At first glance, the Appellate Body Report in Bananas III (Article 21.5; Second Recourse) does not seem to be a case for the Guinness Book. The AB upheld most of the Panel's findings, and the EC lost big. This was hardly surprising, given that the contested measure only marginally differed from the measure at issue in the first recourse to a compliance Panel. It is at second sight that this AB Report reveals its interesting facets. We highlight a few remarkable legal and economics aspects, some of a more systemic nature, some offering practical insights: For practitioners, the role of estoppel in WTO litigation, the legal effect of Panel suggestions, and the relevance of Uruguay Round Modalities Papers as interpretative tools may be of interest. Readers more concerned with systemic aspects of the WTO may take interest in the economics of tariff quotas, the inherently discriminatory nature of tariff-quota allocation in the WTO, and the relevance of compliance proceedings for the damage calculation under Article 22.6 of the DSU.

The United States's enhanced continuous bond requirement [EBR] for goods subject to anti-dumping and countervailing duties was the focus of this dispute. Because of perceived problems with its ability to collect anti-dumping duties, the US amended its bonding requirements in 2004. Under the new rules, importers were required to secure a bond for an amount equal to the cash-deposit rate in effect on the date of entry of the merchandise multiplied by the importer's value of imports from the previous year, as well as pay cash deposits equal to the amount of anti-dumping duties per entry. The US claimed the additional deposit was reasonable and necessary to guarantee duty payment in case the anti-dumping duty increased during the administrative review. Thailand and India claimed that the additional deposit was unreasonable and an additional action against dumping and was therefore impermissible under GATT 1994 and the Anti-Dumping Agreement. The Appellate Body upheld the Panel's findings that while the Ad Note to Article VI:2 and 3 GATT 1994 authorizes the imposition of security requirements during the period following the imposition of an anti-dumping duty order, the additional security requirement resulting from the application of the EBR to shrimp was not ‘reasonable’ within the meaning of the Ad Note. The Appellate Body reversed the legal interpretation by the Panel that there is no obligation under the Ad Note to assess the risk of default by individual importers; however, the AB upheld the Panel's finding that the EBR is not ‘necessary’ within the meaning of Article XX(d) of the GATT 1994. As a result, the AB upheld the Panel's conclusion that the application of the EBR to shrimp was inconsistent with Article 18(1) of the Anti-Dumping Agreement because it was inconsistent with the Ad Note to Article VI:2 and 3 of the GATT 1994 and not justified by Article XX(d). We consider the AB's legal and economic reasoning to be largely correct. The US employed a sledgehammer to kill a mosquito and the AB used the concepts of ‘reasonableness’ in the Ad Note and ‘necessity’ in Article XX(d) to reject what fundamentally was a lack of proportionality, while leaving the door open for more reasonable application of bonding requirements.

This paper provides a legal-economic analysis of the unappealed WTO Panel Report in Mexico–Olive Oil. The case involved a countervailing-duty measure imposed by Mexico on imports of olive oil from the European Communities (in particular, Spain and Italy). The dispute raised important issues regarding the determination of causation of injury, as neither the Panel nor the investigating authority gave much credence to evidence that the main complaint of the domestic industry was the loss of a distribution agreement and brand-name rights with a Spanish exporter. The dispute also raised interesting concerns regarding the remedies for violations of procedural obligations in the conduct of anti-dumping/countervailing-duty investigations and the right of a domestic producer that has ceased production to seek protection under the trade-remedy laws.

The US–Mexico Stainless-Steel dispute presents two interesting questions. First, what role does and should stare decisis (precedent) play in the WTO dispute-resolution system? Second, are there circumstances under which exceptional methodologies, i.e. ‘zeroing’, can better achieve the stated objectives of the agreement than the standard methodologies explicitly stated in the agreement? We argue that the institutional structure and foundational norms of the WTO imply the need for Panels to be bound by the prior decisions of the Appellate Body. Our economic analysis describes the costs and benefits of legal systems with and without precedent. Regarding methodology, we argue that any analysis of the suitability of a methodology (i.e. ‘zeroing’) must be undertaken jointly with an analysis of the underlying objective of the agreement (i.e. remedying injury). We conclude that, under limited circumstances, the ‘zeroing’ methodology is more effective at remedying injury than the ordinary methodology outlined in the Anti-Dumping Agreement.

Based on the reasoning of the Appellate Body in Canada/United States – Continued Suspension of Obligations in the EC–Hormones Dispute (‘Continued Suspension’), this paper analyzes the distinction between the national-treatment obligation under Article III of GATT and the requirement under the Agreement on Sanitary and Phytosanitary (SPS) Measures that such measures be based on a risk assessment that takes into account available scientific evidence. The Appellate Body's reasoning makes clear that the primary purpose of the SPS Agreement is to discipline discriminatory regulation, and not the level of protection. We argue that the case clarifies that de facto protection (market segmentation) created by an SPS measure must be motivated by demonstrating that the measure is addressing a market failure, as reflected in the existence of some scientific basis for a health or safety concern. The scientific-basis requirement is a means for determining the intent of an SPS measure. While this is a factor that is ostensibly not relevant in GATT national-treatment cases, the need for scientific justification is not a move away from a concern with preventing illegitimate discrimination against imported products.

Two of the four issues in this Appellate Body Report concerned the proper scope of Article 21.5 DSU compliance panel proceedings; the other two issues concerned the Appellate Body's review of the Panel's use of evidence. On the Article 21.5 issues, the Appellate Body essentially ruled that an Article 21.5 compliance proceeding could evaluate the WTO consistency of: (i) the entirety of an implementation measure (including parts of the measure that did not specifically implement DSB recommendations and rulings) and (ii) new subsidy grants made under a program in respect of which prior subsidy grants had been found to cause serious prejudice so as to determine whether the new grants also resulted in serious prejudice. On the evidentiary issues, the Appellate Body upheld the Panel's conclusions, although it modified certain of the Panel's reasoning. Probably the most interesting aspect of the case was the substantial deference showed by the Appellate Body to the Panel's consideration of causation and non-attribution issues. This deference was striking compared to the lack of deference that the Appellate Body has given to national authorities on those issues. We detect, however, a welcome interest on the part of the Appellate Body to require the use of analytical tools on the part of panels evaluating serious-prejudice cases.

This paper reviews the WTO Appellate Body Report on China – Measures Affecting Imports of Automobile Parts (WT/DS342/AB/R, 15 December 2008). This dispute concerns a set of regulatory measures imposing a 25% ‘charge’ on imported automobile parts used in the manufacture of motor vehicles in China. The main legal question in this case consisted of the nature of this charge as either a border charge subject to China's tariff concessions or an internal charge, subject to the basic nondiscrimination requirement of GATT Article III. In our report, we examine the reasoning of the Appellate Body relating to the difference between these two types of charges. We discuss the role and relevance of this distinction in the GATT/WTO legal system in general, and for the purposes of resolving this dispute in particular. We also address the important systemic question relating to the review of a Member's domestic laws for purposes of determining their GATT/WTO consistency. This was an important issue in this case, as China claimed that the Panel misunderstood the meaning of the relevant Decree and requested the Appellate Body to review the Panel's erroneous reading of this Decree. We discuss the Appellate Body's reasoning relating to the review of domestic laws by Panels and the Appellate Body and express concern over the distinction drawn by the Appellate Body between legal and factual elements of relevance in the interpretation of such laws.

The ‘economic bone’ in this case is less straightforward to split than the legal one. In legal terms, the Appellate Body's decision is a time-consistent one, but, in economic terms, it is not clear if it is also a welfare-optimal one. The main reason is that many questions relevant to the case were left unaddressed by the Appellate Body. Due to the lack of factual evidence to substantiate its allegations, the Panel's ruling remains rather speculative on certain accounts. For this purpose, we engage in our own examination of the facts, using mainly a unique dataset of Chinese firm-level data. We analyze issues of ownership in China's car industry, the growth of the import-competing Chinese industry over time, the elasticity of the demand for cars, and duty pass-through, etc. The purpose is to verify more closely who ‘benefits’ and who ‘loses’ from the Chinese import duty so as to understand the economic incentives involved. In this respect, we attempt to determine whether the economics support the conclusion that China pursued a beggar-thy-neighbor policy in the car-part industry.

This paper critically reviews the main findings of the Appellate Body in the case India – Additional and Extra-Additional Duties on Imports from the United States (India–Additional Import Duties). This ruling sheds light on the interplay between two core provisions of the GATT, namely Article II GATT (Schedules of Concessions) and III GATT (National Treatment on Internal Taxation and Regulation). Linked to this demarcation, the question on the allocation of the burden of proof was a central point of contention in this dispute. The ruling also establishes the principle that WTO Members are allowed to use border tax adjustments, as long as the tax imposed on imports does not exceed the domestic tax. We argue that this principle can help to reconcile the objectives of the WTO with those of national governments.