INTRODUCTION

Canada appeals from certain issues of law and legal interpretations developed by the Panel in Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products (the “Panel Report”) Following their requests for consultations, the United States and New Zealand requested that the Dispute Settlement Body (the “DSB”) establish panels to examine certain alleged export subsidies that they contended Canada or its provinces had granted, through the Special Milk Classes Scheme, to support the export of dairy products and to examine a claim by the United States regarding imports into Canada of fluid milk and cream within the 64,500 tonnes tariff-rate quota committed in Canada's Schedule of Commitments under the Marrakesh Agreement Establishing the World Trade Organization (the “WTO Agreement”). On 25 March 1998, the DSB agreed to establish two panels in accordance with these requests and further agreed that the two panels would be consolidated into a single panel pur- suant to Article 9.1 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the “DSU”) with standard terms of reference.

The Panel considered claims made by the United States and New Zealand that Canada's measures are inconsistent with Articles II, X, XI and XIII of the General Agreement on Tariffs and Trade 1994 (the “GATT 1994”); Articles 3, 4, 8, 9, and 10 of the Agreement on Agriculture; Article 3 of the Agreement on Subsidies and Countervailing Measures (the “SCM Agreement”); and Articles 1, 2 and 3 of the Agreement on Import Licensing Procedures. The Panel Report was circulated to Members of the World Trade Organization (the “WTO”) on 17 May 1999. In paragraph 8.1 of its Report, the Panel concluded that Canada: