CASE ASSIGNMENT

ON

NATIONAL TREATMENT, AGRICULTURE, AND THE KOREA BEEF

CASE

SUBMITTED ON:

2017-01-30

Submitted By: Submitted to

Zahawa Ahmad (1261) Mr. Bipin

VI Semester Faculty of Law

NATIONAL LAW UNIVERSITY, JODHPUR

WINTER SESSION

(JANUARY TO MAY 2017)

 ACKNOWLEDGEMENT

On the completion of this project I find that there are many persons to whom I would
like to express my gratitude, since without their help and co-operation the success of this
educative endeavour would not have been possible.

I welcome this opportunity to express my sincere gratitude to my teacher and guide,

respected Bipin Sir who has been a constant source of encouragement and guidance
throughout the course of this work.

I am grateful to the IT Staff for providing all necessary facilities for carrying out this
work. Thanks are also due to all members of the Library staff for their help and assistance at
all times.

I am also grateful to all my friends and colleagues for being helpful in their
differences and for their constant support.

I express my deepest gratitude to my father .Dr. Anis Ahmad, who has been the real
driving force for this work and for making me realize my potential and encouraging me to
believe in myself and to push me to work hard and to give my best in this project.

(Zahawa Ahmad)
NATIONAL TREATMENT, AGRICULTURE, AND THE KOREA BEEF
CASE:

CITATION:

Korea – Measures Affecting Imports of Fresh, Chilled, and Frozen Beef (complaint by the
United States, WT/DS161/1, and WT/DS169/1, complaint by Australia).
The DSB adopted the Appellate Body Report and the Panel Report, as modified by the
Appellate Body Report, on 10 January 2001.

PARTIES:

Complainants: Australia
United States
Respondent: Korea

TIMELINE OF THE DISPUTE:

Establishment of Panel 26 May and 26 July 1999

Circulation of Panel Report 31 July 2000
Circulation of AB Report 11 December 2000
Adoption 10 January 2001

MEASURE AND PRODUCT AT ISSUE

• Measure at issue:
1. Korea's measures affecting the importation, distribution and sale of beef,
2. Korea's “dual retail system” for sale of domestic imported beef), and
3. Korea's agricultural domestic support programmes.

• Product at issue: Beef imports from Australia and the United States.

INTRODUCTION
On 1 February 1999, the US requested consultations with Korea in respect of a Korean
regulatory scheme that allegedly discriminates against imported beef by inter alia, confining
sales of imported beef to specialized stores (dual retail system), limiting the manner of its
display, and otherwise constraining the opportunities for the sale of imported beef. The US
alleged that Korea imposes a mark-up on sales of imported beef, limits import authority to
certain so-called “super-groups” and the Livestock Producers Marketing Organization
(“LPMO”), and provides domestic support to the cattle industry in Korea in amounts which
cause Korea to exceed its aggregate measure of support as reflected in Korea’s schedule. The
US contended that these restrictions apply only to imported beef, thereby denying national
treatment to beef imports, and that the support to the domestic industry amounts to domestic
subsidies that contravene the Agreement on Agriculture. The US alleged violations of
Articles II, III, XI, and XVII of GATT 1994; Articles 3, 4, 6, and 7 of the Agreement on
Agriculture; and Articles 1 and 3 of the Import Licensing Agreement.

On 13 April 1999, Australia requested consultations with Korea on the same basis as the US
request.

On 15 April 1999, the US requested the establishment of a panel in respect of WT/DS161. At

its meeting on 28 April 1999, the DSB deferred the establishment of a panel.

FACTUAL MATRIX:

The case was concerning the measures maintained by the republic of Korea on imports of
beef.

 Since its accession in 1967, Korea maintained balance of payments on various

products. Although the restrictions were subject to relaxation by the committee, by
1988 restriction for which Korea claimed BOP included 358 items including beef.
Later when tariff was reduced the beef import kept on rising in huge amount, which
eventually led to falling in prices in domestic market and creating pressure for the
farmers.
 In October 1984, Korea ceased issuing tenders for commercial imports to market
which led to a virtual stop of commercial beef imports. Thought these measures were
 neither notified nor discussed in BOP committee. In august1988, it did open it market
but for permitting up ti 14,500 tons of beef to be imported only.

BOP CONSULTATIONS:
 The meeting in December 1987 made the committee realise the need for improvement
and expressed that the current situation and outlook for the balance of payments was
such that import restrictions could no longer be justified under Article XVIII:B. The
conditions laid down in paragraph 9 of Article XVIII for the imposition of trade
restrictions for balance-of-payments purposes and the statement contained in the 1979
Declaration on Trade Measures Taken for Balance-of-Payments Purposes that
'restrictive trade measures are in general an inefficient means to maintain or restore
balance-of-payments equilibrium' were also recalled.
 The BOP Committee "stressed the need to establish a clear timetable for the early,
progressive removal of Korea's restrictive trade measures maintained for balance-of-
payments purposes. It welcomed Korea's willingness to undertake another full
consultation with the Committee in the first part of 1989. Members of the Committee
had stated that "they did not necessarily expect Korea to disinvoke Article XVIII:B
immediately ...".
 Whereas the economic indicators showed a continuation of the favourable economic
situation terms of trade was improved, the ratio of external debt to GNP decreased
from 30 per cent in 1987 to 20.4 per cent for the period January-September 1988.

KOREA BEEF PRODUCTION AND IMPORT:

 In the 1970s and late 1980s Korea adopted a number of policies to promote a cattle
herd build up. As well it began to import large quantity of beef for domestic
consumption. It undertook an expansion of credit to help farmers. During this period
Korean beef imports averaged 30330 metric tons.
 This success led to a strong increase in domestic cattle numbers. Statistics show the
beef cattle inventory doubled between 1982 and 1986. This led to fall in prices.

PRIORTO 1JULY 1987

 Korea beef import were governed by the foreign trade transaction act which came in
force in 1967. The FTTA provided that the Minister of Trade and Industry was
obliged to publicly notify the classification of automatic approval import items;
restricted approval items; and prohibited items. For restricted items, the Minister was
required to lay down procedures controlling their import, including any restrictions on
quantity. These arrangements were published in a consolidated public notice (the
Exportand Import Notice) As restricted products, beef could be imported on the
recommendation of the National Livestock Cooperatives Federation (NLCF) subject
to the guidelines of the Ministry of Agriculture, Forestry and Fisheries (MAFF),
which controlled the quota allocation. If import levels became too high in relation to
the level of consumption, imports could be adjusted or suspended.
 Under the Foreign Trade Transaction Act, the Republic of Korea handled beef
imports via two separate mechanisms. One mechanism was concerned with imports of
beef for general domestic consumption and generally covered more than 90 per cent
of beef imports. These were administered by the NLCF which was established in 1981
by the Livestock Cooperative Law. The NLCF imported beef for the general market
through a tender system, according to the MAFF's guidelines.
 The second mechanism was concerned with imports of high-quality beef for hotels
and was handled by the Korean Tourist Hotel Supply Centre (KTHSC) between 1981
and 1985.

CURRENT IMPORT SYSTEM:

 On 1 July 1987 the Foreign Trade Transaction Act was superseded by the Foreign
Trade Act (Law No. 3895 of 31 December 1986). Anew organization was established
by the Korean Government, the Livestock Products Marketing Organization (LPMO),
with effect from 1 August 1988. This organization administered on an exclusive basis
the importation of beef within the framework of quantitative restrictions set by the
Korean Government.
 The main function of the LPMO was the administration of the quota restrictions set by
the government.
 Under the current import arrangements, the MAFF sets a maximum import level on
the basis of various criteria such as estimated domestic beef production and estimated
 domestic consumption. In 1988, the LPMO imported the beef through a system of
open tenders and resold a major part of it by auction to the domestic market.
 Between August and October 1988 the LPMO imposed an announced base price
under which the meat was not sold at the wholesale auction. Since October, no
explicit base price had been announced on the understanding that a certain base price
level had to be respected. After having deducted its overhead, the difference between
the import contract price and the auction price (or derived direct sale price) was paid
into the Livestock Development Fund.

THE POLICY OR LAW VOILATED:

1. The GATT Article III specifically paragraph 4.

Article III: National Treatment on Internal Taxation and Regulation
 The products of the territory of any contracting party imported into the territory of any
other contracting party shall be accorded treatment no less favourable than that
accorded to like products of national origin in respect of all laws, regulations and
requirements affecting their internal sale, offering for sale, purchase, transportation,
distribution or use. The provisions of this paragraph shall not prevent the application
of differential internal transportation charges which are based exclusively on the
economic operation of the means of transport and not on the nationality of the
product.

2. The GATT Article II specifically paragraph 1

Article II: Schedules of Concessions
 Each contracting party shall accord to the commerce of the other contracting parties
treatment no less favourable than that provided for in the appropriate Part of the
appropriate Schedule annexed to this Agreement.

3. The GATT Article XI specifically paragraph 1

Article XI*: General Elimination of Quantitative Restrictions
  No prohibitions or restrictions other than duties, taxes or other charges, whether made
effective through quotas, import or export licences or other measures, shall be
instituted or maintained by any contracting party on the importation of any product of
the territory of any other contracting party or on the exportation or sale for export of
any product destined for the territory of any other contracting party.

ISSUES CONTENDED

Submission on behalf of the complainant:

1. It contended that the prohibition of beef imports and subsequent import ceiling
restrictions maintained by korea were contrary to the provision of article XI:2, article
XVIII:B or any other article of the general agreement. The restrictions were also in
contravention of article II:4 of the general agreement.
2. It further questioned the conformity of the measures with the provisions of article
II:1(b),X and XIII. It said that Korea's beef import restrictions had resulted in
nullification and impairment of benefits accruing to Australia within the meaning of
Article XXIII:2 of the General Agreement, and had caused serious damage to
Australia's trade interests.

ARTICLE XI:1
1. It contended as Korean government’s decision on beef import was solely based on
domestic supply and demand situation and industry protection consideration, therefore
it has to be judged under the provision of article XI.
2. Australia also argued that the quantitative restrictions and import ban maintained by
Korea since 1984/85 on imports of beef wereprima facie inconsistent with the GATT
under the provisions of Article XI:1 which proscribed"prohibitions or restrictions
other than duties, taxes or other charges, whether made effective throughquotas,
import or export licences or other measures".
3. Although the Korean Government had often referred to its import regime covering the
period from end-1984 until the second half of 1988 as a "suspension of imports", this,
Australia argued, did not alter the fact that no commercial imports of beef were
permitted by Korea during that period, i.e., the measures had the effect of an import
prohibition. Korean official import statistics supported this contention. Australia also
 noted that although there had been a very limited easing of the ban on beef imports in
the second half of 1988, the fundamental import control mechanisms remained
basically unchanged. Australia had been advised by the Korean Government that the
14,500 tons access for 1988 announced on 26 July was not a definite quota as such
but an anticipated amount that might need to be imported to make up an expected
shortfall in supply. It might be contended that the partial (and possibly temporary)
easing by the Korean Government of its ban on beef imports in the second half of
1988 meant that the continuing controls on access to the market now constituted
restrictions rather than the prohibition that previously existed. However, Australia
would argue that Korea was still clearly in breach of its obligations under Article
XI:1.

ARTICLE II:

1. The Article II:1 violation arose, argued the United States, because—until December
31, 1999—Korea imposed a mark-up on sales of imported beef, particularly beef from
grass-fed cattle, as a result of the operation of its SBS system. Indeed, the Korean
government required a mark-up on all beef imported through this system, which was
set forth in the Management Guidelines.
2. The magnitude of the mark-up was the difference between the (1) duty-paid cost,
insurance, and freight (“CIF”) price of beef and (2) weighted average wholesale price
for all imported boneless grain-fed beef bought and distributed by the LPMO. In other
words, the mark-up was designed to ensure beef imported through the SBS system
and via the LPMO were priced the same. The mark-up was re-set both weekly and
monthly and, overall, was substantial. It was one hundred percent in 1993, sixty
percent in 1996, forty percent in 1997, twenty percent in 1998, and ten percent in
1999. The proceeds from the mark-up were deposited in a fund to help support the
Korean livestock industry.
3. The United States pointed out that Korea had not set forth in its Schedule of
Concessions (Schedule LX) the duties and charges that comprised the mark-up. To
the contrary, in its Schedule, Korea made the following market access commitments
for imported beef: (1) an increase from 123,000 tons in 1995 to 225,000 tons in 2000;
(2) a reduction in the bound tariff from 44.5 percent to 40 percent in 2004; and (3) the
 elimination (or bringing into conformity with GATT obligations) of all remaining
restrictions starting on January 1, 2001.
4. Thus, the United States claimed that Korea treats imported beef from grass-fed cattle
less favourably than provided for in the Schedule of Concessions agreed to by Korea.

ARTICLE XVIII: (PROCEDURAL ASPECTS)

1. Australia contended that the finding of the citrus panel were not binding in any way. It
stated, An examination of the Council's consideration of the report revealed that many
contracting parties, whether or not they supported the recommended "economic
solution" to the dispute, had reservations about individual findings. Australia's view
was made clear in its third party submission to the Citrus Panel.
2. The finding drew a conclusion which was not self-evident, i.e., because something
had never been done, there was some de facto "agreement" that this represented an
accepted practice that it could not or should not be done. An alternative, and more
plausible, conclusion was that a situation had not yet arisen in which recourse to the
procedures of Article XXIII was considered to be necessary. Indeed, Australia was
not aware of any agreement, whether implicit or explicit, in support of the so-called
practice found by the Citrus Panel. Australia would argue that because such a practice
would involve a ceding of basic rights under the General Agreement, any such
agreement would require an explicit decision by the CONTRACTING PARTIES.
3. Australia responded that Article XXIII provided for the settlement of disputes
concerning failure to carry out obligations under any and all provisions of the General
Agreement. Logically, Article XVIII:12(d) consultation procedures would be utilized
in situations where both parties agreed that the import restrictions in question were
restrictions applied for BOP reasons and both parties considered that such a process
was appropriate and useful. Korea had made unilateral declarations that its import
restrictions on beef had been and were being taken for BOP reasons. However,
Australia had demonstrated that the measures and their implementation and
administration had and were being applied for industry protection reasons and should
be judged against the obligations in Articles XI:1 and II:4.
4. Australia argued that the right of recourse to Article XXIII for the examination of an
alleged breach of GATT obligations where the defending party claimed Article
 XVIII:B coverage had been addressed by the GATT Council in a recent case. At its
meeting on 10-11 November 198713, the Council established a panel to examine
India's import restrictions on almonds although India had argued in earlier Council
meetings that the procedures of Article XVIII:B:12(d) should be followed instead.
Korea was a party to the consensus which led to the establishment of this panel.

THE AGRICULTURE AGREEMENT ISSUES

Pointing towards the incongruity between Korea’s treatment of imported beef and its GATT-
WTO obligations, the United States opened one other major line of legal attack. It concerned
the Uruguay Round Agreement on Agriculture. The United States said the Korean
government, in 1997 and 1998, had incorrectly calculated the amount of support it provided
to its domestic beef farmers. Perhaps such an error might sound innocent, but in fact the
United States said it had serious ramifications for compliance with the Agriculture
agreement.

The Article 3:2 violation arose, claimed the United States, because Korea’s true Current Total
AMS was higher than the amount it had set forth in Part IV, Section I of its Schedule of
Concessions. Thus there were five
conceptual inquiries embedded in the American claim.

THE RESPONDENT’S SUBMISSIONS

Korea argued that the restrictions on beef imports were covered by the BOP provisions of
article XVIII:B and were permissibe under the general agreement. Further it stated that
australia’s complaint cannot be reviewed under tthe standards of article XXIII in view of the
standards and procedures in article XVIII:12(d).

Korea did not deny that the beef restrictions maintained by Korea were contrary to the
provisions of Article XI but claimed that they were justified under Article XVIII:B.

Regarding the issue of article II, it it was important to stress at the outset that the LPMO
mechanism did not represent a separate import restriction. TheLPMO simply had no authority
to set or modify quantitative limitations on beef imports. Nor was the LPMO charged with
making recommendations to the Korean Government on the appropriate level of imports.
Rather, the LPMO administered the importation of beef within the framework of quantitative
restrictions set by the Government. Since the LPMO was just an implementing mechanism,
the LPMO's objectives did not affect the justification of the Government's restrictions on beef
imports.

Korea further responded that as long as it maintained quantitative restrictions justified under
Article XVIII:B, these had to be administered, i.e., be allocated among the different suppliers.
With respect to administering restrictions, Article XVIII:B referred to Article XIII, which laid
down principles to avoid discrimination among foreign suppliers who wanted to export to the
country that applied quantitative restrictions. However, Article XIII was not the only standard
that a country had to observe when it imported products which it had subjected to restriction.
Thus, while Article XVIII permitted a country to impose quantitative restrictions for BOP
reasons, it did not make allowance for surcharges that increased import duties above the level
bound in GATT. This was clearly established by the working party that reviewed the tariff
surcharge imposed by the United States for BOP reasons in 1971.

Consequently, assuming that Korea was entitled to maintain quantitative restrictions under
Article XVIII:B, then the LPMO's administration of these restrictions was subject to two
GATT requirements: first, theLPMO had to administer these consistent with Article XIII;
second, theLPMO could not impose surcharges on beef imports that exceeded Korea's tariff
on beef which had been bound pursuant to Article II. These were the relevant standards for
this Panel's review of the LPMO's operation. Korea explained that quota shares were
allocated to the foreign suppliers who submitted the lowest bid to the tender which the LPMO
had issued.
Furthermore, Korea denied that the LPMO, when reselling imported beef on the domestic
market, equalized prices of imported beef to the price level of domestic beef. Korea recalled
that virtually all imported beef was resold through wholesale market auctions or at prices that
were equivalent to or lower than an auction-based price average for imported beef. Thus, in
Korea's view, the LPMO's operation was consistent with Article II.

ARTICLE XVIII ( PROCEDURAL ASPECTS)

1. The republic of Korean on the procedural grounds argued that Australia could not
challenge the GATT compatibility of korea’s restrictions under Article XXIII because
of the existence of special review procedures in article XVIII B.
2. Korea therefore argued that Australia would have to make a showing of "non-
violation" nullification or impairment. "the practice, so far followed by the
CONTRACTING PARTIES never to use the procedures of Article XXIII:2 to make
recommendations or rulings on the GATT compatibility of measures subjectto special
review procedures was sound"9, thus ruling out the consideration of the United States
complaint under paragraph 1(a) of Article XXIII
3. The above-mentioned principle was self-evident, according to Korea. If measures
were subject to GATT review pursuant to special procedures, it made no sense to
allow them to be challenged under Article XXIII as well. Such duplication wasted the
resources of all concerned, in particular those of the GATT bodies charged with the
special review, and of the country whose measures were being examined. Moreover,
to the extent the standards of review under Article XXIII were different from the
standards applied to the special review procedures, review under Article XXIII might
negate the latter.
4. Korea responded that Australia ignored its right to challenge, at any time, the
compatibility with the GATT of BOP restrictions pursuant to the proper standards and
procedure of Article XVIII:12(d). Thus, there was no question of ceding basic rights
under the General Agreement, nor had Australia cited any argument or precedent that
defeated the logic of the Citrus Panel rule, which was self-evident.
5. Korea replied that Australia committed an analytical error. The mere fact that
Australia disagreed that Korea's restrictions on beef imports were justified for BOP
reasons did not mean that these restrictions were unjustified, or that Australia could
ignore the procedures of Article XVIII:B to express its disagreement.
6. Consequently, Korea argued, in accordance with the long-standing practice of the
CONTRACTING PARTIES, Australia was not entitled to complain about the
possible inconsistencies of the disputed beef restrictions with provisions of the
General Agreement pursuant to Article XXIII:1(a). Instead, Australia would have to
show that Korea's restrictions on beef imports constituted "non-violation" nullification
or impairment under Article XXIII:1(b) or (c). In Korea's view, there was no hard and
fast rule as to how a showing of "non-violation" nullification or impairment was to be
 made. What was clear was that the complaining party had to provide a "detailed
justification".11 To date, Australia had not provided any such justification.

Korea replied that, in its opinion, the Council did not settle anything when it established the
above-mentioned Almond Panel. While the issue of the relationship between Articles
XVIII:B andXXIII was raised when the United States requested a panel to review import
restrictions on almonds maintained by India, the Council drew no conclusion at the time. The
discussions in the Council did however reveal that the relationship between Articles
XVIII:12(d) and XXIII was controversial.

PANEL AND APPELLATE BODY PROCEEDINGS

As per Australia’s request to establish a panel in respect of WT/DS169, the DSB established
a panel at its meeting on 26 July 1999. Canada, New Zealand and the US reserved their third-
party rights. At the request of Korea, the DSB agreed that, pursuant to DSU Article 9.1, this
complaint would be examined by the same panel established in respect of WT/DS161. On 4
August 1999, the Panel was composed. The report of the panel was circulated to Members on
31 July 2000. The panel found that:

 a number of the contested Korean measures benefited, by virtue of a Note in Korea’s

Schedule of Concessions, from a transitional period until 1 January 2001, by which
date they had to be eliminated or otherwise brought into conformity with the WTO
Agreement.

 the requirement that the supply of beef from the LPMO’s wholesale market be limited
to specialized imported beef stores and that those stores bear a special sign
“Specialized Imported Beef Store” was in violation of Article III:4 of the GATT
1994, which violation could not be justified under Article XX(d) of the GATT 1994.

 the more stringent record-keeping requirements imposed on purchasers of imported

beef were also inconsistent with Article III:4. Certain other regulations dealing with
the importation and distribution of imported beef were likewise found to violate
Article III:4.
  the LPMO’s lack of and delays in calling for tenders and its discharge practices
between November 1997 and the end of May 1998 constituted import restrictions
contrary to Article XI:1 of the GATT 1994 and Article 4.2 of the Agreement on
Agriculture. Moreover, the LPMO’s calls for tenders that were made subject to
distinctions between grass-fed and grain-fed cattle, constituted, in the view of the
panel, a restriction inconsistent with Article XI:1. They also treated imports of beef
from grass-fed cattle less favourably than provided for in Korea’s Schedule, which
was in breach of Article II:1(a) of the GATT 1994.

 in addition, Korea’s domestic support for beef for 1997 and 1998 was not correctly
calculated and exceeded the de minimis level, contrary to Article 6 of the Agreement
on Agriculture, and was not included in Korea’s Current Total AMS, contrary to
Article 7.2(a) of the Agreement on Agriculture.

 Korea’s total domestic support (Current Total AMS) for 1997 and 1998 exceeded
Korea’s commitment levels, as specified in Section 1, Part IV of its Schedule,
contrary to Article 3.2 of the Agreement on Agriculture.

On 11 September 2000, Korea notified its intention to appeal certain issues of law and legal
interpretations developed by the panel. On 11 December 2000, the report of the Appellate
Body was circulated. The Appellate Body reversed the Panel’s finding on recalculated
amounts of Korea’s domestic support for beef in 1997 and 1998, as the Panel used, for these
recalculations, a methodology inconsistent with Article 1(a)(ii) and Annex 3 of the
Agreement on Agriculture; and reversed, therefore, the Panel’s following conclusions, based
on these recalculated amounts:

 that Korea’s domestic support for beef in 1997 and 1998 exceeded the de
minimis level contrary to Article 6 of the Agreement on Agriculture;

 that Korea’s failure to include Current AMS for beef in Korea’s Current Total AMS
was contrary to Article 7.2(a) of that Agreement; and

 that Korea’s total domestic support for 1997 and 1998 exceeded Korea’s commitment
levels contrary to Article 3.2 of the Agreement on Agriculture.
The Appellate Body was unable, in view of the insufficient factual findings made by the
Panel, to complete the legal analysis of:

 whether Korea’s domestic support for beef exceeds the de minimis level contrary to
Article 6 of the Agreement on Agriculture;

 whether the failure to include Current AMS for beef in Korea’s Current Total AMS
was contrary to Article 7.2(a) of that Agreement; and

 whether Korea’s total domestic support for 1997 and 1998 exceeded Korea’s
commitment levels contrary to Article 3.2 of the Agreement on Agriculture.

Thus as per the provisions it was held:

1. AA Art. 3.2 (domestic support): While upholding the Panel's conclusion that
Korea miscalculated its domestic support (AMS) for beef, the Appellate Body
reversed the Panel's ultimate finding that Korea acted inconsistently with Art.
3.2 by exceeding its commitment levels for total support for 1997 and 1998 as
the Panel had also relied on an improper methodology for its own calculations.
2. GATT Art. III:4 (national treatment – domestic laws and regulations): The
Appellate Body agreed with the Panel's ultimate conclusion that Korea's dual
retail system (requiring imported beef to be sold in separate stores) accorded
“less favourable” treatment to imported beef than to like domestic beef.
According to the Appellate Body, the dual retail system virtually cut off
imported beef from access to the “normal” distribution outlets for beef, which
modified the conditions of competition for imported beef. In this connection,
the Appellate Body said that formally different treatment of imported and
domestic products is not necessarily “less favourable” for imports within the
meaning of Art. III:4.
3. (GATT Art. XX(d) (exceptions – necessary to secure compliance with laws):
Further, the Appellate Body upheld the Panel's finding that the dual retail
system was not justified as a measure necessary to secure compliance with
Korea's Unfair Competition Act because the dual retail system was not
“necessary” within the meaning of Art. XX(d). “Necessary” requires the
 weighing and balancing of regulations of factors such as the contribution made
by the measure to the enforcement of the law or regulation at issue, the
relative importance of the common interests or values protected and the
impact of the law on trade. The Appellate Body agreed with the Panel that
Korea failed to demonstrate that it could not achieve its desired level of
enforcement using alternative measures.
4. GATT Arts. XI:1 (prohibition on quantitative restrictions) and XVII:1(a) (state
trading enterprises – non-discrimination obligations) and AA Art. 4.2
(tariffication): The Panel concluded that the LPMO's failure to call, and delays
in calling for, tenders, as well as its discharge practices (i.e. the LPMO's
increase in its stocks of foreign beef, while failing to meet requests for that
beef) led to import restrictions on beef contrary to GATT Art. XI. This also
led to the conclusion that the measures were inconsistent with AA Art. 4.2,
which prohibits Members from maintaining, resorting to, or reverting to any
quantitative import restrictions, including non-tariff measures maintained
through state-trading enterprises, which have been required to be converted
into ordinary customs duties. The Panel also found that should the LPMO be
viewed as a state-trading enterprise without full control over the distribution of
its import quota share, the measures violated GATT Art. XVII:1(a) (a
provision governing state-trading enterprises) as well, because they were
inconsistent with the general principles of non-discriminatory treatment.
(Korea did not appeal this finding.)

At its meeting of 10 January 2001, the DSB adopted the Appellate Body report and the Panel
report, as modified by the Appellate Body report.

IMPLEMENTATION OF ADOPTED REPORTS

At the DSB meeting of 2 February 2001, Korea announced that it had already implemented
some elements of the DSB’s recommendations and that in order to complete the process it
would need a reasonable period of time. On 19 April 2001, the parties to the dispute notified
the DSB that they had mutually agreed that the reasonable period of time shall be 8 months,
and was thus to expire on 10 September 2001.
At the DSB meeting on 25 September 2001, Korea announced that it had implemented the
DSB’s recommendation by the deadline, i.e. 10 September. The US indicated that it will
continue to work with Korea to ensure that the replacement measures resulted in full market
access for US beef.

LESSONS FOR DEVELOPING COUNTRIES LIKE INDIA FROM THE

PRESENT CASE

 The fact that the United States had to bring another major action against Korea is, at
the very least, a testament to the recalcitrance of Korea, and indeed many countries, to
open domestic agricultural markets to foreign competition. That recalcitrance
bespeaks the power of certain domestic farming constituencies. In turn, in some
countries, that power is based on antediluvian or at least controversial, constitutional
and political laws that prima facie would seem to have nothing to do with trade. Only
structural changes in rules governing matters like electoral district apportionments,
constituency borders, and campaign financing are likely to weaken the grip of the
domestic farming constituencies on the formulation of trade law and policy.

 One of the points the Appellate Body made in its disposal of Korea’s GATT Article
XX:(d) defense to America’s Article III:4 claim may prove to have important
implications for developing countries. Korea argued that the dual retail system was
“necessary” under Article XX:(d), above and beyond traditional enforcement
mechanism, because Korea was aiming for a higher degree of enforcement of its
Unfair Competition Act in the beef market than in other product markets. The
Appellate Body agreed that WTO Members have the sovereign right to decide the
level of enforcement they would like to achieve in their laws and regulations that are
consistent with their GATT-WTO obligations. It also cast doubt on a level of
protection that completely eliminates all illegal behavior, like fraud with respect to the
origin of beef (imported or domestic) sold by Korean retailers. The Appellate Body
rejected Korea’s plea for the dual retail system owing to its lack of enough policemen
to check thousands of shops, twenty-four hours a day, seven days a week. To be sure,
Korea was arguing in a rather contradictory way. It was saying, on the one hand, that
it sought a uniquely high degree of enforcement against fraud and deception in the
beef market, but on the other hand, that it did not have the police to attain such degree
of consumer protection. For Korea, the way out of the contradiction was the dual price
system. It is not difficult to imagine examples from developing countries of trade-
restrictive measures justified by those countries with the same logic. Many such
examples might surface in China as its trading partners bring WTO actions against it.
China (or other developing and transition economy countries) could argue that in the
absence of law enforcement resources— money and policemen—it has no choice but
to implement more draconian rules that are inconsistent with certain GATT
obligations like national treatment.