Disputes Roundup: US Proposes Tuna Solution in Mexico Spat; European Commission Outlines New Plans for Trade Defence Measures

18 April 2013

The past week has seen developments in two WTO disputes involving the US - the first involving a compliance proposal in Washington's tuna-dolphin row with Mexico City, the second regarding Indonesia's efforts to lift some measures that the US challenged at the global trade arbiter in January. Over in Brussels, meanwhile, the European Commission has outlined a proposal for updating its trade defence instruments.

US tuna-dolphin compliance proposal triggers mixed reaction

A proposal by the United States to reform its dolphin-safe tuna label rules to comply with a WTO ruling is receiving praise from environmentalists, who say the initiative would result in fewer dolphin deaths related to the tuna fishing industry. However, because the move would use tighter regulations to comply with the WTO ruling, Mexican tuna would still be locked out of the US tuna market.

The WTO Appellate Body ruled last year that the US dolphin-safe labelling scheme violated core trade rules and discriminated unfairly against Mexican tuna products. (See Bridges Weekly, 16 May 2012) The ruling found that the labelling system was discriminatory because tuna caught with "purse-seine" nets - encircling nets that temporarily set on dolphins to attract the tuna that swim below - are ineligible. Because the nets are today used almost exclusively by Mexican fisheries, due to specific conditions in the Eastern Tropical Pacific (ETP), the majority of Mexican tuna is effectively blocked from the US marketplace.

The purse-seine rule applies even where independent veterinarians certify that no dolphins were killed or injured during the specific catch. Outside the ETP - where purse seine nets are largely not effective - importers are not obliged to prove that no mortalities or serious injuries occurred. The May 2012 ruling found that the label did not sufficiently address dolphin bycatch outside the ETP, where dolphins are harmed by fishing techniques other than purse-seine nets.

The Mexican tuna fleet invested heavily to comply with international standards - namely the Agreement on the International Dolphin Conservation Programme (AIDCP) - which have reduced observed dolphin mortality in the ETP by around 99 percent since 1990. However, the US argues that the law is designed to prevent non-observed injuries and mortalities, which occur most frequently with purse-seine nets. The WTO found the US objectives legitimate, but still ultimately concluded that the scheme was unnecessarily trade restrictive.

Rather than relaxing the labelling requirements within the ETP to comply with the ruling, as expected, the new US National Oceanic and Atmospheric Administration (NOAA) proposal expands the rules to require ETP and non-ETP fishermen to certify that no dolphin mortalities or serious injuries occurred. Outside the ETP, vessel captains would need to issue a statement that no dolphins were killed or seriously injured to comply.

Mark Robertson, a spokesman for the Campaign for Eco-Safe Tuna, which represents Mexico's tuna industry, says the proposed system would be unfair because non-ETP captains would be able to essentially self-certify compliance with the law, while Mexican fisheries would still be subject to an elaborate third-party observation, verification, and tracking system.

While the dolphin-safe label is not technically required for access to the US market, the market is effectively closed for non-certified tuna. But Mexico has argued that the consumers are not being given enough information to make an informed choice about purchasing their tuna.

Indeed, the WTO expressed concern in its initial ruling that American consumers could be misled by dolphin-safe labels affixed to tuna sourced outside the ETP, where it did not necessarily mean that the tuna was caught without mortality or serious injury to dolphins. Mexico has argued that its methods are actually safer than alternative methods, namely the use of Fish Aggregating Devices (FADs), which are employed frequently outside the ETP and have higher incidences of bycatch.

The proposal is open for comments until 6 May, with the US' deadline to comply with the WTO ruling being 13 July.

Indonesia to scrap import quotas on horticultural products

Indonesia will lift import quotas on certain horticultural products, the Trade Ministry announced on Friday. The US challenged these and other measures at the WTO in January, arguing that they unfairly restrict imports of fruits, vegetables, flowers, juices, and other products. (See Bridges Weekly, 16 January 2013)

"We have pledged to double trade with the US and we don't take these complaints [over horticultural and beef imports] personally, but more see them as part of normal trade discussions," said Dino Djalal, the Indonesian Ambassador to the US in a statement to The City Wire during a visit to Arkansas. The US Trade Representative (USTR) has said that it will review the ministry announcement and seek further details before issuing a response.

Washington already filed a first request for a panel to adjudicate the dispute (DS455) in March, which was blocked by Jakarta. A second panel request is currently listed on the agenda for next week's meeting of the WTO Dispute Settlement Body; whether or not the request will be removed from the agenda has not yet been announced.

Should a second request be made, a panel will automatically be established, in accordance with WTO rules. Washington is also challenging import limits on beef and other animal products, which were not addressed in Friday's announcement.

Southeast Asia's largest economy relies on agriculture for 15 percent of its GDP. "These [import quotas] appear to be designed to protect Indonesia's domestic agriculture industry," the USTR said in a statement this March.

European Commission outlines plan to modernise trade defence tools

The European Commission has put forward a proposal for modifying its trade defence measures - including anti-dumping and anti-subsidy instruments - marking the first significant revision since 1995. The process of crafting these revisions began in 2011.

"This is a balanced package with real improvements for all stakeholders affected by trade defence duties - producers, importers, and users," said EU Trade Commissioner Karel De Gucht. "We want to equip EU businesses better to tackle unfair trade practices abroad, while not negatively affecting EU consumers or companies that rely on imports."

Back when De Gucht took office in 2010, he had pledged to hold off on proposing revisions to the bloc's trade defence tools until after the WTO's Doha Round was completed. The global trade body's negotiations have continued to struggle, however, and EU officials now say that the current economic climate and the rise of allegedly unfair practices by its trading partners mean that Brussels cannot afford to wait.

The proposed revisions include a two-week notice period for businesses before anti-dumping or anti-subsidy measures are imposed on countries that use allegedly unfair subsidies in raw material markets. EU importers would also be offered reimbursement for duties collected during an expiry review, should the Commission find that trade measures in place are no longer necessary after five years.

Most notable in the proposal, however, may be a provision granting the European Commission the authority to initiate trade investigations without an official request from industry, which officials say could protect EU industry from retaliation. Some observers note that this could make it easier for the EU to pursue cases against Beijing, with whom Brussels has sparred repeatedly in recent years over alleged dumping and illegal subsidies of some Chinese products.

The legislative proposal will need to be approved by the European Council and the European Parliament. If successful, the proposal is not expected to become law until 2014.

At the end of 2012, the EU had 10 active anti-subsidy measures and 102 active anti-dumping measures. The measures affected 0.25 percent of the bloc's imports that year.

Guatemala lodges WTO complaint over Peru "additional" duties on foodstuffs

Guatemala has initiated a trade dispute at the WTO against Peru, challenging its so-called additional duties on some agricultural imports. In its 12 April filing, Guatemala alleged that the measures violate global trade rules by protecting domestic farmers against fluctuations in global commodity prices.

When commodity prices fall below certain established reference levels, Guatemala City says, Lima imposes extra duties on imports of rice, sugar, corn, and milk. In addition, tariff rebates apply when reference prices are "above certain ceiling price levels."

This marks the first trade dispute between the two countries, and Guatemala will have 60 days to hold consultations with Peru before it can request a panel to hear the case.

ICTSD reporting; "U.S. tuna plan pleases conservationists, upsets Mexican industry," REUTERS, 10 April 2013; "Indonesia scraps horticultural import quotas to avoid US spat," REUTERS, 12 April 2013; "Revise and improve trade policies, WTO tells Indonesia," THE JAKARTA POST, 15 April 2013; "Europe to Improve Trade Defence Instruments," TAX-NEWS, 15 April 2013; "Guatemala says Peru breaks trade rules, takes it to WTO," REUTERS, 15 April 2013.

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