Adding sweeteners to softwood lumber: The WTO-NAFTA 'Spaghetti Bowl' is cooking

Journal of International Economic Law

Volumn 9, Issue 1, 2006, Pages 197-206

  Pauwelyn, Joost ^a  

^a DUKE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

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EID: 33645281479     PISSN: 13693034     EISSN: 14643758     Source Type: Journal    
DOI: 10.1093/jiel/jgi060     Document Type: Review

References (42)

1. WTO Panel Report, United States - Investigation of the International Trade Commission in Softwood Lumber from Canada, Recourse to Article 21.5 of the DSU by Canada, WT/DS277/RW, circulated on 15 November 2005.
2. Opinion and Order of the Extraordinary Challenge Committee, In the Matter of Certain Softwood Lumber Products from Canada, Secretariat File No. ECC-2004-1904-01USA, 10 August 2005
3. (hereafter ECC Opinion).
4. Most recently: Decision of the Panel on the Fourth Remand Determination, In the Matter of Certain Softwood Lumber Products from Canada, Final Affirmative Counterveiling Duty Determination, File USA-CDA-2002-1904-03, 5 October 2005.
5. WTO Appellate Body report, United States - Final Countervailing Duty Determination With Respect To Certain Softwood Lumber from Canada, Recourse by Canada to Article 21.5 of the DSU, WT/DS257/AB/RW, circulated on 5 December 2005. Besides the original Appellate Body report in this dispute finding against the United States, another WTO panel has also condemned the US preliminary determination of subsidy (
6. WTO Panel Report, United States - Preliminary Determinations With Respect To Certain Softwood Lumber From Canada, WT/DS236/R, adopted on 1 November 2002). Note that under NAFTA Chapter 19, only final (not preliminary) antidumping and countervailing determinations can be challenged (NAFTA Article 1904). This may partly explain why Canada decided to bring this case (also) to the WTO, as this was the only available forum at the time the United States made its preliminary determination.
7. U.S. Finally Determines Canadian Softwood Not Subsidized: One Step Toward Resolution, International Trade Canada, Press Release No. 230, 22 November 2005, available at http://www.dfait-maeci.gc.ca.
8. Most recently: Decision of the Panel following Remand, In the Matter of Certain Softwood Lumber Products from Canada, Final Affirmative Antidumping Determination, File USA-CDA-2002-1904-02, 9 June 2005.
9. WTO Appellate Body Report, United States - Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/AB/R, adopted on 31 August 2004.
10. NAFTA Annex 704.2, Appendix B entitled Trade in Sugar.
11. See Rodolfo Cruz Miramontes, 'The NAFTA and The So-called Parallel Letters', 3 Mexican Law Review (2005) available at http:// www.juridicas.unam. mx/publica/rev/mlawr/cont/3/arc/arc3.htm.
12. WTO Panel Report, Mexico - Anti-Dumping Investigation of High-Fructose Corn Syrup (MFCS) from the United States, WT/DS132/R, adopted on 24 February 2000 (not appealed). A subsequent Mexican re-determination, confirming anti-dumping duties, was also declared inconsistent by a WTO Panel and then the Appellate Body in 2001 (
13. WTO Appellate Body Report, Mexico - Anti-Dumping Investigation of High-Fructose Corn Syrup (MFCS) from the United States, Recourse to Article 21.5 of the DSU by the United States, WT/DS132/AB/RW, adopted on 21 November 2001).
14. WTO Panel Report, Mexico - Measures on Soft Drinks and Other Beverages, WT/DS308/R, circulated on 7 October 2005.
15. Article 2009.1 of NAFTA unambiguously states: The Parties shall establish and maintain a roster of up to 30 individuals who are willing and able to serve as panelists' (emphasis added). If such roster had been established, Mexico could have relied on NAFTA Article 2009.2(d) in the face of a US refusal to appoint panelists, providing that, in such case, 'panelists shall be selected by lot from among the roster members who are citizens of the other disputing Party'.
16. Order of the Consolidation Tribunal, In the Matter of: NAFTA and a Request for Consolidation by the USA of the Claims in Canfor Corporation v USA and Tembec et al. v USA and Terminal Forest Products Ltd v USA, 7 September 2005, available at http://www.naftaclaims.com.
17. Order of the Consolidation Tribunal, In the Matter of: NAFTA and a Request for Consolidation by Mexico of the Claims in Com Products International, Inc. v Mexico and Archer Daniels Midland Company and Täte and Lyle Ingredients Americas, Inc. v Mexico, Case CIADI Nr. Arb(AF)/04/5, 20 May 2005, available at http://www.naftaclaims.com.
18. See http://www.naftaclaims.com (I count the 107 notices of intent filed by members of the Canadian Cattlemen for Fair Trade against the US ban on cattle from Canada as one). For example, of the 14 NAFTA Chapter 11 cases brought between January 1994 and November 2005 against the United States, at least nine related to cross-border trade in goods.
19. Articles 14 and 15 of the North American Agreement on Environmental Cooperation (NAAEC). Such investigation does not lead to an award, only a factual record. More recent free trade agreements (FTAs) concluded by the United States include full-fledged state-to-state arbitration proceedings to force parties to implement their own labor and environmental laws, subject to monetary damages (see, for example, Singapore-US FTA, Articles 17, 18, and 20.7). This could theoretically lead to the following odd result: one arbitration panel may condemn a party for failure to enforce its environmental or labor law, while another investment tribunal under the same FTA might find that this very same law violates the investment provisions of the FTA. Interestingly, these recent FT As include a conflict clause stating that '[i]n the event of any inconsistency between this Chapter [on investment] and another Chapter [on, for example, labor or environment], the other Chapter shall prevail to the extent of the inconsistency' (see, for example, US-Singapore FTA, Article 15.3.1).
20. Secretariat of the Commission for Environmental Cooperation, Determination pursuant to Article 14(3) of the NAAEC, Submitters: Methanex Corporation & NESTE Canada Inc., SEM-99-001 and SEM-00-002, 30 June 2000 (refusing to initiate an investigation). Methanex claimed that California failed to enforce its environmental laws by allowing gasoline to be released into the environment from leaking underground storage tanks. If confirmed, such factual record could have assisted Methanex with its claim of discrimination under NAFTA Chapter 11 regarding a Californian ban on methyl tertiary-butyl ether (MTBE), a gasoline additive.
21. Under NAFTA Chapter 19, although it is always a government that will initiate a panel, private parties can force the government to do so. See NAFTA Article 1904.5.
22. On 18 May 2004, the NAFTA Chapter 19 panel rejected a US request to reopen the record. See ECC Opinion, above n 2, para 8.
23. The WTO panel accepting threat of injury was a so-called compliance panel. In 2004, the panel found that the original US determination of May 2002 was inconsistent with WTO rules (WT/ DS277/R, adopted on 26 April 2004). Under WTO rules the United States was then allowed to make a new (so-called Section 129) determination where additional information was gathered and new hearings held (unlike in the NAFTA proceedings where the panel denied a US request to reopen the record, see above n 18). This led to the December 2004 re-determination, accepted by the 2005 WTO compliance panel.
24. The interaction between NAFTA proceedings and factual investigations under NAFTA's side agreement on the environment (NAAEC) is also explicitly dealt with. Article 14.3(a) of the NAAEC provides that if 'the matter is the subject of a pending judicial or administrative proceeding', the Secretariat shall proceed no further. On that basis, a request by Methanex under the NAAEC was denied because of Methanex's pending request under NAFTA Chapter 11. See above n 16.
25. This does not mean that a violation of national treatment under GATT necessarily implies a violation of national treatment under NAFTA Chapter 11. For obvious reasons, Mexico was, indeed, adamant that the WTO panel make 'clear that its findings apply solely to the parties' respective rights and obligations under the WTO agreements and cannot be taken to prejudge legal rights under other rules of international law' (
26. WTO Panel Report, above n 10, para 205). For a rejection of WTO national treatment concepts in NAFTA Chapter 11 proceedings
27. see Methanex Corporation v United States, Final Award of the Tribunal on Jurisdiction and Merits, 9 August 2005, available at http:// www.naftaclaims.com, Part IV - Chapter B (para 37: 'the text and the drafters' intentions, which it manifests, show that trade provisions were not to be transported to investment provisions').
28. NAFTA Article 1134 provides that 'the Tribunal may award only: (a) monetary damages . . . or (b) restitution of the property'. Yet, in the latter case, 'the award shall provide that the disputing Party may pay monetary damages... in lieu of restitution'.
29. See above n 11.
30. See USDA Announces Increase in FY 2006 Sugar Availability, USDA News Release No. 0525.05, 2 December 2005, available at http://www.usda.gov (increasing allowable sugar imports for fiscal year 2006 with 450,000 tons).
31. On 10 September 2004, the US International Trade Commission did, indeed, determine that no threat of material injury existed as directed by the NAFTA Chapter 19 panel (see ECC Opinion, above n 2, para 11). Yet, as pointed out earlier (see above n 19), to comply with a 2004 WTO panel, the ITC subsequently reopened the record and, in December 2004, made a new, positive determination that there was threat of material injury.
32. NAFTA Article 1904.8.
33. See ECC Opinion, above n 2, paras 6-11.
34. Second Remand Decision of the Panel, In the Matter of Certain Softwood Lumber Products from Canada: Final Affirmative Threat of Injury Determination, Secretariat File No. USA-CDA-2002-1904-07, 31 August 2004, at 4 and 7 (upheld by the ECC Opinion, above n 2). In terms that cannot be mistaken, the Panel explained its ruling as follows (at 3): The Commission has made it abundantly clear to this Panel that it is simply unwilling to accept this Panel's review authority under Chapter 19 of the NAFTA and has consistently ignored the authority of this Panel in an effort to preserve its finding of threat of material injury. This conduct obviates the impartiality of the agency decision-making process, and severely undermines the entire Chapter 19 panel review process'.
35. Ibid, at Sand 12.
36. DSU Article 19.1.
37. DSU Article 21.3, but note the exception for prohibited subsidies in Article 4.7 of the Subsidies Agreement (where the panel must recommend withdrawal of the subsidy and fix the time period to do so, normally a mere 90 days).
38. WTO Document WT/DS277/7.
39. See above n 3l.
40. In Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico, for example, the Panel found that since 'the entire investigation rested on an insufficient basis, and therefore should never have been conducted ... we suggest that Guatemala revoke the existing anti-dumping measure on imports of Mexican cement, because, in our view, this is the only appropriate means of implementing our recommendation' (WT/DS60/R, adopted on 25 November 1998, para 8.6, a panel finding that subsequently became moot as the Appellate Body decided that the matter fell outside the Panel's terms of reference).
41. Keep in mind that, as much as Article 19 of the DSU, NAFTA Article 1904.8 does not include an explicit mandate for a NAFTA Chapter 19 panel to instruct a negative determination.
42. US Department of Commerce to Lower Softwood Lumber Duties, International Trade Canada, Press Release No. 243, 6 December 2005, available at http://www.softwoodlumber.gc.ca.