22-30 SEPTEMBER 2005 MEETINGS OF THE WTO RULES

UNCLAS SECTION 01 OF 05 GENEVA 002614

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SUBJECT: 22-30 SEPTEMBER 2005 MEETINGS OF THE WTO RULES
NEGOTIATING GROUP

SUMMARY


1. The WTO Rules Negotiating Group held three days of plenary
meetings to discuss eight papers on antidumping issues and two
papers related to fisheries subsidies. There were also
plurilateral meetings for more in-depth discussions of selected
elaborated antidumping proposals. Two U.S. papers, on causation
and on the lesser duty rule, were discussed in the meetings. The
Chairman reiterated his concern over the Group's ability to
manage the large number of antidumping proposals and emphasized
the importance of bringing greater focus to the discussions
through the use of draft texts in written proposals. The
Chairman also appointed a New Zealand delegate to serve, on an ad
hoc basis, as a facilitator in the plurilateral meeting to
discuss the U.S. causation paper. The next round of Rules
Negotiating Group meetings is scheduled for the weeks of 17 and
24 October 2005.

ANTIDUMPING AND
COUNTERVAILING MEASURES

Plenary Session

Chairman's Concern re
Number of Proposals

2. Rules Negotiating Group Chairman Guillermo Valles Galmes
began the plenary session by expressing concern over the number
and nature of the elaborated proposals received. (Note: There
is a three-step process for considering proposals. Written
negotiating proposals are introduced formally to the Negotiating
Group, elaborated for discussion in an informal plenary session,
and then, if appropriate, and at the discretion of the chairman,
more closely scrutinized in a plurilateral meeting. End note.)
Valles said he is concerned about the group's ability to manage
the large number of proposals, observing that issues were still
being raised for the first time. There were eleven elaborated
proposals for consideration at this meeting and there were many
high priority issues that have not yet been elaborated. The
negotiating group therefore was in danger of having superficial
discussions of many proposals, rather than detailed discussions
of the key issues. The Chairman urged Members to exercise
restraint by limiting proposals to address high priority issues
or issues where compromise is possible. He also said that the
discussions needed to be more focused and pragmatic, through the
use of concrete text-based proposals.

Public Interest Determination


3. Hong Kong China introduced a paper from a subset of the
Friends of Antidumping Negotiations (Friends) entitled "Further
Submission on Public Interest," (circulated as TN/RL/GEN/53).
(Note: The paper was co-sponsored by Israel, Japan, Korea,
Norway, Singapore, Switzerland, Chinese Taipei and Thailand.
Chile was not co-sponsor, but intervened orally in support of it.
Neither Japan nor Brazil said much in support of the proposal.
Brazil has privately commented that it was reluctant to adopt the
formalized procedures outlined in the proposal, even though its
Council of Ministers makes "public interest" determinations. End
note.) The proposal would require authorities to make a
determination whether the application of an anti-dumping measure
is in the "economic interest" of the Member, based upon a
specified list of factors. It also includes provisions relating
to the procedures to be applied by authorities in reaching its
determination, designed to incorporate comments of the importers,
consumers and downstream users, but not those of the domestic
industry.


4. The European Communities said a public interest determination
should be required as a contribution to "good governance." The
public interest "economic balancing" test must be limited
to analyzing the economic effects of antidumping measures,
because non-economic considerations (foreign policy,
environmental, social, etc.) could lead to discriminatory
application of measures in violation of ADA Article 9.2. The EC
registered concerns about the possible application of the WTO
Dispute Settlement system to public interest determinations, even
if the scope of such reviews were to be limited only to
procedural aspects. The United States expressed its concern that
the dispute settlement body could be asked to overrule a Member
state's determination of what it considers to be in its own
"public interest," and noted the absence of guidelines in the
proposal for assessing comments received.

Changed Circumstances Reviews


5. Japan introduced an elaborated proposal from the Friends
entitled "Proceedings under Article 11.2," circulated as
TN/RL/GEN/52. The proposal would make it easier to obtain
Article 11.2 changed circumstances reviews and would introduce
certain presumptions that would increase the likelihood that
measures would be terminated. The EC questioned the underpinning
of the proposals, by noting that the paper ignored the key issue
involved- whether the "change" in circumstances was a temporary
development, a result of the imposition of the measure, or a
permanent change justifying the revocation or modification of the
measure. The U.S. intervention focused on the proponents'
failure to take into account the different contexts involved in
original investigations and in reviews, where measures are
already in place.

Causation of Injury


6. The United States introduced its enhanced proposal, entitled
"Causation (ADA Article 3.5; ASCM Article 15.5),circulated as
TN/RL/GEN/59. The proposal would reaffirm that an authority is
not required to determine that dumped imports are the sole cause
of injury to the domestic industry, nor must it quantify nor
weigh the various factors contributing to the injury. The
authority would be required to examine known factors other than
dumped imports and provide a reasoned explanation that,
notwithstanding any other contributing factors, dumped imports
have made a material contribution to the injury or threat
thereof.


7. The U.S. proposal attracted relatively mild criticism from
the Friends, who had previously submitted a proposal that would
make the causation test much more stringent. The Friends argued
that the U.S. proposal focused on what investigating authorities
did not need to consider in making their analysis of causation of
injury, rather than on what should be considered and the standard
to be applied. Several Members asked for clarification of terms
used in the proposal, including the meaning of "weighing,"
"isolating" and "material contribution." Brazil endorsed the
general thrust of the paper, but raised several questions about
it. Australia, Canada, Egypt, India, China made generally
positive comments, but also posed specific questions. The EC was
relatively non-committal in posing questions for
clarification.

Product under Consideration
Cumulation


8. Brazil introduced two papers address interrelated topics,
"Proposal on Product under Consideration," circulated as
TN/RL/GEN/50, and "Proposal on Cumulation," circulated as
TN/RL/GEN/51. (Note: The Product under Consideration paper was
co-sponsored by Chile, Israel, Korea, Singapore, Switzerland and
Thailand; the Cumulation paper was co-sponsored only by Brazil,
Switzerland and Thailand.) Neither proposal attracted much
support or interest from the group, with several Members
questioning how an investigating authority would be able to make
a determination of the "product under consideration," as proposed
by Brazil. They noted that the kind of detailed information
about conditions of competition contemplated by Brazil for
defining product subject to an investigation is not generally
available to authorities before initiation. The United States
also noted the practical difficulty customs officials would have
in enforcing a measure based on such non-physical criteria.
Several Members also questioned why imports should be mandatorily
cumulated in determining causation of injury, and the rationale
for not cumulating imports from different investigations that are
destined for different geographical areas or at a different time.

Transparency


9. Norway presented its paper entitled "Proposal on Issues
Relating to Evidence, Public Notice and Explanation of
Determinations under Articles 6 and 12 of the ADA," circulated as
TN/RL/GEN/49. (Note: Norway privately said the proposal is
meant to address procedural deficiencies in the EC system that
became apparent during its history of antidumping investigations
of Norwegian salmon. End note.) The twelve-page Norwegian
proposal would impose stringent procedural requirements on
investigating authorities with respect to the identifying foreign
exporters and producers, obtaining information, assisting
respondents in providing information, and conducting
verifications. It would also require that reasoned explanations
be provided for non-acceptance of any information provided by
respondents.


10. The United States expressed its general support for
improving transparency in antidumping investigations and noted
that some of the items the U.S. had previously proposed were
included in the Norwegian paper. However, some of the Norwegian
proposals had been drafted without regard to the practical
constraints under which authorities operate and particular
aspects were simply unworkable. The EC said it favored
improvements in transparency, but then launched into a point-by-
point critique of Norway's proposal. They concluded by saying
that many of the items raised in the proposal were capable of
resolution in the Committee on Antidumping Practices Working
Group on Implementation, and that hours would be required to
resolve each of the items in the proposal. Some developing
countries predictably emphasized the costs and burdens for their
authorities.

U.S. Comments on
Lesser Duty Proposals


11. The United States gave a brief presentation of the paper
entitled "Further Comments on the Lesser Duty Proposals,"
circulated as TN/RL/GEN/58. The paper identifies U.S. concerns
regarding proposals, from the Friends and from India, to require
the application of the so-called "lesser duty rule." The paper
notes that the methodologies proposed for defining "margin of
injury" do not take into account the factors that the antidumping
agreement provide for defining whether or not injury exists. The
paper also raises concerns with respect to the complexity and
costs involved in requiring a lesser-duty analysis, and with the
non-transparent practices that are currently being used by some
Members that purport to apply the lesser duty rule.


12. The European Communities recognized that U.S. concerns with
respect to a mandatory lesser duty rule were serious and deserved
consideration. However, the EC has been applying the lesser duty
rule for years and has not experienced any obstacles that were
not insurmountable. The EC was willing to address the concerns
of others and wanted to make the lesser duty rule part of the
standard practice of all antidumping users. Japan, Brazil,
Chile, Hong Kong, India, Korea, Turkey, and Peru expressed
support for making the application of the lesser duty rule
mandatory. Indonesia, Argentina and Egypt expressed reservations
about making the application of the lesser duty rule mandatory.
Thailand suggested the possibility of allowing Members to apply
different lesser duty methodologies, as long as the methods
applied were transparent and predictable.


13. During the discussion, several proponents acknowledged that
the "margin of injury" they were advocating as a limit to the
applied antidumping duty bore no relationship to the overall
injury being suffered by the domestic industry. In response, the
United States replied that if the "injury margin" does not in
fact address actual injury, then the application of the lesser
duty rule is really industrial policy to regulate imports and
would not appear to meet the requirement, under Article 9.1 of
the Antidumping Agreement, that the lesser duty "would be
adequate to remove the injury to the domestic industry."

Sunset Review


14. Canada introduced its paper, entitled "Sunset Reviews,"
circulated as TN/RL/GEN/61. The Canadian proposal calls for
procedural changes in the conduct of sunset reviews, rather than
the imposition of a mandatory revocation after a stated period.
(Note: The Friends have advocated mandatory revocation after
five years. End note.) The EC supported the proposal, although
it acknowledged that it might have some problems with particular
details. The EC expressed concern that other Members have been
renewing antidumping orders automatically, against the spirit of
the antidumping agreement. Several other Members, including the
United States and Thailand, expressed general support for the
paper and posed some technical questions. Some Friends recalled
their joint proposal for the automatic revocation of orders after
5 years. Brazil posed a technical question about the Canadian
proposal, without referring back to the Friends' proposal for
automatic revocation.

Plurilateral Sessions


15. Plurilateral meetings were held for more detailed and
focused technical discussions of the U.S. paper on causation and
the Friends' papers on changed circumstances reviews, public
interest and sampling. Prior to the discussion of the U.S. paper
on causation, Rules Group Chairman Valles recalled his desire to
focus better the discussions in the plurilaterals meetings, by
limiting discussions in the sessions to specific proposed texts.
He announced his intention to ask some participants, in their
personal capacities as "friends of the chair," to facilitate the
discussions. The facilitators would be nominated on an ad hoc
basis for particular issues, in consideration of the technical
complexity of the subject and the need to retain balance. The
nomination of a facilitator to assist on a topic is not meant to
impart any particular status to the issue under discussion. The
Chairman then named Bruce Cullen, a New Zealand delegate, acting
as a "friend of the chair," to facilitate the discussion of the
U.S. paper on causation. The Chairman also noted that he
intended to "vary the geometry of the participation in the
discussions." (Note: The plurilateral meeting to discuss the
U.S. causation paper was attended by the United States, EC,
Canada, Australia, New Zealand, Japan, Hong Kong China, Brazil,
Korea, Argentina, India, Egypt and China. End note.)

FISHERIES SUBSIDIES

Aquaculture


16. The Negotiating Group had a plenary meeting to resume its
discussion of a paper from Australia, New Zealand and Ecuador
entitled "Contribution to the Discussion on the Framework for
Disciplines on Fisheries Subsidies - Aquaculture," circulated as
TN/RL/GEN/54 (1 July 2005). New Zealand re-introduced the paper
by observing that the Group's July discussion as reflecting
Members' views that aquaculture would not be expressly covered in
strengthened disciplines, both because current rules were
adequate to address it and strengthened rules on wild fisheries
would discipline the areas where there was a potential link
between wild and farmed fisheries (e.g., use of wild fish as
feedstock for fish farms). New Zealand, however, emphasized the
growing importance of the sector and cautioned that Members
should not lose sight of the possibility of circumvention of
strengthen rules on wild fisheries through a shifting of
subsidies to aquaculture. The EC expressed agreement with the
sense of the room that aquaculture was not the target of new
disciplines and that its consideration would further complicate
the negotiations. China and India intervened briefly to reaffirm
their view that aquaculture should not be included.

Architecture of Disciplines


17. Solomon Islands introduced a paper entitled "Architecture on
Fisheries Subsidies Disciplines," circulated as
TN/RL/GEN/57/Rev.2 (13 September 2005) on behalf of Members
characterizing themselves as "small vulnerable coastal states."
(The paper was co-sponsored by Antigua and Barbuda, Barbados, the
Dominican Republic, Fiji, Grenada, Guyana, Jamaica, Papua New
Guinea, St. Kitts and Nevis, St. Lucia, the Solomon Islands, and
Trinidad and Tobago. End note.) The paper describes the
dependency of these countries on foreign aid and argues that
several types of programs should be carved out from new
disciplines: (1) development assistance; (2) assistance to
artisanal or small scale fisheries; (3) access fees through
fisheries access agreements; and (4) fiscal incentives to
facilitate development of these Members' coastal fisheries (such
as support for processing facilities). The Solomon Islands
called for an express footnote to Article 1 of the SCM Agreement
to exclude development assistance from the definition of subsidy.
While the co-sponsors expressed neutrality as between the "top
down" and "bottom up" approaches, so long as they were exempted,
their interventions - even more than the paper itself -
emphasized several themes associated with the bottom up
(Japanese) approach: skepticism about the use of the traffic
light approach and the WTO's competence to fashion new
disciplines.


18. A number of delegations were active in the discussion that
followed, including India, Sri Lanka, Mauritius, Thailand and
Turkey. They essentially called for special and differential
treatment (S&D) provisions that would exclude them from
strengthened disciplines, although some (Thailand, Turkey)
indicated that these provisions should be part of overall
strengthened disciplines. Several delegations, including Peru
and Chile (Friends of Fish),raised concerns with the co-
sponsors' apparent press for creating a new category of
developing countries while other Members, most notably Korea,
urged that any S&D treatment only be granted to small economies
that are "too small to have an impact on fish stocks." Chinese
Taipei noted that the top down approach would rule out the
possibility of any flexibility ("policy space") for developing
countries to develop their fisheries in the future. Japan also
argued that the concerns of the co-sponsors could best be
addressed by the bottom up approach and emphasized aspects of the
paper that supported its position, e.g., the statement that
subsidies were not harmful if given in a sustainably managed
fishery.


19. Brazil stated that two aspects of the paper were consistent
with its position: the importance of conservation measures and
the ability for developing countries to develop their fisheries.
New Zealand stressed that the top down approach provided ample
flexibility to address the co-sponsors' concerns and expressly
stated that development assistance and access payments should be
exceptions to new disciplines. In an important caveat, New
Zealand stressed that the country receiving an access payment was
not the focus of these negotiations; rather, the concern was with
the country providing the payment and only if it did not recover
the cost of the payments from its industry that benefits from the
access. New Zealand also made the point that de minimis
provisions need further exploration - a point that the US and
others have begun to contemplate as a way to focus the
negotiations.


20. The European Community said Members needed to "minimize the
intrusiveness of strengthened disciplines," in addition to S&D
provisions, adding that it was "terrible" that the co-sponsors
would have to come to Geneva to justify their subsidies. The EC
also suggested that a discussion of S&D treatment should not wait
until after the general strengthened disciplines are identified.
[COMMENT: This intervention appeared to align the EC more closely
with the Japanese/Korean position than in previous meetings.] The
United States stated that the top down approach could address the
concerns raised by the co-sponsors and emphasized the progress
the negotiations had made, taking note of the technical work on
specific fisheries categories and Brazil's contribution.


21. There was reconfirmation in the room that special and
differential treatment is a critical element of strengthened
disciplines and that the co-sponsors, as small economies, would
likely be accorded such treatment. There was concern, however,
about the interpretation of what is meant by small-scale and
artisanal fisheries. At the request of some of the paper's co-
sponsors, the Secretariat will prepare a compilation of
definitions of artisanal and small-scale fisheries used in
various fora. Shark