Disputes Roundup: Compliance Panels Rule in US-Mexico Tuna Case, AB Vacancies Persist

2 November 2017

The past weeks have seen a series of developments in WTO dispute settlement, including the issuing of compliance reports in the ongoing US-Mexico row over “dolphin-safe” tuna labelling requirements (DS381) and Qatar’s request for a panel in a separate dispute against the United Arab Emirates (UAE) (DS526).

Meanwhile, WTO members remain divided over starting the selection process for filling empty seats on the organisation’s Appellate Body, which serves as the highest global trade court, even as the prospect of additional vacancies looms.

Tuna dispute: Panel finds US compliance, Mexico to appeal ruling

Two WTO compliance panels (DS381) found last week that changes the US made last year to its “dolphin-safe” tuna labelling requirements were “calibrated to the differences in the overall risks to dolphins arising from the use of different fishing methods in different areas of the ocean.”

Therefore, the panels ruled that the distinctions made by the US law between “setting” on dolphins and other fishing methods are justifiable under the WTO rules. Setting refers to the use of “purse-seine” nets, which initially set on dolphins to catch the tuna swimming below.

The US and Mexico have sparred over the dolphin-safe labelling policy for years, with the case making its way through the WTO legal system. The Appellate Body said five years ago that the original policy violated global trade rules in discriminating against imported Mexican tuna products, and would therefore need to be brought into compliance. (See Bridges Weekly, 16 May 2012)

The global trade court said that while the original version of the policy did address the harms dolphins may face from this type of fishing method, used by Mexican fishers in the Eastern Tropical Pacific (ETP), it failed to account for possible dolphin deaths that could be caused from other tuna fishing methods or in other geographical regions.

While the US made changes to the policy in 2013, adjudicators said that the revisions were not enough to address the WTO-illegal aspects. (See Bridges Weekly, 26 November 2015)

In early 2016, Mexico asked for approval to suspend “tariff concessions and other related obligations” in goods trade against the US, with a WTO arbitrator confirming earlier this year that the level of suspension wold be permitted up to US$163.23 million annually. (See Bridges Weekly, 27 April 2017)

In parallel, the US and Mexico each asked for panels to review whether more recent changes to the US policy, made over a year ago, were enough to address the WTO-illegal elements. Both panels, which featured the same adjudicators, said that overall the “risk profile” of setting on dolphins is far greater than that of the other fishing methods reviewed – such as purse seine fishing without setting, gillnet fishing, trawl, longline fishing, pole and line, and hardline fishing.

Under the 2016 version of the tuna measure, fishing methods other than setting are eligible for “dolphin-safe” labels so long as it can be certified that dolphins are not seriously hurt or killed in the process, and that no equipment was used intentionally to encircle dolphins in the efforts to catch tuna. The eligibility criteria are enforced through certification, tracking and verification requirements, among other methods.

Looking at the tuna policy as a whole, the panels said that it addresses the varying risks posed by different fishing methods – therefore not contravening global trade rules.

Washington welcomed the panels’ findings, with  US Trade Representative Robert Lighthizer stating that “WTO panels have finally agreed with the overwhelming evidence that US dolphin-safe labeling requirements are accurate and fair.”

For its part, Mexico indicated its plans to appeal the result. It has not yet used the authorisation granted to suspend concessions, which it would have to drop should WTO adjudicators definitely find that the 2016 version of the US policy is in line with trade rules.

Qatar pushes forward “economic isolation” dispute with UAE

Meanwhile, questions over the use of national security justifications in a dispute brought to the WTO came up during a meeting of the Dispute Settlement Body (DSB) last week, when Qatar requested the establishment of a panel (DS526) to hear its complaint against the United Arab Emirates concerning the latter’s “measures taken in the context of coercive attempts at economic isolation imposed by the UAE against Qatar.”

In late July, Qatar filed three cases respectively against the United Arab Emirates, Bahrain (DS527), and Saudi Arabia (DS528), alleging that those countries had adopted measures affecting trade in goods, services, and trade-related aspects of intellectual property rights.

Those complaints came shortly after the three Gulf states cut diplomatic ties to Qatar over “national security” concerns tied to the country’s alleged support to terrorist groups, including closing off transport, expelling Qatari citizens, and recalling their own.

In the months since, Qatar has also raised the subject through UN channels, including through a complaint to the UN’s civil aviation body, the International Civil Aviation Organization (ICAO), regarding the move to close the Gulf countries’ airspace to Qatari flights.

In its WTO claims, Qatar listed among the closure of maritime and land borders, the airspace ban, the blocking of access to Qatari websites and audio-visual channels, and the suspension of handling Qatari-related international mail. Qatar also raised intellectual property concerns in this respect.

Qatar said that United Arab Emirates, Bahrain, and Saudi Arabia had prohibited or restricted goods trade “originating in, transiting through, towards or from, or destined for Qatar,” in violation of the WTO’s rules on non-discrimination, freedom of transit, quantitative restrictions, and administering trade regulations.

It also raised market access concerns with regards to the blocking of Qatari services, and further argued that the three nations have also failed to protect intellectual property rights enjoyed by the country’s citizens, as required by WTO rules.

In the panel request, Qatar pointed out that the UAE had rejected dispute consultations with Qatar. Qatar therefore asked that a panel examine the matter.

The UAE, Bahrain, Saudi Arabia, and Egypt all argued that WTO rules allow for measures taken for protecting national security, and by their nature, those issues fall outside of the scope of the global trade body’s jurisdiction, according to a Geneva trade official.

Despite not being a complainant or a respondent, the US noted that “issues of national security are political,” and also suggested that the issue be addressed in another forum or at least outside the formal dispute system.

Following the UAE’s objection, the first panel request was blocked.

Appellate Body impasse

Meanwhile, WTO members are still at odds as to the replacement of members of the Appellate Body. Two of the seven seats are already vacant, due to the expiration of the second term of Ricardo Ramírez-Hernández of Mexico and the resignation of Hyun Chong Kim of South Korea earlier this year. A third vacancy will open up on 11 December, when the second term of Peter Van den Bossche of the EU (Belgium) comes to an end.

Divergent views of members have emerged in recent months. Argentina, Brazil, Colombia, Chile, Guatemala, Mexico, and Peru initially put forward a proposal focusing solely on the starting the task of filling the first empty slot, with the second selection process to be started thereafter. The EU, for its part, had called for both processes to begin jointly. The US had initially backed the Latin American proposal, but has since spoken out against either approach. (See Bridges Weekly, 27 July 2017)

Despite consultations by DSB chair Junichi Ihara of Japan, and the move by the EU and the Latin American countries mentioned above to present similar proposals at last week’s meeting that would start one selection process for filling all three slots, the US reiterated its previous “systemic” concerns. These include the continued participation of some of these former Appellate Body members in ongoing cases. Washington has not removed its objection to moving forward. (See Bridges Weekly, 14 September 2017)

As is normal practice under the global trade court’s working procedures, Ricardo Ramírez-Hernández has continued to work on the appeal proceedings where he was already involved.

That provision of the working procedures, Rule 15, states that “a person who ceases to be a Member of the Appellate Body may, with the authorisation of the Appellate Body and upon notification to the DSB, complete the disposition of any appeal to which that person was assigned while a Member, and that person shall, for that purpose only, be deemed to continue to be a Member of the Appellate Body.”

However, the US says that the DSB should first decide whether to allow an Appellate Body whose term has expired to continue serving on those cases. These long-standing working procedures were drawn up by the Appellate Body in consultation with the Director-General and DSB chair, and are not embodied in WTO rules on dispute settlement.

“As noted in past meetings, the DSB has a responsibility under the [Dispute Settlement Understanding] to decide whether a person whose term of appointment has expired should continue serving. The United States considers that members need to discuss and resolve that issue first before moving on to the issue of replacing such a person,” said the US delegate at the meeting.

According to a Geneva trade official, several WTO members spoke up at the DSB meeting, questioning both the link being made by the US between “systemic concerns” and the start of a process to fill Appellate Body vacancies. They also noted the lack of a proposal from the US to address the matter.

Should the divide continue, the global trade court could have only four of its seven seats full by the end of the year – a situation which officials and trade experts alike warn could put a heavy burden on the WTO’s dispute settlement branch.

Under WTO rules, a minimum of three Appellate Body members must serve on any case. Given that another Appellate Body member’s first term – that of Shree Baboo Chekitan Servansing of Mauritius – concludes on 30 September 2018, concerns have been raised that the global trade court could go down to only three serving members if the situation is not resolved beforehand.

Trade policy observers and various delegates have also expressed worries to Bridges that this situation could detract attention from WTO negotiations on possible deliverables for the Buenos Aires ministerial conference, planned for 10-13 December, if not resolved in Geneva beforehand.

ICTSD reporting.

 

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