Bridges Weekly Trade News Digest • Volume 8 • Number 38 • 10th November 2004
DSU Update: GMOS, Beef Hormones
GMO dispute deadline extended again
In a statement dated 2 November, the WTO panel hearing the challenge by the US, Argentina and Canada against the EC’s de facto moratorium on the approval of genetically modified organisms (GMOs) postponed its issuance of the final report from March 2005 until June 2005. According to the panel, the delay — the third since the inception of the dispute — is due to the time-consuming process of identifying and selecting experts, and, more importantly, a joint request by all four parties that they be granted additional time to prepare further submissions to the panel. This development comes against the backdrop of recent reports that the EC will be persuading five member states, targets of the GMO case, to lift their bans on four GM varieties of corn and rape seeds meant for cultivation, import and processing, which have been approved by the EC. Furthermore, on 26 October, the EC approved Monsanto’s ‘Roundup Ready’ maize for human consumption and market sales, leading critics to point out that this action was motivated by pressure from the case (see BRIDGES Trade BioRes, 5 November 2004).
The panel announced the first delay in the case on 26 August, when it indicated that it would seek expert advice on technical and scientific issues raised in the dispute. Shortly before this, the panel had postponed the timing of its final report from September this year until March 2005 (see BRIDGES Weekly, 1 September 2004). Trade observers had predicted that the scientific hearings could result in further delays, mirroring an earlier case against the EC involving a ban on imports of beef raised with growth hormones (see below).
EC challenges US on beef hormones, tax law amendment
In a press release issued on 8 November, the EC announced it had initiated a WTO dispute against the US and Canada, challenging their continued imposition of sanctions against EC exports in retaliation against an EC ban on beef containing growth-promoting hormones found to be WTO-inconsistent in a dispute dating from 1997. The crux of the EC’s complaint was that these sanctions, in place since 1999, were unjustified because the EC had effectively complied with the WTO ruling. In the words of EU Trade Commissioner Pascal Lamy, "there is no reason why European companies should continue to be targeted by sanctions when they export to Canada and the US. The EC ban on certain growth promoting hormones is now in full respect of our international obligations. We have put in place revised legislation based on a thorough and independent scientific risk assessment."
A WTO panel — and subsequently the Appellate Body — ruled in 1997 and 1998 respectively that the EC ban on beef hormones was not based on a proper scientific risk assessment and that the supporting scientific evidence was insufficient. Since the ruling, the EC has sought to prove that it has fixed those errors by basing a new directive that entered into force in October 2003 on a scientific risk assessment (see BRIDGES Weekly, 13 November 2003).
According to the EC’s press release, apart from refusing to lift the sanctions, Canada and the US had also refused to avail themselves of a special WTO dispute settlement process meant to resolve compliance problems. Under WTO dispute settlement rules, both countries could have requested a WTO panel to examine the compliance measures taken by the EC. On this issue, Lamy noted: "if Canada and the US disagree with the EC measures, they should suspend their sanctions and refer their apparent disagreement to the WTO as the EC has done recently in the FSC case".
In the Foreign Sales Corporations (FSC) case initiated by the EC, WTO panels had ruled that the US maintained illegal tax exemptions for certain US corporations located abroad. On 22 October, the US President adopted a new law that repealed the former WTO-inconsistent FSC legislation (see BRIDGES Weekly, 27 October 2004). As highlighted by the EC in its press release, the EC has now initiated compliance proceedings in the WTO regarding aspects of the new FSC law that it still has concerns with and "has indicated its readiness to suspend sanctions while dispute settlement proceedings are ongoing".
While compliance proceedings — such as those initiated by the EC in the FSC case — normally require the panel to issue a ruling within 90 days, the timeframe for regular panels to deliver their decisions, such as in the beef hormones dispute, is six to nine months. Trade observers have noted that taking into account the probability of a subsequent appeal process, the EC’s new beef hormones challenge could drag on beyond 2006.
The EC’s press release, IP/04/1345, is available Online.
ICTSD reporting; "EU to WTO: U.S., Canada Sanctions Illegal", Reuters.com, 8 November 2004; "EU Challenges U.S., Canada Retaliation for Beef Ban", Bloomberg, 8 November 2004; "EU to Seek WTO Ruling Requiring U.S. To Lift Sanctions in Beef-Hormone Dispute", WTO Reporter, 9 November 2004.