US vs. EU- Information Technology Case DS375 (DS376/DS377 ) Professor: Stuart Malawer ITRN-603 Soujanya Komatreddy G00503353

Back Drop “The United States, Japan and Taiwan complained to the WTO in 2008 that EU customs authorities had reimposed tariffs on three Information Technology products after new features were added”. The Three Products in question are Flat-Panel Displays Multi-Function Printers TV set-top boxes. “The EU imported about $11 billion worth of the three products from all suppliers in 2007, in many cases collecting tariffs of 6 to 14 percent”.

The EC & these Products The EU said- not High-Tech According to the EC - The EC declined three categories of goods: television cable converter boxes that also deliver the Internet, flat-panel computer screens, and printers that also scan, fax or copy. The EU argued that these products were old-fashioned consumer goods, not cutting-edge high-tech products. Under the EU's tariff classifications, these goods were considered ordinary cable boxes, TV screens and photocopiers, subject to tariffs between 6% and 14%. The dispute among the signatories was over the definition of "high-tech." The EU's total imports of these products were valued at $11 billion in 2007, according to the ITIC

The US and others - lobby to reduce Tariffs The U.S., Japan and Taiwan for years lobbied the EU to reduce these tariffs. The three countries are home to some of the world's largest makers of electronic goods. Companies with operations in the U.S., such as Hewlette-Packard Co., Dell Inc. and Japan-based Canon Inc., lobbied for the EU to lower its tariffs Also lobbied the U.S. government to take the case to the WTO. The EU was "manipulating tariffs to discourage technological innovation." - says U.S. trade official The EU declined to remove the tariffs.

The US and others – their Claim The three countries claim that the EC is obliged to grant duty-free treatment under the European Communities Schedule of Concessions to the GATT 1994 ("the EC Schedule") under Information Technology Agreement or "ITA” “The primary purpose of the case is not just the three products that are under consideration, but to preserve the ITA, which starting in 1997 eliminated tariffs on most information technology products” Pursuant to Article 4 of the DSU and Article XXII:1 of the GATT 1994 regarding the tariff treatment to information technology products: The United States and Japan requested Consultations with European Communities on 28 May 2008 Chinese Taipei (Taiwan, Penghu, Kinmen and Matsu) requested Consultations with European Communities on 12 June 2008

WTO - Information Technology Agreement - ITA A multilateral agreement emerging from the Uruguay Round, eliminating tariffs on specific technology and telecommunications products by signatory countries. The most favored nation (MFN) principle, mandates the benefits of ITA tariff liberalization to be extended to all WTO members. Objectives : Increased trade, global diffusion of information technology, and enhanced global economic growth and welfare through trade liberalization for information technology (IT) products. Concluded in late 1996 with 29 WTO member countries and now includes 72 WTO members

Global Trade covered by ITA Global trade in products covered by the ITA increased to $4 trillion in 2008 from $1.2 trillion in 1996.

Panel - Establishment & Composition On 23 September 2008, the Dispute Settlement Body established a single Panel pursuant to the joint panel request of the United States, Japan and Chinese Taipei. Document WT/DS375/8, WT/DS376/8 and WT/DS377/6 in accordance with Article 6 of the DSU. On 12 January 2009 and 22 January 2009 – composition of the Panel established by the Director General. Countries that participated in Panel Proceedings as Third Parties: Australia; Brazil; China; Costa Rica; Hong Kong, China; India; Japan (in respect of the United States' and Chinese Taipei's complaints); Korea; the Philippines; Singapore; Chinese Taipei (in respect of the United States' and Japan's complaints); Thailand; Turkey; the United States (in respect of Japan's and Chinese Taipei's complaints); and Vietnam

Measures at Issue EC raised concerns on the status of the complaining parties as third parties to this dispute EC objected to the inclusion of its member States as responding parties of this dispute. Products at Issue: Flat panel display devices – FPDs Set-top Boxes having a Communication function – STBCs Multifunctional Digital Machines – MFMs Pursuant to Article 13.1 of the DSU, the World Customs Organization ("WCO") Secretariat replied for certain issues relating to the Harmonized System ("HS") – on 29 September 2009

The EC’s Inconsistence - Findings FPDs and MFMs: EC - Inconsistence with Articles II:1(a) and II:1(b) of the GATT 1994 by according certain FPDs treatment less favorable than that provided in the EC Schedule”. Imposed ordinary customs duties, or other duties and charges, in excess of those set forth in the EC Schedule. STBCs EC inconsistence with Articles X:1 and X:2 – Did not promptly publish the Explanatory Notes identified above in respect to these products Applied duties to these products using the approach specified in these Explanatory Notes prior to the date of their publication.

Decision by the WTO – the US hails Victory On 16 August 2010 - The World Trade Organization ordered the European Union to strike down import tariffs on billions of dollars of high-tech goods or risk retaliatory trade sanctions. The arbitration panel requested "the European Communities to bring the relevant measures into conformity with its obligations.“ U.S. Trade Representative Ron Kirk hailed the decision as "an important victory for U.S. technology manufacturers and workers.“ “This ruling affirms the principle that changes in technology are not an excuse to apply new duties to products covered by the Information Technology Agreement”. Biggest wins yet for the U.S. at the Geneva-based trade body in dollar terms

The EU- WTO Appeal period 60 days to appeal. WTO will rule within three months in case the EU appeals. EU officials may renegotiate the entire ITA. “If the EU doesn't respect the WTO ruling and lift the tariffs, the U.S., Japan and Taiwan would have the right to impose tariffs on goods made in Europe—including cars, pharmaceuticals and cheese—valued at an amount equal to the tariffs that the WTO has now ruled illegal.”

Panel and Appellate Proceeding Timeline 28 May 2008: US Request for Consultations 18 August 2008: US, Japan, Taipei request the establishment of a panel. 23 September 2008: Establishment of panel 12 January 2009: US, Japan, Taipei requested the Director-General to compose the panel. 4 February 2009 : Parties and the Panel held their organizational meeting 25 August 2009: Panel issued the draft descriptive part of its Panel Reports 8 September 2009: Panel received comments from the parties on the draft descriptive part 11 June 2010 - Panel issued its Interim Reports to the parties 23 July 2010 Panel Issued Final Reports to the parties 16 August 2010 : Decision Made

Articles and Agreements cited: Article 2: Administration – “Administer these rules and procedures and, except as otherwise provided in a covered agreement, the consultation and dispute settlement provisions of the covered agreements. Accordingly, the DSB shall have the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions and other obligations under the covered agreements. With respect to disputes arising under a covered agreement which is a Plurilateral Trade Agreement, the term “Member” as used herein shall refer only to those Members that are parties to the relevant Plurilateral Trade Agreement. Where the DSB administers the dispute settlement provisions of a Plurilateral Trade Agreement, only those Members that are parties to that Agreement may participate in decisions or actions taken by the DSB with respect to that dispute”. Article 4: Consultations – “ Members affirm their resolve to strengthen and improve the effectiveness of the consultation procedures employed by Members”. Article 10: Third Parties – “The interests of the parties to a dispute and those of other Members under a covered agreement at issue in the dispute shall be fully taken into account during the panel process”. Article 13: Right to Seek Information – “Each panel shall have the right to seek information and technical advice from any individual or body which it deems appropriate. However, before a panel seeks such information or advice from any individual or body within the jurisdiction of a Member it shall inform the authorities of that Member. A Member should respond promptly and fully to any request by a panel for such information as the panel considers necessary and appropriate. Confidential information which is provided shall not be revealed without formal authorization from the individual, body, or authorities of the Member providing the information”. Article 22: Compensation and the Suspension of Concessions - “Compensation and the suspension of concessions or other obligations are temporary measures available in the event that the recommendations and rulings are not implemented within a reasonable period of time. However, neither compensation nor the suspension of concessions or other obligations is preferred to full implementation of a recommendation to bring a measure into conformity with the covered agreements. Compensation is voluntary and, if granted, shall be consistent with the covered agreements.”

Sources http://www.internationaltraderelations.com/Article.WTO%20Case%20(ITA%20Agrement)%20(WSJ%208.17.10).htm http://ca.reuters.com/article/technologyNews/idCATRE67F2YK20100816 http://www.reuters.com/article/idUSTRE65965720100610 http://www.wto.org/english/news_e/news10_e/dsb_21sep10_e.htm http://www.ustr.gov/webfm_send/1250 http://www.ustr.gov/about-us/press-office/press-releases/2010/august/united-states-wins-wto-dispute-eu-high-tech-product http://www.unctad.org/en/docs/edmmisc232add33_en.pdf The WTO – European Communities and its member States – Tariff Treatment of certain Information Technology Products – Reports of the Panel