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<html> <head> <meta name="Generator" content="Corel WordPerfect 8"> <title>CANADA WILL REQUEST WTO AUTHORITY TO RETALIATE AGAINST THE EU </title> </head> <body text="#000000" link="#0000ff" vlink="#551a8b" alink="#ff0000" bgcolor="#c0c0c0"> May 14, 1999 (5:45 p.m. EDT) No. 112 CANADA WILL REQUEST WTO AUTHORITY TO RETALIATE AGAINST THE EU International Trade Minister Sergio Marchi and Agriculture and Agri-Food Minister Lyle Vanclief announced today that the Government will be requesting authorization from the World Trade Organization (WTO) to retaliate against the European Union (EU) for its continued ban on imports of Canadian beef. In 1997, a WTO panel made it clear that the EU ban on beef produced with growth hormones is not based on science and therefore is inconsistent with the EU's WTO obligations. This finding was later confirmed by the WTO Appellate Body in 1998, and a WTO arbitrator gave the EU until May 13, 1999, to lift the ban. The EU has not met its deadline; therefore, Canada is exercising its WTO rights to suspend trade concessions to the EU. "Canada plays by the rules, and expects others to do so as well," said Minister Marchi. "The WTO has ruled twice in our favour, yet the EU has failed to comply with the ruling. This is unacceptable." Minister Marchi said Canada would be seeking authority to increase tariffs on selected products imported from the EU for approximately $70 million worth of lost beef exports due to the ban. Under WTO rules, Canada has until June 12 to request this authority. "Access to European markets is important to the growth of the Canadian agriculture and agri-food sector," said Agriculture and Agri-Food Minister Lyle Vanclief. "Our first preference is to resolve this dispute in a trade-enhancing manner; however, if we cannot find a mutually agreeable solution, we will not hesitate to exercise our WTO rights." Under the WTO settlement process, if a WTO member does not comply with a WTO ruling, members can either reach an agreement on compensation or the aggrieved member can retaliate. Despite discussions in recent weeks, Canada and the EU have not come to an acceptable agreement on compensation. On April 17, the Government of Canada announced a 30-day consultation period with Canadians on a proposed list of products that might be subject to tariff increases. The final list of products will be based on the comments received from the public and the level of retaliation authorized by the WTO Settlement Body. - 30 - A backgrounder, including next steps, is attached. For further information, media representatives may contact: Leslie Swartman Office of the Minister for International Trade (613) 992-7332 Sylvie Millette LeDuc Office of the Minister of Agriculture and Agri-Food (613) 759-1761 Media Relations Office Department of Foreign Affairs and International Trade (613) 995-1874 This document is also available on the Department of Foreign Affairs and International Trade's Internet site: <a href="https://bac-lac.wayback.archive-it.org/web/20061209062249/http://www.dfait-maeci.gc.ca/">http://www.dfait-maeci.gc.ca</a> Backgrounder History of the Dispute <ul> <li>In 1989, the EU banned the use of growth promoting hormones in livestock and imposed a ban on the importation of meat derived from cattle treated with these hormones.</li> <li>Both Canada and the United States consistently opposed the import ban on the grounds that it was not based on scientific evidence and therefore created an unjustified barrier to trade.</li> <li>The Agreement establishing the World Trade Organization, which took effect in 1995, provided an opportunity for Canada to challenge the consistency of the EU ban under the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement).</li> <li>WTO Members, including Canada and the EU, negotiated the SPS Agreement to ensure that while countries have the right to provide the level of health protection they deem appropriate, sanitary and phytosanitary measures must be based on science and they should not be misused as disguised restrictions on trade. </li> <li>Canada conducted a review of all six growth-promoting hormones at issue and found them to be safe when used in accordance with good veterinary practices. </li> <li>Five of the six growth-promoting hormones at issue were reviewed and endorsed by the Codex Alimentarius, an international body established to set and harmonize food safety standards. It was determined that these hormones did not present a risk when used according to good veterinary practices. </li> <li>In July 1996, Canada held formal WTO consultations with the EU regarding the ban. The consultations were unsuccessful in resolving the dispute and Canada requested the establishment of a WTO dispute settlement panel. The panel was established in October 1996.</li> <li>The Panel released its final report in August 1997 which concluded that there was no justification for the ban and that the EU was in violation of its WTO obligations. </li> <li>The EU exercised its right under the dispute settlement procedures of the WTO and appealed the panel report in September 1998.</li> <li>The Appellate Body, which released its report on January 16, 1998, also concluded that there was no scientific basis for the ban and that the EU was in violation of its WTO obligations.</li> <li>The Dispute Settlement Body of the WTO adopted the Panel and Appellate Body reports on February 13, 1998. </li> </ul> <ul> <li>Following the adoption of the reports, the EU sought 4 years to implement the rulings. Canada did not agree since it was well in excess of the 15-month guideline given to WTO members to implement rulings and the matter was referred to an arbitrator. </li> <li>The arbitrator concluded that there were no particular circumstances to justify giving the EU more than 15 months to implement the rulings and gave the EU until May 13, 1999, to bring its measure into compliance with its WTO obligations.</li> <li>To date, a mutually acceptable solution on compensation has not been found.</li> <li>On April 17, the federal government published a notice in the Canada Gazette to request comments on a proposal to increase tariffs of certain EU products in the event that it should become necessary to request authorization to retaliate.</li> <li>Interested parties have been given until May 17, 1999, to provide comments. </li> </ul> Next Steps <ul> <li>Canada has until June 12 to request authorization from the WTO Dispute Settlement Body to retaliate.</li> <li>The final list of products will be based on the comments received and the level of retaliation authorized by the WTO Dispute Settlement Body. Tariffs of 100 percent would be imposed on those products.</li> <li>The EU has the right under the WTO to object to the level of retaliation Canada is seeking. </li> <li>If there is no appeal, Canada will be in the position to impose tariffs once it has received authorization from the WTO Dispute Settlement Body. An announcement will be made prior to any tariff increases.</li> <li>If the EU does appeal, an arbitrator would be appointed to rule on the level of retaliation. The arbitrator would be given 60 days from May 13 (i.e. until July 12) to complete the arbitration.</li> <li>Canada would not be allowed to retaliate until the arbitration is completed. </li> <li>The arbitrator does not rule on the nature of retaliation. The arbitration is limited to the level of retaliation. The arbitrator's decision is final and cannot be appealed.</li> <li>Once the arbitrator has rendered a decision on the level of retaliation, Canada would have to request again authorization to retaliate, from the WTO Dispute Settlement Body, this time to a degree consistent with the arbitrator's decision.</li> </ul> <ul> <li>Once authorization has been received from the WTO Dispute Settlement Body,<strike> </strike>Canada is free to determine when it will impose tariffs on EU products. An announcement will be made prior to any tariff increases.</li> </ul> </body> </html>

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