The WTO dispute settlement framework and operation
Case 1: The EC hormones ban
The complaint by the United States and Canada against the European Community's ban on imports of meat treated with growth-promoting hormones was the first SPS Agreement dispute referred to a panel. This dispute goes back to the 1970s, when European consumers became concerned over the use of growth-promoting hormones in livestock. European consumer organisations called for a boycott of veal suspecting that hormonal irregularities in teenagers had been caused by veal treated with illegal hormones (DES).
In 1980, the EC Council of Ministers banned the use of oestrogen. In 1988, the European Community banned the use of other hormones for growth promotion, including three natural hormones (oestradiol 17, progesterone and testosterone) and three synthetic hormones
(trenbolone acetate, zeranol and melengestrol acetate (MGA)). The European Community also banned imports of meat and meat products unless the exporter could prove the meat had not been treated with the banned hormones. The European Community argued the ban was necessary to protect human health from potential risks caused by the consumption of meat containing the residues of veterinary drugs. The use of the three natural hormones for therapeutic and for herd-management purposes remained authorised.
In 1996, the United States and Canada separately requested a WTO panel to examine the case. The main arguments of the United States and Canada were: (i) no scientific evidence showed risks to human health from the proper use of these hormones for growth-promoting purposes; (ii) the EC measure was not based on international (Codex) standards; (iii) the EC measure was not based on a risk assessment; (iv) the level of risks accepted by the European Community with respect to hormones was inconsistent with the level of risk the European Community accepted in other comparable situations; and (v) there were less trade restrictive measures the European Community could impose to ensure health protection.
Two separate panels were established, in May 1996 (United States complaint) and in October 1996 (Canadian complaint). The panel sought expert advice concerning the human effects of veterinary hormones and drugs used in animals for human consumption; on the role of hormones in human cancer; and on the Codex process of developing international standards for food safety. Both panel reports were issued in August 1997. All parties appealed some findings. The Appellate Body report was issued in January 1998, and adopted by the Dispute Settlement Body the following month (WTO 1998a).
Legal issues and findings
According to Article 3.1 of the SPS Agreement, Members shall base their requirements on international standards. The Panel decided this meant a measure needed to reflect the same level of protection as the international standard. The Codex Alimentarius Commission
had established standards for five of the six hormones in question.
According to Codex, intake levels of the three natural hormones did not have to be limited. For two of the three synthetic hormones, Codex had identified levels of residues below which there was no evidence of any human health risk. The Panel concluded that the ban on imports of hormone-treated meat was not based on the Codex standards (the recognised international standard), since it achieved a significantly higher level of protection. The Appellate Body decided that "based on" meant that a measure could adopt some, but not necessarily all elements of an international standard.
Article 3.3 of the SPS Agreement allows a country to have requirements that achieve a higher level of health protection than the international standard. However, these higher requirements must be scientifically justified, or be the consequence of the Member's appropriate level of health protection. These requirements thus must be based on a scientific assessment of the health risks involved as required by Article 5 of the SPS Agreement. Although the Panel considered Article 3.3 to be an exception to Article 3.1, while the Appellate Body considered it an "autonomous right", both agreed that the European Community had violated Article 3.3 because it had not based its ban on a risk assessment.
According to Article 5.1 of the SPS Agreement, Members should base their SPS measures on an appropriate risk assessment. The definition of a risk assessment, in the case of food-borne risks, is an evaluation of the potential for adverse effects on human health. The European Community had invoked several scientific reports on five of the hormones, and the panel accepted that some of them could be considered to be risk assessments. However, none of the studies supported a ban on hormone-treated meat and the panel concluded that the EC measure was not based on the scientific evidence submitted. The Appellate Body confirmed that the EC ban was not based on a risk assessment and clarified that a rational relationship between the measure and the risk assessment was necessary. With respect to MGA, and to the potential health risks invoked by the European Community, the Appellate Body reached the conclusion that no risk assessment had been undertaken.
Although governments have a sovereign right to decide what level of health risk they accept, the SPS Agreement (Article 5.5) prohibits governments from requiring different levels of health protection in different situations, if these differences are arbitrary or unjustifiable and result in discrimination or a disguised restriction on trade. The panel compared the EC ban on imports of meat treated with natural or synthetic hormones with the EC tolerance of naturally occurring hormones in untreated meat and other food, such as broccoli or eggs. The panel found these situations comparable, since they involved the same hormones and therefore the same potential adverse health effects. The levels of protection were different; in one case the ban existed, in the other case there was no limit on endogenously occurring hormones. The panel found this difference in levels of protection arbitrary or unjustifiable because the hormones had the same potential carcinogenic effect in both cases.
The total residue level of hormones in meat from treated animals fell well within the range of levels found in meat from untreated animals. The level of endogenous natural hormones in products such as eggs and soy oil was much higher than the level in treated meat. The Appellate Body reversed this finding, however, arguing that there was a fundamental difference between added hormones and naturally occurring hormones in meat and other foods.
The panel also compared the use of hormones for growth promotion to the European Community's allowed veterinary uses of hormones for therapy or herd management. Entire herds were often treated with hormones, for extended periods of time. The hormones were the same and the potential adverse health effects of consuming the meat would seem to be the same. Having already found the above violation, the panel decided there was no need to make a finding on this comparison. The Appellate Body concluded that the therapeutic use (of hormones) involved closer supervision of correct use and concluded that the difference was not arbitrary or unjustifiable.
The panel also compared the ban on imports of hormone-treated meat with the use of growth promoters (such as the anti-microbials carbadox and olanquindox) in swine production. Here the panel found an unjustifiable difference in the levels of protection.
Carbadox and olaquindox are known to be carcinogenic yet the
European Community allowed their use without setting maximum residue levels. The panel reasoned that this unexplained difference in protection showed that imports faced discrimination or a disguised restriction on trade. The panel found three additional factors to support this finding. When the ban on imports was initially introduced, the European Community was trying to reduce its beef surpluses by increasing domestic consumption. Secondly, before the ban on hormone treatment, the percentage of hormone treated animals in Europe was significantly lower than in Canada and the United States. In addition, the hormones had been used in a sector where the European Community was trying to limit surpluses. In contrast, carbadox and olaquindox were used in the surplus-free swine sector. Regarding other growth-promoters, the Appellate Body agreed that the distinction in the levels of protection was arbitrary or unjustifiable, but it did not agree that this resulted in discrimination or a disguised restriction of international trade.
The European Community invoked the "precautionary principle" to defend its ban. It argued that the precautionary principle was a customary rule of international law or, at least, a general principle of law. Article 5.7 of the SPS Agreement permits Members to take provisional actions in cases where relevant scientific evidence is insufficient. However, the European Community did not invoke Article 5.7, explictly stating that the import ban was not a provisional measure. The Appellate Body did not take a position on the status of the precautionary principle in international law.
However, the Appellate Body agreed with the panel that the precautionary principle (to the extent it is not explicitly incorporated in Article 5.7) does not override the provisions of the SPS Agreement.
Implementation
The panel report, modified by the Appellate Body, was adopted on 13 February 1998. Because the parties could not agree on a
"reasonable period of time" for the European Community to implement the findings, an arbitrator determined that this period was 15 months. Shortly before this deadline expired the European Community stated it would not be in a position to comply as it had
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.