Decisions of the Appellate Body of the World Trade Organization

Canada-Measures Affecting the Importation of Milk and the Exportation of Dairy Products

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Joel P. Trachtman

WTO Appellate Body Report: Canada-Measures Affecting the Importation of Milk and the Exportation of Dairy Products, AB-1999-4, WT/DS103/AB/R, WT/DS113/AB/R (99-4270), adopted by Dispute Settlement Body, 27 October 1999. Canada, Appellant; New Zealand and United States, Appellees. Division: Matsushita, Feliciano and Lacarte-Muró. Major Topics Addressed by Appellate Body: Subsidies Provisions of Agreement on Agriculture; Qualifications of Tariff Schedules.

1. Abstract

New Zealand and the U.S. challenged several aspects of Canada's regime for milk and dairy products, including, at the Appellate Body level, a system for providing reduced-price milk to processors of dairy products for export, and the exclusion of commercial imports of milk from a beneficial tariff-rate quota. As to the reduced-price milk, the Appellate Body rejected the panel's interpretation of Article 9.1(a) of the Agreement on Agriculture, which interpretation seemed to assume that all "payments-in-kind" were subsidies. The Appellate Body did not perform its own analysis, as it was able to find that these payments-in-kind (provision of reduced-price milk) were payments covered by Article 9.1(c), finding that, despite the specific references to "payments-in-kind" in Article 9.1(a), the more general reference to "payments" included "payments-in-kind." The Appellate Body also found the "payments" were "financed by virtue of government action" as required by Article 9.1(c), because the Canadian agencies involved, although they did not provide the resources themselves, were invested with governmental authority and subject to governmental supervision.

With respect to the exclusion of commercial imports of milk from Canada's tariff-rate quota, the Appellate Body found that language included as a qualification to Canada's GATT 1994 schedule, although lacking clarity, must be interpreted to limit or condition Canada's commitment. On this basis, the Appellate Body reversed the panel's finding that Canada's administration of its tariff-rate quota generally violated Article II of GATT 1994, but found that the dollar limitation on purchases imposed by Canada, which was not referenced in its GATT 1994 schedule, did violate Article II.

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