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WT/DS162/R/Add.1 Page 5

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restrict their imports of foreign steel.9

3.5

In the view of Japan, these settlements demonstrate the third type of negative impact of the 1916 Act.  The Act is being used by US companies to extort settlements from foreign companies.  The settlements disrupt free trade and further undermine the world trading order.  If left unchecked, the practice will compromise the WTO regime.

3.6

Japan argues, in addition, that litigation under the 1916 Act is likely to multiply.  This is because individual US companies can initiate cases (without the majority support of the remaining industry or evidence of dumping and material injury, as required under the WTO and the other US antidumping law) and because US companies have seen how easily Wheeling-Pittsburgh and Geneva Steel were able to burden and extract settlements from their foreign competitors.

3.7

Japan considers that, for these reasons, the lack of a determination of liability by the courts at the present moment is beside the point.  Injury has accrued and is continuing and the mere existence of the 1916 Act does great damage to Japan's legitimate trading interests.

3.8

The United States considers that Japan's allegations that the 1916 Act is having a "negative impact on Japanese companies" are unsubstantiated.  These allegations should be disregarded by the Panel as they are without proof and, in any event, are not relevant to the legal questions before the Panel.  First, Japan has presented no evidence that the 1916 Act is the actual cause of the decrease in steel exports from Japan to the United States.  In fact, a dumping petition involving Japanese steel was filed with the Department of Commerce in September 1998 with the Commerce Department making a preliminary finding of critical circumstances in November 1998.  This meant that if the injury finding were confirmed by the International Trade Commission (which it was), the imports would be subject to antidumping duties from November 1998.  Thus, the decline in steel imports is more likely attributable to this injury finding than the 1916 Act case.  Furthermore, there are many factors that go into the business decision of how much to export to another country.  Japan simply has not shown that the 1916 Act was the factor that caused the Japanese trading firms to decrease their imports into the United States.

3.9

The United States notes, second, that even if it is assumed for the sake of argument that the allegations are credible, they are not material to the Panel's determination in the present case.  Even if the 1916 Act were affecting trade between Japan and the United States, that is not relevant to whether the 1916 Act is inconsistent with the WTO obligations raised by Japan in its panel request.  Whether or not there are any trade effects would only be relevant in the event that Japan was in the position of seeking compensation for failure of the United States to implement an adverse panel finding.  Outside of that context, the trade effects are not relevant in the present case.

D. THE DISTINCTION BETWEEN DISCRETIONARY AND MANDATORY LEGISLATION AND ITS RELEVANCE TO THE PRESENT CASE

3.1

The United States argues that if the complaining party is challenging a statute, as such, as Japan is doing in the present case, the first question for the Panel is whether the statute is mandatory or discretionary.  It is well established under GATT 1947 and WTO jurisprudence that only legislation which mandates WTOinconsistent action can itself be WTOinconsistent.  In this regard, the panel in Canada Measures Affecting the Export of Civilian Aircraft recently stated:

"We recall the distinction that GATT/WTO panels have consistently drawn between discretionary legislation and mandatory legislation.  For example, in United States Tobacco, the panel "recalled that panels had consistently ruled that legislation which mandated action inconsistent with the General Agreement could be challenged as

9 Japan refers to Wheeling-Pittsburgh Steel Corporation press releases.

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