i) Holding - US had legitimate expectation of improved market access and opportunities arising out of tariff concessions. The subsidies, although allowed under Article III.8 are completely undermining the competitive relationship that was negotiated for between the two nations.
(1) US claims that EEC after binding oilseed duty, violated this binding BY proving subsidies to EC oilseed producers. Subsidy undermines 0 duty by allowing domestic producers to charge a lower price. EEC counters with III8(b)
iii) US says “A contracting party which has negotiated a concession under Article II may be assumed, for the purpose of Article XXIII, to have a reasonable expectation, failing evidence to the contrary, that the value of the concession will not be nullified or impaired by the contracting party which granted the concession by the subsequent introduction or increase of a domestic subsidy.”
iv) Panel - Main value of tariff concessions is that provides an assurance of better market access through improved price competition. Thus, assumed tariff negotiations based on expectation that price effect of tariff concession will not be systematically offset.
v) EC argument is that US should have expected us to subsidize.
vi) Panel says
(1) This subsidy program not in policy before negotiation so USA did not expect.
(2) What was US objective for negotiation? Price competition.
vii) EC says to penalize fundamentally change what we agreed to in GATT (specifically did not agree to give up subsidies). Panel says acted in bad faith…if you want oil seeds, keep them, but US gets to get of that part of the deal…can keep the measure but not the deal so not giving up subsidies.
viii) Rule → protection of expectations on competitions, not on trade flows. Articles protect current trade and create the predictability needed to plan future trade.
ix) What are legitimate expectation?
(1) Negotiated benefits you got, I got a better a deal, traded with you, and even though you didn't violate the rules, you took away my "legitimate expectations" through some sort of action by you. I made a deal with you and now I am not getting what I thought I would be.