International Economic Law and Policy Blog

The EU’s New GMO Compromise: Scientific v. “Non-Scientific” Grounds

Folks, this is quite interesting.  The EU member states have just struck a compromise on the GMO regulation by providing individual member states with options to exclude the GMO importation.  (This deal is subject to subsequent legislative procedures involving the Commission and the European Parliament.)  Note that this is not an outright ban.  Those member states “have to ask the Commission to ask companies to exclude them from requests for authorisation for new crops.”  The gist of this individual opt-out is that it can be done on the “non-scientific” grounds, such as socio-cultural reasons. 

 Now, this development reminds us of the recent Seal dispute.  As Professor Howse addressed in his co-authored piece at YJIL, there may be two different (“instrumental” and “non-instrumental”) reasons behind any domestic regulation.  Although the TBT offers an open list for types of regulations to be justified, its science-based structure (such as international standards and risk assessment) might make it more amenable to a scrutiny based on instrumental (scientific) grounds.  On the contrary, GATT Article XX (a) smacks of a scrutiny based on non-instrumental (non-scientific) grounds.  Of course, any measure can retain both grounds, but this conceptual distinction still remains valid. 

 Note that the AB in the Seal dispute refused to apply the TBT.  Its rationale for such refusal does not appear to be very persuasive (to me, at least).  Perhaps the AB did not wish to touch upon this “scientific” route, which might have led to extensive second-guessing in this highly sensitive regulatory area, more extensive than the quite deferential Brazil-Tyres case law (“capable of making a contribution to the objective”).  Also note that Belgium had not originally notified the seal ban under the TBT Agreement a decade ago, while Canada still demanded Belgium’s justification on the risk methodology under the TBT Agreement in the TBT Committee (G/TBT/M/34; G/TBT/M/39; G/TBT/M/40; G/TBT/M/41; G/TBT/M/42; G/TBT/M/43, paras 44-49).

 So, we may see more GATT Article XX (a) disputes in the future. 

Examining Different Aspects of a Measure under Different Provisions

I continue to be frustrated and perplexed by an approach to GATT Article III and XX that considers different aspects of a measure in different parts of the legal analysis.  In that regard, here are some excerpts from the Seal Products AB report: 

Article I:1 

5.95. We note that, in these disputes, the Panel concluded that the measure at issue, although origin-neutral on its face, is de facto inconsistent with Article I:1. The Panel found that, while virtually all Greenlandic seal products are likely to qualify under the IC exception for access to the EU market, the vast majority of seal products from Canada and Norway do not meet the IC requirements for access to the EU market. Thus, the Panel found that, "in terms of its design, structure, and expected operation", the measure at issue detrimentally affects the conditions of competition for Canadian and Norwegian seal products as compared to seal products originating in Greenland. ...

Thus, under Article I:1, the measure at issue seems to be the "IC exception."

Article XX chapeau 

5.339. For these reasons, we find that the European Union has not demonstrated that the EU Seal Regime, in particular with respect to the IC exception, is designed and applied in a manner that meets the requirements of the chapeau of Article XX of the GATT 1994.

 With the chapeau as well, it's the IC exception that is at issue.

Article XX(a) 

5.188. With respect to the claims under Article I:1 of the GATT 1994, the Panel found that,
"in terms of its design, structure, and expected operation, the EU Seal Regime detrimentally
affects the conditions of competition on the market [for seal products] of Canadian and Norwegian origin as compared to seal products of Greenlandic origin."1227 As we see it, the existence of the permissive component in the form of the IC exception alone cannot confer an advantage to seal products of Greenlandic origin, unless it is compared to the treatment of seal products of Canadian and Norwegian origin. It is only the combined operation of the permissive aspect of the EU Seal Regime (i.e. the IC exception, which grants market access to seal products of Greenlandic origin), together with the prohibitive aspect of the EU Seal Regime (i.e. the "ban" that restricts market access for Canadian and Norwegian seal products), that leads to a finding of de facto discrimination under Article I:1.

... 

5.193. At the same time, we do not consider that the Panel was correct to the extent that it
suggested that what it considered must be "justified" in this case was limited to the permissive aspects flowing from the IC and MRM exceptions.1235 Rather, what must be justified is, as we have said, both the prohibitive and permissive components of the EU Seal Regime, taken together. ...

In contrast to Article I:1 and the chapeau, then, under Article XX(a) the examination was of the measure as a whole, not just the IC (or MRM) exception.

----------------------------------------------------

This approach seems very odd to me.  If one part of the measure is discriminatory, and violates the rules (including the chapeau), what difference does it make if the broader measure meets one of the Article XX objectives?  There is no claim that the broader measure violates Article III:4, so why consider whether that broader measure falls under an exception?

In the conext of the chapeau, the AB said:

5.306. One of the most important factors in the assessment of arbitrary or unjustifiable
discrimination is the question of whether the discrimination can be reconciled with, or is rationally related to, the policy objective with respect to which the measure has been provisionally justified under one of the subparagraphs of Article XX. ...

If ultimately you are going to look at the relationship of the discrimination to the policy objective under the chapeau, why bother with first looking at the relationship of the measure and the policy objective under the sub-paragraphs?

Should There Be a Single Non-Discrimination Obligation for Trade in Goods?

A lot of the discussion on the Seal Products case in previous posts highlights the difficulty of reconciling the various WTO non-discrimination obligations:  GATT Articles I:1 and III:4; GATT Article III:4 and TBT 2.1; the GATT Article XX chapeau and TBT 2.1; etc.

This makes me wonder whether the system would be better off if we had a single non-discrimination obligation that applied to trade in goods generally.  If designed properly, it might not need an exception, so you could really do it in just one provision.

And it could even bridge the gap between border measures and internal regulations: Since non-discriminatory import restrictions can be justified under Article XX, Article XI does not add much beyond non-discrimination (of a certain kind).

Aside from the fact that politically it's a non-starter, what does everyone think?  Should all types of measures be subject to a single non-discrimination obligation, perhaps along the lines of the language of TBT 2.1?

The Public Morals Exception After Seals: How to Keep It in Check?

Plenty to think about when it comes to the “necessity” test applied by the AB to the EU seals ban (and especially the exceptions thereunder) under XX(a).

What struck me, in particular, is how the AB set up the public morals justification as somehow fundamentally different from other objectives WTO Members can “protect” under XX. 

I can see that public morals are sensitive and that one needs to give WTO Members plenty of wiggle room to define their own public morals. I also understand that XX does not require WTO Members to be fully consistent when pursuing their public morals objectives (only SPS 5.5 has a genuine consistency requirement).  In addition, public morals (e.g. the risk of buying a seal pelt “harvested” in a way that offends us, or the risk of having pork or alcohol in your food if your religion prohibits their consumption) are not as “scientific” as say, the risk of getting cancer from exposure to asbestos. 

Yet, if you read paras. 5.198 to 5.200 in EC - Seals, the AB went well beyond that:

(i)            “We … do not consider that the term "to protect", when used in relation to "public morals" under Article XX(a), required the Panel, as Canada contends, to identify the existence of a risk to EU public moral concerns regarding seal welfare” (para. 5.198).

(ii)          “we … have difficulty accepting Canada's argument that, for the purposes of an analysis under Article XX(a), a panel is required to identify the exact content of the public morals standard at issue” (para. 5.199).

(iii)         “Members may set different levels of protection even when responding to similar interests of moral concern” (para. 5.200)

Knowing that (i) public morals is merely about “standards of right and wrong conduct” maintained by people and (ii) a WTO Member can invoke public moral concerns of its people simply by putting these concerns in the text and legislative history of the measure (no need, apparently, to submit evidence or surveys confirming that your people really hold these concerns; if the government says so, that is enough, see paras. 135, 138, 139), what stops a WTO Member from saying that its people abhor this or that product (or, for that matter, any imported product)? 

There would apparently not even be a need to “identify the existence of a risk” to public morals, nor must the “exact content” of the public morals standard even be identified.  And it is ok for Members to be freakish about some products even if other products pose the exact same, or even higher, public moral concerns.  Was the core finding of violation in Tuna II not the fact that the US was not even-handed when it comes to dolphin concerns in and outside the ETP; and in Clove that the US was not even-handed when it comes to clove and menthol cigarettes?  Are these types of even-handedness concerns now wiped under the carpet, simply because we are talking of public morals? I guess they come back under the chapeau of XX but what do others make of these paras. 5.198-5.200?  

Rob: Is it not one thing to say (as you did) that public morals is different and may not easily fall under TBT (on which I have my doubts); quite another to say that for public morals we do not even have to identify a precise standard or level of protection, nor a precise concern/risk?  If neither is required, how can other WTO Members figure out what they must do to get market access and how can we even start making a necessity, proportionality or even-handedness assessment?

 

Let's Put the AB's New Article III:4 Test to the Test

It can be difficult to analyze legal standards in the abstract.  To make things more concrete, I've got a hypo that we can test under the Article III:4 test that the AB set out in Seal Products.

Imagine a regulation by Country X that categorizes cars as gas guzzlers and non-gas guzzlers, based on fuel efficiency. The regulation requires that each car company offering cars for sale in Country X must sell at least 50% non-gas guzzlers in that market.

It so happens that companies who produce in Country X make only non-gas guzzlers.  By contrast, companies producing in Country Y sell only gas guzzlers.

I'm pretty sure we all would agree there is a violation of Article III:4 here (feel free to argue that there is not).  But why?  We all know that III:4 is about "competitive opportunities," but, in my view, that doesn't take us very far.  How do we determine that "competitive opportunities" for imports have been adversely affected in this situation?

 Here are some options for analyzing such a measure under Article III:4, with the AB's findings in mind:

-- Under the regulation, there is a detrimental impact on Country Y (its products are adversely affected by the regulation, whereas Country X's are not), which leads to a violation, end of story.

-- Taking into account the detrimental impact, as well as the design, structure, and expected operation of the regulation, there is a violation.

-- Taking into account the detrimental impact, and the "genuine relationship" of the regulation to that impact (possibly due to the design, structure, and expected operation of the regulation), there is a violation.

Any other possibilities?

And which view do you take?

ADDED: And when I say, "which view do you take," that can be either:  (1) What is the law now (i.e., what did the AB have in mind); or (2) What should the law be.

WTO Seals:What is it really that makes the AB think that TBT doesn't apply?

To say the least, there is some puzzlement among WTO lawyers as to exactly why the AB found that the TBT Agreement did not apply to the EU ban on products from commercial seal hunts.   The AB refered to the fact that the EU ban was based on characteristics of the hunt not the products from it, but at the same time did not enter into the analysis of whether this was then a product-related PPM, which would be covered under TBT, or alternatively, non-product related. 

In sorting out what might have been in the back of the AB's mind it may be useful to return to the argument Jo Langille and I made for TBT non-applicability in our original Yale Journal of International Law piece:   

...the provisions of the TBT are inherently unsuited to the determination of whether the EU ban, taken in its aspect as noninstrumental moral regulation, is inconsistent with the purposes of the WTO system.  One need only examine the nature of the least trade-restrictive means test embodied in Article 2.2 of the TBT, which refers to measures that are least-trade restrictive taking into account the risks of non-fulfillment of the member's objective.This suggests a test that is oreinted to an instrumental balancing of some kind...many [public morals] measures are simply not tractable to an analysis based on risk assessment.(p. 423; footnotes omitted)

 

Now consider the following comment of the AB on public morals and risk assessment:

However, the notion of risk in the context of Article XX(b) is difficult to reconcile with the subject matter of protection under Article XX (a), namely, public morals.  While the focus on the dangers or risks to human,animal, or plant life or health ... may lend itself to scientific and other methods of inquiry, such risk-assessment methods do not appear to be of much assistance or relevance inidentifying and assessing public morals.  (paragraph 5.198) 

it seems to me that here the AB has essentially come to the same insight as that in our article:the non-instrumental public morals dimension of the EU ban,the protection of EU consumers and citizens from complicity with the inhumanity of the commercial hunts,is inherently incapable of being assessed in the idiom of "risk".  Which means it is inherently incapable of being assessed under TBT, given the crucial role that the notion of risk plays in TBT 2.2.  It is now somewhat easier to grasp at least some of  the normative considerations underpinning the AB's holding that the EU ban falls outside of the scope of TBT, at least as a public morals measure.

 

WTO Seals:the gestures of good faith the AB is demanding of the EU in return for public morals justification

The AB has held, without ambiguity or qualification, that the EU Parliament's seal products ban is justified as "necessary" for the protection of public morals under GATT Article XX (a), because of the contribution of the ban to the reduction in the number of seals killed inhumanely as well as to protecting EU citizens and consumers from complicity with this inhumanity.  However, under the chapeau (preambular paragraph) of Article XX, the AB has demanded that the EU make certain additional gestures of good faith in the way it administers one aspect of its seals regime, namely the indigenous (IC) exception.  These gestures are to assure the integrity and genuineness of the regime as applied, in relation to its public morals justification.  Given its public morals justification, the EU, the AB seems to be suggesting, must administer the regime in a manner that is above suspicion of any favoritism or arbitrariness.

First of all, the AB questioned the apparent indifference to poor seal welfare outcomes in indigenous hunts as somehow in tension with the integrity of the main public morals justification.  The AB did not say that the EU was precluded from having a lower level of protection of seal welfare by virtue of the other public morals concern of protecting traditional means of subsistence of indigenous communities.  However, doing nothing at all about the suffering of seals in permitted hunts seemed to bring into question good faith or integrity in relation to the concern for seal welfare.  Thus, the EU must now undertake some steps to indicate good faith-i.e. that it is still mindful of seal welfare as a public morals concern when operating the IC exception.  I would suggest that the European authorities appoint a special commission, comprised of veterinary experts, animal ethicists, member state animal welfare authorities,animal rights activists, and indigenous community representatives, which would recommend steps that can be taken,consistent with the federal nature of the EU and the territorial limits of its jurisdiction, to improve seal welfare in indigenous hunts.  In order to allow the time for this commission to do its work and consult with stakeholders the EU should ask for a relatively long implementation period. (In the AB's thinking here, I would add, I see an echo of Tuna II, where the AB was concerned that nothing at all was being done to address the incidental killings of dolphins outside the Eastern Tropical Pacific, and yet did not require the same degree of vigilance.)

Second, the AB was concerned that some of the criteria in the IC exception could be manipulated so that commercial hunters could circumvent the EU ban by abusing the indigenous exception.  I think this was giving too much attention to smoke and mirrors cooked up by Canada and Norway, which the panel bought into.  Nevertheless, the European authorities need to engage in some kind of rule-making that shows they have paid attention to this possiblecircumvention risk and have a strategy to counter it.  I am not an expert in EU law, but I know there are anti-circumvention rules in the operation of a range of EU schemes.  What is clearly required to satisfy the AB is a reasonable effort.  As anyone knows who has been involved in designing regulatory enforcement, one can never make any regulatory scheme 100% invulnerable to manipulation or abuse in all cases.

Finally, the AB, echoing US-Shrimp, found that the EU had not made the kind of effort to cooperate with Canadian indigenous communities to facilitate the entry of their products into the EU under the IC exception as it had done in the case of Greenland indigenous seal products.  Hard to understand the AB here, as the Canadian Inuit have so far preferred litigation to cooperation.  But this is a demand of the AB that should be very easy to satisfy.

It will be noted that the first two gestures will if anything improve further seal welfare, and so in this sense, even the finding that the EU needs to act to meet the conditions of the chapeau is a victory for seals! 

The WTO Appellate Body Ruling in Seals: National Treatment Article III;4

Since the AB's  ruling in US-Cloves on TBT 2.1, where it introduced the notion that a measure does not violate National Treatment or MFN if  the detrimental effects on competition are due exclusively to a legitimate regulatory distinction, there has been much discussion on this blog and elsewhere of whether the AB was intending a symmetrical approach to the interpretation of GATT Article III:4.  One view was that the AB had introduced this step into the application of Article 2.1 because of the absence of an Article XX-like exceptions provision in TBT; it was thus inapplicable to GATT III:4.  The alternative view was that, because of its concern with preserving an appropriate balance between trade liberalization and the right to regulate under both the GATT and the TBT Agreement, the AB also saw the interpretation of IIII:4 as involving the challenge of ensuring that neutral, objective measures with incidental trade effects, but without any un-evenhanded design features, are not impugned as violations of the GATT (even if the regulating Member might be able to justify them under Article XX in the last resort).   On this latter view, which I hoped the AB was moving towards, it seems questionable, given the purpose stated in GATT Article III:1, namely anti-protection, to characterize the enactment of normal government regulation with some incidental negative effects on the competitive opportunities of foreigners as a presumptively internationally wrongful act requiring strict justification if international wrongfulness is to be procluded.

The AB has now (largely) ended the speculation, indicating that it takes the first view, not the second. Policy space is, quite simply, it seems at first glance from Seals a matter for the exceptions under GATT.  There is a certain clarity to this approach, which is one reason why it has been favoured by many scholars, lawyers and particularly economists.       It has often been noted that the list of legitimate policy objectives in GATT Article XX is a closed one, and the EU raised this as an issue in determining whether policy space might have to be addressed in some way within Article III:4.  The AB retorted that the EU was unable to name a legitimate policy objective that would not be covered by Article XX but would be legitimate withinthe meaning of TBT 2.1.  Now consider whether this is a satisfactory way of dismissing the closed list problem.  If the EU legal counsel names such a policy objective they are basically compromising the EU's ability to claim in a future case when defending their regulation, that the objective in question somehow fits within one paragraph or another in Article XX.  The AB should not be letting the parties (with their particular litigation strategies) do all its thinking for it on such an important systemic question, especially where there is extensive scholarly literature.

Perhaps the AB is saying:trust us, if there is a legitimate regulation that nevertheless fails III:4 we will find a way of allowing it be be saved under XX.  Could public morals now be viewed by the AB as a kind of residual clause of Article XX, covering public policies that don't specifically go to the objectives in the other paragraphs, as long as standards of right and wrong in the community are at issue (take consumer fraud, for example)?  XX (d) may have potential along similar lines.

There is however one safety valve to preserve legitimacy that the AB has left open within III:4 itself, and this emerges from the discussion of DR-Cigarettes at paragraph 5.105.  The detrimental impact on the competitive opportunities must be attributable to, i.e. have a "genuine relationship" to, the measure.  This, surely, entails examining and eliminating other factors to which the detrimental impact might be atributable: climatic or geographical or demographic factors, changing consumer tastes or ethical values, policies of the governments of the exporting countries that could effect how the market is structured, etc.  To establish attribution, or a genuine relationship to the measure, a panel must arguably be sure that the detrimental competitive impact in question is not due to the other factors, largely or entirely.  In footnote 1071, the AB was careful to note that the EU did not appeal the panel conclusion that the detrimental impact was attributable to the measure.  Instead, the EU focused on its argument that there is a third step, the inquiry into "legitimate regulatory distinction."  In future cases, the regulating state will surely want the panel to  consider whether detrimental impact is attributable to factors other than the measure itself.

The second safety valve for policy space within III:4 that remains is the flexible or imaginative use of the criteria for likeness, an issue that the AB essentially ignores in Seals.  In this respect we should all re-read carefully the likeness discussion in EC-Asbestos.       

The Appellate Body ruling in Seals: Article I:1 MFN

This is the first in a series of posts on different specific aspects of the AB ruling in Seal Products.  On the big picture result, Jo Langille, Katie Sykes and I should be commenting in short order in a number of fora.

With respect to MFN GATT Article I:1 the Appellate Body made several important doctrinal statements.

First, it indicated that the legal standard of "treatment no less favourable" under MFN is essentially the same as that for National Treatment GATT Article III.  Second, the AB has held that there is a single fundamental purpose animating MFN and National Treatment:  the preservation of equality of competitive opportunities.  Third,the Appellate Body, rejecting implicitly the approach of the panel in EC-GSP, held that the language "unconditionally" in I:1 does not prohibit all conditions that make distinctions between like products but only those that "resulting a detrimental impact on competitive opportunities for like imported products from any Member."    Fourth, the AB held that an origin-neutral measure will nevertheless violate the legal standard of I:1 where its "design, structure and expected operation" (here quoting the panel) result in detrimental effects on the conditions of competition.  Finally, the AB rejected the suggestion of the EU that, before finding a definitive violation of I:1 the adjudicator, should assure itself that the detrimental effects do not derive exclusively from a legitimate regulatory distinction.

On the basis of these interpretations of law, the AB upheld the panel's finding of a violation of I:1. It did so by not questioning the panel's conclusion that the detrimental effects, the greater market access for Greenland seal products relative to Canadian and Norweigian products, were indeed a product of the "design, structure, and expected operation" of the EU measure, rather than extraneous conditions (the way in which the Canadian government structures the hunt, determining through its policies the relative size of the commercial to other hunts, for example).    This deference to the panel is understandable, because here unfortunately the panel's finding could be characterized as one of a factual nature.

What the AB did not  say (even while rejecting the EU legitimate regulatory distinction argument) was that detrimental effects on competition are sufficient on their own to violate the legal standard under 1:1   These effects must be found to be caused by particular features of the "design, structure, and expected operation" of the measure.  It may be a crucial factual inquiry whether other factors unrelated to the design, structure and expected operation of the measure may have contributed to or produced the detrimental effects on competition in question.  I will say more about this in my next post , on the AB's decision on GATT III:4, National Treatment, and especially its view of its own decision in DR-Cigarettes.  

An Emerging Sign of the Trade Constitution 2.0: The “Chapeau Test” in the Seal AB Report

The long-awaited Appellate Body (AB) report on the Seal dispute has just come out.  There have already been several postings on this report.  Let me focus on one particular issue: the “chapeau” test.

 In a nutshell, the AB integrated two strands of case law on the chapeau test (one in Gasoline/Shrimp-Turtle and the other in Brazil-Tyres), while it denied (at least in a formalist sense) the convergence of the “evenhandedness” test under TBT Article 2.1 with the chapeau test under GATT Article XX.

 First, the AB summarized three main AB reports on the chapeau test (Gasoline, Shrimp-Turtle and Brazil-Tyres).  (This summary is indeed very useful.)  In Gasoline, the “impracticality” imposed on foreign producers in complying with the rigid U.S. regulation was a source of arbitrariness (para. 5.304).  In Shrimp-Turtle, three factors (rigid regulatory unilateralism; the failure to consider foreign circumstances; the failure to negotiate) provided the criteria for arbitrariness (para. 5.305).  In Brazil-Tyres, the “rational relationship” between policy objectives and the measure in question was a source for arbitrariness (para. 5.306).  Based on this set of precedents, the AB highlighted the massive ambiguities and nearly abusive discretion therefrom embedded in the EU Seal Regime. (5.326)  The AB held that:

     Given the ambiguities in the criteria of the IC exception and the broad discretion that the recognized     bodies consequently enjoy in applying these criteria, we consider that seal products derived from what     should in fact be properly characterized as "commercial" hunts could potentially enter the EU market     under the IC exception. (5.328)

 Also, the AB viewed that “the European Union has not pursued cooperative arrangements to facilitate the access of Canadian Inuit to the IC exception.” (5.337)  This train of findings smacks of “due process” review under domestic administrative law proceedings.

 Second, the AB revered the panel’s finding that appeared to adopt the theme of convergence between TBT Article 2.1 and the chapeau under GATT Article XX.  The AB viewed that legal standards applicable to these two situations are significantly different despite textual similarities. (para. 5.312)  I beg to differ.  One of the reasons that the AB cited in differentiating the chapeau under GATT Article XX from the TBT Article 2.1 standard was the existence of a “balance” between free trade and regulatory autonomy under GATT.  Yet isn’t this (balance) the most important goal of the TBT Agreement as well?  One may find the same spirit of balance or reconciliation in the so-called “evenhandedness” test or the “legitimate regulatory distinction” standard under TBT Article 2.1.  After all, I believe this convergence thesis should not be so easily dismissed.  On the contrary, one might welcome the convergence between the evenhandedness test (TBT) and the chapeau test (GATT) as an emerging sign of Trade Constitution 2.0, which might shed light on the interpretation of other relevant WTO provisions in the future. 

Contrasting Views on the Seal Products Decision

Global Trade Watch:

The WTO today added fuzzy white baby seals clubbed to death on bloody ice flows to dolphins and sea turtles as animals that the WTO has declared cannot be protected by domestic laws because they  violate “trade” rules, which will just fuel public and policymaker skepticism about these so-called trade deals

The European Commission:

The WTO confirmed the EU's right to ban seal products on moral grounds related to animal welfare and the way the seals are killed. It did, however, criticise the way the exception for Inuit hunts has been designed and implemented.

 

There's No "Consistency" Requirement for Animal Welfare and Public Morals

From the Seal Products AB report:

5.200. Finally, by suggesting that the European Union must recognize the same level of animal welfare risk in seal hunts as it does in its slaughterhouses and terrestrial wildlife hunts, Canada appears to argue that a responding Member must regulate similar public moral concerns in similar ways for the purposes of satisfying the requirement "to protect" public morals under Article XX(a). In this regard, we note that the panel in US – Gambling underscored that Members have the right to determine the level of protection that they consider appropriate, which suggests that Members may set different levels of protection even when responding to similar interests of moral concern. Even if Canada were correct that the European Union has the same moral concerns regarding seal welfare and the welfare of other animals, and must recognize the same level of animal welfare risk in seal hunts as it does in its slaughterhouses and terrestrial wildlife hunts, we do not consider that the European Union was required by Article XX(a), as Canada suggests, to address such public moral concerns in the same way.

The Appellate Body Just Wants To Point Out that It Won't Be Addressing Extra-Territoriality

From the Seal Products AB report:

5.173. Finally, we note that, in US – Shrimp, the Appellate Body stated that it would not "pass upon the question of whether there is an implied jurisdictional limitation in Article XX(g), and if so, the nature or extent of that limitation".1187 The Appellate Body explained that, in the specific circumstances of that case, there was "a sufficient nexus between the migratory and endangered marine populations involved and the United States for purposes of Article XX(g)".1188 As set out in the preamble of the Basic Regulation, the EU Seal Regime is designed to address seal hunting activities occurring "within and outside the Community"1189 and the seal welfare concerns of "citizens and consumers" in EU member States.1190 The participants did not address this issue in their submissions on appeal.1191 Accordingly, while recognizing the systemic importance of the question of whether there is an implied jurisdictional limitation in Article XX(a), and, if so, the nature or extent of that limitation, we have decided in this case not to examine this question further.

Was this paragraph designed to get me excited that the AB was going to address extra-territoriality, only to leave me frustrated by saying it would not be addressed after all?  If so, it worked!

The Tests of Public Morals Under the TBT and the GATT

[This post is from my good colleague, Kyle Dickson-Smith.  He is interested in some of the issues that appear to be unresolved in the Panel Report]. Now that the AB decision is out, I anticipate that he will follow up to evaluate if the AB has resolved these issues. - ASA]

With the seal hunting season mostly behind us, the AB Seals decision is expected momentarily.  In fact it emerged this morning. Much interest has been raised over the Appellate Body (AB) decision in this matter.

The WTO obligations under the TBT Agreement and the GATT often require a determination of whether the measures are necessary to meet their objectives. In considering the common notion of “necessity”, it is interesting that the WTO panel (Panel) limited its discussion when comparing the meaning and operation of GATT XX(a) and Article 2.2, despite the conceptual overlap. It would have been helpful for the Panel to have better distinguished why these obligations were different. While Article 2.2 of the TBT Agreement is an obligation with a self-contained exception (“not more trade restrictive than necessary”), GATT Article XX(a) is not; it is a defence in its own right applying to other GATT obligations.  As a result, GATT Article XX has broader application. So the question is whether this is a basis for differentiating the GATT XX exception from Article 2.2 of the TBT Agreement.  And, if that is the case, then how?

In its analysis under Article 2.2 of the TBT Agreement, the Panel determined that the EU seal regime was “not more trade-restrictive than necessary”. Yet, while the Panel found that the EU seal regime was capable of making and did contribute to addressing public morals concerns (under Article 2.2 of the TBT Agreement), the panel rejected the EU’s defence under the GATT XX(a): the panel found that the EU seal regime was “necessary” to protect public morals, but it determined that the regime had a discriminatory impact that could not be justified by the EU (under the chapeau of GATT XX).

While the Panel did make a point that the GATT and the TBT Agreement should be interpreted in a 'consistent and harmonious manner', it did not elaborate on how that should be achieved for GATT XX and Article 2.2 of the TBT Agreement.

This perhaps will be clarified by the AB decision. With the benefit of Rob Howse's thoughtful reports throughout the AB hearing, we know that Division Member Chang was alert to the difference in the nature and application of Article 2.2 and GATT Article XX. As Rob Howse discussed, because of this difference between Article 2.2 and GATT XX, the AB may clarify and establish a more streamlined test under Article 2.2, to require the complainant to first establish (as a prima facie standard) that there was a reasonably available less trade-restrictive alternative to the impugned measure- and if that prima facie standard is not fulfilled by the complainant, the analysis ends there.

Noticeably, GATT XX(a) is subject to a general non-discrimination requirement, while Article 2.2 is not. How will the AB ‘factor in’ that distinction when refining a legal test under Article 2.2? 

Given that GATT XX-like exceptions have found their way into investment agreements (such as the Australia-Korea FTA and the China-ASEAN Investment Agreement), that makes the AB’s interpretation of such clauses even more relevant for such investment treaties.

 

 

The EU Seal Products Measure Is Not a Technical Regulation

The Appellate Body says the Panel erred in finding that the EU seal products measure is a technical regulation:

5.58. Having reviewed the relevant aspects of the EU Seal Regime, we see only one feature that may suggest that the measure lays down product characteristics, while all others suggest that this is not the case. For example, to the extent that the measure regulates the placing on the EU market of pure seal products, which is a part of the integral and essential aspects of the measure, it does not prescribe or impose any "characteristics" on the products themselves. To the extent the measure prohibits the placing on the EU market of seal-containing products, it could be seen as imposing certain "objective features, qualities or characteristics" on all products by providing that they may not contain seal. However, as stated above, we are not persuaded that this part of the Regulation constitutes the main feature of the measure at issue. Moreover, the EU Seal Regime's prohibition of "mixed" products differs, to a considerable extent, from the prohibitive aspects of the French Decree under EC – Asbestos. More importantly, as noted by the Panel, the EU Seal Regime "consists of both prohibitive and permissive components and should be examined as such".967 As we see it, when the prohibitive aspects of the EU Seal Regime are considered in the light of the IC and MRM exceptions, it becomes apparent that the measure is not concerned with banning the placing on the EU market of seal products as such. Instead, it establishes the conditions for placing seal products on the EU market based on criteria relating to the identity of the hunter or the type or purpose of the hunt from which the product is derived. We view this as the main feature of the measure. That being so, we do not consider that the measure as a whole lays down product characteristics. This is not changed by the fact that the administrative provisions under the EU Seal Regime may "apply" to products containing seal.

5.59. In the light of the above, we reverse the Panel's findings, in paragraphs 7.111 and 7.112 of the Panel Reports, that the EU Seal Regime lays down product characteristics. The Panel's conclusion that the EU Seal Regime constitutes a "technical regulation" relied on its intermediate finding that the EU Seal Regime lays down product characteristics. Accordingly, having reversed this finding by the Panel, we also reverse the Panel's findings in paragraphs 7.125 and 8.2(a) of the Panel Reports that the EU Seal Regime constitutes a "technical regulation" within the meaning of Annex 1.1 to the TBT Agreement.

More to come, as I and others sort through the reasoning.

ADDED: This will take some time to digest, but if I'm reading these passages correctly, does this mean that if the EU banned all seal products, it would be a technical regulation?

MORE: I made some slight edits to this post, because I kind of rushed to get it up there, and I didn't like some of my original word choices.

Banning Windows 8

I've got a number of criticisms of Windows 8 -- why did they shuffle everything around? how do I get to desktop? -- but this is clearly going too far:

China is banning Windows 8 devices from at least some government IT purchases, in a mysterious move that took Microsoft off guard.

The ban came from China’s Central Government Procurement Center, which posted a brief notice last Friday on new requirements for government tenders. Among the demands is that Windows 8 be excluded from the bidding process on computer purchases.

It’s unclear how far-reaching the ban will be. The agency could not be reached Tuesday and the new requirements only concern government purchases for “energy-efficient” IT products, including notebooks, desktops and tablets.

China’s state-controlled Xinhua News Agency, however, was more forceful and said that the government was forbidding the use of Windows 8 after Microsoft recently ended official support for Windows XP. “The Chinese government obviously cannot ignore the risks of running OS without guaranteed technical support,” the Tuesday report said.

Chinese officials have previously stressed that Microsoft should lower the price of Windows. They’ve also said to local press that the nation should develop its own homegrown OS to reduce its reliance on foreign companies.

You get the sense that this is part of larger U.S.-China tensions, but it's hard to say what's driving it.  The U.S. response will be interesting.

What Are the "Trade-Related" Aspects of Intellectual Property?

From a new article on the TRIPS Agreement:

Central to the controversies surrounding the TRIPS Agreement has been the ever-enigmatic determination of how far TRIPS should reach in regulating intellectual property rights. As the name of the Agreement explicitly indicates, the TRIPS Agreement is meant to regulate only those aspects of intellectual property rights that are “trade-related.” Scholars have noted a disconnect between the scope of obligations under TRIPS—unprecedented for a trade agreement—and the “trade-related” limitation in the agreement’s title. Indeed, some have opined that the supposed limitation was meaningless from the start.  Commentators have accused the Agreement of exceeding the purported limitations in scope embodied in its title.

I'm firmly in the "meaningless from the start" camp.  To take an example, how exactly does the choice of, say, a 10, 15, or 20 year patent term (or some other length) relate to trade?  Of course, it may affect trade to some extent, but so does every policy, so it's not clear that tells us anything.

The Role of Secretariats

From a post at the Kluwer Arbitration Blog:

The role of the tribunal secretary in international arbitration has been called an “enormously grey area” that has been subject to instances of “abuse.” With concerns of the secretary going beyond his or her position as an assistant to the tribunal and becoming a decision-making “fourth arbitrator,” the proper role of the tribunal secretary has been a regular topic of discussion within the international arbitration community in recent years.

Advocates for broad responsibilities contend that tribunal secretaries increase the efficiency of the arbitration proceeding, allow the arbitrators to focus on deliberating on the merits, and enable tribunals to render awards faster. It also is commonly noted that using a tribunal secretary is cost effective because the hourly rate of a secretary is well below the rate of the arbitrators.

By contrast, those who advocate for a limited role for tribunal secretaries argue that the selection of arbitrators is intuitus personae (“because of the person”) and therefore there should be no delegation by them. Unlike domestic judges who cannot refuse a case due to a busy docket, the position of arbitrators is voluntary and they can simply decline appointment if they would need assistance from a secretary. In addition, some express concern that any summary or research performed by the tribunal secretary necessarily bears the secretary’s perspective and thus might improperly influence the arbitrator’s own evaluation.

It seems to me that the role of secretariats is an under-studied element of international law and organizations.  I highly recommend someone taking up this area of research, although it won't be easy to get anyone to talk about it.

General Exceptions Clauses in Investment Obligations

I have a short piece in Investment Treaty News, in which I raise some issues related to how a general exceptions clause for investment like the one in the Australia-Korea FTA would work:

First, there is a question as to how such an exception would apply in the investment context.  Note the language:  “nothing in this Agreement shall be construed to prevent a Party from adopting or enforcing measures.”  It could be argued that investment obligations only require compensation, and do not actually prevent any measures.  A government can still take the measure; it simply has to pay.  So if a government measure violates the rules, and the government has to pay compensation, would that “prevent” a party from adopting or enforcing measures?  Presumably, the answer has to be yes, or else the provision would have no meaning.  Indeed, even in the WTO context, measures are not “prevented,” as governments are able to maintain measures that violate WTO obligations if they are willing to accept trade retaliation.

Second, the requirement that “such measures are not applied in a manner which would constitute arbitrary or unjustifiable discrimination between investments or between investors” is different than what is used in the GATT context. There, the discrimination at issue is between “countries where the same conditions prevail.”  Thus, it is nationality-based discrimination.  It is arguably much more difficult to satisfy a standard relying on investor-based discrimination.

Another question is whether the listed policies are sufficient.  Are there additional policy reasons that might eventually be included in such an exception, beyond the four sub-paragraphs listed here?  Can those provisions be interpreted broadly enough to cover most policy goals? A classic GATT dispute involved a “luxury tax” in the form of a higher tax rate on expensive automobiles. It is not clear that such a policy would fall within the exceptions in Article 22.1, and thus a broader list of policy exceptions might be useful.

Finally, in the WTO context, the legal obligations are narrow and bounded, for the most part. By contrast, a “fair and equitable treatment” requirement is extremely broad and vague. How would the Article 22.1 exception be applied in that context? When “due process” concerns have led to a violation, can general exceptions of this kind function as an exception? There is no experience with this situation, so the outcome remains to be seen, but there may be some doubt as to whether it will work to soften the impact of such rules.

The Right To Be Forgotten as a Trade Barrier

By now, most of you are probably familiar with this ECJ ruling:

Internet companies can be made to remove irrelevant or excessive personal information from search engine results, Europe's top court ruled on Tuesday in a case pitting privacy campaigners against Google.

The Court of Justice of the European Union (ECJ) upheld the complaint of a Spanish man who objected to the fact that Google searches on his name threw up links to a 1998 newspaper article about the repossession of his home.

No doubt Google is frustrated with this result.  It creates big hassles for it in dealing with the EU market, and could lead to bigger hassles if this notion spreads to other jurisdictions.  Here's Google's take:

Sources at the world's biggest search company say they are yet to figure out   how to deal with the expected flood of expected requests and will need to build up an "army of removal experts" in each of the 28 European Union countries, including those where Google does not have operations. 

Whether those experts merely remove controversial links or actually judge the   merits of individual takedown requests are among the many questions Google   has yet to figure out, added the source.

Extra burdens, and differing rules across jurisdictions, could be characterized as a "trade barrier."  Will Google make that argument here, perhaps raising it in the TTIP context?

Are we OK with different speech/privacy balances in different jurisdictions, even if that is not the most efficient outcome?

The Seal Hunt Lobby's "Opinion Poll":the Not So Fine Art of Asking Questions to Get the Answers you Want

Suppose someone asked you if you were to support, say, anti-smoking laws if there were no factual evidence that smoking was harmful? I guess I'd have to say no. Like most people I suspect, I don't like to think of myself as indifferent to facts or unconcerned that the exercise of public authority be justified. Still if I were asked whether, on the other hand, an Islamic country could ban alcoholic beverages without factual evidence I would have to hesitate. Just what kind of evidence? I suppose evidence that the ban is based on genuine religious beliefs and a legal system that accepts the enforcement of religious interdictions by governmental authority. Not surprisingly, the pro-seal hunt lobby was able to find a pollster who could concoct European opposition to the EU seal ban, by asking random members of the public whether they would support a public morals based ban, if there were no independently verifiable factual evidence to support it. http://bit.ly/1lw8V3T Were these folks provided with the findings of the panel about negative animal welfare outcomes from sealing, based on extensive scientific evidence? Or the factual findings that there was no way to ensure these negative outcomes did not occur, given the conditions of the Canadian commercial hunt. I very much doubt it. The pollster managed even to scrap up a majority of Europeans who said that they would not be opposed to hunting seals in all circumstances. Unwittingly, this result actually lends support to the EU's claim that its ban with limited exceptions for non-indigenous and marine management hunts, may actually reflect well the opinions of EU nationals. The polled individuals were also asked whether upholding the EU ban on public morals grounds would set a "dangerous precedent" for other areas. This is of course what we call a leading question. I'm sure many people would not like to regard themselves as dismissing out of hand the risk of a "dangerous precedent", and not having much expert knowledge about how WTO jurisprudence functions, and the role of stare decisis in the WTO system, they would simply play it safe and say, yes, a "dangerous precedent" could be set, this having been put into their minds by the pollster. And sure enough a large number answered yes!

Transparency in the Plain Packaging Disputes

From what I can tell, Australia has usually been pretty good about transparency in terms of its WTO dispute and investment arbitration proceedings.  It generally posts its submissions online.

But as Investment Arbitration Reporter tells us, it is holding back on the briefs in the plain packaging investment arbitration, because it worries the arguments there would give the WTO complainants an early look at its WTO defenses:

The Australian Attorney-General’s Department has denied a request made by IAReporter under freedom of information laws for access to Australia’s Statement of Defence in an arbitration brought by Philip Morris Asia Limited. The Statement of Defence was filed by Australia on October 23, 2013, and would offer the first detailed elaboration of Australia’s views on the merits of the case.*

In its decision of April 7, 2014 rejecting the request, the Attorney-General’s Department considered that the Statement of Defence is covered by legal professional privilege and is therefore exempt from disclosure under Australia’s freedom of information legislation. The Department considered that the Statement had been prepared by a team of both government and external lawyers acting as independent advisers for their client, the Commonwealth of Australia, and was intended for use in ongoing litigation, meaning that legal professional privilege attached to it.

The Department also took the view that release of the Statement of Defence “would have detrimental implications in the ongoing BIT proceedings as well as ongoing World Trade Organization (WTO) proceedings”. Given the “real harm” that would result from release, the Department said, privilege should not be waived over Australia’s defence.

...

Furthermore, the Department said, a release of the defence would make Australia’s arguments and evidence available to the five states that have brought claims against Australia at the WTO, again threatening the Department’s proper and efficient conduct in those proceedings (where it is assisting Australia’s Department of Foreign Affairs and Trade). This would give an “unfair legal advantage” to those complainant states.

 It will be interesting to see what happens with the WTO submissions in the dispute.  Hopefully Australia will be forthcoming with its submissions there.  (The U.S. often posts the questions from the panel, and its answers to those questions, which I find particularly helpful; I'd love to see those here as well.)  Any chance the complaints will post theirs?

Will There Be a Human Rights Clause in the TTIP?

 From a Canadian news article published in October of last year:

There's a new pothole on the long, bumpy road towards a Canada-Europe free trade deal: whether human rights and weapons of mass destruction should be addressed in a side agreement to the overall pact.

Diplomats from the European Union say that Canada is balking at the inclusion of language in a final text that would speak to the importance of affirming human rights and non-proliferation efforts.

The clauses would not appear in the Comprehensive Economic and Trade Agreement but in a separate so-called Strategic Partnership Agreement.

The EU's new ambassador to Canada, Marie-Anne Coninsx, said Tuesday the two pacts are linked and there won't be a deal on one without the other.

...

Coninsx said she knows Canada and the EU agree totally on the importance of human rights, but if it's not included in the agreement, that could affect the bloc's future treaty negotiations.

"If we would say, 'OK' with all agreements in the world, but not Canada, we send out a wrong signal with other countries," she said.

So what are the implications of this logic for the TTIP?  Will the EU ask the U.S. for a human rights clause?  And if so, how (badly?) will the U.S. react?

“Sociological Inquires into International Law” (LSE, May 16-17, 2014)

The aim of this workshop is to help bring contemporary international law scholarship into a closer conversation with a number of inspiring and theoretically rich literatures on law and markets deriving from traditions of thinking within sociology and anthropology.  We are convinced that, particularly within the field of international economic law, a deeper and more informed engagement with a range of sociological and social theoretic modes of thinking is necessary for intellectual renewal.  

 For details, please visit the workshop site. 

Musings on the Plain Packaging WTO Dispute

Now that the plain packaging WTO panel has been composed, here are some issues that I've been wondering about related to the case:

• If a ban on using trademarks on the product itself violates the TRIPS Agreement, does a ban on advertising -- which includes a ban on using trademarks in that advertising -- also violate?  I would have thought that advertising is the most important part of the process of reaching customers.  You communicate your trademark through advertising, and then people go look for that trademark on the product in stores (or Amazon).
• Is the Australian plain packaging law a ban on using trademarks, or is it more of a regulation of when and how you may use trademarks? Can these trademarks be used in other ways (i.e., other than on the product)?
• Some trademarks are not allowed because they are deemed offensive.  Presumably this is permissible under the TRIPS Agreement.  On what basis under the TRIPS Agreement can you deny new trademarks, or take away previously registered trademarks, for this reason?
• Is trademark protection simply about preventing others from copying your trademark? Or is there a more general right to distinguish your goods from other goods? I'm not sure I see one in the TRIPS Agreement. 
• Under the Australian plain packaging law, can you still register a new tobacco trademark, but you cannot then use it?  Or can you not register new tobacco trademarks at all?
• Is there evidence that plain packaging discourages smoking?  Does that matter?

The Last Three WTO Complaints

Here are the last three WTO complaints (before today):

• In December of last year, we had Russia bringing a complaint against EU cost adjustment methodologies and anti-dumping measures (DS474).  
• Then on April 8, the EU complained about Russian measures on the import of live pigs and pork products (DS475).  
• And on April 30, Russia complained about EU energy sector practices (DS476).

I'd never seen a string of back and forth cases like this, and I wondered how long it could keep up, but the US and New Zealand ruined the streak today.

The Plain Packaging WTO Panelists

Just announced:

Chairperson: Mr Alexander Erwin

Members:    Mr François Dessemontet, Ms Billie Miller

Erwin (South Africa) was on the Renewable Energy/Feed-in Tariff panel; Dessemontet (Switzerland) was on Section 211 many years ago.  Miller (Barbados) is a first time panelist.  Some biographical info for her is here.

ADDED: To clarify, I only linked to the Ukraine announcement, but these panelists will serve on all five complaints.

Human Rights Clauses in Trade Agreements

From the Japan Times:

The European Union is insisting on a human rights clause linked to a proposed economic partnership agreement (EPA) with Japan, it was learned Monday.

In negotiations between the EU and Japan on a strategic partnership agreement (SPA), which are held in parallel with their EPA talks, the EU is calling for a clause that allows Brussels to suspend the EPA if Japan engages in human rights violations, informed sources said.

It probably won't surprise people too much to hear that I'm skeptical of including such provisions in international economic agreements.  But nevertheless, it's an interesting issue to talk about, so let me ask the following:

-- Are there any current treaties with such clauses?  I'm curious about the specific wording being proposed.

-- Who gets to decide if there is a human rights violation?  Does a party get to make that decision unilaterally, or must there be a neutral, third party determination?

-- The article says: "An EU official emphasizes that the human rights clause is unlikely to be invoked against Japan, but the EU issues a statement condemning capital punishment is cruel and inhuman every time when Japan executes a death-row inmate. The clause may exert tacit pressure on Japan from the EU, which aims for abolition of the death penalty."  However:  "In its free trade agreement talks with the United States, the EU does not call for the conclusion of a political pact like the SPA."  If such clauses made their way into some trade agreements, and were actually used in the context of the death penalty, how would that affect the trade debate here in the U.S.?

-- I understand that the death penalty is a sensitive issue for many people, but "human rights" is obviously much broader than that.  If an EU-Japan agreement had such a clause, what are some of the claims of human rights violations that could be asserted against the EU?

-- Is suspension of the agreement really much of a threat?  It would be incredibly disruptive to EU interests for the EU to suspend an agreement.  It's hard to imagine it ever happening.

Can (Should) the TPP replace the WTO?

The answer is NO, according to our own Simon Lester.  In his posting on the Huffington Post today, Simon presented an excellent case for multilateralism.  In particular, Simon underscored various multilateral disciplines unique to the WTO, such as those governing customs administration and trade remedies (antidumping and subsidies).  In this highly interconnected global business sphere, these kinds of disciplines seem to make sense only in the multilateral setting.  Indeed, none but the WTO Director-General Roberto Azevêdo has recently made a similar observation. 

 “[I]t simply makes no sense to adopt regulations to streamline customs bilaterally — if do it for one country, you do it for everybody.  (…)  Other examples include farming subsidies or fisheries subsides — they cannot be tackled in bilateral deals.  Another example is disciplines on trade remedies like anti-dumping or countervailing duties — you cannot negotiate them bilaterally.  The simple fact is that the major global challenges for trade can only be addressed globally; can only be addressed multilaterally.”

 So, the TPP cannot, and should not, supplant the WTO, even though the former can still supplement the latter.  After all, that’s the spirit of GATT Article XXIV and other related disciplines on trade regionalism: regional trading agreements should be “building,” not stumbling, blocks for the WTO. 

More on the China - Rare Earths Appeal: Some Technical and Boring Issues

Here's a brief rundown of what's going on in the China - Rare Earths dispute, which involves three separate complaints -- DS431 (US); DS432 (EU); and DS433 (Japan) -- that were merged into one panel proceeding, and resulted in three panel reports circulated in a single document.

As we discussed a short time ago, the U.S. got the appeal process rolling in DS431 with a conditional appeal filed on April 8.  It appealed a couple very minor issues, and said that if China did not appeal, then nevermind.

On April 17, China submitted its own "other" appeal on more substantive issues in DS431.  At the time, it surprised me that this appeal only related to DS431.  What about DS432 and DS433?

Well, now I have an answer of sorts.  On April 25, China filed a notice of appeal in DS432 and DS433.  As far as I can tell, its DS432/433 notice of appeal is basically identical to its "other" appeal in DS431.

Now, I hope these various appeals are consolidated into one proceeding, with one AB report, rather than having two processes run simultaneously.  Having two of everything in this case wouldn't make much sense.

But what timelines will be followed, with two notices of appeal filed 17 days apart?  When is the oral hearing going to be?  And will the AB report be issued 90 days from April 8 or from April 25?  

If anyone out there has answers, or explanations as to what was going on behind the scenes, I'd love to hear them.