The SPS agreement and its application in the WTO dispute
settlement
Back
to Contents
Note: Footnotes Omitted
Part
III. Application of The Agreement-Case Law Study
In
this part, the author will examine how the SPS Agreement
is applied in the WTO dispute settlement mechanism.
The WTO Appellate Body has offered three major disputes
concerning SPSMs to the world, which is to be summarized
as follows. The focus of this project is on the first case, which is an
interpretation of nearly all of the important provisions
of the SPS Agreement and is likely to set precedent for
future WTO decisions.
A.
Brief introduction
of three WTO cases
1.
The EC-hormone
case
For over a decade, the United States and the
European Community (EC) have been involved in an ongoing
dispute over the importation of beef from the United States
into the EC. In
1988, the EU prohibited the use of growth-promoting hormones
in beef production, and it implemented an import ban on
hormone treated meat in 1989. The United States and Canada claimed that the use of hormones
for growth promotion purposes in beef cattle was safe and
posed no threat to human health. They contended that the
EU's policy was scientifically unfounded and was designed
to protect EU beef producers from competition. The EU countered by stating that beef
hormones might threaten human health and claimed that science
supported its policy.
The WTO Panel Decisions
Two WTO dispute settlement Panels formed to solve
the issues released their reports on August 18, 1997. Included among their arguments before
the panels, the United States and Canada contended that
the EU's prohibition on the importation of hormone treated
beef violated the EU's obligations under Article 3.1 of
the SPS Agreement as the EU failed to base its measure on
international standards. The Codex maintains standards for
five of the six hormones under dispute.
According
to the Codex, these five hormones, when used according to
sound veterinary practices for purposes of growth promotion
in beef cattle, do not pose risks to human health. The panels
determined that the EU's measures varied from the international
standards of the Codex and thus were not in conformity with
Article 3.1. Article
3.3 makes it clear that a WTO member is not required to
base its SPS measures on international standards. Article
3.3 provides that a member may maintain higher standards
than the international norm, but only if such measures are
based on science or if they operate "as a consequence
of the level of sanitary or phytosanitary protection a Member
determines to be appropriate in accordance with the relevant
provisions of paragraphs 1 through 8 of Article 5."
Article 5 requires that members base their measures
on risk assessments. The EU claimed that risk assessments supported
its position. The
panels determined, however, that the EU failed to demonstrate
that its measures were based on risk assessments as required
in Article 3.3. Therefore, the panels held that the
EU's policy on beef hormones contravened its obligations
under the SPS Agreement.
The WTO Appellate Body Decision
The EU appealed the findings of the panels, and the
WTO Appellate Body released its report on January 16, 1998.
While the Appellate Body's decision rejected a number of
arguments put forward by the panels, it affirmed the panels'
conclusions that the EU's beef hormone policy violated Article
3.3 as it was not based on a risk assessment. In its report,
the Appellate Body emphasized that voluntary standards of
international organizations such as the Codex are not transformed
into mandatory standards for WTO members. Rather, members are permitted under Article
3.3 to maintain SPS measures that are higher than the international
norm (i.e., higher than the standards of the relevant international
organizations), but such measures must be based on risk
assessments as described in Article 5.
2. The Australia-Salmon Dispute
On October 5, 1995, Canada requested WTO-based
consultations with Australia regarding Australia's ban on
the importation of certain fresh, chilled, and frozen salmon.
Australia contended that its prohibition of such
imports, which became operative in 1975, was necessary to
protect Australian fish from up to twenty-four diseases
that could enter the country through imported salmon from
Canada. The establishment of these diseases could have damaging economic
and biological consequences for Australia's fisheries. Canada
claimed that Australia's policy was not founded on science
and was a disguised restriction to international trade.
The WTO Panel Decision
A WTO panel was formed on April 10, 1997, and the
panel released its report on June 12, 1998. The report found
that Australia was in violation of the SPS Agreement as
Australia did not base its salmon import regulation on a
risk assessment (violating Article 5.1 and thus by extension
Article 2.2, which requires that SPS measures be based on
scientific principles). The panel determined that Australia was applying arbitrary
or unjustifiable distinctions in the levels of SPS protection
for measures for different situations,
i.e., was applying more restrictive measures to imports
of salmon than to imports of ornamental live fish although
the latter posed higher risks, which resulted in a disguised
restriction on international trade (in violation of Articles
5.5 and 2.3).
The WTO Appellate Body Decision Australia announced on July 22, 1998,
that it would appeal the panel's decision, and the Appellate
Body of the WTO released its report on the salmon dispute
on October 20, 1998. The Appellate Body upheld the panel's
decision that Australia's policy contravened Australia's
obligations under Article 5.1 because the relevant measure
was not based on a risk assessment, and therefore, Australia's
policy also violated Article 2.2, which requires that SPS
measures be based on scientific evidence.
The Appellate Body upheld the panel's determination
that by maintaining unjustifiable distinctions in levels
of SPS protection in
different
situations, Australia was imposing a disguised restriction
on international trade in violation of Articles 5.5 and
2.3.
3. The Japan--Agricultural Products Dispute
On April 7, 1997, the United States requested
consultations with Japan regarding Japan's approval process
for the importation of certain agricultural products.
The United States alleged that Japan prohibited the
importation of individual varieties of some agricultural
products until each variety had been tested for the required
quarantine treatment.
For example, instead of requiring that apples imported
from the United States meet Japan's quarantine requirements
concerning a certain plant pest, the codling moth, Japan
mandated that testing be conducted on each variety of apple
before different varieties could be imported.
Thus, even though Japan had approved the importation
of certain "red delicious" apples because the
United States had proven that apples of this variety could
be treated effectively for the codling moth, the United
States was unable to export other varieties, such as "Fujis"
or "Braeburns."
The United States claimed that it took from two to
four years to conduct the necessary tests, these tests were
expensive, and that Japan's policy adversely impacted U.S.
agricultural exports and violated Japan's obligations under
the SPS Agreement.
Japan claimed that its policies were consistent with
the requirements of the SPS Agreement.
WTO Panel Decision
The panel determined that Japan's policy contravened
that country's obligations under the SPS Agreement because
Japan's measure, as applied to apples, cherries, nectarines,
and walnuts, was not based on scientific evidence, (violating
Article 2.2), and was more trade restrictive than necessary
(violating Article 5.6).
In addition, as Japan's measure was not published,
the panel held that Japan was in violation of Article 7
and Annex B.1, both of which concern transparency. Japan announced on November 24, 1998,
its decision to appeal the findings of the panel.
WTO Appellate Body Decision
The Appellate released its report on February 22,
1999. Except for reversing only one of the Panel¡¯s findings regarding
burden of proof issue, the Appellate Body upheld or found
no need to address.
B.
The Right
of A National Government to Set its Health Protection Measures.
As noted above, it is understood that, given
the fact that the Agreement only provides general disciplines
that apply to the development and application of all SPSMs,
Members remain free to develop and implement their own specific
measures, as long as those measures do not conflict with
these disciplines.
The EC-hormone Panel interpreted this issue
in its report, basing its ruling in part on an interpretation
of the relationship between Article 3.1, 3.2 and 3.3.
Article 3.2 provides that if a Member's SPS measures
conform to international standards they will be deemed consistent
with WTO obligations. Article 3.1 requires Members to base their
SPS measures on international standards unless they choose
to maintain a higher level in accordance with the requirements
of Article 3.3. Article 3.3 allows Members to maintain
higher levels of protection than would be achieved by international
standards only if there is a scientific justification or
if the Member determines that a higher level is appropriate
after conducting the risk assessment required by paragraphs
1 through 8 of Article 5. In a footnote, the SPS Agreement provides
that:
¡°[T]here is a scientific justification if,
on the basis of an examination and evaluation of available
scientific information in conformity with the relevant provisions
of this Agreement, a Member determines that the relevant
international standards, guidelines or recommendations are
not sufficient to achieve its appropriate level of sanitary
or phytosanitary protection.¡±
In analyzing the SPS Agreement's application
to the EU measures, the Panel first addressed the question
of whether any "international standards, guidelines
or recommendations" exist concerning the use of any
of the disputed hormones for promoting growth. The SPS Agreement
uses the Codex as the standard for veterinary drug and pesticide
residues. Thus, when Members implement sanitary measures,
the measures must either be based on the Codex standards
or meet the requirements of Article 3.3 of the SPS Agreement,
which applies to measures not based on international standards. The Panel concluded that the EC import ban was not based on
the existing Codex standards because it implied a significantly
different level of sanitary protection.
The Appellate Body reversed the Panel's decision
on the rationale that the Panel had erroneously equated
whether the EC measures were based on international standards
with whether the measures were in conformity with the standards. The Appellate Body reasoned that ¡°It
is clear to us that harmonization of SPS measures of Members
on the basis of international standards is projected in
the Agreement, as a goal, yet to be realized in the future.¡± Any other interpretations would, according
to the Appellate Body,
have
vested such standards ¡°with obligatory force and effect.¡±
The Appellate Body¡¯s discussion of the distinction
between ¡°based on¡± and ¡°might be¡± is probably just to
pave the way for its interpretation of state nation¡¯s sovereignty
in enacting SPSMs.
Nations which prefer to preserve their rights should
feel satisfied because, according the Appellate Body¡¯s
understanding, ¡°[U]nder Article 3.3 of the SPS Agreement,
a Member may decide to set for itself a level of protection
different from that implicit in the international standard,
and to implement or embody that level of protection may
be higher than that implied in the international standard.¡± Moreover, the Appellate Body also rejected
Panel¡¯s representation of the ¡°General ¨C Exception¡±
rule, stating that ¡°[t]his right of a Member to establish
its own level of sanitary protection under Article 3.3 of
the SPS Agreement is an autonomous right and not
an ¡®exception¡¯ form a ¡®general obligation¡¯ under Article
3.1.¡±
The stance of the Appellate Body of attaching
great importance to state sovereignty conforms to the conventional
international legal principle, under which sovereignty is
the predominant basis for international obligations. However, this stance is probably inappropriate if more factors
are taken into consideration.
Many argued that, if one of the purposes of the SPS
Agreement is to improve human and animal health, and if
the Appellate Body's purpose is to assess the goals of health
protection and trade liberalization in a manner that secures
a positive solution, then the Appellate Body's reliance
on the notion of sovereignty is an incomplete means of discerning
the bases of the international obligations of WTO Members.
There is a growing awareness in international community
that a linkage should be established between international
trade regime and world environmental protection. It is argued that the concept of sovereignty
is "particularly inappropriate in the international
environmental area; natural ecosystems and pollution alike
do not respect national boundaries or the command of sovereigns."
C. The Risk Assessment
The significance of risk assessment has been
clearly established by the Agreement and the Appellate Body
in the implication that members were free to develop and
apply risk assessment techniques "as appropriate to
the circumstances," so long as the challenged sanitary
measure was "based on an assessment . . . of the risks"
and that assessment of risks incorporated "scientific
principles" and contained "sufficient scientific
evidence. "Paragraph
4 of the SPS Agreement sets out the treaty definition of
risk as ¡°¡ the evaluation of the potential for adverse
effects on human or animal health arising from the presense
of additives, contaminants, toxins or disease-causing organisms
in food, beverages or feedstuffs.¡±
The Panel interpreted the above definition as
a twostep process that "should (i) identify the adverse
effects on human health (if any) arising from the presence
of the hormones at issue when used as growth promoters in
meat or meat products . . .
and (ii) if any such adverse effects exist, evaluate
the potential or probability of occurrence of these effects."
Though specifically addressing the Hormones Controversy,
the conceptual framework would clearly be applicable to
any case where a substance and its specified use are called
into question in the application of an SPS measure.
However, the Appellate disagree with this interpretation. Noting that the ¡°term ¡®risk management¡¯ is not to be found
in either Article 5 or in any other provision of the SPS
Agreement,¡±
the Appellate Body refused to accept the Panel's more restrictive
notion of "risk assessment," rather endorsing
a more general view of risk assessment which need not be
informed by merely scientific data.
From procedural aspect, the Appellate Body rejected
the Panel¡¯s interpretation that there is a ¡°minimum procedural
requirement¡± in Article 5.1. The Panel held that, for a measure to
be considered based on a risk assessment, the Member imposing
a sanitary measure must show that it did indeed consider
a risk assessment when it enacted or maintained the sanitary
measure. Since the EU did not provide any evidence
that the studies to which it referred or the scientific
conclusions reached had been taken into account at the time
the EU enacted the disputed measures, the Panel concluded
that the EU measures had not met the requirements of Article
5.1. The Appellate Body reversed this conclusion,
noting that nothing in the SPS Agreement provides the basis
for such a ¡°minimum procedural requirement.¡± Article 5.1 only requires that the
SPS measures be based on risk assessment, but does not require
a Member to perform its own risk assessment.
A member may use a risk assessment performed by another
party as the justification for a SPS measure.
From the aspect of substantive requirement of
Article 5, which the EU must comply notwithstanding the
minimum procedural requirement, the Appellate Body endorsed
the Panel¡¯s approach.
Here the Panel's goal was to determine whether the
EC's assertions were in conformity with any of those reached
in the [risk assessment] studies. The EU's evidence that specifically addressed
the safety of some or all of the hormones in dispute did
not persuade the Panel.
The Panel further found that the EU failed to show
that the uses of these hormones pose an "identifiable
risk" to human health even when "good practices"
are followed. The evidence that addressed the general safety
of one or more of the hormones in dispute also failed to
convince the Panel that the measures met the substantive
requirements of Article 5. The EU measures only accepted meat with
a zero residue level.
Significantly, the Panel concluded that the EU had
not based the ban on the scientific evidence submitted to
the Panel, despite assertions by the EU that a zero residue
level was necessary to protect human health. The EU also furthered arguments that it
based the ban on the existence of six general categories
of risks. That, however, just drove the Panel to
the conclusion that the EU had not based the ban on a risk
assessment.
The Appellate Body affirmed the Panel¡¯s general
approach of matching the Member¡¯s arguments against the
conclusions found in a risk assessment as useful and relevant,
but also held that this was not sufficient to exhaust the
meaning of ¡®based on¡± a risk assessment. More is required of a panel than merely
matching documents.
In developing its own interpretation of "based
on," the Appellate Body arrived at its own statement
of the content of a panel's findings on risk assessment:
We believe that Article 5.1 . . . requires that
the results of the risk assessment must sufficiently warrant--that
is to say, reasonably support--the SPS measure at stake.
The requirement that an SPS measure be "based
on" a risk assessment is a substantive requirement
that there be a rational relationship between the measure
and the risk assessment.
In the Australia-Solmon case and the Japan-Agriculcural
product case, the same approach was followed by the Appellate
Body.
This search for "reasonable support"
implies that a risk assessment document need not have reached
a "monolithic conclusion" that supports the member's
position; a member might "act in good faith on the
basis of what, at a given time, may be a divergent opinion
coming from qualified and respected sources."
What is required is that there be some available
scientific evidence that qualifies as "a risk assessment"
and which provides "sufficient warrant" or "reasonable
support" for a member's sanitary measure.
It looks to me that both the Panel and the Appellate
has not sufficiently clarified the roles of scientific uncertainty
and science policy in risk assessment. Problems will arise when there are two
plausible scientific accounts and it is uncertain which
will prove to be correct.
I am of the opinion that under this circumstance
a Member should be entitled to base its regulation on either
account, as a matter of its own science policy. My previous analysis concerning governments¡¯
rights in setting their own science policy supports such
a conclusion.
D. Levels of Protection
As noted previously, Article 5.5 of the SPS
Agreement directed Members to aim at achieving consistency
in the application of the concept of an appropriate level
of protection. The Panel interpreted this provision to
mean that there were different appropriate levels of protection
in different situations involving the same substance or
the same adverse health effects. For a sanitary measure to be inconsistent
with Article 5.5, each of the following three elements must
be present: (1)
the Member adopts "different appropriate levels of
sanitary protection in 'different situations;"' (2)
"the distinction in levels of protection imposed by
the member in the different situations is 'arbitrary or
unjustifiable;"' and (3) "the distinction in levels
of protection results in 'discrimination or a disguised
restriction on international trade."'
Based on this test, the Panel concluded that
the EC had adopted arbitrary and unjustifiable levels of
protection for residues of TBA, zeranol and the natural
hormones resulting from their use for growth promotion (i.e.,
no added residues) when compared to the level of protection
for the natural hormones occurring endogenously, or compared
with residues of carbadox used for growth promotion (i.e.,
an unlimited residue level). In addition, the Panel found that the difference between the
EC level of protection for the natural hormones as well
as for zeranol and TBA when used for growth promotion, as
opposed to no limit for the natural hormones which occur
endogenously in meat and other foods, resulted in an import
ban which restricted international trade and constituted
a discrimination or a disguised restriction on international
trade.
The Appellate Body reviewed the Panel's reading
of Article 5.5 and reversed its conclusion.
The Appellate Body emphasized that in analyzing Article
5.5 it is important to realize that "the goal set is
not absolute or perfect consistency ... it is only arbitrary
or unjustifiable inconsistencies that are to be avoided." As to the Panel's interpretation of the
term "different situations" in the first element,
the Appellate Body concluded that the situations can be
compared if they have common elements, but not if they are
totally different.
The Appellate Body then addressed the second
element of Article 5.5, arbitrary or unjustifiable differences
in levels of protection. As to hormones occurring naturally in meat and those that have
been administered as hormones for therapeutic or zootechnical
purposes, the Appellate Body ultimately rejected the Panel's
conclusion that these situations are arbitrary or unjustifiable. Next, the Appellate Body addressed the
issue of the hormones as compared to carbadox. After reviewing the arguments set forth on both sides, it agreed
with the Panel's conclusion that the distinction in the
levels of protection is "arbitrary or unjustifiable."
The Appellate Body then turned to the third
element of Article 5.5, that the distinction in levels of
protection results in "discrimination or a disguised
restriction on international trade."
Although it agreed with the Panel on some points,
it found that "the answer to the question whether arbitrary
or unjustifiable differences or distinctions in levels of
protection established by a Member do in fact result in
discrimination or a disguised restriction on international
trade must be sought in the circumstances of each individual
case." In the present case, this issue arises
as to carbadox. Ultimately,
the
Appellate
Body concluded that the measure did not "result in
discrimination or a disguised restriction on international
trade."
As a result, the Appellate Body reversed the
conclusion of the Panel that the EU did not comply with
the requirements of Article 5.5.
In the Austria-Solomon case, the Appellate Body
followed the same three-element test, concluding that Austria
had acted inconsistently with its obligation under Article
5.5.
