## Facts

- The European Economic Community (EEC) had negotiated and bound zero tariffs on certain oilseeds (including soybeans) in its Schedule of Concessions, creating expectations of improved competitive access for imports.
- After the bindings, the EEC implemented an oilseeds regime combining:
  - Payments to processors conditioned on purchasing oilseeds of EEC origin.
  - Production subsidies paid to EEC oilseed producers.
- The United States alleged the regime insulated EEC producers from import price movements, neutralizing the practical value of the zero-tariff bindings and harming U.S. exports.
- Consultations under GATT Article XXIII:1 did not resolve the dispute, and a panel was established under Article XXIII:2.
- The panel report was circulated on December 14, 1989 and adopted by the GATT Council on January 25, 1990.

## Issues

1. Whether the EEC’s processor payments conditional on purchasing Community-origin oilseeds accorded imported like products less favorable treatment under GATT Article III:4.
2. Whether the EEC’s production subsidy schemes nullified or impaired benefits accruing to the United States from the EEC’s zero-tariff bindings under Article II, within the meaning of non-violation nullification or impairment under Article XXIII:1(b).

## Decision

- The panel found the EEC regulations providing for processor payments conditional on purchase of Community-origin oilseeds were inconsistent with GATT Article III:4.
- The panel found benefits accruing to the United States under the EEC’s Article II zero-tariff bindings for oilseeds were impaired by the EEC production subsidy schemes within the meaning of Article XXIII:1(b).
- The panel recommended the EEC bring the relevant regulations into conformity with the General Agreement and consider ways to eliminate the impairment of the tariff concessions.
- Because both the Article III:4 inconsistency and the impairment arose from the same regulations, the panel recommended no further action under Article XXIII:2 on the impairment claim until the EEC had a reasonable opportunity to adjust its regulations.

## Legal Principles

- Financial measures structured as internal regulations affecting purchase can violate Article III:4 when they incentivize purchases of domestic products and offer no equivalent advantage for imported like products, thereby altering conditions of competition.
- Domestic subsidies are not necessarily prohibited per se, but their design and market effects may be examined under Article III when they discriminate in internal market conditions.
- Even where a measure does not breach a specific obligation, it can still support a non-violation claim under Article XXIII:1(b) if it nullifies or impairs benefits that could reasonably be expected from a negotiated tariff concession by preventing the concession from affecting the competitive relationship.
- Where the same measures both violate Article III:4 and cause nullification or impairment, compliance with the violation finding may be treated as a potentially sufficient path to remove the impairment, warranting restraint in additional Article XXIII:2 action pending implementation.

## Conclusion

The panel concluded that purchase-conditioned processor payments violated national treatment and that the EEC’s domestic support regime impaired expected benefits from zero-tariff bindings, recommending conformity with Article III:4 and deferring further action on impairment while the EEC had time to modify its regulations.


Eur. Econ. Cmty.—Payments & Subsidies Paid to Processors & Producers of Oilseeds & Related Animal-Feed Proteins, GATT B.I.S.D. (37th Supp.) 86 (1990)