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WTO panel rules against Peruvian agriculture duties

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Staff writer ▼ | December 8, 2014
A WTO dispute panel has granted a victory to Guatemala in its complaint against Peru's duties on certain agricultural imports.
Peru agriculture
The decision   A victory for Guatemala
The case that has also highlighted the question of whether and how bilateral trade deals can interact with obligations taken on at the global trade body (DS457).

At the heart of the case were the additional duties imposed by Peru on imports of certain agricultural products, such as milk, maize, rice and sugar, through its Price Range System, or PRS.

The panel structured its analysis by reviewing first Peru's own claim that Guatemala did not act in good faith by taking on this dispute in the first place, and secondly Guatemala's various substantive claims.

Under a Free Trade Agreement (FTA) signed between Peru and Guatemala in December 2011, Guatemala had agreed that Peru could maintain its PRS. Lima had therefore argued that, by initiating a WTO case against the scheme, Guatemala was violating its obligation of acting in good faith in dispute proceedings.

A provision of the WTO's Dispute Settlement Understanding (DSU) requires WTO members to exercise judgement over whether filing a dispute would be fruitful, before lodging the complaint itself.

In the report, the panel said that nothing in the DSU provision, WTO case law, or the present case's circumstances supported the suggestion that Guatemala did not duly exercise its judgement.

On the good faith question, the panel also recalled that the Appellate Body, the WTO's highest court, has previously found that "irrespective of the type of proceeding, if a WTO member has not clearly stated that it would not take legal action with respect to a certain measure, it cannot be regarded as failing to act in good faith if it challenges that measure."

For the panel, Peru had not put forward any argument or evidence on whether Guatemala, before engaging in this dispute, had expressly waived the right to bring a WTO case with respect to the PRS or recognised the consistency of that measure with the global trade body's rules.

The panel also rejected Peru's argument that according to Article 18 of Vienna Convention on the Law of Treaties, Guatemala is obliged not to defeat the object and purpose of the FTA and that by initiating a dispute on PRS, Guatemala rendered the provisions of the treaty meaningless.

The panel considered that, among other findings, making a determination on an unenforced FTA's object and purpose would go beyond the panel's terms of reference.

Regarding the relationship between the FTA and WTO agreements, Peru also argued that, by means of the bilateral deal, the parties had modified their reciprocal WTO rights and obligations. Accordingly, Lima said, the bilateral agreement allowing the use of the PRS should prevail.

The panel found that, because the FTA has not entered into force, its provisions were not binding on the parties at the time of the panel report. As a result, it was unnecessary for the panel to express any opinion on whether the parties may, by means of a free trade pact, modify between themselves their rights and obligations under the WTO covered agreements.

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