was on EEC aids given to domestic production of some canned fruit products and dried grapes.

The panel found EEC aids to have nullified tariff preferences given to U.S. in 1974 for some of these products and in 1979 for others, and recommended that the EEC take actions to restore competitiveness of U.S. products with the EEC domestic production.

The panel found no injury or impairment to the U.S. in respect of dried grapes.

The U.S. itself wanted consideration of the report put off to the next meeting.

On Japanese restrictions on imports of certain semi-finished and finished leather products, where a panel had ruled against Japan and had recommended removal of restrictions over a period of time, Japan reported on measures being taken in respect of some of the semi-finished items, but could not indicate actions to be taken on finished products.

The U.S. had been the original complainant, and has been pressing for Japanese actions, stressing that while it understood, Japan’s problems in this area, it was also a sensitive issue in the U.S.

A number of other countries, including the EEC, the Nordics, Australia, New Zealand, Pakistan, Yugoslavia, India, Brazil and Egypt also expressed dissatisfaction with the pace of liberalisation and compliance with the panel report by Japan.

The EEC and Canada are to hold bilateral consultations over continued Canadian safeguard actions against certain footwear imports.

The Community had complained over impairment of its rights, and has notified GATT of its intention to withdraw some concessions from Canada, in respect of about 20 products (mainly chemicals, but also paper products, motor vehicle radios, etc.) to compensate for loss of benefits in Canada.

Questioning the EEC claims that its damage amounted to about 58 million Canadian dollars, Canada has said it would seek Council's disapproval of the proposed EEC retaliation.

Pending the outcome of the bilateral consultations, the EEC is expected not to enforce the retaliation.

A number of Third World countries, including Hong Kong, South Korea and India, however noted that the Canadian restrictions had been in force for eight years now, while the safeguard actions envisaged under XIX were intended to be strictly emergency actions to meet emergency situations and thus time-bound.