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In October 1998 United States’ lamb and sheep producers filed a petition under Section 201 of the US Trade Act 1974 seeking a remedy for their claim of serious injury caused by increased lamb imports from New Zealand and Australia. The United States International Trade Commission (USITC) concluded that while no actual serious injury had been caused by increasing lamb imports, those imports did cause a threat of serious injury to the domestic industry. The USITC majority recommended that trade restrictions be imposed on New Zealand and Australian lamb imports.
In July 1999 President Clinton announced the imposition of a trade-restrictive safeguard measure against imports of lamb from New Zealand and Australia with effect from 22 July 1999. The safeguard measure imposed consisted of a tariff quota set for three years and one day initially, although the duration of the safeguard measure could be extended for up to a total of eight years. Quota levels were set at approximately 1998 trading levels for the first year, increasing slightly in the following years, and tariff rates of 9% in-quota and 40% out of quota for the first year, 6% in-quota and 32% out-of-quota for the second year, and 3% in-quota and 24% out-of-quota for the third and final year.
New Zealand, Australia and the United States held consultations under the Safeguards Agreement in Geneva in April and May 1999 and in Washington in July 1999. Those consultations reached an unsatisfactory conclusion from New Zealand’s point of view. Accordingly, on 16 July 1999 New Zealand requested consultations with the United States under the Dispute Settlement Understanding (DSU), claiming that the safeguard measure was in breach of Articles 2, 3, 4, 5, 11, and 12 of the Safeguards Agreement, and Articles I, II, and XIX of the GATT 1994. At about the same time Australia also requested DSU consultations with the United States.
New Zealand and Australia held consultations with the United States under the DSU in Geneva in August 1999. Unfortunately, these consultations did not lead to a resolution of differences. Accordingly, on 27 October 1999 New Zealand requested the establishment of an adjudicative panel of the WTO to rule on the matter of the consistency of the safeguard measure with the United States WTO obligations. A panel was established pursuant to this request on 19 November 1999. Australia also requested a panel at the same time, and a single panel has heard both New Zealand and Australian arguments in the case. Canada, the EC, Japan, and Iceland participated as third parties. Panel hearings were held in Geneva on 25 and 26 May 2000, and on 26 and 27 July 2000.
In December 2000, the WTO Panel issued its decision, which was overwhelmingly in New Zealand's and Australia's favour, although there were some decisions on certain aspects which were not completely satisfactory in New Zealand's view. The United States appealed the Panel's ruling to the WTO's Appellate Body in January 2001. In response, New Zealand cross-appealed certain adverse aspects of the Panel's decision.
The Appellate Body heard the appeal in March 2001. The Appellate Body ruled comprehensively in New Zealand's and Australia's favour. It upheld all the findings of the Panel, as well as finding in New Zealand's favour on most of the issues that were cross-appealed. The ruling meant that the tariffs and quotas imposed by the United States on lamb meat were deemed inconsistent with WTO rules. The Appellate Body's report was adopted by the Dispute Settlement Body on 16 May 2001.
After considering its options, on 31 August 2001, the United States announced it would implement the recommendations and rulings of the Dispute Settlement Body by removing the safeguard measure on New Zealand and Australian lamb meat, effective from 15 November 2001.
