## Facts

- The European Communities maintained a ban on imports of meat and meat products from animals treated with certain growth-promoting hormones.
- In the underlying WTO dispute, adopted reports found the ban inconsistent with SPS Agreement obligations and related GATT 1994 disciplines, including for lack of a proper risk assessment and insufficient scientific evidence.
- An arbitrator set a reasonable period for compliance ending on May 13, 1999, but the European Communities did not bring the measure into conformity by that date.
- The United States sought authorization to suspend concessions under DSU Article 22.2 at an annual level it estimated at approximately $202 million.
- The European Communities objected to the proposed “level of suspension,” triggering mandatory arbitration under DSU Article 22.6 to determine the equivalent level of nullification or impairment.
- The arbitration focused on quantifying trade impairment from continued noncompliance and on the permissible scope and administration of retaliatory measures, including whether a fixed product list was required.

## Issues

1. Under DSU Article 22.6, what annual level of suspension of concessions would be equivalent to the nullification or impairment caused by the continued import ban after the reasonable period of time expired?
2. What methodology and evidentiary showing should be used to calculate the value of trade lost “but for” the continued ban, including assumptions about current exports and market conditions?
3. Must the complaining party provide a definitive, fixed list of products to be targeted, and may it modify or rotate targeted products while remaining within DSU constraints?

## Decision

- The arbitrators set the maximum permissible level of suspension of concessions at **$116.8 million per year**.
- The United States was permitted to choose which European Communities tariff concessions to suspend within that monetary ceiling, subject to DSU Article 22 disciplines (including sectoral sequencing and DSB authorization requirements).
- The arbitrators declined to require a once-and-for-all definitive list of targeted products and did not categorically bar rotating product coverage, emphasizing that any changes must remain within the authorized annual level and be subject to DSU controls and potential review if challenged.
- Following the award, the DSB authorized suspension consistent with the $116.8 million figure, and the United States applied additional duties on selected European Communities products up to that annual trade value.

## Legal Principles

- DSU Article 22.6 arbitration is limited to determining whether the proposed suspension is **equivalent** to the level of nullification or impairment; it does not revisit the legality of the underlying measure.
- **Equivalence** under DSU Article 22.4 is the controlling limit: authorized retaliation may not exceed the quantified nullification or impairment.
- The complaining party bears the initial burden to substantiate the proposed level of suspension; the objecting party must raise specific, reasoned challenges to the level or methodology.
- The level of nullification or impairment should be grounded in **current trade effects** and a reasonable counterfactual (“but for” the measure), avoiding speculative projections disconnected from present market conditions.
- DSU Article 22 does not require the complaining party to sacrifice flexibility in selecting products for suspension, provided the overall level remains within the authorized amount and remains subject to DSB oversight and DSU compliance mechanisms.

## Conclusion

The arbitration fixed the permissible U.S. retaliation for the European Communities’ continued noncompliance at $116.8 million annually and confirmed that product targeting may remain flexible, so long as the overall suspension stays equivalent to the quantified trade impairment and conforms to DSU controls.


European Cmtys.—Measures Concerning Meat & Meat Prods., WT/DS26/ARB (WTO Arb. July 12, 1999)