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Beef Hormone - EC Hormones Case Comment

Facts:
The dispute in this case was an issue with the beef hormone trade which involved six hormones that were legally allowed to be used in America but were banned in the European Communities (EC). This was due to the public anxiety that was caused by these growth promoting hormones, of which three were naturally produced while the other three were synthetic hormones1, which were suspected to be affecting peoples health in European consumers leading it to release Directives for the same, prohibiting the use of beef that was produced with the administration of growth hormones, including import of the same from other countries.

These hormones were only allowed in instances of therapeutic reasons or if certified by a doctor2. This started with hormonal issues and negative health effects being seen in children suspected to be coming from poultry with these growth promotions seen in veal productions in France and even Italy, leading to the EC Agriculture Ministers adopting a declaration in favour of this ban which then led to an European Commission Directive being passed in 1981 banning both the production and the import of the meat that has been treated with these growth altering hormones which was ultimately implemented in 1989.

In response to this ban which caused the exports from USA and Canada of these beef products to drop drastically, US invoked its GATT dispute settlement (General Agreement on Tariffs and Trade) in 1987 under the TBT Agreement i.e. Tokyo Round's Technical Barriers to Trade Agreement where the consultation between both the countries didn't succeed in resolving this dispute 3.

This included America supporting its claim by stating that there was lack of supporting scientific information for the ban for which a technical Experts Group (TEG) should be formed under Art 14.5 of the TBT Agreement and even included threats to implement more tariff on EU imports to which the EC responded that they had the right to exercise a zero risk approach which is precautionary which was supported with the consumer opposition throughout the country. After the ban in 1989, United States implemented retaliatory tariffs (100% ad valorem) on selected imports from EU which remained in effect until 1996.

1995 led to a new WTO being set up which involved stricter rules for trade restrictions for sanitary and phytosanitary (SPS) reasons along with a new mechanism to solve these disputes. This WTO SPS Agreement allowed trade barriers when it came to a country supposing a threat with the imports supported with scientific reasons but also that these trade measures should be temporary.

This was followed by both USA and Canada applying for WTO dispute panels in 19964 to settle the EU hormone dispute after which US even stopped its retaliatory measures. In 1997 the WTO panel ruled in concurrence with USA stating that this ban was not taking in regards its obligations under the SPS Agreement. After which the EU applied for an appeal against the same dealing with certain legal interpretations that were found earlier and the same was under Art 16 of the DSU which led to it being submitted for review with the Appellate Body in November 1997 followed by its decision in February 19985.

Issue:
The main question in the case was whether the steps that were taken by the EC of banning the import of meat from animals with hormones affecting a trade loss with other countries, were against the trade rules set under GATT and the SPS Agreement.

The contested points I have brought up are:
  • Whether multiple individual experts can be referred to instead of panel of experts under DSU
  • Whether defense under Article XX(b) of GATT can be used by EC along with specific obligations under Article III of GATT
  • Whether the defense of precautionary principle can be used here under SPS
  • Whether compliance of International standards under SPS has been followed by EC here.
Burden of Proof under SPS Agreement
  • Where does the relationship between SPS and GATT come to play here

Rules:
  1. DSU i.e. Understanding on Rules and Procedures Governing the Settlement of Disputes - Articles 7, 13.2, 15, 21.3.
  2. GATT Articles III and XX(b) and I(1). 3) SPS Agreement Articles 3 and 5.
Analysis:
  1. Dispute Settlement Understanding (DSU):
    Dispute Settlement Understanding deals with issues by resorting to solutions that are acceptable and better for both the parties by trying to resolve it mutually6 first rather than relying on the decision taken by a panel. The same was done in this case initially when both EC and USA consulted each other to reach to an understanding under Art 4 but failed to do so and consequently went to the panel. The question was as to decided the reasonable amount of time 7 for the implementation of what the DSB suggested and for the same, under Art 21.3, the parties even resorted to Arbitration which concluded that the time for its implementation should be 15 months from when the panel or appellate body report has been adopted 8.

    In this case, after hearing both the parties, in accordance with Article 15 of DSU, the panel has presented an interim report. Following the report,

    both the parties can submit a written report focusing on the specific parts of the report they have issues with after which they shall sit again with both the parties to discuss that identified issues that were pointed out in the written reply following which a final report shall be made and given to the parties. This process was followed in this case but there was an issue raised with respect to Article 15 itself. The EC said that the due process as given under the same limits them to discuss and change only the issues that were raised from the interim review while panel didn't agree to the same 9.

    An aspect of the DSU that has been raised in the Appellate body report is Art 13.2 of the DSU which allows the panel to consult an expert for the dispute. Considering the question here was scientific i.e. are hormone given meat bad for health, with respect to the rules laid under Appendix 4, the panel resorted to the same. But an issue arose as to under Article 15 is this only limited to a panel of experts as given under the scheme or can individual experts be appointed to do the same.

    The panel decided on the fact that the Articles didn't stop them from consulting multiple individual experts10, with the consent and knowledge of both the parties and the same was done here without there being any inconsistency with any other provisions.

  2. The General Agreement on Tariffs and Trade (GATT):
    • Article III: 4
      Claims of US- US brought up Article III:4 of GATT stating that the EC measures were not in accordance with the same as it didn't allow for them to sell and import meat unlike the same domestic products11. This meant that they discriminated from the domestic production of the like product and the same didn't consist of any reasonable purpose to do the same.

      Claims of EC- EC responded to the alleged violation of the above Article by stating that the prohibited meat was checked for growth promoting hormones, and thus in the presence of the same they cannot be found to

      be like the other meat found domestically. In case of a violation it resorted to Article XX(b) which allowed for them to take up measures to protect their health.
    • Article XX(b)
      Claims of EC- The EC didn't indulge a lot in GATT except for invoking Article XX(b) as a defence thus when it came to Article I and III of GATT, the panel found that finding inconsistencies in those wont be justifiable as also they had already found inconsistencies with respect to SPS Agreement.

      Claims of US- Regarding Article XX(b), United States said that EC cannot resort to the same as a defense as it had not shown any proof of its issues on health grounds and that it was an arbitrary discrimination or a disguised restriction on international trade12.
    • Article III:I
      Claims of US- One of the important claims of USA against EC was that of disguised protectionism that was being used through these measures. The same was claimed for with respect to Article III:I of GATT which stated that to protect a domestic production, internal measures cannot be applied 13.

      Claims of EC- To the above argument, EC claimed that a very narrow approach was taken in all these aspects and that the measures taken by them werent for protection of their products but to protect human health in life in general and thus isn't in violation of the above.
    • Article I:1
      The discrimination that is covered under this was brought up US which held that they weren't given the same opportunity as other countries with regards to the like product as produced by others to which EC stated this discrimination didn't differentiate with the countries producing these products but with goods of the same category, which also applied to every member the same.

  3. Relation between GATT and SPS Agreement:
    The main contention here was with regard to the primacy of the GATT over the SPS agreement and the EC argued that SPS was a mere clarificatory agreement to the GATT on matters of sanitary measures which was evident from the last recital of the preamble to the SPS agreement which clearly states that:
    desiring therefore to elaborate rules for the application of the provisions of GATT 1994 which relate to the use of sanitary measures, in particular the provisions of Article XX(b), and that to establish a violation under SPS agreement, there needs to be established a violation of articles of GATT first.

    The US on the other hand argued that the SPS agreement enacted primarily to deal with issues relating to sanitary measures which directly or indirectly affects international trade14, thus it is the SPS agreement that is applied when a violation pertaining to a sanitary measure is brought before the Panel and not GATT since it's a general agreement.

    The Panel in this case sided with the interpretation of the United States and also concluded on the point that the SPS agreement contains no explicit requirement of a prior violation of GATT to make the SPS agreement applicable.

  4. SPS Agreement:
    Burden of Proof- The first issue that arose out of this agreement was the question of Burden of Proof. While the US stated that EC had to bear the burden of proof of its contention that the meat being imported with hormones would affect health of its consumers with scientific evidence. This wasn't agreed with initially by the panel which asked the party challenging the measures i.e. US to take the burden of proof as generally the complainant party that has called for the panel bears the burden15 to prove the violation of WTO rules or other agreements but later changed it to EC since they were evidently violating the SPS agreement.

Article 3.1- Article 3.1 of the SPS Agreement deals with International Standards that the measures should be based on. These were to take inference from the standards mentioned by the Codex Alimentarius Commission 16 with no other such conditions. Going through the same its found that there were international standards for five out of six hormones that were in question that were set and thus the measures need to be based on them in accordance with Article 3.1.

When it came to the measure without a set standard, it has to comply with other provisions of this agreement. Thus it was found that the measures resulted in a different level of sanitary protection and thus are not based on these international standards. This was later rejected by the Appellate Body which stated that based on didn't necessarily mean must conform to such standards or guidelines.
  • Article 5- Articles 5.1 and 5.2 came into question in this case as they required for the measures that were implemented by the members to be based on assessment of risk with the help of scientific evidence. Violation of the same would also lead to violating Article 3.3 of SPS which allows for measures to be of a higher level of protection than the set international standards but only with proper scientific evidence.
Similarly the necessity of scientific evidence to support measures taken to protect human, plant or animal life is also brought up in Article 2.2.

Even though Article 5 allows for sanitary protection measures to be taken by the members with proper evidence, it has to avoid the issue of discrimination and restriction on internation trade that is disguised as a measure.

Thus when implementing Art 5.2, its read with Articles 5.4, 5.5 and 5.6 that deal with the risk management decision to minimize trade restricitons and issues while also putting necessary amount of protection.

This is mainly to avoid the unnecessary and arbitrary distinctions in trade restrictions or any kind of discrimination. As a result EC did put out its scientific reports to tests it had conducted to prove its necessity for these restrictions but there wasn't any set procedure to base of its risk assessment however the party had to submit evidence for the same. What was an essential requirement in the same was that the conclusion that is reached to with the scientific evidence are reflected in these measures taken up by the member and is in concurrence with the assessments and evidences for these measures17.

Another method of adopting these measures is to adopt the precautionary principle under Article 5.7 of SPS which is a necessary part of international law but it doesn't allow for it to override Articles 5.1 and 5.2 which necessitates for their to be an assessment of risk and evidence to support these measures 18.

Finally it was held that EC violates these Articles stating that the measures taken werent based on risk assessment and also resulted in a disguised restriction on international trade and since it violated these specific conditions, it need not look at other obligations and provisions. This was however later reversed by the Appellate Body stating that 5.1 only required there to be a rational relation between these measures and risk assessment.

Findings By The Appellate Body (Reversed)
As mentioned previously, there were instances when the Appellate body reversed the findings in the panel body report. It found that the case should have only brought the buren on EC to bring through evidence for their measures after US first should have made a prima facie case with the evidence of provisions of SPS Agreement being violated.

It also reversed the interpretation of based on in Article 3 and stated that it doesn't mean conform to and thus the measure that is to be based on international standards need not conform to the same under Article 3.2.

It also reversed the part where the panel held that there needs to be a specific level of risk that is to be shown with proper evidence when taking risk assessment into account, stating otherwise that such an imposition of a certain standard of requirement for the assessment is not given under the SPS Agreement and thus cannot be made for them to compulsively follow 19.

Over many years, this dispute went unresolved with EU maintaining its ban on beef with hormones from US and Canada while the latter continued with their retaliatory measures. Alongside, EU also went along with its research and studies to prove the ban and in 2003 with a study proving its contentions right in line with its obligations, asked WTO to proceed with US and Canada stopping their measures.

In 2005, they started with new proceedings and in 2009 it was held that all parties were at wrong here and with new hearings and proceedings, in 2008 decided to allow for EU to continue with its ban and USA to continue its measures which led to an even bigger mess.

Conclusion
This dispute persisted for more than two decades and even though it was evident that the WTO rulings didn't help with the dispute being resolved despite of there being the SPS Agreement and the Dispute Settlement Mechanism but the general principles of these rules were complied with when it came to both the reports.

The only issues that came up in my eyes were with respect to different approaches being taken to these rules. For example, the question of whether multiple individual experts can be used in place of panel of experts if it deems to be a better option and even though it was uncontested from both the parties, it was still brought up as it might have been a very wide approach to the rule.

But the fact is that these issues will always persist as interpretation of these rules can be subjective to an extent, we just have to make sure no other obligation is violated and no party has a conflict of interest with the same.

When it came to the SPS Agreement, its main objective was to allow member countries to set its safety standards, and they can be stricter than the international standards but they have to be justified with reports of evidence and studies.

And even though EU could show its consumers completely banning beef with hormones, lack of studies always questioned it to be an act of protectionism. This seems justified as lack of evidence can lead for people to think this is just another negative impact on trade and this is only because the existence of GATT and it leading to a panel adjudicating the matter only seems fair and is only done after consultations with both the parties.

Even though I agree with most of the provisions and its application by the Appellate body like the part with international standards not having to conform to and that there should be a rational relation between the risk assessment and the measures and that there was no discrimination between countries and only of the products of the same catrgory which wasn't prohibited, this wide approach might cause some issues as well which in my eyes was the part of burden of proof.

Even though the appellate body overturned the ruling that US had the burden of proof and found that EC had violated and thus had the burden of proof. Considering previous cases and other instances of the application of this common law, to me the burden should fall on US considering that is the member which brought up action against EC and thus should make a case as to why WTO should go ahead with its proceedings 20.

Thus even though EC started the dispute with its ban, the retaliatory measures taken up by USA didn't really help and in turn introduced further trade issues and restrictions. Thus it isnt only a model case for when it came to economic losses and trade distortions but also how all the dispute resolving mechanisms failed, in my view, despite of all the Agreements.

End-Notes:
  1. See Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/R/USA, August 1997, pg. 4.
  2. Ibid, pg. 8-9
  3. Ibid, pg .11
  4. Ibid pg. 12
  5. See Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, January 1998, pg. 3-4
  6. Article 3.7 DSU
  7. EC Measures Concerning Meat and Meat Products (Hormones)- Arbitration under Article 21.3(c) of DSU, WT/DS26/15,WT/DS48/13
  8. Ibid, pg. 17-20
  9. Ibid, Para 7.6
  10. Ibid, Para 8.7
  11. Ibid, Para 3.3
  12. Ibid, Para 3.3
  13. Ibid, Para 4.242
  14. Ibid, Para 4.5
  15. Ibid, Para 8.55
  16. Ibid, Para 8.69.
  17. Ibid, Para 8.111
  18. Ibid, Para 8.157
  19. Ibid, Para 177

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