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MEMORANDUM TO: Interested Colleagues and Media Representatives Background The hormones at issue in this dispute are used in cattle production to promote growth and lessen the amount of time required to ship beef to market. The United States Food and Drug Administration (FDA) has approved six growth promoting hormones for use in beef production. Three natural hormones (estradiol, progesterone, and testosterone) occur naturally in cattle and other food products. Three synthetic hormones (zeranol, trenbolone acetate, and melengestrol acetate (MGA) produce growth promotion effects but are not found naturally in cattle. In 1980, the presence of the hormone Diethylstilbestrol (DES), a synthetic drug that promotes weight gain and muscle development in livestock, sparked a health scandal in Italy when it was reported that children who had eaten the hormone-treated meat had developed breasts and infant girls had begun menstruating. In response to these events, the EC Council adopted Directive 81/602 in 1981 to prohibit the use of hormones, except for therapeutic purposes. However, the newly enacted ban did not apply to five hormones (estradiol, progesterone, testosterone, trenbolone, and zeranol). In October 1985, the European Parliament adopted a resolution claiming that the scientific information regarding the five hormonal substances noted above was "far from complete and that considerable doubt therefore exists about the desirability of their use and of their effect on human health". A ban on zeranol and trenbolone was approved based on the grounds that "their safety has not been conclusively proven." The EU ban is based on the belief that hormones used in meat production increase incidences of various forms of cancer and may increase estrogenic effects, including reductions in male fertility, in humans. The U.S. maintains that the EU's health concerns are not supported by science and effectively act as a barrier to trade in contravention of WTO rules. In December 1985, the EC Council adopted Directive EC 85/649 that effectively banned the use of synthetic hormones for any purpose and banned the use of natural hormones for all purposes except therapeutic uses. As part of this Directive, the Council banned intra-European trade in hormone-treated meat and member states were to "prohibit importation from third countries of animals and meat from animals to which have been administered in any way whatsoever substances with a thyrostatic, oestrogenic, androgenic or gestagenic action" effective January 1, 1988. As a result of self-imposed delays, the EC ban on third country trade did not take effect until January 1, 1989. In 1991, the Codex Alimentarius Commission (Codex), which was established in 1962 by the World Health Organization (WHO) and the United Nations Food and Agriculture Organization (FAO) "to facilitate the world trade in foods [through] internationally accepted standards" considered adopting standards for the use of growth hormones. After considerable debate, consensus on the issue was not achieved as 28 of 37 countries objected to adoption of growth hormone standards and the issue was postponed. In 1995, Codex considered the issue again and a vote to adopt standards resulted in 33 countries voting in favor, 29 voting against, and 7 abstentions. The Codex Commission decided that maximum residue limits (MRLs) were not necessary for the three natural hormones and adopted MRLs for trenbolone and zeranol. In November 1995, the EU convened its own Scientific Conference on Growth Promotion in Meat Production to examine the available scientific evidence concerning the use of growth hormones. The conference concluded that limitations on the use of such hormones "are a reasonable safeguard of public health" and found that there was no evidence of health risk from the five hormones approved for use in the United States. On January 18, 1996, the European Parliament voted 366-0 on a resolution to maintain the EU measure concerning trade in beef containing growth hormones and cited consumer concern, questions of animal welfare, meat quality, and effects on the EU's beef and milk sectors as its' rationale for the ban. On January 26, 1996, the United States requested consultations under Article XXII of the WTO regarding the EU's hormone measure. EU farm ministers voted 14-1 on January 22, 1996 to maintain the ban. In April 1996, the United States requested the establishment of a panel to review the EU measure for its compatibility with the Sanitary and Phytosanitary text of the WTO and other WTO agreements. On May 20, 1996, the WTO Dispute Settlement Body established a panel to review the U.S. complaint concerning the EU measure. The EU and the U.S. agreed to the composition of the panel on July 2, 1996. The interim report of the findings of the WTO panel upon which the following analysis is based was released to the parties on May 7, 1997. As most of you are aware, the WTO has tentatively ruled in favor of the United States in the eight-year old battle between the EU and the U.S. regarding beef imports containing growth hormone. Needless to say, this is a major decision in WTO jurisprudence with potentially widespread repercussions for environmental and public health policy on a number of fronts. Consider: 1) First Sanitary and Phytosanitary Agreement Interpretation: this is the first WTO panel decision interpreting the Sanitary and Phytosanitary (SPS) Agreement (an agreement many would argue was created to deal with this specific dispute between the EU and the U.S.); 2) Imported and Domestic Products Treated Equally: the ban on beef containing growth hormone applied equally to domestic producers and foreign producers --- national treatment was not at issue; 3) EU Consumer's Democratic Will Undermined: the WTO has effectively ruled against the democratic and legislative prerogative of the EU consumer to maintain a zero-risk tolerance for beef containing growth hormone. One might argue that a trade forum has told the EU citizen what is best for him/her in their beef. The WTO has adjudicated on questions of science while providing no protection for the popular positions of consumers. This appears to be counterintuitive given that liberalized trade is supposed to benefit consumers. In this case, at the end of the day, beef containing hormones that consumers do not want is going to be allowed into the marketplace or consumers will be paying penalties to keep it out; 4) WTO Claims Jurisdiction over Health and Environment Public Policy: the WTO, with U.S. support, has firmly reasserted itself as the forum of choice to resolve these fundamentally domestic social value choices. Many observers believe that a growing consumers' desire to limit the import of genetically modified organisms (GMOs) is a prominent example of a likely future dispute utilizing this decision and its interpretation of the SPS text as a precedent. The U.S. chose the WTO as the forum to decide whether any scientific evidence existed to support a ban on growth hormones in beef. Is that appropriate public policy? Is the WTO the best forum to decide appropriate levels of scientific evidence?; 5) Domestic Standards Must be the Same as International Standards: the failure of the EU to meet an arguably lower "international standard" as determined by a food industry dominated international forum appears to have been the partial basis for the decision against the EU. How will higher domestic standards possibly survive against the frequently lower (but sometimes higher) international standards established in forums largely closed to the public?; 6) U.S. Laws and Regulations Vulnerable: It will not be long before the tables are turned and a U.S. law is challenged by one of our trading partners and the decision goes against the U.S. (If you live by the sword. . . ); 7) Clinton Administration Contradiction: the position of the U.S. and the ultimate decision of the WTO are in direct contradiction with the Clinton Administration's pronouncements and the Uruguay Round's U.S. implementing legislation on the subject of a people's right to choose the level of acceptable risk to which they wish to expose themselves; 8) Precautionary Principle Rejected: the WTO decision contravenes customary international law as reflected in the precautionary principle. The precautionary principle allows countries to err on the side of environmental protection when faced with scientific uncertainty regarding a particular risk; 9) Hinders Trade Regime: early reports indicate the EU may decide not to lift the ban on imported hormone-treated beef and may instead choose to pay compensation, either monetarily or, by lowering tariffs in another unrelated commodity sector. It is difficult to see how that type of response helps create a healthy, rule-based trading regime. On the contrary, it acts as a destabilizing force for the multilateral trading system; 10) Overreaching Result: the U.S. has pursued this challenge in a multitude of discussions and fora, and ultimately to the WTO, for the benefit of a single industry and a relatively small portion of that industry's sales volume (reports indicate that the EU market represents only 10% of the U.S. beef export market). The end result is unlikely to succeed in achieving market access for the beef containing growth hormone. Given the potential cost to consumers, our trading relationships, and our environment and public health policy, is this an appropriate use of U.S. government resources? The WTO Panel's Preliminary Decision At the time of this writing, the United States Trade Representative (USTR) and the WTO Secretariat have refused to publicly release the text of the panel's preliminary report. Despite these unjustified restrictions on public access, a copy of the report has been obtained and can be made available to interested parties upon request. The U.S. and EU are scheduled to make final oral arguments before the panel in Geneva on June 4, 1997, and a final panel report is expected in late July. In the meantime, the following analysis provides an outline of the legal basis for the panel's decision. In summary, the panel ruled that the EU zero-risk prohibition on meat containing growth hormone constituted a violation of the WTO Sanitary and Phytosanitary (SPS) Agreement because: 1) as a stricter standard of protection, the EU measure is not based on an international standard; 2) the EU measure is not "scientifically justified" because it is not based on an appropriate risk assessment and the precautionary principle is inapplicable; 3) the EU measure is an "arbitrary and unjustified" measure that results in "discrimination or a disguised restriction on international trade". As a result of these findings, the EU's article XX(b) defense of the measure and attempt to have the measure qualify as an exception to WTO rules "necessary to protect human, animal or plant life or health" was ruled inapplicable to this dispute because, the panel ruled, a violation of the WTO SPS text is unlikely to satisfy the requirements of Article XX(b). I. Sanitary and Phytosanitary (SPS) Agreement and the Burden of Proof The panel began its analysis by recognizing that the EU ban on all beef containing growth hormone is an effort to protect human health from risks arising from additives in foods. As such, it is a sanitary measure and therefore is covered by the obligations of the WTO members as agreed to under the SPS agreement. The panel supported the U.S. position that the SPS text was a "stand-alone" agreement that does not require a violation of the original GATT agreement to justify a complaint against a fellow member. As a result, the panel proceeded to examine the EU measure strictly upon its compatibility with the SPS text and not in the context of whether any violations had occurred concerning the major principles of the GATT/WTO. The panel also placed the burden of proof squarely on the EU to justify the measure in light of its obligations under the SPS agreement. Comment: The panel's decision to examine the EU measure solely on its compatibility with the SPS text (and not the central principles of the GATT/WTO) represents a major expansion of the WTO's authority to examine non-discriminatory domestic health and environmental laws. A measure, such as the EU growth hormone prohibition that is non-discriminatory in the traditional GATT/WTO sense because it applies to imports and domestic products in the same manner, must now meet the additional requirements of the SPS text to be considered legitimate domestic health and environment policy. As the analysis below makes clear, the SPS text establishes a new series of multiple tests and hurdles that potential domestic laws must face if they wish to be maintained when challenged by a trading partner. The new breadth and scope of the WTO's adjudicatory powers now extends far beyond the simple central tenet of the traditional GATT system to distinguish laws that favor domestic products over imported products. In this decision, the WTO is effectively saying: "The protection of human health is a sovereign responsibility of each WTO member. However, in the course of negotiating the WTO and its SPS text, each country has ceded a degree of its sovereignty in the form of its obligations under the SPS text. If a country wants to protect human health, its method of chosen protection must comply with the WTO's vision of an appropriate method of protection as articulated in the SPS agreement. In addition, it is relatively inconsequential if the chosen measure used for protection applies equally to imported and domestic products. On the contrary, the central concerns will be whether the domestic measure has met the new obligations of the SPS text and whether it supports the goals of liberalized trade." (See e.g., para. 7.153 of the WTO Interim Report). II. The EU Measure, International Standards and, Higher Standards than International Standards The panel concluded that the EU import ban on hormone- treated beef is not based on international standards, and, in particular, Codex Alimentarius standards. In addition, the EU's expression of its chosen appropriate level of risk can not require a higher level of protection than the international standard because it is not "scientifically justified." In the interest of "harmonization", Article 3.1 of the SPS text requires WTO Members to base their SPS measures on international standards. Article 3.3 allows Members to maintain a SPS measure that requires a higher level of protection than the international standard, provided there is "scientific justification". In an Article 3 footnote, "scientific justification" exists, "if, on the basis of an examination and evaluation of available scientific information in conformity with the relevant provisions of this Agreement, a Member determines that the relevant international standards, guidelines or recommendations are not sufficient to achieve its appropriate level of sanitary or phytosanitary protection." The panel, while acknowledging somewhat paradoxically that "even if international standards may not, in their own right, be binding on Members, Article 3.1 requires Members to base their sanitary measures on these standards", concluded that in order for the EU measure to be based on an international standard it had to reflect the same level of protection as Codex standards. The panel noted that because the EU measure is a zero-tolerance protective standard it is a higher standard than the international Codex standard, and therefore, can not be "based on an international standard". In addition, the panel concluded that the EU's stricter measure, while representative of the EU consumer's choice as the appropriate level of risk he/she wishes to be exposed to in beef, is not "scientifically justified" because the EU failed to demonstrate that: 1) international standards are insufficient; 2) the measure is based on an appropriate risk assessment; 3) the measure is consistent with the other obligations of the SPS agreement. (See Article 5 discussion below.) Comment: The panel's decision to require the EU measure to be in conformity with an international standard and, in particular, a Codex Alimentarius standard, effectively establishes from this decision forward, international standards as the de facto ceilings for the level of protection a country may invoke to protect its food supply. The panel's deference to international standards will have important procedural and substantive consequences for domestic food protection efforts. Procedurally, international standards are traditionally adopted and approved in international fora that lack the public participation guarantees of their respective domestic counterparts. As a forum, Codex Alimentarius' objectivity is considered suspect as its committees are dominated by representatives of major multinational food producers and pharmaceutical companies; public participation is highly restricted. In the specific case of the Codex standard concerning growth hormone quoted with approval by the WTO panel, the most recent actual vote on the standard in 1995 was 33 in favor of adoption, 29 against and 7 abstentions with only slightly more than half the voting members participating in the vote. The closeness of the vote and the lack of a consensus surrounding the approval of the growth hormone standard draws into question whether Codex's action with respect to growth hormones established an "internationally accepted standard". Substantively, the panel's deference to international standards has potentially widespread implications for domestic food safety policy because it effectively creates a binding mechanism in which countries will be required to adhere to the often weaker international standard. A previous GAO study has found that Codex standards for carcinogenic pesticide residues on food were less stringent then U.S. standards in 55% of cases. As the panel noted, international standards per se are rarely binding but the obligations of the SPS text create binding commitments (See e.g. para. 7.33 of the WTO Interim Report) At first blush, it is admittedly difficult to recognize the practical difference in this distinction. In this instance, the EU established a zero-tolerance food safety standard for growth hormone residue in beef in which EU consumers view an absolute prohibition on the trade in beef containing growth hormone as the only effective means of achieving their food safety goal. The growth hormone levels allowed under the Codex "internationally acceptable" standard do not accomplish the same food safety objective. Nevertheless, in this decision, the WTO has issued a binding ruling that effectively requires the EU to weaken its standard or pay a penalty to maintain a higher level of protection. III. The EU Measure, WTO 'Scientific Justification', Appropriate Risk Assessment, and the Precautionary Principle. The panel concluded that the EU measure regarding hormone- treated beef is not scientifically justified because, in part, it fails the Article 5.1 requirement that a domestic measure be based on an appropriate risk assessment. In addition, the panel rejected the EU's attempt to justify the measure under the precautionary principle and customary international law may not override the explicit wording of the SPS agreement. In the interest of promoting the use of risk assessment as the basis of SPS measures, Article 5 requires WTO Members to base their SPS measures "on an assessment as appropriate to the circumstances, of the risks to human, animal or plant life or health, taking account risk assessment techniques developed by the relevant international organizations." The panel ruled that the EU measure was not based on an appropriate risk assessment because (a) procedurally, the EU did not take into account any of the scientific studies it referred to in its defense at the time the measure was enacted and, (b) substantively, none of the scientific evidence referred to by the EU indicated that an "identifiable risk arises for human health from the use of these hormones if good practice is followed." Comment: The panel's dismissal of the EU measure for lack of an appropriate risk assessment is a denial of the scientific evidence available concerning the risk of growth hormones to human health. FAO/WHO and U.S. FDA studies have shown that animals treated with growth hormones contain greater amounts of these hormones than occur naturally in the animals. In addition, the International Agency for Research on Cancer has determined that exposure to several of the sex hormones at issue in this dispute may cause human cancer and/or may have carcinogenic effects in laboratory animals. In contrast, the studies the panel relied upon for its analysis, including the work of the EU Scientific Conference, Codex, and the U.S. FDA, were incomplete in several areas. For example, some of the studies failed to assess the potential effect of growth hormones ingested in meat on the levels of natural hormones in the body, on infants that are more susceptible to carcinogenic effects, and in combination with each other and other natural hormones in the body. As a result, the panel's claim that the EU measure is in reaction to no "identifiable risk" is unwarranted and misleading. Further, the panel's rejection of the precautionary principle appears to suggest that the WTO will prohibit the right of a member country under customary international law to take action to protect public health when absolute scientific certainty has not been achieved. Needless to say, absolute scientific certainty of a substance's effect on human health is a difficult standard to meet under the best of circumstances. For example, the opponents of public health initiatives to curb the use of lead in gasoline and human exposure to asbestos used the lack of "absolute scientific certainty" as the basis of their opposition to corrective action for several years before protective measures were eventually approved. IV. The EU Measure, "Arbitrary and Unjustified", and "Disguised Restriction" on International Trade The panel concluded that the EU measure on hormone-treated beef and its level of protection as applied in different situations is an arbitrary and unjustified measure that results in discrimination or a disguised restriction on international trade in violation of Article 5.5 of the SPS text. In the interest of promoting consistency in the application of the appropriate level of SPS protection against risk, Article 5.5 requires each WTO Member to avoid "arbitrary and unjustifiable distinctions" in levels of risk considered appropriate in different situations, particularly if those distinctions "produce discrimination or a disguised restriction on international trade." The panel acknowledged that the provisions of Article 5.5 addressed a WTO member's ability to determine the appropriate level of risk. The panel recognized the distinction between risk assessment and its basis in scientific examination and risk management and its basis in societal value judgments. It noted, that the social value judgment decision to accept risks and determine the appropriate level of protection is a risk management decision. Despite these distinctions, the panel ruled that if there is basis on which to adopt a level of sanitary protection under the SPS Agreement." In essence, the panel is suggesting that with no identifiable risk, there is no risk management decision to be made. Nevertheless, the panel acknowledged that it had a responsibility to determine whether the EU's determination of the appropriate level of risk (risk management decision) was consistent with the obligations of Article 5.5 to "avoid arbitrary and unjustifiable distinctions in levels it considers to be appropriate in different situations, if such distinctions result in discrimination or a disguised restriction on international trade." The panel noted that the parties were in agreement that the establishment of an appropriate level of protection by a WTO member is a sovereign act. The panel stated, "[W]e note, however, that the sovereign right of a Member to set its appropriate level of protection is restricted by the obligations imposed in the SPS Agreement. . . " including, the provisions of Article 5.5. (emphasis added) As a result, the panel examined the EU measure for conformity with Article 5.5 based on three elements: 1) whether different appropriate levels of sanitary protection were adopted in "different situations"; 2) whether the distinction in levels of protection for the different situations is "arbitrary or unjustifiable"; and, 3) whether the distinction in levels of protection results in "discrimination or a disguised restriction on international trade." To be consistent with Article 5.5, all three elements were required to be present. The panel examined the EU measure in light of all three elements of Article 5.5 in comparison with the EU's different levels of protection (i.e. not zero-tolerance) for residue levels of natural hormones present in untreated meat and other foods, and, hormone residue levels when used for therapeutic or zootechnical purposes. In addition, the panel examined the EU's use of a different level of protection regarding growth hormone levels utilising a veterinary hormone entitled "carbadox" in swine production versus its commitment to a ban on growth hormone in beef production and imports. The panel found the levels of protection noted above to have failed to satisfy all three elements of Article 5.5 because the EU did maintain significantly differing levels of protection for these "different" but "comparable situations". The panel ruled that these "different situations" qualified as "comparable situations" because the substances (hormones occurring naturally in meat and other food products versus hormones introduced for growth purposes) were the same substances or types of hormones and the same adverse health effects were at issue (cancer in humans). In addition, the EU failed to provide a plausible justification for the significant difference in levels of protection, and the difference in levels of protection resulted in an import ban that restricts international trade. Thus, the EU measure was found in violation of Article 5.5 of the SPS Agreement. Comment: The WTO panel's decision to find the EU measure and its risk management decision to be a violation of the SPS text represents a rejection of domestic democratic institutions with expertise in human health and their inherent right to determine an appropriate level of risk in favor of health-based policy decisions being drafted in accordance with a closed multilateral institution whose primary aim is to promote liberalized trade. In the process, the WTO panel acknowledges that the sovereign right of a WTO member country to democratically establish the appropriate response to a perceived risk must yield to the obligations contained within the SPS text. As a result, the democratically exercised social value choice of EU citizens to limit beef produced with growth hormones from its market must be removed, or, EU citizens must pay a penalty to maintain their chosen level of protection. In effect, the EU consumer's right to determine the appropriate response to a risk he/she has identified (and must live with) has been ignored by the WTO. The WTO's decision also has important precedential implications for future challenges to domestic health and environmental measures. The WTO's denial of the EU's appropriate level of protection regarding beef containing growth hormones is based on criteria that are unlikely to be satisfied by even the most "trade sensitive" health or environmental measure. For example, the nondiscriminatory EU measure that applies to imported and domestic products on equal terms is considered a violation of the SPS text because the panel inexplicably chooses to ignore the literal meaning of the language, and instead, allows different levels of protection in different situations to actually mean comparable situations. (emphasis added). Similarly, the EU measure is considered a violation of the WTO's own risk management criteria because the risk identified is not justified as a legitimate risk despite the scientific evidence to the contrary and the measure's conformity with the precautionary principle. Finally, the EU measure is considered a violation of the SPS text because even though it prohibits domestic and imported beef containing growth hormone to the same degree, it does restrict the trade in beef containing growth hormones. This last test is particularly worrisome for at least two reasons: Firstly, the EU has selected a ban on the trade in growth hormone treated beef because it has chosen to limit the exposure level to growth hormone in its marketplace at zero. As a result, the only assured means of accomplishing the zero-risk standard is to restrict trade in this product. Secondly, it is difficult to foresee a domestic health or environmental measure (or any law regulating consumer products, for that matter) that would satisfy the burden of not "restricting" trade at some level or in some form. It remains unclear how minor the "restriction" on trade needs to be to rise to the level of "disguised restriction on international trade" and thereby violate the WTO SPS text. V. The WTO's 'Environmental Exception' (Article XX(b)) is Inapplicable to the EU Measure The panel ruled that the WTO exception, Article XX(b) (members may take measures "necessary to protect human, animal or plant life or health") is inapplicable to this dispute because 1) it decided the case strictly on the EU's alleged violations of the SPS text alone (whereas Article XX(b) requires a GATT 1994 violation); 2) the SPS text exists to "elaborate" Article XX(b) and therefore, unless the measure is consistent with the SPS text, it can not possibly qualify for an exception under Article XX(b). Having found numerous violations of the SPS text, the panel concluded Article XX(b) is not applicable. Comment: In deciding the case exclusively on the basis of the SPS text, the panel supported the U.S. position that the SPS Agreement is a "free standing" agreement that does not require a violation of GATT 1994 (such as a Most Favored Nation or National Treatment violation) in order to be invoked. As a result, the EU's only defense of the growth hormone measure was ruled inapplicable to the dispute. The panel's decision to rely exclusively on the SPS text effectively removes the possibility of invoking any Article XX(b) defense when a challenge based on the SPS text is raised. In addition, if the Article XX(b) defense is raised the panel seems to suggest that a measure will have to be consistent with the SPS text to qualify for Article XX(b). This result calls into question the purpose and efficacy of having an exception to the general GATT/WTO rules that must now meet new obligations in the SPS text before it may be invoked. Up to Top HOME | Email Signup | About Us | Contact Us | Terms of Use | © 2008 Sierra Club |
