QUESTION 2
Countries A and B are both WTO Members. These two countries have a long history of problems concerning Country B’s beef import from Country A. The situation is summarized as the following:
1. In 2005, Country B banned imports of beef from Country A following the case of bovine spongiform encephalopathy, known as “mad cow disease”, in Country A.
2. In 2008, Country B signed an agreement with Country A (hereinafter the “Beef Agreement”) and opened the door to bone-in beef, ground beef, and other products from cattle under 30 months old.
3. In 2009, Country’s B legislature revises its Food Act and banned the import of certain beef products with documented mad cow disease cases over the past decade. This amendment effectively halted imports of “ground beef” and “internal organs” from Country A, which alleged that Country B is in violation of the bilateral Beef Agreement and the WTO Agreements.
Please analyze and answer the following questions based on the above information: (50 marks)
2. In 2008, Country B signed an agreement with Country A (hereinafter the “Beef Agreement”) and opened the door to bone-in beef, ground beef, and other products from cattle under 30 months old.
3. In 2009, Country’s B legislature revises its Food Act and banned the import of certain beef products with documented mad cow disease cases over the past decade. This amendment effectively halted imports of “ground beef” and “internal organs” from Country A, which alleged that Country B is in violation of the bilateral Beef Agreement and the WTO Agreements.
Please analyze and answer the following questions based on the above information: (50 marks)
1. About the Beef Agreement:
i. Can Country A bring a complaint against Country B under the WTO Dispute Settlement Understanding based on the allegation that Country B violates the Beef Agreement between them?
According to Art. 3.2 of the DSU, the WTO dispute settlement system serves to preserve the rights and obligations of Members under the covered agreements and to clarify the existing provisions of those agreements. According to the Appellate Body Report in Brazil — Desiccated Coconut,[1]The ‘covered agreements’ include the WTO Agreement, the Agreements in Annexes 1 and 2, as well as any Plurilateral Trade Agreement in Annex 4 where its Committee of signatories has taken a decision to apply the DSU. Thus, for a country to bring a dispute to the WTO, the said dispute has to arise due to a violation of the covered agreements.
This is affirmed in the case of Mexico – Soft Drinks, [2]where the Appellate Body found that there was no basis in the DSU for panels and the Appellate Body to adjudicate non-WTO disputes. In this case, the Beef Agreement is an international treaty between Country A and B, and not a covered agreement under the DSU. Hence, Country A cannot bring a dispute arising from an alleged violation of the said agreement to the WTO Dispute Settlement Understanding.
ii. Would the Beef Agreement help interpret the relevant WTO agreement in the dispute settlement procedures?
According to past WTO jurisprudence, to the extent that such rules are considered to be informative, the Panel may consider other relevant rules of international law to give meaning to WTO rules. For example, according to the panel report in EC – Biotech,[3]a panel may consider other relevant rules of international law when interpreting the terms of WTO agreements if it deems such rules to be informative. It is also supported by the case US – Shrimp,[4]where the AB interpreted WTO rules by reference to non-WTO treaties to establish the meaning of specific treaty terms.
2. About GATT 1994: If Country A is to argue that Country B is in violation of GATT 1994,
i. What would be the relevant articles and what are their respective requirements?
Quantitative restrictions can be defined as specific limits on the quantity or value of goods that can be imported (or exported) during a specific time period. The most common quantitative restrictions are prohibitions and quotas. Article XI:1 applies to all measures applied by a Member prohibiting or restricting the importation, exportation or sale for export of products. In this case, since Country B banned imports of certain beef products from Country A, it constitutes a limitation on the amount of goods imported and thus, a quantitative restriction according to Article XI:1 of the GATT.
ii. Whether Country B violate these articles?
The general prohibition of quantitative restrictions is contained in Article XI:1 of the GATT. WTO Members cannot, as a general rule, impose quantitative restrictions on the goods imported from or exported to another Member. Thus, since Country A and B are both WTO Members, by imposing an import ban on beef products from Country A, Country B violates GATT Art. XI:1.
iii. Whether there are any defenses under the GATT 1994 available to Country B and what are the requirements for applying the defences?
In this case, Country B can justify the alleged violations under the General Exception clauses in GATT 1994. According to the ABR in US-Gasoline,[5]in order that the justifying protection of Article XX may be extended to it, the measure at issue must not only come under one or another of the particular exceptions — paragraphs (a) to (j) — listed under Article XX; it must also satisfy the requirements imposed by the chapeau of Article XX. The analysis is, in other words, two-tiered: first, provisional justification by reason of characterization of the measure under XX(g); second, a further appraisal of the same measure under the introductory clauses of Article XX.”
GATT Art. XX(b) covers measures that are (i) designed to protect the life and health of human, animal, and plant and (ii) necessary.[6]Country B may argue that a measure halting the imports of beef products with documented mad cow disease cases falls within the ambit of GATT Art. XX(b) because it is a measure designed to protect the human life and health in the country from the health consequences from the consumption of those beef products.
Country B would also need to prove that the measures are “necessary” within the meaning of GATT Art. XX(b). As mentioned in the Appellate Body Report of EC-Seal,[7]a necessity analysis involves a process of "weighing and balancing" a series of factors, including the importance of the objective, the contribution of the measure to that objective, and the trade-restrictiveness of the measure.[8]In the case of Brazil-Taxation, the Panel recalls that the Appellate Body has explained that 'few interests are more 'vital' and 'important' than protecting human beings from health risks.[9]
3. Other WTO Agreement(s): In addition to the GATT 1994,
i. What other WTO agreement(s) could also be closely relevant and what are the requirements or general principles under the agreement(s)?
The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) seeks to strike a balance between the need to ensure that a country's consumers are being supplied with food that is safe to eat and at the same time, the need to ensure that strict health and safety regulations are not being used as an excuse for protecting domestic producers and thus restricting international trade. In this case, since the ban on certain beef products was enacted by Country A to protect its nationals from the risk of contracting mad cow disease, it falls within the scope of the SPS Agreement, as this agreement, pursuant to its Annex A, applies to all measures which have the purpose to protect, within the territory of a Member: human life or health from diseases carried by animals, plants or products thereof.
According to the first paragraph of Article 2, members can give priority to health protection over trade. In addition, the level of SPS protection is for each Member to choose. However, the SPS measure must fulfill the procedural and substantive requirements provided for in the SPS Agreement. For example, the measures must be necessary and based on scientific principles (Art. 2.2), and not constitute as arbitrary or unjustifiable discrimination or a disguised restriction on trade (Art. 2.3). Also, members shall base their measures on international standards, guidelines and recommendations, where they exist (Art. 3).
ii. Whether Country B violates these/ this agreement(s)?
The main provision regarding the obligation of harmonization in the SPS Agreement is Article 3. Article 3.1 provides that: “Members shall base their sanitary or phytosanitary measures on international standards guidelines or recommendations where they exist…” Thus, when a Member decides to create a new SPS measure, it should start its task by verifying if an international standard exists for the product and/or measure in question. If it exists, the Member shall base its SPS measure on it, unless there is a scientific justification for not using it or the relevant international standard does not achieve the level of protection aimed by the Member.
In this case, Country B did not verify if an international standard existed for the products in question and did not base its measures on an international standard. Thus, the SPS measure enacted by Country B violates Art. 3.1 of the SPS Agreement.
iii. Whether there are any defenses under the agreement(s) available to Country B?
Governments that do not base their national requirements on international standards may be required to justify their higher standard if this difference gives rise to a trade dispute. According to Article 3 and Article 5 of the SPS Agreement, Members are permitted to adopt SPS measures which are more stringent than the relevant international standards or adopt SPS measures when international standards do not exist, provided the measures, in addition to the basic obligations set forth in Article 2, are: based on scientific risk assessment; consistently applied; and not more trade-restrictive than necessary. Prior to the above, Country B could justify its measure by fulfilling the requirements stated.
iv. Whether the defense under the GATT 1994 also serves as a defense under other WTO agreement(s)?
The Appellate Body Report of China – Raw Materials, has affirmed that Members may only have recourse to GATT Art. XX when there is textual support within the Agreements other than the GATT.[10]
According to Art. 11 of the SPS Agreement, provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply to consultations and the settlement of disputes under this Agreement, except as otherwise specifically provided herein. In this case, unless it is specifically stated that the DSU shall not apply, Art. XX can be invoked to justify a measure violating the SPS Agreement.
4. Country B’s legislature: Could Country B rely on its legislature to defend its position for prohibiting the import of “ground beef” and “internal organs” from Country A?
In order for Country B to defend its position for prohibiting the import of “ground beef” and “internal organs” from Country A, it has to fulfill the requirements found in GATT Art. XX(d). GATT Art, XX(d) covers measures that are (i) designed to secure compliance with laws or regulations and (ii) necessary.[11]
According to the Appellate Body Report of Mexico-Soft Drinks, the terms "laws or regulations" are generally used to refer to domestic laws or regulations.[12]Thus, Country B can rely on its domestic legislature to defend its position for the prohibition of beef products from Country A. However, as elaborated above, the measure would also need to be designed to secure compliance with the said rule, and fulfill the necessity requirement.
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