ARGUMENTS OF THE THIRD PARTIES

ARGUMENTS OF THE THIRD PARTIES

1. The Agreements regarding the Indian measures must be respected and enforced

1. 
   This Panel should consider the years of negotiations and dispute settlement proceedings between India and the European Communities and India and the United States that preceded this dispute. With both the European Communities and the United States, India made due efforts to resolve the issues in a manner that met the concerns of the United States and the European Communities and provided India with the time and flexibility to restructure its automotive regime.
   
2. 
   The United States concedes that the first proceeding regarding its claims ended with an agreement between the United States and India that the reasonable period of time for implementation "shall finally expire on 1 April 2001. Yet the United States seeks to readjudicate those same claims (and to challenge "measures" which do not yet exist). India correctly notes the subtle shift of focus by the United States in this proceeding. The earlier proceeding regarded, among other things, India's discretionary licensing scheme; this proceeding regards the application of the very same licensing scheme. Thus, the "distinction" upon which the United States relies does not appear to be a meaningful distinction. As India accurately notes, the DSB ruling covers both the text and the operation and application of the discretionary licensing system for all products notified under Article XVIII:B of the General Agreement on Tariffs and Trade (GATT 1994), including CKD and SKD kits. Therefore, the United States should have waited until the reasonable period had expired. Then, if the United States still believed that India had not fully implemented the recommendations and rulings of the DSB, it could have sought recourse under Article 21.5 of the DSU or requested consultations for the establishment of a new panel.
   
3. 
   The above analysis of the US action applies also to the EC action. The European Communities and India reached a mutually agreed solution of the India – Quantitative Restrictions (WT/DS96) dispute that they notified under DSU Article 3.6.²⁸² As the European Communities concedes, the solution (as supplemented by the agreement on reasonable period of time between the United States and India) requires India to conform its Regime to its WTO commitments by 1 April 2001.²⁸³ For its part, the European Communities agreed to "refrain from action under GATT Article XXII or Article XXIII as regards those restrictions during the phasing-out period," i.e. for the Regime, until 1 April 2001.²⁸⁴ Thus, the solution reached in the earlier, broader dispute (WT/DS96) applied to the Regime – the subject matter of this dispute. India has complied with the agreed-upon schedule and the 1 April 2001 deadline has yet to pass. Yet, the European Communities nonetheless has brought this proceeding and asked the Panel to address measures covered by the mutually agreed solution. The EC claim that the subject matter of the current dispute is not within the scope of WT/DS96 is based primarily on three assertions. Korea notes in paragraphs 30-37 of India's First Submission where India rebuts the EC assertions. As a review of India's presentation indicates, the subject of this dispute – the Regime –seems to be covered by the mutually agreed solution. The EC's action raises a systemic question for the WTO dispute settlement system enshrined in the DSU. A review of the DSU indicates that the preferred goal in every dispute settlement proceeding is a mutually agreed solution:
   

The EC action seems to undermine this goal by removing any incentive to agree to a solution.

1. 
   In the cases of both the US action and the EC action against India, fundamental values are at stake. Where two Members reach an agreement (as here) and formalize the agreement by notifying it to the WTO (as here), the agreement must be respected by both Members. Any other resolution will undermine the entire dispute settlement mechanism. Members must be able to rely on agreements they reach with other Members. This is a fortiori the case when, as here, the dispute is between a developing and a developed Member of the WTO.
   

1. The measures that India may take by 1 April 2001 are not, and as a matter of logic cannot be, properly before the Panel.

   1. 
      The Panel should not consider any arguments regarding measures that India might propose. First, DSU Article 6.2 indicates that a complainant must "identify the specific measures at issue." Here, the European Communities and the United States could not possibly have identified post–1 April measures as "the specific measures at issue," because the measures do not yet exist. This is confirmed by a review of the panel requests.²⁸⁶ Second, under DSU Article 7.1, the Panel's terms of reference, which set the scope of the proceeding, generally are based (and, in this proceeding, are based) on the "specific measures" identified in the panel request(s). Here, not having been specifically identified in the panel requests, measures that may or may not compose the post– 1 April Regime are not part of the Panel's terms of reference and, thus, are not properly before the Panel. Third, a panel cannot possibly examine a measure not in existence when the panel is established. Once the panel is established and its terms of reference are set, all subsequent occurrences are not subject to review. This is because the scope of the panel's authority is defined when the panel is established.²⁸⁷ In sum, all arguments by the United States and the European Communities regarding steps India may take after the date of each complaining party's panel request to comply with its mutually agreed solution with the European Communities and its agreement with the United States pursuant to DSU Article 21.3 have no subject matter (i.e. there is no actual measure to attack) and are untimely. If they wish, the United States and the European Communities may request consultations for a new panel or pursue a DSU Article 21.5 proceeding with India after 1 April 2001. But they cannot circumvent the procedures of the DSU and the terms of the understanding and the agreement with India by challenging in the current proceeding measures that do not yet exist.
      

2. Prospective measures

   1. 
      As demonstrated above, the post– 1 April Regime is not within the scope of this proceeding. However, as an aside, Korea wishes to note that the post-1 April Regime described by India appears problematic. As India states, the exclusivity enjoyed by the manufacturers, on the one hand, and the commitments to mitigate the adverse impact of the imports on the balance of payment, on the other hand, constitute a "balanced whole." India has indicated that it does not intend to release the car manufacturers from the commitments they assumed under the memoranda of understanding (MOUs) in order to import SKD/CKD kits prior to 1 April 2001. But, India also has indicated that, from 1 April 2001, it no longer will make the importation of SKD/CKD kits subject to the signing of an MOU. The right to import SKD/CKD kits therefore no longer will be conditioned.
      
   2. 
      Thus, under India's plan, starting from 1 April 2001, companies already committed to the MOUs would be put in a situation where the MOU obligations are left, but most of the MOU benefits have been removed. The exclusivity granted under the MOUs has been the primary benefit given to MOU enterprises – abolishing the exclusive right to import SKD/CKD kits while maintaining obligations under the MOUs would compromise the "balanced whole" for the MOU enterprises. As a result, the continued enforcement of the MOU requirements would undermine the conditions of competition by disadvantaging companies that already have committed to India's market, in comparison with new entrants not subject to the MOU requirements.
      
   3. 
      India submits that MOU companies should not complain about the modified regime because they already have obtained a comparable advantage. India further asserts that the MOU requirements imposed after 1 April 2001 are merely a pure "obligation to manufacture" or "requirements to sell goods in foreign markets in preference to the domestic market" and, thus, are consistent with the WTO agreements.²⁸⁸
      
   4. 
      Korea reminds India that the MOU companies undertook these obligations in exchange for the exclusive right to import for the duration of the MOU period. For India to remove this right but maintain the MOU obligations would be unfair to the MOU companies. India's continuation of the MOU requirements cannot be separated from the existing Regime and interpreted as merely an imposition of a new "obligation to manufacture" or "requirements to sell goods in foreign markets in preference to the domestic market." Rather, it is a continuation of the commitments made by the MOU companies as a reward of obtaining the exclusive right to import SKD/CKD kits prior to 1 April 2001. In other words, the post-1 April Regime sketched by India would establish not merely an "obligation to manufacture" or a "requirements to sell goods in foreign markets in preference to the domestic market" – it would establish an obligation and requirement, compliance with which is necessary to obtain an advantage (which was already exhausted). This, of course, would be inconsistent with India's obligations under the TRIMs Agreement and under GATT 1994.
      
   5. 
      Moreover, no provision of the WTO agreements justifies imposing disadvantages on the basis of having provided advantages in the past. If such an "cross-temporal balancing" were allowed, the basic nature – the "immediacy and unconditionality" – of the MFN obligation²⁸⁹ would be compromised. Korea invites India to consider the above points as it decides how to alter the Regime.
      
1. 
   
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