Bridges Weekly Trade News Digest • Volume 12 • Number 35 • 23rd October 2008

Overturning Panel, Appellate Body Issues Mixed Ruling in Hormone Dispute

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In the latest development in an ongoing transatlantic dispute over the European ban of imported hormone-treated beef, the WTO’s Appellate Body issued a mixed ruling on 16 October that said that while Canada and the US can impose trade sanctions on the EU, Brussels can continue banning imports of hormone-treated beef from those countries.

Brussels, Ottawa and Washington had all appealed a March WTO panel ruling that found fault with the three parties in the dispute (see BRIDGES Weekly 2 April 2008, http://ictsd.net/i/news/bridgesweekly/11106/).

But the Appellate Body overturned the panel’s ruling (see BRIDGES Weekly 18 June 2008, http://ictsd.net/i/news/bridgesweekly/12276/) that Canada and the US breached international trade rules by unilaterally deciding to retain sanctions against EU exports without initiating proper legal proceedings at the WTO.

US Trade Representative Susan Schwab welcomed the verdict and said that it meant there was no need for Washington to remove the sanctions.

“The Appellate Body’s report confirms that WTO Members that are subject to additional duties for failing to bring themselves into compliance with the WTO’s ruling and recommendations must do more than simply claim compliance in order to obtain relief from such duties,” she said in a statement.

But the Appellate Body also ruled that the dispute panel had erred in ruling that a 2003 risk assessment by the EU did not bring the 27-nation bloc into compliance with the WTO Agreement on Sanitary and Phytosanitary Measures, known as the SPS Agreement.

But while the Appellate Body faulted the panel for some of its conclusions, it said that it alone was unable to analyse whether the EU’s risk assessment brought the European trading bloc into compliance with the SPS Agreement.

“This is an important decision,” EU Trade spokesman Peter Power said. “The panel had no sound basis for questioning the WTO-legality of the new EU hormones directive. These clarifications will strengthen WTO Members’ ability to protect citizens.”

The Appellate Body concluded by recommending that the parties re-initiate WTO dispute settlement proceedings to resolve the existing disagreement over whether the EU measures now comply with WTO rules and whether the continued Canadian and US are still valid.

Brussels had sought an Appellate Body ruling arguing that its ban on hormone treated beef was scientifically sound, and therefore legal, and that the WTO should have ordered the US and Canada to lift their sanctions. In their appeal, the Washington and Ottawa said it was not enough for the EU to argue that its new scientific study had justified the ban for the sanctions to be removed.

The dispute dates back to the 1980s, when the EU first banned the import of Canadian and US beef that had been treated with growth-promoting hormones. Two years after the dispute was brought to the WTO in 1996, the WTO Appellate Body found that the EU ban was not consistent with international trade law and authorised Canada and the US to impose sanctions of US$ 125 million annually on various European exports.

But Canada and the US decided unilaterally to retain trade sanctions on EU products ranging from Roquefort cheese to Dijon mustard, reasoning that the modifications to its ban that the EU made in 2003 were not sufficient to bring it into compliance with the 1998 WTO ruling. But the EU claimed the amended ban, based on a risk assessment, was in compliance with WTO requirements and challenged the continued application of Canadian and US duties.

ICTSD reporting.