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Terranueva Seeks Justice1

Instructions: Please prepare a briefing memorandum to Ambassador Mendoza answering

the questions set out below. Your essay should be based on the WTO Dispute Settlement

Understanding and the readings in Jackson et al. Additional research should be unnecessary. It is

estimated that your memorandum should not need to be more than 10 pages, double-spaced.

To protect its ailing steel industry from import competition, the hypothetical state of

Richland, a WTO member and an advanced industrialized country, has imposed a quota on imports

of steel from the hypothetical state of Terranueva, a developing country that recently joined the

WTO. Richland’s quota limits steel imports from Terranueva to the same annual quantity of steel as

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it has imported from Terranueva in past years. After extensive lobbying by Ferrometal S.A.,

Terranueva’s major steel producer, and the Terranueva Confederation of Labor, the Government of

Terranueva has decided to challenge Richland’s import quota as a violation of WTO obligations

under GATT articles XI and XIX and the WTO Agreement on Safeguards.

You are an associate with the law firm of Ruth, Gehrig & DiMaggio, which has represented

Ferrometal in a number of matters. Ferrometal asks the firm to assist Terranueva’s understaffed

Delegation to the WTO in the dispute settlement proceedings against Richland. You have been

assigned to advise Terranueva’s Permanent Representative to the WTO, Ambassador Teresa

Mendoza, on procedural and systemic issues arising in the course of the dispute settlement

proceedings. (Your assignment is limited to issues arising under the WTO Dispute Settlement

Understanding. You do not need to consider GATT articles XI and XIX and the Agreement on

Safeguards, which another lawyer in the firm is assigned to research.)

In the course of the proceedings, the following situations arise on which Ambassador

Mendoza requests your advice:

1. To mitigate the damage to Terranueva’s future steel exports and employment in the steel

industry, it is important to act quickly against Richland’s steel quota. Therefore, Terranueva’s

Minister of Foreign Trade, Enrique González, instructs Ambassador Mendoza to request the

immediate establishment of a panel at the next meeting of the DSB. Is Terranueva acting in

accordance with the DSU by requesting the establishment of a panel in this way? If not, could the

DSB refuse to establish the panel? And, if Terranueva’s request is not in accordance with the DSU,

what steps should Terranueva take instead?

2. Ambassador Mendoza learns that Richland’s Permanent Representative to the WTO,

Ambassador Karl Schiller, has received instructions from his Government to block the establishment

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of a panel as much as possible. What can the Richland do to attempt to block the establishment of

1 Adapted from Peter Van den Bossche, The Law and Policy of the World Trade

Organization: Text, Cases and Materials 304-306 (Cambridge 2005).

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the panel? Can it refuse to accept the jurisdiction of the WTO to hear this dispute and demand,

instead, that the dispute be heard before the International Court of Justice? What can Terranueva do

to expedite the establishment of the panel and assure that the case is heard in the WTO?

3. After the panel is established but before its composition is determined, Richland’s

Ambassador Schiller announces that his Government will insist that the panel include five members,

of whom at least one is a national of Richland and none is a national of a developing country.

Among the five members, it wants two economists and a metallurgical engineer. Ambassador

Schiller’s instructions are to refuse to agree to any panel whose composition does not meet these

requirements. The Government of Terranueva cannot agree to Richland’s requirements and, instead,

wants to assure that at least one panelist is a national of a developing country. What can

Ambassador Mendoza do to expedite the process of composing the panel, including securing the

appointment of a panelist from a developing country?

4. The Republic of Costa Dorada, a WTO member, would like to become a third party in this

dispute. Is this possible? Terranueva would welcome Costa Dorada’s participation as a third party,

but Richland would like to prevent it. Can Richland prevent Costa Dorada from becoming a third

party in the dispute?

5. In Richland’s first submission to the panel, Richland argues that even if its import quota

were inconsistent with WTO obligations, Terranueva has failed to present any economic evidence

that the import quota (which permits Terranueva to export the same annual quantity of steel as it has

exported in past years) has harmed Terranueva’s steel exports and therefore the panel should dismiss

Terranueva’s case. Does Terranueva have the burden of presenting evidence to show that Richland’s

measure has harmed its steel exports? How should Terranueva’s rebuttal submission respond to

Richland’s argument?

6. In the panel report, the panel finds in favor of Terranueva and recommends that the DSB

request Richland to bring its measure at issue in this dispute into conformity with its WTO

obligations. Richland’s Ambassador Schiller denounces the report as a legal travesty and says that

Richland will appeal the case to the Appellate Body. When and how can Richland appeal the panel

report? When will Richland need to submit its appellant’s submission? When can a ruling of the

Appellate Body be expected?

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7. Richland appeals the panel’s report. Ambassador Mendoza learns that the division of the

Appellate Body that will hear the case includes an Appellate Body Member who is a national of

Richland. Can Terranueva prevent the Richland national from hearing the appeal?

8. The Appellate Body upholds the Panel Report. Richland’s Ambassador Schiller

announces that the Government of Richland intends to block adoption of the Appellate Body Report

and the Panel Report as upheld. What can Terranueva do to prevent Richland from blocking the

adoption?

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9. After the DSB adopts the Appellate Body Report and the Panel Report as upheld,

Ambassador Schiller announces that Richland will comply with the DSB’s recommendations and

rulings, but that it is unable to do so immediately. Can Terranueva do anything to compel Richland

to withdraw the quota without delay?

10. After the expiration of six months (the period that was determined to be a reasonable

time for implementation), Richland claims that it has fully implemented the recommendations and

rulings of the DSB. Minister of Trade González and Ambassador Mendoza are baffled by this

announcement since the import quota on steel is still in force. What can Terranueva do next? Can

Terranueva immediately take retaliatory measures?

Be prepared to discuss in class: In question 10, suppose that Richland’s import restrictions

had taken the form of a supplementary import duty instead of a quota and that, at the expiration of

the six-month reasonable time for implementation, Richland canceled the import duty on future

import shipments but refused to refund the duties it had collected on past shipments. Can

Terranueva do anything to compel Richland to refund the duties it collected?

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