Ref. Ares(2014)204417-29/01/2014 In the World Trade Organization PERU ADDITIONAL DUTY ON IMPORTS OF CERTAIN AGRICULTURAL PRODUCTS 's Responses to the Questions from the Panel Geneva, 29 January2014
TABLE OF CONTENTS QUESTION 1... 1 QUESTION 2... 1 QUESTION 3... 2 QUESTION 4... 2 QUESTION 5... 3 QUESTION 6... 3 QUESTION 7... 3 QUESTION 8... 4 -i-
TABLE OF CASES Short Title Chile Price Band System EC Bananas III US Gasoline US Tuna II (Mexico) Full Case Title and Citation Appellate Body Report, Chile Price Band System and Safeguard Measures Relating to, WT/DS207/AB/R, adopted 23 October 2002, DSR 2002:VIII, p. 3045 (Corr.1, DSR 2006:XII, p. 5473) Appellate Body Report, European Communities Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, p. 591 Appellate Body Report, United States Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, p. 3 Appellate Body Report, United States Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/DS381/AB/R, adopted 13 June 2012 -ii-
Question 1 (To Third Parties) What is the relevance to this case of the Free Trade Agreement concluded between Peru and Guatemala? How relevant is it that the Agreement has not yet entered into force? What effects would the entry into force of the Agreement have? 1. The EU respectfully points to paragraphs 11-19 of its third party written submission. The Peru-Guatemala Free Trade Agreement (PGFTA) may be relevant to this case to the extent it contains a clear commitment on behalf of Guatemala in respect of non-challenging the Peruvian price band system (PBS) in the WTO. 2. The EU does not believe that any possibility of an FTA waiving WTO dispute settlement rights should be a priori dismissed. It should rather be a case-by-case analysis. Some FTAs address a broad range of issues and thus each case requires a separate analysis. 3. Finally, the EU recalls that the Appellate Body has made it clear from the very Question 2 beginning that the WTO Agreements should not be read in clinical isolation from public international law. 1 In this respect, the EU notes that subsequent agreements between the parties (either contained in a mutually agreed solution under DSU rules or in any other document having a binding nature under international rules) as well as rules of international public law are relevant for the interpretation of the covered agreements, according to Articles 31(3)(b) and 31(3)(c) of the VCLT. Thus, an FTA may be relevant to interpret the scope of the obligations of the Parties at issue. This should not be confused with the application of an FTA instead of, or with primacy over, a WTO agreement. (To Third Parties) What is the relevance to this case of Article 18 of the Vienna Convention on the Law of Treaties? 4. Article 18 of the Vienna Convention on the law of Treaties (VCLT) is an expression of the good faith principle. According to this principle the parties 1 Appellate Body Report, US Gasoline, p. 17. -1-
should refrain from a conduct which would defeat the object and purpose of a Treaty before its entry into force. 5. Article 18 of the VCLT may be relevant to the present case to the extent to which Question 3 the PGFTA contains a clear commitment on behalf of Guatemala in respect of non-challenging the Peruvian PBS in the WTO. (To Third Parties) What is the scope of the obligations arising from Article 3.7 and 3.10 of the DSU? What role can the theory of abuse of rights play in the scope of the obligations set forth in those paragraphs? 6. WTO Members must exercise their judgement as to whether action under these procedures would be fruitful, by virtue of Article 3.7 of the DSU. 7. Article 3.10 of the DSU refers to Members engaging in WTO dispute settlement proceedings in good faith. The concept of good faith in Article 3.10 is informed by good faith as a general principle of law and a principle of customary international law. The principle of good faith can be invoked by itself in WTO proceedings and not only as an add-on to the violation of another WTO rule. 2 8. The doctrine of abuse of rights forbids a Member from exercising a right for an end different from that for which the right was created. The aim of the dispute settlement mechanism is to secure a positive solution to a dispute. The initiation of a WTO case by one Member against another Member may be regarded as abusive, for instance, when it is done solely as a response to a previous case brought by the latter. Question 4 (To Third Parties) Please compare the price band systems that were the subject of Panel and Appellate Body findings in the original proceedings and the compliance proceedings in DS207 (Chile Price Band System) with the price band system in the current proceedings. In your view, is Guatemala's comparison of the two different systems in paragraph 3.85 of its first written submission (page 34) correct? How is this relevant to the current dispute? 9. The EU does not take position on the specific facts of this case. 2 Appellate Body Report, EC Bananas III, paras 223-28. -2-
Question 5 (To Third Parties) If the price band system in the current proceedings has the effect of isolating the Peruvian domestic market from international prices, how relevant is that to the analysis of the case? 10. The EU respectfully draws the attention of the Panel to paragraphs 49-50 of its third party written submission and to paragraphs 15-17 of its third party oral statement. This is one of the main features differentiating an ordinary customs duty from the measures described in footnote 1 to the Agreement on Agriculture. Question 6 (To Third Parties) In the case of the products subject to the price band system, to what extent is it possible, in your opinion, for traders to predict the final amount of duties they will have to pay (including possible additional duties plus the ad valorem duties) before selling or exporting to Peru? 11. The EU does not take position on the specific facts of this case. Question 7 (To Third Parties) Regarding Guatemala's claims under Article 4.2 of the Agreement on Agriculture and under the second sentence of Article II:1(b) of the GATT, what is your view on the order in which the Panel should examine these two claims? If it begins the analysis with Article 4.2 of the Agreement on Agriculture, should the Panel start by examining whether the measure constitutes variable import levies, minimum import prices or similar measures, or by examining whether the measure constitutes ordinary customs duties? 12. The EU makes reference to paragraphs 20-23 of its third party written submission and paragraphs 2-14 of its third party oral statement. For the reasons already explained in detail the EU considers that the Panel should start its analysis with the concept of ordinary customs duties and consequently under Article II:1(b) of the GATT 1994. This approach is different from the one advocated by other participants because it presents the advantages of a position that has as a starting point a presumption that measures are in principle WTO compatible unless otherwise proven. 13. In any event, the EU draws the attention to the Panel that whichever order of analysis it may chose, given the absence of remand authority under the DSU, -3-
judicial economy may not be appropriate if not allowing the Appellate Body to complete the analysis in the case of an appeal. 3 Question 8 (To Third Parties) Please give your opinion regarding the statements made by the in its written submission (paragraphs 49-50) and in its oral statement (paragraph 17) that "a variable import levy system has a very particular trade effect, which is preventing price competition on all imports. Traditionally, variable import levy systems attempt to equalise the import price of all goods by imposing an extra charge or levy on import values". Could the please explain the legal basis for this statement? 14. A variable import levy system is one of the measures in the inclusive category in footnote 1 to the Agreement on Agriculture. The EU would like to recall the findings of the Appellate Body in Chile Price Band System: Before looking at these categories of measures, we note that all of the border measures listed in footnote 1 have in common the object and effect of restricting the volumes, and distorting the prices, of imports of agricultural products in ways different from the ways that ordinary customs duties do. Moreover, all of these measures have in common also that they disconnect domestic prices from international price developments, and thus impede the transmission of world market prices to the domestic market. 4 15. Thus, the Appellate Body observed that the price distortion caused by the measures listed in footnote 1 is different from the price distortion caused by ordinary customs duties. While the former impedes the transmission of world market prices to the domestic prices by equalising all import prices through an additional charge on import values, ordinary customs duties are imposed on import values which may be different depending on the cost structure of each producer/seller and, thus, compete among each other. 5 In addition, ordinary 3 4 5 Appellate Body Report, US Tuna II (Mexico), para. 405 ( Moreover, in our view, the Panel should have made additional findings under the GATT 1994 in the event that the Appellate Body were to disagree with its view that the measure at issue is a technical regulation within the meaning of the TBT Agreement. As a result, it would have been necessary for the Panel to address Mexico's claims under the GATT 1994 given that the Panel found no violation under Article 2.1 of the TBT Agreement. By failing to do so, the Panel engaged, in our view, in an exercise of false judicial economy and acted inconsistently with its obligations under Article 11 of the DSU ). Appellate Body Report, Chile Price Band System, para. 227. To illustrate this with an example: in a variable import levy system, imports from country A with an import value of 100, imports from country B with an import value of 75 and imports from country C with an import value of 50 will bear a different levy to match a reference price (e.g. 100). Country B and C will pay 25 and 50 respectively whereas country A will pay nothing. This -4-
customs duties, depending on the level of binding, permit, at least potentially, price competition between imports and domestic products. 16. Further, the EU refers to Articles 5.1(b), 5.2 and 5.5 of the Agreement on Agriculture as relevant context to interpret the scope of the measures listed in footnote 1. Article 5 permits the imposition of a temporary special safeguard clause, permitting the causation of the trade effects which were envisaged to be eliminated in accordance with Article 4.2 of the Agreement of Agriculture. In particular, Article 5.5 permits the imposition of an additional duty which increases with the value of the imports, thereby equalising import values. 17. Finally, the EU refers the Panel to the following documents where the effects of variable import levy systems were discussed: GATT Contracting Parties, Nineteenth Session, SUMMARY RECORD OF THE EIGHTH MEETING, Held at the Palais des Nations, Geneva, on Monday, 4 December. at 2.30 p.m., SR.19/8, 14 December 1961; 6 and GATT Group on Cereals, SUMMARY OF DISCUSSIONS ON 12-16 FEBRUARY 1962, CG/1, 20 June 1962. 7 6 7 nullifies price competition among them. In contrast, if the ordinary customs duty is 10% ad valorem, each country will pay accordingly and would be able to compete in prices. In particular, p. 118 ("[T]hese levies could have the effect of adjusting the price of imports so that either it would be impossible for the products of outside suppliers to enter the country applying such levies or, alternatively, that the competitive advantage that imports might otherwise have had would be wholly or substantially lost. The variable levy could be a barrier which no imports could surmount, and, the more strenuous the efforts to surmount it, the more effective the barrier could become"). In particular, p. 9 ("The system was intended only to equalize prices so that the prices of the imported product sold on the EEC market would be at the same level as that of the domestic product"). -5-