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European Union – Measures Affecting Tariff Concessions on Certain Poultry Meat Products (EU–Poultry Meat (China)), DS492

Published online by Cambridge University Press:  13 October 2017

Kholofelo Kugler
Kholofelo Kugler*
Affiliation:
Works in the Advisory Centre on WTO Law, Geneva but writes in a wholly personal capacity
*
Email: Kholofelo.Kugler@acwl.ch
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Extract

The dispute concerns the GATT Article XXVIII negotiations of the European Union's (EU) Schedule of Concessions. The EU sought to modify its tariff concessions in respect of certain poultry products. The EU conducted this modification through two separate negotiations. The first round of negotiations were initiated in 2006 and covered the modification of tariff concessions on poultry products falling under HS Codes 0210 99 39, 1602 31, and 1602 32 19 (First Modification Package). The second round of negotiations began in 2009 and pertained to the modification of products falling under HS Codes 1602 20 10, 1602 32 11, 1602 32 30, 1602 32 90, 1602 39 21, 1602 39 29, 1602 39 40, and 1602 39 808 (Second Modification Package). In both rounds, the EU notified its intention to modify its tariff concessions under Article XXVIII of the GATT 1994. It subsequently entered into negotiations with Brazil and Thailand, which it considered to have the required legal interest to enter into these negotiations. The EU reached agreements with Brazil and Thailand and replaced its previous tariff concessions in respect of the tariff rate quotas (TRQs) for certain poultry products.

Information

Type
Case Summaries
Information
World Trade Review , Volume 16 , Issue 4: Symposium on State-Owned Enterprises in China , October 2017 , pp. 746 - 749
Copyright
Copyright © Kholofelo Kugler 2017 

  • Adopted   19 April 2017

  • Complainant   China

  • Respondent   European Union

  • Third Parties   Argentina, Brazil, Canada, India, Russian Federation, Thailand, and the United States

Measure at Issue

The dispute concerns the GATT Article XXVIII negotiations of the European Union's (EU) Schedule of Concessions. The EU sought to modify its tariff concessions in respect of certain poultry products. The EU conducted this modification through two separate negotiations. The first round of negotiations were initiated in 2006 and covered the modification of tariff concessions on poultry products falling under HS Codes 0210 99 39, 1602 31, and 1602 32 19 (First Modification Package). The second round of negotiations began in 2009 and pertained to the modification of products falling under HS Codes 1602 20 10, 1602 32 11, 1602 32 30, 1602 32 90, 1602 39 21, 1602 39 29, 1602 39 40, and 1602 39 808 (Second Modification Package). In both rounds, the EU notified its intention to modify its tariff concessions under Article XXVIII of the GATT 1994. It subsequently entered into negotiations with Brazil and Thailand, which it considered to have the required legal interest to enter into these negotiations. The EU reached agreements with Brazil and Thailand and replaced its previous tariff concessions in respect of the tariff rate quotas (TRQs) for certain poultry products.Footnote 1

Main Adopted Findings of the Panel

Article XXVIII:1 of the GATT 1994

The panel rejected China's claim that the EU violated Article XXVIII:1 by determining which WTO Members (Members) held a principal or supplying interest on the basis of actual import levels over the three-year period preceding its notifications to modify its tariff concession (2003–2005 and 2006–2008) as opposed to basing its determination on what Members' share would have been in the absence of the SPS measures that restricted Chinese poultry imports. China did not argue that imports from similarly situated countries were not subjected to the same SPS measures.Footnote 2 The panel also disagreed with China that an importing Member is legally obliged to re-appraise those Members that hold a principle, or substantial supplying interest, to reflect changes in import shares that took place after the initiation of the negotiations. Therefore, the panel found that the EU did not violate Article XXVIII:1 by not re-determining which Members held a relevant supplying interest based on the increase in imports from China in 2009–2011.Footnote 3 Further, the panel found that because of its previous findings, it was unnecessary to rule on whether the EU's decision not to recognize China as a holder of a principle or substantial interest was justified in light of China's late submission of those supplying interest claims.Footnote 4

The panel thus concluded that China failed to demonstrate that the EU had violated Article XXVIII:1 by not recognizing that China held a principal or substantial interest in supplying the products relevant to the two modification packages.Footnote 5

Article XXVIII:2 of the GATT 1994 Read with Paragraph 6 of the Understanding on Article XXVIII of the GATT 1994

The panel found that the EU was free to base its determinations of supplying interests on actual imports over the reference periods does not a priori exclude the possibility that the EU might have been required to calculate the compensation stipulated under Article XXVIII2 and paragraph 6 of the Understanding based on a different period.Footnote 6 The panel analyzed China's claim that the total amount of the EU's TRQs is inconsistent with the aforementioned provisions based on three considerations: (i) whether the EU was required to calculate the total TRQ amount for both modification packages based on an estimate of what import shares would have been without the SPS measures; (ii) whether the EU was required to calculate the TRQs for the Second Modification Package based on import levels from 2009 to 2011; (iii) whether the EU was required to account in the Second Modification Package for poultry imports from Bulgaria and Croatia in the years prior to their EU accessions.Footnote 7

The panel found that the EU was not required to do any of the foregoing and rejected China's claims.Footnote 8 Moreover, the panel found Article XXVIII:2 and paragraph 6 of the Understanding do not apply to the allocation of TRQ shares among supplying countries and thus the EU did not act inconsistently with these provisions by not taking into account China's future trade prospects in its TRQ allocation.Footnote 9

The panel concluded that China had failed to demonstrate that the tariff rates and TRQs negotiated and applied by the EU were inconsistent with Article XXVIII:2 and paragraph 6 of the Understanding by failing to maintain a general level of reciprocity and mutually advantageous concessions not less favourable to trade than those existing before the modification.Footnote 10

Article XIII:2(d) of the GATT 1994

The panel rejected China's claim that the EU acted inconsistently with Article XIII:2(d) by determining which countries had a substantial supplying interest on the basis of their actual share of imports during the reference period and not based on an estimate of their shares in the absence of the SPS measures.Footnote 11 Further, the panel found that China has demonstrated that the increase in Chinese imports to the EU over the period 2009–2011 following the relaxation of the SPS measures was a ‘special factor' that the EU had to take into account when determining which countries had a substantial interest. Thus, the EU violated Article XIII:2(d) by not recognizing China as a Member holding a substantial supplying interest for certain poultry tariff lines and by failing to seek agreement with China on TRQ allocation for those particular products. However, the EU did not act inconsistently with Article XIII:2(d) by failing to recognize China's substantial interest in other products in the Second Modification Package.Footnote 12

Chapeau of Article XIII:2(d) of the GATT 1994

The panel also rejected China's claim because China had not demonstrated that the EU acted inconsistently with the chapeau of Article XIII:2 by determining TRQ shares allocated to ‘all others’ based on the actual share of imports into the EU, as opposed to an estimate of import shares in the absence of the SPS measures.Footnote 13 The panel ruled that China had demonstrated that its increase in imports from 2009 to 2011, following the relaxation of the SPS measures, was a ‘special factor’ that the EU did not take into account when determining TRQ shares allocated to ‘all others’. Thus, the EU acted inconsistently with Article XIII:2 in this regard.Footnote 14 However, the panel found that China had failed to demonstrate that the EU acted inconsistently with the chapeau of Article XIII:2 by not allocating to ‘all others’ at least 10% of the share of the TRQs under both modification packages.Footnote 15

Article XIII:1 of the GATT 1994

The panel rejected China's claim that the allocation of all or the vast majority of the TRQs to only Brazil and Thailand was inconsistent with Article XIII:1, i.e., no TRQ may be applied to any Member unless the importation of the ‘like’ product of all third countries is ‘similarly prohibited or restricted’.Footnote 16 The panel thus concluded that the EU did not act inconsistently with Article XIII:1.

Article I:1 of the GATT 1994

The panel also rejected China's claim under Article I:1. The panel found that China failed to demonstrate that the allocation of all or the vast majority of the TRQs only to Brazil and Thailand violated the most-favored nation principle in that ‘any favor, privilege or immunity’ granted to one country was not immediately and unconditionally granted to the ‘like’ product originating in another Member.Footnote 17

Article XIII:4 of the GATT 1994

In this regard, the panel found that the right to request consultations under Article XIII:4 is available to Members holding a substantial supplying interest where the allocation of TRQs is agreed pursuant to Article XIII:2(d), first sentence and not only in cases where the shares are unilaterally allocated pursuant to Article XX, second sentence.Footnote 18 The panel found that China was a Member holding a substantial supplying interest for products under tariff lines 1602 39 29 and 1602 39 85 when it requested consultations under Article XIII:4 in December 2013. The panel disagreed with the EU that, for the purposes of Article XIII:4, the determination of which Members hold a substantial supplying interest may only be based on the initial reference period use to determine the TRQ share allocation, without taking into account the changes in market share since the initial TRQ share allocation.Footnote 19 The panel found that the EU did not act inconsistently with Article XIII:2 by refusing to allocate TRQ shares arising from the Second Modification Package in May 2014. The Panel thus rejected China's claim that the EU did not reallocate the TRQ share among supplying countries following China's request for consultations under Article XIII:4.Footnote 20

The panel agreed, however, that China held a substantial supplying interest in the aforementioned poultry products at the time of its Article XIII:4 consultations request. However, the panel found that there were not enough agreed facts on what happened at the May 2014 meeting. Hence, the panel found that China failed to demonstrate that the EU acted inconsistently with Article XIII:4 by refusing to enter into meaningful consultations with China.Footnote 21

Article II:1 of the GATT 1994

The panel considered that the existing provisions of the GATT 1994, the Procedures for Negotiations under Article XXVIII, and the Procedures for Modification and Rectification of Schedules do not indicate that certification is a legal prerequisite that a Member must complete before modifying its concessions.Footnote 22 Thus, the Panel found that it could not uphold China's claims that the EU violated Article II by giving effect to modifications arising from the Article XXVIII negotiations before the changes were reflected in the text of its Schedule through certification.Footnote 23

References

1 Panel Report, EU–Poultry Meat (China), paras. 2.2, 2.3.

2 Ibid. paras. 7.205–7.206.

3 Ibid para. 7.228.

4 Ibid. para. 7.235.

5 Ibid. para. 7.236.

6 Ibid. para. 7.254.

7 Ibid. para. 7.257.

8 Ibid. paras. 7.264, 7.277, 7.286

9 Ibid. para. 7.302.

10 Ibid. para. 7.303.

11 Ibid. para. 7.343. China had argued that its reduced ability to export due to the SPS measures was a ‘special factor’ that affected trade in the concerned poultry products.

12 Ibid. para. 7.378.

13 Ibid. para. 7.399.

14 Ibid. para. 7.406.

15 Ibid. para. 7.421.

16 Ibid. para. 7.437.

17 Ibid. para. 7.451.

18 Ibid. para. 7.464.

19 Ibid. para. 7.471.

20 Ibid. para. 7.482.

21 Ibid. paras. 7.494–7.495.

22 Ibid. para. 7.37.

23 Ibid. paras. 7.550, 7.551.