INTRODUCTION AND FACTUAL BACKGROUND

The United States and Korea appeal from certain issues of law and legal interpretations in the Panel Report, United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea (the “Panel Report”).

The dispute concerns the imposition of a definitive safeguard measure by the United States on imports of circular welded carbon quality line pipe (“line pipe”). This measure was imposed following an investigation conducted by the United States International Trade Commission (the “USITC”), a body comprised of six Commissioners that is charged with conducting such investigations under United States law. On 29 July 1999, the USITC initiated the safeguard investigation into imports of line pipe. The USITC finally determined that “circular welded carbon quality line pipe … is being imported into the United States in such increased quantities as to be a substantial cause of serious injury or the threat of serious injury”. Three Commissioners made a finding of serious injury. Two Commissioners made a finding of threat of serious injury. The affirmative vote of these five Commissioners constituted the majority supporting the “affirmative determination” of the USITC. A single Commissioner made a negative determination that there was neither serious injury nor threat of serious injury. The views of that Commissioner are not part of the USITC determination. In the light of these findings, the USITC determined that “line pipe … is … a substantial cause of serious injury or the threat of serious injury”.

In its investigation, the USITC identified a number of factors, apart from increased imports, which had caused serious injury or threat of serious injury to the domestic line pipe industry. However, the USITC concluded that increased imports were “a cause which is important and not less than any other cause” and that, therefore, the statutory requirement of “substantial cause” was met. On 8 November 1999, the United States notified the Committee on Safeguards, pursuant to Article 12.1(b) of the Agreement on Safeguards, that the USITC had reached an affirmative finding of serious injury or threat thereof caused by increased imports.

INTRODUCTION

Complaint of Korea

On 15 June 2000, Korea requested consultations with the United States pursuant to Article 4 of the Dispute Settlement Understanding (the “DSU”), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (the “GATT 1994”) and Article 14 of the Agreement on Safeguards (also the “Safeguards Agreement”, or “SA”) with regard to a definitive safeguard measure imposed by the United States on imports of circular welded carbon quality line pipe (the “line pipe measure”).

On 28 July 2000, Korea and the United States held the requested consultations, but failed to resolve the dispute.

On 14 September 2000, Korea requested the establishment of a panel to examine the matter.

Establishment and Composition of the Panel

At its meeting of 23 October 2000, the Dispute Settlement Body (the “DSB”) established a Panel pursuant to the request made by Korea in document WT/DS202/4.

At that meeting, the parties to the dispute also agreed that the Panel should have standard terms of reference, as follows:

On 12 January 2001, Korea requested the Director-General to determine the composition of the Panel, pursuant to Article 8.7 of the DSU. On 22 January 2001, the Director-General composed the Panel as follows:

Australia, Canada, the European Communities, Japan and Mexico, reserved their rights to participate in the panel proceedings as third parties.

FACTUAL ASPECTS

This dispute concerns a measure imposed by the United States on imports of circular welded carbon quality line pipe (“line pipe”). This measure was imposed following an investigation conducted by the United States International Trade Commission (“ITC”) in response to a petition filed on 30 June 1999 and amended on 2 July 1999, alleging that imports of line pipe were causing serious injury to the US manufacturers of line pipe.

PURPOSE AND EFFECTS OF REGULATION

As noted before, the GATS makes a clear distinction between domestic regulation and measures subject to trade liberalization. On the one hand, it explicitly recognizes the continued right (and, possibly, the need) of Members to enforce domestic policy objectives through regulation. On the other hand, it promotes the objective of progressive liberalization, consisting of expanding and/or improving existing commitments on market access and national treatment.

Effective regulation – or re-regulation – can be a precondition for liberalization to produce the expected efficiency gains without compromising on quality and other policy objectives. For example, the opening of a hitherto restricted market may need to be accompanied by the introduction of new licensing mechanisms and public service obligations for quality and social policy reasons. Since many services contracts involve customized, not yet existing products (medical intervention, legal advice, etc.), the need for regulatory protection is particularly evident.

By the same token, however, it may be necessary to ensure that the benefits from liberalization are not frustrated by ineffective or inconsistent regulation. Many regulatory regimes have evolved in response to immediate problems and challenges, without much thought being given to trade and efficiency considerations. Moreover, regulatory responsibilities tend to be spread across ministries and agencies (Finance, Justice, Construction, Transport, Health, Education, etc.) and levels of government without much communication, let alone co-ordination.

INTRODUCTION

In a communication dated 12 October 1998 (WT/DS146/1), the European Communities requested consultations with India pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and Article 8 of the Agreement on Trade-Related Investment Measures (TRIMs Agreement), concerning certain measures affecting the automotive sector. On 21 and 22 October 1998, Japan and the United States, respectively, lodged requests to join in the consultations. The European Communities and India held consultations in Geneva on 2 December 1998. The United States and Japan participated in the consultations under DSU Article 4:11.

In a communication dated 2 June 1999 (WT/DS175/1), the United States requested consultations with India pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and Article 8 of the Agreement on Trade-Related Investment Measures (to the extent it incorporates by reference Article XXII of the GATT 1994) regarding certain measures affecting trade and investment in the motor vehicle sector. The United States and India held such consultations, in which Japan and the European Communities joined, on 20 July 1999. The consultations provided some helpful clarifications but failed to settle the dispute.

On 15 May 2000, the United States (WT/DS175/4) requested the Dispute Settlement Body to establish a panel with standard terms of reference as set out in Article 7.1 of the DSU. The Panel was established on 27 July 2000. On 12 October 2000, the European Communities (WT/DS146/4) also requested the DSB to establish a panel pursuant to Article 4.7 and 6 of the DSU.

At its meeting of 17 November 2000, the DSB agreed that, in accordance with Article 9.1 of the DSU, the Panel established on 27 July 2000 to examine the complaint by the United States should also examine the complaint by the European Communities contained in WT/DS146/4 and agreed that the Panel should have standard terms of reference.

Circulated to Members on 26 July 2002

On 8 March 2002, the Dispute Settlement Body (the “DSB”) adopted the Appellate Body Report and the Panel Report, as modified by the Appellate Body Report, in United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea (“US – Line Pipe”). At the DSB meeting of 5 April 2002, the United States informed the DSB, pursuant to Article 21.3 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the “DSU”), that it would implement the recommendations and rulings of the DSB in this dispute in a manner that respects its obligations and that it would require a “reasonable period of time” to do so, pursuant to the terms of Article 21.3 of the DSU.

In view of the parties’ inability to reach an agreement on the period of time reasonably required for implementation of those recommendations and rulings, Korea requested, in a letter dated 29 April 2002, that such period be determined by binding arbitration pursuant to Article 21.3(c) of the DSU.

In the absence of an agreement between the parties on the appointment of an arbitrator within 10 days after referring the matter to arbitration, Korea requested, in a letter dated 13 May 2002, the Director-General of the World Trade Organization (the “WTO”) to appoint the arbitrator, as provided for in footnote 12 to Article 21.3(c) of the DSU. After consultations with the parties, the Director- General decided, on 23 May 2002, to appoint me as the arbitrator in this matter. On the same day, the parties were informed of my acceptance of the designation as arbitrator.

In subsequent letters to me, the parties indicated that they agreed to extend the deadline for completion of the arbitration to 12 July 2002. Notwithstanding this extension of the 90-day time period stipulated in Article 21.3(c) of the DSU, the parties confirmed that the arbitration award shall be deemed to be an award issued under Article 21.3(c) of the DSU.

Written submissions were received from the United States and Korea on 3 June 2002, and an oral hearing was held on 12 June 2002.

The General Agreement on Trade in Services (GATS) is a relatively new agreement. It entered into force in January 1995 as a result of the Uruguay Round negotiations to provide for the extension of the multilateral trading system to services. With a view to achieving a progressively higher level of liberalization, pursuant to Article XIX of the GATS, WTO Members are committed to entering into further rounds of services negotiations. The first such round started in January 2000.

All Members of the WTO are signatories to the GATS and have to assume the resulting obligations. So, regardless of their countries' policy stances, trade officials need to be familiar with this agreement and its implications for trade and development. These implications may be far more significant than available trade data suggest.

Hopefully, these materials will contribute to a better understanding of the GATS and the challenges and opportunities of the ongoing negotiations. For users who are familiar with the General Agreement on Tariffs and Trade (GATT), similarities and differences will be pointed out where relevant. Likewise, for users who are familiar with the balance-of-payments definition of “trade”, departures from the Agreement's coverage will be explained. Whenever indicated, it is recommended to supplement these materials with documents available on the WTO website (www.wto.org).

To stimulate further thinking about core concepts and implications of the Agreement, several boxes have been inserted to provide “Food for thought”.

INTRODUCTION

Complaint of the European Communities

On 10 November 2000, the European Communities requested consultations with the United States pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (“DSU”), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (“GATT 1994”), and Article 30 of the Agreement on Subsidies and Countervailing Measures (“SCM Agreement”), regarding countervailing duties (“CVDs”) imposed by the United States on imports of certain corrosion-resistant carbon steel flat products originating in Germany, in particular, the sunset review of these CVDs.

The European Communities and the United States held consultations on 8 December 2000, but failed to reach a mutually satisfactory solution.

On 5 February 2001, the European Communities requested further consultations with the United States, regarding certain aspects of the procedure followed by the United States in sunset reviews, both as such and as applied in the sunset review in question, in particular, the evidentiary standards applied for the self-initiation of these reviews.

The European Communities and the United States held further consultations on 21 March 2001, but failed to reach a mutually satisfactory solution.

On 8 August 2001, the European Communities requested the establishment of a panel pursuant to Article 6 of the DSU, Article XXIII of GATT 1994, and Article 30 of the SCM Agreement.

Establishment and Composition of the Panel

The Dispute Settlement Body (“DSB”) established a panel on 10 September 2001, with standard terms of reference. The terms of reference of the Panel are:

The Importance of Services for Consumers and Producers, Traders and Investors

Services are an important input for virtually all commercial activities, including other services, and a core determinant of the quality of life. No economy or social community could prosper without adequate transportation, communication, education or health services.

Developed and developing economies have built competitive service industries – the most visible in developing countries include tourism, construction and transport – and benefit from the efficiency of a modern service infrastructure. Services exports may constitute an important foreign-currency earner and contribute to overall economic expansion. The attendant employment effects could help to stem migration from less developed regions and provide a nucleus for self-sustained growth.

The quality of available business services may prove crucial to development. Research in Latin America in the 1980s by UNCTAD indicated that one of the primary distinctions between developed and developing economies was the availability of highly specialized business services. More recent research in Asia, Africa and the Middle East has confirmed the importance of business services of international quality that are customized according to local commercial needs.

SOURCES OF CRITICISM …

Civil society representatives have repeatedly voiced concerns about public policy implications of the GATS. Such concerns revolve, inter alia, around the Agreement's perceived impact on governments' ability to regulate socially important services and ensure equitable access across regions and population groups. It has been alleged that the concept of progressive liberalization, combined with the commercialization of some public services in individual countries, could result in subjecting core governmental activities to external (multilateral) disciplines. There have also been assertions that the Agreement contravenes basic notions of national sovereignty, requiring governments against their will to liberalize access and/or to accept constraints on socially motivated subsidy schemes. While some of these claims may be dismissed as scaremongering, driven for example by income interests of sector incumbents, the complexity of the GATS and the absence, in potentially relevant areas, of authoritative legal interpretations may have added a sense of uncertainty.

In response, the WTO Secretariat has authored, or contributed to, several publications explaining the structure and functioning of the Agreement and, by the same token, debunking frequently traded myths. Relevant sources include a Special Study, Market Access: Unfinished Business, a brief booklet, GATS: Fact and Fiction, and a Joint Study with the WHO, WTO Agreements & Public Health.

… AND THE FACTS

First and foremost, it may be worth reiterating one of the core concepts of the Agreement, the distinction between services liberalization and deregulation.