International Economic Law and Policy Blog

The ELSA Moot Court Competition on WTO Law

From the folks at ELSA:

The European Law Students’ Association (ELSA), as the world’s largest non-political law student’s association, will launch the 12th edition of the prestigious ELSA Moot Competition on WTO law in cooperation with the WTO itself, on the 15th of September 2013. The competition is annually organised by ELSA since 2002 and is now one of the leading moot court competitions in the world.

The ELSA Moot Court Competition is a simulated hearing of the Dispute Settlement System of the World Trade Organisation (WTO). The division of the competition is made into written submissions, regional rounds and finally – the Final Oral Round in the WTO Headquarters in Geneva, Switzerland. With teams from all over the world and cooperation with highly qualified academics and organisations, the ELSA Moot Court Competition is one of the most prestigious competitions for law students and young lawyers.

The competition enables law students to develop their skills in WTO law as well as in negotiation and presentation skills. The ELSA Moot Court Competition also aims to contribute to the on-going discussion regarding globalisation in the context of the WTO Agreements. Finally, it also aims to assist countries in developing their technical legal capacity by preparing the next generation of trade lawyers and negotiators.

The registration deadline is the 10th of December, Regional Rounds will take place during February and March 2014, and the Final Oral Round will take place in Geneva from the 13th to the 18th of May.

You can find useful information about timeline and participation, and register at www.elsamootcourt.org For questions, contact [email protected]

Clove Cigarettes Confusion

I thought I understood the Clove Cigarettes compliance/suspension process, but based on the U.S. statement at today's DSB meeting, I'm no longer sure that I do:

• Second, we are concerned by the erratic behavior of Indonesia in relation to whether to sequence proceedings under Article 21.5 and Article 22 of the DSU.

• Indeed, Indonesia itself initially proposed a sequencing agreement to the United States, with which the United States agreed in principle. Subsequently, however, Indonesia stated it was no longer interested in entering into a sequencing agreement and proceeded to file its request for authorization to suspend concessions.

• There appears to be no question that the parties disagree whether the United States has brought its measure into conformity with the DSB's recommendations and rulings. The issue is whether there will be agreement between the parties on the procedures to be followed to resolve that disagreement. It would appear that Indonesia is of the view that sequencing is not required under the DSU and that issues of compliance may be resolved as part of the Article 22 arbitration. WTO Members and reports adopted by the DSB appear to have reached disparate views on this issue.

• Regardless, the United States considers that the parties had agreed in principle to procedures to govern any questions relating to compliance. We would therefore expect Indonesia to revert to its original proposal to first obtain a DSB ruling on the issue of compliance before engaging in and completing an Article 22.6 arbitration. Even at this juncture, it is open to the parties to enter into an agreement to suspend the Article 22.6 arbitration during the pendency of an Article 21.5 compliance proceeding.

I had been assuming the 21.5/22 process was all settled, and everyone agreed on the approach, but I guess not.

The COOL Article 21.5 Complaints

... are here: Canada and Mexico.

We won't learn much about the details of the argumentation until the submissions start coming.

 

The India - Solar Cells Case (DS456)

For those of you interested in the India - Solar Cells WTO dispute (DS456), Indian attorney Srikanth Hariharan has offered some commentary. Two things to note.  First, I couldn't make his footnotes come through. And second, I haven't thought about the case yet, and I'm not endorsing his conclusions -- just wanted to put them out there.

(Total) Free Trade for Environmental Goods

As many of you probably know, there is lots of talk these days about free trade in environmental goods.  APEC has a list of such goods on which tariffs are to be removed, and President Obama has proposed a tariff-lowering agreement at the WTO.

But there's a flaw in this plan: Trade remedies.  The tariffs they are talking about removing are only normal tariffs, not trade remedy tariffs.  And recently, there have been lots of these tariffs imposed, at fairly high rates.

Which leads to an obvious suggestion: If we want free trade in environmental goods, we have to eliminate trade remedy tariffs as well.

Trust me, I am aware of the political difficulty of such a proposal.  Trade remedy reform of any sort is quite a challenge.  Actually eliminating trade remedy tariffs for particular products is a daunting prospect!

While the chances of such a proposal generating widespread support may be slim, it definitely won't happen if nobody proposes it.  So my Cato colleague Bill Watson and I are proposing it in this short Cato paper: http://www.cato.org/publications/free-trade-bulletin/free-trade-environmental-goods-trade-remedy-problem

Will this ever happen?  I don't know, but it should.  I'll leave you with the conclusion from the paper:

Whether a proposal to exempt environmental goods from trade remedies is politically realistic remains to be seen. No one will really know the answer to this question until a government makes the proposal. In recent years, governments have talked a lot about supporting the environment and about promoting free trade. If they are serious about these goals, a proposal to eliminate all tariffs, including trade remedy tariffs, on a wide range of environmental goods would be a good way to accomplish both. 

PPMs in U.S. Law and Politics: Selling Eggs in California

Having just mentioned PPMs in WTO law the other day, I was excited to see the same issue arise under U.S. law, in relation to a California law governing egg production.  Here's the WSJ explaining the issue in an editorial:

Animal-rights activists have been lobbying Congress for years to adopt costly new food and environmental regulations in the name of more humane conditions for farm animals. Congress has repeatedly declined, and so groups like the Humane Society of the United States took their campaign to California, land of green salads and free-range chickens.

They succeeded in getting California to pass a law in 2010 barring the sale of eggs in the state unless they are laid by chickens housed in cages that are significantly larger than the current industry standard. Any U.S. farmer who wants to sell in California must meet the requirement by 2015, ...

Originally, the law, as passed in a voter initiative, applied only to California eggs, but it was later extended to out-of-state/country eggs:

Proposition 2, passed by 63 percent of voters in 2008, requires that hens should be able to freely lie down, stand up, extend their wings and turn around by 2015. The law essentially bans the use of small cages that cram the animals so tightly they sometimes cannot turn around.

Prop. 2, however, applied only to hens in the state. The bill signed by the governor means that farms outside California will have to abide by the Golden State's humane treatment law if they want to sell eggs here.

The WSJ then notes the domestic trade concerns that were raised in response:

The problem is that this violates the U.S. Constitution's Commerce Clause, which bars states from passing legislation that discriminates against interstate trade. Eggs are already regulated for safety under the Federal Egg Inspection Act. California's law imposes a different standard that threatens the economic health of egg farms nationwide and amounts to rank trade protectionism for California's home-state egg industry.

To deal with these concerns, an Iowa Congressman proposed a federal statute.  Here's the WSJ:

With this in mind, Iowa Republican Steve King proposed the Protect Interstate Commerce Act to bar states from enacting restrictions on out-of-state agriculture producers. The amendment won overwhelming bipartisan backing, 33-13, when opponents tried to kill it in the House Agriculture Committee. The King provision passed as part of the House farm bill.

The animal activists are now trying to strip the provision from any House-Senate conference by saying it violates state rights. They're joined by California farmers who want to impose their new higher costs on every out-of-state competitor.

Here's how Rep. King explained his amenment:

The ... amendment prohibits states from enacting laws that place onerous conditions on the means of production for agricultural goods that are sold within its own borders but are produced in other states.

"I am pleased that the Committee passed my amendment, the Protect Interstate Commerce Act (PICA) because states are entering into trade protectionism by requiring cost prohibitive production methods in other states," said King. "PICA blocks states from requiring 'free range' eggs or 'free range' pork but covers all agriculture products listed in section 206 of the Agriculture Marketing Act of 1946. By 2014 California will require only 'free range' eggs be sold and the impact of their large market would compel producers in every other state to invest billions to meet the California standard of "means of production." PICA will ensure that radical organizations like the Humane Society of the United States (HSUS) and PETA are prohibited from establishing a patchwork of restrictive state laws aimed at slowly suffocating production agriculture out of existence."

And here's the provision itself, from the House version of the farm bill (whose status is uncertain at this point):

SEC. 12308. PROHIBITION AGAINST INTERFERENCE BY STATE AND LOCAL GOVERNMENTS WITH PRODUCTION OR MANUFACTURE OF ITEMS IN OTHER STATES.

(a) In General- The government of a State or locality therein shall not impose a standard or condition on the production or manufacture of any agricultural product sold or offered for sale in interstate commerce if--

(1) such production or manufacture occurs in another State; and

(2) the standard or condition is in addition to the standards and conditions applicable to such production or manufacture pursuant to--

(A) Federal law; and

(B) the laws of the State and locality in which such production or manufacture occurs.

(b) Agricultural Product Defined- In this section, the term ‘agricultural product’ has the meaning given such term in section 207 of the Agricultural Marketing Act of 1946 (7 U.S.C. 1626).

It's not clear to me that the federal statute is necessary; the dormant Commerce Clause might already apply here.  In fact, there was a reference to this Clause as part of the official explanation put forward during the amendment process:

The King amendment would reinforce the Commerce Clause by asserting the right of a state to trade agricultural products with another state. States that a state cannot deny the trade of an agricultural product from another state based on its means of production.

So this statute "reinforces" the Commerce Clause, but I'm not sure what that means exactly. What would the dormant Commerce Clause say about such a law?

There is a battle here between federalism/subsidiarity, efficiency, and animal welfare goals. Which should win out?  Should the states be able to do whatever they want in this area?  Should the federal government take control of the situation?  Should governments just stay out of it entirely?  And furthermore, does the slight increase in cage size make all that much of a difference?

The parallels here with WTO law are interesting, and, in fact, it is possible that this California law could be challenged at the WTO on a similar basis. 

It also occurs to me that you could imagine an international trade law provision along the lines of the proposed federal statute.  To be clear, I'm not saying I support one!  I'm just saying it would be interesting to imagine it.  What if WTO law prevented domestic measures that are based on the "means of production"?

Finally, getting away from the legal technicalities and policy dilemmas, here's Stephen Colbert giving this issue his usual treatment: http://www.colbertnation.com/the-colbert-report-videos/427378/june-20-2013/steve-king-on-chicken-cages

Clove Cigarettes: The Next Step

Indonesia has requested authorization to suspend concessions or other obligations in the Clove Cigarettes dispute:

The United States failed to implement the recommendations and rulings of the DSB with respect to Section 907(a)(1)(A) by the end of the reasonable period of time, and no mutually acceptable arrangement for compensation has been reached. Therefore, Indonesia is entitled to redress under Article 22 of the DSU.

I don't see any other documents related to the case, such as a consultations request or panel request, on the WTO web site.  Does that mean Indonesia takes the view that no measures to comply "exist", and thus it can go right to DSU Article 22, with no need for a compliance panel?  Recall that the U.S. did take some actions.  Does Indonesia believe they do not even qualify as a measure taken to comply?

Hillman on Carbon Taxes and the WTO

Former AB Member Jennifer Hillman has a new paper on carbon taxes and WTO rules. Some excerpts:

Can such a carbon tax be applied in a way that does not violate U.S. obligations under the WTO Agreements? I believe the answer is yes, provided that policymakers carefully design such a tax, keeping in mind the basic requirements of the WTO not to discriminate in favor of domestic producers or to favor imports from certain countries over others. The key is to structure any accompanying border measure as a straightforward extension of the domestic climate policy to imports. If so designed, there should be few questions about the measure’s consistency with the WTO rules. Even if questions were raised, the United States would have strong defenses within the WTO system. And even if those defenses were somehow to fail, the United States would be able to make adjustments should some aspect of its carbon tax system be found wanting. A non-discriminatory tax enacted in good faith to address climate change should pass muster with the WTO. Therefore, the threat of WTO challenges should not deter policymakers from adopting a carbon tax system now.

...

If Congress enacts a carbon tax to address climate change, streamline domestic energy policy, raise revenues, or reduce distortions in the tax system, it must be ready to address the competitiveness concerns of U.S. companies. It could do so by applying the same tax to imports coming into the United States as they apply to domestic goods in order to ensure that everyone competes on a level playing field and that everyone has the same incentive to reduce their carbon footprint. To ensure that U.S. companies are not disadvantaged when they try to export their products to foreign markets, the carbon tax could be rebated to U.S. companies whenever they export the products on which the carbon tax was assessed.

Each of these steps is permitted under the WTO rules provided: 1) that the tax is designed to fall within the parameters of an “indirect” tax on products rather than a direct tax on the producers themselves; and 2) that any parallel taxes on imports or rebates on exports do not discriminate in favor of U.S. products. Policymakers have sufficient latitude within this framework to design and implement a carbon tax system that represents a good faith effort to reduce carbon emissions while encouraging all other countries to cut their emissions too, all while preserving the competitive position of U.S. companies. Policymakers can be bold. The WTO will recognize genuine climate change measures for what they are and is unlikely to find fault with such measures, provided they do not unfairly discriminate in favor of U.S. companies.

As a WTO legal matter, that all sounds right to me.

But what about the issue of PPMs, which a friend of mine raised?  There is a view out there that discrimination against like products based on their production or processing method violates WTO rules.

I don't know what Jennifer's thoughts are on this, but in my view recent WTO jurisprudence makes it fairly clear that measures will not violate WTO law simply because they affect the production or processing method.  I don't want to get into all the provisions that might possibly come up in this regard, but just speaking very generally, it seems to me that if you can show a legitimate objective for the measure and it is applied in an even-handed manner, then basing a measure on PPMs does not inherently lead to a violation.  (And even if it did, it would likely satisfy an exception, if we are talking about a GATT claim).

More on Investor-State and Section 337

Back in February, I wondered whether Samsung could file an investor-state complaint -- under the KORUS FTA -- in the event that some of its components were excluded from the U.S. through a Section 337 determination.  Recent developments in this area now offer up another possible complaint.

As everyone probably knows (and as Joel mentioned), the ITC excluded imports of some Apple products, but USTR overruled this determination.  In a separate case, the ITC has now decided that certain Samsung products should be excluded.  USTR will have to decide whether to overrule that determination as well.

Here's what I wonder.  If USTR does not overrule the Samsung determination, does Samsung have a good investor-state complaint, arguing that the USTR decision to allow Apple imports but not Samsung imports violates national treatment, fair and equitable treatment, or some other provision?

SIEL Essay Prize

The 2013 SIEL essay prize competition is now open:

The competition is open to all current undergraduate and graduate students of any university or other tertiary education institution, and those who have graduated from a university or other tertiary education institution no earlier than five years before the submission deadline (ie those who graduated prior to 30 September 2008 are not eligible for the 2013 Prize). Members of the SIEL Executive Council may not submit entries. The essay must not have been previously published.

 The prize consists of £200, as well as £300 of Cambridge University Press book vouchers and a three year subscription to the World Trade Review. The winning essay will be submitted to the World Trade Review for publication. Publication of the essay in the World Trade Review will be subject to the WTR’s normal review and decision procedure, but the WTR Editorial Board commits to expediting consideration with a view to early publication.

 The prize will be awarded by the SIEL Executive Council on the recommendation of a Prize Committee drawn from its members and the Editorial Board of the World Trade Review. Decisions of the Prize Committee on the winning essay and on any conditions relating to this prize are final and no correspondence will be entered into.

 For clarification, essays with a focus on international commercial arbitration or EU law will not be considered for this Prize.

 ...

Entries must be written in English and should follow the style-sheet for the World Trade Review. Entries should not exceed 8,000 words, including references, footnotes, tables, appendices, etc.

 

Entries must be submitted in Word format with a cover sheet containing the title of the entry, name and contact details. The essay itself must contain no identifying information other than the title.

More details here: http://www.sielnet.org/essayprize

Can the USTR Deny Samsung an Exclusion Order Under Section 337?

Michael Froman recently exercised his discretion to overrule the International Trade Commission's determination to exclude from importation certain Apple products found to infringe Samsung patents.  It is reported to be the first time since 1987 that a 337 order has been overruled.  Thus, it is the first time since TRIPS came into being.  Article 28 of TRIPS confers the right to block importation of infringing goods.  So did Froman violate TRIPS?  I suppose the argument might be that there is a right to block importation under ordinary court litigation, so the right has not been denied completely.  What am I missing?  Will Samsung bring a TRIPS case against the U.S.?  The 1989 Section 337 Panel Report addressed the question of whether the existence of Section 337 discriminates against imported products, and Section 337 was modified afterwards to come into compliance, but the current question is a bit different:  it is not a discrimination case, but a TRIPS Article 28 rights case. 

Transparency in Investment Arbitrations

From a dissenting opinion on the issue of document confidentiality in the Telefonica v. Mexico ICSID case:

3. The majority's decision establishes, de facto, a presumption of confidentiality by prohibiting Parties from disclosing: (i) the records or minutes of the hearings; (ii) the documents submitted by the Parties in this proceedings; (iii) the pleadings or written memorials of the Parties and their annexes; and (iv) the correspondence relating to these proceedings (exchanged between the Parties or between the Parties and the Tribunal). The Parties maintain the right to request the lifting or modification of this confidentiality restriction, but all such requests must be duly justified. This presumption clearly responds to a general interest of confidentiality. Nevertheless, I consider that this presumption is being applied in an overly broad and unlimited manner, without prior control having been exercised by the Tribunal. This can hardly be characterized as a "solution" that protects the interest of both Parties, and much less as a balance struck between the interests of transparency and the interests of confidentiality.

...

15. The Tribunals that originally examined the issue of transparency in ICSID proceedings had two options. The first was to determine that, in the absence of explicit rules on transparency, every proceeding would be confidential, unless otherwise provided. The other option was to develop a standard requiring the weighing of the two types of interests, that is, the interests of confidentiality and the interests of transparency. These Tribunals preferred the second option. In doing so, I understand them to have recognized the fundamental value that transparency has for these kinds of proceedings. As stated by the Tribunal in Becarra, "transparency in investment arbitration shall be encouraged as a means to promote good governance of States, the development of a well-grounded and coherent body of case law in international investment law and therewith legal certainty and confidence in the system of investment arbitration…”.4

16. This reasoning is, in my view, even more relevant today when disputes of this nature are under intense scrutiny by Society. Let me be clear, transparency does not mean that there is no right to protect certain information in particular circumstances. Parties must have the possibility to protect information that is confidential in nature, for example information where disclosure could give an advantage to a competitor or, information that qualifies as a trade secret. I am completely convinced that Tribunals can adopt mechanisms that protect such information while, at the same time, providing more transparency to the proceedings.

17. Society has a right to know – of course protecting at all times information that is genuinely considered to be confidential –the actions of their governments and investors, as well as the manner in which they are defended. For this reason, transparency can provide legitimacy both to the claims of the investor as well as to the defence of the State. Transparency generates certainty, ignorance panic. Transparency therefore can be a means to pave the way and facilitate a better development of these proceedings and to avoid that Society renders a judgement, in the dark, about these proceedings. For all of these reasons, I cannot join a Resolution that goes in the opposite direction.

Transparency in investment and trade disputes is still very uneven.  Sometimes you get a lot; sometimes you don't. In my view, the dissenter says some very sensible things about why more transparency is better.

The Impact of the Sequester on U.S. Trade Policy

Two recent items of note on this topic:

1. From the NY Times, the effect of a smaller budget for USTR:

The Office of the United States Trade Representative has been waging a lonely battle for its budget, which shrank 7 percent to $47 million this year because of sequestration spending caps. Officials in the office, pointing to the 2014 budget proposal in the Republican-controlled House, fear that they could end up with even less money next year.

This matters, officials say, because trade negotiators fly hundreds of thousands of miles just doing their jobs. Since the trade representative’s office spends the bulk of its budget — $46 million — on fixed costs like salaries, benefits and office supplies, a cut of $5 million or $8 million could effectively ground much of its 250-person work force.

“We are in a situation where we’ve having to choose: Can we send people to a negotiation? Can we bring this enforcement case or another?” the newly appointed trade representative, Michael Froman, said in a recent panel discussion with the president of the U.S. Chamber of Commerce, Thomas J. Donohue.

2. From the WSJ, the effect of cutting off those payments to Brazilian cotton farmers:

Secretary of Agriculture Tom Vilsack said the U.S. will have to stop monthly payments to Brazil related to a cotton dispute at the World Trade Organization because of the automatic spending cuts known as the sequester, a move that risks retaliation from Brazil.

The U.S. pays about $150 million a year to the Brazilian cotton industry to avoid being punished under a WTO ruling over cotton. Brazil and the WTO say some U.S. cotton subsidies are unfair under the rules of the global trade group.

Mr. Vilsack said Wednesday in a telephone interview from Brazil that unless Congress adjusts the sequester cuts or passes a farm bill canceling cotton subsidies barred by the WTO, Washington will pay only half of its approximately $12 million monthly cotton payment in September and nothing after that. The payments in the next fiscal year, which begins in October, were already at risk because they didn't appear in the administration's budget.

"I have neither the authority nor the money to make any payment in October or thereafter," he said.

A Republican congressional aide said the Obama administration does in fact have the authority to continue making the cotton payments it negotiated with Brazil, which weren't authorized by Congress.

"Brazil is studying a course of action," said a spokesman for the foreign ministry. "All possibilities are open, including bilateral negotiations with the U.S. government and multilateral talks via the World Trade Organization."

De Jure vs. De Facto Discrimination under TBT Article 2.1

From the EU response to the Seal Products panel's second set of questions:

Question 142 (European Union) Please elaborate on the basis for your position regarding de jure and de facto discrimination claims under the GATT 1994 as described in paragraph 79 of the European Union's oral statement at the second substantive meeting.

157. In that paragraph, the European Union seeks to rebut the Complainants' arguments that the analysis under Articles I:1 and III:4 of the GATT 1994 should be different than the analysis under Article 2.1 of the TBT Agreement, in the sense that the objectives pursued by the measure can only be examined under Article XX of the GATT 1994. The European Union maintains that this should not be the case regarding de facto discrimination claims under the GATT 1994.

158. In all recent cases, i.e. US – Clove Cigarettes, US – COOL and US – Tuna II (Mexico), the Appellate Body has referred to the legitimate regulatory distinctions in cases of de facto discrimination only.93 In the European Union’s view, a contrario this implies that in de jure discrimination cases under Article 2.1 of the TBT Agreement, the Defending Member is not given the possibility to justify its measure on the basis of the objectives pursued. This is in line with the stricter disciplines imposed by the TBT Agreement, as compared with GATT Articles I:1 and III:4, where the possibility of invoking GATT Article XX remains open in de jure discrimination cases. Thus, the objectives of a regulation are relevant in order to establish the existence of de facto discrimination as part of the analysis under Article I:1 or III of the GATT 1994. In the case of regulations involving de jure discrimination, the analysis of the objectives would be confined to Article XX. In contrast, Article 2.1 of the TBT Agreement does not leave any room for considering the objectives of a technical regulation which is discriminatory de jure, and this is consistent with the fact that the TBT Agreement lays down more specific and stricter disciplines with respect to measures qualifying as "technical regulations".

I had never thought about a de facto vs. de jure distinction in TBT Article 2.1.  Why shouldn't justifications be allowed for de jure measures?  Couldn't there ever be a good reason for explicit discrimination under a technical regulation?

Product Characteristics and PPMs

From the EU response to the Seal Products panel's second set of questions:

Question 127 (All parties) Is the scope of "product characteristics or their related processes and production methods" in TBT Annex 1:1 limited to physical qualities, whether intrinsic or extrinsic, of a product? If so, what is the basis for your position?

105. The Appellate Body interpreted the term "product characteristic" as an "objectively definable" feature or quality, such as "a product's composition, size, shape, colour, texture, hardness, tensile strength, flammability, conductivity, density, or viscosity."75 In the definition of a "technical regulation" in Annex 1.1, the TBT Agreement itself gives certain examples of "product characteristics" – "terminology, symbols, packaging, marking or labelling requirements". These examples indicate that "product characteristics" include, not only features and qualities intrinsic to the product itself, but also related "characteristics", such as the means of identification, the presentation and the appearance of a product.76 A product characteristic is therefore a "distinguishing mark of a product" which is either intrinsic to the product or related to the product.

106. Conditions like the ones imposed under the IC and MRM exceptions under the EU Seal Regime, however, do not concern the intrinsic characteristics or features that are related to the products. These conditions are limited at establishing the identity of the hunter (for the IC exception) and the purpose of the hunt (for the IC and the MRM exception), since only these are relevant in determining whether a product falls under the exception to the general ban or not.

107. As explained already in response to Panel's Question 21, the European Union does not consider that the purpose of production falls within the scope of product characteristics and related process and production methods within the meaning of Annex 1.1 of the TBT Agreement.

108. The fact that not only intrinsic characteristics, but also characteristics related to a product can fall within the scope of Annex 1.1 of the TBT Agreement, does not, support an interpretation of "product characteristics", whereby virtually anything that bares any relation to a product – no matter how indirect and distant that relation may be – would be construed as a product characteristic. In interpreting Annex 1.1 of the TBT Agreement one must not lose sight of the object and purpose of the Agreement which was to avoid the creation of "technical" barriers to trade.

109. The Appellate Body in EC – Asbestos also unequivocally confirmed that the scope of the TBT Agreement is to be considered limited to certain measures and does not cover all internal measures covered by Article III:4 of the GATT 1994.

We note, however – and we emphasize – that this does not mean that all internal measures covered by Article III:4 of the GATT 1994 "affecting" the "sale, offering for sale, purchase, transportation, distribution or use" of a product are, necessarily, "technical regulations" under the TBT Agreement. Rather, we rule only that this particular measure, the Decree at stake, falls within the definition of a "technical regulation" given in Annex 1.1 of that Agreement.

110. This intent to circumscribe the scope of the TBT Agreement is also clearly reflected in negotiating history.77 Indeed, WTO Members only agreed to expand the scope of the Agreement on Technical Barriers to Trade to process or production methods related to product characteristics during the Uruguay round negotiations.78

111. If, however, one were to interpret product characteristics as broadly as Canada and Norway propose, whereby the identity of the hunter and/or purpose of the hunt (or indeed any condition for the placing on the market) would be subsumed into a characteristic related to a product, the category of "process or production methods related to product characteristics" would be virtually deprived of any useful purpose and the requirement that the process or production methods be related would equally be easily circumvented. The European Union submits that such a broad interpretation of product characteristics therefore would not be in accordance with customary rules of treaty interpretation.

I'm not sure I can think of any objective way to decide the scope of "product characteristics or their related processes and production methods."  We need to have a clearly defined scope, but should it be broader or narrower?  In essence, should the TBT Agreement cover more or fewer measures?  I suppose your answer will depend on what you think of the TBT Agreement!

 

Extraterritoriality in the Seal Products Dispute

From the EU response to the Seal Products panel's second set of questions:

Question 108 (European Union) Canada argues that, in examining the existence of specific public morals, "it is relevant whether the conduct arises outside or within the jurisdiction or territory of the Member whose measure is at issue, and whether it can be shown that such conduct would result in harm arising within that Member's jurisdiction or territory." (Canada's response to Panel question No. 48) Please explain whether it is relevant to the Panel's examination of the European Union's stated public morals in this case that seal hunting takes place mostly outside the European Union.

38. The statement by Canada quoted in the Panel question responds to another Panel question on "what evidence is necessary in order to establish the existence of public morals under Article XX(a) of the GATT". Canada's quoted assertion, however, does not explain how or why the circumstances cited by Canada would be 'relevant' for that purpose. Canada's response appears to suggest, nevertheless, that the exception provided in Article XX(a) of the GATT cannot be invoked in respect of conduct which takes place outside the territory of the invoking Member, unless it causes harm within its territory.

39. At the outset, it should be recalled that the EU Seal Regime does not seek to regulate seal hunting, but instead trade in seal products, including imports into its territory. Moreover, the public moral concerns invoked by the European Union in this dispute are not confined to the act of killing of seals as such, but extend also to other acts that take place within the territory of the European Union, such as selling and purchasing seal products, which are deemed morally reprehensible in themselves.30 Therefore, contrary to Canada's assumption, the EU Seal Regime responds to harm that arises within the European Union's jurisdiction.

40. Moreover, Canada's restrictive interpretation has no basis on the text of Article XX of the GATT. Nor is it supported by any relevant authority. In US – Shrimp the Appellate Body left open the question of whether there was an "implied jurisdictional limitation" in Article XX(g) by noting that, in any event, there was a "sufficient nexus" with the United States. Similarly, even assuming that there was such an "implicit jurisdictional limitation" in Article XX(a), there is a "sufficient nexus" with the European Union to the extent that the EU Seal Regime seeks to address the moral concerns of the EU population with regard to conducts that take in place, at least in part, within the EU territory.

41. Moreover, in US – Shrimp the Appellate Body mentioned explicitly Article XX(a) as among the provisions of Article XX that would allow Members to condition imports upon the exporting country adopting certain policies:

It appears to us, however, that conditioning access to a Member's domestic market on whether exporting Members comply with, or adopt, a policy or policies unilaterally prescribed by the importing Member may, to some degree, be a common aspect of measures falling within the scope of one or another of the exceptions (a) to (j) of Article XX. Paragraphs (a) to (j) comprise measures that are recognized as exceptions to substantive obligations established in the GATT 1994, because the domestic policies embodied in such measures have been recognized as important and legitimate in character. It is not necessary to assume that requiring from exporting countries compliance with, or adoption of, certain policies (although covered in principle by one or another of the exceptions) prescribed by the importing country, renders a measure a priori incapable of justification under Article XX. Such an interpretation renders most, if not all, of the specific exceptions of Article XX inutile, a result abhorrent to the principles of interpretation we are bound to apply. 31

42. The European Union also notes that Canada does not appear to contest that the European Union can invoke Article XX(b) of the GATT with regard to conduct occurring in Canada's territory, irrespective of whether such conduct results in harm arising within the EU territory. Thus, it seems that the restrictive interpretation invoked by Canada would limit exclusively the scope of Article XX(a). Again, however, there is no basis for making such distinction between those two provisions of Article XX, either in the wording of Article XX or in the case law of the Appellate Body.

43. In addition, Canada's interpretation would have manifestly anomalous and unreasonable results. For example, according to Canada's interpretation, a WTO Member could not ban imports of pornographic materials produced in a third country unless the acts shown in such materials threatened the health or life of the performers. Similarly, a WTO Member could not ban imports of human organs, unless it could be established that the extraction of the traded organs threatened the life or health of humans (which would not be the case whenever the organs are obtained from a deceased person).

44. Furthermore, as suggested by the Panel question, Canada's argument could be read as implying that, for example, Russia's ban on seal products could be justified under Article XX(a) because Russia has been traditionally engaged in commercial seal hunting. On the other hand, Members without a significant population of seals, or without a tradition of commercial seal hunting, would not be entitled to invoke Article XX(a) and could be forced to accept the marketing of seal products in their territory even if they are regarded as morally repugnant by a large majority of their population.

Will we ever get answers to all the questions related to extraterritoriality?  Or will panels and the AB find ways to avoid them forever?

The Welfare of Seals versus the Welfare of Other Animals

From the EU response to the Seal Products panel's second set of questions:

Question 105 (All parties) The parties have referred to animal welfare outcomes in the killing of other wild animals as well as animals in commercial slaughterhouses in these proceedings. Please explain their factual and legal relevance to the animal welfare outcomes relating to seals.

22. The Complainants have argued that the EU Seal Regime is unnecessarily restrictive because the European Union does not ban the placing on the market of products from other animal species which, according to them, are killed in a manner involving worse welfare outcomes.

23. As clarified by the case law of the Appellate Body, the consideration by the Panel of measures applied to other species of animals could be relevant only in so far as such measures concerned sufficiently similar situations7 and then only as a mere "indication" of the availability of alternative measures.8

24. The measures applied by the European Union to other species cited by the Complainants in this dispute are not relevant as examples of available alternative measures because, as explained by the European Union, there are major differences between the situations concerned.9

25. At any rate, even if the situations concerned were sufficiently similar, Article 2.2 of the TBT and Article XX of the GATT do not impose a requirement of "consistency".10 Members are entitled to select different levels of protection in respect of different products or, as in this case, in respect of different species of animals.11

26. The European Union has compared the animal welfare outcomes in the slaughterhouses with those observed in the commercial seal hunts in response to the Complainants' suggestions that the commercial seal hunt is as humane, or even more humane, than the killing of animals at slaughterhouses.

...

28. The European Union has shown that, in fact, there are inherent and widespread practices in commercial sealing that would never be accepted in an abattoir, including high wounding rates18, long and unavoidable delays between stunning, monitoring and bleeding19 or the use of painful procedures (gaffing) prior to bleeding.20

Is the EU being "inconsistent" in its consideration of the welfare of seals and the welfare of other animals? Is "consistency" in public policy goals at all relevant for either TBT Article 2.1 or Article 2.2?

Evidence of Public Morals

From the EU response to the Seal Products panel's first set of questions:

Question 48 (All parties) What kind of evidence is necessary to establish the existence of "public morals" under Article XX(a) of the GATT 1994? Does it differ depending on the type of public moral in question? What differentiates a public moral from public opinion?

161. Previous panels have noted that the content of the concept of public morals "can vary in time and space, depending upon a range of factors, including prevailing social, cultural, ethical and religious values"85 and that, for this reason, Members should be given some scope to define and apply for themselves the concepts of 'public morals' in their respective territories, according to their own systems and scales of values. 86

162. The European Union agrees with the above views. Panels are not bound by the responding Member's own characterization of the measure in dispute as being based on "public morals". Nevertheless, panels should accord appropriate deference to such characterization and be very careful not to substitute its own definition of public morals.

163. Having regard to the above, the European Union considers that the starting point of the enquiry should be the measure itself, including its preamble, and the legislative history. Where, as in the present case, the measure at issue has been adopted in accordance with a democratic and open process by representative political institutions, those institutions are best placed, and uniquely legitimised, to recognise and interpret the moral concerns of the population that they represent. The adoption in good faith of a measure by such institutions with the objective of addressing the moral concerns of the population should, in principle, be regarded as evidence of such moral concerns.

164. Where the examination of the measure is inconclusive or if there are elements that cast doubt on the responding Member's own characterization of the measure, it may be relevant to look, inter alia, at the following other types of evidence in order to confirm whether the measure pursues a genuine public morals objective:

165. First, it may be relevant to examine whether the measure reflects prescriptions of religious origin or the doctrines of a moral school of thought.87

166. Second, it may be relevant to examine whether the measure is part of a broader regulatory policy or similar to other measures which are themselves regarded as pursuing a public moral objective in the responding Member.88

167. Third, it may be relevant to examine whether other Members89 or international organizations90 have taken similar measures on public moral grounds or otherwise expressed views indicating that they regard the subject matter addressed by the measure at issue as a matter of public morals.91

168. Last, opinion polls may be useful, but are not indispensable. In previous disputes have been able to conclude that the measures at issue pursued a public morals objective despite the absence of any opinion polls. Indeed, the definition of “public morals” from US-Gambling above quoted clearly shows that the standards of right and wrong do not necessarily have to originate with the citizens themselves. They can be set by the government “on behalf of” a community. Authoritarian and paternalistic governments often impose from above measures based on public morals which do not enjoy public support. Even in democratic states with representative institutions, governments do not have to poll first the views of the population in order to enact measures based on public morals.

 The EU states that: "the measure at issue has been adopted in accordance with a democratic and open process by representative political institutions, those institutions are best placed, and uniquely legitimised, to recognise and interpret the moral concerns of the population that they represent."  Does that mean it should be harder for authoritarian states to invoke the public morals defense?

What Aspect of the Measure Must be Necessary under the GATT Article XX Exceptions?

From the EU response to the Seal Products panel's first set of questions:

Question 43 (All parties) What aspects of the EU Seal Regime should be examined for the necessity test under Article XX(a) and XX(b) of the GATT 1994? Explain your position in light of the Appellate Body's statement in paragraph 177 of its report in Thailand – Cigarettes, "[w]hen Article XX(d) is invoked to justify an inconsistency with Article III:4, what must be shown to be "necessary" is the treatment giving rise to the finding of less favourable treatment."

144. In Thailand - Cigarettes, the Appellate Body noted that:

Furthermore, when Article XX(d) is invoked to justify an inconsistency with Article III:4, what must be shown to be "necessary" is the treatment giving rise to the finding of less favourable treatment. Thus, when less favourable treatment is found based on differences in the regulation of imports and of like domestic products, the analysis of an Article XX(d) defence should focus on whether those regulatory differences are "necessary" to secure compliance with "laws or regulations" that are not GATT-inconsistent.78

145. The above quoted passage indicates that, according to the Appellate Body, when less favourable treatment results from differences between the regulation of imports and of domestic products, or by analogy from differences between the regulation of different categories of imports, the analysis under Article XX(a) or Article XX (b) should focus on whether such "regulatory differences" are "necessary" in order to achieve the objectives set out in either of those two provisions at the level of protection chosen by the responding Member.

146. In the present case, the less favourable treatment alleged by the Complainants results from the interplay between the General Ban and the IC and MRM exceptions. Specifically, the alleged les favourable treatment results from the fact that the placing on the market of some products imported from Greenland and of some domestic products is allowed, respectively, by the IC exception and the MRM exception, whereas the placing on the market of some products imported from Canada and Norway is prohibited pursuant to the General Ban.

147. Therefore, if the Panel found that the alleged difference in treatment is inconsistent with Articles I:1 and/or Article III:4 of the GATT 1994, it should examine whether the "regulatory differences" between the General Ban and the two exceptions are "necessary" in order to achieve the objectives invoked by the European Union.

148. More specifically, in order to establish that the less favourable treatment alleged by the Complainants is justified under Article XX(a) or Article XX(d), the following would have to be shown: (1) that the treatment provided to seal products subject to the General Ban is “necessary” in order to achieve the objectives set out in Article XX(a) and/or Article XX(b) at the selected level of protection; and (2) that it is not “necessary”, in order to achieve those objectives at the same level of protection, to extend the same treatment provided under the General Ban to seal products falling under the MRM exception or the IC exception.

149. The Complainants appear to consider that the European Union is required to show that the more favourable treatment provided under the IC exception and the MRM exception is, in and by itself, "necessary" in order to achieve the policy objectives pursued by the EU Seal Regime.79 As just explained, however, according to the Appellate Body, what must be shown is that the "regulatory differences" between the General Ban and the two exceptions are "necessary".

Note that the Appellate Body refers to the situation "when less favourable treatment is found based on differences in the regulation of imports and of like domestic products, ... ."  Is that the same regulatory difference the EU is referring to when it talks about "the 'regulatory differences' between the General Ban and the two exceptions"?

The Relationship of TBT Articles 2.1 and 2.2

From the EU response to the Seal Products panel's first set of questions:

Question 36 (European Union) The European Union argues in paragraph 261 of its first written submission that if the legitimacy of an objective is established, then a fortiori, the regulatory distinction at issue is also legitimate. Please elaborate on this argument, including whether the legitimacy of an objective under Article 2.2 of the TBT Agreement is sufficient enough to establish legitimate regulatory distinction under Article 2.1.

122. The European Union considers that, if an objective is considered to be legitimate under Article 2.2 of the TBT Agreement, the regulatory distinction made pursuant to the measure based on that objective would also be legitimate (provided that such a regulatory distinction is designed and applied in a non-discriminatory, even-handed manner).

123. Indeed, the Appellate Body has relied on Article 2.2 of the TBT Agreement, and in particular on the terms "legitimate objective" contained therein, to provide meaning to Article 2.1 of the TBT Agreement.72 The Appellate Body has also relied on the objectives contained in the sixth recital of the TBT Agreement (also reproduced in Article 2.2 of the TBT Agreement) in the context of Article 2.1 of the TBT Agreement, "making clear that technical regulations may pursue the objectives listed therein".73

124. As mentioned before, Articles 2.1 and 2.2 of the TBT Agreement (like Articles I:1, III:4 and XX of the GATT 1994) are intended to strike a balance between trade liberalisation and regulatory autonomy. Thus, if the legitimacy of an objective is established, then any even-handed regulatory distinction based on such objective would also represent the exercise of legitimate (as opposed to protectionist) regulatory autonomy and thus should be taken into account when examining allegations of de facto discrimination.

To some extent, there is overlap between Articles 2.1 and 2.2.  Is it useful to have these as separate obligations?  Could they be collapsed in to a single, clearer obligation? 

What is Even-Handedness in the TBT 2.1 Context?

From the EU response to the Seal Products panel's first set of questions:

Question 35 (All parties) In US-COOL, the Appellate Body stated: [S]ome technical regulations that have a de facto detrimental impact on imports may not be inconsistent with Article 2.1 when such impact stems exclusively from a legitimate regulatory distinction. In contrast, where a regulatory distinction is not designed and applied in an even handed manner — because, for example, it is designed or applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination — that distinction cannot be considered "legitimate", and thus the detrimental impact will reflect discrimination prohibited under Article 2.1. In assessing even handedness, a panel must carefully scrutinize the particular circumstances of the case, that is, the design, architecture, revealing structure, operation, and application of the technical regulation at issue." (para. 271)

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b. What does an assessment of a measure's "even-handedness" entail? For instance, to examine whether a regulatory distinction is "designed or applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination", should the Panel examine factors similar to those examined under the chapeau of Article XX of the GATT 1994 in previous disputes? If so, what specific factors should be taken into account? If not, what other factors should be examined?

120. The assessment of a measure's "even-handedness" entails examining whether the measure is "fair", "non-discriminatory" and "calibrated" to the purpose its pursues. In this respect, the European Union observes that the dictionary meaning of "evenhanded" refers to "fair, evenly-balanced; free of bias or preference".68 The concept of "even-handeness", like discrimination, refers to whether two similar factual situations are treated differently69 and whether the specific measure is "calibrated" (and does not go beyond what it is necessary) to achieve its purpose.70

121. That being said, the straightforward application of the chapeau of Article XX of the GATT 1994 may not be entirely appropriate since the chapeau deals with issues concerning the application of the measure, whereas the language employed by the Appellate Body refers to the "design" as well.71

The Appellate Body introduced the term "even handed" into this issue.  What did it mean by that?  Are "fair" and "calibrated" useful terms here?  Is" fair" too broad?  Does "calibrated" bring the concept of "necessity" into Article 2.1?