WORLD TRADE WT/DS139/R RGANIZATION WT/DS142/R O 11 February 2000 (00-0455) Original: English Canada – Certain Measures Affecting the Automotive Industry Report of the Panel The report of the Panel on "Canada – Certain Measures Affecting the Automotive Industry" is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 11 February 2000 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report, an appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel, and that there shall be no ex parte communications with the panel or Appellate Body concerning matters under consideration by the panel or Appellate Body. Note by the Secretariat : This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by concensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the panel Report is available from the WTO Secretariat. WT/DS139/R WT/DS142/R Page i TABLE OF CONTENTS Page I. PROCEDURAL HISTO RY....................................................................................................................................... 1 A. CONSULTATIONS...........................................................................................................................................................1 B. ESTABLISHMENT AND COMPOSITION OF THE PANEL..............................................................................................1 C. PANEL PROCEEDINGS...................................................................................................................................................2 II. BACKGROUND............................................................................................................................................................ 2 A. THE AUTO PACT ...........................................................................................................................................................2 1. Letters from Auto Pact manufacturer beneficiaries to Industry Canada ........................................................ 2 2. GATT Working Party examination of the Auto Pact........................................................................................... 3 B. THE CANADA - UNITED STATES FREE TRADE AGREEMENT (CUSFTA).............................................................3 C. THE NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)..............................................................................4 D. CANADA'S DOMESTIC MEASURES..............................................................................................................................4 1. The MVTO 1998 ........................................................................................................................................................ 5 2. Special Remission Orders ........................................................................................................................................ 7 III. FINDINGS AND RECOMMENDATIONS REQUESTED BY THE PARTIES .................................... 8 A. JAPAN'S REQUEST FOR FINDINGS AND RECOMMENDATIONS.................................................................................8 B. THE EUROPEAN COMMUNITIES' REQUEST FOR FINDINGS AND RECOMMENDATIONS........................................9 C. CANADA'S REQUEST FOR FINDINGS AND RECOMMENDATIONS...........................................................................10 IV. REQUEST FOR PRELIMINARY RULING..................................................................................................11 A. JAPAN'S ARGUMENT GIVING RISE TO CANADA'S REQUEST FOR A PRELIMINARY RULING.............................11 B. CANADA'S REQUEST FOR A PRELIMINARY RULING...............................................................................................11 C. THE PANEL'S DECISION .............................................................................................................................................12 V. FACTUAL ARGUMENTS OF THE PARTIES .................................................................................................13 A. THE MEASURES AT ISSUE..........................................................................................................................................13 1. Terminology and clarification of claims .............................................................................................................13 (a) Japan's framing of the measures at issue.............................................................................................................13 (b) The European Communities' framing of the measures at issue...........................................................................13 (c) Canada's response to the complainants' framing of the measures at issue..........................................................14 (d) Japan's follow-up to Canada's response..............................................................................................................17 (e) The EC's follow-up to Canada's response...........................................................................................................17 2. Letters........................................................................................................................................................................18 (a) Japan's arguments concerning the Letters...........................................................................................................18 (b) The EC's arguments concerning the Letters........................................................................................................19 (c) Canada's response to the complainants' arguments concerning the Letters........................................................21 (d) Japan's rebuttal to Canada's response..................................................................................................................22 (e) The EC's rebuttal to Canada's response...............................................................................................................23 (f) Response by Canada to the complainants' rebuttals............................................................................................29 (g) The European Communities' follow-up to Canada's response............................................................................32 3. The Auto Pact, the CUSFTA and the NAFTA.....................................................................................................33 (a) Japan's arguments regarding the Auto Pact, the CUSFTA and the NAFTA ......................................................33 (b) The EC's arguments regarding the Auto Pact, the CUSFTA and the NAFTA...................................................40 (c) Canada's response to the complainants' arguments regarding the Auto Pact, the CUSFTA and the NAFTA ...45 (d) Japan's rebuttal to Canada's response..................................................................................................................48 4. Measures relating to administration....................................................................................................................49 (a) Japan's account of Canada's administration of the import duty exemption ........................................................49 (b) The EC's account of Canada's administration of the import duty exemption .....................................................55 (c) Canada's response to the complainant's arguments regarding administration of the import duty exemption.....55 B. STRUCTURE OF THE AUTOMOTIVE INDUSTRY .......................................................................................................57 1. Japan's arguments on the structure of the motor vehicles industry ...............................................................57 (a) The integration of the global automobile industry and its implications for the structure of the Canadian industry .........................................................................................................................................................................58 (b) Implications for the structure of the Canadian industry......................................................................................58 WT/DS139/R WT/DS142/R Page ii (c) Production and importation of like motor vehicles .............................................................................................60 (d) Production and importation of like parts, components and materials used in the manufacture of automobiles .65 (e) Supply and consumption of like services ............................................................................................................65 (f) The discriminatory effects of the Duty Waiver...................................................................................................66 2. Canada's response to certain arguments regarding the structure of the motor vehicles industry............69 3. Japan's rebuttal to Canada's response................................................................................................................70