World Trade Organization

• Author: International Law Group

On December 20, 2002, the Appellate Body of the World Trade Organization (WTO) issued its report in the case brought by New Zealand and the U.S. challenging Canada's measures for the export of dairy products. The Appellate Body basically upholds the previous Panel Report in that Canada has provided export subsidies in excess of its WTO commitments. [See 2002 Int'l Law Update 188, 2002 Int'l Law Update 125, 1999 Int'l Law Update 154.]

Pending before the WTO for several years, the dispute began when Canada introduced its "milk class system" (MCS) in 1995 to replace its subsidy payments on dairy products. In 1999, a WTO Panel found that Canada's MCS then in force constituted an export subsidy by providing for discounts on exported milk.

Canada later initiated its "commercial export milk" (CEM) scheme. It is free from pricing regulation, and uses Special Milk Class 5(d) only for export and within the limits of Canada's permissible export subsidies. Another WTO Panel found the revised CEM improper in a July 2002 ruling. Canada appealed, resulting in the present Appellate Body (AB) decision.

First, the AB overturns the Panel's interpretation of Article 10.3 of the Agreement on Agriculture in paragraph 5.19 of the Panel Report. According to the Panel, a complaining Member would be required to make out a prima facie case in support of all aspects of its claims under Articles 3.3, 8, 9.1(c), and 10.1 of the Agreement on Agriculture. The AB, however, holds that...