WTO DISPUTE SETTLEMENT

PRACTICAL EXERCISES

TRAMONTANA – RECYCLABLE CARS

Background: Consultations between Patria and Tramontana. Cisalpa, Mafalda and

Tribuna were joined in the consultations as third parties.

Having tried through diplomatic channels to persuade Tramontana to withdraw its

measures, the Government of Patria has now requested consultations with Tramontana under
Article 4 of the Dispute Settlement Understanding (DSU), Articles 4, 7 and 30 of the Agreement
on Subsidies and Countervailing Measures ("SCM Agreement"), and Article XXII of the
GATT 1994. Cisalpa, Mafalda and Tribuna have expressed, respectively, their substantial trade
interest in the consultations, and the three countries have submitted requests to join the
consultations pursuant to Article 4.11 of the DSU. The requests to join the consultations have
been accepted by Tramontana.

The consultations between Tramontana and Patria are to be held today in Geneva, with
the participation of Cisalpa, Mafalda and Tribuna.

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Additional instructions for Patria

The industry is threatening to close down production plants in Patria if Tramontana

goes ahead with its plans, because sales volumes in the region will not be sufficient to justify
the continuation of local production activities (Tramontana is the largest market in the region).
Industry directors have stated that with financial support from the Government they might, in
several years' time, achieve 85 per cent recyclability, but not 90 per cent.

There is much concern amongst workers. The trade union that represents most of the
workers from the three largest manufacturers, led by an influential Member of Parliament, is
putting pressure on the Government to take action against Tramontana so as to ensure that
workers' jobs will not be affected by Tramontana's programme.

The Government is willing to discuss the matter with Tramontana and to take a stance
in favour of the industry in order to protect employment in this sector. The economy is in crisis
and unemployment is rising on a monthly basis, all of which is affecting the Government's
popularity. The Government is therefore keen to do whatever it can to support the domestic
motor industry and its employees.

The Ministry of Trade, which is also responsible for foreign affairs, must, however, take
account of a number of significant constraints: (1) Tramontana is an important historical and
political ally of Patria, and Patria relies on its support in major diplomatic negotiations in other
sectors; (2) the Government of Patria is itself planning to implement a programme similar to
Tramontana's, because it has also become aware of considerable waste management problems in
respect of motor vehicles. The industry is not yet aware of this project.

Additional instructions for Tramontana

The legislation in question is a key part of the reform programme introduced by the
Green Party Government that has just come to power in Tramontana. There is no question of it
being amended. Although the Ministry of Trade is aware of the difficulties that the programme
may encounter in terms of compliance with WTO law, the Ministry of the Environment
steadfastly refuses to envisage making any changes to the programme. The Ministry of the
Environment has the full support of the President, a keen advocate of environmental protection.

Additional instructions for Cisalpa

Cisalpa is a developed country known for its strict environmental standards, and the
principle "who pollutes – pays" is deeply enrooted also in the car manufacturing sector. All the
cars produced in the country contain at least 50% per cent recyclable parts, with many models
reaching up to 95% recyclability of the parts used. Cisalpa has the required technology to
produce cars that comply with Tramontana's regulations unlike many other countries that export
cars there, and therefore Tramontana's environmental programme is likely to bring Cisalpa real
gains in the form of increased car exports. It is also to be noted that Cisalpa has in force a
programme similar to that of Tramontana's in order to ensure the recyclability of car parts.

Additional instructions for Mafalda

Mafalda is a developing country and a new "haven" for a number of firms specializing
in the recycling of materials, and the country stands for considerable gains from Tramontana's

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regulations. It is also to be noted that Mafalda's Reform and Recycling Commission recently
revealed its goals of increasing the recyclability of car materials in the country.

Additional instructions for Tribuna

Tribuna is a developing country that has experienced a spectacular increase in car

production in the recent years. This is a reflection of general economic growth in the country, a
fast developing middle-class population segment, and a large-scale production of affordable
cars (as a matter of fact, the world's cheapest car, costing only 2000 dollars, was produced a few
years ago in Tribuna).

The cars produced in Tribuna are mostly low-cost and entry-level models, and the
environmental impact of car production is not a top priority for the Tribunan authorities in the
current situation. Complying with Tramontana's regulations would require a complete redesign
of the car production process and the raw materials used, and the Tribunan authorities have
made a clear-cut statement that for the moment, the country does not have the resources to start
producing cars complying with Tramontana's regulations.

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 WTO DISPUTE SETTLEMENT

PRACTICAL EXERCISES

TRAMONTANA –- RECYCLABLE CARS

I – Preparation of a Panel Request

Unfortunately, the consultations initiated by Patria did not lead to an amicable

settlement of the dispute with Tramontana concerning its recyclable car programme. The
Government of Patria is still under a lot of pressure from motor industry trade unions, which do
not understand why it is taking so long to take action in countering this clearly abusive
programme that poses a threat to their future. Patria has therefore decided to request the
establishment of a panel. In order to do so, it needs your help, because this is the first time it is
involved in a procedure of this kind.

As lawyers of the international law firm Untervailing, Measures & Co., your task is to
prepare a request for the establishment of a panel on behalf of Patria, bearing in mind that the
Government would like to submit it to the Dispute Settlement Body as soon as possible. The
Government wishes to maximize its chances of success and so, as a cautionary measure, it has
requested draft panel requests from a number of experts. Several groups will therefore
simultaneously prepare a draft request, which they will then submit to the Ministry of Trade and
Foreign Affairs. The Deputy Minister would like the groups to submit the requests and to meet
with all the groups right after to discuss their drafts. He is renowned for his punctuality.

A) Your group will have to prepare a written request for the establishment of a Panel
within the time-limit indicated to you by the Minister. In the preparation of the Panel request
you should:

 Prepare a letter to the Chairman of the Dispute Settlement Body, with a copy to
Tramontana and to the Chairs of any relevant WTO Councils or Committees;

 Identify the Tramontanian measures that you consider are inconsistent with the
WTO agreements;

 Identify the legal provisions of the WTO agreements allegedly violated by those
measures, and briefly explain the reasons for the alleged violation;

 Request the Dispute Settlement Body to establish a panel.

While preparing your request, please keep in mind that the specificity requirements for a panel
request are set out in Article 6.2 of the Dispute Settlement Understanding (DSU). It is important
that a panel request is sufficiently clear because it:

 gives the respondent (and third parties) information on the dispute at hand so as to give
them an opportunity to respond to the complainant's case;

 establishes the jurisdiction of a panel by defining the measures and claims at issue in the
dispute. Measures and claims not set out with sufficient clarity may fall outside the
scope of the panel review.

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You can find examples of previous panel requests filed in WTO dispute settlement proceedings
at WTO Documents Online:

http://www.wto.org/english/tratop_e/dispu_e/find_dispu_documents_e.htm

These requests (filed in a letter, fax etc.) have been circulated to all WTO Members with the
document heading WT/DS (chronological number assigned to the dispute)/ (chronological
number of the document filed). A hypothetical example: WT/DS999(number of dispute)/5(fifth
document circulated in the context of this dispute).

Please note, however, that the quality of previous panel requests varies greatly. For this reason,
we advise you to use them as guidelines only when drafting your own request.

B) Please note as well that the government of Patria has given you some guidelines on how to
approach the case. In these guidelines, the government expresses its objectives, but also poses
some questions it does not know the answer to. It now asks you the following:

Measures (a): Premiums to domestic car manufacturers

 Could it be argued that the premiums are subsidies within the meaning of the
Agreement on Subsidies and Countervailing Measures ("SCM Agreement")? How are
subsidies defined in the Agreement?

 Would the same rules and procedures of the SCM Agreement apply to the two premium
categories, or may different rules apply to each category?

Measure (b): Sales ban of non-recyclable cars

 Could it be argued that recyclable and non-recyclable cars (as determined in

Tramontana's regulations), are like products?

 Could it be argued that the sales ban discriminates between imported non-recyclable
cars against domestic recyclable cars? If so, what conditions would need to be fulfilled?
What would the relevant "non-discrimination provision" of the GATT 1994 be?

Measure (c): Import prohibition on non-recyclable cars

 Could the import prohibition be a quantitative restriction? If so, what would the relevant
article of the GATT 1994 be?

 Are quantitative restrictions banned in absolute terms in the GATT 1994?

Measure (d): General import and sales ban on cars coming from a country that produces non-
recyclable cars

 Could the general import and sales ban on cars coming from a country that produces
non-recyclable cars discriminate between different countries exporting cars (recyclable
or non-recyclable) to Tramontana? If so, what would the relevant "non-discrimination
provision" of the GATT 1994 be?

 Could the general import and sales ban be a quantitative restriction? If so, what would
the relevant article of the GATT 1994 be?
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