International Trade Law

By:Lawyer Xu Lu – Shanghai Ganus LawDate:2018-03-08

International Trade Law Case Analysis

                            Lulu Xu

1. Legal justifications for Kohana’s ban: 

This Kohana’s ban complies with the WTO Agreement on Sanitary and Phytosanitary Measures (“SPS agreement”) and the Article XX (b) of the General Agreement on Tariffs and Trade (“GATT”).

Kohana’s ban of the cloned beef from Bogus is a kind of “Sanitary or phytosanitary measure” that defined in Annex A of the SPS agreement, because Kohana applies the ban aim to protect human health within his territory from risks arising from the beef. So the SPS agreement should apply. The SPS agreement grants Kohana the right to regulate the measures for the food safety. Here is the principle, the Preamble of the SPS agreement says “No Member should be prevented from adopting or enforcing measures necessary to protect human, animal or plant life or health, …” and the Article 2.1 also provides that “Members have the right to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health, …”

According with the specific provisions of the SPS agreement, the relevant measure should satisfy the following rule:

(1) Harmonization. The SPS agreement encourages governments to establish their relevant measures consistent with international standards, guidelines and recommendations. The Article 3.1 of the SPS agreement provides that “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, …” But here in this case there is no relevant international standard on the regulatory cloned beef.

(2) Risk Assessment and appropriate level of the relevant protection. The Article 5.1 of the SPS agreement requires that the regulating countries should conduct a risk assessment before actually it formulates any SPS regulations. The provision says “Members shall ensure that their sanitary or phytosanitary measures are based on an assessment (…) of the risks to human, animal or plant life or health, taking into account risk assessment techniques developed by the relevant international organizations.”

And the Article 5.2 provides that “In the assessment of risks, Members shall take into account available scientific evidence, …” In this situation Kohana dose not have the ability to assess the risk of this cloning technology by itself. But in the EC Hormones case, the Appellate Body ruled that minority scientific opinion may be used to support risk assessment and the member country that enforce the SPS measure can outsource the risk assessment from other Members or particular international organization. So Kohana can outsources the risk assessment conducted by another government concluding that the cloned beef could generate fatal genetic diseases to humans who consume it.

Although the Article 2.2 and Article 5.5 required appropriate level of sanitary or phytosanitary, Kohana may argue that it even dose not have the ability to assess the risk of this cloning technology by itself, so except banning the cloned beef,  it dose not the alternative measures. Then the ban also dose not violate this requirement.

(3) Consistency. The Article 5.5 requires the regulating countries to treat the comparable regulatory situations in a consistent. Kohana may argue that the cloned beef form Bogus is not like product to Kohana’s domestic beef, so the ban is not a violation of this article. But Kohana will need to bear the burden to proof this argument.

The Article 5.7 of the SPS agreement gives Kohana the right to take the measure under this particular situation where relevant scientific evidence is insufficient.

Here, Bogus shall bear burden of proof to approve that Kohana’s ban violates the relevant articles of the SPS agreement mentioned above.

The second legal justifications for Kohana’s ban can be GATT Article XX (b). Kohana’s ban is based on the concern of protecting the human health in the country. So it sets to the provision “… (b) necessary to protect human, animal or plant life or health;…” But Kohana needs to bear the burden to proof that the ban is necessary to protect human health.

Kohana also can argue that the cloned beef form Bogus is not like product to Kohana’s domestic beef, so the Article III (National Treatment) not applies to the ban.

2. The legal challenges that Bogus may put forward:

Bogus may firstly claim that there is insufficient evidence for the risk assessment. Most of relevant scientific studies on the safety of the cloned beef conclude that the cloned beef is as safe as a normal beef. The Appellate Body EC Hormones also ruled that whether the minority scientific opinion is sufficient to support the risk assessment should determined one by one in the case. Here the risk assessment that adopted by Kohana is opposed to most of the relevant scientific studies on the safety of the cloned beef. So the scientific evidences for the risk assessment are not sufficient.

Secondly, although the Article 5.7 of SPS grants Kohana to enforce the precautionary measures, the provision also provides that the precautionary measures should be temporary.

Bogus may also claims that the Article XX (b) of GATT should not apply here. There is no evidence of harm to human health, so the ban of Kohana is not necessary. And even if it may be necessary, Kohana did not negotiate with Bogus, so it fails to meet the chapeau, then it is unreasonable to ban the cloned beef, just like the situation in the case of US Gasoline.

And since “coffee is coffee” in the Spanish Coffee case, so here “beef is beef”, and then the cloned beef from Bogus is like product to the Kohana’s domestic beef. Then the Article III of GATT (National Treatment) should apply. According to the content of this provision, Kohana should not ban the cloned beef from Bogus. Bogus bears the burden of proof on these arguments.

Why is the creation of the SPS/TBT important in the evolution of the modern international trade law?

There are two important conceptions under the Technical Barriers to Trade Agreement (TBT), the “Technical Regulations” and “Standards”. The TBT agreement prohibits the import country uses the technical regulations and Standards that is not necessary and unreasonable to set up a trade barrier. Before the TBT agreement generated, the similar WTO norm is the GATT Article XX (b).

And the WTO Agreement on Sanitary and Phytosanitary Measures (SPS) is an agreement that aims to protect: (a) 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) 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) human life or health within the territory of the  Member from risks arising from diseases carried by animals, plants or products thereof, or from the entry, establishment or spread of pests; (d) prevent or limit other damage within the territory of the member from the entry, establishment or spread of pests. The SPS agreement also creates the important conceptions: Scientific evidence, Risk assessment and so on. Before the SPS agreement was generated, the relevant WTO norm is also the GATT Article XX (b).

The TBT agreement and the SPS agreement have the same rationale and structure, but they focus on different subjects. The TBT agreement is focus on the product labeling, packaging and something like these. The SPS agreement focuses on the regulatory sanitary and phytosanitary measures. But there is the most important point that no matter under the TBT agreement or the SPS agreement, the regulation is a kind of right. It is so different from the GATT Article XX (b). Under the GATT Article XX (b), the relevant regulation is just an exception of the general obligation of the WTO members. Unlike the general exceptions under the GATT agreement, there is no the dichotomy in the TBT and SPS agreement.

This theory also effects the allocation of the burden of proof during the dispute settlement. Since it is a right to regulate under the TBT and SPS agreement, the importing country should bear the burden to proof that the regulation used by the regulating is not complied with the provisions of the TBT agreement or the SPS agreement. But under the relevant GATT Article of general exception, the regulating should proof that the regulation not violates the provision.

The creation of the SPS and TBT agreement makes it more specific when determining the alleged regulation is complied with the WTO norms or not. And it also changes the balance between “Free Trade” and “Regulation.” Before the creation of the SPS and TBT agreement, the WTO was more weighed the free trade.  But after the creation of the SPS and TBT, the balance diverted to the part of regulation more than before.

1. Explain, with an example, Mode 2 delivery under GATS.

The Mode 2 delivery under GATS is stated as “in the territory of one Member to the service consumer of any other Member,” it can be concluded as “Consumption Abroad.” Under this delivery, the residents of one country consuming services in foreign markets, only the service consumer is moving. The service consumer moves into another Member's territory to obtain a service. The example can be that a Chinese patient goes to America to seek medical treatment.

2. How is a Free Trade Area (FTA) different from a Customs Union (CU)?

A Free Trade Area is a trade bloc whose member countries have signed a free-trade agreement, such as NAFTA. In the agreement sign by the members of FTA, the member countries eliminate things like tariffs, import quotas and services traded between each other. But the participate countries of CU may use different import quotas in some cases.

And a Customs Union, such as EU is also a trade bloc. The members of a CU have common external tariff, trade and competition policy. But members of FTA do not have a common external tariff to non-member countries.

3. “Bound” tariffs are usually higher than “applied” tariffs.

It’s true that bound tariffs are usually higher than applied tariffs. The rates of bound tariffs are the maximum rates of tariffs that allowed by WTO to any member state for imports from another member state. The bound tariffs are mandatory, bind to every WTO member.

The applied tariffs are the duties that are actually charged by the WTO members on imports. The rule is that the apply tariff actually charged can just equal to or less than the bound tariff. So bound tariffs are usually higher than applied tariffs.

4. A defending (regulating) country can rely on both the SPS and the GATT Article XX (b).

Yes, a regulating country can rely on both the SPS and the GATT Article XX (b). The SPS and the GATT are just two different WTO agreements, there no the said affiliation between them. They have the equal legal status, so if both the SPS and the GATT can apply to the regulating country, then the regulating country can rely on both the SPS and the GATT Article XX (b).

5. After the Superfund case, the concept of “nullification or impairment” is no longer meaningful under the WTO system.

This is not true. The concept of “nullification or impairment” is still meaningful under the WTO system after the Superfund case. But it has changed from the old conception. Before the Superfund case, the importing country should show the “actual injure” such as shrink in the market of exporting country at first. If the importing country cannot show the “injure”, then there will be no case. But after the Superfund case, the importing country just needs to show the “potential” of injure.

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