WTO Dispute Settlement: Obligations and Opportunities of the TBT/SPS

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1 WTO Dispute Settlement: Obligations and Opportunities of the TBT/SPS David A. Gantz Professor of Law University of Arizona National Assembly, Dec ,

2 Introduction Among the potential trade barriers to imports are technical, health, and safety standards applied to assure product conformity or to protect human, animal, or plant life or health. While such standards frequently legitimately promote such goals, they may also be used as non- tariff barriers, designed to protect domestic producers from foreign competition. National Assembly, Dec ,

3 The Technical Barriers to Trade (TBT) Agreement regulates the use of governmental "technical regulations" with the objective of assuring that standards are not used for illegitimate purposes, such as restricting imports. It applies to all "products" and their "related processes." Member states are expected to take "reasonable measures" to assure that the principles of the TBT are applied to local governing bodies. National Assembly, Dec ,

4 WTO accession will require Vietnam to assure that all new technical regulations, standards and conformity assessment procedures are applied consistently with international standards, as of the time of accession, without any transition period. These requirements apply, inter alia, to product inspection and product safety certification. National Assembly, Dec ,

5 The parallel WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) deals primarily with the protection of "human, animal and plant life and health from risks of plant or animal borne pests or diseases, or additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs." It requires that the sanitary or phytosanitary measures be in fact designed and reasonably suited to meet the stated goal, rather than disguised protectionism. National Assembly, Dec ,

6 The obligations under the SPS Agreement are similar to those under the TBT Agreement. For WTO accession, Vietnam will need to establish an SPS system based on international standards, guidelines and regulations. In some instances, Vietnam already bases its regime on international (CODEX, FAO/WHO) standards. In others, the basis is standards promulgated by developed or other developing countries, or national standards. Vietnam also will be required to designate a single enquiry and notification point, presumably within the Ministry of Agriculture and Development. National Assembly, Dec ,

7 Applicability to Vietnam The TBT and SPS Agreements are both a sword and a shield. They can be used as a basis to prevent Vietnam from imposing laws and regulations that are being used to protect domestic interests from foreign competition. As a WTO Member, Vietnam should apply international standards wherever possible, and assure transparency in the application of standards. National Assembly, Dec ,

8 Vietnam has tentatively agreed to comply with the requirements of the SPS Agreement immediately on accession, without any phase in period (as was granted to China and Cambodia). Compliance will be impossible without extensive technical assistance from other Members to partially defray the implementation costs and create the technical capacity that will be required. National Assembly, Dec ,

9 However, the TBT and SPS agreements will also provide Vietnam with a level of protection that has been absent in the past, where largely arbitrary regulations have adversely affected Vietnamese interests. National Assembly, Dec ,

10 Basa and Tra Many will recall that several years ago, the United States enacted domestic legislation which prevented imported Vietnamese Basa and tra from being sold under the generic name of catfish. catfish. This action was taken by Congress in order to protect U.S. catfish growers against foreign competition. National Assembly, Dec ,

11 Catfish is a very common species, with 2,500 different varieties on Earth. Yet, under U.S. law, only a certain type grown in six southern U.S. states can now be labeled catfish. catfish. Protectionism, not logic or consumer protection, was behind this law. National Assembly, Dec ,

12 The labeling law did not really help the U.S. catfish industry. Many restaurants, including several in Tucson, Arizona, used basa or tra on their menus, because those names sound more exotic to diners than simply catfish. catfish. National Assembly, Dec ,

13 This legislative action was soon followed (in 2002) by an antidumping case in the United States. This AD action resulted in the imposition of high dumping duties on Vietnamese catfish and greatly reduced the volume of fish exports to the United States. Those duties remain in effect. National Assembly, Dec ,

14 WTO Dispute Settlement Body Experience The WTO s s Dispute Settlement Body, and in particular its Appellate Body, have made it very difficult for WTO Members to use technical regulations (TBT Agreement) and health regulations (SPS Agreement) as a form of disguised protectionism, and several Members have taken advantage of the DSB for this purpose. National Assembly, Dec ,

15 EU - Sardines The EU enacted technical regulations which permitted only the species of sardines caught off the coasts of Spain and Portugal to be labeled as sardines in the very important EU market. Peru, a South American nation that also catches and sells large volumes of sardines, objected. National Assembly, Dec ,

16 The WTO Panel and Appellate Body determined that the EU standard was inconsistent with the TBT Agreement. Among the relevant considerations were the following: the international regulation, which differed from the EU regulation, contained no such restriction on the use of sardines National Assembly, Dec ,

17 It was not evident to the AB that the use of the term sardines for other species would cause confusion among EU consumers Any possible confusion for consumers could be resolved in a less trade-distorting distorting manner, for example by using the label Peruvian sardines or Pacific Ocean sardines National Assembly, Dec ,

18 Faced with this decision of the DSB, the EU agreed to modify its internal regulations to eliminate the local monopoly on use of the term sardines and by doing so avoided the threat of trade sanctions. National Assembly, Dec ,

19 It is notable that this action was brought by a small developing nation against one of the major world trading groups, the EU. (Peru actually received technical legal assistance from a not-for profit WTO legal consulting group in Geneva.) Yet, the small developing nation, as in some other cases, prevailed. National Assembly, Dec ,

20 Other Developing Country Cases Developing nations have prevailed in many other WTO actions, including: United States Textiles (Costa Rica) Dominican Republic Cigarettes (Honduras) U.S. Gambling Services (Antigua) U.S. Cotton Subsidies (Brazil) Argentina Poultry AD duties (Brazil) National Assembly, Dec ,

21 Chile Price Band (Argentina) Egypt Rebar (Egypt) Thailand Steel (Poland) EC Bed Linen (India) Guatemala Cement (Mexico) Turkey Textiles (India) U.S. Shrimp (India, Malaysia, Thailand, Pakistan) National Assembly, Dec ,

22 Many of these cases involved developing country WTO actions against the U.S. and the EU. Others were cases brought by one developing country against another. Developing country Members are thus relatively frequent parties before the DSB. National Assembly, Dec ,

23 Japan - Apples Here, the United States - which is a major exporter of apples challenged a Japanese regulation under the SPS Agreement. Japanese regulations preclude the importation of apples from countries where a bacterium known as fire blight exists, as in many parts of North America. National Assembly, Dec ,

24 The stated purpose of the prohibition is to prevent imported apples from transmitting fire blight to Japanese apple orchards. However, the United States argued that there was no such possibility of transmission of the bacterium through exports of mature fruit, and that the purpose of the regulation was to protect Japanese apple growers against foreign competition. National Assembly, Dec ,

25 The Panel and AB agreed with the United States. The decision was based on the following: there was no scientific data indicating that fire blight could be transmitted via mature fruit (rather than by wind, insects or birds) Japan s s risk assessment, required under the SPS agreement, failed to demonstrate any risk of transmission via mature fruit National Assembly, Dec ,

26 Ultimately, as in EU Sardines,, Japan agreed to modify its regulations so as to permit imports of U.S. apples, rather than face retaliation through trade sanctions National Assembly, Dec ,

27 Lessons for Vietnam What are the lessons here for Vietnam? They are several: Once Vietnam becomes a member of the WTO, Vietnamese regulations will need to comply with the TBT and SPS agreements. This may be difficult, particularly until Vietnam develops the necessary technical and legal expertise to assure compliance with the agreements The DSB is available not only to rich nations the U.S. and the EU among them but to developing nations as well National Assembly, Dec ,

28 In order to benefit fully from the DSU, Vietnam should develop the expertise to defend itself against DSB actions against laws and regulations believed to be inconsistent with the TBT, SPS and other WTO agreements. Only a strong defense can avoid adverse decisions even if in fact there is no violation. National Assembly, Dec ,

29 Such expertise is necessary as well in situations when another Member s s laws and regulations violate WTO rules and adversely affect Vietnamese interests, as with the U.S. law on catfish/basa/tra or, possibly, the manner in which the U.S. applies its AD laws to NMEs. National Assembly, Dec ,

30 Major developing country WTO members such as Brazil, Mexico, India, Egypt, etc. have successfully learned to use the DSB to protect their trade interests, and to defend against other Members actions. Vietnam can and should do the same! National Assembly, Dec ,