10:19 AM Jul 16, 1996

US AVOIDS WTO ADJUDICATION OF ITS S.301 LAWS

Geneva 15 July (Chakravarthi Raghavan) -- The United States appears to have withdrawn punitive tariffs it had imposed against some $100 million worth of imports from the European Union as a unilateral trade sanctions under S. 301 of US trade law over the EU ban on imports of bovine growth hormone treated beef.

The US action, of which no official confirmation was available, came Monday even as the World Trade Organization's Dispute Settlement Body (DSB) was due to hear an EU request for a panel to look into these unilateral sanctions.

In advising the DSB of this latest information about the rescinding of the punitive tariffs, the EU sought a 24-hour suspension of the DSB to enable the EU to get confirmation and decide on its course of action.

The United States did not confirm the EU information, but did not object to the EU request either.

Trade observers however suggested that the US action is in line with its overall tactics and policy of ensuring that its unilateral actions do not come up for adjudication at the WTO and be declared illegal.

The United States has found it is more useful to preserve on its statute books a measure that provides it leverage in bilateral negotiations by threatening action, rather than the action itself.

Its general S. 301 tactic has been to threaten or initiate S.301 investigations against any trade partner, announce a large list of products (worth several times in value of the trade damage the US is supposed to have suffered) imported from the country against which it is initiating the investigation and say that the list of products to be hit would be chosen from among these large list of products.

This generally sets up a process in the trade partner where every enterprise with an export interest in the US market move their trade ministries to find a compromise.

As a result the US gains its point through a compromise, where the trade partner wants to avoid or reduce the trade insecurity caused, and the United States gains its point.

The WTO dispute settlement processes so far have dealt with disputes only in terms of trade actions actually taken, not of those that threatened and thus causing general trade insecurity.

The US dispute with the EU over ban on hormone treated beef (a ban which the EU applies domestically on beef production inside the EU too) goes back to the mid-1980s. The EU planned the move, by a notification in Dec 1987, but this was actually approved by the Council of Ministers and became effective a year later.

The US then acted in retaliation.

But when the WTO came into being, and with it the Agriculture and that on Sanitary and Phytosanitary agreements, the US renewed its efforts to get the ban removed, citing US and other "scientific opinion" that any adverse effect on humans by consuming such bovine hormone treated animals has not been proved. But the EU took its stand on the basis of the preferences and demands of its consumers, and the argument that if it did not act the entire beef consumption would have been affected.

The US and several other beef-exporting countries have already got a panel established to look into the EU's ban which they say is not backed by scientific opinion as demanded by the WTO Uruguay Round agreements.

The EU then countered with a demand for a panel to look into the US unilateral actions, and this came up Monday before the DSB.

The EU told the DSB that early Monday morning, according to information received by it, the US has rescinded the application of its increased duties on imports from the EU, but was awaiting confirmation. The EU meanwhile sought suspension of the DSB meeting, and its consideration of the panel request, to enable the EU to assess its position.

The US, did not confirm or comment on the rescinding of the tariffs, but did not object to the EU request.

Earlier, the US sought the establishment of a panel over alleged violation by Pakistan to provide the "pipeline protection" for pharmaceutical and agricultural chemical products under Art 70.8 of the TRIPs agreement.

With Pakistan not agreeing to this, the US request is to come up at the next meeting of the DSB, when under the dispute settlement rules, a panel is automatic.

The TRIPs agreement, under Art. 65, developing country 'A', currently only providing for process patent, and not a product patent for any area of technology, has time till 2005 to do so and comply with the TRIPs requirement for process and product patents in all areas of technology. Under Art. 70.8, such a country is to set up a process to receive such applications for product patent, but keep pending a determination of whether to grant patent or not until the period allowed for its compliance with the accord under Art.65. In the meantime, under 70.9 a rights holder of a new product patent, which has secured a patent and permission to market it in a WTO member, is to get exclusive import and marketing rights for the product in country 'A'.

The US had formally sought consultations with Pakistan in April under the DSU and Art XXII of the GATT, and claiming failure, has sought a panel now.

The US has invoked similar formal consultation process with India in July.

In responding to the US request for panel at the DSB, Pakistan's Munir Ahmad said the US had sought consultations and Pakistan had responded positively, inviting the US to hold consultations in Islamabad in the third week of June. Pakistan had done so in view of the financial difficulties involved in bringing its responsible officials to Geneva, as well as preoccupation of officials in preparations for the annual budget and trade policy.

The US, Munir Ahmad said, did not accept this, but insisted on consultations in Geneva within 30 days of its request, and these consultations had been held on 30 May, with the EU joining in it as an interested party.

During the consultations Pakistan had assured the US of its commitment to fulfil its obligations under the TRIPs, and a bill to amend the patent and trade marks law to provide for a "mailbox system" to receive such applications had been introduced in Parliament and was expected to become law soon.

But the US had presented Pakistan, during the consultations, with a series of questions "not directly germane to the issue". These questions included question about when Pakistan expected to provide product patent to pharmaceutical and agricultural chemical products (where Pakistan has ten years to implement the requirement) as also on other areas of the TRIPs agreement where Pakistan has three years to implement.

Nevertheless, Pakistan had responded to the US concerns positively and in good faith, and repeated its assurances that the amending legislation would be enacted after the completion of the parliamentary process.

But three days after this, the US had sought a panel. Pakistan, Munir Ahmad said, was thus disappointed with the US decision to request a panel and wondered whether "it is a most fruitful recourse to procedures of the DSU".