WTO E-Learning. WTO E-Learning Copyright February Sanitary and Phytosanitary Measures

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1 WTO E-Learning WTO E-Learning Copyright February 2014 Sanitary and Phytosanitary Measures

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3 Abstract The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) seeks to strike a balance between the need to ensure that a country's consumers are being supplied with food that is safe to eat and at the same time, the need to ensure that strict health and safety regulations are not being used as an excuse for protecting domestic producers and thus restricting international trade. The course explains how the SPS Agreement attempts to strike the above mentioned balance by allowing countries to set their own SPS measures while also requiring that certain disciplines and guidelines be adhered to. The course begins by taking participants through the basic principles of the WTO and an overview of the SPS Agreement. This is followed by more detailed explanation of the following: The basic disciplines of the SPS Agreement and procedures for control, inspection and approval. The principles of harmonization and the principle of equivalence in the SPS Agreement. Risk assessment, appropriate level of protection, consistency, provisional measures and regionalization in the SPS Agreement. Transparency requirements and procedures. Development dimension in the SPS Agreement and the work of the SPS Committee.

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5 List of Figures MODULE 1 INTRODUCTION TO THE WORLD TRADE ORGANIZATION... 1 FIGURE 1: WTO ORGANIZATION CHART... 8 MODULE 2 INTRODUCTION TO WTO BASIC PRINCIPLES AND RULES FIGURE 1: TARIFF-QUOTA MODULE 3 THE AGREEMENT ON THE APPLICATION OF SANITARY AND PHYTOSANITARY MEASURES FIGURE 1: FIGURE 2: TBT AND SPS MEASURES RELATING TO THE INTERNATIONAL TRADE OF ORANGES TBT AND SPS MEASURES RELATING TO THE INTERNATIONAL TRADE OF BOTTLED WATER FIGURE 3: GATT CORE PRINCIPLES MODULE 4 SPS MEASURES, BASIC DISCIPLINES OF THE SPS AGREEMENT AND PROCEDURES FOR CONTROL, INSPECTION AND APPROVAL FIGURE 1: FOOD SAFETY MEASURES FIGURE 2: MEASURES TO PROTECT HUMAN LIFE OR HEALTH FIGURE 3: MEASURES TO PROTECT ANIMAL OR PLANT LIFE OR HEALTH FIGURE 4: MEASURES TO PROTECT THE TERRITORY MODULE 5 THE PRINCIPLE OF HARMONIZATION AND THE PRINCIPLE OF EQUIVALENCE IN THE SPS AGREEMENT FIGURE 1: BASED ON INTERNATIONAL STANDARDS FIGURE 2: CONFORM TO INTERNATIONAL STANDARDS FIGURE 3: FOR THE REGULATORS: THREE FUNDAMENTAL QUESTIONS MODULE 6 RISK ASSESSMENT, APPROPRIATE LEVEL OF PROTECTION, CONSISTENCY, PROVISIONAL MEASURES AND REGIONALIZATION IN THE SPS AGREEMENT FIGURE 1: CSF IN WILD AND DOMESTIC PIGS, TODAY MODULE 7 TRANSPARENCY REQUIREMENTS AND PROCEDURES FIGURE 1: TRANSPARENCY PROVISIONS IN THE SPS AGREEMENT FIGURE 2: WHY NOTIFY? FIGURE 3: THE TWO COMPONENTS OF THE OBLIGATION TO NOTIFY

6 FIGURE 4: LET'S RECAP FIGURE 5: TIMING OF THE DIFFERENT TRANSPARENCY OBLIGATIONS RELATED TO SPS MEASURES FIGURE 6: PROCESSING AND CIRCULATION OF NOTIFICATIONS FIGURE 7: COMMENTS REASONABLE TIME FIGURE 8: THE OBLIGATIONS - ANNEX B OF THE AGREEMENT FIGURE 9: RECAPITULATION FIGURE 10: ENQUIRY POINTS FUNCTIONS FIGURE 11: USING THE ENQUIRY POINT: BEYOND OBLIGATIONS MODULE 8 DEVELOPMENT DIMENSION IN THE SPS AGREEMENT AND THE WORK OF THE SPS COMMITTEE FIGURE 1: NOTIFICATION OF TECHNICAL ASSISTANCE NEEDS FIGURE 2: TRADE CONCERNS: WHAT CAN YOU DO?

7 List of Tables MODULE 1 INTRODUCTION TO THE WORLD TRADE ORGANIZATION... 1 TABLE 1: GATT ROUNDS OF NEGOTIATIONS... 4 TABLE 2: BASIC STRUCTURE OF THE WTO AGREEMENTS TABLE 3: WTO DISPUTE SETTLEMENT TIMELINE MODULE 3 THE AGREEMENT ON THE APPLICATION OF SANITARY AND PHYTOSANITARY MEASURES TABLE 1: OBJECTIVES OF SPS MEASURES TABLE 2: EXAMPLES OF SPS OR TBT MEASURES MODULE 5 THE PRINCIPLE OF HARMONIZATION AND THE PRINCIPLE OF EQUIVALENCE IN THE SPS AGREEMENT TABLE 1: EXAMPLE OF A MONITORING PROCEDURE FORMAT USED BY MEMBERS AT THE SPS COMMITTEE MODULE 7 TRANSPARENCY REQUIREMENTS AND PROCEDURES TABLE 1: RECOMMENDED PROCEDURES FOR THE COMPLETION OF THE NOTIFICATION FORMAT MODULE 8 DEVELOPMENT DIMENSION IN THE SPS AGREEMENT AND THE WORK OF THE SPS COMMITTEE TABLE 1: OTHER ORGANIZATIONS THAT PROVIDE TRADE RELATED TECHNICAL ASSISTANCE TABLE 2: STDF COVERED THEMES

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9 Acronyms ACP ALADI AMS APEC ASEAN ATC BSE CAP CBD CITES CLMV CNUCED COMECON COMESA CTD African, Caribbean and Pacific Countries. Group of countries with preferential trading relations with the European Union (EU) under the former Lomé Treaty now replaced by the Cotonou Agreement. Latin American Integration Association. The AMS refers to an index that measures the monetary value of the extent of government support to a sector. The AMS, as defined in the WTO Agreement on Agriculture, includes both budgetary outlays as well as revenue transfers from consumers to producers as a result of policies that distort market prices. Asia-Pacific Economic Cooperation. APEC was established in 1989 to further enhance economic growth and prosperity for the region and to strengthen the Asia-Pacific community. APEC has 21 members - Australia; Brunei Darussalam; Canada; Chile; People's Republic of China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; The Republic of the Philippines; The Russian Federation; Singapore; Chinese Taipei; Thailand; United States of America; Viet Nam. Association of Southeast Asian Nations. The seven ASEAN members of the WTO Brunei, Indonesia, Malaysia, Myanmar, the Philippines, Singapore and Thailand often speak in the WTO as one group on general issues. The other ASEAN members are Laos and Vietnam. The WTO Agreement on Textiles and Clothing. Bovine Spongiform Encephalopathy, or "Mad Cow Disease". Common Agricultural Policy The EU's comprehensive system of production targets and marketing mechanisms designed to Manage agricultural trade within the EU and with the rest of the world. Convention on Biological Diversity Convention on International Trade in Endangered Species of Wild Fauna and Flora. Concluded in 1973 under the auspices of the International Union for the Conservation of Nature and Natural Resources (IUCN). The Convention entered into force on 1 July CITES regulates international trade in wild animals and plants. Cambodia, Laos, Myanmar (Burma) and Vietnam. Conférence des Nations Unies sur le Commerce et le Développement. Council for Mutual Economic Assistance. Established in January 1949, it was dissolved in February Common Market for Eastern and Southern Africa. The treaty establishing COMESA was signed at Kampala on 5 November It is the successor to the Preferential Trade Area for Eastern and Southern African States (PTA). Its members are Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe. The WTO Committee on Trade and Development.

10 CTE CTG DSB DSU EAC EC ECDC ECLAC ECOSOC ECOWAS EDI EFTA ESCAP The WTO Committee on Trade and Environment. Council for Trade in Goods. The Dispute Settlement Body, i.e. the WTO General Council meeting to settle trade disputes. Dispute Settlement Understanding. The Uruguay Round Understanding on Rules and Procedures Governing the Settlement of Disputes. East African Cooperation. A mechanism within the Common Market for Eastern and Southern Africa established in It aims to promote faster trade and investment liberalization. Its longer-term objectives are the establishment of a customs union and an East African Federation. The three partners making up the EAC are Kenya, Tanzania and Uganda. See EU. Economic Cooperation between Developing Countries. A mechanism operating mainly within the United Nations system of developing countries through cooperative activities. Economic Commission for Latin America and the Caribbean. One of the United Nations regional economic commissions. It was established in 1948 as the Economic Commission for Latin America (ECLA) and given its current name in United Nations Economic and Social Council. Does not make rules. Its annual high-level sessions of WTO, IBRD and IMF heads are considered to be helpful in promoting coherence of economic policy between countries. Economic Community of West African States. Established in It consists of the members of the West African Economic Community (Benin, Burkina Faso, Côte d'ivoire, Mali, Mauritania, Niger and Senegal), the members of the Mano River Union (Guinea, Liberia and Sierra Leone), and Cape Verde, The Gambia, Ghana, Guinea-Bissau, Nigeria and Togo. Electronic Data Interchange. The transfer of data in a standardized electronic form between companies through the use of networks such as the internet. European Free Trade Association. Entered into force on 3 May 1960 through the Convention of Stockholm. Founding members were Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. Iceland joined in Finland became a full member in 1986 after having been an associate member. Denmark and the United Kingdom left on 31 December 1972 to join the European Economic Community. They were followed by Portugal in 1985 and Austria, Finland and Sweden on 1 January EFTA now comprises Iceland, Liechtenstein, Norway and Switzerland. "The Economic and Social Commission for the Asia-Pacific. One of the United Nations regional economic commissions. It was established in 1947 as the Economic Commission for Asia and the Far East (ECAFE) and given its present name in EU European Union. "On 1 December 2009, the Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community (done at Lisbon, 13 December 2007) entered into force. On 29 November 2009, the WTO received a Verbal Note (WT/L/779) from the Council of the European Union and the Commission of the European Communities stating that, by virtue of the Treaty of Lisbon, as of 1 December 2009, the European Union replaces and succeeds the European Community." FAO FDI Food and Agricultural Organization. Foreign direct investment.

11 FTAA G15 G24 G7 Free Trade Area of the Americas. Also called Western Hemisphere Free Trade Agreement. A group originally of fifteen developing countries acting as the main political organ for the Non-Aligned Movement. It was established in Its members now are: Algeria, Argentina, Brazil, Chile, Colombia, Egypt, India, Indonesia, Iran, Jamaica, Kenya, Malaysia, Mexico, Nigeria, Peru, Senegal, Sri Lanka, Venezuela and Zimbabwe. Intergovernmental Group of Twenty-Four on International Monetary Affairs, established in Members are divided into three regions. Region I (Africa) is represented by Algeria, Côte d'ivoire, Democratic Republic of Congo, Egypt, Ethiopia, Gabon, Ghana, Nigeria and South Africa. Region II (Latin America and the Caribbean) is represented by Argentina, Brazil, Colombia, Guatemala, Mexico, Peru, Trinidad and Tobago and Venezuela. Region III (Asia and developing countries of Europe) is represented by India, Iran, Lebanon, Pakistan, Philippines, Sri Lanka and Syrian Arab Republic. Group of seven leading industrial countries: Canada, France, Germany, Italy, Japan, United Kingdom, United States. G77 Group of developing countries set up in 1964 at the end of the first UNCTAD (originally 77, but now more than 130 countries). G8 GATS GATT G7 plus Russia. General Agreement on Trade in Services. General Agreement on Tariffs and Trade. GATT 1947 General Agreement on Tariffs and Trade GATT 1994 GATT PLUS GRULAC GSP GSTP The new version of the General Agreement, incorporated into the WTO, which governs trade in goods. An expression implying imposition or acceptance of international trade disciplines more stringent than those prescribed by the GATT or extending the GATT rules to areas beyond trade in goods. One of the most ambitious examples of "GATT plus" was the proposal by the Atlantic Council of the United States that there should be a code of trade liberalization within the GATT framework with stronger rules for the conduct of trade relations between industrialized countries willing to accept them. According to its proponents, the benefits would have been extended to all GATT members according to the most-favoured-nation clause. The code would also have been open to new members willing to accept its obligations, but only code members would have been able to initiate tariff negotiations with another code member. The proposal did not find favour with GATT members as a whole. The Group of Latin American and Caribbean Countries which operates informally within the WTO. Generalized System of Preferences. First proposed at UNCTAD II in Entered into force in It gives developing countries a margin of preference in the tariff rates their goods face in the markets of developed countries and in this way increases their competitiveness. The massive tariff reductions since 1971 as a result of multilateral trade negotiations and unilateral actions, as well as changes in productivity, have reduced the importance of the GSP to many developing country exporters, but it remains an important plank in the trade policies of many developing countries. UNCTAD is the main forum for a discussion of GSP issues. Global System of Trade Preferences Among Developing Countries. It entered into force in Its aim is to promote the development of economic cooperation among developing

12 countries through the exchange of tariff preferences. Least developed countries do not have to offer reciprocal concessions. Non-tariff preferences may also be exchanged. Membership of the GSTP is open to members of the Group of 77. Negotiations are conducted under UNCTAD auspices. 44 countries participate in the GSTP. ILO International Labour Organization. Established in 1919 as part of the Treaty of Versailles. It became a United Nations specialized agency in Its objectives are to improve working and living conditions through the adoption of international conventions and recommendations setting minimum standards for wages, hours of work, conditions of employment, social security, etc. It is located in Geneva. IDB OR IADB IEA ILO IMO ISO ISO Inter-American Development Bank. Established in 1959, the Inter-American Development Bank (IDB) supports economic and social development and regional integration in Latin America and the Caribbean. It does so mainly through lending to public institutions, but it also funds some private projects, typically in infrastructure and capital markets development. Members (46) include: Argentina, Austria, The Bahamas, Barbados, Belgium, Belize, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Croatia, Denmark, Dominican Republic, Ecuador, El Salvador, Finland, France, Germany, Guatemala, Guyana, Haiti, Honduras, Israel, Italy, Jamaica, Japan, Mexico, Netherlands, Nicaragua, Norway, Panama, Paraguay, Peru, Portugal, Slovenia, Spain, Suriname, Sweden, Switzerland, Trinidad and Tobago, United Kingdom, United States, Uruguay and Venezuela. International Energy Agency. An intergovernmental organization established in 1974 after the first oil shock. It consists of OECD member countries. International Labour Organization. International Maritime Organization. International Organization for Standardization. A world-wide federation of national standards bodies established in 1947 to promote the development of standardization and related activities with a view to facilitating the international exchange of goods and services. Each country is represented by one organization only. The ISO also promotes the development of cooperation in intellectual, scientific, technological and economic activities. It is associated with the WTO especially through work concerning the Agreement on Technical Barriers to Trade which is aimed at ensuring that standards are not used as disguised barriers to trade. A series of environmental management standards prepared by the International Organization for Standardization (ISO) covering six areas: environmental managing systems; environmental auditing; environmental labelling; environmental performance evaluation; life cycle assessment; terms and definitions. Most of the standards are intended as guidance documents on environmental tools and systems to help companies and other organizations integrate environmental considerations into their normal business processes. Only one of the standards, ISO on environmental management systems, contains specifications for certification or registration purposes. ISO 9000 IPC A series of quality systems standards developed by the International Organization for Standardization (ISO). These are standards for evaluating the way a firm works. They should not be confused with product standards. Quality systems standards enable firms to identify the means of meeting consistently the requirements of its customers. International Patent Classification.

13 IPRS ITA ITA II ITC ITU LAFTA LAIA LDCS LLDC MEA MERCOSUL MERCOSUR MFA MFN NAFTA NEPAD NGBT NGMTS NGO NTBS NTMS OAS OAU Intellectual Property Rights. Ownership of ideas, including literary and artistic works (protected by copyright), inventions (protected by patents), signs for distinguishing goods of an enterprise (protected by trademarks) and other elements of industrial property. Information Technology Agreement, or formally the Ministerial-Declaration on Trade in Information Technology Products. Negotiations aimed at expanding ITA's product coverage. International Trade Centre UNCTAD/WTO. Established in 1964 as the focal point in the United Nations system for technical cooperation with developing countries in trade promotion. Its work program now covers product and market development, development of trade support services, trade information, human resource development, international purchasing and supply management and trade promotion needs. International Telecommunication Union. Latin American Free Trade Association. Latin American Integration Association. Least Developed Countries. Least developed of the Least Developed Countries. Multilateral Environmental Agreement. Mercado Comum do Sul. Southern Common Market. The name in Portuguese of Mercosur. Mercado Común del Sur (Southern Common Market). Currently a customs union covering trade in goods except sugar and automobiles. It includes Argentina, Brazil, Paraguay and Uruguay. Chile and Bolivia signed an association agreement on 1 October 1996 and 1 March 1997 respectively. Membership is open to ALADI members. Multi Fibre Arrangement ( ) under which countries whose markets are disrupted by increased imports of textiles and clothing from another country were able to negotiate quota restrictions. Most-favoured-nation treatment (GATT Article I, GATS Article II and TRIPS Article IV), the principle of not discriminating between one's trading partners. The North American Free Trade Agreement (NAFTA) is a free trade agreement involving Canada, Mexico, and the United States, implemented on 1 January New Partnership for Africa's Development. Negotiating Group on Basic Telecommunications. Maritime transport services. Non-governmental Organization. Non-tariff barriers, such as quotas, import licensing systems, sanitary regulations, prohibitions, etc. Same as "non-tariff measures". Non-tariff measures, such as quotas, import licensing systems, sanitary regulations, prohibitions, etc. Same as "non-tariff barriers". Organization of American States. Organization of African Unity. Superseded in July 2001 by the African Union.

14 OECS OECD Organization of Eastern Caribbean States. It superseded the East Caribbean Common Market. OECS members are Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis, St Lucia, St Vincent, and the Grenadines. The British Virgin Islands and Anguilla are associate members. The Organization for Economic Cooperation and Development (OECD) groups 30 member countries. Members (30) include: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, South Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, United Kingdom and the United States. OPEC Organization of Petroleum Exporting Countries. Its current members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates and Venezuela. P-5 Short for Pacific-5. It includes Australia, Chile, New Zealand, Singapore and the United States. PACER PAFTA PICTA PIF PSI QRS RBPS SACU SELA SPS TARIC TBT Pacific Agreement on Closer Economic Relations. An agreement adopted in August 2001 by the Pacific Islands Forum which sets out the framework for the development of trade relations between the Forum members. It is not a free-trade agreement, but it allows for the establishment of free-trade areas. One of these is the Pacific Island Countries Trade Agreement. PACER entered into force on 3 October Pacific Free Trade Area. An idea for a regional preferential trade arrangement that has been around since the 1960s. Some say that the formation of APEC has made PAFTA redundant. Pacific Island Countries Free Trade Agreement. Australia and New Zealand are eligible to join if they wish. PICTA will enter into force after six countries have ratified it. Pacific Islands Forum. Its members are Australia, Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Nauru, New Zealand, Niue, Palau, Papua New guinea, Republic of the Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu. Preshipment Inspection the practice of employing specialized private companies to check shipment details of goods ordered overseas i.e. price, quantity, quality, and so forth. Quantitative restrictions specific limits on the quantity or value of goods that can be imported (or exported) during a specific period. Restrictive Business Practices. Anti-competitive behaviour by private firms of the type dealt with by national competition laws and policies. These can include collusion, abuse of dominant position, refusals to deal, price discrimination, resale price maintenance, exclusive dealing, vertical and horizontal arrangements, etc. Southern African Customs Union comprising Botswana, Lesotho, Namibia, South Africa and Swaziland. Latin American Economic System. Sanitary and Phytosanitary measures or regulations implemented by governments to protect human, animal and plant life and health, and to help ensure that food is safe for consumption. Integrated Tariff of the European Union. The WTO Agreement on Technical Barriers to Trade.

15 TMB TPRB, TPRM TRIMS TRIPS UNCTAD UPOV The Textiles Monitoring Body consists of a chairman plus 10 members and oversees the implementation of ATC commitments. The Trade Policy Review Body is General Council operating under special procedures for meetings to review trade policies and practices of individual WTO members under the Trade Policy Review Mechanism. Trade-Related Investment Measures. Trade-Related Aspects of Intellectual Property Rights. The United Nations Conference on Trade and Development. International Union for the Protection of New Varieties of Plants (Union Internationale pour la Protection des Obtentions Végétales). Concluded in 1961 in Paris and revised in 1978 in Geneva. It provides for the grant of patents or special titles of protection to breeders of new plant varieties. It is administered by the International Union for the Protection of New Varieties of Plants (UPOV), rather than by WIPO. VRA, VER, OMA Voluntary Restraint Arrangement, Voluntary Export Restraint, Orderly Marketing Arrangement. Bilateral arrangements whereby an exporting country (government or industry) agrees to reduce or restrict exports without the importing country having to make use of quotas, tariffs or other import controls. WCO WIPO World Customs Organization, a multilateral organization located in Brussels through which participating countries seek to simplify and rationalize customs procedures. World Intellectual Property Organization.

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17 Table of Contents MODULE 1 INTRODUCTION TO THE WORLD TRADE ORGANIZATION... 1 I. INTRODUCTION TO THE WTO... 3 I.A. WHAT IS THE WTO?... 3 I.B. OBJECTIVES OF THE WTO... 5 I.C. FUNCTIONS OF THE WTO... 6 I.D. WTO ORGANIZATIONAL STRUCTURE... 8 I.E. DECISION-MAKING IN THE WTO II. THE WTO AGREEMENTS III. DISPUTE SETTLEMENT IV. SPS-RELATED WORK IN THE WTO V. SUMMARY MODULE 2 INTRODUCTION TO WTO BASIC PRINCIPLES AND RULES PART I: BASIC PRINCIPLES IN THE WTO I. INTRODUCTION II. RULES ON TRADE IN GOODS II.A. NON-DISCRIMINATION PRINCIPLE II.B. THE MFN PRINCIPLE UNDER GATS II.C. THE MFN PRINCIPLE UNDER TRIPS III. NATIONAL TREATMENT (ARTICLE III) III.A. THE NATIONAL TREATMENT PRINCIPLE IN RULES ON TRADE IN GOODS III.B. EXCEPTIONS III.C. NATIONAL TREATMENT IN GATS III.D. NATIONAL TREATMENT IN TRIPS IV. SUMMARY PART I PART II: BASIC PRINCIPLES RELATED TO MARKET ACCESS I. INTRODUCTION II. WHAT IS A TARIFF? II.A. NEGOTIATIONS ON TARIFF REDUCTIONS II.B. PRINCIPLES ON TARIFF NEGOTIATIONS II.C. NATIONAL TARIFFS II.D. SCHEDULE OF CONCESSION (ARTICLE II) II.E. RENEGOTIATION OF CONCESSIONS/MODIFICATION OF SCHEDULES II.F. OTHER DUTIES & CHARGES III. NON-TARIFF BARRIERS III.A. INTRODUCTION... 56

18 III.B. QUANTITATIVE RESTRICTIONS III.C. GENERAL ELIMINATION OF QUANTITATIVE RESTRICTIONS (ARTICLE XI) III.D. TARIFF-QUOTA IV. OTHER NON TARIFF BARRIERS V. MARKET ACCESS FOR SERVICES VI. BARRIERS TO TRADE IN SERVICES VII. SUMMARY PART II PART III: TRADE REMEDIES PART IV: EXCEPTIONS TO THE BASIC PRINCIPLES I. INTRODUCTION II. GENERAL EXCEPTIONS II.A. IN THE GATT II.B. IN GATS II.C. IN TRIPS III. SECURITY EXCEPTIONS III.A. IN THE GATT III.B. IN GATS III.C. IN TRIPS IV. SAFEGUARD MEASURES V. WAIVERS VI. REGIONAL INTEGRATION VII. S&D FOR DEVELOPING COUNTRIES MODULE 3 THE AGREEMENT ON THE APPLICATION OF SANITARY AND PHYTOSANITARY MEASURES I. INTRODUCTION II. THE SPS AGREEMENT II.A. OBJECTIVES II.B. HISTORY OF THE SPS AGREEMENT II.C. STRUCTURE OF THE AGREEMENT II.D. SCOPE OF THE AGREEMENT II.E. RELATIONSHIP BETWEEN THE SPS AND OTHER RELEVANT WTO AGREEMENTS88 II.F. INSTITUTIONAL COVERAGE II.G. TEMPORAL SCOPE OF APPLICATION OF THE AGREEMENT III. SUMMARY MODULE 4 SPS MEASURES, BASIC DISCIPLINES OF THE SPS AGREEMENT AND PROCEDURES FOR CONTROL, INSPECTION AND APPROVAL I. INTRODUCTION II. SANITARY AND PHYTOSANITARY MEASURES

19 II.A. FOOD SAFETY MEASURES II.B. II.C. MEASURES TO PROTECT HUMAN, ANIMAL, OR PLANTS AGAINST DISEASES AND PESTS MEASURES AGAINST THE ENTRY, ESTABLISHMENT OR SPREAD OF PESTS IN A TERRITORY III. SPS AGREEMENT BASIC RIGHTS AND OBLIGATIONS III.A. RIGHT TO ADOPT SPS MEASURES III.B. MEASURE MUST BE NECESSARY AND BASED ON SCIENTIFIC PRINCIPLES III.C. NO ARBITRARY OR UNJUSTIFIABLE DISCRIMINATION OR DISGUISED RESTRICTION ON TRADE III.D. CONFORMITY WITH GATT PROVISIONS IV. CONTROL, INSPECTION AND APPROVAL PROCEDURES IV.A. TYPES OF PROCEDURES IV.B. SPECIFIC REQUIREMENTS REGARDING CONTROL, INSPECTION AND APPROVAL PROCEDURES V. PRINCIPLES IN THE SPS AGREEMENT VI. SUMMARY MODULE 5 THE PRINCIPLE OF HARMONIZATION AND THE PRINCIPLE OF EQUIVALENCE IN THE SPS AGREEMENT I. INTRODUCTION II. THE WORK OF INTERNATIONAL STANDARD-SETTING BODIES II.A. THE HARMONIZATION EFFORT II.B. THE ROLE OF INTERNATIONAL STANDARD-SETTING BODIES IN THE SPS AGREEMENT II.C. THE WORK OF THE THREE SISTERS III. HARMONIZATION PROVISIONS IN THE SPS AGREEMENT III.A. USE OF INTERNATIONAL STANDARDS AS A BASIS III.B. PRESUMPTION OF NECESSITY & CONSISTENCY III.C. III.D. III.E. RIGHT TO ADOPT "STRICTER" SPS MEASURES WITH SCIENTIFIC JUSTIFICATION PARTICIPATION IN THE WORK OF INTERNATIONAL STANDARD-SETTING BODIES THE SPS COMMITTEE ROLE IN RELATION TO INTERNATIONAL HARMONIZATION IV. EQUIVALENCE PROVISIONS IN THE SPS AGREEMENT IV.A. SPECIFIC GUIDANCE RELATED TO EQUIVALENCE IV.B. NOTIFICATION OF EQUIVALENCE V. SUMMARY

20 MODULE 6 RISK ASSESSMENT, APPROPRIATE LEVEL OF PROTECTION, CONSISTENCY, PROVISIONAL MEASURES AND REGIONALIZATION IN THE SPS AGREEMENT I. INTRODUCTION II. RISK ASSESSMENT II.A. TYPES OF RISK ASSESSMENT II.B. OBLIGATIONS REGARDING RISK ASSESSMENT III. THE APPROPRIATE LEVEL OF PROTECTION (ALOP) III.A. OBJECTIVE OF MINIMIZING NEGATIVE TRADE EFFECTS III.B. CONSISTENCY III.C. MEASURE NO MORE TRADE RESTRICTIVE THAN REQUIRED TO ACHIEVE THE ALOP IV. PROVISIONAL MEASURES IV.A. PROVISIONAL MEASURES IV.B. THE PRECAUTIONARY PRINCIPLE V. REGIONALIZATION V.A. OBLIGATIONS REGARDING REGIONALIZATION V.B. THE WORK OF THE SPS COMMITTEE ON REGIONALIZATION VI. SUMMARY MODULE 7 TRANSPARENCY REQUIREMENTS AND PROCEDURES I. INTRODUCTION II. TRANSPARENCY IN THE SPS AGREEMENT III. NOTIFICATIONS III.A. NOTIFICATION AUTHORITY III.B. BACKGROUND III.C. WHAT TO NOTIFY? III.D. WHEN TO NOTIFY? (TIMING) III.E. HOW TO NOTIFY? (NOTIFICATION FORMATS) III.F. UPDATES & ADDITIONAL INFORMATION III.G. PROCESSING AND CIRCULATION III.H. HANDLING OTHER MEMBERS' REQUESTS FOR COPIES AND COMMENTS ON DRAFT REGULATIONS III.I. TRANSLATIONS III.J. WHAT ELSE TO NOTIFY? IV. PUBLICATION OBLIGATIONS IV.A. BEFORE THE ADOPTION OF THE REGULATION IV.B. AFTER THE ADOPTION OF THE MEASURE V. ENQUIRY POINTS (EPS) V.A. ESTABLISHMENT OF ENQUIRY POINTS V.B. FUNCTIONING OF ENQUIRY POINTS

21 VI. USE OF ELECTRONIC TOOLS VII. SUMMARY MODULE 8 DEVELOPMENT DIMENSION IN THE SPS AGREEMENT AND THE WORK OF THE SPS COMMITTEE I. INTRODUCTION II. DEVELOPMENT DIMENSION IN THE SPS AGREEMENT II.A. TECHNICAL ASSISTANCE (TA) II.B. SPECIAL AND DIFFERENTIAL TREATMENT III. THE WORK OF THE SPS COMMITTEE III.A. INSTITUTIONAL ISSUES III.B. IMPLEMENTATION AND ADMINISTRATION OF THE SPS AGREEMENT IV. SUMMARY MODULE 9 CONCLUSION I. SUMMARY REFERENCE LIST SUPPORT DOCUMENTS

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23 MODULE 01 Introduction to the World Trade Organization ESTIMATED TIME: 5 hours OBJECTIVES OF MODULE 1 Explain the objectives, functions, principles and organizational structure of the WTO, including the role of the SPS Committee; and introduce the WTO agreements and describe how the SPS Agreement is integrated in the WTO legal framework. 1

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25 M1 I. INTRODUCTION TO THE WTO This module explains what the WTO is. It elucidates the objectives and function of the WTO and it also introduces the SPS Agreement. In this Module, in addition to providing information on the SPS and other WTO agreements, there will be reference to GATT, Uruguay Round, Doha Development Agenda and related Negotiations, and the SPS Committee. These terms are explained throughout the course. I.A. WHAT IS THE WTO? IN BRIEF WTO is the acronym of the World Trade Organization. The WTO is the only global international organization dealing with the rules of international trade between nations. At its heart are the many agreements, which were negotiated and signed by governments and ratified in their parliaments. IN DETAIL The WTO came into being in 1995, and though legally distinct from the "GATT", they are interrelated. The WTO was created after the culmination of long, intense negotiations, which took place under the auspices of the "GATT" and are known as the "Uruguay Round" of negotiations. "GATT" means General Agreement on Tariffs and Trade. Formally, the GATT ( ) was not an international organization but simply an international agreement, concluded in It contained rules and obligations that governed the trade in goods for almost fifty years between the Member nations party to the agreement (called "The Contracting Parties"). However, the Secretariat of the GATT took up many responsibilities throughout the years, which lead to the GATT being called a de facto international organization. So while the WTO is still young, the multilateral trading system that was originally set up under GATT is well over 50 years old. IF YOU WANT TO KNOW MORE THE GATT (GENERAL AGREEMENT ON TARIFFS AND TRADE) From 1948 to 1994, the GATT provided the rules for much of world trade. Although it appeared well established, during its 47 years it was a provisional agreement and organization. The GATT developed a multilateral trading system through a series of trade negotiations or rounds. The early rounds dealt mainly with tariff reductions on goods, but later negotiations included other areas such as anti-dumping and non-tariff measures. The last round the Uruguay Round led to the creation of the WTO in

26 The project to establish a multilateral trading system to negotiate lower customs duty rates and other trade barriers and to stimulate expansion in world trade originated in the 1940s. The original Project involved a dual track approach: (1) Creation of the International Trade Organization ("ITO"); (2) Launching of multilateral tariff negotiations; and drafting of clauses of obligations relating to tariffs in the "General Agreement on Tariffs and Trade" ("GATT"). The GATT Agreement was adopted, but the ITO was never created. However, the Interim Commission for the International Trade Organization ("ICITO") was established to serve as Secretariat to the GATT. If you want to know more about the GATT History, check the slideshow: Multilateral Trading System: 50 years of achievement. As mentioned, from 1947 to 1994, Contracting Parties organised eight rounds of negotiations. Rounds of trade negotiations Year Place/name Subjects covered Countries 1947 Geneva Tariffs Annecy Tariffs Torquay Tariffs Geneva Tariffs Geneva, Dillon Round Tariffs Geneva, Kennedy Round Tariffs and anti-dumping measures Geneva, Tokyo Round Tariffs, non-tariff measures, "framework" agreements Geneva, Uruguay Round Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc 123 Table 1: GATT rounds of negotiations 4

27 The major Rounds were: The Kennedy Round ( ): achieved substantial reduction of tariff barriers. The Tokyo Round ( ): first negotiations on non-tariff barriers; creation of plurilateral codes (rules applying only to those countries which explicitly agreed to them); and establishment of the enabling clause. The Uruguay Round ( ): creation of the WTO; transformation of Tokyo Round plurilateral codes into multilateral agreements; streamlining of the dispute settlement system; and incorporation of new agreements on trade in services and trade-related aspects of intellectual property rights which considerably broadened the scope of the multilateral trade system. Participants in the Uruguay Round of Multilateral Trade Negotiations concluded the Round by adopting the "Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations" ("the Final Act"). The Final Act includes the "Marrakesh Agreement Establishing the World Trade Organization" (the "WTO Agreement") and its four Annexes (Annexes 1 (1A, 1B, 1C); 2; 3 and 4). The WTO Agreement is the constitutive agreement which established a new organizational body, the World Trade Organization (the "WTO"), which is in charge of administering the Uruguay Round Agreements. I.B. OBJECTIVES OF THE WTO IN BRIEF The Preamble to the Marrakesh Agreement establishing the WTO encapsulates its objectives, which are to improve the welfare of the peoples of its Member countries (standard of living, employment, income, etc.). The expansion of the production and trade of goods and services or free trade - is the means chosen by Members to achieve these objectives, through negotiations leading to trade liberalization or by "entering into reciprocal and mutually advantageous arrangements" as mentioned in the text of the GATT This objective should be attained in accordance with sustainable development and with due consideration of the development needs of developing countries. 5

28 IN DETAIL In the Preamble to the Marrakesh Agreement establishing the WTO ("the WTO Agreement"), the parties to the Agreement recognize certain objectives they wish to attain through the multilateral trading system: raise living standards; ensure full employment; ensure a large and steadily growing volume of real income and effective demand; and expand the production of and trade in, goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development. The Preamble of the Agreement also recognizes the need for "positive efforts to ensure that developing countries, and especially the least-developed among them, secure a share in the growth in international trade commensurate with their economic development". I.C. FUNCTIONS OF THE WTO IN BRIEF The main functions of the WTO are to: 1. administer trade agreements; 2. serve as a forum for trade negotiations; 3. settle trade disputes; 4. review Member's trade policies; 5. assist developing countries with trade policy issues, through technical assistance and training programmes; and 6. cooperate with other international organizations. IN DETAIL Article III of the WTO Agreement expounds the functions of the WTO. Paragraphs 1-2 refer to the role of the WTO of providing a permanent institutional forum for trade negotiations among its Members. These negotiations may be on subjects already covered under the WTO agreements or in respect of "new issues" to be disciplined by the WTO. Paragraph 3 of Article III of the WTO Agreement obliges the WTO to administer the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU") in Annex 2 of the WTO Agreement. It refers to the role of the WTO as a forum for the settlement of disputes between its Members in accordance with the disciplines and procedures elaborated in the Dispute Settlement Understanding. When Members are unable to reach a mutually acceptable solution to a dispute arising under one of the agreements covered by the DSU, they may have recourse to the Dispute Settlement Procedure. 6

29 Paragraph 4 of Article III of the WTO Agreement obliges the WTO to administer the Trade Policy Review Mechanism ("TPRM") provided for in Annex 3 to the WTO Agreement. This function underscores the role of the WTO in the transparency mechanism designed by Members during the Uruguay Round. The TPRM was one of the few elements of the WTO Agreement that formed part of the "Early Harvest" realized before the Uruguay Round ended. Early Harvest is an expression which was used in the Uruguay Round negotiations when at the "Mid-Term Review" Ministerial Meeting, held in Montreal in 1988, GATT Contracting Parties agreed that certain results of the negotiations, on which a clear consensus already existed, would enter into force immediately (but on a provisional basis back then). The Trade Policy Review Mechanism is, hence, a mechanism to ensure "surveillance" of national trade policies. WTO members are reviewed, the frequency of each country's review varying according to its share of world trade. The final paragraph of Article III of the WTO Agreement, Paragraph 5, identifies one aspect that Members have to consider when they enter into negotiations to design an international regulatory framework. They must cooperate with other multilateral agencies and as we are going to see, for SPS matters, there are many organizations whose work is related to sanitary and phytosanitary measures, regulations and standards. The WTO cooperates with relevant international organizations active in food safety, animal and plant health protection. TIP The WTO rights and obligations constitute the Multilateral Trading System (also referred to as "MTS") which regulates and affects most international trade transactions. Other organizations and agreements also affect trade. For example, regulations of the International Monetary Fund ("IMF") influence how countries trade, as its work is related to the regulation of currency rates and balance of payments. EXERCISES: 1. How are Members of the WTO to achieve the objectives of the organization (improve the welfare of the peoples of its Member countries standard of living, employment, income, etc)? 2. What are some of the achievements of the Uruguay Round? 3. What is the Final Act? 7

30 I.D. WTO ORGANIZATIONAL STRUCTURE All WTO members may participate in all councils, committees, etc. In the Appellate Body, Dispute Settlement panels, and plurilateral committees only the parties involved may participate. Figure 1: WTO organization chart 8

31 I.D.1. THE MINISTERIAL CONFERENCE The Ministerial Conference is the highest authority in the WTO. Its sessions must take place at least once every two years. The Ministerial Conference can take decisions on all matters under all multilateral trade agreements. I.D.2. THE GENERAL COUNCIL The General Council constitutes the second tier in the WTO Structure. It comprises representatives from all Member countries, usually Ambassadors/Permanent Representatives based in Geneva. It meets regularly (approximately once a month) to adopt Decisions, mostly on behalf of the Ministerial Conference when the Conference is not in session. The General Council has authority over the Trade Negotiations Committee ("TNC"), which is in charge of the negotiations mandated by the Doha Development Agenda. The General Council also meets as: The Trade Policy Review Body ("TPRB"), with its own Chairperson, to carry out trade policy reviews as mandated by the Trade Policy Review Mechanism (Annex 3 of the WTO Agreement). The Dispute Settlement Body ("DSB"), with its own Chairperson, to administer the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"). The DSB has the authority to establish panels on an ad hoc basis, at the request of a Member (or Members). It is responsible for adopting Panel and Appellate Body Reports, overseeing the implementation of rulings and recommendations, and authorizing the suspension of concessions and other obligations under the agreements for which disputes can be settled by the DSU - the "covered agreements". The DSB also appoints persons to serve on the Appellate Body. When adopted by the DSB, the Panel Report as upheld, amended, or reversed by the Appellate Body becomes binding on the disputing Members. I.D.3. COUNCILS & SUBSIDIARY BODIES Councils can be described as subsidiary bodies to the General Council. They are composed of all WTO Members. There are three: The Council for Trade in Goods (the "Goods Council") oversees all the issues related to the agreements on trade in goods. The Council for Trade in Services (the "GATS Council") oversees all issues related to the GATS Agreement. The Council for Trade-Related Aspects of Intellectual Property Rights (the "TRIPS Council") administers the TRIPS Agreement. The Goods and Services Councils have subsidiary bodies. 9

32 The Goods Council has 11 committees working on subjects covered on the specific agreements on goods (such as sanitary and phytosanitary measures, agriculture, market access, subsidies, anti-dumping measures, etc.). All of these committees are composed of all Members. Subsidiary bodies of the Services Council deal with financial services, domestic regulations, GATS rules, and specific commitments. This Council does not have a permanently fixed number of subsidiary bodies. For example, the Negotiating Group on Basic Telecommunications was dissolved in February 1997 when its work ended. Several other bodies, which focus on specific issues, report to the General Council. They are usually called Committees, Working Groups or Working Parties; they are: Committee on Trade and Development ("CTD"); Committee on Trade and Environment ("CTE"); Committee on Regional Trade Agreements ("CRTA"); Committee on Balance-of-Payment Restrictions ("BOP Committee"); Committee on Budget, Finance and Administration ("CBFA"); Working Parties on Accession; Working Group on Trade, Debt and Finance; Working Group on Trade and Technology Transfer. Besides these, there is another important organ which responds directly to the General Council: The Trade Negotiations Committee. It was set up by the Doha Declaration, which in turn assigned it to create subsidiary negotiating bodies to handle negotiations for enumerated (mandated) topics. Its current chairman is Mr. Pascal Lamy, presently the Director-General of the WTO. Its subsidiary bodies include the Special Sessions of various Committees that currently carry a mandate to negotiate (such as Agriculture, Trade and Environment, Subsidies, etc). These Special Sessions have different Chairmen from those of the Committee Regular Sessions (the latter reporting to the Council for Trade in Goods). Remember that the SPS Committee, which works under the Goods Council, does not have Special Sessions meetings, linked to the Doha Development Agenda negotiations. We are going to discuss this further later in this Module! 10

33 EXERCISES: 4. Please arrange the following WTO bodies in hierarchical order: (a) (b) (c) (d) General Council Committee on Sanitary and Phytosanitary Measures Council for Trade in Goods Ministerial Conference 5. Please state the function of the following WTO bodies: (a) (b) (c) (d) Ministerial Conference General Council Council for Trade in Goods Committee on Sanitary and Phytosanitary Measures 11

34 I.E. DECISION-MAKING IN THE WTO CONSENSUS VERSUS... The WTO is a member-driven, consensus-based organization. Consensus is defined in Article IX (Footnote 1) of the WTO Agreement, which states: "The Body concerned shall be deemed to have decided by consensus on a matter submitted for its consideration if no Member present at the meeting when the decision is taken formally objects to the proposed decision." VOTING Where consensus is not possible, the WTO Agreement permits voting a vote being won by a tally of the majority of votes cast, and based on "one country, one vote". The WTO Agreement envisages voting in four specific situations: to adopt an interpretation of any of multilateral trade agreements, requiring a three-quarters majority of WTO Members; to waive an obligation imposed on a Member by a multilateral agreement, requiring a three-quarters majority at a Ministerial Conference; to take a decision to amend provisions of the multilateral agreements, requiring all Members or a two-thirds majority (depending on the provision being voted upon). However, the amendments only apply to WTO Members that accept them; to take a decision to admit a new Member, requiring a two-thirds majority at a Ministerial Conference or at the General Council when in between conferences. Voting is not possible in all Committees. The SPS Agreement, for example, explicitly states that the SPS Committee shall reach its decisions by consensus. FORMALS AND INFORMALS Important breakthroughs are rarely made in formal WTO meetings, or in the higher level Councils. Since decisions are generally made by consensus, without voting, WTO informal consultations play a vital role in bringing the diverse Membership to an agreement. One tier below the formal meetings is informal meetings. Informal meetings may also include the full membership, but permit more frank discussions, off the record. Informal meetings can be held including, for example, only Heads of Delegations. Issues that are difficult are easier to discuss in smaller groups. A recent practice is the attempt to forge a compromise by the chairperson of a negotiating group, through consultations with delegations in twos or threes, or in groups of (of the most interested delegations in the particular issue at hand). These smaller meetings have to be handled with sensitivity. The key is to ensure that everyone is kept informed even if they are not in a particular consultation or meeting (the process must be "transparent"), and that they have an opportunity to participate or to provide input (it must be "inclusive"). 12

35 Some meetings take place in the "Green Room". The "Green Room" is a phrase taken from the informal name of the Director-General's conference room. The term refers to meetings of delegations. These meetings can be called by a committee chairperson as well as by the Director-General, and can take place elsewhere, such as at Ministerial Conferences. In the past, delegations have sometimes felt that Green Room meetings could lead to compromises being made without their input or consent. Accordingly, measures are taken to ensure that the process is handled correctly, with regular reports submitted to the full membership. In the end, decisions are taken by all Members by consensus. The negotiations on market access also involve small groups, but for a completely different reason. The outcome is a multilateral package of individual countries' commitments, which are the result of numerous informal bilateral bargaining sessions, and in the interest of individual countries (examples are the tariff, and market access negotiations on trade in services). Consequently, informal consultations play a vital role in facilitating consensus, but they do not appear in organizational charts because they are informal. However, informal consultations are not separate from formal meetings. They are necessary to facilitate formal decisions in the Councils and Committees. Nor are the formal meetings unimportant. Formal meetings are the forums for exchanging views, putting countries' positions on the record, and ultimately confirming decisions. The art of achieving agreement among all WTO Members is to strike an appropriate balance, so that a breakthrough achieved among only a few countries is acceptable to the rest of the membership. These formal and informal meetings form the basis of negotiations in the WTO, and often of the advancement on difficult issues in the regular Committees. 13

36 II. THE WTO AGREEMENTS You have seen reference made above to the WTO agreements. What are these agreements? IN BRIEF Most of the WTO agreements are the result of the Uruguay Round negotiations, signed at the Marrakesh Ministerial Meeting in April There are about 60 Agreements and Decisions totalling 550 pages. It also included a major revision of the original GATT text. (Negotiations since then have produced additional legal texts such as the Information Technology Agreement, Services and Accession Protocols). The Final Act signed in Marrakesh in 1994 is like a cover note. Everything else is attached to this. Foremost is the Agreement Establishing the WTO ("the WTO Agreement"), which serves as an umbrella agreement. Annexed to the Agreement Establishing the WTO are the agreements on Goods, Services and Intellectual Property, Dispute Settlement, Trade Policy Review Mechanism and the Plurilateral Agreements. The Schedules of Commitments also form part of the Uruguay Round agreements. These schedules contain the commitments made by individual WTO members allowing specific foreign products or service-providers access to their markets. In the print version these schedules comprise about 30,000 pages for all WTO Members. The ensemble of these agreements are often called the "WTO's Trade Rules", or the "WTO Law". In other words: The agreements include individual countries' commitments to lower customs tariffs and other trade barriers, to open services markets and keep them open, and to protect intellectual property rights. The agreements set out procedures for settling disputes. The agreements prescribe special treatment for developing countries. The agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted, and through regular reports by the secretariat on countries' trade policies. The basic structure of the WTO agreements: how the six main areas fit together the umbrella WTO Agreement, goods, services, intellectual property, disputes settlement, trade policy reviews and the plurilateral agreements. Umbrella Agreement establishing WTO Goods (Annex 1 A) Services (Annex 1 B) Intellectual Property (Annex 1 C) Basic principles GATT GATS TRIPS 14

37 Umbrella Agreement establishing WTO Goods (Annex 1 A) Services (Annex 1 B) Intellectual Property (Annex 1 C) Additional details Other goods agreements and annexes 1 2 Services annexes Market access commitments Countries' schedules of commitments Countries' schedules of commitments(and MFN exemptions) Dispute settlement DISPUTE SETTLEMENT ( Annex 2) Transparency TRADE POLICY REVIEWS (Annex 3) Plurilateral commitments Plurilateral Agreements (Annex 4) Table 2: Basic structure of the WTO Agreements TIP If you click on the hyperlinks, you will be able to read a brief summary about the agreements. For more information on the GATS, there is a self-training module on the WTO site at the following address: For more information on the DSU, there is a self-training module available on the WTO site at the following address: 1 The agreements that disciplines the trade in Goods, which are contained in Annex 1A, are the: General Agreement on Tariffs and Trade (GATT 1994); Agreement on Agriculture (AoA); Agreement on the Application of Sanitary and Phytosanitary Measures (SPS); Agreement on Textiles and Clothing (ATC, terminated on the 1st January 2005); Agreement on Technical Barriers to Trade (TBT); Agreement on Trade Related Investment Measures (TRIMS); Agreement on Anti-dumping (AA); Agreement on Customs Valuation; Agreement on Preshipment Inspection; Agreement on Rules of Origin; Agreement on Import Licensing; Agreement on Subsidies and Countervailing Measures; Agreement on Safeguards. 2 The Agreement that disciplines the trade in Services, which is contained in Annex 1B, is the General Agreement on Trade in Services. This Agreement has several annexes on its own, which are the: Annex on Article II Exemptions; Annex on Movement of Natural Persons Supplying Services under the Agreement; Annex on Air Transport Services; Annex on Financial Services and Second Annex on Financial Services; Annex on Telecommunications and Annex on Negotiations on Basic Telecommunications; Annex on Negotiations on Maritime Transport Services. 15

38 IN MORE DETAIL Let us take a closer look at the structure of the WTO Agreement, with a view to better understanding how the SPS Agreement is integrated into the multilateral legal framework of the WTO. The Marrakesh Agreement establishing the World Trade Organization (the WTO Agreement) includes provisions on establishment, scope, functions and structure of the WTO. It defines WTO's relationship with other organizations, its secretariat, budget and contributions, legal status, and decision-making and amendment procedures (including special voting procedures). Additionally, it presents information on the definition of original Members, accession, non-application, acceptance, entry into force and deposit, denunciation and final provisions. The WTO Agreement has four Annexes - Annexes 1, 2, 3 and 4. Annexes 1, 2, and 3 are termed "Multilateral Trade Agreements". Annex 4 is termed "Plurilateral Trade Agreements". Note Multilateral Agreements are agreements signed by all Members and therefore binding all WTO Members. Plurilateral Agreements bind only those Members party to the agreement. The Multilateral Trade Agreements (Annex 1, 2, 3) are applicable to all Members and as such have to be complied with simultaneously, without the possibility, for the Member, of choosing just this or that agreement to be bound by. This is the "single undertaking" principle, which is further explained below. WHAT IS THE SINGLE UNDERTAKING? Agreements related to GATT 1947 were negotiated during negotiating rounds prior to the Uruguay Round. In particular, some agreements on non-tariff barriers were negotiated during the Tokyo Round. However, these agreements were not adopted by all GATT Contracting Parties; they applied only to those countries who agreed to be bound by them. This is what was called "GATT à la carte". In the Uruguay Round, a different approach was adopted - it was decided that the multilateral agreements negotiated were to be accepted as a whole. The General Agreement on Tariffs and Trade, the Agreement on Agriculture, the Agreement on Sanitary and Phytosanitary Measures, the Agreement on Trade-Related Aspects of Intellectual Property Rights, the General Agreement on Trade in Services, as well as most of the other agreements negotiated during the Uruguay Round are part of this "single undertaking". However, there are four plurilateral trade agreements (Uruguay Round Agreements) that bind only those Members who negotiated and accepted to be bound by each agreement. These are the Agreement on Trade in Civil Aircraft, the Agreement on Government Procurement, the International Dairy Agreement and the International Bovine Meat Agreement. The latter two were terminated at the end of EXERCISES: 6. What is the WTO Agreement and what do its annexes cover? 16

39 III. DISPUTE SETTLEMENT The task of ensuring that all Members live up to their commitments, and that there is a common understanding of the nature of those commitments, is a central part of the work of the WTO. It is two-fold and involves: the broad multilateral review and transparency aspect; and the aspect relating to individualised disputes, arisen out of diverging interpretations of WTO obligations by Members. Thus, the dispute settlement not only ensures security and predictability to the multilateral trading system, but is also concerned with situations where a Member seeks a remedy for (a perceived) damage to its trade interests caused by the actions/inaction of other Member/s. To sum up, the system serves to preserve the Members' rights and obligations under the WTO Agreements. In contrast to the old GATT dispute settlement arrangement, the new rules are more detailed and provide for deadlines and approval procedures that speed up the dispute settlement process, thereby preventing undue delays in the settlement of disputes. Panels and the Appellate Body are in charge of adjudicating disputes between Members. Panels are composed of three, and exceptionally five, experts selected on an ad hoc basis. The Appellate Body is a permanent group of seven experts in trade issues and trade law, in charge of reviewing the legal aspects of the reports issued by panels. Reports by panels and the Appellate Body must be adopted by the Dispute Settlement Body. Perhaps the most important difference between the GATT and WTO dispute settlement rules is the change introduced in the decision-making procedures. Under the GATT, dispute settlement decisions depended on the consensus agreement of Contracting Parties. If a party to a dispute was unwilling to have a panel established, or objected to its membership or terms of reference, or did not accept the Panel's conclusions, it could "block" a consensus being formed on any of those issues. In the absence of consensus, no action could be taken even where a determination was made in a Contracting Party's favour. In the DSU the consensus requirement is reversed and a panel report is adopted "unless there is a consensus not to adopt it", i.e. all Members are against the adoption. This is called the negative consensus rule. Furthermore, the DSB has the authority to: establish panels; adopt panel and Appellate Body reports; maintain the surveillance of the implementation of rulings and recommendations made by the panels and the Appellate Body; and authorize the suspension of obligations under the covered agreements. 17

40 HOW LONG TO SETTLE A DISPUTE? These approximate periods for each stage of a dispute settlement procedure are target figures the agreement is flexible. In addition, the countries can settle their dispute themselves at any stage. Totals are also approximate. 60 days Consultations, mediation, etc 45 days Panel set up and panellists appointed 6 months Final panel report to parties 3 weeks Final panel report to WTO members 60 days Dispute Settlement Body adopts report (if no appeal) Total = 1 year (without appeal) days Appeals report 30 days Dispute Settlement Body adopts appeals report Total = 1y 3m (with appeal) Table 3: WTO dispute settlement timeline Finally, in the DSU, the priority is to settle disputes through consultations. A majority of disputes so far (about two-thirds) in the WTO have not proceeded beyond consultations, either because a satisfactory settlement was found, or because the complainant decided not to pursue the matter further. This shows that consultations are often an effective means of dispute resolution in the WTO and that Members are cautious about not misusing the instruments of adjudication and enforcement in the dispute settlement system. Another important set of principles, appropriately entitled "Strengthening of the Multilateral System", is set out under Article 23 of the DSU. This prohibits unilateral actions by Members to redress what they see as violations of obligations, or the nullification or impairment of benefits, under any of the WTO agreements. Members are required to use the WTO dispute settlement procedures, which includes consultations throughout the whole process, to settle grievances related to covered agreements. III.A. DISPUTE SETTLEMENT IN THE SPS AGREEMENT The SPS Agreement is one of the "covered agreements", therefore subject to the jurisdiction of the Dispute Settlement Body. Notwithstanding, "covered agreements" may contain some "special and additional rules and procedures" on dispute settlement, which is the case for the SPS Agreement. 18

41 Specific rules and procedures designed to deal with the particularities of disputes under the SPS Agreement take precedence over the rules in the DSU "where the provisions of the DSU and the special or additional rules and procedures of a covered agreement cannot be read as complementing each other" (Article 1.2 of the DSU). SPS-specific provisions on dispute settlement contained in Article 11 of the SPS Agreement relate to the establishment of an advisory technical expert group, or the consultation of the relevant international organizations, at the request of the party or on the Panel's initiative. Article 11.3 of the SPS Agreement recognizes that other relevant international bodies may offer dispute resolution means that could assist Members, given the technical and scientific nature of many SPS disputes. The IPPC and OIE have such procedures. It states that: 11.3 Nothing in this Agreement shall impair the rights of Members under other international agreements including the right to resort to the good offices or dispute settlement mechanisms of other international organizations or established under any international agreement. TECHNICAL EXPERT GROUP Article 11.2 of the SPS Agreement specifies that, at the request of a party to a dispute, or on its own initiative, a Panel may establish an advisory technical expert group to assist in scientific or technical issues. Article 11.2 reads: 11.2 In a dispute under this Agreement involving scientific or technical issues a panel should seek advice from experts chosen by the panel in consultation with the parties to the dispute. To this end the panel may when it deems it appropriate establish an advisory technical experts group or consult the relevant international organizations at the request of either party to the dispute or on its own initiative. As stated in this Article, a panel may also seek advice from experts at relevant international organizations. In Article 3.4 of the SPS Agreement, the Codex Alimentarius, the International Office of Epizootics (nowadays the World Organization for Animal Health) and the International Plant Protection Convention are recognized as relevant international organizations for harmonization efforts purposes. CASES RELATED TO THE SPS AGREEMENT Several WTO disputes are directly related to the SPS Agreement. Some of them (five) actually reached the Panel phase: EC Hormones, brought by the United States and also by Canada in 1996 (WT/DS26 and WT/DS48, respectively) Australia - Salmon, brought by Canada in 1997 (WT/DS18) Japan - Varietals (also referred to as Japan Agricultural Products II), brought by the United States in 1997 (WT/DS76) Japan - Apples, brought by the United States in 2002 (WT/DS245) 19

42 EC - GMOs, brought by the United States, Canada and Argentina in 2003 (WT/DS291, WT/DS292 and WT/DS293 respectively) Panel and/or Appellate Body reports adopted in these cases have addressed many issues relating to the interpretation of "necessity" and "appropriate level or protection" under the SPS Agreement; have dealt with the issue of the temporary application of the Agreement; have clarified the relationship between the precautionary principle and the SPS Agreement, and have provided guidance on questions regarding the carrying out of a risk assessment. We are going to discuss all of these issues throughout our course on the SPS Agreement! 20

43 IV. SPS-RELATED WORK IN THE WTO IN BRIEF SPS-related work in the WTO takes place in the Committee on Sanitary and Phytosanitary Measures (the "SPS Committee"), which responds directly to the Council for Trade in Goods, and is open to all members of the WTO. The SPS Committee affords Members: a forum where they can consult regularly on any matters relating to the operation of the SPS Agreement; (Article 12.1) the necessary means to implement the provisions of the agreement and the furtherance of its objectives, in particular with respect to harmonization (Article 12.1). The in-depth report on the work developed by the SPS Committee, i.e. the many responsibilities it carries out while giving life to its mandate shall be presented to you in Module 8, under "Implementation". WORK IN THE SPS COMMITTEE The SPS Committee meets in "regular sessions" (in this case, regular meetings). There are no "special sessions" for negotiations in the SPS Committee, although special meetings on specific issues can be convened. The SPS Committee meets to carry out the functions necessary to implement the provisions of the SPS Agreement, or such other tasks which it may be required to deal with. The SPS Committee normally meets three times a year. RECALL SPECIAL SESSIONS The special sessions are for the negotiations as established by a mandate under the Doha Development Agenda. There is no mandate for negotiations on the SPS Agreement under the DDA, and therefore, no Special Sessions for the SPS Committee. WHO CAN ATTEND THE MEETINGS? The meetings of the SPS Committee are open to all WTO Members and other governments with observer status in WTO bodies. In addition, certain international intergovernmental organizations have been granted observer status in the Committee, either on a permanent basis or on an ad hoc meeting-by-meeting basis. These are: International Intergovernmental Organizations and others with Observer Status on a regular basis in the SPS Committee* (as of May 2010) United Nations Food and Agriculture Organization (FAO) FAO International Plant Protection Convention (IPPC) 21

44 International Monetary Fund (IMF) International Organization for Standardization (ISO) International Trade Centre UNCTAD/WTO (ITC) World Organization for Animal Health (OIE) United Nations Conference on Trade and Development (UNCTAD) World Health Organization (WHO) WHO/FAO Joint Codex Alimentarius Commission (Codex) World Bank (*) Other International Intergovernmental Organizations have observer status on an ad hoc (meeting-bymeeting) basis. We are going to further explore some of these Observer organizations, in particular the work of international standard-setting bodies, when we talk about harmonization and the use of international standards (Module 5), and technical assistance (Module 8). Regular meetings of the SPS Committee may be composed of a formal and an informal segment. Formal and informal meetings have already been explained above in this Module. Take another look there, if you think it useful! Important note The SPS Committee has established its rules of procedures to conduct its meetings (G/L/170). You can also check the Working Procedures of the Committee (see document G/SPS/1). An official record of the discussions held during formal meetings is prepared by the WTO Secretariat and is made publicly available (See document series: G/SPS/R/), while no such records are prepared for informal meetings. However, the Chairperson informs the formal SPS Committee about the proceedings of any informal meetings, and these oral reports are included in the summary of the formal meeting. In addition to these regular meetings, the SPS Committee holds workshops and seminars on topics of particular interest to Members (for instance, workshops on the implementation of the agreement, the operation of SPS enquiry points, risk analysis, SPS capacity building). Special formal meetings are sometimes held to progress specific issues, such as to complete work on the review of the operation of the agreement, or on transparency. 22

45 TIP SPS Committee documents are of different types: GEN General - G/SPS/GEN/*; R Reports of Meetings G/SPS/R/*; W Working Document G/SPS/W/*; N Notification G/SPS/N/*; NNA List of National Notification Authorities G/SPS/NNA/*; ENQ List of Enquiry Points G/SPS/ENQ/*; Delegates Information - G/SPS/INF/*; G Various - G/SPS/*, which include Decisions of SPS Committee, Special reports, etc. There might also be revisions, addendum, and corrections of such documents. Check the summary of the latest meeting: G/SPS/R41.doc You can find other information on SPS Committee Documents at the WTO website/sanitary and Phytosanitary Measures Section: WTO Sanitary and Phytosanitary Measures - gateway IN DETAIL The SPS Committee is responsible for: Providing a forum for consulting regularly on any matters relating to the operation of the SPS Agreement and for the furtherance of its objectives, in particular with respect to harmonization (Article 12.1); developing a procedure to monitor the process of international harmonization and the use of international standards, guidelines or recommendations, and for coordinating efforts in this regard with the relevant international organizations (Article 3.5 and Article 12.4); promoting increased coordination and integration between international and national systems and approaches for approving the use of food additives or for establishing tolerances for contaminants in foods, beverages or feedstuffs (and Article 12.2); developing guidelines to further the practical implementation of Article 5.5, which describes the obligation for Members to avoid arbitrary or unjustifiable distinctions in the levels they consider to be appropriate in different situations (of risk), if such distinctions result in discrimination or a disguised restriction on international trade (Article 5.5); granting, to Developing Country Members, specified, time-limited exceptions in whole or in part from obligations under this Agreement, upon request, taking into account their financial, trade and development needs (Article 10.3); securing the best available scientific and technical advice for the administration of the Agreement in order to ensure that unnecessary duplication of effort is avoided, through a close contact with relevant international organizations, especially with the Codex Alimentarius Commission, the International Office 23

46 of Epizootics (now called the World Organization for Animal Health), and the Secretariat of the International Plant Protection Convention. The Committee may decide to use the information generated by the procedures, particularly for notification, which are in operation in the relevant international organizations (Article 12.3 and Article 12.5); inviting, on the basis of an initiative from a WTO Member, the relevant international organization (and/or subsidiary bodies) to examine specific matters referred to it in connection to particular SPS standards, guidelines or recommendations (Article 12.6); reviewing the operation and implementation of the SPS Agreement, and submitting proposals to amend its text to the Council for Trade in Goods (Article 12.7). The SPS Committee has transparency responsibilities, which include receiving the notifications made by Members prior to the adoption of new (or updated) sanitary and phytosanitary measures and regulations (Article 7 and Annex B of the SPS Agreement). It is also responsible for carrying out the review of the agreement every four years, as provided for in the Doha Decision on Implementation-Related Issues and Concerns (WT/MIN(01)/17). Important note There are common misunderstandings about the role that the WTO plays in standardization. Therefore, it is very important to clarify what the WTO and the SPS Committee do not do. What the SPS Committee does not do? The SPS Committee does not set the food safety, animal and plant health protection measures and regulations that Members should apply domestically or internationally. The SPS Agreement, actually, sets the principles (obligations that a Member must comply with) that a Member should follow while developing and enforcing such measures and regulations, for these to be transparent and not to hinder the rights of the other WTO Members, so as to bring predictability and stability to the Multilateral Trading System. In fact, such measures and regulations are set by the interested Members, through domestic regulation and legislation processes, preferably based on international standards. International standards are those set by relevant international standard-setting bodies, as defined in Annex A, paragraph 3, of the SPS Agreement. These international standard-setting bodies count with the participation of the scientific and regulatory experts from governments, and in some cases also include participation by the international community, members of civil society, industries, experts, etc. The SPS Agreement encourages WTO Members to play a full part in them and to promote within these organizations the development and periodic review of standards, guidelines and recommendations with respect to all aspects of sanitary and phytosanitary measures. In Module 8, we will discuss the work of the SPS Committee in more detail and also the current issues before it, especially in the context of the implementation of the Agreement and its review. 24

47 EXERCISES: 7. What is the WTO body in charge of sanitary and phytosanitary measures? To whom does it report? 8. What are the assigned tasks to the SPS Committee? And what does it not do? 25

48 V. SUMMARY OBJECTIVE OF THE WTO The objective of the WTO, as encapsulated in the Preamble, is to improve the welfare of the people of its Member countries (standard of living, employment, income, etc.) by expanding the production of, and trade in, goods and services. FUNCTION OF THE WTO Facilitate the implementation, administration and operation of the WTO agreements (including the Plurilateral Agreements), together with furthering their objectives; Serve as a forum for trade negotiations; Administer the Dispute Settlement Understanding (DSU); Administer the Trade Policy Review Mechanism (TPRM); and Cooperate inter alia with the IMF and the IBRD (World Bank) to achieve coherence in global economic policy making. STRUCTURE OF THE WTO Ministerial Conference General Council (also DSB and TPRB) Councils for Goods, Services, Intellectual Property Committees Sub-Committees THE WTO AGREEMENT CONTAINS FOUR ANNEXES - ANNEXES 1, 2, 3 AND 4 Annexes 1, 2, and 3 - the "Multilateral Trade Agreements". Annex 1 is divided into three sections: Annex 1A (the Multilateral Agreements on Trade in Goods); Annex 1B (the Agreement on Trade in Services); and Annex 1C (the Agreement on Trade-Related Aspects of Intellectual Property Rights). Annex 2 contain0073 the Dispute Settlement Understanding. Annex 3 contains the Trade Policy Review Mechanism. Annex 4 comprises the Plurilateral Trade Agreements, which are only binding on their signatories. 26

49 THE DISPUTE SETTLEMENT SYSTEM OF THE WTO The dispute settlement system of the WTO "is a central element in providing security and predictability to the multilateral trading system". It serves to preserve rights and obligations entered into by WTO Members and it's an important tool to ensure that all Members live up to their commitments, and that there is a common understanding of the nature of those commitments. THE WTO'S DISPUTE SETTLEMENT BODY HAS THE AUTHORITY TO Establish panels; adopt panel and Appellate Body reports; maintain the surveillance of the implementation of rulings and recommendations; and authorize the suspension of obligations under the covered agreements. THE SPS AGREEMENT The SPS Agreement is a WTO Agreement, which lays down provisions that should guide Members with regard to the development and application of all sanitary and phytosanitary measures directly or indirectly affecting international trade. It contains a dispute settlement provision that allows panels to count on technical expert groups to provide technical or scientific information, at the request of the parties to the dispute or on its own initiative. THE SPS COMMITTEE SPS related work in the WTO takes place in the Committee on Sanitary and Phytosanitary Measures ("SPS Committee"), which reports directly to the Council for Trade in Goods, and is open to all members of the WTO. The SPS Committee affords Members the opportunity to consult on any matters relating to the operation of the SPS Agreement or the furtherance of its objectives. It also carries out such responsibilities as assigned to it by the SPS Agreement or WTO Members, under Article 12 of the Agreement. This includes mainly the mandate to cooperate with the relevant international standard-setting bodies, in order to promote the objective of harmonization and avoid work duplication. These responsibilities also include receiving the notifications made by Members prior to the adoption of new (or updated) sanitary and phytosanitary measures and regulations and carrying out the review of the agreement every four years, among other duties. 27

50 PROPOSED ANSWERS: 1. Although the WTO's objectives do not mention trade liberalization as the means to establish free trade between Members, the drafters, nevertheless, considered "substantial reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international trade relations" as significant means to achieving its objectives. A second means to achieve the objectives in the preamble is the practice of Members of "entering into reciprocal and mutually advantageous arrangements". 2. Achievements of the Uruguay Round (i) (ii) creation of the WTO; transformation of the plurilateral codes (agreements) from the Tokyo Round into multilateral agreements; (iii) strengthened dispute settlement system; and (iv) incorporation of the new agreements on trade in services and trade-related aspects of intellectual property rights. 3. The Final Act (Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations) is the agreement signed in 1994, by which the participants in the Uruguay Round of Multilateral Trade Negotiations concluded the Round. The Final Act includes the "Marrakesh Agreement Establishing the World Trade Organization" ("the WTO Agreement") and its Annexes. 4. Hierarchical order: (a) (b) (c) (d) Ministerial Conference; General Council; Council for Trade in Goods; Committee on Sanitary and Phytosanitary Measures. 5. The Ministerial Conference is the highest authority of the WTO. It can take decisions on all matters under all multilateral trade agreements. It meets at least once every two years. Below the Ministerial Conference in rank is the General Council. It takes all decisions on behalf of the Ministerial Conference when the Ministerial Conference is not in session. The General Council meets regularly (in principle, monthly), usually at the Geneva Headquarters. The General Council reports to the Ministerial Conference. Below the General Council is the Council for Trade in Goods (CTG). It oversees the implementation of the multilateral agreements on trade in goods (Annex 1A of the Marrakesh Agreement), and it reports to the General Council. The Committee on Sanitary and Phytosanitary Measures is one of several subsidiary bodies of the CTG. It is responsible for discussing matters related to the implementation of specific provisions of one Agreement, the SPS Agreement. All Members participate in the work of all WTO Bodies. 6. The WTO Agreement is the 1994 Marrakesh Agreement Establishing the WTO. It has four Annexes. 28

51 Annex 1 includes the Multilateral Agreements on Trade. It is divided into three sections: Annex 1A (the Multilateral Agreements on Trade in Goods); Annex 1B (the General Agreement on Trade in Services); and Annex 1C (the Agreement on Trade-Related Aspects of Intellectual Property Rights). Annex 2 contains the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). It is dedicated to rules governing the dispute settlement system in the WTO. Annex 3 is dedicated to rules governing the Trade Policy Review Mechanism (TPRM) in the WTO. Annex 4 contains the Plurilateral Trade Agreements. 7. SPS-related work in the WTO takes place in the Committee on SPS measures ("SPS Committee"), which reports directly to the Council for Trade in Goods, and is open to all members of the WTO. The SPS Committee affords Members the opportunity to consult on any matters relating to the operation of the SPS Agreement or the furtherance of its objectives. It also carries out the responsibilities assigned to it by the SPS Agreement or the WTO Members (Article 12 provides for the Administration of the Agreement). 8. The SPS Committee is responsible for: a) Monitoring the process of international harmonization and the use of international standards, guidelines or recommendations; b) promoting increased coordination and integration between international and national systems and approaches; c) developing guidelines to further the practical implementation of Article 5.5; d) granting, to Developing Country Members, specified, time-limited exceptions in whole or in part from obligations under the Agreement; e) securing the best available scientific and technical advice for the administration of the SPS Agreement in order to ensure that unnecessary duplication of effort is avoided; f) inviting the relevant international organization (and/or subsidiary bodies) to examine specific matters referred to it in connection to particular SPS standards, guidelines or recommendations; g) reviewing the operation and implementation of the SPS Agreement, and submitting proposals to amend its text to the Council for Trade in Goods. The SPS Committee is not a standard-setting Body, neither is the WTO. Several international organizations, which are Observers at the SPS Committee, set international standards with the participation or cooperation of scientific experts. 29

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53 MODULE 2 Introduction to WTO basic principles and rules ESTIMATED TIME: 6 hours OBJECTIVES OF MODULE 2 Explain the non-discrimination rules: Most Favoured Nation (MFN) Principle and National Treatment (NT) Principle; explain the market-access rules; present WTO rules on trade remedies: Anti-dumping measures and subsidies and countervailing measures; and explain the exceptions to the basic principles. 31

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55 M2 PART I: BASIC PRINCIPLES IN THE WTO I. INTRODUCTION As you saw in Module 1, multilateral rules and principles were agreed back in 1947 to govern trade in goods between GATT Contracting Parties. From 1947 to 1994, the GATT provided the forum for negotiating lower customs duty rates, as well as the reduction or elimination of other trade barriers. The text of the GATT contained important rules, particularly non-discrimination. After the conclusion of the Uruguay Round and the entry into force of the WTO Agreement, the basic principles formulated in the GATT remained fundamentally unchanged. Since 1995, the updated GATT (called "GATT 1994") has become the general agreement for trade in goods. Other agreements also cover specific sectors such as agriculture, as well as with specific issues such as technical barriers to trade and subsidies. The WTO Agreement also incorporated new disciplines beyond trade in goods, for example, the GATS and the agreement on trade in services (GATS) and the Agreement on trade related intellectual property rights (TRIPS Agreement). In this section, you will study the non-discrimination principles and their specific exceptions with reference to the GATT, GATS and TRIPS Agreement. 33

56 II. RULES ON TRADE IN GOODS II.A. NON-DISCRIMINATION PRINCIPLE Non-discrimination is a fundamental principle of the multilateral trading system and is recognized in the Preamble to of the WTO Agreement as a key instrument to achieve the objectives of the WTO. In the Preamble, WTO members express their desire to eliminate discriminatory treatment in international trade relations. Non discrimination in the WTO is embodied by two principles, the most favoured nation (MFN) treatment obligation and the national treatment obligation. The MFN principle applies to trade in goods, trade in services, and trade related aspects of intellectual property. According to the Appellate Body in the EU Tariff Preferences case (WT/DS246), the MFN obligation is a cornerstone of the GATT and one of the pillars of the WTO trading system (paragraph 101). II.A.1. THE MFN PRINCIPLE WITH REGARD TO THE TRADE IN GOODS IN BRIEF Pursuant to the WTO agreements countries cannot normally discriminate between their trading partners. If a Member grants to a country a special favour (such as a lower customs duty on one of its products) it must grant the favour immediately and unconditionally to all WTO members. IN DETAIL Members of the WTO can be seen as members of a club. One of the fundamental rules of the club is that each member will grant any other member the best possible treatment it grants to any one else. Hence, each member of the club is guaranteed to receive the best possible treatment from each of its fellow-members. For example, let us assume that Rauritania's MFN duty (duty applicable to all WTO Members) for tomatoes is 10%. Medatia is a big tomato producer interested in increasing its exports of tomatoes to Rauritania. If, during a WTO negotiating round, the Government of Medatia initiates tariff negotiations on tomatoes with Rauritania. After long and difficult bilateral meetings, Rauritania agrees to give Medatia a duty free access (0%) for tomatoes. However, according to the MFN principle, Rauritania should extend the 0% duty on tomatoes to all WTO Members. This is because all WTO Members should enjoy the most favourable treatment for tomatoes granted by Rauritania. For trade in goods, the MFN principle requires each Member to extend to all other Members, treatment no less favourable than it accords to imports from any other country. 34

57 II.A.2. GATT ARTICLE I:1 GATT Article I:1 contains the specific rules for MFN treatment for goods. GATT Article I:1 General Most-Favoured-Nation Treatment 1. With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any Member to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other Members. The general effect of Article I.1 is to create the obligation among WTO Members to give each others' like products the best existing market access opportunities without discrimination in law or in fact. A detailed reading of the provision reveals that the key elements of the MFN principle are: 1. Any advantage, favour of privilege covered in Article I Like products. 3. The immediate and unconditional grant of the advantage at issue to the like products concerned. ANY ADVANTAGE COVERED IN ARTICLE I:1 The advantages that a WTO Member must grant to all members' like products without discrimination in fact or in law are listed in the first part of Article I.1. They are advantages in respect of the following measures: Customs duties; Any kind of charges imposed on importation or exportation; Any kind of charges imposed in connection with importation or exportation; Any charges imposed on the international transfer of payments for imports and exports; The method of levying such duties and charges; The rules and formalities in connection with importation and exportation; Internal taxes or other internal charges (covered in Article III.2); Laws, regulations and requirements affecting internal sale, offering fore sale, purchase, transportation, distribution or use of any product (covered in Article III.4). The scope of the measures covered in Article I.1 is in practice, wide enough to cover a very broad range of measures in relation to exportation and importation as well as internal measures. 35

58 LIKE PRODUCTS The MFN obligation applies to like products. The idea of "likeness" is very relative and is not defined in the GATT, therefore WTO case law has developed four criteria that should be considered in deciding if products are alike (see for example, Japan Taxes on Alcoholic Beverages - WT/DS8, 10 and 11; and Canada - Autos WT/DS139 and 142). Such consideration should be assessed on a case by case basis but the said factors are as follows: 1. physical characteristics of the products; 2. end use of the products; 3. consumer preferences; 4. the classification of the products in Members' tariff laws. THE IMMEDIATE AND UNCONDITIONAL GRANT OF THE ADVANTAGE TO THE LIKE PRODUCTS CONCERNED Once a WTO Member has granted an advantage to imports from any country, it must immediately grant that advantage to imports from all WTO members and it cannot make the granting of that advantage to imports from all WTO members conditional upon receiving something in return. This obligation applies equally to exports, therefore advantages granted by a WTO Member to exports to any country must be granted immediately and unconditionally to exports to all WTO Members. PROVISIONS THAT ALLOW DEROGATION FROM MFN EXCEPTIONS There are a number of provisions that allow WTO members to derogate from non-discrimination principles as well as from other WTO disciplines. These exceptions will be covered in more detail in Part IV of the module. These provisions include: general exceptions; security exceptions; balance of payment exceptions; waivers; regional integration exceptions. SPECIFIC EXCEPTIONS RELATED TO THE MFN OBLIGATION CAN BE SUMMARIZED AS FOLLOWS: Historical Preferences (GATT Article 1.2-4): Frontier Traffic (GATT Article XXIV:3): 36

59 ILLUSTRATION MFN Principle (for Goods) Let us assume that Vanin, Medatia and Tristat are WTO Members and that Rauritania is not. The MFN principle would prohibit Vanin's customs authorities from levying a customs duty of 10% for imported watches originating in Medatia, while levying a lower customs duty of 5% for imported watches originating in Tristat. The MFN principle requires that the WTO favourable treatment (5%), be granted automatically and unconditionally to imported watches originating from all WTO members (in this case, Medatia). The application of this principle would be the same if the "best treatment" had been initially granted to watches originating in Rauritania, which is not a WTO Member. One relevant issue is whether watches from Medatia are "like products" vis-à-vis watches from Tristat. If they are not like products, then different treatment (customs duty) may be applied. However, assuming that they are like products, there would be a violation of the MFN obligation by Vanin. However, if one of the permitted specific exceptions to the MFN or general WTO obligations applies, Vanin's conduct can be considered a permitted derogation and would therefore be consistent with its WTO obligations. EXERCISES: 9. GATT Article I.1 says: "With respect to customs duties any advantage granted by any Member to any product originating in or destined for any other COUNTRY shall be accorded immediately and unconditionally." Why did the drafters of Article I.1 of the GATT 1994 refer to "any other COUNTRY" and not "any other MEMBER"? 37

60 II.B. THE MFN PRINCIPLE UNDER GATS Under Article II of the GATS, WTO members are held to extend immediately and unconditionally to services and service suppliers of all other members "treatment no less favourable than that accorded to like services and service suppliers of any other country". Therefore, the best access conditions that have been conceded to one country must be extended to all WTO members. This amounts to a prohibition, in principle, of preferential treatment among Members, or groups of Members, in individual sectors, or of reciprocity provisions which confine access benefits to trading partners granting similar treatment. The MFN obligation is applicable to any measure that affects trade in services in any sector falling under the Agreement, whether specific commitments have been undertaken or not. SPECIFIC EXEMPTIONS Derogations are possible in the form of Article II-Exemptions. WTO members were allowed to seek exemptions under the Annex on Article I Exemptions before the GATS entered into force. New exemptions can only be granted to new members at the time of accession or, in the case of current members, by way of a waiver under Article IX:3 of the WTO Agreement. All exemptions should in principle not last longer than 10 years and are subject to periodic review in the Council for Trade in Services; Exemptions in Maritime transport services are still possible (Annex on Negotiations on Maritime Transport Services and doc. S/L/24). Note that the GATS allows groups of Members to enter into economic integration agreements (Article V) and to mutually recognize regulatory standards and certificates (Article VII), subject to certain conditions. II.C. THE MFN PRINCIPLE UNDER TRIPS The MFN Principle under the Agreement on Trade Related Aspects of Intellectual Property ("TRIPS Agreement") is found in Article 4 of the TRIPS Agreement. It requires that "With regard to the protection of intellectual property, any advantage, favour, privilege or immunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members...". The wording of Article 4 of the TRIPS Agreement is similar to that of GATT Article I. However, unlike the GATT, in which the subject of MFN treatment is goods, or GATS in which the subjects of MFN treatment is services or service suppliers, in the context of the TRIPS Agreement, the subject of MFN treatment is "nationals". The term national includes persons, natural or legal, who are domiciled or who have a real and effective industrial or commercial establishment in that customs territory. The MFN principle under TRIPS applies to any advantage conferred to the nationals of any other country, even if the benefited country is not a WTO Member. Article 1.3 states that "when 'nationals' are referred to in this Agreement, they shall be deemed, in the case of a separate customs territory Member of the WTO, to mean persons, natural or legal, who are domiciled or who have a real and effective industrial or commercial establishment in that customs territory". The footnote 38

61 concerns only separate customs territory i.e., a minority of the Membership. For further information see the text of Article 1.3 itself. SPECIFIC EXEMPTIONS There are some important exemptions specifically related to the MFN Principle in the TRIPS Agreement. These are listed in Article 4 (a) - (d) of the TRIPS Agreement. EXERCISES: 10. Most-favoured-nation treatment must be ensured for which types of services? 39

62 III. NATIONAL TREATMENT (ARTICLE III) In this section, the National Treatment principle, which constitutes the second component of the non discrimination pillar, will be discussed. The first component is the MFN principle, presented in the previous section. IN BRIEF Whilst the MFN principle seeks to ensure that a WTO Member does not discriminate between like products originating in or destined for other WTO Members the National Treatment principle addresses the treatment to be applied to imported products once they are in a Member's territory. The National Treatment principle prohibits a Member from favouring its domestic products over the imported products of other Member countries. National Treatment principle is foreseen for trade in goods by GATT Article III; for trade in services by GATS Article XVII; and for trade-related aspects of intellectual property rights by Article 3 of the TRIPS Agreement. III.A. THE NATIONAL TREATMENT PRINCIPLE IN RULES ON TRADE IN GOODS According to the National Treatment principle, each trading partner should treat imports no less favourably than they treat like domestically produced goods. The national treatment obligation for goods is provided in Article III of the GATT The relevant portions of GATT Article III are paragraphs 1, 2 and 4 as well as the explanatory Ad Note to Article III. GATT Article III: National Treatment on Internal Taxation and Regulation 1. Members recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production. 2. The products of the territory of any Member imported in to the territory of any other Member shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no Member shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph

63 4. The products of the territory of any Member imported into the territory of any other Member shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations, transportation, and requirements affecting their internal sale, offering for sale, purchase, transportation distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product. ARTICLE III:1 - THE GENERAL OBLIGATION Article III:1 lays out the general objective and scope of the national treatment obligation. The stated objective is to ensure that internal measures are not applied to domestic and imported products so as to afford protection to domestic production. With regard to the scope of this provision, the national treatment obligation applies to internal measures as opposed to border measures. Thus, before seeking to apply Article III, it is important to ensure that the measure at issue is an internal measure and not a border measure, as the latter would fall under Articles II and XI and not Article III. Distinguishing between an internal measure and border measure is assisted by the Ad Note to Article III which provides the following: AD NOTE: TO ARTICLE III "Any internal tax or other internal charge, or any law, regulation or requirement of the kind referred to in paragraph 1, which applies to an imported product and to the like domestic product and is collected or enforced in the case of the imported product at the time or point of importation, is nevertheless to be regarded as an internal tax or other internal charge, or a law, regulation or requirement of the kind referred to in paragraph 1, and is accordingly subject to the provisions of Article III." ARTICLE III:2 - INTERNAL TAXATION Article III:2 applies the general non-discrimination principle set out in paragraph 1 to internal taxation. The first sentence deals with the internal taxation of like products, while the second sentence (by cross reference with the relevant Ad Note) deals with the internal taxation of directly competitive or substitutable products. ARTICLE III:2 - FIRST SENTENCE To establish an infringement of the first sentence, one must show that 2 elements are present: (1) The imported and domestic products are like products; (2) The imported products are taxed in excess of the domestic products. 41

64 (1) The imported and domestic products are like products The determination of likeness for the purposes of the first sentence is to be made on a case by case basis but the following 4 criteria should be used to assist in the determination: 1. The product's end uses; 2. Consumer tastes and habits; 3. The product's properties nature and quality; 4. Tariff classification. (2) The imported products are taxed in excess of the domestic products The taxes levied on imported products can not be in excess of those levied on like domestic products. The slightest margin of excessive taxing will constitute an infringement, even if the margin is de minimis. ARTICLE III:2 - SECOND SENTENCE If either of the elements in the first sentence can not be established, one must still consider if there is an infringement of the second sentence, which casts a wider net. To establish an infringement of the second sentence, one must show 3 elements: (1) The imported and domestic products are directly competitive or substitutable; (2) The domestic and imported products are not similarly taxed; (3) The dissimilar taxation is applied to give protection to domestic production. (1) The imported and domestic products are directly competitive or substitutable The second sentence of Article III:2 applies to competitive or directly substitutable products. This is a much broader concept than likeness in the first sentence because the first sentence applies only to products that are perfectly substitutable whereas the second sentence is broad enough to include products that are imperfectly substitutable. (2) The domestic and imported products are not similarly taxed In the first sentence, even the slightest difference in tax between imported and domestic products will lead to inconsistency with the national treatment obligation. This is not the case with regard to the second sentence where the requirement is that the product must be "similarly taxed" in that text the difference in tax must be more than de minimis to constitute an infringement of the national treatment obligation. 42

65 (3) The dissimilar taxation is applied to give protection to domestic production If it is established that a dissimilar taxation is applied, it must thereafter be established that this was applied so as to afford protection to domestic production [is not a matter of intent]. ARTICLE III:4 - INTERNAL LAWS, REGULATIONS AND REQUIREMENTS As opposed to Article III:2 which deals with internal taxation, the national treatment obligation in Article III:4 is concerned with internal laws, regulations and requirements. There are three elements that must be shown to establish an infringement of Article III:4. They are: (1) The measure is a law, regulation or requirement covered in Article III:4; (2) The imported and domestic products are like products; (3) The imported products are afforded less favourable treatment. (1) The measure is a law, regulation or requirement covered in Article III:4 Article III:4 relates to all laws, regulations, and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products. (2) The imported and domestic products are like products The scope of likeness in paragraph 4 is wider than in the first sentence of paragraph 2. This is because the scope of the first sentence must be read in light of its interpretive relationship with the second sentence, something that does not apply to Article III.4. Determining if products are like for the purposes of Article III:4 should be made on a case by case basis, employing the following 4 criteria: 1. The physical properties of the products. 2. The extent to which the products are capable of serving the same or similar uses. 3. The extent to which consumers perceive and treat the goods as substitutable. 4. The international classification of the goods for tariff purposes. (3) The imported products are afforded less favourable treatment The national treatment obligation requires that imported and domestic products are given equal treatment in terms of competitive opportunities. Therefore, if a measure gives imported products less favourable treatment than it gives to like domestic products, the measure will be inconsistent with the national treatment obligation. EXERCISES: 11. Member prohibits advertisements of foreign watches. Is this compatible with the GATT 1994? 43

66 III.B. EXCEPTIONS As with MFN, there are general and specific exceptions to the principle of national treatment. General exceptions of a horizontal nature and protective measures which also constitute a derogation to other rules are examined in Part IV. Specific exceptions only related to the National Treatment principle can be summarized as follows: GOVERNMENT PROCUREMENT (GATT ARTICLE III:8A) Advantages or preferences can be accorded to domestic products over imported ones if government agencies purchase such products for government purposes and not for commercial resale or use in the production of goods for commercial sale. The Plurilateral Agreement on Government Procurement contains specific rules pertaining to the opening of the procurement process by government entities to international competition. Because of its plurilateral nature, the rights and obligations it contains only bind the members that have ratified it. The Plurilateral Agreement on Government Procurement originated among some GATT Contracting Parties in the Tokyo Round, and developed further in the Uruguay Round. SUBSIDIES TO DOMESTIC PRODUCERS (GATT ARTICLE III:8B) Governments can provide subsidies (including payments to domestic producers derived from the proceeds of internal taxes or charges applied consistently with the provisions of Article III) exclusively to domestic producers. GATT Contracting Parties and WTO Members considered that the practice of granting production subsidies was not necessarily illegal. CINEMATOGRAPH FILMS (GATT ARTICLE III:10 AND ARTICLE IV) As an exception to the National Treatment principle, negotiators of the GATT retained the possibility of giving preferences to products emanating from the national movie industry (exposed cinematograph films). National preferences are governed by the provisions of GATT Article IV, and take the form of internal quantitative regulations in "screen quotas". This provision must now be read together with specific commitments taken by Members in the audiovisual sector in the GATS Agreement. 44

67 ILLUSTRATION National Treatment (for Goods) Let us assume that Vanin, Medatia and Tristat are WTO Members. GATT Article III embodies the principle of National Treatment. It prohibits WTO members from discriminating in favour of domestically produced goods. The result is that once the applicable border duties (e.g. tariffs) have been paid, the importing Member cannot apply any further burdens on imports that are not applied to the like domestic products. Article III applies to two types of internal measures. Article III.2 applies to "internal taxes or other internal charges", "whilst Article III.4 applies to" all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. Therefore, Vanin would be prohibited from applying a sales tax of 5% on domestically produced watches, while applying a sales tax of 10% on imported watches from Medatia or Tristat. Based on the assumption that the domestic and imported watches are "like products", this sales tax would violate Article III.2 because the measure taxes imported products "in excess" of the applicable tax on domestic like products. III.C. NATIONAL TREATMENT IN GATS Article XVII of the GATS governs national treatment for services: "1. In the sectors inscribed in its Schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers. (10) 2. A Member may meet the requirement of paragraph 1 by according to services and service suppliers of any other Member, either formally identical treatment or formally different treatment to that it accords to its own like services and service suppliers. 3. Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of competition in favour of services or service suppliers of the Member compared to like services or service suppliers of any other Member." National treatment under GATS Article XVII implies the absence of discriminatory measures that may modify the conditions of competition in favour of domestic services and service suppliers as compared to foreign like services and like service suppliers. Hence, WTO members are not to modify, in law or in fact, the conditions of competition in favour of their own service industry. National treatment (as well as market access) in the GATS is not a general obligation, but is granted only in sectors which a Member lists in its national schedule of "specific commitments". To explain: each WTO Member is required to have a schedule of specific commitments that identifies the services for which the 45

68 Member guarantees market access (Article XVI) and national treatment (Article XVII), and any limitations that may be attached thereto. That is, limitations may be attached to specific commitments in order to reserve the right to apply measures inconsistent with full market access and/or national treatment. Hence, the extension of national treatment in any sector may be made subject to conditions and qualifications. Limitations may be listed to provide cover for inconsistent measures, such as discriminatory subsidies and tax measures, residency requirements, etc. It is for the individual Member to ensure that all potentially relevant measures are listed (examples of frequently scheduled national treatment restrictions are in the Attachment 1 to document S/L/92). This means that the GATS allows each Member to adjust the conditions of market entry and participation to its sector-specific objectives and constraints. Market access and national treatment specific commitments guarantee minimum levels of treatment, but do not prevent Members from being more open (or less discriminatory) in practice. Note At a glance, it may be difficult to understand why the national treatment obligation under the GATS is of a more limited in scope confined to scheduled services and subject to possible limitations than under the GATT where it applies across the board.the reason lies in the particular nature of services trade. Universal national treatment for goods does not necessarily imply free trade. Imports of foreign goods can still be controlled by tariffs which, in turn, may be bound in the country's tariff schedule. By contrast, given the impossibility of operating tariff-type measures across intangible services transactions, regulatory distinctions are the only way to control the supply of foreign services. In these conditions, the general extension of national treatment in services would in practice be tantamount to guaranteeing free access. III.D. NATIONAL TREATMENT IN TRIPS National Treatment had long been a feature of intellectual property conventions. For trade-related aspects of intellectual property rights (TRIPS), the national treatment principle prohibits treatment of foreign nationals on less favourable terms than those accorded to nationals in the context of the implementation of national or international intellectual property laws or regulations. The obligation is found both in Article 3 of the TRIPS Agreement itself and in the provisions of the Paris Convention, the Berne Convention, the Rome Convention and the Treaty on Intellectual Property in Respect of Integrated Circuits (IPIC Treaty) which are incorporated by reference in the TRIPS Agreement. These obligations are worded somewhat differently from Article 3 of TRIPS. Naturally, such national treatment obligations are limited in scope to the intellectual property covered by the pertinent convention. 46

69 SPECIFIC EXEMPTIONS There are some exemptions specifically related to the national treatment principle in Article 3 of TRIPS. They refer to exceptions which are provided in the: (1) Paris Convention (1967) for the Protection of Industrial Property; (2) Berne Convention (1971) for the Protection of Literary and Artistic Works; (3) Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations; and the (4) Treaty on Intellectual Property in Respect of Integrated Circuits. 47

70 IV. SUMMARY PART I THE MAIN PRINCIPLES OF THE GATT As you have seen there are two main principles of non-discrimination, the MFN and the national treatment principles. GATT ARTICLES CONTAINING THE PRINCIPLES Most Favoured Nation Article I National Treatment Article III GATS ARTICLES CONTAINING THE PRINCIPLES Most Favoured Nation Article II:1 National Treatment Article XVII TRIPS AGREEMENT ARTICLES CONTAINING THE PRINCIPLES Most Favoured Nation Article 4 National Treatment Article 3 of the TRIPS Agreement EXCEPTIONS AND DEROGATIONS TO THESE BASIC OBLIGATIONS Specific exceptions are included in the articles containing the principles There are also General Exceptions Under the GATT, the subject of MFN treatment is goods and under the GATS the subjects are services and service providers, while in the context of the TRIPS Agreement, the subject of MFN treatment is "nationals". For goods, the MFN principle prohibits discrimination between imports irrespective of their origin or destination while the national treatment principle prohibits discrimination between imported and locally produced like products. The MFN Principle for services obliges WTO Members to "...accord immediately and unconditionally to services and service providers of any other Member, treatment no less favourable than that it accords to like services and service providers of any other country". For intellectual property, any advantage, favour, privilege or immunity granted by a Member with regard to the protection of intellectual property, to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members. For goods, whilst the MFN principle seeks to ensure that a WTO Member does not discriminate between like products originating in or destined for WTO Members, the national treatment principle prohibits a Member from favouring its domestic products over the imported products of other Members. For services, the national treatment principle (as well as the provisions on market access) commit Members to giving no less favourable treatment to foreign services and service suppliers than provided for in the 48

71 relevant columns of their respective schedule of commitments. For intellectual property, each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection of intellectual property, subject to the exceptions already provided in, respectively, the Paris Convention (1967), the Berne Convention (1971), the Rome Convention or the Treaty on Intellectual Property in Respect of Integrated Circuits. In addition to the specific exceptions that you have seen for the principles for goods, services and intellectual property rights, there are other exceptions of a horizontal nature, which also constitute a derogation to other rules. These horizontal exceptions and protective measures include the general and security exceptions provisions in the GATT, GATS and TRIPS Agreements. 49

72 PROPOSED ANSWERS: 1. If GATT Article I.1 referred to any other MEMBER, this would mean that members need only ensure that the best treatment, given to products originating in one of the members, be extended to the other members. This could therefore mean that a Member could grant an advantage to products originating in a country which is not a WTO Member without having to extend this MFN treatment to the other WTO Members. With the present text (using COUNTRY), the advantages given to products from one country must also be extended to products from all WTO members. Consequently, WTO members get the best treatment except for derogations permitted by the WTO Agreements. 2. For all services covered by GATS. In the GATS, the MFN obligation (Article II) is applicable to any measure that affects trade in services in any sector falling under the Agreement, whether or not specific commitments have been made. Exemptions could have been sought at the time of the acceptance of the Agreement (for acceding countries: date of accession), or, in the case of current Members, by way of a waiver under Article IX:3 of the WTO Agreement. They are contained in country-specific lists, and their duration must not exceed ten years in principle. 3. The ban on advertising constitutes a measure "affecting the internal sale" of imported "like products" under GATT Article III.4. This measure would be a violation of Article III.4 if foreign and domestic watches are "like products" under Article III.4, because the prohibition on the advertising of foreign watches amounts to treating imported goods less favourably than "like" domestic goods. 50

73 PART II: BASIC PRINCIPLES RELATED TO MARKET ACCESS I. INTRODUCTION As you certainly imagine, there are many possible impediments to market access for goods, services and intellectual property. The two main categories of barriers to market access for goods are (1) tariff and (2) non tariff barriers. The reduction of tariff and non-tariff barriers to market access is, together with the elimination of discrimination, a key instrument to achieve the objectives of the WTO. The various WTO agreements have rules on market access. 51

74 II. WHAT IS A TARIFF? Tariffs, also called "customs duties", are the most common and widely used barrier to market access for goods. A tariff is a financial charge in the form of a tax, imposed on merchandise imports. Tariffs can also be imposed on exports. Tariffs give a price advantage to similarly produced local goods and raise revenue for governments, as market access is conditional upon the payment of the custom duty. In addition, a tariff can be used to promote a rational allocation of scarce foreign exchange. Tariffs can be specific, ad valorem, or mixed. A specific tariff is an amount based on the weight, volume or quantity of product, for example, US$ 7 per kilo. Ad valorem tariff refers to the tax levied as a percentage of value, for example, a 7% duty on cars. So the duty on a car worth US$ 7,000 would be 490. A mixed or compound tariff is made up of a specific and ad valorem tariff. II.A. NEGOTIATIONS ON TARIFF REDUCTIONS The WTO does not prohibit the use of tariffs, however, there is the recognition that they often constitute obstacles to trade, hence there is the obligation on members to negotiate on tariffs. Article XXVIIIbis of the GATT 1947 contains the original mandate on tariff negotiations. Current negotiations under the Doha Development Agenda focus on the reduction of tariffs in agriculture and non-agricultural market access. One result of the Uruguay Round was countries' commitments to cut tariffs and to "bind" their customs duty rates to levels, which are difficult to increase. Countries made commitments on specific categories of goods. In the Uruguay Round, there was also a significant increase in the number of "bound" tariffs, or duty rates. II.B. PRINCIPLES ON TARIFF NEGOTIATIONS Tariff negotiations are based on (1) reciprocity and mutual advantage, and (2) the most favoured nation (MFN) treatment obligation. II.B.1. RECIPROCITY AND MUTUAL ADVANTAGE Article XXVIIIbis of the GATT 1994 provides for reciprocity and mutual advantage with regard to tariff negotiations. According to the principle, where a Member requests another Member to reduce its tariffs on certain products, it must also be prepared to reduce its own tariffs on products of export interest to the Member to whom the request is made. However, the reciprocity and mutual advantage does not apply to negotiations between developed and developing countries. According to the Enabling Clause, developed-country members shall not seek, neither 52

75 shall developing-country members be required to make concessions that are inconsistent with the latter's development, financial and trade needs. Similarly, the Enabling Clause instructs developed-country members to exercise the utmost restraint in seeking concessions from least-developed country Members in return for commitments to reduce or remove tariffs. II.B.2. MFN TREATMENT According to the MFN treatment obligation set out in Article I:1 of the GATT 1994, any tariff reduction a Member grants to any country, as a result of tariff negotiations with that country, must be granted to all WTO members immediately and unconditionally. II.C. NATIONAL TARIFFS The word "tariff" also has a second meaning. It sometimes refers to a structured list of products description and their corresponding customs duties. Most national tariffs reflect the structure in the Harmonized Commodity Description and Coding System - an international commodity classification system. This comes from the International Convention on the Harmonized Commodity Description and Coding System which entered into force on 1 January 1988 and to which most WTO members are a party. II.D. SCHEDULE OF CONCESSION (ARTICLE II) The schedules of tariff concessions are legal instruments attached to the Marrakesh Agreement - through the "Marrakesh Protocol" - and form an integral part of the legally binding commitments made by WTO members. A thorough reading of the Schedule - including footnotes and head notes is necessary for one to get a precise understanding of what was agreed by the WTO Member. Specific limitations or particular conditions may be agreed during the negotiations and inscribed as part of, or as limitation to, commitments in the schedule. Each WTO Member has a Schedule, except for members that are part of a customs union; they sometimes have a schedule together with the other members of the union. GATT Article II regulates the goods schedule of tariff concessions. (See the Online Library for an example of a schedule) GATT Article II.1b - first sentence: Schedule of Concessions. 1.b) "The products described in Part I of the Schedule relating to any Member, which are the products of territories of other Members, shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set forth and provided therein " The schedules consist of a list of products for which a maximum applicable customs duty has been agreed by the Member concerned. The product is identified by a code and its description is usually based on the 53

76 Harmonized Commodity Description and Coding System of Classification (HS). customs duty represents the "bound" level of the tariff. This maximum applicable The tariff concessions or "bindings" of each WTO Member are set out in that particular Member's Schedule of Tariff Concession. Each WTO Member may negotiate the "bound" level of an import duty for each product in the Schedule. Members are not obliged to bind tariffs on all imports of goods. However, after more than 50 years of GATT and WTO, many tariff levels are now bound. WHAT IS A "BOUND TARIFF"? A "bound tariff" is a tariff for which there is a legal commitment not to raise it above the bound level. The bound level of the tariff is the maximum level of customs duty to be levied on products imported into a Member. Each Member is responsible for negotiating its "bound levels". The "bound levels" are agreed upon during "market access negotiations", which are often bilateral. The bound levels are sometimes determined by "target levels", or reduction objectives that are to be met by "tariff cuts". Acceding countries also have to negotiate their Schedule of Tariff Concessions in the market access negotiations (usually bilaterally), which take place during the accession process. A bound tariff can differ from an applied tariff as a Member can apply a different (lower) tariff than the one it committed to apply as a maximum. Members can apply lower customs duties ("applied tariff level") but they cannot apply customs duty at a level higher than the one indicated in their Schedule of Tariff Concession (bound tariff level). Article II of GATT applies to imported products. Consequently, economic operators are guaranteed that the ordinary customs duty which will be levied on their imports will not be higher than the level indicated as the "bound level" in the Schedule of Tariff Concessions of the importing Member. EXERCISES: 1. What is a tariff? 2. List three purposes of tariffs/customs duties? 54

77 II.E. RENEGOTIATION OF CONCESSIONS/MODIFICATION OF SCHEDULES Renegotiation of concessions is governed by the rules and provisions in GATT Article XXVIII and GATT Article XXVIIIbis, GATT 1994 Understanding on the interpretation of Article XXVIII as well as the Note Ad Article XXVIII. If a Member wishes to withdraw its previous commitment and impose a higher customs duty than the bound rate in its Schedule, two alternatives are available under GATT Article XXVIII: 1. the level of the tariff concession can be TEMPORARILY "waived" - where the Member has, under exceptional circumstances, received specific authorization from all the other Members; 2. the level of the tariff concession can be PERMANENTLY changed (decreased or increased). The renegotiation of any tariff concession requires compensating the exporting Members. II.F. OTHER DUTIES & CHARGES Article II of GATT states, "The products shall be exempt from ordinary customs duties " The "bound rate" of customs duty indicated in the Schedule of Tariff Concessions represents the maximum customs duty that WTO members have committed to levy on imports from other members, under general WTO rules. However, "other duties and charges (ODCs)" may be imposed in addition to the "ordinary customs duty". In such circumstances charges can exceed the "bound level" inscribed in the Schedule of Tariff Concessions. However, for ODCs to be applicable, they MUST be registered in the Schedule and they must not exceed the level indicated therein. Other duties and charges are governed by GATT Article II:1 b - second sentence. The Understanding on the Interpretation of GATT Article II.1.b, clarifies the types of duties and charges that can be collected in addition to the "ordinary customs duties". Examples of these ODCs are: Import surcharge, i.e. a duty imposed on an imported product in addition to the ordinary custom's duties; Security deposit to be made on the importation of goods; Statistical tax imposed to finance the collection of statistical information; and Customs fee charged for processing the goods. EXERCISES: 3. In Tristat's Schedule of Tariff Concessions, the bound duty for pocket watches set is 15%. Can Tristat apply a tariff different from the 15% listed in its Schedule? 55

78 III. NON-TARIFF BARRIERS III.A. INTRODUCTION Non-tariff barriers also restrict the market access of goods. Non-tariff barriers include quantitative restrictions (such as quotas) and other barriers (for example, lack of transparency in trade regulation, unfair and arbitrary application of trade regulations, customs formalities, technical barriers to trade and government procurement practices). III.B. QUANTITATIVE RESTRICTIONS What is a quantitative restriction (QR)? Can Members apply QRs? There is no explicit definition of the term "quantitative restriction" in the WTO. An implicit definition is provided by GATT Article XI:1, which proscribes any prohibition or restriction other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures. The Council for Trade in Goods, in a 1996 Decision (G/L/59, Annex) provides an illustrative list of quantitative restrictions. This list includes: prohibition, prohibition except under defined conditions, global quota, global quota allocated by country, bilateral quota (i.e. anything less than a global quota), automatic licensing, non automatic licensing, quantitative restriction made effective through state-trading operations, mixing regulation, minimum price triggering a quantitative restriction, and "voluntary" export restraints. III.C. GENERAL ELIMINATION OF QUANTITATIVE RESTRICTIONS (ARTICLE XI) Quantitative restrictions are a ban on imports or exports after a determined quantity (the quota) has entered the territory. According to Article XI:1 of GATT, quantitative restrictions should not be maintained by WTO Members. The prohibition means that only import duties can be used to regulate goods trade at customs. The "General Elimination of Quantitative Restrictions (QRs) is regulated by GATT Article XI (for trade in goods) and GATS Article XVI (for trade in services). Therefore, a WTO Member cannot, as a general rule, impose import or export prohibitions or restrictions in quantities or value on the goods of another Member. The only protective barriers that WTO Members can institute or maintain are "duties, taxes or other charges" compatible with the GATT rules already discussed. Consequently, quantitative restrictions, whether "quotas, import or export charges or other measures", are a violation of the rule in Article XI:1. The list of measures in Article XI:1 is not exhaustive. Thus, if a measure would have an effect similar to those noted in Article XI, the measure might be prohibited under Article XI:1. The general prohibition on quantitative restrictions applies equally to import and export measures. trading enterprises (Article XVII) are also prohibited from imposing quantitative restrictions. State 56

79 Finally, we must also note GATT Article XIII: Non-discriminatory Administration of Quantitative Restrictions 1. No prohibitions or restrictions shall be applied by any Member on the importation of any product of the territory of any other Member or on the exportation of any product destined for the territory of any other Member, unless the importation of the like product of all third countries or the exportation of the like product to all third countries is similarly prohibited or restricted. Where authorized by the GATT, quantitative restrictions must be imposed on a non-discriminatory basis. In other words, the Member imposing the quantitative restrictions is not allowed to favour any country over another. The Member is expected to impose them across the board. 2. In applying import restrictions to any product, Members shall aim at a distribution of trade in such product approaching as closely as possible the shares which the various Members might be expected to obtain in the absence of such restrictions. This provision focuses on the allocation of quotas between exporting Members and aims to ensure that when imposed, quantitative restrictions do not distort ordinary trade flows. In other words, quotas should be applied equally to goods from all origins and their allocations should correspond as closely as possible to the expected market shares that would have existed in the absence of quotas. Nevertheless, agreements between the importing Member and its principal suppliers are possible. SPECIFIC EXCEPTIONS The specific exceptions to the general prohibition against the use of QRs are to: 1. Prevent critical shortage of foodstuffs or other essential products (GATT Article XI:2a); 2. Remove temporary surpluses of a domestic like product for which the imported product is a direct substitute (GATT Article XI:2(c)(ii); 3. Uphold import restrictions on agricultural and fisheries products (GATT Article XI:2c). The drafters of the GATT realized that in specific circumstances (shortages or surplus of goods domestically produced) one could derogate from the "no Quantitative Restrictions" rules to prevent or deal with critical situations. The exception contained in GATT Article XI:2(c) created a quasi-general derogation for agricultural policies and measures relating to fishery products and constituted the essential provision which led to the "special treatment" for agriculture before the Uruguay Round. The "agricultural exception" ended when the WTO Agreement on Agriculture entered into force. The WTO Agreement on Agriculture superseded GATT Article XI:2(c). Article 4 of the Agreement on Agriculture provides, among other things, that quotas must be transformed into tariffs (in a process called "tariffication"). Consequently, under the WTO agreements, quantitative restrictions remain possible only on fishery products. 57

80 III.D. TARIFF-QUOTA One must distinguish between quotas, which are generally prohibited, and tariff-rate quotas (TRQs). TRQs are predetermined quantities of goods which can be imported at a "preferential" rate of customs duty ("in quota Tariff Rate"). Once the TRQ has been filled, one can continue to import the product without limitation so it is not a quantitative restriction in the sense of GATT Article XI but at a higher tariff rate ("out-of-quota Tariff Rate"). The "out-of-quota Tariff Rate" is generally the MFN rate. In a tariff-rate quota, specific quantities of goods may be imported at different tariff levels The allocation of the TRQ should follow the disciplines in GATT Article XIII (Non discriminatory Administration of Quantitative Restrictions) which provides that TRQs should be applied similarly to products from all origins, but allocations should also respond as closely as possible to the expected markets share that would have existed in the absence of TRQs. Agreements with principal suppliers are also possible. The following diagram shows how a tariff-quota might look like: Figure 1: Tariff-Quota Imports entering under the tariff-rate quota (up to 1,000 tons) are generally charged 10%. Imports entering outside the tariff-rate quota are charged 80%. After the Uruguay Round, the 1,000 tons would be based on actual imports in the base period or an agreed "minimum access" formula. 58

81 IV. OTHER NON TARIFF BARRIERS In addition to customs duties and other charges, as well as quantitative restrictions, trade in goods is also impeded by other non-tariff barriers that restrict market access. Lack of transparency, unfair and arbitrary application of trade measures, customs formalities and procedures, and other measures or actions such as pre-shipment inspection, marks of origin, and measures relating to transit shipments, as well as other forms of inaction (failure to inform about applicable trade laws, regulations, procedures and practices, timely and accurately) may constitute a barrier to trade. The main non-tariff barriers in the multilateral trade system are: Technical Regulations and Standards: The Agreement on Technical Barriers to Trade (TBT Agreement), Sanitary and Phytosanitary Measures: The Agreement on Sanitary and Phytosanitary Measures (or the "SPS Agreement"), Lack of Transparency, unfair and arbitrary Application of Trade Measures: GATT Article X:3(a) Customs Formalities and Procedures: Article VIII:1(c) AND Article VIII:3 Pre-shipment Inspection: The Pre-shipment Inspection Agreement (PSI), Marks of Origin, Measures Relating to Transit Shipments Rules of Origin: The Agreement on Rules of Origin Import Licensing Procedures: The Agreement on Import Licensing Procedures 59

82 V. MARKET ACCESS FOR SERVICES In the case of trade in services, GATS Article XX contains a similar concept on market access to the GATT schedules for goods with some variations. As with national treatment, market access for services is not a general obligation but a series of commitments made in national schedules. Thus, in the case of market access, each party "shall accord services and service providers of other Members, treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its schedule". Commitments are undertaken with respect to each of the four different modes of service supply. Market access is a negotiated commitment in specified sectors. The provisions of GATS, laid down in Article XVI, cover six types of restrictions that must not be maintained in the absence of limitations. The restrictions relate to the: 1. Limitations on the number of service suppliers; 2. On the total value of service transactions or assets; 3. Number of operations or quantity of output; 4. Number of natural persons supplying a service; 5. Type of legal entity or joint venture through which a service is provided; 6. Any foreign capital limitations relating to maximum levels of foreign participation are to be progressively eliminated. The intention of the market-access provision is to progressively eliminate the following six types of measures mentioned above. These measures, except for (5) and (6), are not necessarily discriminatory, i.e. they may affect national as well as foreign services or service suppliers. Part IV of GATS establishes the basis for progressive liberalization in the services area through successive rounds of negotiations and the development of national schedules. It also permits, after a period of three years, parties to withdraw or modify commitments made in their schedules. Where commitments are modified or withdrawn, negotiations should be undertaken with interested parties to agree on compensatory adjustments. Where agreement cannot be reached, compensation would be decided by arbitration. They may assume additional commitments in the Schedule, for example, regarding, the implementation of specified standards or regulatory principles. Commitments are undertaken with respect to each of the four different modes of service supply. The purpose of commitments is similar to tariff concessions under GATT and aims to ensure stability and predictability of trading conditions. However, commitments are not a straitjacket. They may be renegotiated against compensation of affected trading partners (Article XXI); and there are special provisions that allow for flexible responses, despite existing commitments, in specified circumstances (developed later in the course). Therefore, commitments must not necessarily be complied with from the date of entry into force of a schedule. Rather, Members may specify in relevant part(s) of their schedule a timeframe for implementation. Such "pre commitments" are as legally valid as any other commitment. 60

83 VI. BARRIERS TO TRADE IN SERVICES Since domestic regulations, not border measures, influence services trade, the GATS contains provisions mandating that such measures of general application should be administered in a reasonable, objective and impartial manner. Also, there is a requirement that parties establish the means for prompt reviews of administrative decisions relating to the supply of services. The GATS also contains transparency requirements, among them the publication of all relevant laws and regulations. Furthermore, the provisions to facilitate the increased participation of developing countries in world services trade envisage negotiated commitments on access to technology, improvements in access to distribution channels and information networks and the liberalization of market access in sectors and modes of supply of export interest. The GATS contains obligations with respect to recognition requirements (educational background, for instance) for the purpose of securing authorizations, licenses or certification in the services area. The GATS encourages recognition requirements achieved through harmonization and internationally-agreed criteria. Further provisions state that parties are required to ensure that monopolies and exclusive service providers do not abuse their positions. Restrictive business practices should be subject to consultations between parties with a view to their elimination. While parties are normally obliged not to restrict international transfers and payments for current transactions relating to commitments under the Agreement, there are provisions allowing limited restrictions in the event of balance of payments difficulties. However, where such restrictions are imposed they would be subject to conditions; including that they are non-discriminatory, that they avoid unnecessary commercial damage to other parties and that they are of a temporary nature. EXERCISES: 4. List the six types of restrictions that Members shall not maintain or adopt In sectors where market-access commitments are undertaken, unless otherwise specified in its Schedule as per GATS Article XVI? 5. Why are domestic regulation important to market access for services? 61

84 VII. SUMMARY PART II Tariffs are the most common and widely used barrier to market access for goods. A tariff is a financial charge in the form of a tax, imposed on merchandise imports. Tariff rates are listed in the Schedules of Tariff Concessions. WTO members are obliged to adhere to the bound tariff rates in their Schedules. However, WTO members can modify the concessions in the Schedules of Tariff Concessions by using the renegotiation procedures outlined in GATT Article XXVIII for trade in goods. Obligations on the bound tariff level can be found in GATT Article II, XXVIII, XXVIIIbis and the Understanding on Article XXVIII. Non-tariff barriers also restrict market access. Hence, WTO rules prohibit the introduction or maintenance of quantitative restrictions. The rules on quantitative restrictions are governed by Articles XI and XIII. The only restrictions on free trade that the WTO permits are duties, taxes or other charges, and safeguards or emergency actions in limited circumstances. They are also rules for other non-tariff barriers. For example, on SPS measures, or TBT measures. For trade in services, each WTO member is required to have a Schedule of Specific Commitments that identifies the services for which the Member guarantees market access, national treatment, and any limitations that may be attached. GATS Article XVI (Market Access) and XVII (national treatment) commit Members to giving no less favourable treatment to foreign services and service suppliers than provided for in the relevant columns of their Schedule. Commitments thus guarantee minimum levels of treatment, but do not prevent Members from being more open (or less discriminatory) in practice. Members may also modify pursuant to the provision in Article XXI of the GATS Agreement. There are many rules, which allow derogations to these basic obligations on market access. In this Part, you studied the specific exemptions; you will see the general exemptions in Part IV. 62

85 PROPOSED ANSWERS: 1. A tariff is a financial charge in the form of a tax, imposed on merchandise imports. Tariffs can also be imposed on exports. The word "tariff" also refers to a structured list (the Harmonized Commodity Description) of products description and their corresponding customs duties. 2. (1) To give a price advantage to similarly produced local goods (2) To raise revenue for governments (3) To promote a rational allocation of scarce foreign resource. 3. Yes. Tristat can apply a tariff different than the one listed in its Schedule of Tariff Concessions in two circumstances. (1) Tristat may have an applied tariff lower than the bound tariff in its Schedule. However, if Tristat offers a lower rate to Vanin for example, it must apply this rate to all Members. (2) Tristat may charge a higher tariff that the bound rate in its Schedule to any non-member, such as Rauritania, since WTO obligations do not extend to non-members. 4. Limitations on: the number of service suppliers; the total value of service transactions or assets; the number of operations or quantity of output; the number of natural persons supplying a service; the type of legal entity or joint venture through which a service is provided; any foreign capital limitations relating to maximum levels of foreign participation are to be progressively eliminated. 5. In contrast to goods which is mostly imported in its physical form services cannot always be easily subjected to border measures. Hence, domestic regulations has a significant influence on trade in services. 63

86 PART III: TRADE REMEDIES People sometimes refer to the two concepts studied in this Part at the same time i.e. anti-dumping (AD) measures and countervailing duties (CVD) but there are fundamental differences. Dumping and subsidies share a number of similarities. Many countries handle the two under a single law, apply a similar process to deal with them and give a single authority responsibility for investigations. Occasionally, the two WTO committees responsible for these issues meet jointly. The reaction to dumping and subsidies is often a special offsetting import tax (countervailing duty in the case of a subsidy). This is charged on products from specific countries and therefore it breaks the GATT principles of binding a tariff and treating trading partners equally (MFN). The agreements provide an escape clause, but they both also say that before imposing a duty, the importing country must conduct a detailed investigation that shows properly that domestic industry is being hurt. Nevertheless, there are also fundamental differences, and these are reflected in the agreements. Dumping is an action by private firms and it is not actually prohibited by the WTO provisions. With subsidies, it is the government or a government agency that acts, either by paying out subsidies directly or by requiring companies to subsidize certain customers. Anti-dumping measures are the conditional right to take action to correct the effects caused by distorting practice of private firms called "dumping". The provisions regulate the right of the importing WTO Member to protect its domestic market against "unfairly" priced imports. The WTO is an organization of countries and their governments. The WTO does not deal with companies and cannot regulate companies' actions such as dumping. Therefore the Anti-dumping Agreement only concerns the actions governments may take against dumping. Anti-dumping measures are disciplined by GATT Article VI and the Anti-dumping Agreement. Dumping takes place when a product of one firm is introduced into the commerce of another country at less than the normal value of the product. Investigations have to be conducted to determine the margin of dumping and to define the level of the anti-dumping duty. With regard to subsidies, governments act on both sides: they subsidize and they act against each others' subsidies. Therefore the subsidies SCM Agreement disciplines both the subsidies and the reactions. Subsidies are governed by the SCM Agreement. Subsidies on Agricultural products are governed by the Agreement on Agriculture. The SCM Agreement defines two categories of subsidies: prohibited and actionable. It originally contained a third category - non-actionable subsidies. This category existed for five years and ended on 31 December The SCM Agreement regulates the actions countries can take to counter the effects of subsidies. The SCM Agreement further elaborated the basic principles in Article VI governing the investigation, determination and application of countervailing duties. A Member can also use a countervailing measure if it determines that its imports are subsidized, that the subsidized imports are causing injury to a domestic industry and there is a causal link between the subsidies and the injury to the domestic industry. The disciplines set out in the SCM Agreement govern only specific subsidies. The SCM Agreement also allows Members to challenge through the WTO dispute settlement mechanism the consistency of any subsidy programme with the WTO rules. 64

87 PART IV: EXCEPTIONS TO THE BASIC PRINCIPLES I. INTRODUCTION This section illustrate the circumstances under which a WTO Member can invoke the general and security exceptions. WTO members are obliged not to discriminate (MFN and national treatment) among themselves, to follow certain rules on market access, like for example, they cannot withdraw "liberalization commitments/concessions" that they made without following pre-determined rules, and there is a prohibition on the use of quantitative restrictions by Members. Nevertheless, in certain circumstances, WTO members may derogate from these obligations, provided they comply with certain requirements. The category of exceptions discussed in this Part is horizontal in nature, i.e. they allow a Member to derogate from any of the GATT, GATS and TRIPS obligations. 65

88 II. GENERAL EXCEPTIONS II.A. IN THE GATT Article XX (General Exceptions) of GATT 1994 recognizes that governments may need to apply and enforce measures for purposes such as the protection of public morals; human animal or plant life and health; and the protection of national treasures. The GATT 1994 does not prevent governments from adopting and enforcing such measures. However, any measure adopted under the general exceptions provisions must not constitute a means of arbitrary or unjustifiable discrimination nor should it be a disguised restrictions on international trade. GATT Article XX provides the use of the General Exception for trade in goods: GATT Article XX: General Exceptions Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures: (a) necessary to protect public morals; (b) necessary to protect human, animal or plant life or health; (c) relating to the importations or exportations of gold or silver; (d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices; (e) relating to the products of prison labour; (f) imposed for the protection of national treasures or artistic, historic or archaeological value; (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption; (h) undertaken in pursuance of obligations under any intergovernmental commodity agreement which conforms to criteria submitted to Members and not disapproved by them or which is itself so submitted and not so disapproved; (i) involving restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry during periods when the domestic price of such materials is held below the world price as part of a governmental stabilization plan; Provided that such restrictions shall not operate to increase the exports of or the protection afforded to such 66

89 domestic industry, and shall not depart from the provisions of this Agreement relating to nondiscrimination; (j) essential to the acquisition or distribution of products in general or local short supply; Provided that any such measures shall be consistent with the principle that all Members are entitled to an equitable share of the international supply of such products, and that any such measures, which are inconsistent with the other provisions of the Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist. The Members shall review the need for this sub paragraph no later than 30 June GATT Article XX permits Members to take certain measures, otherwise prohibited by GATT provisions, subject to stipulated conditions. 1) The first condition is that the contemplated measure must fit under one of the 10 categories in sub paragraphs (a) - (j) of Article XX. For example, sub-paragraphs (a), (b), and (d) indicate that the measures sought to be taken by Members must be necessary either to, protect public morals; human, animal or plant life or health; or to secure compliance with certain laws or regulations. For those three categories, there is an imperative "necessity" test that must be satisfied for the measures to be consistent with Article XX. The determination of whether a measure, though not indispensable, may nevertheless be considered "necessary", involves a weighing and balancing of factors, such as: The importance of the common interests or values protected by the measure; The efficacy of the measure in achieving the intended policies; The impact of the measure on imports especially vis-à-vis its like domestic products. Specific case of WTO members invoking Article XX include reference to paragraph (a) (public morals) to justify import bans on religious grounds. Frequent references are also made to the exception governing measures aimed at protecting the environment in paragraphs (b) and (g). Over the years, WTO jurisprudence has established that members have the right to determine the level of health or environmental protection they deem appropriate. This principle is reiterated in the TBT and SPS agreements for the measures covered by those agreements. Furthermore, there is no requirement in Article XX of the GATT 1994 to quantify the risk to human life or health. A risk may be evaluated in either quantitative or qualitative terms. 2) The second condition refers to the opening paragraph of Article XX (commonly referred to as the "chapeau of Article XX"). Measures covered under the General Exceptions must not be applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade. Consequently, before certain measures are used to derogate from GATT rules, they must meet the requirements of the chapeau i.e. they have to be "applied" in a manner that does not create "arbitrary or unjustifiable discrimination". The chapeau of Article XX of GATT aims to prevent the use of derogation measures to unjustifiably impede the market access rights of other WTO members. 67

90 The combined effect of the chapeau and the enumerated provisions of Article XX are to set out a two-level test that a proposed measure must pass before it is deemed consistent with Article XX, and therefore qualify as an exception to the obligations in the GATT: The first test is whether the policy fulfils the criteria in Article XX (a) (j); The second test is whether, when it fulfils those criteria, it satisfies the "Chapeau test". That is, if the measure is being applied "arbitrarily", "unjustifiably", or as a "disguised restriction on trade". These provisions attempt to strike a "balance" between the market access rights of WTO members and the need to ensure that other members' right to invoke these exceptions are not rendered illusory. While members have a prima facie right to maintain measures necessary to enforce health policies for example, criteria have been developed to ensure that Members demonstrate their good faith and not apply measures in a discriminatory manner or as a disguised restriction on trade. II.B. IN GATS Article XIV of the GATS permits members to maintain restrictions on services and service suppliers if the measure satisfies one of the policy purposes in sub-paragraphs (a) - (e). Furthermore, Article XIV GATS recognizes that members need to maintain a balance between trade measures and other legitimate policies and interests, such as the protection of the health of its citizens. GATS Article XIV is very similar to GATT Article XX, which governs trade in goods. Certain measures, which would otherwise be prohibited by other provisions of the GATS, can still be taken provided two conditions are met: 1) The first condition is that the measure taken must fall into one of the five categories in sub-paragraphs (a) to (e). For example, sub-paragraphs (a), (b) and (c) indicate that the measures must, in similar terms to GATT Article XX, be "necessary" either to protect public morals, or to maintain public order (a specific definition of this latter term is in the accompanying footnote); to protect human health, animal or plant life or health; or to secure compliance with certain laws or regulations. For these three categories, as in GATT, a "necessity" test must be passed. The categories in letters (d) and (e) are specific to trade in services. Paragraph (d) mandates that members can still take measures, otherwise inconsistent with the National Treatment Principle (GATS Article XVII), if the measure facilitates the collection of direct taxes. Such differential treatment, which appear to be less favourable for foreign services or foreign service providers than for national ones, are authorized only where their purpose is to ensure that the imposition of direct taxes is "equitable and effective". According to paragraph (e), measures that do not conform with the MFN Principle (GATS Article II) can still be taken if their purpose is to put into effect agreements to avoid double-taxation, for example. 2) As with GATT Article XX governing trade in goods, the second condition is that the measure must satisfy the chapeau of Article XIV. Measures covered by the GATS General Exceptions provisions must not be "applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevails, or a disguised restriction on trade in services ". These provisions are because Members recognized that certain measures might be applied even if they derogate from some of the major GATS principles. 68

91 II.C. IN TRIPS There are no general exceptions as such under the TRIPS Agreement. However, some provisions may apply to specify situations where protection is not required. See for example Arts. 27.2, 27.3, 30 and 31 (patents), Article 17 (trademarks), and Article 13 (copyrights and related rights). ILLUSTRATION Let us assume that Alba and Vanin are WTO Members and that Alba imposed market access restrictions on imports. Alba, a WTO Member, has a prima facie right to impose market access restrictions on imports provided the criteria in GATT Article XX are satisfied. If Vanin challenges these measures, Alba may need to justify them. Assuming that Alba's measures violate a GATT market access provision (Articles I, II, III or XI), Alba would need to demonstrate that its measure is justified by one or more of the general exceptions in Article XX. In order to demonstrate this, it is necessary for Alba to demonstrate, firstly that the measures fall within one of the exceptions in Article XX sub-paragraphs (a) (j). If it is able to show that the measures are, for example, "necessary" to protect human health or the environment, then the measures are provisionally justified. The "necessity test" will often call for an examination of whether any other measure, reasonably available for Alba, would provide the same level of (or better) protection for the environment or human health but with less trade distortion (less trade restrictive alternative measure). Secondly, Alba must fulfil the requirements in the introductory paragraph/chapeau of Article XX. Alba will need to show that the measure is not applied in an arbitrary manner, does not result in "arbitrary or unjustifiable discrimination between countries where the same conditions exist", and that the measure is not a disguised restriction on international trade. For instance, if the measure is applied in an inflexible and rigid manner, without taking into account the specific conditions of the exporting Members, this could constitute arbitrary or unjustifiable discrimination. The objective of the measures must be to protect health or the environment, and so forth, and not to discriminate between "like products". If Alba fails to satisfy any of the requirements of Article XX (sub-paragraphs or chapeau), it cannot invoke the "General Exception" contained in Article XX to justify inconsistencies with other GATT provisions. In such circumstances, the Dispute Settlement Body will require Alba to eliminate the measures because they would be deemed a violation of GATT Articles I, II, III or XI and not "covered" by the General Exception provisions. Now let us examine how general exceptions are interpreted in the WTO dispute settlement procedure by studying a famous case. This case involved a measure that was applied to imports of shrimp and shrimp products, and the protection of sea turtles. The US - Shrimp Case illustrates the interaction between trade related measures and non-trade related concerns within the multilateral trade system. 69

92 EXERCISES: 1. Can Vanin maintain an environmental measure banning the imports from some, but not all WTO Members? 70

93 III. SECURITY EXCEPTIONS III.A. IN THE GATT IN BRIEF A WTO Member is allowed to take any action which it considers necessary for the protection of its essential security interests or in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security. Members are not required to furnish information the disclosure of which would be contrary to their essential security interests. IN DETAIL For trade in goods, GATT Article XXI governs the use of the "Security Exceptions". GATT Article XXI: Security Exceptions Nothing in this Agreement shall be construed: to require any Member to furnish any information the disclosure of which it considers contrary to its essential security interests; or to prevent any Member from taking any action which it considers necessary for the protection of its essential security interests (i) relating to fissionable materials or the materials from which they are derived; (ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; (iii) taken in time of war or other emergency in international relations; or to prevent any Member from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security. GATT Article XXI allows certain security measures, which would otherwise be prohibited by GATT provisions, to be taken in two specific circumstances: 1) Sub-paragraph (a) refers to the disclosure of information that the WTO Member would consider contrary to its essential security interests. Sub-paragraph (b) prescribes the condition under which a Member may take action that it determines to be "necessary for the protection of its essential security interests" including those relating to either: the trade in fissionable materials; or traffic in arms, ammunition and other war-related trade. 71

94 Sub-paragraph (b)(iii) refers to measures taken not only in time of war, but also to measures taken in time of "other emergency in international relations". The term "emergency in international relations" is not defined in Article XXI. 2) Second, Members are allowed to implement measures, which are taken in pursuance of their obligations under the United Nations Charter (for the maintenance of international peace and security). This is a reference to economic sanctions. Article XXI does not contain an obligation for Members to notify measures taken pursuant to the Security Exception. However, a Decision adopted by the GATT Contracting Parties in 1982 states that "subject to the exception in Article XXI(a), Contracting Parties (now WTO Members) should be informed to the fullest extent possible of trade measures taken under Article XXI". III.B. IN GATS For trade in services, GATS Article XIVbis governs the use of the "Security Exception". The wording of GATS Article XIV bis is almost identical to the security exception for trade in goods (GATT Article XXI) and the concepts do not differ in both instances. However, unlike in GATT Article XXI, there is a notification obligation in the security exception for trade in services (see paragraph 2). It is instructive to note that in the 1982 Decision (relating to GATT Article XXI) the wording used is "should", while in paragraph 2 of GATS Article XIVbis, the wording used is "shall", which implies an obligation. III.C. IN TRIPS For trade-related intellectual property rights, Article 73 of the TRIPS Agreement governs the use of the "Security Exception". The wording of Article 73 of the TRIPS Agreement is identical to the provision governing trade in goods (GATT Article XXI) and the application of the concept is the same as for trade in goods and trade in services. There is no explicit obligation in Article 73 to notify measures taken pursuant to the Security Exception. EXERCISES: 2. What is a security exception? 72

95 IV. SAFEGUARD MEASURES The WTO obligations not to discriminate, not to withdraw commitments and/or concessions may appear to restrict the sovereign rights of WTO members to exercise full autonomy in trade and economic matters. However, numerous exceptions allow members to derogate from these market access disciplines, either because: 1. Specific provisions within these disciplines permit them to do so; or 2. The horizontal exception enables them to do so. There are general as well as security exceptions relating to goods, services and intellectual property. For example, Article XIV of the GATS Agreement allows members to take measures necessary for overriding policy concerns, including the protection of public morals or the protection of human, animal or plant life or health. However, such measures must not lead to arbitrary or unjustifiable discrimination or constitute a disguised restriction to trade. If essential security interests are at stake, Article XIVbis of the GATS Agreement provides cover. GATT Contracting Parties and likewise WTO members have kept the possibility for members to take measures to safeguard their economic interest. Safeguard measures are taken to confront unforeseen circumstances. GATT rules on safeguards are in Article XIX (general safeguards) and XII (BOP provisions) of the GATT. Article XII of the GATT Agreement allows for the introduction of temporary restrictions to safeguard the balance-of-payments; and a so-called "prudential carve-out" in financial services permits Members to take measures in order, inter alia, to ensure the integrity and stability of their financial system (Annex on Financial Services, paragraph 2). However, the disciplines are not as developed as in the GATT. Members are currently negotiating to define rules on safeguards for trade in services. 73

96 V. WAIVERS A WTO Member may be authorized by the other Members to derogate for a specific time and under certain conditions, from any provision contained in the WTO Agreements. These derogations are called "waivers". A waiver is a permission granted by WTO Membership allowing a particular WTO Member to not comply with its normal commitments. Waivers are governed by Article IX of the Marrakesh Agreement (Establishing the WTO) and are applicable to trade in goods, trade in services and trade-related aspects of intellectual property rights. In "exceptional circumstances", waivers are granted by the whole WTO Membership, through a decision of the Ministerial Conference or the General Council. Waivers are time-bound. A definite time-period is set for termination of a waiver. Waivers have time limits and extensions have to be justified. They can be renewed annually by the Membership if the exceptional circumstances warranting its grant still exist. 74

97 VI. REGIONAL INTEGRATION When a WTO Member enters into a RTA through which it grants more favourable conditions to its trade with other parties to that arrangement than to other WTO members' trade, it departs from the guiding principle of non-discrimination defined in Article I of GATT, Article II of GATS, and elsewhere. WTO members are however permitted to enter into RTAs under specific conditions which are spelled out in three sets of rules: 1. Paragraphs 4 to 10 of Article XXIV of GATT (as clarified in the Understanding on the Interpretation of Article XXIV of the GATT 1994) provide for the formation and operation of customs unions and free trade areas covering trade in goods; 2. the Enabling Clause (the 1979 Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries) 3. Article V of GATS governs the conclusion of RTAs in the area of trade in services, for both developed and developing countries. 75

98 VII. S&D FOR DEVELOPING COUNTRIES Part 4 of the GATT includes provisions on the concept of non reciprocity in trade negotiations between developed and developing countries, i.e. when developed countries grant trade concessions to developing countries they should not expect the developing countries to make matching offers in return. The Enabling Clause is an exception to the MFN obligation that allows developed countries to offer more favourable tariff treatment to imports from developing and least developed countries without the obligation to extend that favourable treatment to other WTO members. It creates a permanent derogation from one of the key principles contained in GATT Article I, and is a concrete contribution to S&D treatment for developing countries. The WTO agreements include numerous provisions giving developing and least-developed countries special rights or extra leniency "special and differential treatment". Among these are provisions that allow developed countries to treat developing countries more favourably than other WTO members. Both GATT and the GATS allow developing countries some preferential treatment. Other measures concerning developing countries in the WTO agreements include: extra time for developing countries to fulfil their commitments (in many of the WTO agreements); provisions designed to increase developing countries' trading opportunities through greater market access (e.g. in services, technical barriers to trade); provisions requiring WTO members to safeguard the interests of developing countries when adopting some domestic or international measures (e.g. in anti-dumping, safeguards, technical barriers to trade); provisions for various means of helping developing countries (e.g. to deal with commitments on animal and plant health standards, technical standards, and in strengthening their domestic telecommunications sectors). 76

99 PROPOSED ANSWERS: 1. Vanin can, if the measure does not violate GATT Article I and/or XIII (MFN for quotas). Additionally in some circumstances and pursuant to Article XX a Member is able to maintain measures that otherwise violate provisions of the GATT. However, the Member would first need to show that the goal of the measure is recognized by one of the exceptions listed in sub-paragraphs (a) - (j) of Article XX. Provided the measure fulfils the criteria in sub-paragraphs (a) - (j) the Member would need to show, in addition, that the measure is applied in such a way that it does not violate the requirements of the opening paragraph/chapeau to Article XX. Namely, that the measure is not applied to cause arbitrary or unjustified discrimination between Members where the same conditions exist and is not applied to constitute a disguised restriction on trade. 2. A security exception allows a WTO Member to take any action which it considers necessary for the protection of its essential security interests or in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security. When Members utilize the exception they are not required to furnish any information, the disclosure of which would be contrary to their essential security interests. 77

100

101 MODULE 3 The Agreement on the Application of Sanitary and Phytosanitary Measures ESTIMATED TIME: 4½ hours OBJECTIVES OF MODULE 3 Present the historical background of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement); and explain the SPS Agreement: its objectives, history, structure and scope, as well as its relationship with other WTO Agreements, its institutional coverage and temporal application. 79

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103 M3 I. INTRODUCTION As we learned in the previous Module, the multilateral trading system was founded in In its earliest years, the General Agreement on Tariffs and Trade (GATT), which later evolved into the WTO, concentrated on reducing tariffs and quantitative restrictions. Soon, however, Contracting Parties recognized that other non-tariff measures needed to be tackled. In 1994, with the creation of the World Trade Organization, a new multilateral agreement was adopted: the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement). Within the WTO framework, the SPS Agreement recognizes the right of Members to adopt science-based measures necessary to ensure food safety; human, animal or plant life or health; or to protect the territory of a country from pests or diseases. However, such measures shall not be applied in a manner which constitutes arbitrary or unjustifiable discrimination between Members (where similar conditions prevail) or a disguised restriction to international trade. It is time for us to proceed to an in-depth examination of the SPS Agreement: its objectives, history, structure and scope, as well as its relationship with other WTO agreements, its institutional coverage and temporal application. 81

104 II. THE SPS AGREEMENT II.A. OBJECTIVES IN BRIEF The Preamble of the SPS Agreement strikes a balance: it is recognized that: no Member should be prevented from adopting or enforcing measures necessary to protect human, animal or plant life or health; and Members are not required to change their appropriate level of protection of human, animal or plant life or health; at the same time sanitary and phytosanitary measures are not to be applied in a manner that constitutes: a means of arbitrary or unjustifiable discrimination between Members where the same conditions prevail; or a disguised restriction on international trade. The multilateral framework which guides sanitary and phytosanitary measures aims to improve the human health, animal health and phytosanitary situation in all Members, while minimizing negative effects on trade. To achieve this goal, the SPS Agreement permits Members to take measures, as long as they are based on science. Such measures should be applied only to the extent necessary to protect human, animal or plant life or health and should not be discriminatory, as mentioned above. The Agreement also aims to harmonize the measures used through the adoption of measures based on international standards. As we will learn during this course, WTO Members have considerable regulatory freedom to elaborate, apply and enforce sanitary and phytosanitary measures. IN DETAIL The Preamble to the SPS Agreement states its objectives as follows: Reaffirming that no Member should be prevented from adopting or enforcing measures necessary to protect human health, animal or plant life or health, subject to the requirement that these measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Members where the same conditions prevail or a disguised restriction on international trade; Desiring to improve the human health, animal health and phytosanitary situation in all Members; Noting that sanitary and phytosanitary measures are often applied on the basis of bilateral agreements of protocols; 82

105 Desiring the establishment of a multilateral framework of rules and disciplines to guide the development, adoption and enforcement of sanitary and phytosanitary measures in order to minimize their negative effects on trade; Recognizing the important contribution that international standards, guidelines and recommendations can make in this regard; Desiring to further the use of harmonized sanitary and phytosanitary measures between Members, on the basis of international standards, guidelines and recommendations developed by the relevant international organizations, including the Codex Alimentarius Commission, the International Office of Epizootics, and the relevant international and regional organizations operating within the framework of the International Plant Protection Convention, without requiring Members to change their appropriate level of protection of human, animal or plant life or health; Recognizing that developing country Members may encounter special difficulties in complying with the sanitary or phytosanitary measures of importing Members, and as a consequence in access to markets, and also in the formulation and application of sanitary or phytosanitary measures in their own territories, and desiring to assist them in their endeavours in this regard; Desiring therefore to elaborate rules for the application of the provisions of GATT 1994 which relate to the use of sanitary or phytosanitary measures, in particular the provisions of Article XX(b). As you are probably aware, the preamble of an international treaty provides information about the object and purpose of the treaty. That is, the preamble is important for the interpretation of the agreement, as provided by the customary rules of treaty interpretation referred to in Article 3.2 of the WTO Dispute Settlement Understanding. IF YOU WANT TO KNOW MORE CUSTOMARY RULES OF TREATY INTERPRETATION The customary rules of treaty interpretation are enumerated in Article 31 and 32 of the Vienna Convention on the Law of Treaties (VCLT) of 1969 which can be found at our Digital Library. These two Articles provide that a treaty shall be interpreted in good faith and according to the ordinary meaning of its terms in the light of its object and purpose. Besides the preamble other instruments serve to determine the object and purpose of a treaty and its context such as other (related) agreements entered into by the same parties. The Appellate Body while deciding the case US - Gasoline (WT/DS 2) noted that Article 31 of the VCLT forms part of the customary rules of treaty interpretation as provided for in Article 3.2 of the WTO Dispute Settlement Understanding. EXERCISES: 1. What is the objective of the SPS Agreement? 83

106 II.B. HISTORY OF THE SPS AGREEMENT The GATT 1947 did not establish a comprehensive legal structure for the treatment of sanitary and phytosanitary measures. However, pursuant to GATT Articles I, III and XX(b), national food safety, animal and plant health measures which affected trade were subject to GATT rules. These rules applied, for instance, to regulations on pesticide residue and food additives limits, as well as to trade restrictions for animal or plant health purposes. RECALL As you recall, GATT is the General Agreement on Tariffs and Trade, the umbrella agreement for trade in goods which was concluded in 1947 to regulate the international trade of goods. Today it is referred to as GATT 1994, which is the original agreement as modified by the Uruguay Round ( ). During the 1970's, the idea emerged that a specific agreement on technical barriers to trade was necessary. A Plurilateral Agreement on Technical Barriers to Trade (or "Standards Code") was then negotiated during the Tokyo Round ( ). Although this agreement was not developed primarily for the purpose of regulating sanitary and phytosanitary measures, it covered technical requirements, and among these, those resulting from food safety and human, animal and plant health measures (which include pesticide residue limits, inspection requirements and labelling). During the Uruguay Round ( ), it was felt that there was a need for more specific rights and obligations with respect to food safety and human, animal and plant health measures affecting international trade. An Agreement on the Application of Sanitary and Phytosanitary Measures was thus negotiated during that Round of negotiations in a Working Group under the Agriculture Committee. In contrast to the Standards Code of the Tokyo Round, the SPS Agreement negotiated during the Uruguay Round is one of 12 multilateral trade agreements on international trade in goods. The main differences between the Standards Code and the SPS Agreement are that: Under the Uruguay Round's "single undertaking", in signing up to the WTO Agreement, all Members of the WTO automatically signed up to the SPS Agreement as well. This stands in contrast to the plurilateral nature of the Standards Code, which at the end of 1994 had 46 contracting parties. Another important difference is that the SPS Agreement is subject to the unified dispute settlement provisions of the WTO, while containing some specific additional provisions on the matter. The Standards Code had its own dispute settlement mechanism. Under the WTO, two separate agreements have been created the SPS Agreement on food safety and animal and plant health standards, and the TBT Agreement, whose combined coverage is roughly the same as that of the Standards Code. RECALL Do you recall the single undertaking principle? If not, take a look at Module 1 again. This is the principle that states that WTO Members are bound by all WTO Multilateral Agreements (Article XIV.1 of the Marrakesh Agreement). 84

107 II.C. STRUCTURE OF THE AGREEMENT IN BRIEF The SPS Agreement disciplines all SPS measures which affect trade. Annex A contains definitions which are important towards a full understanding of the Agreement - in particular the definition of an SPS measure. Other terms defined in Annex A include harmonization; international standards, guidelines and recommendations; risk assessment; appropriate level of SPS protection; pest or disease free area; and area of low pest or disease prevalence.. The SPS Agreement consists of a Preamble setting out the general objectives of the Agreement 14 Articles and three Annexes. IN DETAIL PROVISIONS OF THE SPS AGREEMENT Preamble Article 1 Article 2 Article 3 Article 4 Article 5 Article 6 Article 7 Article 8 Article 9 General Provisions Basic Rights and Obligations Harmonization Equivalence Assessment of Risk and Determination of the Appropriate Level of Sanitary and Phytosanitary Protection Adaptation to Regional Conditions, Including Pest or Disease-Free Areas and Areas of Low Pest or Disease Prevalence Transparency Control, Inspection and Approval Procedures Technical Assistance Article 10 Special and Differential Treatment Article 11 Consultations and Dispute Settlement Article 12 Administration Article 13 Implementation Article 14 Final Provisions Annexes Annex A Annex B Annex C Definitions Transparency of Sanitary and Phytosanitary Regulations Control, Inspection and Approval Procedures 85

108 Now it is time for us to present the provisions on the scope of application, relationship with other agreements, institutional coverage and temporal application of the SPS Agreement. II.D. SCOPE OF THE AGREEMENT The SPS Agreement, pursuant to its Annex A, applies to all measures which have the purpose to protect, within the territory of a Member: animal and plant life or health from the entry, establishment or spread of pests, disease-carrying or disease-causing organisms; human or animal life or health from food-borne risks (risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs); human life or health from diseases carried by animals, plants or products thereof; a Member's territory from other damage arising from the entry, establishment or spread of pests. Measures taken to protect the health of fish and wild fauna, as well as of forests and wild flora, from the risks stated above are also within its scope of application. It is important to mention that "pests" include weeds, while contaminants include pesticide and veterinary drug residues and extraneous matter (Footnote 4 to Annex A). The SPS Agreement covers measures applied to final products and/or to related processes and production methods. Annex A states that: Sanitary or phytosanitary measures include all relevant laws decrees regulations requirements and procedures including inter alia end product criteria; processes and production methods; testing inspection certification and approval procedures; quarantine treatments including relevant requirements associated with the transport of animals or plants or with the materials necessary for their survival during transport; provisions on relevant statistical methods sampling procedures and methods of risk assessment; and packaging and labelling requirements directly related to food safety. Important note Remember that "sanitary" relates to human and animal health, while "phytosanitary" relates to plant protection. Being aware of the scope of application of the SPS Agreement is important in order to verify the applicability of the Agreement applies to a certain measure, since there are two other WTO Agreements which also regulate internal measures (such as domestic regulations), i.e., the General Agreement on Tariffs and Trade (GATT) and the Agreement on Technical Barriers to Trade. We shall present a full explanation of the four categories of SPS measures in Module 4. For now, let's just keep in mind that these are the different measures within the scope of application of the SPS Agreement. 86

109 PROCESS AND PRODUCTION METHODS (PPMS) Many SPS measures are related to processes and production methods (PPMs), because it is often more effective to ensure the safety of a final product by requiring that it be produced and processed appropriately. Governments, for example, set requirements on the operation of slaughter-houses (abattoirs), requiring certain hygiene measures to be taken at a number of points in the processing chain. Many governments also require the application of a Hazard Analysis and Critical Control Point (HACCP) system, which is science-based and systematic, and identifies specific hazards and measures for their control at critical points in the food chain, from primary production to final consumption, in order to ensure food safety. HACCP systems focus on prevention rather than relying mainly on end-product testing. A number of the Codex standards recommend the use of HACCP-based systems to secure the safety of food. As we will see in Module 5, the SPS Agreement refers Members to the work of three international standard setting bodies. The Codex Alimentarius Commission is referred to for food safety. Several of its recommended International Codes of Hygienic Practice are international standards of relevance to the SPS Agreement, such as those dealing with various processed fruit and vegetable products, poultry, meat, eggs, seafood and milk products. Their purpose is to ensure the safety of the final product, by regulating the way the product is processed and handled. The first dispute which addressed the SPS Agreement, the EC - Hormones case (WT/DS21 and WT/DS48) dealt with PPMs. The EC requirements prohibited the use of growth-promoting hormones in the production of cattle for meat purposes. This prohibition was questioned by Canada and the United States, in part, because three of the hormones identified in the dispute were naturally occurring hormones, and some level of these was found in all beef, whether or not the cattle had been treated for growth-promotion or other purposes. Similarly, the measures at issue in the Japan - Varietals case (WT/DS76) and in the Japan Apples dispute (WT/DS245) dealt with the production and processing requirements imposed by Japan to avoid the entry, establishment and spread of a pest, respectively a disease, within Japan's territory. For instance, in the first case, Japan wanted to avoid the entry of fruits' coddling moth, by requiring each variety of fruit to undergo certain testing procedures in order to establish the effectiveness of fumigation treatment. In the second case, Japan aimed at avoiding the bacterium responsible for fire blight allegedly contained in imported apples. Thus, it required, inter alia: imported apples to be grown in designated areas of the United States (the exporter), that orchards be surrounded by a buffer zone and undergo several inspections each year, and a certain treatment for the containers and facilities used for the harvest and storage of the apples. In all of the above disputes, the fact that the SPS measures took the form of production and processing requirements was not at issue, but rather whether the production and processing requirements were scientifically justified and otherwise met the requirements of the SPS Agreement. EXERCISES: 2. What is the structure of the SPS Agreement? 3. What types of measures are covered by the SPS Agreement? 87

110 II.E. RELATIONSHIP BETWEEN THE SPS AND OTHER RELEVANT WTO AGREEMENTS II.E.1. BETWEEN THE SPS AND TBT AGREEMENTS The Agreement on Technical Barriers to Trade (TBT Agreement) is one of 12 multilateral trade agreements dealing with international trade in goods. It covers technical regulations (which are mandatory requirements), standards (which are not mandatory) and conformity assessment procedures (procedures to verify compliance with technical regulations and/or standards). Regarding the relationship between the SPS Agreement and the TBT Agreement, Article 1.5 of the TBT Agreement excludes sanitary and phytosanitary measures from its scope of application. It reads: The provisions of this Agreement do not apply to sanitary and phytosanitary measures as defined in Annex A of the Agreement on the Application of Sanitary and Phytosanitary Measures. Likewise, Article 1.4 of the SPS Agreement provides that: Nothing in this Agreement shall affect the rights of Members under the Agreement on Technical Barriers to Trade with respect to measures not within the scope of this Agreement. The scope of application of the SPS and the TBT Agreement is therefore mutually exclusive. That is: the TBT Agreement covers all technical regulations, standards and conformity assessment procedures, except when these are sanitary or phytosanitary measures as defined by the SPS Agreement. TIP Sometimes a regulation may have more than one objective and, therefore, could be covered by both the SPS and the TBT Agreement. Parts of the regulation (that is, some provisions) could fall within the scope of the SPS Agreement while others are within that of the TBT Agreement. Note For more details on the TBT Agreement see "Understanding the TBT Agreement " on the WTO web site. SPS OR TBT? The SPS Agreement covers all measures, whose purpose is to protect human or animal health from food-borne risks; human health from animal or plant-carried diseases; animals and plants from pests or diseases; or to prevent other damage from pests. 88

111 Annex A, Paragraph 1 of the SPS Agreement states that SPS measures include: All relevant laws, decrees, regulations, requirements and procedures including, inter alia, end product criteria; processes and production methods; testing, inspection, certification and approval procedures; quarantine treatments including relevant requirements associated with the transport of animals or plants, or with the materials necessary for their survival during transport; provisions on relevant statistical methods, sampling procedures and methods of risk assessment; and packaging and labelling requirements directly related to food safety. Summarizing, SPS measures are those whose objective is specified in Annex A of the SPS Agreement. To protect From animal or plant life or health the entry, establishment or spread of pests, disease-carrying or diseasecausing organisms human or animal life or health risks arising from additives, contaminants, toxins or disease-causing organisms in their food, beverages or feedstuffs human life or health diseases carried by plants, animals or products thereof (zoonoses) a country damage caused by the entry, establishment or spread of pests Table 1: Objectives of SPS measures Important note "Animal" includes fish and wild fauna; "plant" includes forests and wild flora; "pests" include weeds; and "contaminants" include pesticide and veterinary drug residues and extraneous matter. 89

112 TBT MEASURES TBT measures could cover any subject, from car safety to energy-saving devices, to the shape of food cartons. To give some examples pertaining to human health, TBT measures could include requirements for pharmaceuticals or the labelling of cigarettes. In terms of food, most labelling requirements, nutrition claims and concerns, quality and packaging regulations are generally considered to be TBT measures. As illustrated below, trade in fruits, in this case oranges, may be regulated by measures that could fall under both the TBT and SPS Agreement: a measure dealing with the treatment of the imported fruit to prevent the spread of pests would be under the SPS Agreement, while a measure addressing quality, grading and labelling characteristics of the imported fruit would fall under the TBT Agreement. TBT OR SPS? AN EXAMPLE ORANGES: Figure 1: TBT and SPS measures relating to the international trade of oranges BOTTLED WATER SPECIFICATION FOR BOTTLES: Figure 2: TBT and SPS measures relating to the international trade of bottled water 90

113 COMMON FEATURES The two Agreements have some common elements, including the requirement that a measure be the least trade restrictive; disciplines regarding control and inspection procedures (Conformity Assessment Procedures in TBT parlance); basic obligations of non-discrimination and similar requirements for the advance notification of proposed measures and the creation of information offices (so-called transparency requirements). Furthermore, both Agreements encourage the use of international standards in order to promote harmonization. DIFFERENCES Sanitary and phytosanitary measures may be imposed only to the extent necessary to protect human, animal and plant health, and on the basis of scientific information. Governments may, however, introduce TBT regulations when necessary to meet a number of objectives, such as national security, the prevention of deceptive practices, protection of human, animal or plant life or health, or the environment, among others. Because the obligations that governments have accepted are different under the two agreements, it is important to know whether a measure falls under the realm of SPS or TBT. Examples SPS measures typically deal with: Additives in food or drink; contaminants in food or drink; poisonous substances in food or drink; residues of veterinary drugs or pesticides in food or drink; certification of food safety, animal or plant health; processing methods with implications for food safety; labelling requirements directly related to food safety; plant/animal quarantine; declarations of areas free from specific pests or diseases; other sanitary requirements for imports (on imported pallets used to transport animals, for example); etc. TBT measures typically deal with: Composition of certain processed foods; labelling of food, drink and drugs; quality requirements for fresh food; packaging requirements for fresh food; packaging and labelling for dangerous chemicals and toxic substances; regulations for electrical appliances; regulations for cordless phones, radio equipment; textiles and garments product/production description; testing of vehicles and accessories; safety for toys; etc. Table 2: Examples of SPS or TBT measures We may conclude by saying that the SPS Agreement's scope of application is narrower than that of the TBT Agreement and that, unlike the latter, the SPS Agreement makes no distinction between the type of measure applied (mandatory or voluntary). 91

114 II.E.2. BETWEEN THE SPS AGREEMENT AND THE AGREEMENT ON AGRICULTURE SPS measures cover sanitary and phytosanitary risks arising from all goods in international trade. The product coverage of the Agreement on Agriculture is more limited as it disciplines, inter alia, the use of tariff measures and some non-tariff measures (such as quotas), as related to agricultural products listed in Annex 1 of the Agreement; which excludes forestry and fishery products. The Agreement on Agriculture is intrinsically related to the SPS Agreement, as the latter complements the former in very specific areas, such as food safety and the protection of human, animal and plant life or health from pests or diseases. As market access opportunities increase because of declining tariffs, governments may be tempted to use non-tariff measures to protect their domestic producers from foreign competition. The SPS Agreement thus complements the Agreement on Agriculture by bringing more "discipline" to these areas and ensuring governments do not go beyond what is necessary for the accomplishment of SPS objectives. Regarding the relationship between these two Agreements, the Agreement on Agriculture provides that: Part VIII: Article 14 - Sanitary and Phytosanitary Measures Members agree to give effect to the Agreement on the Application of Sanitary and Phytosanitary Measures. The two Agreements may apply simultaneously as they are not mutually exclusive. II.E.3. BETWEEN THE SPS AGREEMENT AND THE GATT The SPS Agreement may be seen as a further specialization of Article XX(b) of the GATT. Article 2.4 of the SPS Agreement provides that: Sanitary and phytosanitary measures which conform to the relevant provisions of this Agreement shall be presumed to be in accordance with the obligations of the Members under the provisions of GATT 1994 which relate to the use of sanitary and phytosanitary measures, in particular provisions of Article XX(b). The abovementioned provision could have consequences also for the provisions of GATT Article I and III, on most favoured nation and national treatment, as a difference in treatment could be justified under the SPS Agreement on scientific grounds. Articles I and III of the GATT provide that "like products" should not be treated less favourably, independently of their origin or because they're imported. The SPS Agreement prohibits arbitrary or unjustified discrimination among Members (without referring to the concept of "like products") where the same conditions prevail. It also disallows a less favourable treatment of imported products, with respect to SPS measures and procedures to check and ensure the fulfilment of SPS measures (Annex C - Control, Inspection and Approval Procedures). 92

115 Under the SPS Agreement, Members whose territory (or animals, or plants) is affected by a certain animal disease and Members whose territory (or animals, or plants) is not affected by such a disease could receive different treatment by an importing Member, because their products pose different risks to the population (food safety) and/or animals (risk of the spread of a disease) of the importing country, even if their products may be considered like products. Therefore, pursuant to Article 2.4 of the SPS Agreement, as long as the difference in treatment is not arbitrary or unjustified, and the measure does not constitute a violation of other SPS Agreement provisions, such a measure would be presumed to be in conformity with the GATT. Articles I and III of the GATT contain the two components of the core principle of non-discrimination: the Most Favoured Nation (MFN) (Article I), and National Treatment (Article III) Principles. Article XI regulates the prohibition of quantitative restrictions. Figure 3: GATT core principles RECALL GATT ARTICLE I Pursuant to Article I, on the Most Favoured Nation Principle, WTO Members are bound to grant to the products of other Members treatment no less favourable than that accorded to the products of any other country. Thus, no Member is to give special trading advantages to one Member at the exclusion of others. All Members are meant to be treated on an equal footing and share the benefits of any movement towards lower trade barriers. GATT ARTICLE III Article III contains the National Treatment Principle. It stipulates that once goods have entered a market, they must be treated no less favourably than like products that are domestically produced. More specifically, Article III:4 requires that the products of any Member imported into any other Member shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of "all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use". 93

116 OTHER GATT PROVISIONS Further provisions of the GATT 1994 are also relevant. Article XI requires the general elimination of quantitative restrictions on the importation or exportation of products. Article XI:2(b) introduces an exception to the general rule and allows import and export prohibitions or restrictions "necessary to the application of standards or regulations for the classification, grading or marketing of commodities in international trade". EXCEPTIONS Finally, Article XX establishes exceptions to GATT obligations that may be relevant to SPS measures. This provision lays out a number of specific instances in which Members may be "exempted" from GATT rules. However, the chapeau, which is the introductory sentence to Article XX, is designed to ensure that such measures do not result in arbitrary or unjustifiable discrimination and do not constitute a disguised restriction on international trade. IN DETAIL The relevant parts of Article XX state that: Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (...) (b) necessary to protect human, animal or plant life or health; (...) As stated in the SPS Agreement Preamble, the SPS Agreement is, inter alia, a further elaboration of rules of the application of the provisions of GATT 1994, Article XX(b). As we saw above, pursuant to Article 2.4 of the SPS Agreement, an SPS measure that conforms to the provisions of the SPS Agreement, will be presumed to be in conformity with the GATT, particularly with Article XX(b), including its chapeau. That is, a measure that is found in conformity with the SPS Agreement should not be questioned under the GATT. Furthermore, while discussing the relationship between GATT and the SPS Agreement, we may apply the General Interpretative Note to Annex 1A (to Annex 1A of the WTO Agreement), which states that: In the event of conflict between a provision of the General Agreement on Tariffs and Trade 1994 and a provision of another agreement in Annex 1A [in this case the SPS Agreement] to the Agreement Establishing the World Trade Organization (...) the provision of the other agreement shall prevail to the extent of the conflict. Therefore, the provisions of the SPS Agreement take precedence over those of GATT 1994 in any situation in which there might be a conflict. 94

117 EXERCISES: 4. What is the relationship between the SPS and the TBT Agreement? 5. Can you place the measures below under the correct column (SPS measures or TBT measures)? 1 A limitation on the use of lithium in batteries, for reasons of health and safety. 2 Requirements on the size, colour and quality of fruits. 3 The control of pesticide use in fruits, for reasons of food safety. 4 Specifications on recyclable packaging for strawberries, for environmental purposes. 5 Prohibition of the use of CFC products in microchips, to protect the ozone layer. 6 The ban of chicken imports from bird flu affected areas, to protect domestic birds and human health. 6. What is the relationship between the SPS Agreement and the GATT? And between the SPS Agreement and the Agreement on Agriculture? 95

118 II.F. INSTITUTIONAL COVERAGE The SPS Agreement applies to a wide range of bodies and systems: central government bodies; local government bodies (which include provincial and state government bodies); regional and non-governmental bodies. The disciplines and the type of obligations undertaken by Members depend on the type of body concerned. Thus: Central Government Bodies: Members are fully responsible for ensuring that central government bodies comply with the obligations set forth in the SPS Agreement. Other Governmental Bodies, i.e., provincial, state or local level government: Members shall formulate and implement positive measures and mechanisms in support of the observance of SPS Agreement provisions by other than central government bodies. This is an important provision since it is possible that certain plant or animal pests or diseases occur only in some areas of a country, and related SPS measures may be taken at the local or provincial level. Non-governmental entities within the territory of WTO Members, as well as regional bodies in which relevant entities within their territories are members: Members shall take reasonable measures to ensure that they comply with the relevant provisions of the Agreement. Furthermore, Members shall not take measures which require or encourage the abovementioned bodies, or local government bodies, to act inconsistently with the Agreement. A number of regional bodies undertake work on SPS issues, and there is a growing use of commercial or private standards developed by non-governmental bodies which address SPS concerns. In this case, Members shall ensure that they rely on the services of non-governmental entities for implementing SPS measures only if these entities comply with the provisions of the Agreement. Some Members may, for example, use private laboratories for testing that products comply with SPS measures, or use private inspection services, etc. IN DETAIL Article 13 of the SPS Agreement, on Implementation, provides that: Members are fully responsible under this Agreement for the observance of all obligations set forth herein. Members shall formulate and implement positive measures and mechanisms in support of the observance of the provisions of this Agreement by other than central government bodies. Members shall take such reasonable measures as may be available to them to ensure that non-governmental entities within their territories, as well as regional bodies in which relevant entities within their territories are members, comply with the relevant provisions of this Agreement. In addition Members shall not take measures which have the effect of, directly or indirectly, requiring or encouraging such regional or non-governmental entities, or local governmental bodies, to act in a manner inconsistent with the provisions of this Agreement. Members shall ensure that they rely on the services of non-governmental entities for implementing sanitary or phytosanitary measures only if these entities comply with the provisions of this Agreement. 96

119 II.G. TEMPORAL SCOPE OF APPLICATION OF THE AGREEMENT The SPS Agreement applies to measures currently in legal force. Article XVI:4 of the WTO Agreement provides for the temporal scope of application of the SPS Agreement, and reads as follows: Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements. The WTO's Appellate Body in the EC - Hormones case addressed the issue of the temporal scope of application of the SPS Agreement. There, it defined that, in the absence of a provision limiting the temporal application of the SPS Agreement, it could not be assumed that the SPS Agreement did not apply to measures which were enacted before 1995, which were still (or continued to be) in force. Finally, we should mention that the SPS Agreement includes a transitional provision for least developed country (LDCs) and developing country Members in Article 14. It reads: The least-developed country Members may delay application of the provisions of this Agreement for a period of five years following the date of entry into force of the WTO Agreement with respect to their sanitary or phytosanitary measures affecting importation or imported products. Other developing country Members may delay application of the provisions of this Agreement, other than paragraph 8 of Article 5 and Article 7, for two years following the date of entry into force of the WTO Agreement with respect to their existing sanitary or phytosanitary measures affecting importation or imported products, where such application is prevented by a lack of technical expertise, technical infrastructure or resources. This afforded LDC Members another five years (until 2000) and developing Members another two years (until 1997) before they were fully subject to the provisions of the SPS Agreement. Developing Members, nonetheless, had to apply the provisions of Article 5.8 (providing explanations for measures) and Article 7 (transparency) from the date the Agreement entered into force (1 January 1995). EXERCISES: 7. Members are responsible for the implementation of the SPS Agreement, but its obligation to ensure compliance is different at different levels of governmental bodies, non-governmental entities and regional bodies. Could you explain how the SPS Agreement applies at these different levels? 8. What is the temporal scope of application of the SPS Agreement? 97

120 III. SUMMARY OBJECTIVES OF THE SPS AGREEMENT While recognizing the right of Members to adopt sanitary and phytosanitary measures when scientifically justified, the SPS Agreement is intended to ensure that such measures needed to protect the safety of food and animal or plant life or health are not applied in a manner which constitutes arbitrary or unjustifiable discrimination between Members (where the same conditions prevail) or a disguised restriction to international trade. THE SPS AGREEMENT HAS THE STANDARDS CODE AS ITS PREDECESSOR. THE MAIN DIFFERENCES BETWEEN THESE TWO AGREEMENTS ARE THAT The Standards Code was a Plurilateral Agreement, with 46 Signatories in 1994, with a Dispute Settlement Mechanism specific to this Agreement, covering TBT and some SPS measures and applicable to all products. The SPS Agreement is a Multilateral Agreement, with 150 parties in 2007 (all WTO Members), a unified Dispute Settlement Mechanism under the DSU, and applying both to products and to related processes and production methods. SCOPE OF THE SPS AGREEMENT The SPS Agreement applies to all measures whose purpose is to protect, within the territory of the Member: animal and plant life or health from the entry, establishment or spread of pests, disease-carrying or disease-causing organisms; human or animal life or health from food-borne risks (risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs); human life or health from diseases carried by animals, plants or products thereof; a Member's territory from other damage arising from the entry, establishment or spread of pests. These measures include sanitary and phytosanitary measures taken to protect the health of fish and wild fauna, as well as of forests and wild flora, from the risks stated above. RELATIONSHIP BETWEEN THE SPS AND TBT AGREEMENT The SPS and the TBT Agreements are mutually exclusive (Article 1.5 of the TBT Agreement). The SPS Agreement covers all measures with a purpose to protect human or animal health from food-borne risks; human health from animal or plant-carried diseases; animals and plants from pests or diseases; or to prevent other damage from pests. The TBT Agreement covers all technical regulations, standards and conformity assessment procedures regardless of their objectives, except when these are sanitary or phytosanitary measures as defined by Annex A of the SPS Agreement. 98

121 RELATIONSHIP BETWEEN THE SPS AGREEMENT AND THE AGREEMENT ON AGRICULTURE The Agreement on Agriculture is intrinsically related to the SPS Agreement, as the latter complements the former on very specific measures. It provides that "Members agree to give effect to the Agreement on the Application of Sanitary and Phytosanitary Measures". The two Agreements may apply simultaneously as they are not mutually exclusive. RELATIONSHIP BETWEEN THE SPS AGREEMENT AND THE GATT The SPS Agreement is, among other things, a further specialization of Article XX(b) of the GATT. Article 2.4 of the SPS Agreement provides that SPS measures considered to be in accordance with the relevant provisions of the SPS Agreement shall be presumed to be in accordance with the obligations of the Members under the provisions of GATT 1994 (in particular Article XX(b)). In the event of conflict between a provision of the GATT 1994 and a provision of the SPS Agreement, the provision of the latter shall prevail to the extent of the conflict. THE INSTITUTIONAL COVERAGE OF THE SPS AGREEMENT INCLUDES A wide range of bodies and systems: (i) central government bodies; (ii) local government bodies (which include provincial and state government bodies); and (ii) regional and non-governmental bodies. Members' obligations vary according to the type of body. THE TEMPORAL SCOPE OF THE SPS AGREEMENT The SPS Agreement applies to measures in legal force regardless of the date they were enacted by the Member. 99

122 PROPOSED ANSWERS: 1. The Preamble of the SPS Agreement strikes a balance: It is recognized that: no Member should be prevented from adopting or enforcing measures necessary to protect human, animal or plant life or health; and Members are not required to change their appropriate level of protection of human, animal or plant life or health; at the same time: sanitary and phytosanitary measures are not to be applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination between Members where the same conditions prevail; or a disguised restriction on international trade. The establishment of a multilateral framework of rules and disciplines to guide the development, adoption and enforcement of sanitary and phytosanitary measures has the objective of improving the human health, animal health and the phytosanitary situation of all Members while minimizing their negative effects on trade. To achieve this, the SPS Agreement allows countries to set their own standards, as long as they are based on science. They should be applied only to the extent necessary to protect human, animal or plant life or health and should not be discriminatory, as mentioned above. 2. The SPS Agreement consists of a Preamble, setting out the general objectives of the Agreement, 14 Articles and three Annexes. Provisions of the SPS Agreement: Preamble Article 1 Article 2 Article 3 Article 4 General Provisions Basic Rights and Obligations Harmonization Equivalence Article 5 Assessment of Risk and Determination of the Appropriate Level of Sanitary and Phytosanitary Protection Article 6 Adaptation to Regional Conditions, Including Pest or Disease - Free Areas and Areas of Low Pest or Disease Prevalence Article 7 Article 8 Article 9 Article 10 Article 11 Article 12 Transparency Control, Inspection and Approval Procedures Technical Assistance Special and Differential Treatment Consultations and Dispute Settlement Administration 100

123 Article 13 Article 14 Implementation Final Provisions Annexes Annex A Annex B Annex C Definitions Transparency of Sanitary and Phytosanitary Regulations Control, Inspection and Approval Procedures 3. The SPS Agreement applies to all measures which have the purpose of protecting, within the territory of a Member: animal and plant life or health from the entry, establishment or spread of pests, disease-carrying or disease-causing organisms; human or animal life or health from food-borne risks (risks arising from additives, contaminants, toxins or disease-causing organisms in their foods, beverages or feedstuffs); human life or health from diseases carried by animals, or plants or products thereof; a Member's territory from other damage arising from the entry, establishment or spread of pests. The SPS Agreement covers measures applied to final products and/or to related processes and production methods. 4. Pursuant to Article 1.5 of the TBT Agreement and Article 1.4 of the SPS Agreement, the application of the SPS and the TBT Agreements is mutually exclusive. That is: the TBT Agreement covers all technical regulations, standards and conformity assessment procedures, except when these are sanitary or phytosanitary measures as defined by Annex A of the SPS Agreement. The SPS Agreement covers all measures which have the purpose to protect human or animal health from food-borne risks; human health from animal or plant-carried diseases; animals and plants from pests or diseases; or to prevent other damage from pests. 5. SPS measures, numbers 3 and 6. TBT measures, numbers 1, 2, 4 and 5 6. The SPS Agreement may be seen as a further specialization in particular of Article XX(b) of the GATT. Article 2.4 of the SPS Agreement provides that SPS measures considered to be in accordance with the relevant provisions of the SPS Agreement shall be presumed to be in accordance with the obligations of the Members under the provisions of GATT 1994 (in particular Article XX(b)). In the event of a conflict between a provision of GATT 1994 and a provision of the SPS Agreement, the provision of the latter shall prevail to the extent of the conflict (General Interpretative Note to Annex 1A of the WTO Agreement). The Agreement on Agriculture is intrinsically related to the SPS Agreement, as the latter complements the first on very specific measures. It also provides that "Members agree to give effect to the Agreement on the Application of Sanitary and Phytosanitary Measures". The two Agreements may apply simultaneously as they are not mutually exclusive. 101

124 7. The SPS Agreement applies to a wide range of bodies and systems: a) central government bodies; b) local government bodies (which include provincial and state government bodies); c) regional and nongovernmental bodies. The disciplines and the type of obligations undertaken by Members depend on the type of body concerned. Thus, with regards to: Central Government Bodies: Members are fully responsible for ensuring that central government bodies comply with the obligations set forth in the SPS Agreement. Other Governmental Bodies, i.e., provincial and state or local level government: Members shall formulate and implement positive measures and mechanisms in support of the observance of SPS Agreement provisions by others than central government bodies. Non-governmental entities within the territory of WTO Members, as well as regional bodies in which relevant entities within their territories are members: Members shall take reasonable measures to ensure that they comply with the relevant provisions of the Agreement..Furthermore, Members shall not take measures which require or encourage the abovementioned bodies, or local government bodies, to act inconsistently with the Agreement. 8. The SPS Agreement applies to measures currently in force even if they were enacted before the date of entry into force of the SPS Agreement. A transitional provision for least developed countries (LDCs) and developing country Members in Article 14 of the SPS Agreement afforded LDC Members another five years (until 2000) and developing country Members another two years (until 1997) before they were fully subject to the provisions of the SPS Agreement. Developing country Members, nonetheless, had to apply the provisions of Article 5.8 (providing explanations for measures) and Article 7 (transparency) from the date the Agreement entered into force (1 January 1995). 102

125 MODULE 4 SPS Measures, Basic Disciplines of the SPS Agreement and procedures for Control, Inspection and Approval ESTIMATED TIME: 5 hours OBJECTIVES OF MODULE 4 Give examples of measures regulated by the SPS Agreement: measures aimed at food safety; the protection of human, animal and plant health from risks arising from pests and diseases; and measures to prevent other damage from the entry, establishment and spread of pests; explain the basic disciplines of the SPS Agreement (Article 2); and present Members' obligations with regard to Control, Inspection and Approval Procedures. 103

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127 M4 I. INTRODUCTION In the previous Module, we learned that the SPS Agreement is intended to ensure that SPS measures needed to protect the safety of food, and human, animal or plant life or health are not applied in a manner which constitutes arbitrary or unjustifiable discrimination between Members (where the same conditions prevail) or a disguised restriction to international trade, while recognizing the right of Members to adopt such measures when scientifically justified. We also learned that the SPS Agreement applies to all measures whose purpose is to protect, within the territory of a Member: human or animal life or health from food-borne risks (risks arising from additives, contaminants, toxins or disease-causing organisms in their food, feed or beverages); human life or health from animal - or plant - carried diseases; animal and plant life or health from pests, diseases or disease-causing organisms; a Member's territory from damage from the entry, establishment or spread of pests (including weeds). These include sanitary and phytosanitary measures related to products and to process and production methods. SPS measures are also those taken to protect the health of fish and wild fauna, as well as of forests and wild flora, from the risks stated above. Furthermore, we analysed the relationship between the SPS and TBT Agreements, and found out that the SPS and TBT Agreements are mutually exclusive in the measures they cover. The SPS Agreement covers all measures taken for one or more of the purposes identified above. The TBT Agreement covers all technical regulations, standards and conformity assessment procedures regardless of their objectives, except when these are sanitary or phytosanitary measures as defined by Annex A of the SPS Agreement. Finally, we understand now that the SPS Agreement is, among other things, a further specialization of Article XX(b) of the GATT. Article 2.4 of the SPS Agreement provides that SPS measures considered to be in accordance with the relevant provisions of the SPS Agreement shall be presumed to be in accordance with the obligations of a Member under the provisions of GATT 1994 (Article I, III and, in particular, XX(b)). We also have to keep in mind, regarding the institutional coverage of the SPS Agreement, that it applies to a wide range of bodies and systems: (i) central government bodies; (ii) local government bodies (which include provincial/state government bodies); and (ii) regional and non-governmental bodies. Members' obligations vary according to the type of body. Furthermore, the SPS Agreement applies to SPS measures in legal force regardless of the date they were enacted by the Member. In this Module, we are going to see some examples of SPS measures and discuss the basic obligations contained in the SPS Agreement, as set forth in its Article 2. In the final part of this Module we will explain the disciplines on procedures for Control, Inspection and Approval, as set forth in Article 8 and Annex C of the SPS Agreement. 105

128 II. SANITARY AND PHYTOSANITARY MEASURES IN DETAIL As we learned in the previous Module, SPS measures are those whose aim is to: (SPS Agreement, Annex A.1 Definitions): a) protect animal or plant life or health within the territory of the Member from risks arising from the entry establishment or spread of pests diseases disease-carrying organisms or disease-causing organisms; b) protect human or animal life or health within the territory of the Member from risks arising from additives contaminants toxins or disease-causing organisms in foods beverages or feedstuffs; c) protect human life or health within the territory or the Member from risks arising from diseases carried by animals plants or products thereof or from the entry establishment or spread of pests; or d) prevent or limit other damage within the territory of the Member from the entry establishment or spread of pests. The SPS Agreement applies to SPS measures which may, directly or indirectly, affect international trade (Article 1). The development and application of these measures shall be in accordance with the provisions of the Agreement. Annex A of the SPS Agreement specifies that SPS measures include all relevant: Laws; Decrees; Regulations; Requirements; and Procedures. These include measures related to, inter alia: end product criteria; processes and production methods; testing, inspection, certification and approval procedures; quarantine treatments including relevant requirements associated with the transport of animals or plants, or with the materials necessary for their survival during transport; provisions on relevant statistical methods, sampling procedures and methods of risk assessment; and packaging and labelling requirements directly related to food safety. 106

129 RECALL Remember that "sanitary" relates to human and animal life or health protection, while "phytosanitary" relates to plant protection. Moreover, "animal" includes fish and wild fauna; "plant" includes forests and wild flora; "pests" include weeds; and "contaminants" include pesticide and veterinary drug residues and extraneous matter. The term "SPS measure" may seem quite abstract or even vague when we first hear about it, right? With some examples we have collected below, we hope that it will become clearer what "SPS measures" may mean. We shall present them as divided into three categories, so as to facilitate comprehension: measures aimed at food safety; those aimed at the protection from pests and diseases of: human life or health; animal or plant life or health; and measures to prevent the entry, establishment or spread of pests and diseases. The distinction between the different categories of risk, i.e. food-borne risks, and pest or disease risks, is very important since the kind of risk assessment to be conducted is different for each of these risk categories. We will learn about risk assessment in Module 6 of our course. By the way, do you know which were the latest SPS measures adopted by your country? These should have been published, and notified in advance to trading partners, as we will learn in Module 8 on Transparency. II.A. FOOD SAFETY MEASURES Food safety measures are those measures aimed at protecting human or animal life or health from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs. "Contaminants" include pesticide and veterinary drug residues and extraneous matter. Figure 1: Food safety Measures 107

130 ILLUSTRATION First example: Maximum Residue Limit for Pesticides on Fruits and Vegetables Some consumers have become increasingly concerned about the adverse impacts pesticides may have not only on the environment, but also on human health. Most countries impose limits on pesticide residue levels in or on fruits and vegetables, and systems for testing and inspection have been put in place to ensure the fulfilment of requirements by both foreign and domestic producers. The Codex Alimentarius Commission, one of the three standard-setting bodies named in the SPS Agreement, has a Committee on Pesticide Residues (CCPR), an intergovernmental body whose prime objective is to reach agreement among governments on maximum residue limits (MRLs) for pesticides residues in food commodities moving in international trade. Such MRLs are sanitary requirements relating to end product criteria when, for example, apples imported and domestically produced are required not to contain more than 10mg/Kg of Diphenylamine, a type of pesticide. However, MRLs may also relate to processes and production methods, since the application of pesticides during the growing period of the fruit is what determines the residue levels found in or on the fruit at harvest. Furthermore, governments may put in place sampling and testing requirements, to control the fulfilment of the MRLs proposed by the importing country. Second example: Feed-stuff: Animal feed must not contain bone meal Firstly recognized in Great Britain in 1986, bovine spongiform encephalopathy (BSE) or "mad cow" disease is a fatal neurological disease of adult cattle, believed to occur as a result of dietary exposure to feedstuffs containing infected meat and bone meal (MBM). While never having been as widespread as other livestock diseases, such as foot and mouth and rinderpest, BSE has attracted wide attention because it seems possible to transmit the disease to humans; it is thought to be the cause of new variant Creutzfeldt-Jakob disease (vcjd), a human brain-wasting disease. Many importing countries require that beef imports from BSE-affected countries contain no high-risk material such as brain tissue. Given the potential for introduction and recycling of the BSE agent through consumption by cattle of meat-and-bone meal of ruminant origin, many countries require that feedstuff for animals do not contain meat-and-bone meal and do not allow importation of animal feed that contains meat-and-bone meal. BSE is one of the diseases notifiable to the World Organization for Animal Health (OIE), i.e., each OIE member country has to report any BSE cases it detects on its territory. The OIE has developed a way to categorize countries according to their BSE risk and published a list of countries with negligible or controlled BSE risk. Moreover, it has established a list of products that can be traded without BSE risk, and appropriate measures to take when importing animal products from BSE-affected countries. 108

131 II.B. MEASURES TO PROTECT HUMAN, ANIMAL, OR PLANTS AGAINST DISEASES AND PESTS II.B.1. MEASURES TO PROTECT HUMAN LIFE OR HEALTH Sanitary measures are also those taken to protect human life or health from risks arising from diseases carried by animals plants or products thereof or from the entry establishment or spread of pests. Figure 2: Measures to protect human life or health ILLUSTRATION First example: Veterinary vaccination prior to the importation of pets Many countries, especially developed countries, have eradicated rabies. Therefore, they impose numerous restrictions on the import of domestic animals, including the requirement that such animals be vaccinated against rabies and have not spent the previous six months prior to import in an area where rabies still occurs. Such measures are twofold: on one hand they want to prevent animals in the importing country from contracting the disease, but they are also aimed at protecting human life and health, as rabies, a disease carried by animals, is potentially fatal to humans and results in the death of 55,000 people every year. Note The OIE is recognized by the SPS Agreement as the relevant international organization with respect to measures that protect humans from animal-carried diseases which are called "zoonoses". 109

132 II.B.2. MEASURES TO PROTECT ANIMAL OR PLANT LIFE OR HEALTH Sanitary and phytosanitary measures are also taken to protect animal or plant life or health from risks arising from the entry, establishment or spread of pests, diseases, disease-carrying or disease-causing organisms. Figure 3: Measures to protect animal or plant life or health ILLUSTRATION First example: Measures to prevent Avian Influenza Sanitary regulations set by Members to prevent the spread of Avian Influenza belong to the category of measures to protect animal health, if the purpose is to protect birds within the territory of the Member. However, such measures may also serve to protect human life and health, since avian influenza can under certain circumstances be transmitted from animals to humans. The OIE has been serving as a forum for the prevention and control of the disease, in terms of both human and animal health protection. The World Health Organization also participates in an international effort aimed at human health protection. In order to avoid the spread of avian influenza within their territories, many countries have adopted measures suspending imports of live birds and poultry products from infected areas. The OIE has specified procedures for diagnostics and prevention of the most dangerous strains of the disease in its Terrestrial Animal Health Code and in the Manual of Diagnostic Tests and Vaccines for Terrestrial Animals, including measures to be taken when importing poultry products from areas with different avian influenza situations. Second example: Requirement of Permits for plants imports Various countries request permits or authorization for the importation and transit of plants and plant products. This serves to allow legitimate international and interstate trade while preventing the introduction of harmful, exotic agricultural quarantine pests and diseases. Imported plant products may be subject to governmental scrutiny, quarantine procedures and health inspection. Such measures aim at protecting plant health by preventing that disease-causing organisms, noxious weeds and pests be released into the environment and have an adverse impact on wild plants and crops. 110

133 As an example, we may mention the requirement that imported plants be free from Mediterranean fruit fly: Mediterranean fruit fly (Medfly) is one of the world's most destructive insect pests. It attacks more than 250 kinds of fruits, nuts, and vegetables, many of which grow in home gardens and orchards. Imported fruits may carry Medflies from an infested area to a disease-free area, thus contaminating entire crops and causing huge financial losses, in crop damages, additional pesticide use, and quarantine requirements. Preventive measures are important to avoid the import of infested fruits, and phytosanitary measures regarding Medfly eradication include survey, regulation (such as quarantine) and control programs. IF YOU WANT TO KNOW MORE PLANT PROTECTION AGAINST PESTS (FRUIT FLIES) Check the international standards on plant health elaborated by the International Plant Protection Convention (IPPC) Commission, the international phytosanitary standard-setting body, as recognized by the SPS Agreement. Two international standards are considered relevant in the example we gave above, on fruit flies: ISPM No. 9 (1998) - Guidelines For Pest Eradication Programmes; and ISPM No. 26 (2006) - Establishment of Pest Free Areas for Fruit Flies (Tephritidae). WTO Members have to base their phytosanitary measures aimed at pest control on these international standards, according to the obligations contained in Article 3.1 of the SPS Agreement. This is called harmonization, as you will learn in the next Module (Module 5) of our course. II.C. MEASURES AGAINST THE ENTRY, ESTABLISHMENT OR SPREAD OF PESTS IN A TERRITORY Sanitary or phytosanitary measures may also aim to prevent or limit other damage within the territory of the Member from the entry establishment or spread of pests that do not necessarily introduce diseases. Figure 4: Measures to protect the territory Such measures are aimed at avoiding the introduction of species which may disrupt the ecosystem and may cause economic damage within the territory of a country. 111

134 ILLUSTRATION First Example: Invasive Zebra Mussels According to the United States Department of Agriculture - Animal and Plant Health Inspection Service, zebra mussels are relatively new invaders, believed to have come to America in the ballast tanks of a transoceanic ship. Native to Europe's Caspian and Black Seas, the zebra mussel was first found in North America in 1988 in Lake St. Clair between Lakes Huron and Erie. Since then, the zebra mussel has spread throughout the Great Lakes and waterways of at least 19 states. It remains unstopped by predators and parasites. The threat of the zebra mussel lies in its ability to reproduce in large numbers (over 40,000 eggs can be laid in a reproductive cycle and up to one million in a spawning season, according to the US Geological Survey) and in the fact that it can stick to anything hard (a rock, a pipe, or even the shell of another sea creature). The mussels will blanket marinas and block intake pipes to factories and water treatment plants and cause great economic losses. Invaded areas in the US have been treated with a solution of potassium chloride, which is fatal to the zebra mussels but does not harm fish and other aquatic life in the water. However, the best treatment still is prevention and the United States has adopted measures such as the requirement that all vessels equipped with ballast water tanks that enter a US port after operating on the waters beyond the US exclusive economic zone (EEZ) carry out exchange of ballast water beyond the EEZ, prior to entry into any port within the US; or in other waters where the exchange does not pose a threat of infestation or spread of aquatic nuisance species in waters of the United States. Sampling procedures to monitor compliance with the requirements of the regulations were also set forth, along with the request for certification of vessels. Other concerns relating to zebra mussels are that they can crowd out native bivalve species like freshwater clams. Sea creatures with shells often fall victim when literally hundreds of zebra mussels cover them, preventing them from feeding, growing, moving, breathing, and reproducing. Due to the fact that zebra mussels filter all the plankton available in the waters, they literally lead to the starvation of native species, including fish. EXERCISES: 1. Measures covered by SPS Agreement have at least one of four objectives. Which objectives are these? 2. Annex A of the SPS Agreement states that SPS measures include all relevant laws, decrees, regulations, requirements and procedures with regard to six types of measures. Could you list these? 112

135 III. SPS AGREEMENT BASIC RIGHTS AND OBLIGATIONS IN BRIEF Article 2 of the SPS Agreement stresses that Members have the right to adopt SPS measures to achieve their self determined level of health protection. The right to adopt SPS measures to achieve a given level of protection is accompanied by basic obligations. Essentially, countries may adopt SPS measures provided the measures: are applied only to the extent necessary to protect life or health; are based on scientific principles and not maintained without sufficient scientific evidence; and do not unjustifiably discriminate between national and foreign, or among foreign sources of supply. Members have two options to show that their measures are based on science. They may either: base their measures on international standards (as we will learn in Module 5); or base their measures on scientific risk assessment (as shall be explained in Module 6). IN DETAIL As we know, the SPS Agreement specifies the conditions under which national regulatory authorities may set and enforce health and safety standards that directly or indirectly affect international trade. The Agreement sets out both substantive and procedural requirements aiming at preventing food safety and animal and plant health regulations from unnecessarily obstructing international trade and from being misused for protectionist purposes. Article 2 of the SPS Agreement states Members' basic rights and obligations, which are then further elaborated on in subsequent articles. Let's examine Article 2 in detail. III.A. RIGHT TO ADOPT SPS MEASURES The first paragraph of Article 2 provides that: 1. Members have the right to take sanitary and phytosanitary measures necessary for the protection of human animal or plant life or health provided that such measures are not inconsistent with the provisions of this Agreement. 113

136 This means Members can give priority to health protection over trade. In addition, the level of SPS protection is for each Member to choose. However, the SPS measure must fulfil the procedural and substantive requirements provided for in the SPS Agreement. However, if another Member does not agree with the importing Member's SPS measures, it can bring a legal challenge before a WTO dispute settlement Panel. It is up to the challenging Member to adduce sufficient proof to establish a prima facie case that such measure is inconsistent with the SPS Agreement. III.B. MEASURE MUST BE NECESSARY AND BASED ON SCIENTIFIC PRINCIPLES Article 2.2 states that an SPS measure must be: applied only to the extent necessary to protect human animal or plant life or health based on scientific principles and not maintained without sufficient scientific evidence except as provided for in paragraph 7 of Article 5. III.B.1. NECESSITY The concept of necessity has never been tested in dispute settlement proceedings in the SPS context, as complaining parties have directed their claims to more specific provisions of the SPS Agreement. There has been an evolving interpretation of necessity in the GATT context particularly in the context of GATT Article XX, paragraphs (b) and (d). Although not having the same application and meaning of "necessity" in the SPS Agreement, we will briefly analyse the interpretation of necessity in the GATT (Article XX) context, below, as it provides useful guidance. As we mentioned in Module 3 of our course, GATT Article XX is an exception to the obligations set forth in the GATT Agreement. That is, a Member which violates a GATT obligation (for example, Article I, III or XI, among others), may claim that its measure is justified under Article XX because it fulfils one of the objectives set forth in the paragraphs of this Article (while also complying with the requirements of the chapeau of the Article). However, there are situations in which, even if fulfilling one of the objectives protected by Article XX, a Member's measure is not found in violation of other GATT obligations, and thus Article XX is not applicable to the case. In the context of Article 2 of the SPS Agreement, the question of necessity is not related to an exception, but rather to the basic rights and obligations of Members. An SPS measure must be "necessary" to protect health, and the subsequent requirements of Article 2 clarify that scientific information is to be considered in determining whether a risk to health exists and how it can be mitigated. 114

137 CASE STUDIES ON THE DETERMINATION OF NECESSITY IN THE GATT CONTEXT In the Korea Various Measures on Beef (DS/WT 161, 169) case, the Appellate Body ruled that determination of whether a measure, which is not 'indispensable' may nevertheless be 'necessary' "involves in every case a process of weighing and balancing a series of factors which prominently include the contribution made by the compliance measure to the enforcement of the law or regulation at issue, the importance of the common interests or values protected by that law or regulation, and the accompanying impact of the law or regulation on imports or exports". This "process of weighing and balancing" has been further developed in the EC Asbestos case (WT/DS135), where the Appellate Body found that "the more vital or important the common interests or values pursued, the easier it would be to accept, as 'necessary', measures designed to achieve those ends". The Appellate Body noted that in the Asbestos case, the objective pursued by the measure was the preservation of human life and health, a value both "vital" and "important in the highest degree". III.B.2. SCIENTIFIC EVIDENCE The requirement under Article 2.2 that an SPS measures must have a scientific basis and not be maintained without sufficient scientific evidence is the cornerstone of the SPS Agreement and is further elaborated in Article 5.1 and5.2 on risk assessment. As the Appellate Body stated in the EC Hormones case (European Communities Measures Concerning Meat and Meat Products (Hormones), WT/DS26 and WT/DS 48), this requirement is essential for the maintenance of the delicate and carefully negotiated balance in the SPS Agreement between the shared interests of promoting international trade and of protecting life and health of humans, animals and plants. III.B.3. TIMELINESS It is not sufficient for a measure to have been based on scientific principles at the time of its establishment. Scientific knowledge evolves over time, and Article 2.2 requires a measure not to be maintained or continued unless sufficient scientific evidence to support it remains. As explained by the Appellate Body in the Japan - Agricultural Products II (Japan Measures Affecting Agricultural Products WT/DS76) case, for evidence to be sufficient, there must be a rational or objective relationship between the SPS measure and the scientific evidence available. This has to be determined on a case-by-case basis and will depend upon the particular circumstances of the case, including the characteristics of the measure at issue and the quality and quantity of scientific evidence. The burden of proof rests with the complaining party to raise a prima facie case that there is "not sufficient scientific evidence" for the measure. The Member adopting the Measure has then to bring forward the scientific evidence on which it has based its SPS measure (Appellate Body report in Japan Agricultural Products II). Where a measure conforms to an internationally developed standard, as will be explained in Module 5 on Harmonization, the measure is presumed to be based on sufficient scientific evidence and a Member may not need to provide further evidence. For a measure not based on an international standard, however, Members need to provide not only evidence but also a risk assessment, as will be learned in Module

138 The risk assessment and the results of the risk assessment have to sufficiently warrant the SPS measure. The only qualified exception to this rule is contained in Article 5.7, which allows Members to adopt provisional SPS measures in cases where the scientific evidence available is insufficient, further examined in Module 6 as well. III.C. NO ARBITRARY OR UNJUSTIFIABLE DISCRIMINATION OR DISGUISED RESTRICTION ON TRADE In addition, Article 2.3 states that SPS measures shall not: arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail including between their own territory and that of other Members [and] shall not be applied in a manner which would constitute a disguised restriction on international trade. Article 2.3 thus contains a non-discrimination requirement, which prevents arbitrary or unjustifiable discrimination by an SPS measure, where identical or similar conditions prevail. The Panel on Australia - Salmon (Article 21.5) (Australia - Measures Affecting Importation of Salmon WT/DS18) identified three elements, cumulative in nature, necessary to find a violation of Article 2.3: the measure discriminates between the territories of Members other than the Member imposing the measure, or between the territory of the Member imposing the measure and that of another Member; the discrimination is arbitrary or unjustifiable; and identical or similar conditions prevail in the territory of the Members compared. The Panel in Australia - Salmon found that discrimination under this Article may occur not only between like products, but also between different products if these pose the same or similar health risks (which would justify them being treated the same way). This broad non-discrimination provision is complemented by Article 5.5 on "Consistency", according to which each Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different situations, if such distinctions result in discrimination or a disguised restriction on international trade. The Appellate Body in the Australia Salmon case clarified that "finding a violation of Article 5.5 will necessarily imply a violation of Article 2.3" first or second sentence. We shall discuss Consistency (Article 5.5) in Module 6. III.D. CONFORMITY WITH GATT PROVISIONS Finally, Article 2.4 provides that SPS measures: which conform to the relevant provisions of this Agreement shall be presumed to be in accordance with the obligations of the Members under the provisions of GATT 1994 which relate to the use of sanitary or phytosanitary measures in particular the provisions of Article XX(b). 116

139 RECALL Article XX(b) provides for an exception to the other provisions of the GATT, whereas the SPS Agreement provides explicitly for the rights and obligations of Members when applying an SPS measure. We should note that, although Article 2 of the SPS Agreement and Article XX(b) of the GATT impose similar requirements that a measure: must be necessary to protect animal, plant life or health; must not arbitrarily or unjustifiably discriminate between Members where the same conditions prevail; and must not constitute a disguised restriction to international trade. the SPS Agreement imposes more strict requirements, since procedural obligations are involved (transparency, for example); necessity has to be proved via scientific evidence; and discrimination must be avoided between Members where similar (and not only identical) conditions prevail and between products which are not necessarily like (as stated by the Panel in Australia Salmon (Article 21.5). For these reasons, the conformity of a measure with the provisions of the SPS Agreement presumes the conformity with the relevant provisions of the GATT, namely those which regulate non-discrimination (Articles I and III) and the protection of human, animal and plant life or health (Article XX). Not all SPS measures, if analysed under the GATT, would fall under Article XX since not all SPS measures violate GATT provisions. As we mentioned above, the violation of a GATT provision(s) is a pre-requisite for the application of Article XX, which is an exception provision in itself. On the other hand, Article XX(b) applies to measures which are outside of the scope of the SPS Agreement, such as the protection of human health from risks related to transportation, or human transmitted diseases, etc. We should note that, in practice, when in a trade dispute a measure has been determined to be an SPS measure, dispute settlement panels have stopped their evaluations before finding whether or not there has been a violation of the GATT. EXERCISES: 3. What are the basic rights and obligations provided in the SPS Agreement? 4. What are the non-discrimination requirements imposed by Article 2.3 of the SPS Agreement? 117

140 IV. CONTROL, INSPECTION AND APPROVAL PROCEDURES Article 8 and Annex C of the SPS Agreement provide disciplines for control, inspection and approval procedures, which are used by governments to check and ensure the fulfilment of SPS measures. Control, inspection and approval procedures include, inter alia, procedures for sampling, testing and certification, as indicated in the footnote 7 to Annex C. Important note The SPS Agreement does not present a definition of sampling, testing or certification procedures. The basic requirement is that any such procedures shall be no less favourable for imported products than they are for like domestic goods, and shall be no more than that which is necessary to ensure compliance with regulations. This applies for time delays, information requirements, fees, sampling procedures, location of facilities, etc. Moreover, some Members have national approval procedures or "positive list" systems whereby only explicitly approved additives or tolerances for contaminants are permitted. In these cases, the SPS Agreement requires that the Member consider the use of a relevant international standard as the basis for allowing import access until they have made a final safety determination. Article 8 on Control, Inspection and Approval Procedures states that: Members shall observe the provisions of Annex C in the operation of control inspection and approval procedures including national systems for approving the use of additives or for establishing tolerances for contaminants in foods beverages or feedstuffs and otherwise ensure that their procedures are not inconsistent with the provisions of this Agreement. It is Annex C, thus, which contains the detailed obligations of Members in this area. We shall examine Annex C further below. IV.A. TYPES OF PROCEDURES As we mentioned above, Control, Inspection and Approval Procedures include a wide range of activities (e.g. sampling, testing, inspection and certification) and are sometimes also referred to as "conformity assessment" procedures. They are, thus the procedures that are used to check whether a product meets the set of SPS requirements. The various control, inspection and approval procedures may be linked. For instance, testing may form part of inspection and inspection and testing results may be used to support certification. The SPS Agreement contains no relevant definitions of the types of procedures used for control, approval and inspection purposes. However, for pedagogical purposes, we would like to introduce you to some of the 118

141 definitions found in dictionaries and in the work of the relevant international organizations, namely the Codex Alimentarius Commission, the Food and Agriculture Organization (FAO), the International Plant Protection Convention (IPPC) and the World Organization for Animal Health (OIE) which have developed extensive work in this field. The definitions may vary for the areas of human, animal or plant life or health, but their core principles remain the same. We will briefly explain testing (which includes sampling), inspection and certification activities below. IV.A.1. TESTING Test is a procedure intended to establish the quality performance or reliability of something. It is a procedure for identifying a substance or revealing whether it is present. (Compact Oxford English Dictionary 2007). Test is defined by FAO (Food and Agriculture Organization) as an official examination other than visual to determine if pests are present or to identify pests (FAO 1990). Testing is probably the most commonly performed control procedure: it is the process of determining that a product complies with specified requirements. Testing provides the basis for other major procedures, such as inspection and certification, and is operated by a wide range of organizations, including government agencies, academic and research institutions, commercial organizations, and industry. In a broad context, typical tests involve measurement of dimensions, chemical composition, microbiological purity, strength or other physical characteristics of materials or structures. Different procedures may be used in order to test products. For example, sampling is the process of selecting one or more specimens of a product in a statistically valid manner for the purpose of evaluating the conformity of the product with specified requirements. Another possibility is 100 per cent testing, whereby every product specimen of a batch is tested individually. In relation to food safety, the Codex Committee on Methods of Analysis and Sampling (CCMAS) has served as a coordinating body for Codex with other international groups working in methods of analysis and sampling and quality assurance systems for laboratories. The work developed by this Codex Committee resulted in the Principles for the Establishment or Selection of Codex Sampling Procedures. A number of Codex standards, such as the Recommended Methods of Analysis and Sampling (Codex Stan ), which enumerates the methods by commodities categories; the General Methods of Analysis for Contaminants (Codex Stan ) and of Food Additives (Codex Stan ) are relevant for testing aimed at food safety. In the field of animal health, veterinary testing plays a very important role. The OIE provides a Manual of Diagnostic Tests and Vaccines for Terrestrial Animals that contains background information for sampling methods, good laboratory practices, principles of veterinary vaccine production, and tests for sterility and freedom from contamination of biological materials. Part 2 of the Manual covers standards for diagnostic tests and vaccines for the diseases within the scope of the OIE. A similar manual has been elaborated with respect to diseases of aquatic animals (Manual of Diagnostic Tests for Aquatic Animals). For plant health, the IPPC has not developed specific standards on testing. However, testing procedures are addressed in the 2004 Guidelines for a Phytosanitary Import Regulatory System (ISPM 20), which recognizes 119

142 that testing, including laboratory testing, may be required for purposes of verification of a declared product; for checking compliance with requirements concerning infestations not detectable by inspection and for identifying latent infections; for audit or monitoring; among other purposes. IV.A.2. INSPECTION Inspection is the examination of a product or a system for control of a product raw materials processing and distribution including in process and/or finished product testing in order to verify conformity with requirements (adapted from the Codex Principles for Food Import and Export Inspection and Certification CAC/GL hereinafter the "Codex Principles"). As provided by the Codex Principles, inspection should be carried out at the most appropriate stages. Inspection of food, for example, may occur at any stage in the production and distribution process. For some foods, inspection oversight of harvesting, processing, storage, transport, and other handling of the product may be the most appropriate means to ensuring food safety. For others, it may be inspection of the final products. In the field of plant health, the IPPC has adopted the Guidelines for Inspection (2005, ISPM 23), which provide procedures for the inspection of consignments of plants, plant products and other regulated articles at import and export. The inspection should focus on the determination of compliance with phytosanitary requirements, based on visual examination, documentary checks, and identity and integrity checks. In the field of animal health, veterinary inspection procedures may be also based on visual examination. The OIE Manual of Diagnostic Tests and Vaccines for Terrestrial Animals, mentioned above, may be useful as a guideline for veterinary inspection. Important note There may be an overlap between testing and inspection and such activities are often performed by the same organizations. However: Inspection relies mostly on visual examinations but may also involve testing usually with simple instruments, such as scales. Inspection usually relies on the subjective judgement and experience of the inspector. Testing is generally carried out according to objective and standardized procedures by highly trained staff. IV.A.3. CERTIFICATION Certification is the procedure by which official certification bodies or officially recognized certification bodies provide written or equivalent assurance that a product or a product control system (or a process) conform to specified requirements (adapted from the Codex Principles). 120

143 As the Codex Principles describe, certification goes beyond testing and inspection and may be, as appropriate, based on a range of inspection activities which may include continuous on-line inspection, auditing of quality assurance systems, and examination of finished products. Certification is normally based on type approval and not 100 per cent testing of every individual item. Apart from certifying product characteristics, certain certification bodies also attest to the conformity of systems. In the field of animal health, the OIE provides for "Model International Veterinary Certificates" for live animals and products of animal origin in Part 4 of the Terrestrial Animal Health Code, which may be used as a model for certificates issued by official veterinary certification bodies worldwide. In the field of plant health, the IPPC has adopted Guidelines for Phytosanitary Certificates (2001, ISPM 12), on the issuance of phytosanitary certificates. It provides that "phytosanitary certificates are issued to indicate that consignments of plants, plant products or other regulated articles meet specified phytosanitary import requirements and are in conformity with the certifying statement of the appropriate model certificate". IV.B. SPECIFIC REQUIREMENTS REGARDING CONTROL, INSPECTION AND APPROVAL PROCEDURES While implementing Article 8 and Annex C on control, inspection and approval procedures, Members have to observe the requirements contained Annex C, paragraph 1 (a) to (i). In order to better explain these requirements, we would propose to discuss them as related to four categories: timing; transparency; information to be submitted; and non-discrimination and avoidance of unnecessary obstacles to trade. Firstly, we should note that a basic obligation of non-discrimination is prescribed in the second phrase of paragraph 1(a) of Annex C, which states: Members shall ensure, with respect to any procedure to check and ensure the fulfilment of SPS measures, that: (a) such procedures are undertaken and completed without undue delay and in no less favourable manner for imported products than for like domestic products. This obligation of national treatment should guide the overall conduct of Members in the implementation of Annex C of the SPS Agreement. Furthermore, the Panel in the GMO case provided some important rulings regarding the interpretation and implementation of Annex C(1)(a), especially on that which regards the first sentence, on avoidance of undue delay. Let's examine this requirement below. 121

144 CASE STUDY: EC GMO (WT/DS291, 292 AND 293) EC - GMOs Overview European Communities Approval and Marketing of Biotech Products (WT/DS291, 292 and 293); Complaint by the United States (US) (WT/DS291), Canada (WT/DS292) and Argentina (WT/DS293); Respondent: the European Communities (EC); Third participants: Australia; Brazil; Chile; China; Chinese Taipei; Colombia; El Salvador; Honduras; Mexico; New Zealand; Norway; Paraguay; Peru; Thailand; Uruguay. Canada, Argentina and the US were third parties on each other's case. There were several measures at issue in this dispute: (i) Regarding EC-level measures, the complaining parties asserted that a moratorium applied by the EC since October 1998 on the approval of biotech products had restricted imports of agricultural and food products from the US, Canada and Argentina; (ii) Regarding member State-level measures, the US and Canada asserted that a number of EC member States maintained national marketing and import bans on biotech products even though those products had already been approved by the EC for import and marketing in the EC. Argentina presented similar claims overall. What were the arguments from the Complainants? The US, Canada and Argentina, in their respective cases, argued, among other things, that the measures were inconsistent with provisions of the SPS Agreement contained in Articles 2, 5, 7 and 8; Annex B and C. Argentina also alleged a violation of Article 10. What did the Panel say? The report of the Panel was circulated to Members on 29 September The Panel found that the European Communities applied a general de facto moratorium on the approval of biotech products between June 1999 and August 2003 (date of initiation of dispute settlement procedures) and that, by applying this moratorium, the EC had acted inconsistently with its obligations under Annex C(1)(a), first clause, and Article 8 of the SPS Agreement because the de facto moratorium led to undue delays in the completion of EC approval procedures. With regard to the EC product-specific measures, the Panel found that the European Communities had acted inconsistently with its same obligations mentioned above. With regard to the EC - member States safeguard measures, the Panel found that the European Communities acted inconsistently with its obligations under Articles 5.1 and 2.2 of the SPS Agreement, because these measures were not based on risk assessments satisfying the definition of the SPS Agreement and hence could be presumed to be maintained without sufficient scientific evidence. Since we are only discussing Annex C in this section of our course, these findings of the panel will not be analysed here. At its meeting on 21 November 2006, the DSB adopted the panel reports. 122

145 IV.B.1. REQUIREMENTS ON TIMING NO UNDUE DELAY The United States and Canada had claimed that the EC had failed to undertake and complete its approval procedures for biotech products without undue delay, as a result of the adoption and application of the general de facto moratorium on approvals. Annex C(1)(a), first clause, requires Members to ensure that approval procedures are "undertaken and completed without undue delay". The Panel in the GMO case interpreted the above terms and stated that the obligation to "undertake and complete" means that Members are required to "begin, or start, approval procedures after receiving and application for approval", and to "finish or conclude" approval procedures without undue delay, which covers all stages of approval procedures. Once an application has been received, approval procedures must be started and carried out from beginning to end, without undue delay. The Panel went on to interpret "undue delay", having come to the conclusion that the overall time for undertaking and completing the procedure, or the length of the delay, are not the most important factors, but rather if the reasons for delay are legitimate and/or justified. That is, not every delay in the undertaking or completion of approval procedures which is caused by a Member is contrary to the provisions of Annex 1(C)(a), first clause, but only those which are "undue". Undue is, thus, the delay that goes beyond what is warranted and which consists in "an unjustifiable loss of time". Moreover, a short delay may be found to be "undue", if it is unjustifiable; and a long delay may be due if, for example, it is justified by the availability of new or additional information at a later stage in the approval procedure, which would require the requested authority to assess it further. Finally, a determination of whether a particular approval procedure has been undertaken and/or completed "without undue delay" must be made on a case-by-case basis, taking account of relevant facts and circumstances, i.e., the length of the approval procedure shall be the time reasonably needed to determine with adequate confidence the fulfilment of SPS requirements. This is the overall objective of Article 8 and Annex C. In the GMO case, the Panel found that the EC de facto moratorium on approvals was inconsistent with EC's obligations under Annex C(1)(a) and Article 8 of the SPS Agreement, as the delay was undue. Let's now analyse the other obligations contained in Annex C. IV.B.2. REQUIREMENTS ON TRANSPARENCY Paragraph 1(b) of Annex C imposes the following requirements on Members aimed at transparency of the process for the applicants: Publication (or, upon request, communication) of the standard processing period of each procedure; Prompt examination of the completeness of the application by the competent body and request of missing documents in a precise and complete manner; Expeditious transmission of precise and complete results of the procedure by the competent body; 123

146 Continuation of the procedure as far as practicable even in case of deficiencies of an application, if the applicant so requests; and If requested by the applicant, timely information about the stage of the procedure. IV.B.3. INFORMATION REQUIREMENTS There are two types of information requirements set forth in Annex C: one related to the information to be submitted by the applicant paragraph 1(c) - and one to the treatment of the information received by the Member imposing the procedure paragraph 1(d): The amount of information requested is limited to what is necessary for appropriate control, inspection and approval procedures, including for approval of the use of additives or for the establishment of tolerances for contaminants in food, beverages or feedstuffs; Confidentiality of information derived from control, inspection and approval procedures is respected in a way no less favourable than for domestic products, so that "legitimate commercial interests are protected". IV.B.4. NON-DISCRIMINATION AND AVOIDANCE OF UNNECESSARY TRADE BARRIERS The last five subparagraphs - (e) to (i) of Annex C.1 are intended to ensure that the principles of non-discrimination and avoidance of unnecessary barriers to international trade are respected in the implementation of procedures for control, inspection and approval. Therefore, a Member shall ensure that: Requirements for control, inspection and approval of individual specimens of a product are limited to what is reasonable and necessary; Fees imposed for the procedures on imported products are equitable in relation to those imposed on like domestic products or products originating in any other Member and should not be higher than the actual cost of the service; The same criteria above should be used in the location of facilities used and the selection of samples of imported products as for domestic products so as to minimize the inconvenience to applicants, importers, exporters or their agents; When specifications of a product change, the control procedure for the modified product must be limited to what is necessary to determine whether adequate confidence exists that the product still meets the regulations concerned; and A review procedure exists for complaints concerning the operation of control regulations, so that corrective action may be taken when a complaint is justified. 124

147 IV.B.5. PRIOR APPROVAL SYSTEMS The final sentence of paragraph 1 of Annex C states that: Where an importing Member operates a system for the approval of the use of food additives or for the establishment of tolerances for contaminants in food beverages or feedstuffs which prohibits or restricts access to its domestic markets for products based on the absence of an approval the importing Member shall consider the use of a relevant international standard as the basis for access until a final determination is made. Prior approval systems for additives or contaminants in food are widely used by Members. These systems should also be based on an assessment of risk and the SPS Agreement encourages Members to use relevant international standards as the basis for access to their markets. IV.B.6. CONTROLS As explained in Module 3, many SPS measures are related to processes and production methods (PPMs), because it is often more effective to ensure the safety of a final product by requiring that it be produced and processed appropriately. Pursuant to paragraph 2 of Annex C: Where a sanitary or phytosanitary measure specifies control at the level of production the Member in whose territory the production takes place shall provide the necessary assistance to facilitate such control and the work of the controlling authorities [of the Member which imports the product]. Furthermore, Members shall not be prevented from carrying out reasonable inspection within their territories (Annex C, paragraph 3). During the discussions related to the Second Review of the SPS Agreement (G/SPS/36), the European Communities suggested that a debate on issues related to implementation of control measures would be useful to clarify ambiguities regarding who should bear the cost of inspections. The European Communities drew attention to the increasing number of requests for inspection visits made to EC authorities by exporting countries and the resource intensive nature of these visits. The European Communities suggested that the Committee should discuss the possibility of developing common practices in this regard. Members were then invited to provide information and to submit suggestions regarding their experiences in this area. To date, no Member has submitted any specific proposals or papers in this regard to the SPS Committee. ILLUSTRATION The Codex Committee on Food Import and Export Inspection and Certification Systems (CCFICS) has done a lot of work related to control, inspection and approval in the food area. 125

148 The CCFICS develops: (a) (b) (c) (d) (e) (f) (g) principles and guidelines for food import and export inspection and certification systems with a view to harmonising methods and procedures which protect the health of consumers, ensure fair trading practices and facilitate international trade in foodstuffs; principles and guidelines for the application of measures by the competent authorities of exporting and importing countries to provide assurance where necessary that foodstuffs comply with requirements, especially statutory health requirements; guidelines for the utilisation, as and when appropriate, of quality assurance systems to ensure that foodstuffs conform with requirements and to promote the recognition of these systems in facilitating trade in food products under bilateral/multilateral arrangements by countries; guidelines and criteria with respect to format, declarations and language of such official certificates as countries may require with a view towards international harmonization; recommendations for information exchange in relation to food import/export control; consultations as necessary with other international groups working on matters related to food inspection and certification systems; and other matters assigned to it by the Codex Alimentarius Commission in relation to food inspection and certification systems. As noted above, the IPPC and the OIE have also developed guidelines for inspection and control, in their respective fields of action, i.e. plant health, and animal health. EXERCISES: 5. What are the basic requirements regarding Control, Inspection and Approval Procedures in the SPS Agreement? 6. Control, inspection and approval procedures include, inter alia, procedures for sampling, testing and certification. Could you briefly explain testing, inspection and certification in your own words? 7. Give two examples of requirements on timing, transparency, information, and non-discrimination and avoidance of unnecessary barriers to trade Members have to fulfil while implementing their obligations under Article 8 and Annex C of the SPS Agreement. 126

149 V. PRINCIPLES IN THE SPS AGREEMENT We will conclude this Module by presenting the main principles incorporated into the SPS Agreement. In addition to the Principle of Non-Discrimination contained in Article 2 and examined above, six other principles can be singled out in the SPS Agreement: Harmonization (Article 3); Equivalence (Article 4); Scientific evidence (Risk Assessment) (Article 5); Regionalization (Article 6); Transparency (Article 7); Technical Assistance, and Special and Differential Treatment to Developing Members (Articles 9 and 10). These are the subjects of our next four modules of study, in which we will examine how these principles apply to SPS-related measures We hope you will enjoy the ride!!! 127

150 VI. SUMMARY A SANITARY AND PHYTOSANITARY MEASURE IS A MEASURE WHOSE PURPOSE IS TO PROTECT, WITHIN THE TERRITORY OF THE MEMBER human or animal life or health from food-borne risks (risks arising from additives, contaminants, toxins or disease-causing organisms in their food); human life or health from animal- or plant-carried diseases; animal and plant life or health from pests, diseases or disease-causing organisms; the territory of a Member from damage from the entry, establishment or spread of pests. These include sanitary and phytosanitary measures taken to protect the health of fish and wild fauna, as well as of forests and wild flora, from the risks stated above. For purposes of application of the SPS Agreement, this only applies to those SPS measures which may, directly or indirectly, affect international trade. SPS MEASURES INCLUDE ALL RELEVANT LAWS, DECREES, REGULATIONS, REQUIREMENTS AND PROCEDURES RELATING TO end product criteria; processes and production methods; testing, inspection, certification and approval procedures; quarantine treatments including relevant requirements associated with the transport of animals or plants, or with the materials necessary for their survival during transport; provisions on relevant statistical methods, sampling procedures and methods of risk assessment; and packaging and labelling requirements directly related to food safety. THE RIGHT TO ADOPT SPS MEASURES TO ACHIEVE A GIVEN APPROPRIATE LEVEL OF PROTECTION IS ACCOMPANIED BY BASIC OBLIGATIONS. ESSENTIALLY, COUNTRIES MAY ADOPT SPS MEASURES PROVIDED THE MEASURES are applied only to the extent necessary to protect life or health; are based on scientific principles and not maintained without sufficient scientific evidence; and do not unjustifiably discriminate between national and foreign, or among foreign sources of supply, where identical or similar conditions prevail. 128

151 MEMBERS HAVE TWO OPTIONS TO SHOW THAT THEIR MEASURES ARE BASED ON SCIENCE. THEY MAY EITHER base their measures on international standards; or base their measures on scientific risk assessment. THE BASIC REQUIREMENTS REGARDING CONTROL, INSPECTION AND APPROVAL PROCEDURES The basic requirements regarding Control, Inspection and Approval Procedures are that any such procedures shall be no less favourable for imported products than they are for like domestic goods, and shall be no more than what is necessary to ensure compliance with regulations. This applies for time delays, information requirements, fees, sampling procedures, location of facilities, etc. MEMBERS HAVE TO OBSERVE THE REQUIREMENTS CONTAINED IN ANNEX C, PARAGRAPH 1 (A) TO (I), REGARDING timing: procedures must be undertaken and completed without undue delay. transparency: publication or communication of the standard processing period of each procedure; prompt examination of the completeness of the application; expeditious transmission of precise and complete results of the procedure; continuation of the procedure as far as practicable even in case of deficiencies of application; and timely information about the stage of the procedure. information to be submitted: the amount of information requested must be limited to what is necessary for appropriate control, inspection and approval procedures; confidentiality of information derived from such procedures must be respected in a way no less favourable than for domestic products, so that "legitimate commercial interests are protected". non-discrimination and avoidance of unnecessary trade barriers: requirements for control, inspection and approval of individual specimens of a product are limited to what is reasonable and necessary; fees should not be higher than the cost of the service and should be equitable regarding procedures for imported and like domestic products; the location of facilities used and the selection of samples of imported products should be made equitably; when specifications of a product change, the procedure for the modified product has to be limited to what is necessary to determine if the product still meets the requirements concerned; and a review procedure shall exist for complaints concerning the operation of such procedures, so that corrective action may be taken when a complaint is justified. PRIOR APPROVAL SYSTEMS Prior approval systems for additives or contaminants on food shall be also based on an assessment of risk and Members are encouraged to use relevant international standards as the basis for access to their markets. WHEN CONTROL IS MADE AT THE LEVEL OF PRODUCTION, THE IMPORTING MEMBERS SHALL BE AFFORDED THE NECESSARY ASSISTANCE TO FACILITATE SUCH CONTROL AT ANOTHER MEMBER'S TERRITORY (ANNEX C, PARAGRAPH 2). 129

152 FURTHERMORE, MEMBERS SHALL NOT BE PREVENTED FROM CARRYING OUT REASONABLE INSPECTION WITHIN THEIR TERRITORIES (ANNEX C, PARAGRAPH 3). THE SEVEN PRINCIPLES WHICH CAN BE SINGLED OUT IN THE SPS AGREEMENT ARE Non-Discrimination; Harmonization; Equivalence; Scientific Evidence (Risk Assessment); Regionalization; Transparency; Technical Assistance to Developing Members, and Special and Differential Treatment. 130

153 PROPOSED ANSWERS: 1. The SPS Agreement applies to all measures whose purpose is to protect, within the territory of a Member: human or animal life or health from food-borne risks (risks arising from additives, contaminants, toxins or disease-causing organisms in their food); human life or health from animal- or plant-carried diseases; animal and plant life or health from pests, diseases or disease-causing organisms; a Member's territory from other damage from the entry, establishment or spread of pests. 2. Annex A of the SPS Agreement specifies that SPS measures include all relevant laws, decrees, regulations, requirements, and procedures regarding, inter alia: end product criteria; processes and production methods; testing, inspection, certification and approval procedures; quarantine treatments including relevant requirements associated with the transport of animals or plants, or with the materials necessary for their survival during transport; provisions on relevant statistical methods, sampling procedures and methods of risk assessment; and packaging and labelling requirements directly related to food safety. 3. Article 2 of the SPS Agreement stresses that Members have the right to adopt SPS measures to achieve their self-determined level of health protection. The right to adopt SPS measures to achieve a given appropriate level of protection is accompanied by basic obligations. Essentially, Members may adopt SPS measures provided the measures: are applied only to the extent necessary to protect life or health; are based on scientific principles and not maintained without sufficient scientific evidence; and do not unjustifiably discriminate between national and foreign, or among foreign sources of supply. Members have two options to show that their measures are based on science. They may either: base their measures on international standards; or base their measures on scientific risk assessment. 131

154 4. Article 2.3 imposes a non-discrimination requirement which aims to prevent arbitrary or unjustifiable discrimination by an SPS measure where identical or similar conditions prevail. The Panel on Australia - Salmon (Article Canada) identified three elements, cumulative in nature, necessary to find a violation of Article 2.3: the measure discriminates between the territories of Members other than the Member imposing the measure, or between the territory of the Member imposing the measure and that of another Member; the discrimination is arbitrary or unjustifiable; and identical or similar conditions prevail in the territory of the Members compared. Discrimination is not necessarily limited to the treatment of like products, but could also result if different products that present similar health risks are treated differently. This broad non-discrimination provision is complemented by Article 5.5 on Consistency, according to which each Member shall avoid arbitrary or unjustifiable distinctions in the levels of health protection it considers to be appropriate in different situations, if such distinctions result in discrimination or a disguised restriction on international trade. 5. The basic requirements are that any such procedures shall be no less favourable for imported products than they are for like domestic goods, and shall be no more than what is necessary to ensure compliance with regulations. This applies for time delays, information requirements, fees, sampling procedures, location of facilities, etc. 6. A test is a technical operation that consists of the determination of one or more characteristics of a given product or process according to a specified procedure. Inspection is the examination of a product or a system for control of a product, by measuring, observing, testing (in-process and/or finished product), in order to verify conformity with requirements. Inspection relies mostly on visual examinations but may also involve testing usually with simple instruments, such as scales. Inspection usually relies on the subjective judgement and experience of the inspector. Testing is generally carried out according to objective and standardized procedures by highly trained staff. Certification is the procedure by which official certification bodies or officially recognized certification bodies provide written or equivalent assurance that a product or a product control system (or a process) conform to specified requirements. 7. While implementing Article 8 and Annex C on Control, Inspection and Approval procedures, Members have to observe Annex C, paragraph 1 (a) to (i), regarding: timing: procedures must be undertaken and completed without undue delay. transparency: publication or communication of the standard processing period of each procedure; prompt examination of the completeness of the application; expeditious transmission of precise and complete results of the procedure; continuation of the procedure as far as practicable even in case of deficiencies of application; and timely information about the stage of the procedure. 132

155 information to be submitted: the amount of information requested must be limited to what is necessary for appropriate control, inspection and approval procedures; confidentiality of information derived from such procedures must be respected in a way no less favourable than for domestic products, so that "legitimate commercial interests are protected". Non-discrimination and avoidance of unnecessary trade barriers: requirements for control, inspection and approval of individual specimens of a product are limited to what is reasonable and necessary; fees should not be higher than the cost of the service and should be equitable regarding procedures for imported and like domestic products; the location of facilities used and the selection of samples of imported products should be made equitably; when specifications of a product change, the procedure for the modified product has to be limited to what is necessary to determine if the product still meets the requirements concerned; and a review procedure shall exist for complaints concerning the operation of such procedures, so that corrective action may be taken when a complaint is justified. Prior approval systems for additives or contaminants on food shall be also based on an assessment of risk and Members are encouraged to use relevant international standards as the basis for access to their markets. When control is made at the level of production, the importing Members shall be afforded the necessary assistance to facilitate such control (Annex C, paragraph 2). Furthermore, Members shall not be prevented from carrying out reasonable inspection within their territories (Annex C, paragraph 3). 133

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157 MODULE 5 The Principle of Harmonization and The Principle of Equivalence in the SPS Agreement ESTIMATED TIME: 8 hours OBJECTIVES OF MODULE 5 Present another two core principles of the SPS Agreement: The principle of harmonization and the principle of equivalence; introduce the work of the three sister organizations; explore how the principle of harmonization applies to the preparation, adoption and application of SPS measures and its interpretation in WTO dispute settlement; and explain the principle of equivalence in the SPS Agreement and Members' obligations in this regard. 135

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159 M5 I. INTRODUCTION As we could see in the previous Module, the SPS Agreement is a multilateral framework consisting of rules and disciplines intended to achieve its two-fold objective of ensuring Members' rights to protect health, while aiming to prevent the imposition of arbitrary or unjustified trade barriers. RECALL Remember we said that, while elaborating an SPS measure, governments have to comply with the various obligations contained in the SPS Agreement. First of all, it should keep in mind that a WTO Member has the right to adopt SPS measures to achieve its self-determined health protection level. That is, the WTO Member determines the level of protection it aims to achieve, and adopts the measures which allow it to achieve that level. We learned in Module 4 that the right to adopt SPS measures to achieve a given appropriate level of protection is accompanied by basic obligations. Essentially, countries may adopt SPS measures provided these: are applied only to the extent necessary to protect life or health; are based on scientific principles and not maintained without sufficient scientific evidence (exception made for provisional measures, Article 5.7 of the Agreement); and do not unjustifiably discriminate between national and foreign, or among foreign sources of supply, where identical or similar conditions prevail. Members have two options to show that their measures are based on science. They may either: base their measures on international standards; or base their measures on scientific risk assessment. Furthermore, we became aware that the basic requirements regarding Control, Inspection and Approval Procedures are that any such procedures shall be no less favourable for imported products than they are for like domestic goods, and shall be no more than what is necessary to ensure compliance with regulations. This applies for time delays, information requirements, fees, sampling procedures, location of facilities, etc. Moreover, Members have also to observe the requirements contained in Annex C, regarding: Timing: procedures must be undertaken and completed without undue delay. Transparency: publication or communication of the standard processing period of each procedure; prompt examination of the completeness of the application; expeditious transmission of precise and complete results of the procedure; continuation of the procedure as far as practicable even in case of deficiencies of application; and timely information about the stage of the procedure. Information to be submitted: the amount of information requested must be limited to what is necessary for appropriate control, inspection and approval procedures; confidentiality of information derived from such procedures must be respected in a way no less favourable than for domestic products, so that "legitimate commercial interests are protected". 137

160 Non-discrimination and avoidance of unnecessary trade barriers: requirements for control, inspection and approval of individual specimens of a product are limited to what is reasonable and necessary; fees should not be higher than the cost of the service and should be equitable regarding procedures for imported and like domestic products; the location of facilities used and the selection of samples of imported products should be made equitably; when specifications of a product change, the procedure for the modified product has to be limited to what is necessary to determine if the product still meets the requirements concerned; and a review procedure shall exist for complaints concerning the operation of such procedures, so that corrective action may be taken when a complaint is justified. Prior approval systems for additives or contaminants on food shall be also based on an assessment of risk and Members are encouraged to use relevant international standards as the basis for access to their markets. When control is made at the level of production, the importing Members shall be afforded the necessary assistance to facilitate such control at another Member's territory (Annex C, paragraph 2). Finally, Members shall not be prevented from carrying out reasonable inspection within their territories (Annex C, paragraph 3). In this module we will discuss how Members may comply with the obligation to base SPS measures on science by basing them on international standards. That is what is referred to as "harmonization" in the SPS Agreement, since different Members' diverging SPS requirements become harmonized if they are based on international standards. We will also discuss "equivalence" later in this Module. This is the obligation Members have to accept SPS measures of other Members as equivalent, under certain circumstances. Harmonization and equivalence are two important ways to improve the international flow of goods and to facilitate international trade, by the adoption of common, or the recognition of equivalent, standards. So, it is time to start Module 5! We will first learn about harmonization and then about equivalence in the SPS Agreement. Please take a look at our digital library and the additional resources we have prepared for you. Remember to note down the chat session dates. We are looking forward to seeing you there and our guests are waiting for your questions! Be prepared!!! 138

161 II. THE WORK OF INTERNATIONAL STANDARD-SETTING BODIES II.A. THE HARMONIZATION EFFORT IN BRIEF One may think of harmonization in general as the establishment, recognition and application of common measures by different countries where previously each country might have had its own set of requirements. The SPS Agreement defines harmonization in Annex A, para. 2, as "the establishment, recognition and application of common sanitary and phytosanitary measures by different Members". In the context of SPS measures, the harmonization effort takes place when WTO Members base their SPS measures on the relevant international standards, as will be explained below. IN DETAIL The relevant parts of the Preamble of the SPS Agreement read: ( ) Desiring to improve the human health, animal health and phytosanitary situation in all Members; Noting that sanitary and phytosanitary measures are often applied on the basis of bilateral agreements or protocols; Desiring the establishment of a multilateral framework of rules and disciplines to guide the development, adoption and enforcement of sanitary and phytosanitary measures in order to minimize their negative effects on trade; Recognizing the important contribution that international standards, guidelines and recommendations can make in this regard; Desiring to further the use of harmonized sanitary and phytosanitary measures between Members, on the basis of international standards, guidelines and recommendations developed by the relevant international organizations, including the Codex Alimentarius Commission, the International Office of Epizootics, and the relevant international and regional organizations operating within the framework of the International Plant Protection Convention, without requiring Members to change their appropriate level of protection of human, animal or plant life or health; Recognizing that developing country Members may encounter special difficulties in complying with the sanitary or phytosanitary measures of importing Members, and as a consequence in access to markets, and also in the formulation and application of sanitary or phytosanitary measures in their own territories, and desiring to assist them in their endeavours in this regard; ( ) 139

162 In addition to its importance in the improvement of human, animal and plant life and health protection worldwide, harmonization can bring several benefits. It can: facilitate international trade, as products conforming to the same standards may be accepted more widely and producers do not need to know in advance the final markets for their products, resulting in fewer unjustified restrictions on trade; diffuse technology embodied in products and processes; promote efficiencies and allow economies of scale, as producers do not have to create different processes or design and manufacture a product in many variations to meet varying, different standards; result in lower costs to consumers who may compare and choose from a larger number of suppliers; and aid governments in developing science-based SPS measures and ensure food safety, animal and plant health without the need to undertake risk assessments on their own. They may use the conclusions of a risk assessment undertaken by an international body or by another Member. Ultimately, harmonization can ease production and trading conditions for producers, importers and exporters, especially from developing countries (which face more financial constraints to adapt to the requirements of the export market), thus minimizing obstacles to international trade. We are going to examine how the principle of harmonization is applied in the SPS Agreement; but first, we will explain the role that international standard-setting bodies namely the Codex, the OIE and the IPPC - play with regard to SPS matters. We will illustrate the work of these bodies and how they contribute to the harmonization process. TIP Note that "international standard-setting organizations" (or bodies), are also referred to as "international standardizing organizations" (or bodies). Then, we will examine the legal obligations contained in the SPS Agreement in the area of harmonization and the role that international standards play when Members formulate, adopt and apply their SPS measures. II.B. THE ROLE OF INTERNATIONAL STANDARD-SETTING BODIES IN THE SPS AGREEMENT The main provision regarding harmonization in the SPS Agreement is Article 3. Article 3.1 provides that: To harmonize sanitary and phytosanitary measures on a wide a basis as possible Members shall base their sanitary or phytosanitary measures on international standards guidelines or recommendations where they exist except as otherwise provided for in the Agreement and in particular in paragraph

163 Article 3.1 speaks, thus, of international standards, guidelines or recommendations. But what are these? Who develops these? What is the role of the WTO in the development of international standards? First, international standards, guidelines and recommendations, are defined in the SPS Agreement, in Annex A Definitions paragraph 3, which reads: 3. INTERNATIONAL STANDARDS GUIDELINES AND RECOMMENDATIONS (a) (b) (c) (d) for food safety, the standards guidelines and recommendations established by the Codex Alimentarius Commission relating to food additives, veterinary drug and pesticide residues, contaminants, methods of analysis and sampling, and codes and guidelines of hygienic practice; for animal health and zoonoses, the standards, guidelines and recommendations developed under the auspices of the International Office of Epizootics; for plant health, the international standards, guidelines and recommendations developed under the auspices of the Secretariat of the International Plant Protection Convention in cooperation with regional organizations operating within the framework of the International Plant Protection Convention; and for matters not covered by the above organizations, appropriate standards guidelines and recommendations promulgated by other relevant international organizations open for membership to all Members as identified by the Committee. (emphasis added) As per the text above, as well as Article 3.4 of the SPS Agreement, there is an express recognition of three standard-setting bodies as relevant for SPS-related purposes: The Codex Alimentarius Commission (Codex) for food safety. The International Office of Epizootics (OIE) for animal health and zoonoses. The International Plant Protection Convention Secretariat (IPPC) for plant health. They are referred to as the "three sisters" (or three sister organizations) at the WTO. RECALL As we explained in previous Modules, the International Office of Epizootics is now named the World Organization for Animal Health. The abbreviation used to designate the organization remains the same: the OIE. Thus, international standards, for SPS purposes, are those created by relevant international standard-setting bodies, which are the "three sisters" and "other relevant international organizations" as identified by the SPS Committee. The SPS Agreement does not define the meaning of the expression "other relevant international organizations", but gives some indications of what these might be, by stating they are organizations open for membership to all WTO Members, as identified by the SPS Committee. More importantly, the SPS Committee has not as yet identified any other relevant standard-setting organization. 141

164 Important note Unlike the SPS Agreement, the TBT Agreement does not contain a direct reference to specific international standard-setting bodies. It merely defines an "international body or system" in its Annex 1, as a "body or system whose membership is open to the relevant national body from every country". Therefore, in the TBT context, the term is open and should be interpreted on a case-by-case basis. It should be noted that the SPS Agreement makes no legal distinction between the "standards", "guidelines" and "recommendations" of the three sister organizations. All three types of norms have equal status under the SPS Agreement (see "Clarification of References to Codex Texts", G/SPS/W/86/Rev.1). TIP In 2004, the three sisters submitted a list of relevant international standards developed by each of them, to the SPS Committee. You can find the relevant international standards developed by the World Organization for Animal Health in documents G/SPS/GEN/512 and G/SPS/GEN/552; the ones developed under the auspices of the International Plant Protection Convention in document G/SPS/GEN/617; and, finally, those under the auspices of the Codex Alimentarius Commission in documents G/SPS/GEN/514 and G/SPS/GEN/599. Remember to check for updated versions of these documents, as international standard-setting bodies adopt new or revised international standards annually or bi-annually. You can find the up-to-date standards for these organizations on their web sites, which can be reached through links posted on the SPS gateway. The SPS Agreement encourages Members to participate, within the limits of their resources, in the work of relevant international organizations, in particular that of the three sisters, for the development and periodical review of standards, guidelines and recommendations with respect to all aspects of sanitary and phytosanitary measures (Article 3.4 of the SPS Agreement). Widespread participation in international standard-setting bodies can ensure that international standards reflect country-specific production and trade interests. Important note As we mentioned before, there are many international standard-setting bodies and the WTO is not one of them. The WTO neither sets international standards nor is responsible for the actual process of harmonizing various SPS measures of Members. The SPS Committee, nonetheless, has the mandate to monitor the process of international harmonization and to coordinate efforts with relevant international organizations. We shall explain this mandate further in this Module. WHAT ROLE DO INTERNATIONAL STANDARDS PLAY IN THE CREATION AND APPLICATION OF SPS MEASURES BY MEMBERS? In short, when a Member decides to create a new SPS measure - or revise one which is already in place - it should start its task by verifying if an international standard exists for the product and/or measure in question. If it exists, the Member has the obligation to base its SPS measure on it, unless there is a scientific justification 142

165 for not using it, or the relevant international standard does not achieve the level of protection aimed by the Member (Article 3.3). Let's now examine the work carried out by the three sisters. EXERCISES: 1. How would you describe harmonization? 2. What are some of the benefits harmonization may bring to international trade relations? 3. How are international standards defined in the SPS context? What role do international standards play in the creation and application of SPS measures by Members? 143

166 II.C. THE WORK OF THE THREE SISTERS We would like to present a brief summary of the work of the three sisters: the Codex Alimentarius Commission (a joint FAO/WHO standard-setting Commission), the World Organization for Animal Health (previously named the International Office of Epizootics), and the International Plant Protection Convention (its Secretariat and Regional Organizations). Next time you have to find out if an international standard in the SPS field exists, you will know where to start! These three international standard-setting bodies have many features in common: Broad participation by experts from many countries. Their standards are usually adopted through an elaborate procedure, which involves at least three phases: drafting or planning, discussions (when comments are made and inputs taken into consideration) and adoption. They adopt their decisions by consensus, unanimity, and if not possible, by voting. Important note Different international organizations have different criteria for membership. Some grant membership only to sovereign countries as recognized by the United Nations, while others follow the WTO practice and also grant membership to separate customs territories. A list with the membership of the three sister organizations, in comparison to that in the WTO, may be found in document G/SPS/GEN/49/Rev.7. Take a look! Since the information changes regularly, check for updated information on the website of each organization. TIP There are also MANY national and regional bodies in charge of formulating SPS measures, which usually set national and/or common standards for a country or group of countries. If your country or your country's businesses are interested in a particular market, you need to find out what SPS measures are in place in that particular market for your specific products, by contacting the importing Member's SPS Enquiry Point. A list of WTO Members' SPS Enquiry Points is available at our Digital Library or in document G/SPS/ENQ/20. The SPS Enquiry Points have the obligation of providing answers to questions about SPS measures, for a particular product, in place within the territory of that WTO Member. II.C.1. THE CODEX ALIMENTARIUS COMMISSION a. BACKGROUND In the early 1960s, the Food and Agriculture Organization (FAO) of the United Nations and the World Health Organization (WHO) recognized the importance of developing international food standards for the purposes of protecting public health and minimizing disruption of international food trade. The Joint FAO/WHO Food 144

167 Standards Program was established, and the Codex Alimentarius Commission was designated to administer the program. b. MEMBERSHIP & MISSION Membership of the Commission is open to all member Nations and Associate members of FAO and WHO and currently comprises 175 countries. The Commission develops standards through consultative mechanisms with member governments, which takes place in meetings and by correspondence. Codex meetings are open to participation by accredited NGOs, and observers from the public. Its mission is to: protect the health of consumers and ensure fair practices in food trade; promote coordination of all food standards work undertaken by international governmental and non-governmental organizations; determine priorities, and initiate and guide the preparation of draft standards through and with the aid of appropriate organizations; finalize standards elaborated and, after acceptance by governments, publish them in a Codex Alimentarius, together with international standards already finalized by other bodies; and amend published standards, after appropriate survey in the light of developments. To facilitate continuous contact with member countries, the Commission, in collaboration with national governments, has established country Codex Contact Points and many member countries have National Codex Committees to coordinate activities nationally. c. STANDARD SETTING PROCESS Over the years, the Commission has developed over 200 standards covering processed, semi-processed or raw foods intended for sale for the consumer or for intermediate processing; over 40 hygienic and technological codes of practice; evaluated over 1000 food additives and 54 veterinary drugs; set more than 3000 maximum levels for pesticide residues; and specified over 30 guidelines for contaminants. The core scientific work is done independently by several WHO and FAO joint expert bodies, for example on food additives and contaminants, pesticide and veterinary drug residues, and microbiological contaminants in foods. The recommendations of these scientific expert bodies often serve as the basis for proposed draft Codex standards. TIP There are three joint WHO and FAO expert bodies: Joint FAO/WHO Expert Committee for Food Additives (JEFCA) Joint FAO/WHO Meetings on Pesticide Residues The Joint FAO/WHO Meetings on Microbiological Risk Assessment More information is available on the Codex website. 145

168 The procedures for preparing standards are open and transparent and involve: The submission of a proposal for a standard to be developed by a national government or a subsidiary committee of the Commission. A decision by the Commission or the Executive Committee that a standard be developed as proposed. Formal Criteria for the Establishment of Work Priorities and for the Establishment of Subsidiary Bodies exist to assist the Commission or Executive Committee in their decision-making and in selecting or creating the subsidiary body to be responsible for steering the standard through its development. The preparation of a proposed draft standard is arranged by the Commission Secretariat and circulated to Member Governments for comments. A draft standard is sent to governments a number of times before becoming a Codex standard. Once adopted by the Commission, a Codex standard is added to the Codex Alimentarius. In addition to commodity standards, the Codex Alimentarius includes general standards, which have across-the-board application to all foods and are not product-specific. In a normal procedure, eight steps are required for the development of a standard. In an accelerated procedure, the number of steps is reduced to five. Most standards take several years to develop. d. MAJOR WORK AND PUBLICATIONS One of the principal purposes of the Commission is the preparation of food standards and their publication in the Codex Alimentarius. The legal basis for the Commission's operations and procedures is published in the Codex Alimentarius - Procedural Manual. The Commission has elaborated general standards or recommendations for: food labelling; food additives; contaminants; methods of analysis and sampling; food hygiene; nutrition and foods for special dietary uses; food import and export inspection and certification systems; residues of veterinary drugs in foods; pesticide residues in foods. Important note The Codex Commission also develops standards for the composition and quality of foods, as well as for labelling, nutrition and other matters that are not related to the safety of the foods or beverages. These Codex standards are not relevant in the context of the SPS Agreement, although they may be considered as relevant international standards under the TBT Agreement. The Codex Alimentarius Commission is an observer body in the SPS Committee. IF YOU WANT TO KNOW MORE THE CODEX ALIMENTARIUS COMMISSION (CODEX) The Codex Alimentarius Commission Secretariat is based at the FAO headquarters in Rome Italy. For more information visit the Codex website at and check the document Understanding the Codex Alimentarius.. 146

169 II.C.2. WORLD ORGANIZATION FOR ANIMAL HEALTH (OIE) a. BACKGROUND The World Organization for Animal Health (previously called the Office International des Epizooties) (OIE) is the organisation for animal health recognized by the SPS Agreement. b. MEMBERSHIP & MISSION Founded in 1924, it currently has almost 170 members. The OIE has five main objectives: to ensure transparency in the global animal disease situation; to collect, analyse and disseminate veterinary scientific information; to provide expertise and encourage international solidarity in the control of animal diseases; within its mandate under the WTO SPS Agreement, to safeguard world trade by publishing health standards for international trade in animals and animal products; and to improve the legal framework and resources of national Veterinary Services. These missions are achieved through different activities including the establishment of standards pertaining to animal health. The OIE aims at assisting governments of member countries in preventing the transfer of animal pathogens which are detrimental to animal production/health and public health from one country to another. c. STANDARD SETTING PROCESS The OIE does not carry out technical and scientific studies, but develops draft standards from scientific material published in internationally recognized scientific journals and which has been submitted to a peer committee for review. The process of elaboration of an OIE standard is, in brief, the following: an international expert on the specific subject will draft a standard on the basis of such studies; the draft will be studied and commented upon by an ad hoc group; it will then be reviewed by one of the OIE's Specialist Commissions for consideration, which circulates the proposed standard for comment to member countries, experts and organisations and revises it on basis of comments received; and it is, finally, submitted for adoption by the International Committee at its annual session. All decisions on standards are taken on the basis of consensus among members at the International Committee. The average length of time required to develop a standard in the OIE is three years, however some standards can be "fast-tracked" and developed within one year if the International Committee is in agreement. A revision of a standard could be completed in a similar time frame. For each animal disease (or category of diseases), the OIE standards identify those products which can be safely traded across international borders, or for which specific treatment may be required to permit this trade, as well as those products susceptible of spreading the disease. OIE standards thus address animal and human health risks associated with avian influenza, bovine spongiform encephalopathy (BSE or "mad cow disease"), and foot-and-mouth disease, to name just a few. 147

170 As scientific knowledge on disease agents and their ways of diffusion increases every day, new diagnostic techniques become available, and control methods become more refined, the OIE Codes and Manuals, and the standards contained therein, are revised whenever the need arises. d. MAJOR WORK AND PUBLICATIONS The core work of the OIE includes the following: Terrestrial Animal Health Code (for mammals, birds and bees) and the accompanying Manual of Diagnostic Tests and Vaccines for Terrestrial Animals Aquatic Animal Health Code (for fish, molluscs, crustaceans and amphibians), and the accompanying Manual of Diagnostic Tests for Aquatic Animals Lists of countries recognised as being free from four serious diseases (foot and mouth disease, rinderpest, BSE, contagious bovine pleuropneumonia) The above-mentioned Codes as well as their associated Manuals are designed as reference documents to be used by the veterinary administration or the competent authorities of the member countries, so as to assist them in establishing health regulations for import and export of live animals and animal products. Members of the OIE are required to notify the organization of the incidence of diseases listed by the OIE. This list includes those diseases of greatest importance in terms of trade, including transmissible diseases that have the potential for very serious and rapid spread either within the country and/or across international borders, which are of serious socio-economic or public health consequence and which are of major importance in the international trade of animals and animal products. These diseases include those that are of concern only with respect to animal health as well as "zoonoses", i.e. animal diseases which pose potential risks to human health. The OIE also works jointly with the Codex to promote the safety of food of animal origin, and has recently begun to promote animal welfare through a science-based approach. The OIE's standard-setting activities in this field focus on eliminating potential hazards existing prior to the slaughter of animals or the primary processing of their products (meat, milk, eggs, etc.) that could be a source of risk for consumers. The OIE is an observer body in the SPS Committee. IF YOU WANT TO KNOW MORE THE WORLD ORGANIZATION FOR ANIMAL HEALTH (OIE) The OIE headquarters are located in Paris, France. For more information, visit the OIE website at For animal health information, consult the World Animal Health Information Database or (WAHID) Interface 148

171 II.C.3. INTERNATIONAL PLANT PROTECTION CONVENTION a. BACKGROUND The International Plant Protection Convention (IPPC) is a multilateral treaty for international cooperation in plant protection. The Convention makes provision for the application of measures by governments to protect their plant resources from harmful pests (phytosanitary measures) which may be introduced through international trade. The IPPC is deposited with the Director-General of the FAO and is administered by the IPPC Secretariat, which exists within FAO's Plant Protection Service. The IPPC was first adopted in 1951 and has been amended twice, most recently in b. MEMBERSHIP & MISSION The IPPC has 154 contracting-parties, as of January Its Secretariat was established in 1992 by the FAO and has the responsibility for coordination of the IPPC work programme involving three main activities: Standard Setting: the development of International Standards for Phytosanitary Measures; Information Exchange: the provision of information required by the IPPC and the facilitation of information exchange between contracting-parties; Technical Assistance: the provision of technical assistance, especially for capacity building, to facilitate the implementation of the IPPC. c. STANDARD SETTING PROCESS The IPPC has a short history of standard setting with processes evolving quickly in the last few years. The 1997 Revision of the IPPC provided for the creation of a Commission on Phytosanitary Measures (CPM), which operated on an interim basis until the 1997 Revision of the Convention entered into force, in The CPM is assisted in the standardization effort by an auxiliary body, the Standards Committee (SC), which reviews and approves draft standards before they are distributed to countries for comments, then reviews comments and amends draft standards as necessary before the standards are submitted to the CPM for adoption. The CPM has as practice the adoption of standards by unanimous decision, although, if that is not possible, a vote of a two-thirds majority is required. The stress on consensus reflects the IPPC's desire to create universally acceptable standards based on a decision-making process which pays due respect to transparency and inclusiveness and not just expediency. Most of the IPPC standards are general in nature, addressing basic concepts such as the definition of quarantine and non-quarantine pests, pest risk analysis, establishment of pest-free areas, etc. The IPPC has recently begun developing standards for specific products (wood packaging material) or pests (fruit flies). 149

172 We may summarize the standardization process at the IPPC into the following steps, which occur in chronological order: CPM decides the priority of a standard; An expert working group drafts the standard; The SC reviews the draft, which, once approved, is sent out for countries consultation; The SC receives and incorporates comments as appropriate; The draft standard (ISPM) recommended by the SC is then forwarded to the CPM for adoption. The entire process usually takes 2 years. d. MAJOR WORK AND PUBLICATIONS IPPC work includes standards on pest risk analysis, requirements for the establishment of pest-free areas, and other standards which give specific guidance on topics related to the SPS Agreement. As of March 2007, the IPPC had 27 completed (adopted) international standards. The current status of IPPC standards is available here. The IPPC is an observer body in the SPS Committee. IF YOU WANT TO KNOW MORE THE INTERNATIONAL PLANT PROTECTION CONVENTION (IPPC) The Secretariat of the IPPC is located at the FAO headquarters in Rome, Italy. For more information, visit the IPPC website at EXERCISES: 4. Is the World Trade Organization one of the international standard-setting bodies? 5. What characteristics do the three sister organizations have in common? 150

173 III. HARMONIZATION PROVISIONS IN THE SPS AGREEMENT We are now going to discuss how the principle of harmonization is applied to the measures falling within the scope of the SPS Agreement. IN BRIEF Harmonization is a central discipline of the SPS Agreement and is articulated into obligations and rights for WTO Members. The two main requirements are that: Members shall base their SPS measures on international standards, guidelines or recommendations; and Members shall participate in the development and periodic review of international standards, guidelines and recommendations prepared by international standard-setting bodies, in particular the "three sisters". The two main rights are that: Members' SPS measures which conform to international standards, guidelines or recommendations will be deemed to be necessary and presumed to be consistent with the relevant provisions of the SPS Agreement (and of GATT 1994). Members may, however, adopt SPS measures which are stricter than the relevant international standard, if they have a scientific justification or as a consequence of the level of protection they determine to be appropriate. IN DETAIL Article 3 of the SPS Agreement requires Members to base their measures on international standards, guidelines and recommendations, where they exist. This facilitates harmonization, or the establishment, recognition and application of common SPS measures by different Members. By harmonizing SPS measures with international standards, food safety and animal and plant health protection can be achieved without unduly restricting international trade. Article 3.1 reads: To harmonize sanitary and phytosanitary measures on as wide a basis as possible, Members shall base their sanitary or phytosanitary measures on international standards, guidelines or recommendations, where they exist, except as otherwise provided for in this Agreement, and in particular in paragraph

174 Article 3.2 contains the presumption of consistency: Sanitary and phytosanitary measures which conform to international standards guidelines or recommendations shall be deemed to be necessary to protect human, animal or plant life or health, and presumed to be consistent with the relevant provisions of this Agreement and of GATT Concerning WTO Members' right to adopt SPS measures which are stricter than relevant international standards Article 3.3 reads: Members may introduce or maintain sanitary or phytosanitary measures which result in a higher level of sanitary or phytosanitary protection than would be achieved by measures based on the relevant international standards, guidelines or recommendations, if there is a scientific justification, or as a consequence of the level of sanitary or phytosanitary protection a Member determines to be appropriate in accordance with the relevant provisions of paragraphs 1 through 8 of Article 5.(2) Notwithstanding the above, all measures which result in a level of sanitary or phytosanitary protection different from that which would be achieved by measures based on international standards, guidelines or recommendations shall not be inconsistent with any other provision of this Agreement. (2 footnote original) For the purposes of paragraph 3 of Article 3, there is a scientific justification 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. Finally, Article 3.4 reads: Members shall play a full part, within the limits of their resources in the relevant international organizations and their subsidiary bodies, in particular the Codex Alimentarius Commission the International Office of Epizootics, and the international and regional organizations operating within the framework of the International Plant Protection Convention, to promote within these organizations the development and periodic review of standards, guidelines and recommendations with respect to all aspects of sanitary and phytosanitary measures. Before starting our analysis, we note the fact that in some areas or for some products, there is no international standard in place. Let's now analyse in-depth the rights and obligations of Members under Article 3, which is the main provision on harmonization in the SPS Agreement. 152

175 SUMMARY OF MEMBER'S RIGHTS AND OBLIGATIONS CONCERNING HARMONIZATION: A. Use of international standards (art. 3.1) B. Presumption of Necessity & Consistency (art. 3.2) C. Right to adopt a "stricter" SPS measure, with scientific justification (art. 3.3) D. Participation in international standard-setting bodies' activities (art. 3.4) Let's get started! EXERCISES: 6. What are the main rights and obligations of Members, with respect to harmonization under the SPS Agreement? 153

176 III.A. USE OF INTERNATIONAL STANDARDS AS A BASIS As we said above, Members have an obligation to base their SPS measures on international standards, guidelines and recommendations, as provided in Article 3.1. Two key concepts have to be clarified for the understanding of such obligation, namely the meaning of the two expressions below, as further interpreted in WTO dispute settlement: relevant "international standards, where they exist" "base measures on international standards" The dispute European Communities Measures Concerning Meat and Meat Products (EC Hormones) is particularly relevant in this context and shall be further explored below. CASE STUDY: EC HORMONES (WT/DS26 AND WT/DS48) EC Hormones Overview EC Measures Concerning Meat and Meat Products (Hormones) Complaint by the United States (WT/DS26) and Canada (WT/DS48) Respondent: the European Communities Third parties: Australia, Norway, New Zealand. The measure at issue was an EC ban on imports of beef from cows treated with hormones (oestradiol - 17ß, progesterone and testosterone, trenbolone acetate (TBA), zeranol and melengestrol acetate) for growth-promotion purposes. The EC claimed the ban was necessary for food safety, the US and Canada claimed there was no evidence of harm to human health. Arguments from the Complainants The US and Canada, in their respective cases, argued, among other things, that the measure was inconsistent with SPS Agreement Articles 2, 3 and 5. What did the Panel say? The report of the Panel was circulated to Members on 18 August The Panel found that the EC ban on imports of meat and meat products from cattle treated with any of six specific hormones for growth promotion purposes was inconsistent with Articles 3.1, 5.1 and 5.5 of the SPS Agreement. 154

177 What did the Appellate Body say? The Appellate Body examined the appeal and issued a report which was circulated on 16 January The Appellate Body upheld the Panel's finding that the EC import prohibition was inconsistent with Articles 3.3 and 5.1 of the SPS Agreement, but reversed the Panel's finding that the EC import prohibition was inconsistent with Articles 3.1 and 5.5 of the SPS Agreement. RELEVANT "INTERNATIONAL STANDARDS, WHERE THEY EXIST" As we had the opportunity to learn above, relevant international standards are those adopted by the relevant international organizations, which are the three sisters, in their respective fields of action. Remember that not all standards developed by the Codex, OIE or IPPC are relevant under the SPS Agreement, but only those addressing the issues identified in Annex A, paragraph 3, of the SPS Agreement. No other conditions are imposed in the SPS Agreement on the relevance of international standards for the purpose of Article 3. Thus, whether a particular standard was adopted by consensus, or by qualified majority vote or by simple majority vote, is not relevant. What matters is that the standard was duly "developed" according to the procedures of the standard-setting body (Codex, IPPC or OIE). RECALL As we mentioned above, you can find the list of relevant international standards applied by the World Organization of Animal Health in documents G/SPS/GEN/512 and G/SPS/GEN/552; the ones applied under the auspices of the International Plant Protection Convention in document G/SPS/GEN/617; and, finally, those under the auspices of the Codex Alimentarius Commission in documents G/SPS/GEN/514 and G/SPS/GEN/599. Remember to check for updated versions of these documents, as international standard-setting bodies adopt new or revised international standards annually or bi-annually. You can find these standards on the three sisters' websites. As the Panel in the EC - Hormones case reported: "to determine... whether or not a Member has an obligation to base its sanitary measure on international standards in accordance with Article 3.1, we only need to determine whether such international standards exist". In this case, the Codex Alimentarius Commission had established standards for five of the six hormones in question. Codex found that for the three natural hormones, intake levels did not have to be limited. Codex established safe limits for residues of two of the three synthetic hormones, at levels considered to pose no risk to human health. Important note The Panel in the Australia - Salmon (Australia Measures Affecting Importation of Salmon WT/DS18) case added an important piece to the interpretation of Article 3.1, by stating that: "the fact... that no international guidelines exist for all... diseases of concern does not mean that an international guideline which applies to only one of these diseases cannot be relevant... for the measure at issue". 155

178 We may conclude that relevant international standards on which WTO Members have to base their measures: are those issued by the three sisters (or by another relevant international organization if the SPS Committee were to identify one in the future, as provided in paragraph 3 of Annex A to the SPS Agreement); and that even if an international standard which specifically addresses the measure at issue does not exist, there may be another Codex, IPPC or OIE standard that could be relevant for the measure under analysis. Finally, determining if a relevant international standard exists is of major importance for assessing a WTO Member's obligations under the SPS Agreement. That is, if a relevant international standard is found to exist and the Member is found not to be basing its SPS measure on it, it will have to provide a scientific justification for its measure, in accordance with Article 5 provisions. RECALL The SPS Committee has not as yet identified any other relevant international organizations under paragraph 3 of the Annex A to the SPS Agreement. "BASED ON INTERNATIONAL STANDARDS" This expression was also interpreted in the EC Hormones case. The Appellate Body affirmed in that case that "the ordinary meaning of 'based on' is quite different from the plain or natural import of 'conform to' ", used in Article 3.2 of the Agreement. The Panel had previously considered that, to be based on an international standard, a measure needed to reflect the same level of protection as the standard, and thus concluded that the ban on imports of hormonetreated meat was not based on the Codex standards, since it achieved a significantly higher level of protection. The Appellate Body, however, decided that "based on" meant that a measure could adopt some, but not necessarily all elements of an international standard. The Appellate Body stated: "A thing is commonly said to be 'based on' another thing when the former 'stands' or is 'founded' or 'built' upon or 'is supported by' the latter. In contrast, much more is required before one thing may be regarded as 'conform[ing] to another: the former must 'comply with', 'yield or show compliance' with the latter..." 156

179 Figure 1: Based on international standards It added: "a measure that 'conforms to' and incorporates a Codex standard is, of course, 'based on' that standard. A measure, however, based on the same standard might not conform to that standard, as where only some, not all, of the elements of the standard are incorporated into the measure." (emphasis added) To sum up, a WTO Member is highly encouraged but is not obliged to use a relevant international standard as a basis for its SPS measure, as Members are authorized to deviate from international standards if there is a scientific justification or if these do not achieve the Member's appropriate level of protection. We will see more of this later. Finally, when a WTO Member adopts an SPS measure which conforms to an international standard, it enjoys a presumption that this measure is necessary and consistent with the relevant provisions of the SPS Agreement and the GATT. Important note When the measure is only based on the international standard, it does not enjoy such a presumption, as clarified by the Appellate Body while deciding the EC Hormones case. We are going to analyse this particular right in the next sub-section. III.B. PRESUMPTION OF NECESSITY & CONSISTENCY Measures which conform to international standards, guidelines or recommendations developed by the three sister organizations are presumed to be consistent with the SPS Agreement, and Members which adopt such measures can have some assurance of their compliance with the SPS Agreement. Article 3.2 reads: Sanitary or phytosanitary measures which conform to international standards guidelines or recommendations shall be deemed to be necessary to protect human animal or plant life or health and presumed to be consistent with the relevant provisions of this Agreement and of GATT Article 3.2 provides that such measures will be deemed necessary for health protection. That is, the SPS measure is deemed not to create an unnecessary obstacle to international trade if it conforms to the relevant international standard(s). International standards are sometimes described as providing a "safe harbour" for governments. Clearly, however, Members have the right to challenge all SPS measures, and particularly if they believe, for example, that the claim that a measure conforms to an international standard is ill founded. As described above, the Appellate Body interpreted the expression "conform to" in the EC - Hormones case. It stated: "In contrast, much more is required before one thing may be regarded as 'conform[ing] to another: the former must 'comply with', 'yield or show compliance' with the latter. The reference of 'conform to' is to 'correspondence in form or manner', to 'compliance with' or acquiescence', to 'follow[ing] in form or nature'." 157

180 Figure 2: Conform to international standards Furthermore, the Appellate Body, in the same case, clarified that: "Under Article 3.2 of the SPS Agreement, a Member may decide to promulgate an SPS measure that conforms to an international standard. Such a measure would embody the international standard completely and, for practical purposes, converts it into a municipal standard." Note Note that municipal standard is the same as domestic or national standard. Such a measure enjoys the benefit of a presumption (albeit a rebuttable one) that it is consistent with the relevant provisions of the SPS Agreement and of the GATT Important note It is important that this presumption is a rebuttable one. A Member which transcribes into national regulation an international standard that provides protection from something which does NOT pose a health risk to the importing country could still be challenged for imposing a requirement that is more trade restrictive than necessary for health protection. For example, if a Member requires imported products to meet the international standard for preventing the entry or spread of a particular plant disease when, due to climate, that disease presents no threat to the health of the plants in the importing Member, the requirement could be challenged despite its conformity to the international standard. Also, it is possible that a measure adopted by a Member conforms to an international standard, but the manner in which the Member applies the measure results in a violation of a provision, for example, of Annex C (on Control, Approval and Inspection Procedures), of the SPS Agreement. 158

181 III.C. RIGHT TO ADOPT "STRICTER" SPS MEASURES WITH SCIENTIFIC JUSTIFICATION Some, especially developing countries, say that one problem with international standards is that they are often so stringent that many countries have difficulties implementing them nationally. But the encouragement to use international standards does not mean that these constitute a floor on national standards, nor a ceiling. National standards do not violate the SPS Agreement simply because they differ from international norms. In fact, the SPS Agreement explicitly permits governments to impose more stringent requirements than the international standards. Article 3.3 provides that: Members may introduce or maintain sanitary or phytosanitary measures which result in a higher level of sanitary or phytosanitary protection than would be achieved by measures based on the relevant international standards, guidelines or recommendations, if there is a scientific justification, or as a consequence of the level of sanitary or phytosanitary protection a Member determines to be appropriate in accordance with the relevant provisions of paragraphs 1 through 8 of Article 5.(2) Notwithstanding the above, all measures which result in a level of sanitary or phytosanitary protection different from that which would be achieved by measures based on international standards, guidelines or recommendations shall not be inconsistent with any other provision of this Agreement. (2 footnote original) For the purposes of paragraph 3 of Article 3, there is a scientific justification 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. Members may introduce or maintain an SPS measure which results in a higher level of protection, in two cases: if there is a scientific justification; or as a consequence of the level of protection a Member determines to be appropriate, in accordance with the relevant provisions of Article 5. RECALL Governments which do not base their national requirements on international standards may be required to justify their higher standard if this difference gives rise to a trade dispute. Such justification must be based on an analysis of scientific evidence and the risks involved. The disciplines related to this scientific justification that is, the assessment of risk and the determination of the appropriate level of sanitary or phytosanitary protection are provided in Article 5 of the SPS Agreement, which will be thoroughly explored in our next Module (Module 6). 159

182 About the right to establish a measure which is not based on an international standard, the Appellate Body, in the EC - Hormones dispute, noted that: "Under Article 3.3 of the SPS Agreement, a Member may decide to set for itself a level of protection different from that implicit in the international standard, and to implement or embody that level of protection in a measure not 'based on' the international standard. The Member's appropriate level of protection may be higher than that implied in the international standard. The right of a Member to determine its own appropriate level of sanitary protection is an important right." (emphasis added) RIGHT TO REQUEST AN EXPLANATION Pursuant to Article 5.8 of the SPS Agreement, Members have an obligation to explain, upon request, the rationale of their regulation. Should their regulation not be based on an international standard, another WTO Member may request an explanation as to why the relevant international standard was not used in the formulation of the measure. Article 5.8 provides: When a Member has reason to believe that a specific sanitary or phytosanitary measure introduced or maintained by another Member is constraining, or has the potential to constrain, its exports and the measure is not based on the relevant international standards, guidelines or recommendations, or such standards, guidelines or recommendations do not exist, an explanation of the reasons for such sanitary or phytosanitary measure may be requested and shall be provided by the member maintaining the measure. Therefore, WTO Members shall provide an explanation for their SPS measures, upon the request of another Member, when the following two circumstances apply: first, a relevant international standard does not exist or the SPS measure is not based on relevant international standards; and second, the SPS measure constrains, or has the potential to constrain, the trade of the Member requesting the explanation. As we will see in Module 7 on Transparency, Members also have to give an explanation of the rationale and objective of their SPS regulations when notifying the draft measure to other Members, through the WTO Secretariat. EXERCISES: 7. Please explain the Members' obligation to "base their SPS measures on international standards". What have we learned from dispute settlement cases? 8. Is a Member always obliged to base its measures on international standards? What is the main advantage, for Members, of adopting measures which conform to international standards? 9. Article 3.2 provides that measures which conform to international standards are deemed to be necessary and presumed to be in conformity with the SPS Agreement. Could you explain what this means exactly? 160

183 III.D. PARTICIPATION IN THE WORK OF INTERNATIONAL STANDARD-SETTING BODIES Article 3.4 establishes that Members shall play a full part in the work of the three sisters to promote within these organizations the development and periodic review of standards guidelines and recommendations with a view to harmonizing SPS measures. The limit foreseen to this participation is a Member's resources. We have illustrated the work of the relevant international standard-setting bodies in the previous section. At the 2001 Doha Ministerial Conference, WTO Members urged the WTO Director-General to continue his cooperative efforts with international standard setting organizations and other institutions, which prioritized the effective participation of least-developed country Members and the facilitation of technical and financial assistance provision for this purpose (WT/MIN(01)/17). Active participation in the work of international standard-setting bodies can be particularly difficult for developing countries. A number of developing country Members had noted that they were not able to effectively participate in the work of the standard-setting bodies and, in particular, in the development of international standards. These Members were concerned that the standards did not necessarily reflect their needs and interests and, in various occasions, indicated the need for further technical assistance activities aimed at improving their participation in the work of standard-setting organizations. TIP In this context, international standard-setting organizations have taken actions to enhance the participation of developing country Members in their work. The FAO/WHO (for the Codex Alimentarius Commission), the IPPC and the OIE have all established trust funds, supported through contributions by donor agencies and member countries, to enhance the participation of developing countries in standardsetting meetings and activities, training programmes and regional technical consultations on standards and their implementation. These funds also cover expenses that developing country representatives incur while attending meetings abroad, as reported in the Workshop on the International Standard-Setting Organizations: Process and Participation, held by the WTO Secretariat in March 2001 (G/SPS/GEN/250). It was pointed out at the Workshop mentioned above, however, that developing countries could also increase their participation's effectiveness by ensuring better coordination between the relevant ministries at the national level, most notably the ministries of agriculture, health and trade: lack of dialogue between administrators and scientific experts, both at a regional and national levels, is a major problem in most developing (and many developed) countries. Another obstacle to the full participation by WTO Members in the work of all three sisters is the different criteria for membership of these bodies. To be a member of the Codex Alimentarius Commission, for example, a country must be a member of at least one of its parent organizations, FAO and WHO. However, neither FAO or WHO grant membership to separate customs territories. These are, however, permitted to be members of the OIE. 161

184 TIP More on the technical assistance work carried out by the three sisters will be presented in Module 8. III.E. THE SPS COMMITTEE ROLE IN RELATION TO INTERNATIONAL HARMONIZATION Pursuant to Article 12.1, the SPS Committee provides a regular forum for consultations and shall carry out the functions necessary to implement the Agreement and to further its objectives, in particular with respect to harmonization. The SPS Committee plays a significant role in relation to international harmonization, given that it: sponsors technical consultation and study with the objective of increasing coordination and integration between international and national systems and approaches for approving the use of food additives or for establishing tolerances for contaminants in foods, beverages or feedstuff (Article 12.2); maintains close contact with the relevant international organizations in the field of SPS protection, with the objective of securing the best available scientific and technical advice for the administration of the SPS Agreement and in order to ensure that unnecessary duplication of effort is avoided (Article 12.3); administers the procedure that monitors the use of international standards, guidelines and recommendations by Members, and, if requested by a Member, invites the relevant international organization to examine specific matters with respect to a particular standard, guideline or recommendation (Articles 12.4 and 12.6). All three sister organizations have been granted regular (permanent) observer status in the SPS Committee. They are invited to actively participate in discussions carried out in the Committee with respect to any agenda item that is relevant to their respective mandates, through the submission of papers and/or oral statements at the meetings. The three sister organizations are also regularly invited to participate in informal meetings of the SPS Committee, as well as in workshops organized by the Secretariat. We will now examine the role of the SPS Committee in the development and administration of the procedure that monitors the use of international standards in more detail. III.E.1. MONITORING THE USE OF INTERNATIONAL STANDARDS Articles 3.5 and 12.4 of the SPS Agreement require the Committee to develop a procedure to monitor the process of international harmonization and the use of international standards, guidelines or recommendations. 162

185 IN DETAIL Article 3.5 states that: The Committee on Sanitary and Phytosanitary Measures provided for in paragraphs 1 and 4 of Article 12 (referred to in this Agreement as the "Committee") shall develop a procedure to monitor the process of international harmonization and coordinate efforts in this regard with the relevant international organizations. Article 12.4, in its relevant part, provides that: The Committee shall develop a procedure to monitor the process of international harmonization and the use of international standards, guidelines or recommendations. For this purpose, the Committee should, in conjunction with the relevant international organizations, establish a list of international standards, guidelines or recommendations relating to sanitary or phytosanitary measures which the Committee determines to have a major trade impact. The list should include an indication by Members of those international standards, guidelines or recommendations which they apply as conditions for import or on the basis of which imported products conforming to these standards can enjoy access to their markets. Moreover, Article 12.6, reads: The Committee may, on the basis of an initiative from one of the Members, through appropriate channels invite the relevant international organizations or their subsidiary bodies to examine specific matters with respect to a particular standard, guideline or recommendation, including the basis of explanations for non use given according to paragraph 4. The underlying purpose of the harmonization monitoring procedure, which was adopted as a provisional procedure in 1997, and last reviewed in 2004 (G/SPS/11/Rev.1), is to identify, with the help of Members, where there is a major impact on trade resulting from the non-use of international standards, guidelines or recommendations and to determine the reasons for the non-use of the standard, guideline or recommendation concerned. Moreover, it should also help to identify, for the benefit of the relevant international organizations, where a standard, guideline or recommendation lacks or when one is not appropriate for its purpose and use. In 2006, the SPS Committee decided to extend the provisional procedure to monitor the use of international standards indefinitely (G/SPS/40) and to review its operation as an integral part of the periodic review of the operation and implementation of the SPS Agreement under Article 12.7, which takes place every four years. While discussing the creation of this procedure in 1997 Members pointed out that: they did not seek a burdensome procedure; duplication of the work undertaken by the relevant standard-setting bodies must be avoided; and the monitoring procedure should focus on those standards, guidelines or recommendations that have a major impact on trade. 163

186 The trade impact of an international standard, guideline or recommendation should be determined primarily on the basis of the extent to which Members use the standard (i.e., apply it to imports) and the frequency or severity of problems experienced in the trade of the goods covered by the standard. According to the procedure, Members are asked to submit, at least ten days in advance of each regular meeting of the Committee, concrete examples of what they consider to be problems with a significant trade impact which they believe are related to the use or non-use of relevant international standards, guidelines or recommendations. In their submissions, Members should describe the nature of each of these trade problems and note whether it is the result of: the non-use of an appropriate existing international standard, guideline or recommendation; or the non-existence, or inappropriateness of an existing international standard, guideline or recommendation, e.g. if it is outdated, technically flawed, etc. In light of Members' reasons for the non-use of a standard, the SPS Committee has the option to invite the relevant international standard-setting body to: (i) consider reviewing the existing standard, guideline or recommendation, or to (ii) consider whether it would be appropriate to develop a standard when there isn't one in place already. The scope of the monitoring system is limited to the standards, guidelines or recommendations developed by the international organizations specifically cited in the SPS Agreement: the Codex, OIE and IPPC. Although no format for submitting examples for the monitoring procedure has been adopted by the Committee, the format proposed in G/SPS/W/87 received considerable support from Members and has been widely used. It is reproduced below: Submission on pork and pork products made by a WTO member to the SPS Committee Commodities affected: Pork and pork products Disease/problem/issue: Chlortetracycline (CTC) residues Is international trade significantly affected because of this issue? Yes, trade in pork and pork products is significantly affected. There is also the potential to significantly affect trade in cattle, sheep, chicken, turkey and duck products. Does there currently exist an international standard for this disease/problem/issue with these commodities? No If so: Briefly describe the existing standard: N/A Is the international standard inappropriate? N/A 164

187 Description of how trade is affected by this issue and how the issue can be resolved through new or existing international standards: Of the tetracyclines (CTC, Oxytetracycline and Tetracycline), only Oxytetracycline has a MRL international standard. In an effort to harmonize standards for the tetracyclines, Codex is currently considering one MRL standard that would apply to each of the three tetracyclines. However, the draft MRL has not been finalized by Codex - Codex is currently at step 6 of this process - and therefore a formal international standard for CTC has not been set. JECFA plans to reconsider the proposed tetracycline standards at its February 1998 meeting. JECFA is reconsidering the draft standards because of new scientific information that has recently been made available. The Commission will then reconsider the proposed standards at step 8 at its scheduled meeting in late June Because of the impact on international trade, it is important that Codex moves as quickly as possible to finalize MRLs for CTC. Some countries have no tolerance or maximum residue limit (MRL) in place for CTC. However, studies conducted to evaluate the toxicology and residue depletion profile of CTC have demonstrated that it is possible to establish a MRL for CTC that is safe for human consumption. Table 1: Example of a monitoring procedure format used by members at the SPS Committee The SPS Committee compiles the submissions made by Members on the monitoring of international harmonization and circulates them to all Members for further comments, before inviting international standard-setting bodies to provide additional information. TIP Check the document "Request for information from Members on the use of international standards", G/SPS/W/100. The three sister organizations then respond to the issues raised in the SPS Committee. The WTO Secretariat produces an annual summary report of the harmonization monitoring process. The most recent annual report (in the G/SPS/series) can be downloaded from the WTO website. ILLUSTRATION Now it is time to illustrate what we have discussed so far in this Module. Suppose your country seeks your advice for the preparation of an SPS regulation in the field of food safety, more specifically imposing limits on residues of veterinary drugs in meat products (maximum residue levels, or MRLs). So far, you know that: (i) first, your SPS measure should not be unjustifiably discriminatory, so that foreign food products do not receive a less favourable treatment than the domestic producer and products that come from another WTO Member; (ii) second, it has to be designed in a way so as not to create unnecessary obstacles to trade. 165

188 Suppose that to elaborate the requirements that should be appropriate to achieve your country's chosen level of protection you sit down with your fellow experts. What should you do? You should look for international standards in this field and see what has been already discussed, proposed and adopted by the relevant international organization in the field, in this case the Codex Alimentarius Commission. Taking into consideration that the Codex has adopted standards on Veterinary Drug Residues in Food MRLs ( your country should base its SPS measure on these standards. This constitutes a great tool to ensure the protection of the health of consumers in your country, and save you the costs and efforts of trying to assess potential risks on your own. These organizations, while creating and updating standards, receive the input of experts from various countries, so as to propose a "one size fits all" solution. At the same time, it will promote cooperation and transparency, and by doing so you will be applying the SPS Agreement and fulfilling the obligations contained in Article 3. Moreover, if your domestic SPS measure conforms to the Codex Alimentarius standards (i.e. adopts them integrally), your country's measure will be deemed to be necessary for the protection of human life or health and presumed to be in conformity with the relevant provisions of the SPS Agreement and the GATT. Figure 3: For the regulators: Three fundamental questions You should also keep in mind that, if the international standard does not achieve your country's appropriate level of SPS protection, you can depart from it. In fact, as we explained before, the level of SPS protection is for you (your government) to chose. If you do not base your measure on an existing international standard, you are required to provide a scientific justification. Remember that, according to Article 5.8, another Member may request that you present a justification for not using an international standard. Now, let us turn our attention to the study of Equivalence in the SPS Agreement. EXERCISES: 10. What is the obligation WTO Members have regarding participation in the standard-setting work carried out by the three sister organizations? 166

189 11. What is the role of the SPS Committee in relation to international harmonization? What is the procedure to monitor the process of international harmonization and how does it work? 167

190 IV. EQUIVALENCE PROVISIONS IN THE SPS AGREEMENT IN BRIEF Codex and the SPS Committee define equivalence as the state wherein sanitary or phytosanitary measures applied in an exporting country, though different from the measures applied in an importing country, achieve the importing country's appropriate level of sanitary or phytosanitary protection (G/SPS/19/Rev.2). IPPC defines equivalence as the situation where, for a specified pest risk, different phytosanitary measures achieve a contracting party's appropriate level of protection/ acceptable level of risk. OIE describes equivalence as different animal health and production systems which provide the same level of animal and human health protection. A determination of the recognition of equivalence may be with respect to a specific measure or measures related to a certain product or categories of products, or on a systems-wide basis. Equivalence must be demonstrated by the exporting country and recognized by the importing country. Article 4 of the SPS Agreement recognizes that more than one SPS measure may be equally effective in satisfying a country's appropriate level of protection. Therefore, importing Members shall seek to accept as equivalent the SPS measures of an exporting Member (even if these measures are different from the importer's) if the exporter objectively demonstrates that its measures achieve the importer's appropriate level of protection. That is, the exporting Member must prove its case to the importing Member, by providing appropriate science-based and technical information in support of its request. In order to facilitate the evaluation of equivalence, exporting Members are required to grant reasonable access to the importer for inspection, testing, and other relevant procedures. IN DETAIL Article 4 of the SPS Agreement on Equivalence provides that: 1. Members shall accept the sanitary or phytosanitary measures of other Members as equivalent, even if these measures differ from their own or from those used by other Members trading in the same product, if the exporting Member objectively demonstrates to the importing Member that its measures achieve the importing Member's appropriate level of sanitary or phytosanitary protection. For this purpose, reasonable access shall be given, upon request, to the importing Member for inspection, testing and other relevant procedures. 2. Members shall, upon request, enter into consultations with the aim of achieving bilateral and multilateral agreements on recognition of the equivalence of specified sanitary or phytosanitary measures. 168

191 Most determinations of equivalence occur on a bilateral basis. However, the SPS Agreement encourages Members to conduct consultations with the aim of achieving multilateral equivalence agreements as well. The three sister organizations have been developing guidelines to help Members negotiate the recognition of equivalence in their specific areas of action. Examples of equivalence agreements are illustrated below. Equivalence has been one of the "hot" topics of interest for many Members, and one that a number of developing country Members have found difficult to apply in practice. With that in mind, the SPS Committee decided, in May 2000, that it would focus on facilitating the implementation of the equivalence provisions, among other subjects. In parallel, the WTO General Council, in the framework of its discussions on implementation problems related to the Uruguay Round Agreements, also addressed the issue of equivalence in the context of the SPS Agreement. The General Council requested the SPS Committee "to examine the concerns of developing countries regarding the equivalence of SPS measures and to come up with concrete options as to how to deal with them" (Ministerial Decision on Implementation-related Issues and Concerns, WT/MIN(01)/17). In October 2001, the SPS Committee adopted the Decision on the Implementation of Article 4 of the SPS Agreement, which was last revised in 2004 (G/SPS/19/Rev.2). This Decision provides guidance for governments negotiating the recognition of equivalent measures or products, for example with regard to information exchange. In March 2002, the SPS Committee adopted a work programme for its continued discussions of the subject (G/SPS/20). The Committee completed its work programme on Equivalence in the first semester of 2004, and with this, it clarified the Decision on Equivalence (G/SPS/19/Rev.2) with respect to: the facilitation of recognition of equivalence based on historic trade (paragraph 5); the effect of a request for recognition of equivalence on trade (paragraph 6); the importance of scientific information in evaluating the impact of exporting countries' measures (paragraph 7). Equivalence remains a standing agenda item of the SPS Committee. We will learn about the work of the SPS Committee in Module 8 of our course. IV.A. SPECIFIC GUIDANCE RELATED TO EQUIVALENCE The Committee's Decision (G/SPS/19/Rev.2) provides guidance to Members on how to implement the concept of equivalence. Pursuant to the Decision, it is recommended that importing Members: Explain the objective and rationale of the SPS measure and identify the risks this measure is intended to address; Indicate the appropriate level of protection the measure is designed to achieve. Provide additional information which may assist the exporting Member to demonstrate the equivalence of its own measure. Respond in a timely manner to any request for consideration of equivalence, normally within a six-month period. 169

192 Accelerate the procedure for determining equivalence in respect of products it has historically imported from the exporting Member. Abstain from disrupting or suspending on-going imports from a Member requesting recognition of equivalence of its measures, with regard to a specific product. Analyse the science-basis and technical information provided by the exporting Member on SPS measures, with a view to determine whether these achieve the level of protection provided by its own relevant SPS measures. Consider requests from developing countries for appropriate technical assistance to facilitate the implementation of Article 4 of the SPS Agreement. It is recommended that an exporting Member: Provide appropriate science-based and technical information to support its claim that its measure achieves the appropriate level of protection identified by the importing Member; Provide reasonable access, upon request, to the importing Member for inspection, testing and other relevant procedures for the recognition of equivalence. An evaluation of the product-related infrastructure and programmes within which the measure is being applied may also be necessary. Important note Please note that, since a request for recognition of equivalence does not in itself alter the way in which trade is occurring, there is no justification for disruption or suspension of trade. At the same time, such request does not impede the right of an importing Member to take any measure it may deem necessary to achieve its appropriate level of protection, including measures in response to emergency situations. This Member may be invited to justify its measures to the exporting Member, nonetheless. Furthermore, the Decision provides that Members should actively participate in the ongoing work on the issue of equivalence carried out by the three sisters, which have developed some guidance in this area: The Codex Alimentarius Commission has adopted "Guidelines on the Judgement of Equivalence of Sanitary Measures Associated with Food Inspection and Certification Systems" (CAC-GL 53/2003) at its 26th Session held in Rome, Italy, from 30 June to 7 July See also the Guidelines CAC/GL 34/1999 "Guidelines for the Development of Equivalence Agreements Regarding Food Import and Export Inspection and Certification Systems". The International Committee of the OIE adopted the "Guidelines for Reaching a Judgement on Equivalence of Sanitary Measures" at its 71st General Session held in Paris, France, from 18 to 23 May At the seventh session of the Interim Commission on Phytosanitary Measures (ICPM, nowadays the CPM no longer an interim commission) held in Rome, Italy, in spring 2005, the ICPM adopted "Guidelines for the Determination and Recognition of Equivalence of Phytosanitary Measures", ISPM No. 24 (2005). Note that the equivalence of sanitary or phytosanitary measures does not require duplication or identical measures, but the acceptance of alternative measures that meet an importing Member's appropriate level of 170

193 sanitary or phytosanitary protection. Equivalence can be applied between all Members, irrespective of their level of development. For instance, if the exporting Member demonstrates by way of an objective basis of comparison or similar approach established by a relevant international organization that its measure has the same effect in achieving the SPS objective as the importing Member's measure, the importing Member should recognize both measures as equivalent, as was agreed in the SPS Committee in July 2004 (G/SPS/19/Rev.2). Members are encouraged to provide information regarding their experiences in the implementation of Article 4 and in the use of the guidance developed by the Committee (G/SPS/19/Rev.2). In particular, Members are encouraged to notify any agreements reached on the recognition of equivalence, which shall be further explained in the next sub-section. ILLUSTRATIONS 1 - Dairy Products and Foot and Mouth Disease In 1994, the Scientific Veterinary Committee (Animal Health) of the European Commission (EC) published a document considering the heat treatment of milk originating from foot and mouth disease (FMD) affected areas. The publication recommended specific heat treatments that could be applied to potentially infected milk to destroy the FMD virus. The recommendations were subsequently incorporated into EC legislation. Based on these, the EC also accepted imports of dairy products from countries that had experienced outbreaks of FMD, provided the milk had been subjected to one of the specified heat treatments. New Zealand operated a policy of only accepting dairy products from countries that had been free from FMD for at least 12 months. During negotiations on a New Zealand/EC veterinary agreement in 1996, it was agreed that New Zealand would undertake a risk analysis of dairy products and that the EC would provide information to support their position on accepting dairy products from countries with FMD. New Zealand completed the risk analysis in early 1998 and adopted a similar position to the EC. As a result, New Zealand was able to recognise the relevant EC legislation as being equivalent to New Zealand standards. Interestingly, the OIE also considered the same information and subsequently adopted the heat treatments recommended by the EC as part of the OIE International Animal Health Code. Therefore, nowadays, these requirements became an example of international harmonization, although it started as a case of recognition of equivalence between the EC and New Zealand. 171

194 2 - Cheese and Food Safety The Australia New Zealand Food Authority (ANZFA) was requested by the Swiss Federal Veterinary Office in 2001 to amend the Australian legislation which set standards for cheese and cheese products, so as to permit the use of raw milk in the making of some speciality cheeses to be exported to Australia. In terms of food safety related to the abovementioned products, Australia required the use of pasteurization or thermization techniques, as well as storage, to ensure the cheese was safe for consumption. The Swiss authority's application aimed to demonstrate the equivalence of applied risk management measures in achieving a level of safety in its cheese products comparable to the Australian domestic standard. In the absence of a Codex guideline for the determination of equivalence, the application was addressed through the use of risk assessment. The risk assessment concluded that, when made according to the manufacturing process in the Swiss application, the hard cheeses attained at least the same level of pathogen destruction as for pasteurization, while the semi-hard cheeses did not. On this basis, the Emmental, Sbrinz and Gruyere cheeses were recognized as being as safe as those cheeses produced using pasteurization or thermized milk, and similar permissions were applicable to manufacturers of raw milk cheeses, domestic or internationally, if they were able to demonstrate a system that provided an equivalent level of food safety. The determination of recognition of equivalence was reported at an SPS meeting held on the March ACCELERATED PROCEDURE: THE CASE FOR HISTORICALLY IMPORTED PRODUCTS Pursuant to paragraph 5 of the Decision on the Implementation of Article 4 (Equivalence) of the SPS Agreement (G/SPS/19/Rev.2), the importing Member should accelerate its procedure for determining equivalence in respect of those products which it has historically imported from the exporting Member. The Decision affirms that "historic trade provides an opportunity for an importing Member to become familiar with the infrastructure and measures of an exporting Member, and to develop confidence in the regulatory procedures of that Member", which includes the knowledge of the exporting Member's system of inspection and certification for a certain product or group of products. In such situations, the Decision on Equivalence recommends the following: The information and experience mentioned above, if directly relevant to the product or measure under consideration, should be taken into account in the recognition of equivalence and should contribute to expedite the procedure; Information already available to the importing Member should not be sought again with respect to procedures to determine the equivalence of measures proposed by the exporting Member, unless this information is in need of updating; 172

195 Information related to SPS measures of other products should be taken into consideration by the importing Member, if useful; In cases where the SPS measures are applied to low risk products, Members should reduce requirements and accelerate the procedure; The importing Member should estimate the steps that the demonstration of equivalence will require, and inform the exporting Member of an estimated time schedule for the whole process, when possible. These additional steps to be undertaken by the importing Member were developed by the SPS Committee based on Members' experiences with the application of Article 4 of the Agreement. IV.B. NOTIFICATION OF EQUIVALENCE As part of its Decision on Equivalence, the SPS Committee decided that a Member which has made a As part of its Decision on Equivalence, the SPS Committee decided that a Member which has made a determination recognizing the equivalence of sanitary or phytosanitary measures of another Member or Members, should notify other Members, through the Secretariat, of the measure(s) recognized to be equivalent and of the products affected by this recognition. Notification should also be made of significant variations to existing equivalence arrangements, including their suspension or termination. WTO Members have not as yet submitted any such notifications of recognition of equivalence. The format of the notification is contained in document G/SPS/7/Rev.2/Add.1, and shall be explained in Module 7, on Transparency. EXERCISES: 12. How is Equivalence of SPS measures defined by the Codex, SPS Committee, OIE and IPPC? 13. What steps are importing Members recommended to take according to the Decision on Equivalence, when examining a request of recognition of equivalence from an exporting Member? And what should be the role of the latter? 14. What additional steps should be carried out by the importing Member when the request of equivalence is made in regard to historically imported products? Mention at least three of them. 173

196 V. SUMMARY HARMONIZATION MAY BE COMMONLY DESCRIBED AS THE ESTABLISHMENT, RECOGNITION AND APPLICATION OF COMMON MEASURES BY DIFFERENT COUNTRIES, WHERE PREVIOUSLY EACH MIGHT HAVE HAD ITS OWN SET OF REQUIREMENTS INTERNATIONAL STANDARDS International Standards are defined in Annex A of the SPS Agreement as those created by the Codex Alimentarius Commission, the World Organization for Animal Health and the International Plant Protection Convention, in their respective areas. The SPS Committee can identify other relevant standard-setting organizations, but has not done so to date. HARMONIZATION IS A CENTRAL DISCIPLINE OF THE SPS AGREEMENT AND IS ARTICULATED INTO OBLIGATIONS AND RIGHTS FOR WTO MEMBERS The two main requirements are that: Members shall base their SPS measures on international standards, guidelines or recommendations; and Members shall participate in the development and periodic review of international standards, guidelines and recommendations prepared by international standard-setting bodies, in particular the "three sisters". The two main rights are that: Members' SPS measures which conform to international standards, guidelines or recommendations will be deemed to be necessary and presumed to be consistent with the relevant provisions of the SPS Agreement. Members may adopt SPS measures which are more strict than the relevant international standard, if they have a scientific justification or as a consequence of the level of protection a Member determines to be appropriate, in accordance with the relevant provisions of Article 5 of the SPS Agreement. THE DIFFERENCE BETWEEN THE MEASURE BEING BASED ON AND CONFORMING TO AN INTERNATIONAL STANDARD WAS POINTED OUT BY THE APPELLATE BODY IN THE EC - HORMONES CASE, WHERE IT STATED "A thing is commonly said to be 'based on' another thing when the former 'stands' or is 'founded' or 'built' upon or 'is supported by' the latter. In contrast, much more is required before one thing may be regarded as 'conform[ing] to another: the former must 'comply with', 'yield or show compliance' with the latter..." 174

197 THE PROCESS OF INTERNATIONAL HARMONIZATION AND THE USE OF INTERNATIONAL STANDARDS The SPS Committee developed a procedure to monitor the process of international harmonization and the use of international standards, guidelines or recommendations (G/SPS/11/Rev.1). The procedure's focus is on identifying, with the help of Members, where there is a major impact on trade resulting from the non-use of those international standards, guidelines or recommendations and to determine the reasons for their non-use. It also aims at identifying where a standard, guideline or recommendation lacks or when one is not appropriate for its purpose and use. WHEN A MEMBER DECIDES TO CREATE A NEW SPS MEASURE When a Member decides to create a new SPS measure - or revise one which is already in place - it should start its task by verifying if an international standard exists for the product and/or measure in question. If it exists, the Member shall base its SPS measure on it, unless there is a scientific justification for not using it, or the relevant international standard does not achieve the level of protection aimed by the Member. If a Members designs its SPS measure in conformity with a relevant international standard, it shall be presumed to be in accordance with the relevant provisions of the SPS Agreement and the GATT. This presumption is a rebuttable one. EQUIVALENCE Equivalence is the state wherein sanitary or phytosanitary measures applied in an exporting country, though different from the measures applied in an importing country, achieve the importing country's appropriate level of sanitary or phytosanitary protection. It does not require duplication or identical measures, and can be applied between all Members, irrespective of their level of development. Equivalence, however, has to be demonstrated by the exporting country and recognized by the importing country. A DETERMINATION OF THE RECOGNITION OF EQUIVALENCE MAY BE WITH RESPECT TO A SPECIFIC MEASURE OR MEASURES RELATED TO A CERTAIN PRODUCT OR CATEGORIES OF PRODUCTS, OR ON A SYSTEMS-WIDE BASIS THE SPS COMMITTEE DECISION ON EQUIVALENCE The SPS Committee Decision on Equivalence (G/SPS/19/Rev.2) provides guidance in the recognition of equivalence and recommends that a Member which has recognized the equivalence of SPS measures of another Member should notify others, through the Secretariat, of the measure(s) recognized to be equivalent and of the products affected by this recognition. Notification should also be made of significant variations to existing equivalence arrangements, including their suspension or termination. 175

198 PROPOSED ANSWERS: 1. Harmonization may be described as the establishment, recognition and application of common measures by different countries, where previously each might have had its own set of requirements. The SPS Agreement defines harmonization in Annex A, para. 2, as "the establishment, recognition and application of common sanitary and phytosanitary measures by different Members". 2. In addition to its importance in the improvement of human, animal and plant life and health protection worldwide, harmonization can bring several benefits. It can: facilitate international trade, as products conforming to the same standards may be accepted more widely and producers do not need to know in advance the final markets for their products, resulting in fewer unjustified restrictions on trade; diffuse technology embodied in products and processes; promote efficiencies and allow economies of scale, as producers do not have to create different processes or design and manufacture a product in many variations to meet varying, different standards; result in lower costs to consumers who may compare and chose from a larger number of suppliers; and aid governments in developing science-based SPS measures and ensure food safety, animal and plant health without the need to undertake risk assessments on their own. They may use the conclusions of a risk assessment undertaken by an international body or by another Member. Ultimately, harmonization can ease production and trading conditions for producers, importers and exporters, especially from developing countries (which face more financial constraints to adapt to the requirements of the export market), thus minimizing obstacles to international trade. 3. International standards, guidelines and recommendations are defined in Annex A of the SPS Agreement. These are the standards created by relevant international bodies, which are mainly the "three sisters", in their respective area: The Codex Alimentarius Commission (Codex) for food safety. The World Organization for Animal Health (OIE) for animal health and zoonoses. The International Plant Protection Convention Secretariat (IPPC) for plant health. In short, when a Member decides to create a new SPS measure - or revise one which is already in place - it should start its task by verifying if an international standard exists for the product and/or measure in question. If it exists, the Member has the obligation to base its SPS measure on it, unless there is a scientific justification for not using it, or the relevant international standard does not achieve the level of protection desired by the Member (Article 3.3 of the SPS Agreement). 4. The WTO is not an international standard-setting body. It neither sets international standards nor is responsible for the actual process of harmonizing various SPS measures of Members. The SPS Committee, nonetheless, has the mandate to monitor the process of international harmonization and to coordinate efforts with relevant international organizations. 176

199 5. The international standard-setting bodies have in common: broad participation, which includes experts from many countries; their standards are usually adopted through an elaborated procedure, which involves at least three phases: the drafting or planning, the discussions (when country comments are made and inputs are taken into consideration) and the adoption. Many of the international standardsetting bodies adopt their decisions by consensus or unanimity, and if it proves unviable, through voting. 6. The two main requirements are that: Members shall base their SPS measures on international standards, guidelines or recommendations. Members shall participate in the development and periodic review of international standards, guidelines and recommendations prepared by international standard-setting bodies, in particular the "three sisters". The two main rights are that: Members' SPS measures which conform to international standards, guidelines or recommendations will be deemed to be necessary and presumed to be consistent with the relevant provisions of the SPS Agreement (and of GATT 1994). Members may, however, adopt SPS measures which are stricter than the relevant international standard, if they have a scientific justification or as a consequence of the level of protection they determine to be appropriate. 7. Members have an obligation to base their SPS measures on international standards, guidelines and recommendations, as provided in Article 3.1. Two key concepts are at the core of this obligation, which have been clarified by the interpretation offered in WTO dispute settlement: relevant "international standards where they exist" "base measures on international standards" Relevant international standards are those adopted by the relevant international organizations, which are the thee sisters, in their respective field of action, as provided in Annex A, paragraph 3, of the SPS Agreement. They "exist", and thus a Member has the obligations to base its measures on it, not only when a specific standard has been put in place, but also when a standard which is not specific can be related to the measure at issue. "Based on international standards" conveys the idea that the SPS measure "stands" or is "founded" or 'built upon' or 'is supported by' the relevant international standard. To be "based on" does not mean that the measure conforms to the international standard or that it repeats it integrally. As interpreted in WTO case law (EC - Hormones case, Appellate Body report), a measure may adopt some, not necessarily all, of the elements of the international standard to be considered to be based on it. 177

200 8. A WTO Member is highly encouraged but is not obliged to use a relevant international standard as a basis for its SPS measure, as Members are authorized to deviate from international standards if there is a scientific justification or if the international standard does not achieve the Member's appropriate level of protection (Article 3.3 of the SPS Agreement). When a WTO Member adopts an SPS measure which conforms to that is, which incorporates - an international standard, it enjoys a presumption that this measure is necessary and consistent with the relevant provisions of the SPS Agreement and the GATT. When the measure is only based on the international standard, it does not enjoy such presumption, as interpreted by the Appellate Body in the EC Hormones case. 9. Members' measures which conform to international standards, guidelines or recommendations developed by the three sister organizations, are presumed to be consistent with the SPS Agreement, and Members who adopt such measures can have some assurance of their compliance with the SPS Agreement. The Appellate Body interpreted the expression "conform to" in the EC - Hormones case as measures that 'comply with', 'yield or show compliance' with the international standard. The reference of 'conform to' is to 'correspondence in form or manner', to be in 'compliance with' or acquiescence', to 'follow in form or nature'. Article 3.2 of the SPS Agreement provides that such measures will be deemed necessary for health protection. That is, the SPS measure is deemed not to create an unnecessary obstacle to international trade if it conforms to the relevant international standard(s). International standards are sometimes described as providing a "safe harbour" for governments. Clearly, however, Members have the right to challenge all SPS measures if they believe, for example, that the claim that a measure conforms to an international standard is ill founded. That is why it is said that the presumption of consistency is a rebuttable one. 10. Article 3.4 establishes that Members shall play a full part in the work of the three sisters, to promote within these organizations the development and periodic review of standards, guidelines and recommendations, with a view to harmonizing SPS measures. The limit foreseen to this participation is a Member's resources. On this matter, international standard-setting organizations have taken actions to enhance the participation of developing country members in their work. The FAO/WHO (for the Codex Alimentarius Commission), the IPPC and the OIE have each established trust funds, supported through contributions from donor agencies and member countries, to enhance the participation of developing countries in standard-setting meetings and activities, training programmes and regional technical consultations on standards and their implementation. 11. Articles 3.5 and 12.4 of the SPS Agreement require the Committee to develop a procedure to monitor the process of international harmonization and the use of international standards, guidelines or recommendations. The underlying purpose of the monitoring procedure, which was adopted as a provisional procedure in 1997 and was last reviewed in 2004 (G/SPS/11/Rev.1), is to identify, with the help of Members, where there is a major impact on trade resulting from the non-use of those international standards, guidelines or recommendations and to determine the reasons for the non-use of the standard, guideline or recommendation concerned. Moreover, it should also help to identify, for the benefit of the relevant 178

201 international organizations, where a standard, guideline or recommendation lacks or when one is not appropriate for its purpose and use. The scope of the monitoring system is limited to the standards, guidelines or recommendations developed by the international organizations specifically cited in the SPS Agreement: the Codex, OIE and IPPC. Although no format for submitting examples for the monitoring procedure has been adopted by the Committee, the format proposed in G/SPS/W/87 received considerable support from Members and has been widely used. 12. Codex and the SPS Committee defined equivalence as the state wherein sanitary or phytosanitary measures applied in an exporting country, though different from the measures applied in an importing country, achieve the importing country's appropriate level of sanitary or phytosanitary protection (G/SPS/Rev.2/Add.1). IPPC defines equivalence as the situation where, for a specified pest risk, different phytosanitary measures achieve a contracting party's appropriate level of protection/ acceptable level of risk. OIE describes equivalence as different animal health and production systems which provide the same level of animal and human health protection. 13. Members are recommended to take certain measures when entering into an equivalence agreement. The importing Member should: Explain the objective and rationale of the SPS measure and identify the risks this measure is intended to address. Indicate the appropriate level of protection the measure is designed to achieve. Provide additional information which may assist the exporting Member to demonstrate the equivalence of its own measure. Respond in a timely manner to any request for consideration of equivalence, normally within a sixmonth period. Accelerate the procedure for determining equivalence in respect of products it has historically imported form the exporting Member. Abstain from disrupting or suspending on-going imports from a Member requesting recognition of equivalence of its measures, with regard to a specific product. Analyse the science-basis and technical information provided by the exporting Member on SPS measures, with a view to determine whether these measures achieve the level of protection provided by its own relevant SPS measures. Consider requests from developing countries for appropriate technical assistance to facilitate the implementation of Article 4 of the SPS Agreement. The exporting Member should: Provide appropriate science-based and technical information to support its claim that its measure achieves the appropriate level of protection identified by the importing Member. Provide reasonable access, upon request, to the importing Member for inspection, testing and other relevant procedures for the recognition of equivalence. 179

202 14. Pursuant to paragraph 5 of the Decision on the Implementation of Article 4 (Equivalence) of the SPS Agreement (G/SPS/19), an importing Member should accelerate its procedure for determining equivalence in respect of those products which it has historically imported from the exporting Member. In such situations, the Decision on Equivalence recommends the following: The information and experience historic trade has provided, if directly relevant to the product or measure under consideration, should be taken into account in the recognition of equivalence and should contribute to expedite the procedure. Information already available to the importing Member should not be sought again with respect to procedures to determine the equivalence of measures proposed by the exporting Member, unless this information is in need of updating. Information related to SPS measures of other products should be taken into consideration by the importing Member, if useful. In cases where the SPS measures are applied to low risk products, Members should reduce requirements and accelerate the procedure. The importing Member should estimate the steps that the demonstration of equivalence will require, and inform the exporting Member of an estimated time schedule for the whole process, when possible. 180

203 MODULE 6 Risk Assessment, Appropriate Level of Protection, Consistency, Provisional Measures and Regionalization in the SPS Agreement ESTIMATED TIME: 7 hours OBJECTIVES OF MODULE 6 Present the obligations regarding risk assessment and the determination of the appropriate level of protection contained in the SPS Agreement, including the disciplines regarding consistency and provisional measures. (Article 5); explain the subject as interpreted in WTO Dispute Settlement; and explain the obligations related to regionalization (Article 6). 181

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205 M6 I. INTRODUCTION As already explained, a WTO Member has the right to adopt SPS measures to achieve its self-determined level of health protection. That is, the WTO Member determines the level of protection it aims to achieve, and adopts the measures which allow it to achieve this level. Remember that the right to adopt SPS measures is accompanied by basic obligations, contained in Article 2 and further elaborated in other provisions. Essentially, countries may adopt SPS measures provided these: are applied only to the extent necessary to protect life or health; are based on scientific principles and not maintained without sufficient scientific evidence; and do not unjustifiably discriminate between national and foreign, or among foreign sources of supply. As we learned before, Members have two options to show that their measures are based on science. They may either: base their measures on international standards; OR base their measures on scientific risk assessment. In this Module, it is one of our aims to discuss how Members may comply with the obligation to base SPS measures on science by basing them on scientific risk assessment. This differs from harmonization because the measure adopted by a Member is not based on an internationally agreed standard, but rather on a specific assessment of risks and the appropriate level of protection the Member believes necessary for human, animal or plant life or health. In the previous Module, we learned about "harmonization". Harmonization is a central discipline in the SPS Agreement and takes place in situations where Members base their SPS measures on international standards, thus adopting common standards. Note that, even with harmonization, each Member adopts its own measure to reflect its appropriate level of protection but without necessarily doing a risk assessment. Harmonization is articulated into obligations and rights for WTO Members, which are recalled below. RECALL THE TWO MAIN REQUIREMENTS ARE THAT Members shall base their SPS measures on international standards, guidelines or recommendations; and Members shall participate in the development and periodic review of international standards, guidelines and recommendations prepared by international standard-setting bodies, in particular the "three sisters". 183

206 THE TWO MAIN RIGHTS ARE THAT Members' SPS measures which conform to international standards, guidelines or recommendations will be deemed to be necessary and presumed to be consistent with the relevant provisions of the SPS Agreement. Members may, however, adopt SPS measures which are stricter than the relevant international standard, if they have a scientific justification or as a consequence of the level of protection a Member determines to be appropriate, in accordance with the relevant provisions of Article 5 of the SPS Agreement. Annex A.3 of the SPS Agreement defines international standards as those created by the Codex Alimentarius Commission; the World Organization for Animal Health (OIE), and the International Plant Protection Convention (IPPC), in their respective field of action. The SPS Committee can identify other relevant international standard-setting organizations, but has not done so to date. So, it is time to start Module 6! We will learn first about "risk assessment"; followed by the requirements on the choice of the "appropriate level of protection" and the requirement of consistency. We will then analyse a Member's right to adopt provisional measures, and finally the obligations of "regionalization" in the SPS Agreement. Please, remember to click on the hyperlinks and check the original documents. They are very important for you to take advantage of this experience while also getting familiarized with the WTO Documentation system. Oh, and remember to send your questions to your tutor and to also regularly participate in our discussion forums. We are positive that your peers have a lot to discuss and that your input will be greatly appreciated! 184

207 II. RISK ASSESSMENT Members do not always base their measures on internationally-agreed standards, for several reasons. First, the three sister organizations have not elaborated international standards for every aspect of food safety, animal and plant health. Furthermore, Members may desire to adopt SPS measures that achieve a higher or lower level of health protection than that achieved by the relevant international standards. In this context it is important to note that the encouragement to use international standards does not mean that these constitute a floor or a ceiling on national standards. National measures do not violate the SPS Agreement simply because they differ from international norms. According to Article 3 and Article 5 of the SPS Agreement, Members are permitted to adopt SPS measures which are more stringent than the relevant international standards or adopt SPS measures when international standards do not exist, provided the measures, in addition to the basic obligations set forth in Article 2, are: based on scientific risk assessment; consistently applied; and not more trade restrictive than necessary. Article 5 disciplines the "assessment of risk and the determination of the appropriate level of sanitary and phytosanitary protection". Article 5.1 provides: 1. Members shall ensure that their sanitary or phytosanitary measures are based on an assessment, as appropriate to the circumstances, of the risks to human, animal or plant life or health, taking into account risk assessment techniques developed by the relevant international organizations. In order to establish if an SPS measure is based on a risk assessment, as required by Article 5.1, we should first determine what "risk assessment" actually means. II.A. TYPES OF RISK ASSESSMENT IN BRIEF There are two types of risk assessment as defined by Annex A.4 of the SPS Agreement: Risks arising from pests or diseases: the evaluation of the likelihood of entry, establishment or spread of a pest or disease within the territory of an importing Member according to the SPS measures which might be applied, and of the associated potential biological and economic consequences; or Food-borne risks: the evaluation of the potential for adverse effects on human or animal health arising from the presence of additives, contaminants, toxins or disease-causing organisms in food, beverages or feedstuffs. 185

208 It is important to determine which definition of risk assessment is applicable in a particular situation, as the requirements are different for each type. The category of SPS measure (which depends on its aim) determines which type of risk assessment is applicable. II.A.1. RISK ASSESSMENT FOR RISKS ARISING FROM PESTS AND DISEASES The first type of risk assessment, related to the entry, establishment or spread of diseases or pests, was the object of analysis in the Australia Salmon case. There, Canada questioned Australia's ban on the import of fresh, chilled or frozen salmon, allegedly imposed for animal health reasons. Because we will be discussing the dispute Australia Salmon quite a lot in this Module, we will give you a brief summary of the case here. CASE STUDY: AUSTRALIA - SALMON (WT/DS18) Overview Australia Measures affecting importation of Salmon Complaint by Canada Respondent: Australia Third Parties: European Communities, India, Norway, United States The measure at issue was Australia's ban on importation of fresh, chilled or frozen salmon, allegedly to protect the domestic salmon population from a number of diseases. Canada claimed that salmon imported for human consumption was very unlikely to lead to the introduction of these diseases. What did the Panel say? The report of the Panel was circulated to Members on 12 June The Panel found that Australia's measures were inconsistent with Articles 2.2, 2.3, 5.1, 5.5, and 5.6 of the SPS Agreement, and also nullified or impaired benefits accruing to Canada under the SPS Agreement. What did the Appellate Body say? The report of the Appellate Body was circulated to Members on 20 October The Appellate Body reversed the Panel's reasoning with respect to Articles 5.1 and 2.2 of the SPS Agreement but nevertheless found that: Australia had acted inconsistently with Articles 5.1 and 2.2 of the SPS Agreement; broadened the Panel's finding that Australia had acted inconsistently with Articles 5.5 and 2.3 of the SPS Agreement; 186

209 reversed the Panel's finding that Australia had acted inconsistently with Article 5.6 of the SPS Agreement but was unable to come to a conclusion whether or not Australia's measure was consistent with Article 5.6 due to insufficient factual findings by the Panel. The Appellate Body, while analysing the case, decided that for the assessment of risks arising from pests and diseases, a three pronged test must be met, as the risk assessment must: identify the pests or diseases whose entry, establishment or spread a Member wants to prevent within its territory, as well as the potential biological and economic consequences associated with the entry, establishment or spread of these pests or diseases; evaluate the likelihood of the entry, establishment or spread of these pests or diseases, as well as the associated potential biological and economic consequences; and evaluate the likelihood of entry, establishment or spread of these diseases according to the SPS measures which might be applied. The Appellate Body affirmed that likelihood means probability and that a mere demonstration of possibility of a pest or disease entry, establishment or spread would not be enough to fulfil the requirement of a risk assessment for risks arising from pests and diseases, as defined by the SPS Agreement. Important note The likelihood of entry may be expressed either quantitatively or qualitatively and there is no requirement for the risk assessment to establish a certain magnitude or threshold level of the degree of risk. II.A.2. RISK ASSESSMENT FOR FOOD-BORNE RISKS In the dispute EC Hormones (WT/DS26 and WT/DS48), presented in Module 5, the United States and Canada questioned the ban imposed by the European Communities on imports of beef from hormone-treated cattle, for food safety reasons. The Appellate Body, in this case, applied a two-step test for the assessment of food-borne risks: identification of the adverse effects on human (or animal, as the case may be) health arising from the presence of additives, contaminants, etc.; AND if such adverse effects exist, evaluation of the potential occurrence of these effects. The Appellate Body recognized that there must be an "identifiable risk" and that, this risk need not be quantified but can be expressed qualitatively. Note Moreover, the Appellate Body, in Australia Salmon (see case explanation above) pointed to the different language used in the first and second definitions in Annex A of the SPS Agreement. While the assessment of food-borne risks requires an evaluation of the "potential" for adverse effects, the assessment of risks arising from pests or diseases calls for an evaluation of the "likelihood" of their entry, establishment or spread, which equates to probability. 187

210 II.A.3. COMMON FEATURES BETWEEN THE TWO TYPES Common features for both types of risk assessment, as identified in the Appellate Body reports in the two cases examined above, are: The risks they address should be ascertainable. Theoretical uncertainty is not the kind of risk which, under Article 5.1, is to be assessed. The risks covered should be specific. There is a requirement of specificity, and it is not sufficient for a risk assessment to identify a general risk of harm, or address the overall risk related to the combination of all diseases of concern, for example. The risk assessment should be comprehensive and cover each of the products at issue. While the Panel on EC-Hormones had held that a risk assessment would have to be carried out for each individual substance at issue, the Panel on Australia Salmon held that studies on one particular product category could be relevant for a risk assessment in respect of another product category. Therefore, we may say that a risk assessment undertaken for one category of product may be relevant to another category, if such products are subject to the same or similar kind of risk. IF YOU WANT TO KNOW MORE INTERPRETATION OF RISK ASSESSMENT OBLIGATIONS IN WTO CASE LAW Check the WTO Analytical Index, which summarizes the interpretation of the various Articles of the SPS Agreement in WTO case law. The Section on Article 5.1 includes selected paragraphs of the various Panel's and Appellate Body reports mentioned thus far in our Module, which are relevant for our study. EXERCISES: 1. Are WTO Members permitted to adopt SPS measures which are more stringent than the relevant international standards? 2. What are the types of risk assessment defined in the SPS Agreement? What are their common features, according to WTO case law? 188

211 II.B. OBLIGATIONS REGARDING RISK ASSESSMENT Let us now examine Article 5 of the SPS Agreement in detail. II.B.1. OBLIGATION TO BASE SPS MEASURES ON A RISK ASSESSMENT IN DETAIL As we mentioned above, Article 5.1 provides for the obligation to base SPS measures on an assessment of risk, taking into account the techniques developed by relevant international organizations, which are the Codex Alimentarius Commission, the OIE and the IPPC. We learned in Module 4 how the term "base on" has been interpreted in WTO case law. RECALL The Appellate Body in EC Hormones interpreted the requirement to base an SPS measure on a risk assessment as a substantive requirement that refers to a certain objective or rational relationship between the SPS measure and the risk assessment. Article 5.1 read together with Article 2.2 requires the results of the risk assessment to sufficiently warrant or reasonably support the relevant SPS measure. The requirement that SPS measures be based on a risk assessment is qualified by the sentence "as appropriate to the circumstances", which provides for a certain degree of flexibility in meeting the requirements of Article 5.1. Such reference relates to the way in which the risk assessment has be carried out and does not annul or supersede the obligation to base an SPS measure on a risk assessment (Panel report in Australia - Salmon, WT/DS 18). Important note As stated by the Panel in the Australia Salmon case, the manner of carrying out a risk assessment may vary according to the source and subject of the risk, product involved, origin and destination, including country specific situations. The appropriateness of a risk assessment should be determined having as references the techniques of the relevant international organizations and the opinion of scientific experts. Furthermore: Members are not required to base a measure on a quantitative risk assessment but may instead rely on a qualitative assessment of potential risks (EC - Hormones). Members are not obliged to base a measure on a risk assessment that represents mainstream scientific opinion, they are allowed to use diverging scientific opinions from respected, qualified sources (Appellate Body report in EC Hormones). Members are not required, under Article 5.1, to conduct their own risk assessment, and may base their measures on a risk assessment carried out by another Member or by relevant international organizations (Appellate Body report in EC Hormones). Members are nonetheless responsible for the 189

212 appropriateness and comprehensiveness of the risk assessment on which they base a measure, which should address the risk situation actually faced by the Member imposing the measure. Members have an obligation to base a measure on a risk assessment, even if the measure was enacted before the entry into force of the SPS Agreement. (Panel report in EC - Hormones). SPS measures should not be maintained without sufficient scientific evidence, which means that a Member should be able to provide scientific evidence (a risk assessment) for an SPS measure which is in force and is not based on an international standard, if so requested. TIP The three sisters have developed guidelines on risk analysis, which is a three-step process that includes risk assessment, risk management and risk communication, in their respective fields of action. For your reference: (i) (ii) on animal health risk analysis, see the work developed by the OIE, whose principles and methods are described in Section 1.3 of the Terrestrial Code and Section 1.4 of the Aquatic Code; and in the OIE Handbook on Import Risk Analysis, which discusses qualitative and quantitative approaches; on plant health risk analysis, see the work developed by the IPPC, whose relevant standards are ISPM 2 (1995) Guidelines for pest risk analysis, ISPM 11 (2004) Pest risk analysis for quarantine pests including analysis of environmental risks and living modified organisms, and ISPM 21 (2004) Pest Risk analysis for regulated non-quarantine pests; (iii) on food safety risk analysis, see the work developed by the Codex, mainly the 2007 Working Principles for Risk Analysis for Food Safety for Application by Governments (CAC/GL 62), the Principles and Guidelines for the Conduct of Microbiological Risk Assessment (CAC/GL 30), the 2003 Principles for the Risk Analysis of Foods derived from Modern Biotechnology (CAC/GL 44). II.B.2. FACTORS TO BE TAKEN INTO ACCOUNT IN DETAIL Articles 5.2 and 5.3 provide that: 2. In the assessment of risks, Members shall take into account available scientific evidence; relevant processes and production methods; relevant inspection, sampling and testing methods; prevalence of specific diseases or pests; existence of pest- or disease-free areas; relevant ecological and environmental conditions; and quarantine or other treatment. 3. In assessing the risk to animal or plant life or health and determining the measure to be applied for achieving the appropriate level of sanitary or phytosanitary protection from such risk, Members shall take into account as relevant economic factors: the potential damage in terms of loss of production or sales in the event of the entry, establishment or spread of a pest or disease; the costs of control or eradication in the territory of the importing Member; and the relative cost-effectiveness of alternative approaches to limiting risks. 190

213 These two paragraphs list certain factors Members must take into account while undertaking a risk assessment, but do not specify a methodology to be used. In the assessment of risks, Members shall take into account: available scientific evidence; relevant processes and production methods; relevant inspection, sampling and testing methods; prevalence of specific diseases or pests; existence of pest or disease free areas; relevant ecological and environmental conditions; and quarantine and other treatment. According to the Appellate Body, Article 5.2 shows that a risk assessed under Article 5.1 "is not only risk ascertainable in a science laboratory operating under strictly controlled conditions, but also risk in human societies as they actually exist, in other words, the actual potential for adverse effects on human health in the real world where people live and work and die" (Appellate Body report in EC Hormones). The Appellate Body further clarified that the list in Article 5.2 is not a closed one, and that risks related to detection and control of compliance with certain requirements (such as the failure to observe good veterinary practice) may also be taken into account as part of the risk assessment. Article 5.3 lists various economic factors a Member has to take into account while assessing risks to animal or plant life or health, and when choosing the SPS measure to be applied to achieve its appropriate level of protection against such risks: the potential damage in terms of loss of production or sales in the event of the entry, establishment or spread of a pest or disease; the costs of control or eradication in the territory of the importing Member; and the relative cost-effectiveness of alternative approaches to limiting risks. Important note Bear in mind that Members are not required to take such economic factors into consideration while designing or applying an SPS measure aimed at the protection of human life or health. II.B.3. RISK ASSESSMENT, RISK ANALYSIS, RISK MANAGEMENT Article 5 refers explicitly to risk assessment. It should be noted that international standard-setting organizations recognize risk assessment to be part of a wider process called "risk analysis". Risk analysis is a systematic way of gathering, evaluating, recording and disseminating information leading to recommendations for a position or action in response to an identified hazard. There are some slight variations in the terms used by the three sister organizations. However, risk analysis is usually seen as a process 191

214 consisting of three or four steps, depending on whether Hazard Identification is considered as a separate step or included within Risk Assessment: Hazard Identification, which involves specifying the adverse event which is of concern. The Codex Alimentarius Commission includes this step within Risk Assessment; Risk Assessment, which takes into account the probability (the expected likelihood and not just the possibility) of the hazard occurring, the consequences of that hazard occurring, and the degree of uncertainty involved. Note that this description of risk assessment differs somewhat from the definition contained in the SPS Agreement, which was drafted prior to the elaboration of techniques by Codex, IPPC and OIE; Risk Management, which involves identifying and implementing the best option for reducing or eliminating the likelihood of the hazard occurring; and Risk Communication, which implies the open exchange of explanatory information and opinions that lead to better understanding and decisions. Risk assessment is a science-based process of determining the existence of a risk and the likelihood (or potential in terms of risks to human life or health, in the SPS Agreement context) of it occurring. Risk management, on the other hand, entails a policy-based choice of the level of health protection that a state wants to secure in its territory, and the choice of an SPS measure to achieve this level of protection. Risk management decisions are based not only on the scientific results of the risk assessment but also on various societal value judgements such as the citizens' tolerance to risk. IF YOU WANT TO KNOW MORE RISK ANALYSIS Check the website dedicated to the SPS Risk Analysis Workshop, organized by the WTO Secretariat and held in June 2000, immediately before the 18th meeting of the SPS Committee. At the workshop's website you will find the meeting's summary report (G/SPS/GEN/209), presentations made by various organizations and Members, and the programme, which included: Session I: I.A I.B I.C The link between the SPS Agreement and risk analysis Fundamentals of Risk Analysis and its practical application Examples from Members/Observers Session II: II.A The SPS Agreement as it relates to scientific justification II.B Examples from Members/Observers II.C The Codex, OIE, and IPPC their work relating to risk analysis Session III: III.A Examples from Members/Observers 192

215 ILLUSTRATION The Republic of Vanin, a WTO Member, through one of its governmental agencies, decides to address the safety of shell eggs and egg products, and specifically the possible contamination by Salmonella Enteritidis, in order to protect human health against food-borne risks. What should the regulatory body in Vanin keep in mind in terms of the risk assessment obligations contained in the SPS Agreement? Note that the objective of this illustration is not to find a final answer, but to analyse the various factors that should be kept in mind. Taking into consideration the SPS obligations Vanin has undertaken as a Member to the WTO, Vanin's regulators are aware that an SPS measure may not be introduced or maintained without sufficient scientific evidence. And before deciding which SPS measure is the most appropriate to prevent Salmonellosis as a consequence of contaminated shell eggs and egg products, it has to review the scientific evidence on the risk, and to determine the appropriate level of protection against that risk. Remember that Vanin may, at any point, adopt the current international standard and base or conform its measure to it, thus avoiding the obligation to justify its measure with a risk assessment. Let's start by analysing the risk assessment obligations, and deal with the issue of appropriate level of protection in the next section of our Module. Risk assessment for food-borne risks is defined by the SPS Agreement as the evaluation of the potential for adverse effects on human or animal health arising from the presence of additives, contaminants, toxins or disease-causing organisms in food, beverages or feedstuffs. When discussing the meaning of the word "potential" in the context of food-borne risks, the Appellate Body clarified that it is closer to the meaning of "possibility" then to "probability". Furthermore, Vanin has to take into account the risk assessment techniques developed by the relevant international organization, in this case the Codex Alimentarius Commission, which has developed the 1999 Principles and Guidelines for the Conduct of Microbiological Risk Assessment (CAC/GL 30). Taking into consideration this specific illustration, another document that would be useful for the conduct of a risk assessment is: the Codex Recommended International Code of Hygienic Practice for Egg Products (CAC/RCP ), which contains Microbiological Specifications for Pasteurized Egg Products (Section V End Product Specifications), with Reference Methods for the Detection of Salmonellae in Egg Products. Furthermore, the document published jointly by the World Health Organization (WHO) and the Food and Agriculture Organization (FAO), "Risk Assessments of Salmonella in eggs and broiler chickens" Microbiological Risk Assessment Series 2, could itself serve as a risk assessment on which Vanin may base its measure, without having to conduct its own risk assessment. In case Vanin decides to conduct its own risk assessment, this has to identify the adverse effects that the presence of Salmonella Enteritidis in eggs causes to human health. Once the adverse effects are established, it should evaluate the potential occurrence of these effects, in order to establish the risk. Remember that, in the assessment of risks, Vanin should take various factors into account, namely available scientific evidence; relevant processes and production methods; relevant inspection, sampling and testing methods, among others. 193

216 Vanin reunites a number of experts and establishes that the objectives of this risk assessment are to: establish the unmitigated risk of food-borne Salmonellosis (e.g. the risk of taking no measure); identify and consider the efficacy of some risk management interventions for addressing the problems associated with Salmonella in eggs and egg products; identify data needs, and prioritize future data collection efforts. Vanin's final risk assessment model consisted of six modules: Introduction and Methodology; Hazard Identification; Hazard Characterization of Salmonella Enteriditis; Exposure Assessment of Samonella Enteriditis in Eggs and Egg Products; Risk Characterization of Salmonella Enteriditis in Eggs and Egg Products; Evaluation of Risk Mitigation measures for Salmonella Enteriditis. Vanin's risk assessment determined that 5% of its shell eggs are usually infected with Salmonella Enteriditis. The data also showed that of about cases of illnesses registered every year, about are cases of human illness likely related to Salmonella Enteritidis in eggs. Finally, the risk assessment identified various alternative measures which could be imposed, such as: requiring that table eggs come only from poultry flocks tested to be free of Salmonella Enteritidis, or that eggs from flocks of Salmonella Enteritidis be subject to precooking, or educating the public about the need to thoroughly cook any foods containing eggs, etc., and the extent to which each of those measures might reduce the risk of human illness. Let us now move forward and examine the concept of "appropriate level of protection" under the SPS Agreement. EXERCISES: 3. According to WTO case law, especially the reports on the case EC Hormones, how has the Members' obligation to base a food safety measure on a risk assessment been interpreted, regarding the 1 - conduct of a risk a assessment, 2 - its timing, and 3 - the use of mainstream/diverging scientific opinion? 4. What are the factors to be taken into account in the assessment of risks, according to Article 5.2 of the SPS Agreement, as interpreted in WTO case law? 5. What are the economic factors to be taken into account in the assessment of risks to animal or plant life or health, and when choosing the SPS measure to be applied to achieve a Member's appropriate level of protection against such risks (Article 5.3 of the SPS Agreement)? 194

217 III. THE APPROPRIATE LEVEL OF PROTECTION (ALOP) The definition of the concept appropriate level of protection (ALOP) is given by paragraph 5 of Annex A of the SPS Agreement. Let us take a look at it before describing the rights and obligations imposed by Article 5 on this matter. Annex A.5 states: Appropriate level of sanitary or phytosanitary protection The level of protection deemed appropriate by the Member establishing a sanitary or phytosanitary measure to protect human, animal or plant life or health within its territory. Note: Many Members otherwise refer to this concept as the "acceptable level of risk". Members determine the level of risk they are willing to tolerate. The SPS Agreement does not require Members to accept a level of protection lower than the one it has chosen, even if this result in fewer restrictions on trade. According to the level of risk considered acceptable by the Member its appropriate level of SPS protection - it will choose an SPS measure to achieve this level. Keep in mind that the choice of the level of protection is a Member's sovereign decision subject to only a few disciplines set forth in Article 5 of the SPS Agreement. Important note In contrast, the choice of the measure to achieve the desired level of protection is subject to virtually all of the disciplines of the SPS Agreement, including the basic obligation that the measure be base on scientific evidence (and not maintained without sufficient scientific evidence) in Article 2, be based on international standards (unless there is a scientific justification for not doing so) in Article 3, be based on a risk assessment in Article 5, be published and notified in Article 7, etc. We shall analyse Members' obligations regarding the choice of the measure to achieve the desired level of protection, namely those set forth in Article 5 paragraphs 4, 5 and 6. III.A. OBJECTIVE OF MINIMIZING NEGATIVE TRADE EFFECTS IN DETAIL Article 5.4 reads: Members should, when determining the appropriate level of sanitary and phytosanitary protection, take into account the objective of minimizing negative trade effects. 195

218 Article 5.4 provides that Members should take into account the objective of minimizing negative trade effects, when ch oosing their appropriate level o protection. The use of the term "should" rather than "shall" indicates that this is a hortative provision, containing no binding obligation on Members, but encouraging them to consider the trade effects of their choice of level of protection, as stated by the Panel in the EC - Hormones case report. ILLUSTRATION Taking into consideration the example above, on the risks associated with Salmonella Enteridis in shell eggs and egg products, we would like to discuss the choice of appropriate level of protection by Vanin. First of all, through the risk assessment procedure, the existence of a risk was verified: Vanin's risk assessment determined that 5 per cent of its shell eggs are usually infected with Salmonella Enteriditis, and that this results in about cases of human illness each year. As we know, Vanin has to determine its appropriate level of protection having in mind the goal of minimizing negative trade effects. The baseline egg products model used in Vanin's risk assessment predicts that the probability is low that any cases of Salmonella Enteritidis will result from the consumption of pasteurized egg products. However, Vanin's current time and temperature regulations do not provide sufficient guidance to the egg products industry for the large range of products the industry produces. Time and temperature standards based on the amount of bacteria in the raw product, how the raw product will be processed, and the intended use of the final product will provide greater protection to the consumers of egg products. Vanin may decide on its appropriate level of protection bearing in mind the information above. It may decide that it should have no more than cases of human illness a year related to Salmonella Enteritidis in eggs, and no more than 1% infected shell eggs. Concerning the choice of the measure, Vanin may require that all eggs products, including imported ones, be pasteurized and treated at certain temperatures. As for shell eggs, requirements that these be taken to low temperatures before being put on the market may reduce the incidence of Salmonella. The specific requirements will depend on the appropriate level of protection Vanin sets, i.e. the level of risk it believes it can tolerate. EXERCISES: 6. Who sets the appropriate level of SPS protection, or the acceptable level of risk? 196

219 III.B. CONSISTENCY Unlike Article 5.4, Article 5.5 of the SPS Agreement contains a binding obligation, which disciplines Members' choice of appropriate level of protection. Article 5.5 reads: 5. With the objective of achieving consistency in the application of the concept of appropriate level of sanitary or phytosanitary protection against risks to human life or health, or to animal and plant life or health, each Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different situations, if such distinctions result in discrimination or a disguised restriction on international trade. Members shall cooperate in the Committee, in accordance with paragraphs 1, 2 and 3 of Article 12, to develop guidelines to further the practical implementation of this provision. In developing the guidelines, the Committee shall take into account all relevant factors, including the exceptional character of human health risks to which people voluntarily expose themselves. (emphasis added) The consistency requirement, articulated in Article 5.5, means that Members must avoid unjustifiable differences in the level of health protection they require in different situations, if such differences result in discrimination or a disguised restriction on international trade. For example, if a Member restricts the importation of one animal product because of disease risks, yet allows the importation of other animals presenting identical or similar risks, there would be a concern that the distinctions are a disguised restriction on international trade. Two features of Article 5.5 may be singled out: the goal of achieving consistency in the application of the concept of appropriate level of SPS protection; and the legal obligation to avoid arbitrary or unjustifiable distinctions in the levels of protection considered to be appropriate in different situations, if these distinctions result in discrimination or disguised trade restrictions. In EC Hormones, the Appellate Body discussed both features. On the first one, it held that the goal is not absolute or perfect consistency, but only the avoidance of arbitrary or unjustifiable inconsistencies, to be achieved in the future, through the development of guidelines by the SPS Committee. On the second, which is an immediate obligation, the Appellate Body stated that a violation may be demonstrated if three cumulative elements are fulfilled: the Member has adopted its own appropriate levels of SPS protection against risks to human life or health in several different situations; those levels of protection exhibit arbitrary or unjustifiable differences (or "distinctions" in the language of Article 5.5) in their treatment of different situations; and the arbitrary or unjustifiable differences result in discrimination or a disguised restriction of international trade (referring to the effect of the application of the measure embodying or implementing a particular level of protection). 197

220 Since these requirements are cumulative, the mere proof of different treatment in different situations is not sufficient, although it might serve as a warning signal that the implementing measure in its application might be discriminatory or a disguised restriction on trade. We are going to analyse each of these conditions below. III.B.1. LEVEL OF PROTECTION IN DIFFERENT SITUATIONS In the EC Hormones case, the Appellate Body found that situations exhibiting differing levels of protection can only be compared if they present some common element or elements sufficient to render them comparable. If the situations proposed for examination are totally different from one another, they would not be rationally comparable and the differences in levels of protection could not be examined for arbitrariness. In the Australia - Salmon case, the Appellate Body noted that situations involving a risk of entry, establishment or spread of the same or a similar disease, or situations with a risk of the same or similar associated potential biological and economic consequences, have sufficient common elements to render them comparable under Article 5.5. For different situations to be comparable under Article 5.5, it is not necessary for both the disease and the biological and economic consequences to be the same or similar, similarity of either one or the other set of characteristics should suffice to render them comparable. Note Thus, to establish if the first requirement has been met, it is necessary to determine whether a Member has imposed different levels of protection in different but comparable situations. The question is then: "How to ascertain the level of SPS protection chosen by a Member?" In Australia Salmon, the Appellate Body addressed the question of how to ascertain the level of sanitary protection chosen by a Member and found that: Members have an implicit obligation under the SPS Agreement to positively determine their appropriate level of protection; There is no obligation to determine it in quantitative terms; In cases where a Member does not determine its appropriate level of protection, or does so with insufficient precision, such level may be established by panels on the basis of the level reflected in the SPS measure actually applied. The Panel in this case had noted that "imposing the same sanitary measure for different situations does not necessarily result in the same level of protection". The Appellate Body did not disagree with this observation. III.B.2. ARBITRARY OR UNJUSTIFIABLE DIFFERENCES The second step in the test for a violation of Article 5.5 is that a Member applies arbitrary or unjustifiable distinctions in the levels of protection. The panels and the Appellate Body, namely in the cases EC Hormones 198

221 and Australia Salmon, examined whether there were reasons to justify the differences in levels of protection, and recognized that several situations may justify such differences, inter alia: the two situations compared involved different levels of risk; or the difficulty of controlling the risks differed in each case; or the degree of government intervention necessary to achieve the same level of protection in each case differed. In such cases, among others, differences would likely be seen as justifiable. III.B.3. DISCRIMINATION OR DISGUISED RESTRICTION ON TRADE In Australia Salmon, the Appellate Body agreed with the Panel's identification of three "warning signs" with respect to the issue of whether a disguised restriction on trade arises from the distinct levels of protection adopted by a Member: the arbitrary character of the differences in levels of protection (that is, that the second requirement for the violation of Article 5.5 is met); a rather substantial difference in levels of protection; and cumulative findings of inconsistency with both Article 5.1 and 2.2 (on the absence of scientific justification) which indicate that the measure at issue constitutes a restriction on international trade, disguised as a sanitary measure. In the EC Hormones case, the Appellate Body pointed out that the phrase "discrimination or a disguised restriction on international trade", as provided for in Article 5.5, has to be interpreted in the context of the basic obligations of Members contained in Article 2.3, which requires that SPS measures shall not be applied in a manner which would constitute a disguised restriction on international trade. However, the Appellate Body disagreed with the Panel's finding which considered pertinent, in the analysis of the above-mentioned terms, the jurisprudence under Articles III and XX of the GATT. The Appellate Body explained its reluctance to apply its jurisprudence under Article III:2 of GATT to Article 5.5 of the SPS Agreement by noting that a tax differential is very different from a differential in levels of protection. While there is a "clear and linear relationship" between a tax differential and protection given to domestic products, no such clear relationship exists between differentials of levels of protection of human health and protection given to domestic products. TIP The magnitude of the difference in the levels of protection is only one kind of factor which, along with others, may cumulatively lead to the conclusion that discrimination or a disguised restriction on international trade results from the application of a measure or measures embodying those different levels of protection. Whether arbitrary or unjustifiable differences result in discrimination or a disguised restriction has to be determined bearing in mind the circumstances of each individual case. 199

222 III.B.4. SPS COMMITTEE GUIDELINES ON THE IMPLEMENTATION OF ARTICLE 5.5 In June 2000, the SPS Committee adopted the "Guidelines to Further the Practical Implementation of Article 5.5" (G/SPS/15). The guidelines are intended to provide assistance to Members in the application of the concept of consistency in appropriate levels of protection and in the adoption and implementation of SPS measures. These guidelines address the two elements within Article 5.5 and reflect the interpretations and clarifications resulting from case law, in particular the occurrence of the "warning signals" mentioned above as a possible indication of a violation of Article 5.5. The main recommendations contained in the Guidelines are that Members should: clearly indicate the level of protection considered appropriate with respect to risks to human, animal or plant life or health, so as to allow an examination of whether any SPS measure achieves that level; establish common approaches or consistent procedures for use by the authorities assessing risks and evaluating the measures which might be applied to achieve the desired levels of protection; when determining an appropriate level of protection, either broadly or specifically, consider (i) if there is a difference between levels being determined and already determined by a Member in different situations, and, if so, (ii) if it is arbitrary or unjustifiable, and, if so, (iii) if it may result in discrimination or in a disguised restriction on international trade; establish clear and effective communication and information flows within and between the authorities responsible for the determination of appropriate levels of protection, and between these and those responsible for choosing and implementing the SPS measure designed to achieve it; compare any proposed decision on the level of protection in a particular situation with the level previously considered appropriate; and compare any proposed measure intended to achieve the appropriate level of protection in a particular situation with other SPS measures previously taken, or being considered, in situations which contain sufficient common elements so as to render them comparable; clearly identify those situations which they consider justify their acceptance exceptionally of a lower level of protection for human health, specifically with respect to risks to which people voluntarily expose themselves; in determining a new or modified appropriate level of protection: review their previous decisions in this regard, taking into account current decisions and developments; examine any relevant international standards, guidelines or recommendations, or decisions taken by other Members facing similar risks and situations; and consider seeking expert advice to contribute to the decision-making process; in considering a measure to achieve an appropriate level of protection in a particular situation: routinely review existing measures, taking also into account current decisions and developments; determine whether a relevant international standard, guideline or recommendation exists, and if it does, whether adoption of it would achieve the Member's appropriate level of protection; examine measures applied by other Members facing similar risks and situations; consider seeking expert advice on the selection and implementation of SPS measures to achieve it. 200

223 As you can see, many of these recommendations aim at achieving transparency. Further examples and explanations are provided in the Guidelines, so as to assist Members in the implementation of their obligations regarding consistency. The first review of the Guidelines was conducted as part of the Second Review of the SPS Agreement. It was noted that Members had not raised any concerns related to the Guidelines since their adoption in July Another review of the operations of the Guidelines will take place whenever Members identify the need, and in any case not later than December EXERCISES: 7. What is the obligation contained in Article 5.5, regarding consistency in the application of the concept of appropriate level of sanitary or phytosanitary protection against risks to human life or health, or to animal and plant life or health? 8. In the light of WTO case law, when may a violation of Article 5.5 be found? 201

224 III.C. MEASURE NO MORE TRADE RESTRICTIVE THAN REQUIRED TO ACHIEVE THE ALOP After having discussed Article 5.5, on Consistency, we now turn to Article 5.6, which addresses the condition that a measure be no more trade restrictive than required to achieve a Member's appropriate level of SPS protection. Article 5.6 requires: 6. Without prejudice to paragraph 2 of Article 3, when establishing or maintaining sanitary or phytosanitary measures to achieve the appropriate level of sanitary or phytosanitary protection, Members shall ensure that such measures are not more trade-restrictive than required to achieve their appropriate level of sanitary or phytosanitary protection, taking into account technical and economic feasibility.(3) Footnote 3. For purposes of paragraph 6 of Article 5, a measure is not more trade-restrictive than required unless there is another measure, reasonably available taking into account technical and economic feasibility, that achieves the appropriate level of sanitary or phytosanitary protection and is significantly less restrictive to trade. WTO Members choose not only their appropriate level of protection, but also the appropriate SPS measure to achieve their level of protection. Article 5.6 obliges Members to adopt measures no more trade restrictive than required to achieve the chosen level of SPS protection, considering technical and economic feasibility. This is a discipline on the choice of the measure rather than on the determination of the appropriate level of protection. For example, if a country wants to avoid the introduction of an insect associated with fruit imports, requiring fumigation might be a less trade-restrictive alternative to an import ban. TIP The appropriate level of protection established by a Member and the SPS measure have to be clearly distinguished. The first is an objective, the second is an instrument chosen to attain or implement that objective. The Appellate Body in the case Australia - Salmon agreed with the Panel that Article 5.6 contains a three-pronged test for determining whether a measure is more trade restrictive than required. This is the case if there is another SPS measure which: is reasonably available taking into account technical and economic feasibility; achieves the Member's appropriate level of sanitary or phytosanitary protection; and is significantly less restrictive to trade than the SPS measure contested. These three elements are cumulative in nature. A measure is reasonably available when the Member which adopts it has the resources or technical capacity to do so. The reasonability is directly related to technical and economic feasibility. For example, a less trade 202

225 restrictive measure which implies a high regulatory or compliance burden or which is impractical to implement taking into account the level of development of the Member, is not "reasonably available". Regarding the second requirement, the complaining Member has the burden to demonstrate, when invoking a violation of Article 5.6, that an alternative measure which is less trade restrictive still achieves the importing Member's appropriate level of protection. Although a Member may request another Member to adopt a different SPS measure to tackle a certain risk, it cannot require a Member to change its appropriate level of protection (Appellate Body report in Australia Salmon). Thus, taking the appropriate level of protection which was set by the importing Member into consideration, a discontent Member has to demonstrate that another measure, less trade restrictive and reasonably available, still achieves the appropriate level of protection of the former. The alternative measure has to be "significantly" less trade restrictive. A small difference in the trade impacts of the two measures is not sufficient to oblige a Member to adopt the alternative measure. Great! So far we have learned a lot about risk assessment, the appropriate level of protection, and the choice of an SPS measure. Let us now turn our attention to the issue of provisional SPS measures under the SPS Agreement, and the role of precaution. EXERCISES: 9. What are Members' obligations regarding the objective of minimizing negative trade effects while choosing the appropriate level of protection (Article 5.4) and the adoption of a measure no more trade restrictive than required to achieve its appropriate level or protection (Article 5.6)? 10. When is a measure more trade restrictive than required to achieve the appropriate level of SPS protection? 203

226 IV. PROVISIONAL MEASURES The discipline of risk assessment, one of the basic obligations of the SPS Agreement, was developed to guide action in the face of incomplete knowledge about risks to health. As it is virtually impossible to scientifically prove the "safety" of a food or product, scientists rather seek evidence of any harm. Governments often act with precaution, in order to protect society against potential risks, without waiting for the conclusive results of scientific analysis. Precaution is a notion which supports taking protective action before there is scientific proof of a risk; that is, action should not be delayed simply because full scientific information is lacking. In the fields of food safety, plant and animal health protection, precaution in the face of scientific uncertainty and incomplete scientific knowledge has long been addressed through the use of safety margins and provisional measures. IV.A. PROVISIONAL MEASURES Article 5.7 permits the taking of provisional measures when there is insufficient scientific evidence to permit the assessment of health risks. However, a Member must base its measure on the available pertinent information, must seek the additional information necessary for a more objective assessment of the risk(s), and review the SPS measure within a reasonable period of time. Article 5.7 provides: In cases where relevant scientific evidence is insufficient a Member may provisionally adopt sanitary or phytosanitary measures on the basis of available pertinent information including that from the relevant international organizations as well as from sanitary or phytosanitary measures applied by other Members. In such circumstances Members shall seek to obtain the additional information necessary for a more objective assessment of risk and review the sanitary or phytosanitary measure accordingly within a reasonable period of time. Provisional measures could be taken, for example, as an emergency response to a sudden outbreak of an animal disease suspected of being linked to imports, while further information about the source of the outbreak and its extent are gathered. Another example is the case of new food processing techniques where sufficient evidence regarding safety does not yet exist. Article 5.7 was invoked in three cases: Japan Agricultural Products II (also referred to as Japan Varietals, WT/DS76); Japan Apples (Japan Measures Affecting the Importation of Apples, WT/DS245); and EC GMOs (European Communities Measures Affecting the Approval and Marketing of Biotech Products, WT/DS 291, 292, 293). We are going to analyse the Japan Agricultural Products II dispute below. 204

227 CASE STUDY: JAPAN AGRICULTURAL PRODUCTS II (W T/DS 76) JAPAN - VARIETALS Complaint by the United States Third Parties: Brazil, European Communities, Hungary On 7 April 1997, the United States requested consultations with Japan in respect of the latter's SPS testing requirements applied to certain agricultural products. Japan required the testing of each variety of apples, cherries, peaches, walnuts, apricots, pears, plums and quinces for the efficacy of treatment against codling moth. The United States claimed that it was not necessary to test each variety of a fruit for the efficacy of the treatment. What did the Panel and the Appellate Body say? Among other things, the Panel stated and the Appellate Body upheld that: the variety testing requirement violated Article 2.2 since there was no rational relationship between the scientific evidence submitted by Japan and the measure. the exception provided in Article 5.7 did not apply since the Panel found no evidence that Japan had actively sought to obtain additional information in order to review its measure within a reasonable period of time, as required by Article 5.7. The Appellate Body report in this case provides useful guidance in the interpretation of Article 5.7, by proposing that four conditions must be cumulatively met (i.e. all of them must be complied with) for the provision to be legitimately invoked: An Article 5.7 SPS measure must be imposed in respect of a situation where relevant scientific information is insufficient; The provisional measure must be adopted on the basis of available pertinent information; The Member adopting the measure must seek to obtain the additional information necessary for a more objective assessment of risk; and The Member must review the SPS measure accordingly within a reasonable period of time. IV.A.1. INSUFFICIENT SCIENTIFIC EVIDENCE Regarding the first requirement, the Appellate Body, in the dispute Japan Apples, affirmed that "the notions of 'relevance' and 'insufficiency' in the introductory phrase of Article 5.7 imply a relationship between the scientific evidence and something else". It continued, in its report: "( ) 'Relevant scientific evidence' will be 'insufficient' within the meaning of Article 5.7 if the body of available scientific evidence does not allow, in quantitative or qualitative terms, the performance of an adequate assessment of risks as required under Article 5.1 and as defined in Annex A to the SPS Agreement. Thus, the question is not whether there is sufficient evidence of a general nature or whether there is sufficient evidence related to a specific aspect of a phytosanitary problem, or a specific risk. The question is whether the relevant 205

228 evidence, be it 'general' or 'specific', in the Panel's parlance, is sufficient to permit the evaluation of the likelihood of entry, establishment or spread of, in this case, fire blight in Japan." Japan, in this case, had maintained that, despite considerable scientific evidence regarding fire blight, there was still uncertainty about certain aspects of transmission of fire blight. The Appellate Body remarked that "the application of Article 5.7 is triggered not by the existence of scientific uncertainty, but rather by the insufficiency of scientific evidence", and that the two concepts are not interchangeable. It noted that, in that case, the scientific evidence was rather conclusive. SUFFICIENCY OF EVIDENCE NOT RELATED TO ALOP: THE GMO CASE In the EC Biotech case (European Communities Measures Affecting the Approval and Marketing of Biotech Products WT/DS 291, 292, 293), the Panel did not agree with the argument that the insufficiency of scientific evidence must be assessed with reference to the appropriate level of protection (ALOP) of the importing Member. The Panel considered that scientists did not need to know a Member's "acceptable level of risk" in order to assess objectively the existence and magnitude of a risk. On the other hand, the Panel found that a Member's ALOP is definitely relevant in determining the SPS measure to be applied, if any, to protect a Member from risks. IV.A.2. MEASURE ADOPTED ON THE BASIS OF AVAILABLE PERTINENT INFORMATION This requirement has not as yet been interpreted in WTO case law. IV.A.3. SEEK TO OBTAIN ADDITIONAL INFORMATION Regarding the third requirement, the Appellate Body in Japan Agricultural Products II stated that the additional information to be sought must be "germane" to conducting a more objective risk assessment. It held that: Neither Article 5.7 nor any other provision of the SPS Agreement sets out explicit prerequisites regarding the additional information to be collected or a specific collection procedure. Furthermore, Article 5.7 does not specify what actual results must be achieved; the obligation is to 'seek to obtain' additional information. However, Article 5.7 states that the additional information is to be sought in order to allow the Member to conduct 'a more objective assessment of risk'. Therefore, the information sought must be germane to conducting such a risk assessment, i.e., the evaluation of the likelihood of entry, establishment or spread of, in casu, a pest, according to the SPS measures which might be applied. IV.A.4. REVISION WITHIN A REASONABLE PERIOD OF TIME The last requirement refers to the obligation to review the measure within a reasonable period of time. Thus, this Article creates only a time-limited exemption from the normal SPS disciplines, pending review of the measure in the light of new evidence. 206

229 The Appellate Body in Japan Agricultural Products II stated that the reasonable period of time has to be established on a case-by-case basis, having regard to the specific circumstances of the case and the difficulty of obtaining additional information necessary for the review, and the characteristics of the provisional SPS measure. This is important to give Members room for manoeuvre in cases where the insufficiency of scientific evidence persists for extended periods or where the risks involved are expected to materialize only in the long term. Therefore, reasonability will have to be interpreted on a case-by-case basis. IV.B. THE PRECAUTIONARY PRINCIPLE The "precautionary principle", or "precautionary approach", has been incorporated into several international environmental agreements, and some claim that it is now recognized as a general principle of international environmental law. However, in the EC - Hormones dispute, the Appellate Body noted that the "precautionary principle" was reflected in the SPS Agreement, but that it did not override the specific obligations in the Agreement. The Appellate Body considered that the notion of precaution was, in particular, incorporated in paragraph 6 of the Preamble, Article 3.3, and Article 5.7 of the SPS Agreement. Paragraph 6 of the Preamble embraces precaution by encouraging harmonization of national SPS measures with international standards without requiring Members to change their sovereignly-determined appropriate levels of health protection. Article 3.3 of the SPS Agreement entails a precautionary approach because it explicitly permits Members to adopt SPS measures which are more stringent than measures based on the relevant international standards. As stated above, Article 5.7 allows Members to take provisional measures when sufficient scientific evidence does not exist to permit a final decision on the safety of a product or process. The provisional measure must take into consideration available pertinent information and the Member adopting the measure must seek to obtain the additional information necessary for a more objective assessment of risk, and review the SPS measure within a reasonable period of time. An interesting situation happened in the EC Hormones dispute: The European Communities did not actually invoke Article 5.7, but rather stressed that its import ban was not a provisional measure. Instead, the EC argued that the precautionary principle as a "general customary rule of international law or at least a general principle of law", was applicable to the interpretation of the scientific disciplines in the SPS Agreement, and argued that Articles 5.1 and 5.2 on risk assessment did not prevent Members from being cautious when setting health standards in the face of conflicting scientific evidence and uncertainty. EXERCISES: 11. What are the disciplines concerning provisional measures and a precautionary approach in the SPS Agreement? 207

230 V. REGIONALIZATION The existence or spread of pests and diseases is often determined by geographic and ecological conditions rather than political borders. This may be the case either due to variations in climatic, environmental or geographic conditions within a country or due to the efforts of the regulatory authorities to eradicate a pest or disease from specific areas. In the past, it was common for an importing country to ban products from an entire country when it was established that a pest or disease of significance for the importing country occurred, even if its prevalence was limited to certain regions. This approach is changing, however, as it would violate Article 6 of the SPS Agreement, on regionalization. Article 6, on regionalization, aims to promote recognition of pest or disease free areas and areas of low prevalence of pest or diseases. If importing countries adapt their SPS measures to the conditions prevailing in the region of origin of the product, this may greatly improve market access possibilities, and avoid unnecessary import bans. IN DETAIL Article 6.1 states: 1. Members shall ensure that their sanitary or phytosanitary measures are adapted to the sanitary or phytosanitary characteristics of the area whether all of a country, part of a country, or all or parts of several countries from which the product originated and to which the product is destined. In assessing the sanitary or phytosanitary characteristics of a region, Members shall take into account, inter alia, the level of prevalence of specific diseases or pests, the existence of eradication or control programmes, and appropriate criteria or guidelines which may be developed by the relevant international organizations. Article 6 of the SPS Agreement recognizes the concepts of pest- or disease-free areas, and areas of low pest or disease prevalence. Annex A of the Agreement introduces the two terms which are relevant in the analysis of regionalization: 6. Pest or disease-free area An area whether all of a country part of a country or all or parts of several countries as identified by the competent authorities in which a specific pest or disease does not occur. Note: A pest or disease-free area may surround be surrounded by or be adjacent to an area whether within part of a country or in a geographic region which includes parts of or all of several countries in which a specific pest or disease is known to occur but is subject to regional control measures such as the establishment of protection surveillance and buffer zones which will confine or eradicate the pest or disease in question. 7. Area of low pest or disease prevalence An area whether all of a country part of a country or all or parts of several countries as identified by the competent authorities in which a specific pest or disease occurs at low levels and which is subject to effective surveillance control or eradication measures. 208

231 Such concepts are essential to maintain trade flows from non-infected or surveyed/controlled areas, therefore preventing importing Members from denying access to goods from such areas, even if a disease prevails elsewhere in the exporting country(ies). Similar to the provisions for equivalence, presented in Module 5, it is the exporting Member's burden to prove the disease-free status that it claims for the region, and to grant access to the importing Member for investigation of this claim (Article 6.3). TIP The OIE and the IPPC have developed guidelines on regionalization and the recognition of pest or disease free status by importing countries, in their respective fields of action. Such organizations also serve as a forum for discussions. For your reference: (i) (ii) see the work developed by the OIE on zoning. At the OIE, regionalization is referred to as zoning and compartmentalization. Requirements for obtaining disease free status are described in Section of the Terrestrial Animal Health Code and Section of the Aquatic Code. In addition to providing disease-specific information in relevant Chapters of the Codes, the OIE officially recognizes free status for four diseases (Rinderpest, Foot and Mouth disease, BSE, and Contagious Bovine Pleuropneumonia); see the work developed by the IPPC on Pest Free Area Plants, whose relevant standards are ISPM 4 (1995) Requirements for the Establishment of Pest Free Areas; ISPM 10 (1999) Requirements for the establishment of pest free places of production and pest free production sites; ISPM 22 (2005) Requirements for the establishment of areas of low pest prevalence. At the 2007 meeting, the IPPC started to discuss the possibility to introduce a mechanism for the recognition of pest (disease) -free areas for plant diseases; ISPM 29 (2007) - Recognition of pest free areas and areas of low pest prevalence. IF YOU WANT TO KNOW MORE ZONING AND COMPARTMENTALIZATION AT THE OIE For the purposes of the OIE Terrestrial Code, 'zoning' and 'regionalisation' have the same meaning. Given the difficulty of establishing and maintaining a disease free status for an entire country, especially for diseases the entry of which is difficult to control through measures at national boundaries, there may be benefits to Member Countries in establishing and maintaining a subpopulation with a different animal health status within national boundaries. Subpopulations may be separated by natural or artificial geographical barriers, or in certain animal industries, by the application of appropriate management systems, including biosecurity management. Zoning and compartmentalisation are procedures implemented by a country under the provisions of the OIE Terrestrial Code with a view to defining subpopulations of different animal health status within its territory for the purpose of disease control and/or international trade. Compartmentalisation applies to a subpopulation when management systems related to biosecurity (i.e. by site) are applied, while zoning applies when a subpopulation is defined on a geographical basis. 209

232 V.A. OBLIGATIONS REGARDING REGIONALIZATION V.A.1. FACTORS TO BE TAKEN INTO ACCOUNT In determining what the sanitary or phytosanitary characteristics of a region are, Article 6.1 obliges Members to take into account: the level of prevalence of specific pests or diseases; the existence of eradication or control programmes; and appropriate criteria or guidelines developed by international organizations. However, the list of factors in Article 6.1 is not exhaustive, and Members may utilise other factors for determining regional characteristics. V.A.2. PEST - OR DISEASE - FREE AREAS OR AREAS OF LOW PEST OR DISEASE PREVALENCE Article 6.2 specifically creates the obligation on Members to recognize the concepts of pest - or disease - free areas and areas of low pest or disease prevalence, set forth in Annex A of the SPS Agreement and stated above. The determination of such areas shall be based on factors such as: geography; ecosystems; epidemiological surveillance; and the effectiveness of SPS controls. The list of factors in Article 6.2 is not exhaustive either. V.A.3. OBLIGATIONS OF EXPORTING MEMBERS Article 6.3 provides that an exporting Member that claims that areas within its territory are pest - or disease - free or have low pest or disease prevalence must provide the necessary evidence of this fact to the importing Member. For this purpose, it must give the importing Member reasonable access for inspection, testing and other relevant procedures. V.B. THE WORK OF THE SPS COMMITTEE ON REGIONALIZATION For fruit exporters, market access often depends on the recognition of areas free from fruit flies, just as for meat exporters it can depend on recognition of freedom from foot and mouth disease. In order to ensure that 210

233 an area is free of pests or diseases and to prove that this is so, countries often have to invest large amounts of money and resources and comply with lengthy procedures. This situation is even more difficult (and costly) if the pest or disease must first be eradicated in the area. For the investment to be worthwhile, countries need to be sure that their efforts will result in increased market access. In the First Review of the SPS Agreement in 1999 (G/SPS/12), the Committee noted that the recognition of pest or disease-free areas or areas of low pest or disease prevalence could facilitate trade in agricultural products. On that occasion, the Committee noted Members faced difficulties in implementing the provisions of Article 6, including excessively lengthy administrative processes for recognition in importing countries, divergences in interpretation and implementation of international guidelines, and complexities involved in risk assessment. The Committee initiated substantive discussions on this matter in 2003 (ongoing), focusing on two aspects of regionalization: the establishment of pest or disease free areas by exporters; and the recognition of the pest - or disease free status by importing countries. The discussions are, at present, more focused on the second item. See documents G/SPS/R/38, G/SPS/GEN/636/Rev.1 and G/SPS/GEN/640/Rev.1 to learn more. Note Both the IPPC and the OIE have provided guidance for countries seeking to establish, or to be recognized for pest or disease free status, as mentioned above. During the Second Review of the SPS Agreement (G/SPS/36), Members recommended that the Committee should maintain regionalization as a standing item of the agenda for its regular meetings and that it should develop a proposal for a decision on the effective application of Article 6, taking into consideration the discussions and the various proposals submitted by Members to the Committee (G/SPS/R/38). There was also discussion of defining maximum timeframes for the recognition process, so as to avoid undue delays. Important note It is not always feasible to regionalize. For example, in the field of animal health, the OIE has noted that some diseases, due primarily to the way in which they are transmitted, are not suited to the application of the concept of zoning (regionalization by geographic areas) or compartmentalization (regionalization by production sites). Furthermore, while the implementation of regionalization requires substantial involvement of the private sector, with a high level of trust between the private and the public sectors, it is on the veterinary administrators of the exporting country that the heavy burden falls. It has been noted by several Members that there is a direct relationship between the speed at which disease free status is recognized and the reliability of the exporter's veterinary services. 211

234 IF YOU WANT TO KNOW MORE REGIONALIZATION Check the website dedicated to the SPS Enhanced Informal Meeting on Article 6, organized by the SPS Committee and held in January 2006, immediately before the regular meeting of SPS Committee. The objective was to provide Members with the opportunity to present and discuss experiences in the area of regionalization and the implementation of Article 6 of the SPS Agreement. The summary of this special meeting may be found in document G/SPS/R/38. At the meeting's website you will find a list of papers prepared by Members for this meeting (Mexico, Japan, Argentina, Peru, Brazil, Chile, Colombia, Canada, Ecuador, Egypt, United States and European Communities) and the presentations made by Members and observer organizations, which include presentations by: 1. Argentina 2. Brazil 3. European Communities 4. Germany 5. Netherlands 6. OIE 7. Sweden ILLUSTRATION As an illustration of this concept, we will present Germany's efforts to manage Classical Swine Fever, as reported in the Summary of the Special Meeting on Article 6 (regionalization), held on January See Germany's presentation in full here. Germany worked towards the eradication of classical swine fever in wild boars in the Rhineland-Palatinate area ( ). Classical Swine Fever (CSF) is a high mortality infectious disease of pigs (both domestic and wild). Virus reservoirs in feral pigs have been the most common source of infection and oral vaccination of the infected feral pig population is a key measure to control the spread and eradicate the disease. To address the issue of virus reservoirs, Germany implemented a system of oral vaccination in which bait containing vaccine were introduced about three times a year to wild pig populations. The main elements for application of a successful regionalized approach to managing this disease included (i) appropriate definition of the area, (ii) implementation of effective control measures and surveillance, (iii) the conduct of risk assessments for specific commodities for trade, (iv) the conduct of audits and inspections, and (v) supporting high quality of veterinary services. In order to enhance mutual trust and transparency, throughout the process all stakeholders were kept informed and a database was established containing results of tests for the disease. The efforts to regionalize 212

235 the control of this disease allowed trade from non-infected areas while at the same time supporting the eradication of classical swine fever. In 2004, regionalization measures were lifted, after control measures found 0 cases of the virus. Figure 1: CSF in wild and domestic pigs, today EXERCISES: 12. What are the main obligations concerning regionalization (Article 6) in the SPS Agreement? 213

236 VI. SUMMARY MEMBERS ARE PERMITTED TO ADOPT SPS MEASURES WHICH ARE MORE STRINGENT THAN THE RELEVANT INTERNATIONAL STANDARDS OR ADOPT SPS MEASURES WHEN INTERNATIONAL STANDARDS DO NOT EXIST, PROVIDED THE MEASURES ARE based on scientific risk assessment; consistently applied; and not more trade restrictive than necessary. THERE ARE TWO TYPES OF RISK ASSESSMENT AS DEFINED BY ANNEX A.4 OF THE SPS AGREEMENT For risks arising from pests or diseases: the evaluation of the likelihood of entry, establishment or spread of a pest or disease within the territory of an importing Member according to the SPS measures which might be applied, and of the associated potential biological and economic consequences; or For food-borne risks: the evaluation of the potential for adverse effects on human or animal health arising from the presence of additives, contaminants, toxins or disease-causing organisms in food, beverages or feedstuffs. BOTH TYPES OF RISK ASSESSMENT SHOULD BE SPECIFIC (THAT IS, DEMONSTRATE MORE THAN A GENERAL RISK OF HARM), AND COMPREHENSIVE (COVER EACH SUBSTANCE/PRODUCT AT ISSUE) FURTHERMORE Members are not obliged to base a measure on a risk assessment that represents mainstream scientific opinion, they are allowed to take into account diverging scientific opinions from respected, qualified sources (Appellate Body report in EC Hormones); Members are not required, under Article 5.1, to conduct their own risk assessment, and may base their measures on a risk assessment carried out by another Member or by relevant international organizations (Appellate Body report in EC Hormones). Members are nonetheless responsible for the appropriateness and comprehensiveness of the risk assessment on which they base a measure, which should address the risk situation actually faced by the Member imposing the measure; Members have an obligation to base a measure on a risk assessment, even if the measure was enacted before the entry into force of the SPS Agreement. (Panel report in EC - Hormones). SPS measures should not be maintained without sufficient scientific evidence, which means that a Member should be able to provide scientific evidence (a risk assessment) for an SPS measure which is force and is not based on an international standard, if so requested. 214

237 IN THE ASSESSMENT OF RISKS, MEMBERS SHALL TAKE INTO ACCOUNT Available scientific evidence; relevant processes and production methods; relevant inspection, sampling and testing methods; prevalence of specific diseases or pests; existence of pest or disease free areas; relevant ecological and environmental conditions; and quarantine and other treatment. WHILE ASSESSING THE RISKS TO ANIMAL OR PLANT LIFE OR HEALTH, OR WHEN CHOOSING THE SPS MEASURE TO BE APPLIED TO ACHIEVE ITS APPROPRIATE LEVEL OF PROTECTION, MEMBERS SHALL TAKE INTO ACCOUNT The potential damage in terms of loss of production or sales in the event of the entry, establishment or spread of a pest or disease; the costs of control or eradication in the territory of the importing Member; and the relative cost-effectiveness of alternative approaches to limiting risks. APPROPRIATE LEVEL OF PROTECTION: THE LEVEL OF SPS PROTECTION DEEMED APPROPRIATE IS SET BY THE MEMBER IMPOSING THE MEASURE Members should take into account the objective of minimizing negative trade effects when choosing their appropriate level of protection. Members must avoid unjustifiable differences in the level of health protection they require in different situations, if such differences result in discrimination or a disguised restriction on international trade. The mere proof of different treatment in different situations is not sufficient to show a violation of this Article, although it might serve as a warning signal that the implementing measure might be discriminatory in its application, or a disguised restriction on trade. Members shall adopt measures no more trade restrictive than what is required to achieve the chosen level of SPS protection, considering technical and economic feasibility. A measure is more trade restrictive than required if there is another measure which is reasonably available taking into account technical and economic feasibility; achieves the Member's appropriate level of sanitary or phytosanitary protection; and is significantly less restrictive to trade than the SPS measure contested (Appellate Body in Australia Salmon). "GUIDELINES TO FURTHER THE PRACTICAL IMPLEMENTATION OF ARTICLE 5.5" In June 2000, the SPS Committee adopted the "Guidelines to Further the Practical Implementation of Article 5.5" (G/SPS/15). The guidelines are intended to provide assistance to Members in the application of consistency while deciding on the appropriate level of protection or on the adoption and implementation of SPS measures. THE ROLE OF PRECAUTION IN THE SPS AGREEMENT Article 5.7 permits the taking of provisional measures on the basis of the available pertinent information about the product or process health risk(s), when there is insufficient scientific evidence to permit a final decision on its safety. However, a Member must seek the additional information necessary for a more objective assessment of the risk(s), and review the SPS measure within a reasonable period of time. 215

238 FOUR CONDITIONS MUST BE CUMULATIVELY MET FOR ARTICLE 5.7 TO BE LEGITIMATELY INVOKED (APPELLATE BODY IN JAPAN AGRICULTURAL PRODUCTS II) The provisional SPS measure must be imposed in respect of a situation where relevant scientific information is insufficient; The provisional measure must be adopted on the basis of available pertinent information; The Member adopting the measure must seek to obtain the additional information necessary for a more objective assessment of risk; and The Member must review the SPS measure accordingly within a reasonable period of time, which is determined on a case-by-case basis. REGIONALIZATION (ARTICLE 6) Members shall ensure that their sanitary or phytosanitary measures are adapted to the sanitary or phytosanitary characteristics of the area whether all of a country, part of a country, or all or parts of several countries from which the product originated and to which the product is destined. The main obligations regarding Regionalization are: While determining SPS characteristics of a region, Members shall take into account, inter alia, the level of prevalence of specific pests or diseases; the existence of eradication or control programmes; and appropriate criteria or guidelines developed by international organizations. Members have the obligation to recognize pest - or disease - free areas and areas of low pest or disease prevalence established in other Members. The determination of such areas shall be based on factors such as: geography, ecosystems, epidemiological surveillance, and the effectiveness of SPS controls. An exporting Member that claims that areas within its territory are pest - or disease - free or have low pest or disease prevalence must provide the necessary evidence of this fact to the importing Member. For this purpose, it must give the importing Member reasonable access for inspection, testing and other relevant procedures. 216

239 PROPOSED ANSWERS: 1. In addition to the basic obligations set forth in Article 2, pursuant to Article 3 and Article 5 of the SPS Agreement, Members are permitted to adopt SPS measures which are more stringent than the relevant international standards or adopt SPS measures when international standards do not exist, provided the measures are: based on scientific risk assessment; consistently applied; and not more trade restrictive than necessary. 2. There are two types of risk assessment as defined by Annex A.4 of the SPS Agreement: Risks arising from pests or diseases: the evaluation of the likelihood of entry, establishment or spread of a pest or disease within the territory of an importing Member according to the SPS measures which might be applied, and of the associated potential biological and economic consequences; or Food-borne risks: the evaluation of the potential for adverse effects on human or animal health arising from the presence of additives, contaminants, toxins or disease-causing organisms in food, beverages or feedstuffs. It is important to determine which definition of risk assessment is applicable in a particular situation, as the requirements are different for each type. The category of SPS measure (which depends on its objective) determines what the applicable type of risk assessment is. On the common features, the risks covered in both types of risk assessment should be ascertainable and specific, i.e., it is not sufficient for a risk assessment to show a general risk of harm. The risk assessment should also be comprehensive and cover each of the products at issue. While the Panel on EC Hormones had held that a risk assessment would have to be carried out for each individual substance at issue, the Panel on Australia Salmon held that studies on one particular product category could be relevant for a risk assessment in respect of another product category. Therefore, we may say that a risk assessment undertaken for one category of product may be relevant to another category, if such products are subject to the same or similar kind of risk Members are not required to base a measure on a quantitative risk assessment but may instead rely on a qualitative assessment of potential risks (EC - Hormones). 2. Members are not required, under Article 5.1, to conduct their own risk assessment, and may base their measures on a risk assessment carried out by another Member or by relevant international organizations (Appellate Body report in EC Hormones). The risk assessment must nonetheless be appropriate and comprehensive, that is, it should address the risk situation actually faced by the Member imposing the measure. 3. Members have an obligation to base a measure on a risk assessment even if the measure was enacted before the entry into force of the SPS Agreement. (Panel report in the EC - Hormones). SPS measures should not be maintained without sufficient scientific evidence, which means that a Member should be able to provide scientific evidence (a risk assessment) for an SPS measure which is in force and is not based on an international standard, if so requested. Members are not obliged to base a measure on a risk assessment that represents mainstream scientific opinion, they are allowed to use diverging scientific opinions from respected, qualified sources (Appellate Body report in EC Hormones). 217

240 4. In the assessment of risks, Members shall take into account: available scientific evidence; relevant processes and production methods; relevant inspection, sampling and testing methods; prevalence of specific diseases or pests; existence of pest or disease free areas; relevant ecological and environmental conditions; and quarantine and other treatment. According to the Appellate Body, Article 5.2 shows that a risk assessed under Article 5.1 "is not only risk ascertainable in a science laboratory operating under strictly controlled conditions, but also risk in human societies as they actually exist, in other words, the actual potential for adverse effects on human health in the real world where people live and work and die" (Appellate Body report in EC Hormones). The Appellate Body further clarified that the list in Article 5.2 is not a closed one, and that risks related to detection and control of compliance with certain requirements (such as the failure to observe good veterinary practice) may also be taken into account as part of the risk assessment. 5. Article 5.3 lists various economic factors a Member has to take into account while assessing risks to animal or plant life or health, and when choosing the SPS measure to be applied to achieve its appropriate level of protection against such risks: the potential damage in terms of loss of production or sales in the event of the entry, establishment or spread of a pest or disease; the costs of control or eradication in the territory of the importing Member; and the relative cost-effectiveness of alternative approaches to limiting risks. Members are not required to take economic factors into consideration while choosing a measure to protect human life or health. 6. The level of SPS protection deemed appropriate is set by the Member imposing the measure. Members determine the level of risk they are willing to tolerate. The SPS Agreement does not require Members to accept a level of protection lower than the one it has chosen, even if this would be more trade creating. According to the level of risk considered acceptable by the Member or the appropriate level of SPS protection - it will choose an SPS measure to achieve this level. However, this choice is subject to certain disciplines set forth in Article 5 of the SPS Agreement, namely paragraphs 4, 5 and 6 of this Article. 7. The consistency requirement, articulated in Article 5.5, means that Members must avoid unjustifiable differences in the level of health protection they require in different situations, if such differences result in discrimination or a disguised restriction on international trade. For example, if a Member restricts the importation of one animal product because of disease risks, yet allows the importation of other animal products presenting identical or similar risks, there would be a concern that the distinctions could be a disguised restriction on international trade. 218

241 Two features of Article 5.5 may be singled out: the goal of achieving consistency in the application of the concept of appropriate level of SPS protection; and the legal obligation to avoid arbitrary or unjustifiable distinctions in the levels of protection considered to be appropriate in different situations, if these distinctions result in discrimination or a disguised trade restriction. 8. In EC Hormones, the Appellate Body stated that a violation of the binding obligations of Article 5.5 may be demonstrated if three cumulative elements are fulfilled: the Member has adopted its own appropriate levels of SPS protection against risks to human life or health in several different situations. These situations must be comparable; those levels of protection exhibit arbitrary or unjustifiable differences (or distinctions in the language of Article 5.5) in their treatment of different situations. Reasons which justify differences in levels of protection may involve the difficulty of controlling the risks in each case, or the degree of government intervention necessary to achieve the same level of protection; and the arbitrary or unjustifiable differences result in discrimination or a disguised restriction of international trade (referring to the effect of the application of the measure embodying or implementing a particular level of protection). The "discrimination or a disguised restriction on international trade", as provided for in Article 5.5, has to be interpreted in the context of the basic obligations of Members contained in Article 2.3, which requires that SPS measures shall not be applied in a manner which would constitute a disguised restriction on international trade. Whether arbitrary or unjustifiable differences result in discrimination or a disguised restriction on trade has to be determined bearing in mind the circumstances of each individual case. The mere proof of different treatment in different situations is not sufficient, although it might serve as a warning signal that the implementing measure in its application might be discriminatory or a disguised restriction on trade. 9. Article 5.4 provides that Members should take into account the objective of minimizing negative trade effects, when choosing their appropriate level o protection. This is a hortative provision, containing no binding obligation on Members, but encouraging them to consider the trade effects of their choice of level of protection. Article 5.6 deals with the choice of SPS measure and requires Members to adopt measures no more trade restrictive than required to achieve the chosen level of SPS protection, considering technical and economic feasibility. This is a discipline on the choice of the measure rather than on the selection of the appropriate level of protection. The appropriate level of protection established by a Member and the SPS measure have to be clearly distinguished. The first is an objective, the second is an instrument chosen to attain or implement that objective. 10. The Appellate Body in the case Australia - Salmon agreed with the Panel that Article 5.6 contains a three-pronged test for qualifying whether a measure is more trade restrictive than required. This is the case if there is another SPS measure which: is reasonably available taking into account technical and economic feasibility; achieves the Member's appropriate level of sanitary or phytosanitary protection; and 219

242 is significantly less restrictive to trade than the SPS measure contested. These three elements are cumulative in nature. The burden of proof rests on the complaining party to demonstrate that an alternative measure, significantly less trade restrictive than the SPS measure contested, achieves the appropriate level of SPS protection of the respondent. 11. Article 5.7 permits the taking of provisional measures on the basis of the available pertinent information about the product or process health risk(s), when there is insufficient scientific evidence to permit a final decision on its safety. However, a Member must seek the additional information necessary for a more objective assessment of the risk(s), and review the SPS measure within a reasonable period of time. The Appellate Body report in the case Japan Agricultural Products II provides useful guidance in the interpretation of Article 5.7, by proposing that four conditions must be cumulatively met for the provision to be legitimately invoked: An Article 5.7 SPS measure must be imposed in respect of a situation where relevant scientific information is insufficient; The provisional measure must be adopted on the basis of available pertinent information; The Member adopting the measure must seek to obtain the additional information necessary for a more objective assessment of risk; and The Member must review the SPS measure accordingly within a reasonable period of time, which is determined on a case-by-case basis. 12. Members shall ensure that their sanitary or phytosanitary measures are adapted to the sanitary or phytosanitary characteristics of the area whether all of a country, part of a country, or all or parts of several countries from which a product originates and to which a product is destined. While determining SPS characteristics of a region, Members shall take into account, inter alia, the level of prevalence of specific pests or diseases; the existence of eradication or control programmes; and appropriate criteria or guidelines developed by international organizations. Article 6.2 specifically creates the obligation on Members to recognize the concepts of pest - or disease - free areas and areas of low pest or disease prevalence, set forth in Annex A of the SPS Agreement. The determination of such areas shall be based on factors such as: geography, ecosystems, epidemiological surveillance, and the effectiveness of SPS controls. Article 6.3 provides that an exporting Member that claims that areas within its territory are pest - or disease - free or have low pest or disease prevalence must provide the necessary evidence of this fact to the importing Member. For this purpose, it must give the importing Member reasonable access for inspection, testing and other relevant procedures. 220

243 MODULE 7 Transparency Requirements and Procedures ESTIMATED TIME: 7 hours OBJECTIVES OF MODULE 7 Present another core principle of the SPS Agreement: Transparency; and explain the Transparency Requirements and Procedures set forth in the SPS Agreement and in the relevant decisions and recommendations by the SPS Committee. 221

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245 M7 I. INTRODUCTION In the previous Module we learned all about risk assessment, the appropriate level of protection and consistency in the SPS Agreement. We learned that Members are permitted to adopt SPS measures which are more stringent than the relevant international standards (or when international standards are not in place), provided the measures are: based on scientific risk assessment; consistently applied; and no more trade restrictive than necessary. We also found out that there are two types of risk assessment as defined by Annex A.4 of the SPS Agreement: for risks arising from pests or diseases: the evaluation of the likelihood of entry, establishment or spread of a pest or disease within the territory of an importing Member according to the SPS measures which might be applied, and of the associated potential biological and economic consequences; or for food-borne risks: the evaluation of the potential for adverse effects on human or animal health arising from the presence of additives, contaminants, toxins or disease-causing organisms in food, beverages or feedstuffs. On the Appropriate Level of Protection (ALOP), we learned that the level of SPS protection deemed appropriate is set by the Member imposing the measure, and that Members should take into account the objective of minimizing negative trade effects, when choosing their appropriate level of protection. Furthermore, Members shall adopt measures no more trade restrictive than what is required to achieve the chosen level of SPS protection, considering technical and economic feasibility. A measure is more trade restrictive than required if there is another measure which, cumulatively (Appellate Body in Australia Salmon), is reasonably available taking into account technical and economic feasibility; achieves the Member's appropriate level of sanitary or phytosanitary protection; and is significantly less restrictive to trade than the SPS measure contested. The Consistency requirement, articulated in Article 5.5, means that Members must avoid unjustifiable differences in the level of health protection they require in different situations if such differences result in discrimination or a disguised restriction on international trade. In June 2000, the SPS Committee adopted the "Guidelines to Further the Practical Implementation of Article 5.5" (G/SPS/15), to provide assistance to Members in the application of consistency while deciding on the appropriate levels of protection or the adoption and implementation of SPS measures. Furthermore, the SPS Agreement, in Article 5.7, permits the adoption of provisional measures when there is insufficient scientific evidence to permit a final decision on the safety of a product or process. In such cases, measures may be provisionally adopted on the basis of the available pertinent information about the health risk(s) of a product or process. However, a Member must seek the additional information necessary for a more objective assessment of the risk(s), and review the SPS measure within a reasonable period of time. Furthermore, the SPS Agreement disciplines what is called Regionalization. That is, Members shall ensure that their sanitary or phytosanitary measures are adapted to the sanitary or phytosanitary characteristics of the area whether all of a country, part of a country, or all or parts of several countries from which the product originated and to which the product is destined. 223

246 In this Module, our Module 7, we are going to learn about Transparency, which is another core discipline of the SPS Agreement. Firstly we will discuss the requirements regarding notification, then, we will analyse the publication obligations. Finally, we will examine the tasks assigned to the SPS Enquiry Points under the SPS Agreement and the role they play in the implementation of the Agreement. Let's get started! 224

247 II. TRANSPARENCY IN THE SPS AGREEMENT The word transparency in the context of the WTO is used to signify one of the fundamental principles of its agreements: the aim to achieve a greater degree of clarity, predictability and information exchange about trade policies, rules and regulations of Members. Members use notifications as the main instrument to implement transparency. Transparency features in many WTO agreements, such as the GATT (Article X), GATS (Article III), TRIPS (Article 63), TBT (Articles 2, 3, 5, 7 to 10 and Annex 3) and the SPS Agreement (Article 7 and Annex B, as well as Article 5.8). IN BRIEF Transparency is an important tool to ensure that trade flows as smoothly, predictably and freely as possible. The SPS Agreement contains transparency obligations in: Article 5.8 (provision of explanations in response to requests); Article 7 (general transparency provision); and Annex B. Under the SPS Agreement, each WTO Member is required to: notify draft and adopted SPS measures under certain circumstances, and to identify a single central government notification authority to be responsible for the notification requirements of the SPS Agreement; publish all SPS measures; and establish an enquiry point responsible for answering queries from other WTO Members about SPS measures and related issues. Therefore, we may say that the transparency obligations set forth in the SPS Agreement may be grouped into these three sets of obligations. RECALL The requirement to provide an explanation for a measure in response to a request under Article 5.8 was described in Module 5. Please refer to Module 5 to refresh your knowledge on this matter! 225

248 Summarizing: Figure 1: Transparency provisions in the SPS Agreement During the 2nd Review of the SPS Agreement (G/SPS/36), Members underlined that assistance should be provided to least-developed and developing countries in order to enable them to fully implement the transparency provisions and to make use of the benefits associated with transparency. Developing country and LDC Members are encouraged to clearly identify the specific problems they face in implementing their transparency obligations, in order to have their technical assistance needs fulfilled by interested donors and cooperation agencies. We shall examine Technical Assistance (TA) in detail in Module 8. Transparency remains a standing item on the SPS Committee's Agenda, which means that Members may further discuss and elaborate procedures to facilitate the implementation of such obligations and can raise any problems or difficulties encountered therein. We shall explain each of these three sets of transparency obligations further below. IF YOU WANT TO KNOW MORE THE HANDBOOK ON HOW TO APPLY THE TRANSPARENCY PROVISIONS OF THE SPS AGREEMENT To help Members, in particular the developing and least-developed countries, to implement the transparency obligations, the Secretariat has put together a handbook titled: "How to Apply the Transparency Provisions of the SPS Agreement". There you will find detailed descriptions of how to set up and operate Enquiry Points and National Notification Authorities, how to notify, models for letters, etc. 226

249 III. NOTIFICATIONS The obligation to notify is central to the transparency disciplines of the SPS Agreement. III.A. NOTIFICATION AUTHORITY Pursuant to Annex B, paragraph 10, of the SPS Agreement, Members shall designate a single central government authority as responsible for the implementation, at the national level, of provisions concerning notification procedures according to paragraphs 5, 6, 7 and 8 of that Annex. Important note The notification authority must be part of the central government, so this function cannot be carried out at the sub-national level (by a state, provincial or regional agency). Most Members find it convenient for the notification authority to be operated by the government department that is most concerned with the responsibilities covered by the SPS Agreement (i.e., food safety, animal health, plant health). Even if these functions are the responsibility of more than one government agency, there should be only one SPS notification authority. The notification authority is responsible for: ensuring proposed SPS regulations are published early, to allow for comments; notifying other Members, through the WTO Secretariat, of proposed regulations, using the appropriate notification forms; providing copies of proposed regulations on request; and ensuring that comments are handled correctly. TIP The addresses of WTO Members' SPS Notification Authorities are contained in the document "National Notification Authorities", Note by the Secretariat, G/SPS/NNA/ and are available and regularly updated on the SPS website at: 227

250 III.B. BACKGROUND Notifications can make an important contribution towards avoiding unnecessary obstacles to trade and providing Members with the opportunity to influence final requirements of other Members. Annex B (Transparency of Sanitary and Phytosanitary Regulations) paragraphs 5, 6, 7 and 8, contain the notification obligations related to SPS regulations. The SPS Committee has put in place detailed procedures for notification (G/SPS/7/Rev.2). On the left, you will find an example of typical questions that a Member might raise while exporting to another Member: how to find out about the measures adopted by the importing country? How to comment on such measures? When to comment? Where to obtain more information about the measure that is being implemented? Figure 2: Why notify? Any Member proposing to introduce a new or changed SPS regulation is, in most circumstances, required to: submit a notification through the WTO Secretariat; allow reasonable time for other Members to make comments in writing; discuss these comments upon request; take the comments and the results of the discussions into account; explain to the submitting Member how it plans to take the comments into account; where appropriate, provide additional relevant information on the proposed SPS regulation concerned; provide the submitting country with a copy of the text of the corresponding SPS regulations as adopted, or information that no corresponding SPS regulation will be put into force for the time being. The SPS notification system facilitates trade by allowing some lead time before new measures must be complied with (a "no surprises" approach). 228

251 Important note The SPS Agreement uses the terms 'measures' and 'regulations' somewhat interchangeably. While the body of the SPS Agreement refers to "measures" (which are defined in Annex A(1) as all relevant laws, decrees, regulations, requirements and procedures), Annex B refers to SPS "regulations", and a footnote indicates that these are "[s]anitary and phytosanitary measures such as laws, decrees or ordinances which are applicable generally". It is important to recall, however, that in the Japan Agricultural Products II case, the Appellate Body considered that the list in Annex B of laws, decrees or ordinances of general application was not exhaustive, and agreed with the Panel that other instruments which are similar in character and applicable generally must also be notified. Canada presented a proposal to clarify the issue through a Committee decision recognizing that, when referring to "regulations" in Annex B, the intent of the SPS Agreement is to include all measures that are applicable generally and may have a significant effect on trade of other Members, and which shall be, therefore, notified to the WTO. See Canada's document: G/SPS/W/186 IF YOU WANT TO KNOW MORE STATISTICS ON NOTIFICATIONS Following the transparency provisions of the SPS Agreement, 1247 notifications (including addenda, corrigenda and revisions) were submitted in the period between the 1st January and 31 December 2006, bringing the total number of SPS notifications submitted since the entry into force of the Agreement to almost 7,500. A regional breakdown of notifications from 1995 to 2004 (when 87 Members had notified at least one new or revised SPS measure) shows that 30 per cent of notifications were made by Asia and Pacific countries, 2 per cent by Africa and the Middle East, 18 per cent by Latin American and the Caribbean Members, 15 per cent by European Countries and 35 per cent by North Americans. As of the end of 2006, more than 100 Members had submitted at least one SPS notification. III.C. WHAT TO NOTIFY? The SPS Agreement requires Members to notify other Members, through the WTO Secretariat, of proposed new SPS regulations or modifications to existing ones whenever: firstly, the content of a proposed SPS regulation is not substantially the same as the content of an international standard, guideline or recommendation, OR a relevant international standard, recommendation or guideline does not exist; AND secondly, the proposed regulation may have a significant effect on the trade of other Members. 229

252 For the sake of improved transparency, some Members also notify regulations which conform to international standards, a practice which is welcomed. IN DETAIL Paragraph 5 of Annex B clarifies which regulations Members have to notify: Whenever an international standard guideline or recommendation does not exist or the content of a proposed sanitary or phytosanitary regulation is not substantially the same as the content of an international standard guideline or recommendation and if the regulation may have a significant effect on trade of other Members shall:... Figure 3: The Two Components of the Obligation to Notify Criteria for the definition of "significant effect on trade of other Members" may refer to the effect on trade of one sanitary and phytosanitary regulation only, or of various SPS regulations in combination; of a specific product, group of products or products in general; and between two or more Members (so strictly bilateral SPS regulations must still be notified if they meet the other criteria). The concept of a significant effect on trade of other Members includes both import-enhancing and import-reducing effects on trade, as long as such effects are significant. This means that SPS regulations that facilitate trade must also be notified. When assessing the significance of the effect on trade of SPS measures, the Member concerned should take into consideration such elements as (G/SPS/7/Rev.2): The value or other importance of imports in respect of the importing and/or exporting Members concerned, whether from other Members individually or collectively; the potential development of such imports; and the difficulties for producers in other Members to comply with the proposed SPS regulations. TIP If you are not certain whether a proposed SPS measure will affect international trade it is recommended that you notify the measure, for the sake of increased transparency. 230

253 Note When a regulation contains both, SPS and/or TBT elements, it should be notified both under the SPS and TBT Agreements following the procedures contained in the respective Agreements, preferably with an indication of which parts of the regulation fall under the SPS Agreement (e.g., a food safety measure) and which parts fall under the TBT Agreement (e.g., quality or compositional requirements). ILLUSTRATION Vanin, a WTO Member, is adopting a new law on the importation of live poultry, given the Avian Influenza epidemics (bird flu), via its Ministry of Animal Health. It currently imports most of the poultry consumed in its domestic market, mainly from Tristat and Rauritania, also WTO Members. The draft sanitary regulation provides, among other things, that: "Imported live poultry from non-infected areas should be submitted to a quarantine procedure of 60 days and shall not be allowed in the country unless vaccinated. Imported live poultry from infected areas shall not be allowed in the country for at least 24 months after the date of the last recorded case of avian influenza in the area, a period which can be extended." Tristat has informed the occurrence of the disease to the World Organization for Animal Health (OIE), while Rauritania, which is a developing country, has not had any cases of the disease. As we know already, the organization responsible for international standardization in the domain of animal health is the OIE, which has developed some standards on Notifiable Avian Influenza (NAI), for control, prevention, surveillance and diagnosis (Chapter of the OIE Terrestrial Animal Health Code (2006). Just as a matter of clarification, there are many strains of avian influenza, not all of which are considered to pose serious animal health risks. Thus, not all strains are required to be notified to the OIE. Article of the OIE Terrestrial Animal Health Code (2006) states that: "When importing from an NAI free country, zone or compartment, Veterinary Administrators should require the presentation of an international veterinary certificate attesting that: 1. the poultry showed no clinical sign of NAI on the day of shipment; 2. the poultry were kept in an NAI free country, zone or compartment since they were hatched or for at least the past 21 days; 3. the required surveillance has been carried out on the establishment within at least the past 21 days; 4. if vaccinated, the poultry have been vaccinated in accordance with Appendix , and the relevant information is attached." Vanin recognized that such international standard exists, but alleges that it has a scientific justification, based on a risk assessment, to adopt a more stringent requirement for the import of live chicken, which is the bird preferred by national consumers. Tristat and Rauritania both produce chicken in conformity with the relevant international standard above and Tristat follows all the procedures for the containment of the disease. Both these countries are of the opinion that Vanin's proposed regulation creates a negative effect on their trade and 231

254 Rauritania, being a developing country, sustains that the vaccination requirement will represent an additional burden on its exporters, in addition to being an unnecessary obstacle to trade, since the country has been free of the disease. In such circumstances, Vanin has the obligation to notify the draft sanitary regulation to other WTO Members via the WTO Secretariat: Firstly because the measure is not substantially the same as the relevant international standard; and Secondly because it is likely to create a significant effect on trade. Figure 4: Let's recap Learn more about Avian Influenza at: EXERCISES: 1. Transparency provisions in the SPS Agreement may be grouped into three sets of obligations, regarding their nature. Which are these and which are the main provisions on transparency in the SPS Agreement? 2. Members have the obligation to establish a national authority to be responsible for notifications. What is the role of this authority? 3. What are the circumstances in which Members shall notify the SPS Committee of draft SPS regulations? 232

255 III.D. WHEN TO NOTIFY? (TIMING) WTO Members have several obligations under the transparency provisions of the SPS Agreement. Firstly, Members shall publish a notice at an early stage so as to enable interested Members to become acquainted with the proposal to introduce a particular regulation. Once a draft SPS regulation exists, Members should make a notification to other Members, through the WTO Secretariat. In the previous section, we explained which are the cases that require Members to notify a measure. A notification should be made when a draft with the complete text of a proposed regulation is available, and when amendments can still be introduced and comments taken into account. For urgent measures, Members may notify them upon adoption or. The SPS Committee adopted procedures which recommend allowing a comment period of at least 60 days before a draft regulation is adopted. This is the period during which Members may make comments on the draft regulation. Members are also encouraged to provide 30 days extension to the comment period whenever possible. After the closing of the comment period, Members may adopt the regulation, taking into consideration the input provided by other Members. Then, it is required to publish the adopted regulation. Members have the obligation to publish all regulations, and to give at least a six months period between the publication of a regulation and its entry into force. This will be further discussed below. Important note For proposed SPS measures that unambiguously facilitate trade, Members may reduce or eliminate the period for receiving comments. But to enhance transparency, notifications should be made as early as possible. Figure 5: Timing of the Different Transparency Obligations Related to SPS measures 233

256 Important note Many Members use the submission of an SPS notification (#3) as the means of publishing a notice of the draft regulation (#2). URGENT MEASURES A Member may notify an SPS regulation upon adoption in cases "where urgent problems of health protection arise or threaten to arise" for the Member implementing the measure. A shorter period for comments may be established in this case. The provision on urgent problems, paragraph 6 of Annex B, reads: [ ] Where urgent problems of health protection arise or threaten to arise for a Member that Member may omit such of the steps enumerated in paragraph 5 of this Annex as it finds necessary provided that the Member: a) immediately notifies other Members through the Secretariat of the particular regulation and the products covered with a brief indication of the objective and the rationale of the regulation including the nature of the urgent problem(s); Emergency measures may be notified either before or immediately after they are adopted, with an explanation of the reasons for resorting to emergency action, as requested in the emergency notification form. Important note Emergency (urgent) SPS measures may be invoked on a temporary basis. This means that after its period of application has expired an emergency measure should be revoked. As the revocation of a measure also affects trade, it is necessary to make a notification to the WTO when this happens. This would normally be done through an addendum to the original notification. 234

257 III.E. HOW TO NOTIFY? (NOTIFICATION FORMATS) Notifications must contain information on the products covered, together with a brief indication of the objective and rationale of the proposed SPS measure. Remember that when a notification refers to an urgent measures, the notification form shall mention the nature of the urgent problem. Paragraph 5 (b) of Annex B reads: [Members shall] notify other Members through the Secretariat of the products to be covered by the regulation together with a brief indication of the objective and rationale of the proposed regulation. Such notifications shall take place at an early stage when amendments can still be introduced and comments taken into account. ( ) 235

258 The SPS Committee elaborated on these requirements (G/SPS/7/Rev.2), and adopted the format below for notification of regular SPS measures. Another format has been adopted for the notification of emergency measures: NOTIFICATION OF SPS MEASURES WORLD TRADE ORGANIZATION Committee on Sanitary and Phytosanitary Measures G/SPS/N/COUNTRY/ Date of distribution (##-####) Original: NOTIFICATION 1. Member to Agreement notifying: If applicable, name of local government involved: 2. Agency responsible: 3. Products covered (provide tariff item number(s) as specified in national schedules deposited with the WTO; ICS numbers should be provided in addition, where applicable): 4. Regions or countries likely to be affected, to the extent relevant or practicable: 5. Title, language and number of pages of the notified document: 6. Description of content: 7. Objective and rationale: food safety [ ], animal health [ ], plant protection [ ], protect humans from animal/plant pest or disease [ ], protect territory from other damage from pests [ ] 8. International standard, guideline or recommendation: Codex Alimentarius Commission [ ],Office International des Epizooties [ ],International Plant Protection Convention [ ],None If an international standard, guideline or recommendation exists, give the appropriate reference and briefly identify deviations: 9. Relevant documents and language(s) in which these are available: 10. Proposed date of adoption: 11. Proposed date of entry into force: 12. Final date for comments: Agency or authority designated to handle comments: National notification authority [ ], National enquiry point [ ], or address, fax number and address (if available) of other body: 13. Texts available from: National notification authority [ ], National enquiry point, or address [ ], fax number and address (if available) of other body: 236

259 WORLD TRADE ORGANIZATION Committee on Sanitary and Phytosanitary Measures G/SPS/N/COUNTRY/ Date of distribution (##-####) Original: NOTIFICATION OF EMERGENCY MEASURES 1. Member to Agreement notifying: If applicable, name of local government involved: 2. Agency responsible: 3. Products covered (provide tariff item number(s) as specified in national schedules deposited with the WTO; ICS numbers should be provided in addition, where applicable): 4. Regions or countries likely to be affected, to the extent relevant or practicable: 5. Title, language and number of pages of the notified document: 6. Description of content: 7. Objective and rationale: food safety [ ], animal health [ ], plant protection [ ], protect humans from animal/plant pest or disease [ ], protect territory from other damage from pests [ ] 8. Nature of the urgent problem(s) and reason for urgent action: 9. International standard, guideline or recommendation: Codex Alimentarius Commission [ ], Office International des Epizooties [ ], International Plant Protection Convention [ ], None [ ] If an international standard, guideline or recommendation exists, give the appropriate reference and briefly identify deviations: 10. Relevant documents and language(s) in which these are available: 11. Date of entry into force/period of application (as applicable): 12. Agency or authority designated to handle comments: National notification authority [ ], National enquiry point [ ], or address, fax number and address (if available) of other body: 13. Texts available from: National notification authority [ ], National enquiry point [ ], or address, fax number and address (if available) of other body: As you can see, there are 13 sections in the notification forms. Both the regular and the emergency notification formats are quite similar concerning the information Members should present: Section 1 indicates the Government, including the competent authority of the European Communities, which makes the notification. In addition, when a local government is involved, it has to be mentioned in this section. Section 2 designates the agency (body) responsible for elaborating the proposal or promulgating the SPS measure. 237

260 Section 3 contains a clear description of the products covered by the measure (including tariff headings). HS Code or CCCN should come here, where applicable, as contained in national schedules deposited with the WTO. ICS numbers may be provided in addition, where applicable. TIP HS stands for Harmonized Commodity Description and Coding System of tariff nomenclature, which is an internationally standardized system of names and numbers for classifying traded products, developed and maintained by the World Customs Organization (WCO, formerly named Customs Cooperation Council). CCCN stands for Customs Cooperation Council Nomenclature, a customs tariff nomenclature formerly used by many countries, including most European nations. It has been superseded by the Harmonized System Nomenclature to which most trading nations adhere. ICS stands for International Classification for Standards. The ICS was developed and is maintained by the International Organization for Standardization (ISO), as an international classification system for technical standards. It is designed to cover every economic sector where technical standards may be used. Section 4 identifies the geographical regions or countries likely to be affected by the notified regulation. Section 5 indicates the title of the proposed or adopted SPS regulation notified, the number of pages of the notified document, the language(s) in which the notified document is available; and the availability of a translation of the document. Section 6 describes the content of the proposed (or adopted) SPS regulation, including its health protection objective. The summary should be as complete and accurate as possible to allow the full understanding of the proposed regulation and its likely effects on trade. Section 7 states the objective and rationale, whether it be: protection of human health from food-borne risks; protection of animal health from pests or diseases, or from contaminated feed-stuff; protection of plant health from pests or diseases; or protection of human health from plant - or animal - carried diseases; or prevention of other damage from entry, establishment or spread of pests. You will recognize these choices as the objectives that define a measure as an SPS measure, stated in Annex A.1 of the SPS Agreement. Section 8 concerns the existence of a relevant Codex, OIE or IPPC international standard, guideline or recommendation, and requests the identification of the organization and the standard on which the measure is based. Here, one should describe how the proposed regulation deviates from the international standard and if no international standard, guideline or recommendation exists, put a cross in the "none" box. In the emergency form, Section 8 relates to the nature of the urgent problem and the reason for urgent action. 238

261 Section 9 makes a reference to relevant documents and the language in which they are available, such as (1) the publication where a notice appears; (2) the proposal and basic document to which the proposal refers; and (3) the publication in which the proposal will appear when adopted. In the emergency form, Section 9 concerns the existence of a relevant international standard, guideline or recommendation (see Section 8 of the routine notification form above). Section 10 gives the proposed date of adoption of the SPS regulation. In the emergency form, Section 10 makes a reference to relevant documents and the language in which they are available (see Section 9 of the routine notification form above). Section 11 gives the proposed date of entry into force of SPS regulation. Where appropriate, Members should accord longer time-frames for compliance on products of interest to developing country Members. Section 12 indicates a specific and final date by which Members may submit comments, in accordance with paragraph 5(b) of Annex B. A Member shall normally allow a period of at least sixty days for comment. Any Member which is able to provide a time limit beyond sixty days is encouraged to do so. The agency or authority which has been designated to handle the comments should be indicated in this field. Section 13 provides information on whether the text of the measure is available from the national notification authority or enquiry point, or from another body. Members shall also indicate here the exact address, where available, address, telephone and fax numbers of the body responsible for supplying the relevant documents if that body is not the notification authority or enquiry point. If the documents are made available on-line, the web address should be included here. TIP Up-to-date notification authority addresses are listed in documents in the G/SPS/NNA/ series. Addresses for enquiry points are listed in the G/SPS/ENQ/series. You are encouraged to ensure that the information about your own enquiry point and notification authority in these documents is correct, and to inform the WTO Secretariat of any changes. All notifications to the WTO Secretariat are required to be in one of the three working languages of the WTO: English, French or Spanish. Members should not send the texts of the proposed regulation being notified. Notifications should be sent, preferably by , or else by fax or air mail, to the Central Registry of Notifications (CRN) at the WTO, either through the WTO representative or directly. The address is: Central Registry of Notifications Rue de Lausanne Geneva 21 Switzerland Fax: (+41 22) crn@wto.org 239

262 Important note The fact that the notification of a regular measure is late should not become the reason for using the emergency format; it is preferable that the notification is made late rather than not at all, and in the right format, that is, the format for routine notifications. Also, changes in the address or contact information for a national notification authority or enquiry point need to be provided directly to the WTO Secretariat. Merely including a new address in Section 12 or 13 on the notification form is not sufficient. IF YOU WANT TO KNOW MORE THE HARMONIZED SYSTEM Before 1987, many countries and territories used the Customs Cooperation Council Nomenclature (CCCN) as a classification basis for their customs tariffs. However, some countries, notably the United States and Canada, used different nomenclatures. In 1970, a Study Group was established in the Customs Cooperation Council (nowadays the World Customs Organization - WCO) to examine the possibility of preparing a new system of nomenclature capable of meeting the principal requirements of customs authorities, statisticians, carriers and producers. The "Harmonized Commodity Description and Coding System" (Harmonized System or HS) is an international product nomenclature which has been developed as a result of the above-mentioned study under the auspices of the WCO, an intergovernmental organization with over 160 member countries based in Brussels, Belgium. The HS is a six-digit nomenclature. Individual countries have extended it to ten digits for customs purposes, and to 8 digits for export purposes. This nomenclature is broadly based on the CCCN and the United Nations SITC (Standard International Trade Classification), but it also takes into account some aspect of the TSUS (national tariff of the United States) and the Canadian nomenclature. The Harmonized System was developed not only for customs purposes but also for the collection of trade statistics, and for all kinds of transactions in international trade (transport, insurance, etc). The HS comprises about 5,000 commodity groups, each identified by a six digit code, arranged in a legal and logical structure. The system is used by more than 200 countries and economies as a basis for their customs tariffs. Over 98 per cent of the merchandise in international trade is classified in terms of the HS. The Harmonized System is governed by "The International Convention on the Harmonized Commodity Description and Coding System". The official interpretation of the HS is given in the Explanatory Notes (5 volumes in English and French) published by the WCO. The 2007 version is the third major revision of the HS since its adoption by the WCO Council in 1983 and its entry into force in The new version includes more than 350 amendments to the HS Nomenclature. If you want to know more, check the WCO website: 240

263 III.F. UPDATES & ADDITIONAL INFORMATION Finally, Members, in addition to their original notifications, should also provide supplementary information in three different forms. An addendum is used to provide additional information or changes to an original notification. A Member may wish to indicate on the addendum if the final regulation has been substantially modified from the notified proposal. A corrigendum is used to correct an error in an original notification such as an incorrect address detail. A revision is used to replace an existing notification. Any addendum or corrigendum should be read in conjunction with the original notification. ADDENDA Members should notify changes in the status of a notified SPS regulation. Addenda to SPS notifications should be made in a number of circumstances, such as: when a proposed regulation is either adopted or comes into force. A Member may wish to indicate on the addendum if the final regulation has been substantially modified from the notified proposal; if a proposed regulation is withdrawn; if a regulation is revoked; if the comment period has been extended; if the period of application of the existing notification is extended; if the scope of application of the existing notification is reduced, either in terms of Members affected or products covered. Such a change may warrant the extension of the comment period. CORRIGENDA Members should inform the Secretariat of any error(s) contained in their original notification. The Secretariat will issue a corrigendum accordingly. REVISIONS Revisions replace an existing notification. Revisions should be submitted, for example: when the scope of application of a notified regulation is extended, either in terms of Members affected or products covered; or if a notification contained a large number of errors which necessitated issuing a revision. A Member should provide a further period for comments on the revised notification, normally 60 days. 241

264 TIP The SPS Committee has adopted forms to be used for routine and emergency notifications, and also for a revision, addendum and corrigendum to these notifications. Such forms are available from the Secretariat in electronic format or in document G/SPS/7/Rev.2 (Recommended Procedures for Implementing the Transparency Obligations of the SPS Agreement (Article 7)), available at our Digital Library. Notification formats are also available on the SPS section of the WTO website. ILLUSTRATION Let's go back to the example we presented above, on Vanin's draft sanitary regulation on the import of live poultry. As you remember, we came to the conclusion that Vanin was required to notify it to the WTO Secretariat. Now it is time for us to prepare the notification form, based on the information Vanin provided. Vanin's country code is VAN and the regulation is written in Vaninian (5 pages), with English translation provided. This sanitary regulation applies to live poultry imported into Vanin and establishes quarantine and vaccination requirements for animals imported from non-infected areas and a ban on the import of poultry from areas where there is an outbreak of avian influenza. The notice was published in the Official Gazette (1 February 2007) and is also available at The final date for comments is 1 April 2007, so that the regulation may be adopted 15 days later. The entry into force is foreseen for 1 November and the National Notification Authority is in charge of providing the regulation text and handling comments. 242

265 WORLD TRADE ORGANIZATION G/SPS/N/VAN Date of distribution (##-####) Committee on Sanitary and Phytosanitary Measures Original: NOTIFICATION 1. Member to Agreement notifying: VANIN If applicable, name of local government involved: N/A 2. Agency responsible: MINISTRY OF ANIMAL HEALTH 3. Products covered (provide tariff item number(s) as specified in national schedules deposited with the WTO; ICS numbers should be provided in addition, where applicable): Live Poultry (HS ) HS And Regions or countries likely to be affected, to the extent relevant or practicable: Tristat and Rauritania 5. Title, language and number of pages of the notified document: Sanitary Requirements on Live Poultry, available in Vaninian, 5 Pages. 6. Description of content: This sanitary regulation applies to live poultry imported into Vanin and establishes quarantine and vaccination requirements for animals imported from non-infected areas and a ban on the import of poultry from areas where there is an outbreak of avian influenza. 7. Objective and rationale: food safety [ ], animal health [X], plant protection [ ], protect humans from animal/plant pest or disease [ ], protect territory from other damage from pests [ ] 8. International standard, guideline or recommendation: Codex Alimentarius Commission [ ],Office International des Epizooties [X],International Plant Protection Convention [ ],None If an international standard, guideline or recommendation exists, give the appropriate reference and briefly identify deviations: Chapter of the OIE Terrestrial Animal Health Code (2006) Deviation of the time-frame for quarantine (60 days instead of 21) and of the vaccination requirement. Imposes restrictions on the import of poultry from infected areas. 9. Relevant documents and language(s) in which these are available: Vanin Official Gazette. Translation into English provided. 10. Proposed date of adoption: 15 April Proposed date of entry into force: 1 November Final date for comments: 1 April 2007 Agency or authority designated to handle comments: National notification authority [X], National enquiry point [ ], or address, fax number and address (if available) of other body: 13. Texts available from: National notification authority [X], National enquiry point, or address [ ], fax number and address (if available) of other body: 243

266 EXERCISES: 4. When is the most appropriate time for making a notification of SPS regulations? 5. Tristat, a developing country Member, is notifying the WTO Secretariat about a draft sanitary regulation. Its Ministry of Agriculture proposes the amendment of Tristat Food Safety Code in order to adjust Maximum Residue Limits (MRLs) of certain pesticides, such as Deltamethrin, on "Apples, Beans (dry), Carrots, Cereal Grains, Citrus Fruits, Eggs, Field Pea, Grapes and Hazelnuts", for which it previously did not apply any MRL. This proposed regulatory amendment would adopt the Codex Alimentarius MRLs for Deltamethrin. Since Tristat did not impose any limits on this pesticide before, such a regulation would impose new requirements on imports and Tristat thus decided to notify it, although it is not obliged to do so (due to the fact that the regulation conforms to an international standard). The text of the proposed regulation has three pages and is available at in English. The notice of a draft regulation was published at Tristat's Official Gazette, on 1 March The final date for comments to be sent to Tristat is 15 May and the regulation will be adopted on 1 June. Tristat also stated that the reasonable interval period of six months for the entry into force of the regulation shall be respected. Please fill in the corresponding notification format. 244

267 EXERCISES (CONTINUATION): WORLD TRADE ORGANIZATION G/SPS/N/COUNTRY/ Date of distribution (##-####) Committee on Sanitary and Phytosanitary Measures Original: NOTIFICATION 1. Member to Agreement notifying: If applicable, name of local government involved: 2. Agency responsible: 3. Products covered (provide tariff item number(s) as specified in national schedules deposited with the WTO; ICS numbers should be provided in addition, where applicable): 4. Regions or countries likely to be affected, to the extent relevant or practicable: 5. Title, language and number of pages of the notified document: 6. Description of content: 7. Objective and rationale: food safety [ ], animal health [ ], plant protection [ ], protect humans from animal/plant pest or disease [ ], protect territory from other damage from pests [ ] 8. International standard, guideline or recommendation: Codex Alimentarius Commission [ ],Office International des Epizooties [ ],International Plant Protection Convention [ ],None If an international standard, guideline or recommendation exists, give the appropriate reference and briefly identify deviations: 9. Relevant documents and language(s) in which these are available: 10. Proposed date of adoption: 11. Proposed date of entry into force: 12. Final date for comments: Agency or authority designated to handle comments: National notification authority [ ], National enquiry point [ ], or address, fax number and address (if available) of other body: 13. Texts available from: National notification authority [ ], National enquiry point, or address [ ], fax number and address (if available) of other body: 245

268 III.G. PROCESSING AND CIRCULATION Once an SPS notification has reached the Central Registry for Notifications (CRN) at the WTO, it is put on a file, given a record number and forwarded to the Agriculture and Commodities Division of the WTO Secretariat, where it is formatted and checked for completeness and accuracy. The notification is then transferred to the Document Management System (DMS) for circulation to Members, posted on the WTO web site and translated into the other working languages of the WTO. Figure 6: Processing and Circulation of Notifications Past experience shows that the accuracy with which notification forms are completed by Members can significantly affect the processing time required by the Secretariat. An automated distribution system has been set up which twice a week sends out all the SPS notifications (and other SPS documents) issued in the period. To subscribe: ELECTRONIC TRANSMISSION OF SPS NOTIFICATIONS ***************** HOW TO SUBSCRIBE ***************** To subscribe to the list, send an message to "listproc@list.unicc.org" with the following in the body of the message (leave the subject line blank): SUBSCRIBE SPS your full name Example: SUBSCRIBE SPS Michael Jackson Your address will be automatically registered. TIP Notifications of SPS regulations are issued in the G/SPS/N/- (followed by the country code) series of documents. Addenda, Revisions and Corrections (Corrigenda) to notifications carry the same document symbol and number as the original, followed by Add., Rev., and Corr., respectively. This allows them to be adequately traced. Information on where to find unofficial translations of notified regulations, when these are made available, are issued with the same symbol of the original notification, followed by Suppl. The country codes are those proposed by the International Standards Organization (ISO). You can find the various country codes at the Documents on Line Help Session. 246

269 The Secretariat prepares monthly lists of notifications. They are contained in documents with the symbol G/SPS/GEN/ (search by keyword "notifications"). All documents are available on the WTO web site and at the Documents Online Database ( IF YOU WANT TO KNOW MORE DOCUMENTS ON LINE HOW TO USE IT Documents Online is a database provided by the WTO. There you will be able to find every derestricted WTO document, including SPS notifications. If you have never used it, or if you have doubts about how to use it, do not miss out the "tutorial" offered at the Help section of the Documents online link at the WTO webpage: There, you can also download the Documents online "manual", either in Word or PDF file. TIP There is a specific online tool for the management of SPS related notifications, the SPS Information Management System: It is synchronised with Documents Online and the Central Registry of Notifications, and linked with the WTO Integrated Database, which includes trade and tariff data of WTO Members. For more about the SPS IMS, please go to III.H. HANDLING OTHER MEMBERS' REQUESTS FOR COPIES AND COMMENTS ON DRAFT REGULATIONS When a country notifies an SPS regulation, it is obliged to supply copies of the proposed regulation to other Members, upon request. All requests for documents should be made to the notifying country's notification authority, unless the enquiry point is specified or an alternative address is listed in the final box of the notification. Members should respond in the same way to all requests for notified documents, and ideally also to those which may come directly from industry groups or individuals (although this is not an obligation under the SPS Agreement). Requests should be dealt with by the notifying Member within 5 working days. If this cannot be done, the request should be acknowledged by fax or and an estimate given of the anticipated delay. As regards fees charged for provision of documents, national treatment should be afforded to requests from foreign interested parties, with due adjustments to be made for differential costs of delivery. Furthermore, Members are required, prior to the adoption of SPS regulations, to: allow reasonable time for other Members to make comments about the draft regulation in writing; 247

270 discuss these comments upon request; and take these written comments and the results of these discussions into account. IN DETAIL Paragraph 4 of Annex B reads: [Members shall...] without discrimination allow reasonable time for other Members to make comments in writing discuss these comments upon request and take the comments and the results of the discussions into account. As explained before, the SPS Committee recommends that the normal time-limit for presentation of comments on notified draft SPS regulations should be at least 60 days, before the adoption of the measure takes place. Members which are able to provide a time limit of more than 60 days, such as 90 days, are encouraged to do so and to indicate this fact on the notification form. Insufficient comment periods may prevent Members from exercising their right to submit comments, to hold consultations, and to have their comments taken into account. Lack of time is particularly problematic when draft texts need to be requested and/or translated. Important note The same obligations relating to comments apply to SPS measures adopted for urgent reasons, with the exception that no time-limit is provided and that comments are made after the adoption of the measure. Members should grant requests for extension of the comment period wherever practicable, notably with regard to notifications relating to products of particular interest to developing country Members; where there have been delays in receiving and translating the relevant documents; or where there is a need for further clarification of the measure notified. A 30-day extension should normally be provided. When the notification is of a trade-liberalizing measure, e.g. the lifting of a ban on imported products, the Member should take the action without delay and does not need to provide a comment period. Figure 7: Comments Reasonable time 248

271 In order to clarify the procedures for the handling of comments, among other things, the SPS Committee adopted the following procedures (See G/SPS/7/Rev.2): Each Member should notify the WTO Secretariat of the authority or agency (e.g. its notification authority) which it has designated to be in charge of handling comments received (in Box 12 of both formats for notifications); and a Member receiving comments from another Member should without further request: acknowledge the receipt of such comments; explain within a reasonable time, and at the earliest possible date before the adoption of the measure, to any Member from which it has received comments, how it will take these comments into account and, where appropriate, provide additional relevant information on the proposed sanitary or phytosanitary regulations concerned; provide to any Member from which it has received comments, a copy of the corresponding SPS regulation as adopted or information that no corresponding SPS regulations will be adopted for the time being; and where possible make available to other Members comments and questions it has received and answers it has provided, preferably through electronic facilities. To sum up, these are the obligations Members have under Paragraph 5 of Annex B of the SPS Agreement: Figure 8: The obligations - Annex B of the Agreement III.I. TRANSLATIONS The SPS Agreement neither requires the publication of texts nor the provision of details or copies of drafts other than in the language of the Member. However, pursuant to Paragraph 8 of Annex B, developed country Members are required, upon request, to provide translations of the documents covered by a specific notification; or in case of voluminous documents, summaries of such documents, in one of the three working languages of the WTO. 249

272 This is the only provision concerning translations that was written into the transparency obligations set forth by the SPS Agreement. With this in mind, the SPS Committee elaborated further on this obligation and agreed on procedures to enhance the sharing and dissemination of existing translations in one of the WTO working languages (G/SPS/7/Rev.2): When a translation of a relevant document, or of its summary, exists or is planned, this fact should be indicated on the WTO notification form next to the title of the document (ibox 5 of the notification format). If a Member requests a copy of a regulation and a its translation exists (in the Member's language or in its WTO working language), it should be automatically sent with the original of the document requested. Where documents are not available in a WTO working language, developed country Members shall, upon request, supply a translation of the document, or in case of voluminous documents, a translation of a summary of the documents, in a WTO working language. Members are encouraged to seek unofficial translations from other Members in cases where the notifying Member does not have a copy of the document in the requesting Member's WTO working language. The notifying Member should advise the requesting Member of other Members that have requested, as of that date, a copy of the document. Any Member possessing an unofficial translation of a document relating to a notification should inform the notifying Member of the existence of the unofficial translation and is encouraged to make it available to other interested Members, through electronic facilities where appropriate, indicating its unofficial nature. TIP The WTO Secretariat has established a mechanism to circulate information on the availability of unofficial translations of draft regulations notified to Members (G/SPS/GEN/487). This document contains a form Members can use in order to notify the Committee of the availability of such unofficial translations. Information on where to find unofficial translations of notified regulations, when these are made available, is issued with the same symbol of the original notification, followed by Suppl. ILLUSTRATION Vanin has already notified the Secretariat about the draft sanitary regulation on the import of live poultry. Now it is the time for WTO Members, especially those such as Tristat and Rauritania, whose trade may be directly affected by the regulation, to act. But how? Firstly Tristat and Rauritania could request a copy of the drafted measure from Vanin's Notification Authority (as identified on the notification form), and since a translation into English already exists, they can request the translated document. 250

273 Then, they can make use of the time provided to make comments on the draft regulation to Vanin's Notification Authority. These comments should be acknowledged by the Authority once received. Note that Tristat and Rauritania should have at least 60 days to provide comments and in case this time is not enough, they may request an extension of this period. In addition to providing comments to Vanin, these two Members are also entitled, under Article 5.8 of the SPS Agreement, to request that Vanin explains the justification of its measure, since it was not based on the relevant international standard. Vanin has to provide a scientific justification for its sanitary regulation; it should also explain how the comments provided by Tristat and Rauritania have been taken into account in the process of the elaboration/adoption of the measure. In case Vanin decides not to adopt the measure, or to modify the proposed measure substantially, it should inform all WTO Members in an addendum to the original notification. Figure 9: Recapitulation III.J. WHAT ELSE TO NOTIFY? III.J.1. NOTIFICATION OF EQUIVALENCE Although notification of the recognition of equivalence is not a requirement in the SPS Agreement, in June 2002 the SPS Committee adopted a decision on the subject, the Recommended Procedures for the Notification of Determination of the Recognition of Equivalence of Sanitary and Phytosanitary Measures (G/SPS/19/Rev.2). This decision includes a format for equivalence notifications (G/SPS/7/Rev.2/Add.1). 251

274 According to these recommended procedures, when a country has made a determination recognizing an SPS measure of another country as equivalent to its own, it should make a notification of the measure that has been recognized, and of the products affected. When significant changes are made to an existing equivalence arrangement, these should also be notified, including suspension or termination of such arrangements. RECALL As we learned in Module 5, Equivalence is defined to be: "The state wherein sanitary or phytosanitary measures applied in an exporting country, though different from the measures applied in an importing country, achieve, as demonstrated by the exporting country and recognized by the importing country, the importing country's appropriate level of sanitary or phytosanitary protection. A determination of the recognition of equivalence may be with respect to a specific measure or measures related to a certain product or categories of products, or on a systems-wide basis." (G/SPS/19/Rev.2) The format used for Equivalence Notifications is shown below. WORLD TRADE ORGANIZATION G/SPS/EQV/N/# Date of distribution (##-####) Committee on Sanitary and Phytosanitary Measures Original: NOTIFICATION OF DETERMINATION OF THE RECOGNITION OF EQUIVALENCE OF SANITARY OR PHYTOSANITARY MEASURES The following notification of determination of the recognition of equivalence has been received. 1. Member to Agreement notifying: 2. Title of the text stating the determination of the recognition of equivalence: 3. Parties involved: 4. Date of entry into force of the determination of the recognition of equivalence and any associated procedures or regulations: 5. Products covered (HS or CCCN where applicable, otherwise national tariff heading): 6. Description of measures recognized to be equivalent: 7. Further information available from: National Enquiry Point [ ],Other (specify) [ ] 252

275 RECOMMENDED PROCEDURES FOR THE COMPLETION OF THE NOTIFICATION FORMAT Item Description 1. Member notifying Government, including the competent authorities of the European Communities, which is making the notification. 2. Title of the text stating determination of the recognition of equivalence Title of any formal or informal agreement, Memorandum of Understanding or other document establishing the determination of recognition of equivalence. 3. Parties involved Name of the exporting Member or Members whose measure has been determined to be equivalent. 4. Date of entry into force of the determination of the recognition of equivalence and any associated procedures or regulations Date from which procedures, regulations or other measures based on the determination of recognition of equivalence took effect. 5. Products covered (HS or CCCN where applicable, otherwise national tariff heading) Tariff item number(s) (normally HS, chapter or heading and number) as contained in national schedules deposited with the WTO of the product(s) which are imported on the basis of the determination of the recognition of equivalence. 6. Brief description of the measure(s) recognized to be equivalent Clearly indicate the nature of the recognition of equivalence, including which measure(s) of the exporting Member have been determined to be equivalent and which elements of the importing Member's usual requirements are met by these equivalent measures. 7. Further information available from The agency or authority from which an interested Member may request further information regarding the specific determination of equivalence being notified. If this is the national enquiry point, check the box provided. If available from another body, give its address, fax number and (if available) address. Provide the world wide web address of the document, if available. Table 1: Recommended procedures for the completion of the notification format III.J.2. NOTIFICATION OF SPECIAL AND DIFFERENTIAL TREATMENT One of the specific issues raised in the Committee has been the need to enhance transparency regarding the provision of special and differential treatment. Some Members presented proposals in this regard, and the Committee adopted, in 2003, one suggested by Canada, which proposed that an importing country should 253

276 consider any requests for special and differential treatment or technical assistance made in response to their notification of a new measure and should notify the SPS Committee of any subsequent action. In October 2004, the Committee elaborated steps to implement this procedure (Procedure to Enhance Transparency of Special and Differential Treatment in Favour of Developing Country Members, G/SPS/33). More specifically, after submitting a notification for a new or revised draft regulation (following the guidance provided in G/SPS/7/Rev.2), a notifying Member shall submit additional information, in a specific addendum to the notification, indicating where special and differential treatment or technical assistance has been requested in the context of the notification, and what response has been given to the request. If an exporting Member identifies significant difficulties with a proposed measure, or if, following the entry into force of a new regulation (including emergency measures), an exporting Member identifies significant difficulties which its exports face in complying with it, the Member may request an opportunity to discuss its difficulties with the importing Member. Resolution of the concern identified could include one of the following, or a combination thereof: a change in the measure to be applied on a MFN basis; the provision of technical assistance to the exporting Member; the provision of special and differential treatment. Should S&D treatment be provided, it would apply equally to all developing country Members. When a decision is taken on whether and how S&D treatment may be provided for a measure in response to specific requests, the notifying Member should promptly submit to the WTO Secretariat an addendum to its original notification indicating: if special and differential treatment was requested; the name of Member(s) requesting S&D treatment; if S&D treatment was provided, the form of such treatment; and if not provided, the Addendum shall indicate why S&D treatment was not provided and whether technical assistance or any other solution was found to address the identified concern. 254

277 Check the notification format below: WORLD TRADE ORGANIZATION G/SPS/N/COUNTRY/#/Add.# Date of distribution (##-####) Committee on Sanitary and Phytosanitary Measures Original NOTIFICATION Addendum The following communication, dated DD/MM/YY has been received from [Member]. Title outlining what the SPS measure or product is: [Text describing any modification to the notified measure.] Special and Differential Treatment Text (1) indicating if special and differential treatment was requested; (2) providing the name(s) of the Member(s) that requested special and differential treatment; (3) if special and differential treatment was provided, describing how such treatment was provided, including what form it took; and (4) if special and differential treatment was not provided, indicating why it was not provided and whether technical assistance or any other solution was found to address the identified concern. Where the notified document can be obtained from include contact name, agency, full address, telephone, facsimile, and as appropriate. EXERCISES: 6. Where should you send your notifications? What is the general document code for notifications? How can you retrieve information about other Members' notifications? 7. What are Members' transparency obligations under the SPS Agreement, in relation to the provision of requested copies and to the handling of comments on draft SPS regulations made by other Members? 255

278 IV. PUBLICATION OBLIGATIONS A fundamental component of transparency under the SPS Agreement is the publication of regulations. This is a general obligation of WTO Members, and does not relate specifically to the work of either the notification authority or enquiry point. Annex B, paragraphs 1 and 2, of the SPS Agreement provide that: Publication of regulations 1. Members shall ensure that all sanitary and phytosanitary regulations (5) which have been adopted are published promptly in such a manner as to enable interested Members to become acquainted with them. 2. Except in urgent circumstances, Members shall allow a reasonable interval between the publication of a sanitary or phytosanitary regulation and its entry into force in order to allow time for producers in exporting Members, and particularly in developing country Members, to adapt their products and methods of production to the requirements of the importing Member. (5) Footnote: Sanitary and phytosanitary measures such as laws, decrees or ordinances which are applicable generally. WTO Members are, thus, obliged to: promptly publish adopted SPS regulations, which include laws, decrees or ordinances which are applicable generally. allow a reasonable interval between the publication of an SPS regulation and its entry into force, except in urgent circumstances. In the Decision on Implementation Related Issues and Concerns (WT/MIN(01)17) taken on 14 November 2001 at the Fourth Ministerial Conference in Doha, Qatar, it was decided that the "reasonable interval" between the publication of an SPS regulation and its entry into force shall normally mean a period of not less than 6 months. Important note The entry into force of measures which liberalize trade should not be unnecessarily delayed. Members must fulfil publication obligations both before the adoption of an SPS measure, and thereafter. The obligations Members have concerning publication are presented in more detail below. IV.A. BEFORE THE ADOPTION OF THE REGULATION Members are required to publish an early notice of their intention to introduce a particular SPS regulation. The requirements for the publication of such notice are the same as for the notification of regulations: a notice should be published if the proposed regulation may have a significant effect on trade of other Members and 256

279 whenever an international standard does not exist or the content of a proposed sanitary or phytosanitary regulation is not substantially the same as the content of an international standard, guideline or recommendation. Some Members use the submission of an SPS notification to the WTO Secretariat as the means of publishing this early notice. Paragraph 5(a) of Annex B reads: [Members shall] publish a notice at an early stage in such a manner as to enable interested Members to become acquainted with the proposal to introduce a particular regulation IV.B. AFTER THE ADOPTION OF THE MEASURE Members are required to promptly publish all adopted SPS measures, including those which do not have a significant effect on the trade of other Members, or those which are in accordance with an international standard. The obligation to publish (all) adopted regulations is wider than that to notify draft measures or to publish an early notice and includes measures whose notice does not have to be published or which do not have to be notified a priori. Paragraph 1 of Annex B reads as follows: Members shall ensure that all sanitary and phytosanitary regulations (3) which have been adopted are published promptly in such a manner as to enable interested Members to become acquainted with them. Footnote (3) Sanitary and phytosanitary measures such as laws, decrees or ordinances which are applicable generally. CASE STUDY: JAPAN AGRICULTURAL PRODUCTS II (W T/DS 76) We discussed the Japan Agricultural Products II case (WT/DS76) in Module 6 of our course. In addition to what we discussed there, with respect to risk assessment, we would like to discuss the claims made by US that the testing requirements should have been published and that Japan had violated its transparency obligations. Regarding Japan's transparency obligations under the SPS Agreement, the Panel stated and the Appellate Body upheld that: the measure at issue violated Article 7 and Annex B. The Panel found that the variety testing requirement should have been published, despite the argument made by Japan that the requirement was not mandatory. 257

280 Concerning the obligation to publish SPS measures, the Appellate Body refuted Japan's argument that those phytosanitary requirements did not constitute a regulation, and therefore did not have to be published. Japan stated that such requirements were not enforceable, and did not constitute "laws, decrees or ordinances". The Appellate Body stated that the list of instruments contained in the footnote to paragraph 1 of Annex B was, as indicated by the words "such as", not exhaustive in nature and that the varietal testing requirements should have been published. The Appellate Body: considered that the scope of application of the publication requirement is not limited to, but also includes other instruments which are applicable generally and are similar in character to the instruments explicitly referred to in the illustrative list of the footnote to paragraph 1 of Annex B. went on to analyse the object and purpose of the publication requirement (contained in paragraph 1 of Annex B), and concluded that its object and purpose is 'to enable interested Members to become acquainted with' the sanitary and phytosanitary regulations adopted or maintained by other Members and thus to enhance transparency regarding these measures. noted that it was undisputed that the varietal testing requirement was applicable generally and that, in the light of the actual impact of the varietal testing requirement on exporting countries, this instrument was of a character similar to laws, decrees and ordinances (the instruments explicitly referred to in the footnote to paragraph 1 of Annex B). EXERCISES: 8. What are the main obligations relating to the publication of SPS regulations? 9. Members shall allow a reasonable interval between the publication of an SPS regulation and its entry into force, except in urgent circumstances. What is considered a "reasonable interval between publication and entry into force"? 10. Put the following transparency obligations related to SPS regulations in chronological order: Publication of the measure Drafting of regulation Entry into force of the measure End of comment period and discussion of comments Provision of copies Adoption of the measure Publication of a notice and notification to other Members 258

281 V. ENQUIRY POINTS (EPS) V.A. ESTABLISHMENT OF ENQUIRY POINTS The enquiry point system was created so that Members can easily obtain information about SPS and related issues, without having to identify and directly contact the agency responsible for any given function in another country. The Enquiry Point (EP) is the contact point to which any relevant enquiries can be made. It has the responsibility of obtaining the answers from the relevant national bodies and replying to the Member making the enquiry. Paragraph 3 of Annex B of the SPS Agreement is the main provision on the establishment and attribution of Enquiry Points. It states that: 3. Each Member shall ensure that one enquiry point exists which is responsible for the provision of answers to all reasonable questions from interested Members as well as for the provision of relevant documents regarding: (a) any sanitary or phytosanitary regulations adopted or proposed within its territory; (b) any control and inspection procedures, production and quarantine treatment, pesticide tolerance and food additive approval procedures, which are operated within its territory; (c) risk assessment procedures, factors taken into consideration, as well as the determination of the appropriate level of sanitary or phytosanitary protection; (d) the membership and participation of the Member, or of relevant bodies within its territory, in international and regional sanitary and phytosanitary organizations and systems, as well as in bilateral and multilateral agreements and arrangements within the scope of this Agreement, and the texts of such agreements and arrangements. In the period , 138 Members have provided information on the existence of an SPS enquiry point. Some Members have different enquiry points for plant protection, animal protection and food safety subject matters, such as Panama (which has 5), Armenia (which has 4), Bulgaria, Cuba, India, Kenya, Korea, Malawi, Malaysia, Peru, Zambia (which have 3) and Bahrain, Brazil, Croatia, El Salvador, Malta, Morocco, Paraguay, Romania, and Swaziland, (which have 2). For transparency reasons, Members are not encouraged to have more than one Enquiry Point and when more than one Enquiry Point exists, their areas of responsibility should be clearly defined by the Member. TIP The addresses of WTO Members SPS Enquiry Points are contained in document "National Enquiry Points", Note by the Secretariat, G/SPS/ENQ/ and are available and regularly updated on the SPS website at: 259

282 V.B. FUNCTIONING OF ENQUIRY POINTS V.B.1. WHAT TYPE OF INFORMATION? Enquiry points are required to respond to all reasonable enquiries from other Members and to provide relevant documents regarding: any sanitary or phytosanitary regulations adopted or proposed within the territory of the Member; any control and inspection procedures, production and quarantine treatment, pesticide tolerance and food additive approval procedures, which are operated within the territory of the Member; risk assessment procedures, factors taken into consideration, as well as the determination of the appropriate level of sanitary or phytosanitary protection; the membership and participation of the Member, or of relevant bodies within its territory, in international and regional sanitary and phytosanitary organizations and systems, as well as in bilateral and multilateral agreements and arrangements within the scope of this Agreement (including Equivalence Agreements), and the texts of such agreements and arrangements. Developed Members' Enquiry Points shall also provide translations or translated summaries of the documents related to a notification (which is also done by the Notification Authority in certain Members). Enquiry Points should supply copies of requested documents to Members and interested parties of Members at an equitable price. While the Member's notification authority may handle questions on notified draft measures, the EP is responsible for answering questions on all existing SPS measures (even those that existed before the WTO and the SPS Agreement came into force), or those which have not been notified (because, for example, they incorporate international standards or do not restrict international trade). Figure 10: Enquiry Points Functions 260

283 V.B.2. GOING BEYOND OBLIGATIONS In addition to fulfilling the obligations discussed above, certain enquiry points perform additional tasks related to the better dissemination and understanding of SPS related information. In fact, enquiry points can play a significant role in this area if they are made responsible for collecting and sharing information (e.g. notifications) received from other WTO Members. Such information often interests private parties as well, for example, producers, importers, exporters, chambers of commerce, associations, etc. Those directly affected by a foreign regulation may be given the opportunity to make comments and raise concerns to, or via, the enquiry point, if good coordination between these parties is in place. The enquiry point can collect these comments and concerns and be responsible, in consultation with the relevant agencies, of formulating and sending comments to the notifying Member. Some Members' enquiry points work as focal points that coordinate information exchange on SPS matters. Such coordination and consultations may result in a specific trade concern being raised at an SPS Committee meeting, a subject we shall further explore in Module 8. Figure 11: Using the Enquiry Point: Beyond Obligations 261

284 VI. USE OF ELECTRONIC TOOLS The use of electronic tools is recognized by the SPS Committee as a means to increase access to, and exchange of, information by Members. Electronic means can also make it easier, and maximize the time available, to receive notifications, obtain and translate relevant documents, and present comments. Members should use and fax facilities in their Enquiry Points, to the extent possible, while responding to requests for documentation or information. Members are also encouraged to publish their sanitary or phytosanitary measures on the world wide web, to facilitate the supply of documents. EXERCISES: 11. What are the tasks which an Enquiry Point is mandated to perform, according to the SPS Agreement? 12. You are the Enquiry Point of Rauritania and you have received the notification mentioned before on the importation of live poultry from Vanin, which might potentially affect your country's exports. Please put the actions below in order: 1. Collect stakeholders' comments; 2. Identify stakeholders (Public and private); 3. Send comments to the notifier; 4. Request copy of the proposed regulation, and ask if there is a translation; 5. Circulate notification to stakeholders; 6. If no translation provided, check the existence of informal translations 13. How can Enquiry Points contribute to a better dissemination and understanding of SPS-related information? 262

285 VII. SUMMARY TRANSPARENCY IS AN IMPORTANT TOOL TO ENSURE THAT TRADE FLOWS AS SMOOTHLY, PREDICTABLY AND FREELY AS POSSIBLE. THE SPS AGREEMENT CONTAINS DETAILED TRANSPARENCY OBLIGATIONS, WHICH APPEAR IN Article 5.8; Article 7 (general transparency provision); and Annex B. THE TRANSPARENCY OBLIGATIONS SET FORTH IN THE SPS AGREEMENT CAN BE GROUPED INTO THREE SETS OF OBLIGATIONS Notifications and establishment of SPS Notification Authorities; Publication; Establishment and functioning of SPS Enquiry Points. MEMBERS SHALL NOTIFY DRAFT SPS REGULATIONS WHEN THE FOLLOWING TWO CONDITIONS APPLY The content of a proposed SPS regulation is not substantially the same as the content of a relevant international standard or a relevant international standard, recommendation or guideline does not exist; and the proposed measure may have a significant effect on the trade of other Members (either import-enhancing or import-reducing effects). THE SPS COMMITTEE CLARIFIED THAT THE SIGNIFICANCE OF THE EFFECT ON TRADE OF SPS REGULATIONS CAN BE ASSESSED BY TAKING INTO ACCOUNT The value/importance of imports in respect of the importing and/or exporting Members concerned, individually or collectively; the potential development of such imports; and the difficulties of Members to comply with the proposed regulations. NOTIFICATIONS Notifications of SPS regulations shall take place at an early appropriate stage, when amendments can still be introduced and comments taken into account. In case urgent problems of health protection arise or threaten to arise, Members are allowed to notify the measure taken immediately before or after its adoption. The notification must describe the nature of the urgent problems. Formats of SPS notifications can be found in document G/SPS/7/Rev

286 Notifications should be sent to the Central Registry of Notifications (CRN) at the WTO, by , fax or normal post to Rue de Lausanne 154, 1211 Geneva 21, Switzerland e mail: crn@wto.org Fax: The electronic transmission of notifications to the CRN is encouraged. Notifications are published with the document code G/SPS/N/country code, in English, French or Spanish. PRIOR TO THE ADOPTION OF AN SPS REGULATION MEMBERS ARE REQUIRED TO allow reasonable time for other Members to make comments in writing; discuss these comments upon request; and take these written comments and the results of these discussions into account. A time-limit for submitting comments on notified draft SPS regulations of (at least) 60 days should be allowed and extensions should be granted, in particular when the product notified is of interest to developing country Members; when delays in receiving and translating relevant documents occur; or where there is a need for further clarification of the measure notified. A 30-day extension should normally be provided. Members are encouraged to share existing unofficial translations of documents in WTO languages, where an official translation is not available. Members are encouraged to indicate on the notification form whether an official translation exists or is planned. MEMBERS HAVE THE FOLLOWING PUBLICATION OBLIGATIONS Before the adoption of the measure: Members are required to publish an early notice of their intention to introduce a particular SPS regulation. After the adoption of the measure: Members are required to promptly publish all adopted SPS measures, including those which do not have a significant effect on the trade of other Members, or those which are in accordance with an international standard. Members shall allow a reasonable interval between the publication of an SPS regulation and its entry into force, except in urgent circumstances. Such reasonable interval normally means a period of no less than 6 months. The entry into force of measures which liberalize trade should not be unnecessarily delayed. ENQUIRY POINTS ARE REQUIRED TO RESPOND TO ALL REASONABLE ENQUIRIES FROM OTHER MEMBERS AND PROVIDE RELEVANT DOCUMENTS REGARDING any sanitary or phytosanitary regulations adopted or proposed within the territory of the Member; any control and inspection procedures, production and quarantine treatment, pesticide tolerance and food additive approval procedures, which are operated within the territory of the Member; risk assessment procedures, factors taken into consideration, as well as the determination of the appropriate level of sanitary or phytosanitary protection; the membership and participation of the Member, or of relevant bodies within its territory, in international and regional sanitary and phytosanitary organizations and systems, as well as in bilateral and multilateral agreements and arrangements within the scope of this Agreement 264

287 (including Equivalence Agreements), and the texts of such agreements and arrangements. The addresses of WTO Members' SPS Enquiry Points are contained in document "National Enquiry Points", Note by the Secretariat, G/SPS/ENQ/ and are available and regularly updated on the SPS website at: The addresses of WTO Members' SPS Notification Authorities are contained in the document "National Notification Authorities", Note by the Secretariat, G/SPS/NNA/ and are available and regularly updated on the SPS website at: 265

288 PROPOSED ANSWERS: 1. Transparency is an important tool to ensure that trade flows as smoothly, predictably and freely as possible. The SPS Agreement contains detailed transparency obligations, which appear in Articles 5.8, 7 and Annex B. The transparency obligations set forth in the SPS Agreement can be grouped into three sets of obligations. Those related to: (i) SPS notifications and the establishment of a notification authority; (ii) publication (of all regulations); (iii) establishment and functioning of SPS Enquiry Points. 2. Pursuant to Annex B, paragraph 10 of the SPS Agreement, Members shall designate a single central government authority as responsible for the implementation, on the national level, of provisions concerning notification procedures. The notification authority is responsible for: ensuring proposed regulations are published early, to allow for comments; notifying other Members, through the WTO Secretariat, of SPS regulations, using the appropriate notification forms; providing copies of proposed regulations on request; and ensuring that comments are handled correctly. 3. Members shall notify draft SPS regulations when the following two conditions apply: firstly, the content of a proposed SPS regulation is not substantially the same as the content of the international standard, guideline or recommendation, OR a relevant international standard, recommendation or guideline does not exist; AND secondly, the proposed measure may have a significant effect on the trade of other Members (both import-enhancing and import-reducing effects). For the sake of improved transparency, some Members also notify regulations which conform to international standards, a practice which is welcomed. The significance of the effect on trade of SPS measures can be assessed by taking into account: The value/importance of imports in respect of the importing and/or exporting Members concerned, individually or collectively; the potential development of such imports; and the difficulties of Members to comply with the proposed SPS regulation. 4. Paragraph 5 of Annex B of the SPS Agreement provides that notifications of SPS regulations shall be made at an early appropriate stage. Notifications shall be made when a draft with the complete text of a proposed SPS regulation is available, and when amendments can still be introduced and comments taken into account. Furthermore, notifications shall be made well before the adoption of the measure (a comment period of 60 days should be provided upon notification, so that interested Members may present an input to the draft notification before it is adopted). In the case of SPS regulations adopted for urgent reasons, a notification may be made immediately before or after its adoption. 266

289 5. Notification format WORLD TRADE ORGANIZATION G/SPS/N/TRIS/ Date of distribution (##-####) Committee on Sanitary and Phytosanitary Measures Original: NOTIFICATION 1. Member to Agreement notifying: TRISTAT If applicable, name of local government involved: 2. Agency responsible: MINISTRY OF AGRICULTURE 3. Products covered (provide tariff item number(s) as specified in national schedules deposited with the WTO; ICS numbers should be provided in addition, where applicable): Deltamethrin, Apples, Beans (Dry), Carrots, Cereal Grains, Citrus Fruits, Eggs, Field Pea, Grapes, Hazelnuts. 4. Regions or countries likely to be affected, to the extent relevant or practicable: All Members exporting these products to Tristat. 5. Title, language and number of pages of the notified document: New Requirements on Deltametrhin MRLs, English, 3 Pages. 6. Description of content: The Ministry of Agriculture proposes the amendment of Tristat Food Safety Code in order to adjust maximum residue limits (MRLs) of certain pesticides, such as Deltamethrin, on apples, beans (dry), carrots, cereal grains, citrus fruits, eggs, field pea, grapes and hazelnuts, for which it previously did not apply any MRL, in order to adopt the Codex Alimentarius MRLs for Deltamethrin. 7. Objective and rationale: food safety [X], animal health [ ], plant protection [ ], protect humans from animal/plant pest or disease [ ], protect territory from other damage from pests [ ] 8. International standard, guideline or recommendation: Codex Alimentarius Commission [X],Office International des Epizooties [ ],International Plant Protection Convention [ ],None If an international standard, guideline or recommendation exists, give the appropriate reference and briefly identify deviations: No deviation 9. Relevant documents and language(s) in which these are available: Tristat's Official Gazette, English (publication 1 March 2007). 10. Proposed date of adoption: 1 June Proposed date of entry into force: 1 December Final date for comments: 15 May 2007 Agency or authority designated to handle comments: National notification authority [X], National enquiry point [ ], or address, fax number and address (if available) of other body: 13. Texts available from: National notification authority [X], National enquiry point, or address [ ], fax number and address (if available) of other body: 267

290 6. Notifications are made in English, French or Spanish and sent to the Central Registry of Notifications (CRN) at the WTO, usually by , fax, or normal post to Rue de Lausanne 154, 1211 Geneva 21, Switzerland e mail: crn@wto.org Fax: The electronic transmission of notifications to the CRN is encouraged. Notifications are issued in the G/SPS/N/- series of documents, followed by the Member's country code. All documents are available on the WTO web site and at the Documents Online Database ( Also, you can receive notifications via by subscribing to an automatic electronic mailing list maintained by the WTO Secretariat. 7. When a country has notified an SPS regulation, it is obliged to supply copies of the proposed regulation, upon request. Requests of the text of the SPS regulation should be dealt with by the notifying Member within 5 working days. With respect to fees charged for provision of documents, national treatment must be afforded to requests from foreign interested parties, with due adjustments to be made for differential costs of delivery. Members are required, prior to the adoption of an SPS regulation, to: allow reasonable time for other Members to make comments on the draft regulation in writing; discuss these comments upon request; and take these written comments and the results of these discussions into account. The SPS Committee recommended that the normal time-limit for presentation of comments on notified draft SPS regulations should be 60 days. Members which are able to provide a time limit of more than 60 days, such as 90 days, are encouraged to do so and to indicate this fact on the notification form. Extensions for developing countries, especially when translation work is involved, are also encouraged. In order to clarify the implementation of transparency provisions, the SPS Committee adopted recommended procedures, which can be found in document G/SPS/7/Rev Before the adoption of the measure: Members are required to publish an early notice of their intention to introduce a particular SPS regulation. The requirements for the publication of such notice are the same as for the notification of regulations: a notice should be published if the proposed regulation may have a significant effect on trade of other Members and whenever an international standard does not exist or the content of a proposed sanitary or phytosanitary regulation is not substantially the same as the content of an international standard, guideline or recommendation. After the adoption of the measure: Members are required to promptly publish all adopted SPS measures, including those which do not have a significant effect on the trade of other Members, or those which are in accordance with an international standard. The obligation to publish (all) adopted regulations is wider than that to notify draft measures or to publish an early notice and includes measures whose notice does not have to be published or which do not have to be notified a priori. 9. In the Decision on Implementation Related Issues and Concerns (WT/MIN(01)17) taken on 14 November 2001 at the Fourth Ministerial Conference in Doha, Qatar, it was decided that the "reasonable interval" between the publication of an SPS regulation and its entry into force shall normally mean a period of not less than 6 months. However, the entry into force of measures which liberalize trade should not be unnecessarily delayed. 268

291 10. 1 Drafting of regulation; 2 Publication of a notice and notification to other members; 3 Provision of copies; 4 End of comment period and discussion of the comments; 5 Adoption of the measure; 6 - Publication of the measure; 7 Entry into force of the measure. Some Members use the submission of an SPS notification to the WTO Secretariat as the means of publishing an early notice. Otherwise, such notice should be published as a means to inform other Members that there are plans to introduce a particular regulation in the SPS field. The period of time between the notification to other Members and the end of the period to receive comments from other Members period should be no less than 60 days (except in urgent situations). The period of time between the publication of the measure and its entry into force should be no less than 6 months. 11. An Enquiry Point is required to respond to all reasonable enquiries from other Members and provide relevant documents regarding: any sanitary or phytosanitary regulations adopted or proposed within its territory; any control and inspection procedures, production and quarantine treatment, pesticide tolerance and food additive approval procedures, which are operated within its territory; risk assessment procedures, factors taken into consideration, as well as the determination of the appropriate level of sanitary or phytosanitary protection; the membership and participation of the Member, or of relevant bodies within its territory, in international and regional sanitary and phytosanitary organizations and systems, as well as in bilateral and multilateral agreements and arrangements within the scope of this Agreement (including Equivalence Agreements), and the texts of such agreements and arrangements. Enquiry Points supply copies of requested documents to Members and interested parties of Members at an equitable price, or by electronic means. Developed Members Enquiry Points also provide translations or translated summaries of documents related to a notification. 12. Actions in order: 4. Request copy of the proposed regulation, and ask if there is a translation 6. If no translation provided, check the existence of informal translations 2. Identify stakeholders (Public and Private) 5. Circulate notification to stakeholders 1. Collect stakeholders comments 3. Send comments to the notifying Member 269

292 13. Those directly affected by a foreign regulation may be given the opportunity to make comments and raise concerns to, or via, the enquiry point, if good coordination between these parties is in place. The enquiry point can collect these comments and concerns and be responsible, in consultation with the relevant agencies, of formulating and sending comments to the notifying Member. Some Members' enquiry point work as focal points that coordinate information exchange on SPS matters. Such coordination and consultations may result in a specific trade concern being raised at an SPS Committee meeting. The enquiry point may be used for: Collecting and disseminating SPS information (SPS documents and notifications received) Informing other government agencies, and the private sector Coordinating comments on other Members' notifications, including those from relevant stakeholders Submitting comments/follow-up Promoting the debate for the formulation of specific trade concerns to be raised at the SPS Committee. 270

293 MODULE 8 Development Dimension in the SPS Agreement and the Work of the SPS Committee ESTIMATED TIME: 7 hours OBJECTIVES OF MODULE 8 Present the provisions of the SPS Agreement which deal with Technical Assistance (TA) and Special and Differential (S&D) Treatment to developing countries. Explain relevant decisions adopted by the SPS Committee on these issues; and expound the work that takes place in the SPS Committee; illustrate its agenda, including the discussions on Specific Trade Concerns and the Review of the Agreement. 271

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295 M8 I. INTRODUCTION This is the final part of our course, where we are going to discuss the provisions on technical assistance and special and differential treatment granted to developing countries, and the work of the SPS Committee. Our next Module is a revision Module. In the last Module we presented the transparency requirements contained in the SPS Agreement. We learned that: The transparency obligations set forth in the SPS Agreement (Articles 5.8, 7 and Annex B) can be grouped into three sets of obligations: Notifications and establishment of SPS Notification Authorities; Publication; Establishment and functioning of SPS Enquiry Points. WTO Members shall notify draft SPS regulations when the following two circumstances apply: A relevant international standard, recommendation or guideline does not exist or the content of a proposed SPS regulation is not substantially the same as the content of a relevant international standard; and the proposed measure may have a significant effect on the trade of other WTO Members (both import-enhancing and import-reducing effects). Notifications of SPS regulations shall take place at an early appropriate stage, when amendments can still be introduced and comments taken into account. In case urgent problems of health protection arise or threaten to arise, WTO Members are allowed to notify the measure taken immediately before or after its adoption. The notification must describe the nature of the urgent problems. The transparency obligations related to SPS regulations in chronological order are: 1 Drafting of the measure; 2 Publication of a notice and notification to other WTO Members; 3 - Provision of copies; 4 Discussion of comments; 5 Adoption of the measure (if applicable, taking into account the comments of WTO Members); 6 Publication of the measure; 7 Entry into force of the measure (at least six months after its publication). WTO Members are obliged to publish their SPS measures: Before the adoption of the measure: WTO Members are required to publish an early notice of their intention to introduce a particular SPS regulation. After the adoption of the measure: WTO Members are required to promptly publish all adopted SPS measures, including those which do not have a significant effect on the trade of other WTO Members, or those which are in accordance with an international standard. Enquiry points are required to respond to all reasonable enquiries from other WTO Members and provide relevant documents regarding: any sanitary or phytosanitary regulation adopted or proposed within the territory of the WTO Member; 273

296 any control and inspection procedure, production and quarantine treatment, pesticide tolerance and food additive approval procedure, operated within the territory of the WTO Member; risk assessment procedures, factors taken into consideration, as well as the determination of the appropriate level of sanitary or phytosanitary protection; the membership and participation of the WTO Member, or of relevant bodies within its territory, in international and regional sanitary and phytosanitary organizations and systems, as well as in bilateral and multilateral agreements and arrangements within the scope of this Agreement (including Equivalence Agreements), and the texts of such agreements and arrangements. The addresses of WTO Members SPS Enquiry Points are contained in document "National Enquiry Points", Note by the Secretariat, G/SPS/ENQ/, available and regularly updated on the SPS website at: The addresses of WTO Members' SPS Notification Authorities are contained in the document "National Notification Authorities", Note by the Secretariat, G/SPS/NNA/, available and regularly updated on the SPS website at: Now we know that, while adopting an SPS regulation, a WTO Member cannot arbitrarily or unjustifiably discriminate among WTO Members with identical or similar conditions, and that a measure has to be no more trade restrictive than necessary to achieve a WTO Member's appropriate level of SPS protection. We also learned that each WTO Member shall avoid arbitrary or unjustifiable distinctions in the levels of health protection it considers to be appropriate in different situations, if such distinction results in discrimination or a disguised restriction on international trade. We became aware that WTO Members shall base their SPS measures on international standards developed by Codex, IPPC and OIE and that if a WTO Member's measure conforms to the relevant international standards, it will be deemed to be necessary and presumed to be in compliance with the relevant provisions of the SPS and the GATT Agreements' relevant provisions. However, WTO Members have the right to adopt SPS measures which are stricter than the relevant international standard, if the latter does not meet that WTO Member's appropriate level of health protection. However, the WTO Member has to have a scientific justification, which is obtained through a risk assessment, carried out by itself or another WTO Member or international standard-setting body. We are now turning to another set of obligations which relates to the development dimension of the SPS Agreement, that is, its provisions on Technical Assistance (TA) and Special and Differential (S&D) Treatment. In short, while complying with all other obligations mentioned above, WTO Members have to take into consideration the special developmental, financial and technical needs of developing countries. The offer of technical assistance to help WTO Members implement the SPS Agreement obligations is one of the ways to comply with this obligation. Finally, we are going to briefly present the work which takes place in the SPS Committee under its mandate, including the work related to the Review of the SPS Agreement. 274

297 II. DEVELOPMENT DIMENSION IN THE SPS AGREEMENT IN BRIEF The SPS Agreement recognizes the special difficulties developing country Members of the WTO may encounter in complying with SPS measures of importing WTO Members and also in the formulation and application of SPS measures in their own territories. Their special development and trade needs and their stage of development may hinder their ability to fully discharge their obligations under the SPS Agreement. Several provisions were envisaged to assist them in this regard. By accepting the "single undertaking" of the Uruguay Round, developing countries, like other WTO Members, agreed to the whole spectrum of WTO rights and obligations. It is important to note that the SPS Agreement was phased-in for developing countries. Transition periods of 2 years for developing countries and five years for least developed countries (LDCs) were provided in the SPS Agreement itself. Only on 1 January 2000 did the SPS Agreement enter into full legal force for all WTO Members. This additional time to comply was a key tool to assist developing countries. Developing countries, especially the least-developed, face, however, important challenges in the implementation of such a technical SPS Agreement as the SPS Agreement. At the same time, since agricultural exports are of critical importance for many developing countries, the SPS Agreement can be a useful tool they can use against trade barriers imposed by their trading partners. It is thus necessary that developing countries are able to implement this SPS Agreement, not only to be in compliance with their obligations, but also to take full advantage of their rights. The WTO agreements, and among these the SPS Agreement, reflect thus an increased recognition of the need to integrate developing countries into the trading system by extending various benefits to them. In the Uruguay Round, the "development dimension" of the multilateral trading system gained specificity with the introduction of detailed Special and Differential (S&D) treatment provisions, including ones on Technical Assistance (TA), over the many agreements. In the WTO, S&D treatment provisions grant special treatment to developing country Members and provide developed Members with the right to treat them more favourably, under certain circumstances. We shall examine below the specific Technical Assistance provision (Article 9), followed by the S&D treatment provision (Article 10), contained in the SPS Agreement. IN DETAIL The SPS Agreement's "development dimension" can be found mainly in its Article 9, which provides for Technical Assistance, and its Article 10, which disciplines Special and Differential Treatment for developing country Members of the WTO. Article 14 of the SPS Agreement is also relevant in this context, since it provided transitional periods for the implementation of the SPS Agreement for developing and least developed countries. 275

298 Furthermore, Paragraphs 2 and 8 of Annex B (Transparency) of the SPS Agreement also afford special and differential treatment to developing country Members. Paragraph 2 requests WTO Members to afford a reasonable interval between the publication of an SPS regulation and its entry into force, with a view to allow producers from the exporting country, especially developing countries, to adapt their products and methods of production to the requirement of the importing WTO Member. Annex B's Paragraph 8 imposes upon developed country Members the obligation to provide translations of notified draft SPS regulations (or of their summaries, in case of voluminous documents), in one of the three WTO working languages. We could therefore say that the provisions on technical assistance and special and differential treatment mentioned above are there to assist developing and least developed country Members in the implementation of SPS obligations, while helping them to enhance market access for products of export interest to them, so that they may have their share in the benefits derived from an increase in international trade. II.A. TECHNICAL ASSISTANCE (TA) II.A.1. OBLIGATIONS REGARDING TECHNICAL ASSISTANCE IN BRIEF Article 9 of the SPS Agreement, which deals with technical assistance, recognizes the difficulty to adjust to, and comply with, the SPS measures necessary to achieve the appropriate level of health protection in export markets, especially for exporters in developing countries. In this Article, WTO Members agree to facilitate the provision of technical assistance, which can be provided bilaterally or through international organizations. Provisions on technical assistance (TA) in the SPS Agreement contain specific obligations to be fulfilled by WTO Members. IN DETAIL Pursuant to Article 9: 1. Members agree to facilitate the provision of technical assistance to other Members, especially developing country Members, either bilaterally or through the appropriate international organizations. Such assistance may be, inter alia, in the areas of: processing technologies, research and infrastructure, including in the establishment of national regulatory bodies, and may take the form of advice, credits, donations and grants, including for the purpose of seeking technical expertise, training and equipment to allow such countries to adjust to, and comply with, sanitary or phytosanitary measures necessary to achieve the appropriate level of sanitary or phytosanitary protection in their export markets. 276

299 2. Where substantial investments are required in order for an exporting developing country Member to fulfil the sanitary or phytosanitary requirements of an importing Member, the latter shall consider providing such technical assistance as will permit the developing country Member to maintain and expand its market access opportunities for the product involved. As we can learn from the provisions above, technical assistance may take the form of advice, credits, donations and grants, training and equipment. There is more than one way of providing TA. Moreover, WTO Members are not obliged to carry out the technical assistance activities themselves; that is, they may provide the funds to appropriate international organizations, either multilateral or regional, or may finance specialised institutions to that end. In addition, the SPS Agreement creates explicit obligations for WTO Members in a particular situation: where a developing country Member requires substantial investments to tailor its exports to SPS requirements imposed by the importing WTO Member. In this case, the latter shall consider assisting the exporting Member, so as to preserve developing WTO Members' market access opportunities. Technical Assistance is a very broad term, and includes different types of activities. With that in mind, the SPS Committee, in 2000, requested the WTO Secretariat to prepare a paper outlining a possible typology of technical assistance needs to help WTO Members decide which type of technical assistance action were most appropriate. The Secretariat suggested that technical assistance could be systematically classified by way of four broad categories (G/SPS/GEN/206): Information: Information activities are aimed at enhancing the awareness and understanding of WTO Members' rights and obligations under the SPS Agreement and normally take the form of conferences, seminars and workshops. Training: Training activities involve providing detailed explanations of particular aspects of the SPS Agreement such as transparency, equivalence and risk analysis; again through conferences, seminars and workshops. "Soft" Infrastructure Development: Soft infrastructure covers areas such as procedures and techniques, national regulatory frameworks, human capital in the form of properly trained personnel, food safety programmes and consumer education. "Hard" Infrastructure Development: Hard infrastructure refers to field equipment and physical systems necessary for testing, monitoring, and other functions required of WTO Members' governments. From the perspective of the SPS Agreement, infrastructure also covers implementation of certain transparency provisions of Article 7 and Annex B, such as the designation of a single central government notification authority and of an enquiry point. During informal discussions in the SPS Committee in , it was noted that among the most pressing needs, apart from information requirements, were the development of laws and regulatory frameworks, and institution building. Risk analysis has been frequently referred to as one of the central areas where significant assistance is required. Needs for hard infrastructure, such as laboratories, although important, were not always the most serious obstacle to the appropriate implementation of the SPS Agreement. Many countries have reformed their sanitary and phytosanitary systems, making structural changes to public authorities and developing new administrative structures and legislation. WTO Members' lack of financial resources, equipment or sophisticated infrastructures has not necessarily proved to be a hindering factor. 277

300 Other factors, such as a lack of understanding of the SPS Agreement; the absence of an operational framework for the authorities responsible for administering the SPS Agreement; and a WTO Member's limited participation in the Codex, IPPC, OIE and the SPS Committee, have proved equally important (Statement by Guatemala, G/SPS/GEN/157, 1999). SPS knowledge has to be spread through various levels to produce positive results in the implementation of the SPS Agreement. Namely, those receiving training should be not only officials responsible for the development of the regulatory framework, but also those who are at the technical level, in the "field", such as veterinarians, agents in quarantine services, botanists, or those working in food safety. The participation of stakeholders in TA activities should also be considered, so as to improve dialogue and to include the input of those directly affected by the SPS measures adopted by an importing WTO Member. In 2001, the Secretariat circulated a questionnaire on technical assistance. (G/SPS/W/113). This questionnaire is intended to assist coordination with respect to current and future technical assistance activities and to facilitate the voluntary identification of specific needs. It offers WTO Members an opportunity to provide a response to such needs. Responses to this questionnaire are contained in addenda to document G/SPS/GEN/295. Thirty-three WTO Members have responded. The questionnaire and additional information are outlined below. IF YOU WANT TO KNOW MORE FINDING OUT WHAT TYPE OF TECHNICAL ASSISTANCE YOU NEED Are you unsure about the type of SPS related assistance your country actually needs? See document G/SPS/GEN/206, where you may find a detailed explanation of those four categories of TA briefly presented above, so as to have a better picture. In this document, you will also find the areas of training covered by the three sister organizations. Each organization has developed its own diagnostic tools. The IPPC developed the Phytosanitary Capacity Evaluation (PCE) to help countries address their current capacity and identify needs for assistance. Similar diagnostic tools have been developed by the FAO/WHO with respect to food safety, and recently by the OIE, for animal health. Also, see the presentations made by the various international organizations about their TA work in the SPS field at the Seminar on Technical Assistance and Capacity building related to the SPS Agreement, organized by the WTO Secretariat in Still not sure? What about getting in contact with the WTO Secretariat? We will be very glad to assist you in formulating your TA requests to the SPS Committee. 278

301 Technical assistance requirements: Information Training Infrastructure: Hard and/or Soft) Specific concern Other Rights, obligations and practical operation of the SPS Agreement Food Safety Animal Health Plant Health Contact details 279

302 ADDITIONAL INFORMATION (Such information could include, inter alia, a more detailed description of the technical assistance required, any relevant background information on the reasons for the request, the possibility of using a regional approach to the provision of the requested assistance and the scope for a coordinated approach among relevant international organisations.) Figure 1: Notification of Technical Assistance Needs 280

303 Starting from its first meeting in March 1995, technical assistance activities have been a standing item on the agenda of each regular meeting of the SPS Committee. Under this agenda item, WTO Members are invited to identify any specific technical assistance needs which they may have, and/or to report on any SPS-related technical assistance they have received or provided. The Secretariat also reports on those technical assistance activities in which it has participated, whether organized by the WTO or by some other body. Observer organizations also report on their initiatives in this field. TIP Note that, in addition to responding to the questionnaire (G/SPS/W/113), WTO Members continue to provide general information on their technical cooperation activities as separate submissions to the SPS Committee. For instance, the EC, Canada, Australia and the US regularly provide lists of their TA SPS projects. See documents G/SPS/GEN/669 (EC), G/SPS/GEN/728 (Canada), G/SPS/GEN/717 (Australia), G/SPS/GEN/181/Add.5/Rev.1 (US), for example. We recommend you take a look at some of the requests for technical assistance submitted by other WTO Members. Check the various addenda to G/SPS/GEN/295, which are WTO Members' answers to the questionnaire (G/SPS/GEN/295/Add.) Information about the technical assistance provided in this area by the WTO Secretariat is described in document G/SPS/GEN/521/Rev.2. Also, look at documents G/SPS/GEN/726 (Overview of SPS-related technical assistance reported to the WTO/OECD Trade Capacity Building Database); G/SPS/GEN/521/Rev.2 (SPS Technical Assistance and Training Activities ) to have a global overview of the TA activities offered so far in the SPS domain. There you will find detailed statistical information on the training offered by: type of activity, number per year, activities per region, participants per region, participation of standard-setting organizations in SPS regional workshops, breakdown per country category, and a language breakdown. Finally, document G/SPS/GEN/726 gives an overview of the assistance provided to the 33 WTO Members who completed the TA Questionnaire. Furthermore, the Ministerial Conference held at Doha in 2001 urged: the Director General to continue his cooperative efforts with relevant international standard-setting organizations with a view to facilitate the effective participation of least developed countries in their work and to provide TA; and WTO Members to provide the financial and technical assistance necessary to enable least-developed countries to meet the SPS requirements in their export markets and to help them with their implementation of the SPS Agreement. 281

304 The relevant SPS-related TA paragraphs of the Doha Decision on Implementation-Related Issues and Concerns (WT/MIN(01)/17) state: The Ministerial Conference (...) 3.5 (i) Takes note of the actions taken to date by the Director-General to facilitate the increased participation of Members at different levels of development in the work of the relevant international standard setting organizations as well as his efforts to coordinate with these organizations and financial institutions in identifying SPS-related technical assistance needs and how best to address them; and (ii) urges the Director-General to continue his cooperative efforts with these organizations and institutions in this regard, including with a view to according priority to the effective participation of least-developed countries and facilitating the provision of technical and financial assistance for this purpose. 3.6 (i) Urges Members to provide, to the extent possible, the financial and technical assistance necessary to enable least-developed countries to respond adequately to the introduction of any new SPS measures which may have significant negative effects on their trade; and (ii) urges Members to ensure that technical assistance is provided to least-developed countries with a view to responding to the special problems faced by them in implementing the Agreement on the Application of Sanitary and Phytosanitary Measures. During the Second Review of the SPS Agreement ( ), the Committee recommended that WTO Members requiring TA, and WTO Members, WTO Secretariat and observer organizations providing TA, keep the Committee informed about their needs, and their programmes, respectively. Most importantly, WTO Members were encouraged to report on the effectiveness of the technical assistance they received so as to contribute to the debate on best practices in the area of SPS-related TA. Finally, in order to develop a framework for technical assistance that is demand driven, the active participation and contribution from developing countries is essential. IF YOU WANT TO KNOW MORE HOW TO FULFIL YOUR TECHNICAL ASSISTANCE NEEDS Making use of the questionnaire on technical assistance needs explained above is a good start but besides this step there are other measures your country can adopt that may facilitate the receipt of TA, either via bilateral cooperation or multilateral initiatives: 1. Be specific: It is recognized that developing countries have various difficulties and that more than one area is usually in need of technical assistance. However, donors tend to focus on specific projects, for which concrete results can be seen and follow-up can be provided. So, when requesting aid, be specific by choosing a priority area. For example, you might lack infra-structure for SPS related matters. Start by requesting aid for the installation of an enquiry point, or for accreditation of one central laboratory vital to your countries exports. 282

305 2. Be informed about others who share your same difficulties: Donors tend to focus on providing technical assistance on those subjects for which they already have experience. So, try to identify which countries face problems similar to yours, and how they have been successfully assisted. You could then contact the same donors to see if your project also fits in their agenda. Check the reports on TA submitted by WTO Members who are potential donors, to find out what has been their focus in SPS-related technical assistance activities. You may also refer to documents G/SPS/GEN/726 (Overview of SPS-related technical assistance reported to the WTO/OECD Trade Capacity Building Database) and G/SPS/GEN/521/Rev.2 (SPS Technical Assistance and Training Activities ), for example. 3. Elaborate a Plan that covers various issues of an area in an integrated manner: It is easier to get financing and technical assistance for problems which can be addressed in a systemic way. That is, a plan to enhance exports of a given product may include the training of customs officials, the organization of border infrastructure, and the establishment of a new regulatory framework for a speedy processing of the merchandise. So, "vision" is an important tool in the elaboration of a plan. 4. Be informed about the projects carried out by the relevant international standard-setting bodies (the three sister organizations): These are highly specialized bodies which also have a mandate to provide technical assistance, by themselves and/or in cooperation with the WTO. Knowing what they are doing is very important, especially if you have a specific concern that requires focused training. Check document G/SPS/GEN/206, pages 5 and 6, to have an idea of the areas of training covered by these organizations. 5. Seek assistance in elaborating a project. The Standards and Trade Development Facility (STDF) provides funding to turn good ideas into projects which can be subsequently funded either through the STDF or by other donors. 6. Other ideas suggested in the SPS Committee: Focus on the development of human resources; link the private sector to the initiatives in order to ensure that their requirements are part of the projects; work towards ensuring inter-departmental or inter-institutional cooperation and coordination; target assistance both to help your country comply with measures in the export markets but also to develop its own regulatory system and to improve its human, animal and plant health situation; take a regional approach; specifically and concretely identify SPS elements in more general technical assistance programmes. EXERCISES: 1. What does the "development dimension" of WTO Agreements consist of? In which provisions of the SPS Agreement can we find this development dimension? 2. What are the main obligations WTO Members have concerning the provision of technical assistance under the SPS Agreement? 3. Please explain the four broad categories of TA activities identified by the WTO Secretariat in What mechanism has, thus, been envisaged by the SPS Committee to enhance coordination in technical assistance? 283

306 II.A.2. WHO PROVIDES ASSISTANCE? The WTO Secretariat provides demand-driven assistance to developing and least-developed WTO Members in the implementation of the SPS Agreement, often with the participation of the three sister organizations. Much technical assistance is also provided bilaterally by WTO Members, as well as by the three standard-setting organizations independently. Other regional and international organizations also participate in the technical assistance effort. Although initially given in the form of introductory seminars explaining WTO Members' rights and obligations under the SPS Agreement, TA activities have become increasingly varied as countries make progress in the implementation of the SPS Agreement. More specific seminars on problematic topics, e.g. on risk assessment, have been provided, along with services ranging from scientific advice to hands-on assistance in setting up national inspection services or investments in laboratory infrastructure. The purpose of the WTO Secretariat's technical assistance activities, so far, has been mainly to raise awareness about the SPS Agreement, to assist beneficiary countries in their understanding of the main disciplines and rules, and to update capital-based officials on the issues taken up in the SPS Committee. Technical assistance organized by the WTO Secretariat takes the form of distance learning courses, regional, sub-regional and national seminars as well as Geneva-based events, including workshops on specific topics and trade policy courses. TIP The WTO Committee on Trade and Development (CTD) is in charge of planning the WTO's Technical Assistance. It adopts an annual Technical Assistance work plan. You can have access to the 2007 TA Plan, WT/COMTD/W/151. Developing country Members of the WTO can request its Secretariat to deliver two national seminars or workshops per year in their country on the agreements of their choice, whereas least developed Members can request three national activities each year. In addition, the WTO Secretariat usually organizes three regional (or sub-regional) seminars each year on the implementation of the SPS Agreement. The TA Plan for 2007 was approved by the CTD on 28 November 2006, and is also available at the Development Portal of the WTO webpage. IF YOU WANT TO KNOW MORE TECHNICAL ASSISTANCE (TA) IN THE FIELD OF SANITARY AND PHYTOSANITARY MEASURES As we mentioned above, there are a number of organizations which offer technical assistance and capacity building activities within their scope of action. 284

307 You can check the training activities and other forms of cooperation offered by them at the links below: Organizations Website WTO FAO/Codex World Health Organization OIE IPPC STDF JITAP (for selected African Countries) IF (for selected LDC) Other organizations Inter-American Institute for Cooperation in Agriculture OECD International Trade Centre UNCTAD ISO UNIDO World Bank Table 1: Other organizations that provide trade related technical assistance II.A.3. STANDARDS AND TRADE DEVELOPMENT FACILITY (STDF) The Standards and Trade Development Facility (STDF) is a global programme on capacity building and technical assistance. This initiative was established by the Food and Agriculture Organization (FAO), the World 285

308 Organization for Animal Health (OIE), the World Bank, the World Health Organization (WHO) and the World Trade Organization (WTO) in The STDF is both a co-ordinating and a financing mechanism. As a co-ordinating mechanism, the STDF acts as a forum for information sharing on past, present and planned SPS-related technical co-operation activities. Central to the STDF's co-ordination role is reporting on technical co-operation provided or planned, the sharing of project and programme implementation experience, and the dissemination of best practice in relation to both the provision and receipt of SPS-related technical co-operation. A further component of STDF's co-ordination function is to ensure that projects and other proposed technical initiatives do not duplicate past, present or planned technical co-operation activities. The aims of the STDF are: to assist developing countries enhance their expertise and capacity to analyze and to implement international sanitary and phytosanitary (SPS) standards, thus improving their human, animal and plant health situation, and with it the ability to gain and maintain market access; and to act as a vehicle for co-ordination among technical co-operation providers, the mobilization of funds, the exchange of experience and the dissemination of best practice in relation to the provision and receipt of SPS-related technical co-operation. The STDF provides funds for two types of grants: project preparation grants and project grants. To be eligible, projects or project preparation grants must address one of the following three themes: Theme 1: SPS capacity evaluation and planning tools, including the need for and implications of international standards and their application. Theme 2: Capacity building for public and private organizations, notably with respect to market access. Theme 3: Information sharing on standards and coordination of technical cooperation activities. The main objective of the project must be to: enhance capacity to meet official or commercial requirements in the sanitary and phytosanitary field and thus gain or maintain market access; and better protect human and animal health and plants against disease and pest hazards related to crossborder trade. Funding for projects is awarded by the STDF Working Group on a biannual basis. The deadline for project submissions is set 45 days prior to each Working Group meeting to allow a detailed evaluation of the project proposals. Check the schedule of meetings and deadlines at the STDF website: The table below provides examples of projects that might be financed under each one of the three STDF themes. 286

309 Heading Examples of eligible activities Theme 1: SPS capacity evaluation and planning tools, including the need for and implications of international standards and their application Development of capacity evaluation and planning tools sector or country specific. Support for participatory country or sector specific surveys, including the preparation of action plans. Support in understanding and use of risk analysis methodologies. Assessment of impact of proposed commercial standards and new standards implemented by trading partners. Training for national officials to analyse the implications of SPS standards in development. Theme 2: Capacity building for public and private organizations, notably with respect to market access Strengthening of public-private dialogue and partnerships in the food safety, animal health and plant health area. Training and assistance in adapting domestic legislation to international standards and commercial market requirements. Training in contracting for private and public sector organizations engaged in the implementation of SPS standards. Establishment and maintenance of disease and pest surveillance databases and reporting systems. Support to improve institutional capacity to engage in market access negotiations related to food safety, animal health and plant health. Applied research for developing good agricultural practice, good laboratory practice and good manufacturing practice. Advisory services and training of staff in the fields of food safety, animal or plant health. Strengthening farmers organizations and/or professional service provider organizations, and trade and industry organizations in contributing to better management of SPS standards. Analytical support to identify potential markets and their SPS requirements, including collecting data for risk analysis. Support in achieving international recognition of disease freedom technical, legal and institutional aspects. Applied research to analyze, assess and solve SPS obstacles to gain and maintain market access. Feasibility studies for important investments, such as establishment of pest and disease free zones, or sanitation and quarantine systems. 287

310 Theme 3: Information sharing on standards and coordination of technical cooperation Collection of SPS training materials. Maintenance of database on SPS-related technical assistance activities. Analysing information on official and commercial SPS requirements. Table 2: STDF covered themes IF YOU WANT TO KNOW MORE THE STANDARDS AND TRADE DEVELOPMENT FACILITY (STDF) STDF has a very comprehensive website, where you can find information about funding opportunities, how to elaborate a project, in addition to a technical assistance database. You can also contact the STDF Secretariat at: STDFSecretariat@wto.org. Also, check the latest STDF update reports to the SPS Committee, documents G/SPS/GEN/648 and G/SPS/GEN/718. EXERCISES: 4. What kind of TA has been provided by the WTO Secretariat so far? Who, besides the WTO Secretariat, provides technical assistance in the SPS field? 5. What is the Standards and Trade Development Facility (STDF)? 288

311 II.B. SPECIAL AND DIFFERENTIAL TREATMENT During the Uruguay Round negotiations, there was some concern that certain obligations would be difficult for developing and least-developed countries to implement. Therefore, many WTO agreements contain provisions for the "special and differential" treatment of developing and least-developed countries. Such provisions are scattered throughout the WTO agreements and can be classified in six main groups: provisions aimed at increasing trade opportunities for developing countries; provisions which call upon WTO Members to safeguard the interests of developing country Members when adopting protective trade measures; provisions allowing flexibility to developing countries in the use of economic and commercial policy instruments; provisions granting longer transitional periods for the implementation by developing countries of various commitments flowing from these agreements; the provision of technical assistance in the implementation of their commitments as well as in their efforts to reap full benefits from the results of the Uruguay Round; and provisions in favour of least-developed countries. The latter are, however, an application of the first five categories for the exclusive benefit of LDCs. There is currently a mandate under the Doha Development Agenda Negotiations to review all special and differential treatment provisions contained in WTO Agreements, including the provisions in the SPS Agreement. This is being done with the aim of strengthening them, and making them more precise, effective and operational. The concerns of developing countries remain a standing agenda item for all regular meetings of the SPS Committee, and any WTO Member can raise, in this context, issues relating to special and differential treatment. Furthermore, S&D treatment in the SPS context is also discussed by the three sister organizations, as for example by the Codex in the Codex Committee on General Principles (CCGP). 289

312 II.B.1. SPS OBLIGATIONS REGARDING SPECIAL AND DIFFERENTIAL TREATMENT IN BRIEF Article 10 of the SPS Agreement contains S&D obligations. These refer to the following obligations: WTO Members have to take the needs of developing and least developed country Members into account in the application and preparation of SPS measures; WTO Members should accord longer time-frames for compliance on products of interest to developing country Members, where phased introduction of new SPS measures is possible; The SPS Committee may grant developing country Members, upon request, specified, time-limited exceptions from obligations under the SPS Agreement; WTO Members should encourage and facilitate the active participation of developing country Members in the relevant international organizations. IN DETAIL In addition to Article 10, there are other provisions in the SPS Agreement which relate to S&D treatment: the Preamble, which recognizes that developing country Members may encounter special difficulties in complying with the SPS measures of importing WTO Members and also in formulating and applying SPS measures in their own territories, and affirms the desire to assist them in their endeavours in this regard; Article 14 on final provisions, which delayed the application of the SPS Agreement to LDCs by five years; and to developing countries by two years. Annex B, paragraph 2 on the reasonable interval between the publication of SPS regulations and their entry into force; and Annex B, paragraph 8 on the provision by developed country Members of translations of documents covered by a specific notification. More importantly, pursuant to Article 10 of the SPS Agreement on Special and Differential Treatment: 1. In the preparation and application of sanitary or phytosanitary measures, Members shall take account of the special needs of developing country Members, and in particular of the least-developed country Members. 2. Where the appropriate level of sanitary or phytosanitary protection allows scope for the phased introduction of new sanitary or phytosanitary measures, longer time-frames for compliance should be accorded on products of interest to developing country Members so as to maintain opportunities for their exports. 3. With a view to ensuring that developing country Members are able to comply with the provisions of this Agreement, the Committee is enabled to grant to such countries, upon request, specified, time- 290

313 limited exceptions in whole or in part from obligations under this Agreement, taking into account their financial, trade and development needs. 4. Members should encourage and facilitate the active participation of developing country Members in the relevant international organizations. We shall examine below each of the paragraphs of Article 10. a. PREPARATION AND APPLICATION OF SPS MEASURES According to Article 10.1 of the SPS Agreement, WTO Members shall take into account the special needs of developing and particularly least-developed country Members in the preparation and application of SPS measures. 1. In the preparation and application of sanitary or phytosanitary measures, Members shall take account of the special needs of developing country Members, and in particular of the least developed country Members. The Committee has noted on previous occasions (e.g. in the context of the First Review of the SPS Agreement) that it had no information on the extent to which this Article had been implemented. WTO Members were thus encouraged to further its practical implementation, and intense debates have taken place in the SPS Committee meetings, where developing countries presented proposals on how to implement this provision. TIP Take a look at document G/SPS/35, which compiles WTO Members' proposals for special and differential treatment. b. LONGER TIME FRAMES FOR COMPLIANCE It is recognized in Article 10.2 of the SPS Agreement that: 2. Where the appropriate level of sanitary or phytosanitary protection allows scope for the phased introduction of new sanitary or phytosanitary measures, longer time frames for compliance should be accorded on products of interest to developing country Members so as to maintain opportunities for their exports. Where the appropriate level of protection allows it, WTO Members should accord longer time-frames for compliance to new SPS measures where products of interest to developing country Members are concerned. This is designed to make it possible for developing country Members to maintain opportunities for their exports. When a government introduces a new SPS requirement to reduce health risks in cases where there is no urgent or immediate threat to health, they often phase-in the new requirement in such a way as to allow the 291

314 domestic industry to adapt with fewer costs. For example, if new hygienic processing methods are being introduced for slaughter houses, the regulation may require that some of the new methods be introduced within 12 months, and those methods that require substantial investments for modernizing of facilities may not become a legal requirement for 24 months. According to the provision of Article 10.2 of the SPS Agreement, when a government can phase-in a new SPS requirement, it should also consider the time needed for developing country suppliers to adapt, not just its own domestic producers. The Decision on Implementation taken at the Doha Ministerial Conference in 2001 specifies that, where the appropriate level of protection allows scope for the phased introduction of SPS measures, the "longer time-frame for compliance" referred to in Article 10.2 of the SPS Agreement shall normally mean at least 6 months. Where the phased introduction of a new measure is not possible, but a WTO Member identifies specific problems, the WTO Member applying the new measure shall enter into consultations, upon request, to try to find a mutually satisfactory solution. c. TIME-LIMITED EXCEPTIONS Article 10.3 of the SPS Agreement provides that: 3. With a view to ensuring that developing country Members are able to comply with the provisions of this Agreement, the Committee is enabled to grant to such countries, upon request, specified, time limited exceptions in whole or in part from obligations under this Agreement, taking into account their financial, trade and development needs. Upon request, the Committee can grant specified time-limited exceptions in whole or in part from obligations under the SPS Agreement to developing countries, taking into account their financial, trade and development needs. As of April 2007, no Member of the WTO had asked for such an exception. d. HARMONIZATION Special and Differential Treatment in the SPS Agreement is also aimed at facilitating the implementation by developing country Members of the harmonization principle and their participation in international standard setting bodies. Article 10.4 of the SPS Agreement provides that: 4. Members should encourage and facilitate the active participation of developing country Members in the relevant international organizations. Active participation of developing countries in the work of the three sister organizations (Codex, OIE and IPPC) should be encouraged and facilitated. In fact, many developing countries do attend the meetings of at least some committees of these organizations, or comment on standards that are being developed. However, some WTO Members are concerned that international standards are often not appropriate for developing countries' special needs, or that standards do not exist for products of special interest to them. 292

315 Moreover, it has been noted by developing countries that, in addition to the lack of specific international standards for many products of interest to them, many importing countries fail to specify their appropriate levels of protection, which has impeded the increase of exports (G/SPS/GEN/85). In 2001/2002, the Director-General contacted a number of international standard-setting bodies and intergovernmental organizations to explore financial and technical mechanisms to assist developing countries' participation in international standard-setting activities, and to identify how best to address SPS-related technical assistance needs. A report compiling the information received from a number of relevant institutions on their actions to increase participation of developing country Members in international standards development and their related technical assistance activities, resulted from this initiative ("Actions to Increase Participation of Developing Country Members in the Work of Relevant International Standard Setting Organizations", WT/GC/48). RECALL As we saw above, the Director-General was further requested, at the 2001 Doha Ministerial Conference, to continue his cooperative efforts with these organizations and institutions, namely to improve the participation of least developed country Members. (Decision WT/MIN(01)/17). As described in the previous section, the Codex, IPPC and OIE have all taken actions to increase the participation of developing countries in their standard-setting activities, by creating trust funds for this purpose. Another outcome of the Director-General's efforts to identify how best to address SPS-related TA needs was the creation of the Standards and Trade Development Facility (STDF), which was also described in the previous section. e. DELAY IN APPLICATION OF THE AGREEMENT The SPS Agreement entered into force with the establishment of the WTO on 1 January However, pursuant to Article 14, least-developed countries were permitted to delay application of the SPS Agreement to their import requirements until 1 January Developing countries were also permitted to delay the application of the SPS Agreement, other than its transparency provisions, until 1 January 1997, but only with respect to existing sanitary or phytosanitary measures on imported products in cases where they lacked technical expertise, technical infrastructure or resources. TIP Early submissions ( ) made by WTO Members on the subject of special and differential treatment at the SPS Committee were summarized by the Secretariat in the document G/SPS/W/105. A more recent report on proposals for special and differential treatment from various WTO Members was adopted by the SPS Committee in June 2005 (document G/SPS/35). 293

316 II.B.2. TRANSPARENCY ON S&D TREATMENT We discussed the SPS Agreement's obligations regarding transparency in Module 7. One of the specific issues raised in the Committee has been the need to enhance transparency regarding the provision of special and differential treatment. Some WTO Members presented proposals in this regard, and the Committee adopted, in 2003, a proposal by Canada that an importing country should consider any requests for special and differential treatment or technical assistance made in response to their notification of a new measure and should notify the SPS Committee of any subsequent action. As noted in the previous Module on Transparency, in October 2004, the Committee elaborated steps to implement this procedure (Procedure to Enhance Transparency of Special and Differential Treatment in Favour of Developing Country Members, G/SPS/33). More specifically, after submitting a notification for a new or revised draft regulation (following the guidance provided in G/SPS/7/Rev.2), a notifying WTO Member should submit additional information, in a specific addendum to the notification, indicating when special and differential treatment or technical assistance has been requested in the context of the notification, and the response to the request. If an exporting WTO Member identifies significant difficulties with a proposed measure, or if, following the entry into force of a new regulation (including emergency measures), it identifies significant difficulties which its exports face in complying with a new regulation, it may request an opportunity to discuss its difficulties with the importing WTO Member. Resolution of the concern identified could include one of the following, or a combination thereof: A change in the measure to be applied on an MFN basis; The provision of technical assistance to the exporting WTO Member; The provision of special and differential treatment. Should S&D treatment be provided, it would apply equally to all developing country WTO Members. When a decision is taken on whether and how S&D treatment may be provided for a measure in response to a specific request, the notifying WTO Member should promptly submit to the WTO Secretariat an Addendum to its original notification indicating: If special and differential treatment was requested; The name of WTO Member(s) requesting S&D treatment; If S&D treatment was provided, the form of such treatment; and If not provided, the Addendum shall indicate why S&D treatment was not provided and whether technical assistance or any other solution was found to address the identified concern. TIP The Addendum format is contained in document G/SPS/33. Finally, such procedure is without prejudice to the rights and obligations of WTO Members under Article 10.1 of the SPS Agreement, which provides that in the preparation and application of sanitary and phytosanitary 294

317 measures, WTO Members shall take account of the special needs of developing country Members and, in particular, of the least developed among them. EXERCISES: 6. Please identify all the provisions which relate to special and differential treatment for developing and least developed countries in the SPS Agreement. 7. What are the main obligations contained in Article 10 (Special and Differential Treatment) of the SPS Agreement? 8. What is the mechanism created by the SPS Committee to enhance transparency in the provision of special and differential treatment? 295

318 III. THE WORK OF THE SPS COMMITTEE III.A. INSTITUTIONAL ISSUES The SPS Agreement established a Committee on Sanitary and Phytosanitary Measures (the "SPS Committee"), to: provide a forum for consultations about SPS measures which affect trade; and to ensure the implementation of the SPS Agreement. While implementing the SPS Agreement, the SPS Committee has developed procedures and guidelines which help governments comply with their SPS obligations. These documents include, to mention a few: recommended procedures for implementing the transparency obligations of the SPS Agreement (G/SPS/7/Rev.2), which contain detailed explanations on how to fill in the notification formats; a provisional procedure to monitor the use of international standards (G/SPS/11/Rev.1), and annual reports on the results of this monitoring process; guidelines (G/SPS/15) to further the practical application of Article 5.5 of the SPS Agreement, which address consistency in decisions dealing with risks. These are designed to aid governments in avoiding arbitrary or unjustifiable decisions that may result in discrimination or disguised trade restrictions; a decision on Equivalence (G/SPS/19/Rev.2) to assist WTO Members in the implementation of Article 4 of the SPS Agreement; a procedure to enhance the transparency of special and differential treatment in favour of developing country Members (G/SPS/33 and G/SPS/33/Add.1). The SPS Committee also carries out any responsibilities it's assigned with under the SPS Agreement or by WTO Members. RECALL Do you remember the specific responsibilities of the SPS Committee, discussed in Module 1? It provides a forum for consulting regularly on any matters relating to the operation of the SPS Agreement and for the furtherance of its objectives, in particular with respect to harmonization (Article 12.1 of the SPS Agreement); It monitors the process of international harmonization and the use of international standards, guidelines or recommendations, and coordinates efforts in this regard with the relevant international organizations (Article 3.5 and Article 12.4 of the SPS Agreement); It encourages and facilitates ad hoc consultations and negotiations among WTO Members on specific SPS issues (Article 12.2 of the SPS Agreement); It promotes increased coordination and integration between international and national systems and approaches to approve the use of food additives or to establish tolerances for contaminants in foods, beverages or feedstuffs (Article 12.2 of the SPS Agreement); 296

319 It developed guidelines to further the practical implementation of Article 5.5 of the SPS Agreement, which describes WTO Members' the obligation to avoid arbitrary or unjustifiable distinctions in the protection levels they consider to be appropriate in different situations (of risk), if such distinctions result in discrimination or a disguised restriction on international trade (Article 5.5 of the SPS Agreement); It grants developing country Members, specified, time-limited exceptions from all or a part of its obligations under the SPS Agreement, upon request, taking into account their financial, trade and development needs (Article 10.3 of the SPS Agreement); It secures the best available scientific and technical advice for the administration of the SPS Agreement in order to ensure that unnecessary duplication of effort is avoided, through a close contact with relevant international organizations, especially with the three sister organizations. The SPS Committee may decide to use the information generated by the procedures, particularly for notification, which are in operation in the relevant international organizations (Article 12.3 and Article 12.5 of the SPS Agreement); It invites, on the basis of an initiative from a WTO Member, the relevant international organization (and/or subsidiary bodies) to examine specific matters referred to it in connection to particular SPS standards, guidelines or recommendations (Article 12.6 of the SPS Agreement); It reviews the operation and implementation of the SPS Agreement, and submits proposals to the Council for Trade in Goods to amend its text (Article 12.7 of the SPS Agreement). The SPS Committee normally holds three regular meetings each year at the WTO headquarters in Geneva. It takes its decisions by consensus only. The regular meetings of the SPS Committee usually last for two days, and may be preceded by one or several informal meetings to discuss specific topics. It may also hold special meetings or workshops. Previously, these meetings have been held to discuss issues such as risk assessment, the process and participation in standard-setting bodies, regionalization, implementation of the SPS Agreement, and transparency, often with the participation of the three sister organizations, which are observers at the Committee. At the end of each meeting, the SPS Committee adopts a tentative agenda for the following meeting. About one month in advance of each meeting, the Director-General of the WTO circulates the proposed agenda for the next meeting along with a reminder of the relevant deadlines. In WTO jargon it is called an "Airgram". WTO Members may request inclusion of specific items on the agenda up until ten calendar days before the next meeting, when the "airgram" is prepared. This airgram is sent to each Member of the WTO. 297

320 A typical agenda for a formal meeting of the SPS Committee looks like this: 1. Adoption of the agenda 2. Implementation of the SPS Agreement a. Information from WTO Members b. Specific Trade Concerns c. Consideration of specific notifications received d. Any other matters related to the operation of transparency provisions 3. The SPS Agreement and developing countries 4. Equivalence Article 4 5. Technical assistance and cooperation 6. Monitoring the use of international standards 7. Matters of interest arising from the work of observer organizations 8. Requests for observer status 9. Other business These agenda items are explained in more detail below. The Secretariat also prepares an annotated agenda, to assist WTO Members in better preparing for the anticipated discussions and decisions. AGENDA ITEM: ADOPTION OF THE AGENDA WTO Members can request changes to the proposed agenda before it is adopted. These changes are usually the removal of a specific trade concern because bilateral progress has been made in resolving the problem, or the inclusion of specific items under "Other Business". AGENDA ITEM: IMPLEMENTATION OF THE SPS AGREEMENT Under this agenda item, WTO Members can discuss specific aspects of the implementation of the SPS Agreement. For example, WTO Members can provide information on advances they have made in implementing the SPS Agreement, on disease outbreaks and how they are controlling these, or on their recognition of areas as free from certain pests or diseases. WTO Members can raise specific trade concerns, for example when their products are facing sanitary or phytosanitary barriers to enter into other WTO Members' markets. If a WTO Member has notified a regulation about which other WTO Members are concerned, the latter can raise it under this agenda item, as well as other matters related to transparency, such as a WTO Member's failure to notify certain measures, or its unclear notifications. These discussions, especially on specific trade concerns, have been very useful for many countries. They can lead to exchanges of information or bilateral consultations and, where necessary, exert some pressure to resolve problems. In many cases, WTO Members raising a problem will find that they have "allies" in the SPS Committee who are facing similar difficulties. Specific trade concerns will be discussed in more detail in the next section. 298

321 AGENDA ITEM: THE SPS AGREEMENT AND DEVELOPING COUNTRIES During the first review of the SPS Agreement ( ), the Committee noted that developing countries faced some difficulties in the implementation of the SPS Agreement. Following more general discussion, the SPS Committee has begun to focus the discussions on one or two topics at a time. The first two topics singled out for more in-depth discussion were special and differential treatment for developing countries, and equivalence. AGENDA ITEM: EQUIVALENCE ARTICLE 4 In the Decision on the Implementation of Article 4 (G/SPS/19/Rev.2), the SPS Committee decided that equivalence should become a standing agenda item. WTO Members are invited to report on their experiences with the recognition of equivalence, and the three sister organizations inform the SPS Committee of their relevant work. AGENDA ITEM: TECHNICAL ASSISTANCE AND COOPERATION Under this agenda item, WTO Members have the opportunity to identify their technical assistance needs, and to inform other WTO Members of technical assistance they have provided. In addition, the WTO Secretariat and several of the observer organizations regularly provide information on their technical assistance activities. AGENDA ITEM: MONITORING THE USE OF INTERNATIONAL STANDARDS Trade problems due to an outdated or unused international standard, or due to the non-existence of such a standard, can be raised under this agenda item. According to the provisional procedure to monitor the process of international harmonization (G/SPS/11/Rev.1) developed by the SPS Committee, WTO Members should identify specific examples of such problems at least 10 days before each meeting of the SPS Committee. These examples are discussed, and the relevant standard-setting organizations may be asked to consider the standards identified. An annual report (in the G/SPS/ series) summarizes the SPS Committee's monitoring activities, summary which is provided to the international standard-setting organizations. AGENDA ITEM: MATTERS OF INTEREST ARISING FROM THE WORK OF OBSERVER ORGANIZATIONS Under this agenda item all the observers are invited to provide relevant information to the SPS Committee, for example on the development of international standards and meetings of standard-setting committees. AGENDA ITEM: REQUESTS FOR OBSERVER STATUS The SPS Committee must decide whether to grant observer status to applicants on a consensus basis. The SPS Committee considers the mandate and membership of the requesting organization, as well as the relevance of its work to the SPS Committee, on the basis of guidelines adopted by the WTO General Council. Observer status can only be granted to intergovernmental organizations. The SPS Committee has accepted some observer organizations on a regular basis, and others on an ad hoc, meeting-by-meeting basis. In addition, countries in the process of acceding to the WTO are automatically observers to WTO Committees. 299

322 AGENDA ITEM: OTHER BUSINESS Under "other business", WTO Members can raise any point which they have not previously raised. This includes specific trade concerns which could not be brought to the attention of the other WTO Member and of the WTO Secretariat at least ten calendar days in advance of the meeting. TIP Summary Reports of SPS Committee Meetings are found under G/SPS/R/... EXERCISES: 9. What is the typical Agenda of an SPS Committee Meeting? 300

323 III.B. IMPLEMENTATION AND ADMINISTRATION OF THE SPS AGREEMENT III.B.1. SPECIFIC TRADE CONCERNS RAISED IN THE SPS COMMITTEE Specific Trade Concerns are discussed under the Agenda item on Implementation and Administration of the SPS Agreement. These are issues usually raised by WTO Members in relation to measures adopted or in the process of being adopted by other WTO Members, including transparency issues. This is where the SPS Committee becomes a forum for WTO Members to raise concerns about the effects of measures imposed by other WTO Members. Before raising a specific trade concern at the SPS Committee, WTO Members may have gone through several steps of information exchange and consultations. A WTO Member may have requested information from the Notifying Authority and submitted comments on a notification to the notifying WTO Member. A WTO Member may have entered into bilateral discussions and consultations with a WTO Member over an SPS measure. These preliminary steps are not always taken and a WTO Member may raise a trade concern directly at the SPS Committee. However, when it requests that a specific trade concern be put on the agenda at least 10 days before the SPS Committee meeting, it must also inform the WTO Member that maintains the measure and provide an outline of its concerns. It is not unusual for WTO Members to schedule bilateral meetings at the margin of the SPS Committee meeting to discuss these specific trade concerns. As noted above, if these discussions result in significant progress, or the resolution of the problem, the WTO Member who had initially put the item on the agenda for the SPS meeting may request its withdrawal. In cases where raising a question in the SPS Committee does not produce the desired result, a WTO Member may request the initiation of formal consultations and a dispute settlement procedure, before the Dispute Settlement Body (DSB). Figure 2: Trade concerns: what can you do? 301

324 WTO Members are encouraged to use the good offices of the Chairperson (G/SPS/1) of the SPS Committee or, if so they wish, the dispute settlement procedures available at the OIE or the IPPC, in their respective fields of action, to facilitate the resolution of specific trade concerns. Raising an issue as a specific trade concern can be an important way of gathering support. At first, mostly developed countries raised specific trade concerns. Nowadays, developing countries are participating actively under this agenda item of SPS Committee meetings. Over the twelve years between 1995 and 2006, developing country Members have raised 120 trade concerns (on many occasions more than one WTO Member has raised, supported or maintained an issue) compared to 172 raised by developed country Members and two raised by least-developed country Members. A developing country Member has supported another WTO Member raising an issue in 177 cases, compared to 120 for developed country Members and one for least-developed country Members. In 166 cases, the measure at issue was maintained by a developed country WTO Member, and in 115 cases it was maintained by a developing country Member. No trade concerns regarding measures maintained by least-developed country Members have been raised. TIP For a summary of specific trade concerns raised, refer to document G/SPS/GEN/204/Rev.7 and its addenda (G/SPS/GEN/204/Rev.7/Add.1; Add.2; Add.3). Altogether, 245 specific trade concerns were raised in the twelve years between 1995 and the end of Of these, 27% relate to food safety concerns, 29% relate to plant health, and 4% concern other issues such as certification requirements or translation. Forty per cent of concerns raised relate to animal health and zoonoses. The animal health and zoonoses category is further divided into foot-and-mouth disease (FMD), transmissible spongiform encephalopathy (TSEs), Avian Influenza (AI) and other animal health concerns (OAH). TSEs account for 39% of animal health concerns, while issues related to foot-and-mouth disease account for 23%. The remaining 38% relate to other animal health concerns and avian influenza. In order to facilitate the follow-up on WTO Members' specific trade concerns brought to the attention of the SPS Committee, the SPS Committee recommended at the Second Review of the Agreement that WTO Members inform the SPS Committee, on a voluntary basis, of all specific trade concerns resolved. A resolution has been reported for 66 of the specific concerns raised, whereas a partial resolution has been reported for further 15 concerns. ILLUSTRATION Let's now go through a practical example of how a trade concern can be brought to the attention of the SPS Committee. Vanin, a WTO Member, is in the process of adopting a phytosanitary measure on the import of citric fruits, with the aim of protecting the health of plants, since the fruits originating from some trading partners were allegedly infected with the citrus lepropsis virus. The draft regulation requires, among other things, that a bi-national technical team verifies the occurrence of the disease in the export country and the measures in place to prevent and eradicate it, as well as the determination of disease-free areas. 302

325 Since there is no international standard in place, and the new measure restricts trade, Vanin has an obligation to notify the draft of the SPS regulation to the WTO. Tristat, also a WTO Member, produces mature lemons and exports them to Vanin. It receives a copy of the notification via its own Enquiry Point, which then disseminates the notification to the interested parties (industry). A visit from the technical team is scheduled and it verifies that although citrus lepropsis occurs in a small area of the northern part of the country, the rest of the country is free of the disease. Furthermore, a risk analysis determines that mature fruits are not a pathway for the spread of the disease. Since the SPS regulation could have an impact on the exports of lemons from Tristat to Vanin, Tristat and its producers and exporters request a copy of the draft text of the regulation to the Notification Authority of Vanin. Meanwhile, Vanin stops imports of such products from Tristat. Tristat analyses the draft measure. Following the input by its industry, Tristat's government, via its national Enquiry Point, sends comments on the notified draft regulation to Vanin, specifying that the measure is considered unjustified and more trade restrictive than necessary to maintain Vanin's appropriate phytosanitary level of protection. Vanin responds to the comments and states that they will be taken into account. However, the ban on imports from Tristat is in force and the date for the adoption of the SPS regulation is approaching, and yet no results are seen in terms of changes to the draft. Producers in Tristat, thus, pressure Tristat's government to do something about this issue. Tristat raises the issue at the multilateral level in the SPS Committee. Other WTO Members which export citrus, such as Arcania and Delund, associate themselves with the concerns expressed by Tristat. Vanin answers that the concerns identified will be considered by the competent authorities and Tristat initiates bilateral consultations with Vanin. Vanin has, now, two options: either it amends the draft regulation to take into account the concerns expressed by Tristat, Arcania and Delund; or it adopts the regulation as it is. In the latter case, Tristat can continue to raise the trade concern bilaterally and in the SPS Committee and/or it can request formal consultations with Vanin before the Dispute Settlement Body, which could eventually lead to the establishment of a Panel. Alternatively, Tristat could use the good offices of the Chairperson of the SPS Committee and/or the dispute resolution procedures of the IPPC, the relevant international standardsetting body for phytosanitary concerns, to find a solution to this problem. III.B.2. SPS AGREEMENT REVIEWS Pursuant to Article 12.7 of the SPS Agreement, the SPS Committee should review the SPS Agreement after three years of its entry into force and thereafter as the need arises. 303