INTRODUCTION

On 4 May 1998, the United States requested consultations with Australia under Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (“DSU”) and Articles 4.1 and 30 (to the extent that it incorporates by reference Article XXIII:1 of the General Agreement on Tariffs and Trade 1994) of the Agreement on Subsidies and Countervailing Measures (the “SCM Agreement”) regarding allegedly prohibited subsidies provided to an Australian producer and exporter of automotive leather, Howe and Company Proprietary Ltd. (“Howe”), or any of its affiliated and/or parent companies (WT/DS126/1).

The United States and Australia met on 4 June 1998.

On 11 June 1998, pursuant to Article 4.4 of the SCM Agreement and Article 1.2 of the DSU, the United States requested the immediate establishment of a panel to examine the consistency of the subsidies provided to Howe with Australia's obligations under the Marrakesh Agreement Establishing the World Trade Organization (the “WTO Agreement”), in particular those contained in the SCM Agreement (WT/DS126/2).

At the meeting of the Dispute Settlement Body (“DSB”) on 22 June 1998, the DSB established a panel in accordance with Article 4.4 of the SCM Agreement and Article 6 of the DSU with standard terms of reference. The terms of reference were:

On 27 October 1998, the United States requested the Director-General to determine the composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU. On 2 November 1998, the Director-General composed the Panel as follows:

The Panel met with the parties on 9-10 December 1998 and 13-14 January 1999.

The Panel submitted its interim report to the parties on 8 March 1999. On 15 March 1999, Australia and the United States submitted written requests for the Panel to review precise aspects of the interim report. The Panel submitted its final report to the parties on 23 March 1999.