INTRODUCTION

Canada appeals certain issues of law and legal interpretations in the Panel Report, Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products - Recourse to Article 21.5 of the DSU by New Zealand and the United States (the “Panel Report”). The Panel was established to consider a complaint by New Zealand and the United States that certain measures taken by Canada to comply with the recommendations and rulings of the Dispute Settlement Body (the “DSB”) in Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products (“Canada - Dairy”) were not consistent with Canada's obligations under the Agreement on Agriculture and the Agreement on Subsidies and Countervailing Duties (the “SCM Agreement”).

In Canada - Dairy, the original panel and the Appellate Body found, inter alia, that Canada had acted inconsistently with its obligations under Articles 3.3 and 8 of the Agreement on Agriculture, through its scheme of Special Milk Classes 5(d) and 5(e), by providing “export subsidies” within the meaning of Article 9.1(c) of that Agreement, in excess of the quantity commitment levels specified by Canada in its Schedule of Commitments under the Marrakesh Agreement Establishing the World Trade Organization (the “WTO Agreement”). On 27 October 1999, the DSB adopted the original panel and Appellate Body reports.

On 23 December 1999, pursuant to Article 21.3(b) of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the “DSU”), Canada, New Zealand and the United States agreed that the reasonable period of time for Canada to implement the recommendations and rulings of the DSB would expire on 31 December 2000. On 11 December 2000, the parties agreed to extend this period of time until 31 January 2001. On 19 January 2001, Canada affirmed that it would complete its implementation of the recommendations and rulings of the DSB by 31 January 2001.

The measures taken by Canada to comply with the recommendations and rulings of the DSB included the elimination of Special Milk Class 5(e) and the restriction of exports of dairy products under Special Milk Class 5(d) to Canada's export subsidy commitment levels.