The WTO dispute settlement framework and operation
Case 2: Australian restrictions on salmon imports
commissioned 17 scientific studies which would take longer than 15 months to conclude. The parties were unable to agree on compensation by the European Community for the lack of implementation, so the United States and Canada requested the right to suspend trade benefits they had previously given to the European Community. The parties could not agree on the amount of benefits to be suspended, and the original panel was asked to arbitrate. On the recommendation of the arbitrators, the Dispute Settlement Body authorised the United States to raise tariffs by 100 percent on EC products worth US$116 million per year, while Canada was authorised to suspend concessions with a value of CAN$11.3 million per year. As of October 2000, both countries were continuing to apply these tariffs, as the European Community has not yet brought its measure into conformity with the SPS Agreement.
report, the Australian government maintained its ban on the importation of fresh chilled and frozen salmon.
Canada requested a panel under the WTO dispute settlement procedures, claiming that salmon imported for human consumption was very unlikely to lead to the introduction of fish diseases.
Canada's main arguments were: (i) Australia's requirements were neither based on international standards nor on a proper risk assessment; (ii) the level of risk accepted by Australia with respect to salmon was inconsistent with the level of risk Australia accepted from other fish; and (iii) there were less trade restrictive measures which Australia could impose in order to ensure its chosen level of health protection.
A panel was established in April 1997. The panel consulted scientific experts chosen, in consultation with the parties, from lists of experts provided by the International Office of Epizootics (OIE). Expert advice was sought on fish diseases, risk assessment and the OIE.
Legal issues and findings
The panel observed that Australia had conducted a risk assessment on adult, wild, ocean-caught Pacific salmon, and assumed that this risk assessment met the requirements of a risk assessment contained in Articles 5.1 and 5.2 of the SPS Agreement. However, the panel found that the actions Australia had taken were not based on the risk assessment, i.e. there was no rational relationship between this risk assessment and the import ban on Pacific salmon. For all other types of salmon, the panel found that Australia had not done a risk assessment and was thus in violation. The panel considered that Australia's action prohibiting imports of fresh chilled or frozen salmon could also be described as a requirement that the salmon be heat-treated.
The Appellate Body rejected the panel premise that the heat-treatment requirement was the SPS measure at issue. The Appellate Body examined Australia's risk assessment on the basis of the definition of a risk assessment found in Annex A of the SPS Agreement. The Appellate Body concluded that the risk assessment (of Pacific salmon) met the first criteria of the definition, in that it (i)
identified the diseases in question, as well as the associated biological and economic consequences. However, the Appellate Body found that the risk assessment did not (ii) evaluate the likelihood of entry, establishment or spread of these diseases, as well as the associated biological and economic consequences; and did not (iii) evaluate the likelihood of entry, establishment or spread of these diseases according to the SPS measures which might be applied. It concluded that Australia had acted inconsistently with Article 5.1. It further concluded that no risk assessment had been done for the remaining types of salmon.
With respect to Article 5.5 of the SPS Agreement, the panel compared Australia's ban on salmon imports with the allowed importation of whole frozen herring for bait and the allowed importation of live ornamental finfish (aquarium fish). The panel looked at (i) differences in the levels of protection adopted in different, but comparable situations; (ii) if these differences were arbitrary or unjustifiable (iii) and whether they resulted in discrimination or a disguised restriction on trade. Although in all situations there was at least one disease in common, the panel found that the levels of protection were quite different. Salmon importation was prohibited, herring were allowed in without controls, and ornamental fish were allowed with few controls. The panel found the differences in protection to be arbitrary or unjustifiable, since bait was directly introduced into the aquatic environment, and ornamental fish often became released into the wild. Based on these arbitrary or unjustifiable differences, the violation of Article 5.1, the sudden change in conclusions between the 1995 and 1996 versions of the risk assessment, and the lack of restrictions on the internal movement of fish, the panel concluded that the ban on salmon imports was discriminatory or resulted in a disguised restriction on trade. The Appellate Body upheld this finding.
The panel next examined whether Australia violated Article 5.6 of the SPS Agreement, which requires that a measure be no more trade-restrictive than needed to achieve the appropriate level of protection.
It examined if other measures: (i) were reasonably available, taking into account technical and economic feasibility; (ii) achieved
Australia's appropriate level of protection; and (iii) were significantly less restrictive to trade.
The panel noted that Australia's risk assessment identified seven technically and economically feasible options and indicated that it was "extremely difficult to distinguish between the levels of risk" that each option presented. Some of the options were clearly less trade-restrictive than the import ban/heat treatment requirement imposed by Australia. The Panel concluded that less trade-restrictive measures existed which could have been used by Australia (WTO 1998b).
The Appellate Body reversed the finding on grounds that the panel had based its considerations on the heat-treatment requirement, not on the import prohibition. Because of insufficient factual findings, the Appellate Body found itself unable to conclude whether Australia had violated Article 5.6 (WTO 1998c).
Implementation
The parties were unable to agree on a 'reasonable period of time' for Australia to implement the findings. An arbitrator set the reasonable period of time for compliance as 8 months after adoption of the reports. Australia claimed it had fully implemented the panel and Appellate Body recommendations in July 1999, two weeks after this deadline expired. Australia had carried out a new import risk assessment for fresh chilled and frozen salmon for human consumption and other non-viable marine finfish, and a separate risk analysis for live ornamental fish. Based on the 1999 risk assessment, Australia's new actions allowed the importation of all kinds of Canadian salmon, under certain conditions.
Canada challenged Australia's claim of implementation and requested authorisation to take retaliatory trade action on Australian exports worth CDN$45 million. Australia asked for arbitration over this amount of "retaliation". The Dispute Settlement Body asked the original panel to consider Australia's compliance (Article 21.5 of the DSU) and to decide the appropriate level of
"retaliation" (Article 22.6 of the DSU). Both countries agreed to wait for the panel decision on compliance before proceeding with arbitration over possible trade actions.
The same panel Member s had also been charged with examining a complaint by the United States against Australia on the same issue.
However, the United States also decided to wait for the judgement on compliance before pursuing its complaint.
Determination of compliance
Based on its new risk assessment for all fresh chilled and frozen salmon, Australia set new conditions on imports. In addition to requiring that fish be eviscerated, head and gills removed, washed internally and externally and certified, Australia specified that the product had to be processed to a "consumer-ready" state to be released from quarantine. The definition of what constituted consumer-ready product included a requirement that skin be removed from all products larger than 450 grams. Salmon that was not in consumer-ready form would have to be processed to consumer-ready form in approved premises to reduce risks from improper disposal of large quantities of skin, bone, etc.
The panel noted the compliance deadline had not been strictly met and that some of the new measures on fish other than salmon (to comply with the consistency requirement) were to be phased in at later dates.
Next, the Panel considered whether Australia's measures affecting salmon imports were based on a risk assessment. It found that the new risk assessment met the requirements of the SPS Agreement, i.e.
it identified the diseases and evaluated the likelihood of entry, establishment or spread of these diseases, as well as the associated biological and economic consequences according to the SPS measures which might be applied. However, the Panel found that the requirement for salmon products to be in a specified consumer-ready form was not based on a risk assessment and thus was contrary to Article 5.1 of the SPS Agreement.
The Panel also found the definition of the consumer-ready product to be more trade restrictive than required to achieve the desired level of health protection, in violation of Article 5.6. Australia argued the consumer-ready requirement was to limit any risk from untreated waste from salmon processing plants. The Panel thought
that less trade-restrictive requirements, such as consumer packaging, would also avoid unsafe processing and achieve the desired health protection.
The report of the panel on compliance was adopted without appeal on 20 March 2000. Australia and Canada started consulting, and reported on 18 May 2000 that a mutually agreed solution had been reached.