Sultans of Swing? The Emerging WTO Case Law on TBT

Columbia Law School Scholarship Archive Faculty Scholarship Faculty Publications 2013 Sultans of Swing? The Emerging WTO Case Law on TBT Carlo M. Cantore University of Antwerp, carlo.cantore@uantwerpen.be Petros C. Mavroidis Columbia Law School, petros.mavroidis@unine.ch Follow this and additional works at: https://scholarship.law.columbia.edu/faculty_scholarship Part of the International Trade Law Commons Recommended Citation Carlo M. Cantore & Petros C. Mavroidis, Sultans of Swing? The Emerging WTO Case Law on TBT, EUROPEAN JOURNAL OF RISK REGULATION, VOL. 4, P. 268, 2013 (2013). Available at: https://scholarship.law.columbia.edu/faculty_scholarship/2376 This Working Paper is brought to you for free and open access by the Faculty Publications at Scholarship Archive. It has been accepted for inclusion in Faculty Scholarship by an authorized administrator of Scholarship Archive. For more information, please contact cls2184@columbia.edu. ! Sultans(of(Swing?( The(Emerging(WTO(case(law(on(TBT( ! by( ( Carlo(M.(Cantore(&(Petros(C.(Mavroidis*( ( ( ( ( *Both! EUI.! For! helpful! comments! we! thank! Alessandra! Arcuri! and! Enrico! Bonadio! ! ! ! ! 1! Electronic copy available at: http://ssrn.com/abstract=2237955 ! I.(Introduction( ! Following! years! of! silence! after! EC#Sardines1,! three! cases! were! adjudicated! by! Panels!under!the!WTO!Agreement!on!Technical!Barriers!to!Trade!(TBT)!in!2011:! US#Clove1 Cigarettes,! US#Tuna1 II1 (Mexico),! and! US#COOL.! These! three! cases! dealt! with! key! provisions! of! the! Agreement,! but! the! Panels! adopted! irreconcilable! approaches.! All! three! decisions! were! appealed! before! the! Appellate! Body! (AB),! but!even!the!latter!failed!to!apply!a!coherent!methodology!to!adjudicate!similar.! ! In! Section! II,! we! provide! a! brief! account! of! the! facts! and! the! outcomes! of! the! cases,! whereas,! in! Section! III! we! discuss! the! methodology! applied! by! the! WTO! judiciary!in!the!three!cases.! ! II.(The(Cases( ! US#Clove1Cigarettes21 ! In!2009,!the!US!adopted!a!new!regulation!according!to!which!it!was!prohibited!to! sell!cigarettes!containing!artificial!or!natural!flavors!as!constituents!or!additives,! with! the! notable! exception! of! tobacco! and! menthol! cigarettes.! According! to! scientific!studies,!juveniles!are!particularly!addicted!to!flavored!cigarettes,!since! additives!somehow!mask!the!unpleasant!taste!of!tobacco!and!are!more!attractive! to! young! people.! Indonesia! was,! between! 2007! and! 2009,! the! main! exporter! of! clove! cigarettes! to! the! US.! It! lamented! that! the! domestic! measure! was! inconsistent! with! Art.! 2.1! TBT! since! it! accorded! imported! clove! cigarettes! less! favorable! treatment! than! that! accorded! to! like! domestic! goods! (menthol! cigarettes).!The!panel!understood!“likeness”!under!Art.!2.1!TBT!as!related!to!the! objectives! pursued! by! the! regulator,! and! found! the! US! regulation! to! be! inconsistent! with! Art.! 2.1! TBT.! The! AB,! upheld! the! panel’s! view! on! the! issue! of! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1!European1Communities1–1Trade1Description1of1Sardines1DS231![EC#Sardines]! 2!United1States1–1Measures1Affecting1the1Production1and1Sale1of1Clove1Cigarettes,!DS406![US#1Clove1 Cigarettes].! ! 2! Electronic copy available at: http://ssrn.com/abstract=2237955 likeness!and,!hence!outlawed!the!measure.!However,!it!dismissed!the!argument! related!to!“policyZlikeness”!and!focused!on!the!competitive!relationship!between! menthol!and!clove!cigarettes.!! ! US#Tuna1II1(Mexico)31 ! The! US! adopted! in! 2009! a! regulation! according! to! which! only! tuna! fished! with! certain! techniques! that! respect! the! life! of! dolphins!could! be! sold! with! a! special! label! on! the! packaging! (“dolphinZsafe”! label);! tuna! products! not! meeting! these! requirements!could!be!sold,!although!without!the!above!mentioned!label.!Mexico! argued! that! the! regulation! accorded! less! favorable! treatment! to! Mexican! companies! by! excluding! the! techniques! adopted! by! them! not! to! kill! dolphins! from!those!eligible!to!receive!the!‘dolphinZsafe’!label.!Both!the!Panel!and!the!AB! classified! the! relevant! measure! as! a! ‘technical! regulation’! and! judged! it! as! inconsistent!with!Art.!2.1!TBT!by!according!Mexican!companies!less!favourable! treatment!when!compared!to!their!US!counterparts.! ! US#COOL41 ! US!legislation!introduced!in!2009!a!system!of!labeling!meat!products!according! to! their! origin.! The! regulation! distinguished! between! meat! products! wholly! obtained! in! the! US! (A),! born! raised! or! slaughtered! in! the! US! (B),! imported! for! immediate! slaughter! (C)! or! wholly! originating! abroad! (D).! Mexico! and! Canada! challenged! the! measure! before! the! WTO! judiciary! and! the! AB,! although! dismissing! the! finding! by! the! Panel! that! the! objective! pursued! by! the! US! regulation! was! not! legitimate,! upheld! the! view! of! the! judges! of! first! instance! according!to!whom!the!measure!was!inconsistent!with!Art.!2.1!TBT!by!providing! less!favourable!treatment!to!meat!products!originating!outside!the!US.! ! ! ! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3!United1States1–1Measures1Concerning1the1Importation,1Marketing1and1Sale1of1Tuna1Products,1 DS381![US#Tuna1II1(Mexico)].! 4!United1States1–1Certain1Country1of1Origin1Labellin1(COOL)1Requirements,!DS386![US#COOL] ! ! 3! III.(A(critique( ! Although! occasionally! wrong! tests! can! lead! to! right! outcomes,! and! this! was! indeed!the!case!in!at!least!one!of!the!judgments!(US1–1Clove1Cigarettes,!as!it!will! be! explained! later),! the! AB! added! little! to! the! understanding! of! the! TBT! Agreement!and!the!predictability!of!future!caseZlaw.! ! An!analysis!of!the!cases!reveals!that!the!judges,!instead!of!analyzing!the!issues!in! light! of! the! object! and! purpose! of! the! TBT! Agreement,! relied! heavily! on! preZ existent! GATT! case! law.! This! is! the! original! sin! behind! the! unsatisfactory! outcomes!of!the!decisions!under!analysis!for!two!main!sets!of!reasons:!“likeness”! in!the!TBT!refers!to!policyZlikeness!and!not!marketZlikeness;!furthermore,!unlike! GATT,!TBT!deals!with!a!default!scenario!where!governments!are!unhappy!with! the! market! outcome.! It! is! the! exercise! of! their! ‘unhappiness’! that! needs! to! be! evaluated,!and!not!consumers’!reactions.!! ! The1AB1approach1in1the1TBT1trio1 ! Schematically! one! can! describe! the! approach! adopted! by! the! AB! in! the! three! reports! as! follows:! first,! the! AB! asks! how! consumers! define! like! products;! second,! if! in! presence! on! likeZproducts,! it! will! ask! whether! less! favourable! treatment! was! afforded! to! foreign! products;! finally,! it! will! review! whether! the! standard!or!technical!regulation!constitutes!the!least!restrictive!option!available! to!achieve!the!objective!pursued.!! ! The1suggested1approach1 ! The!case!law!in!question!reveals!some!confusion!on!the!interpretation!of!the!keyZ terms!of!the!TBT!Agreement!and,!more!in!general,!on!the!understanding!of!the! function!that!the!Agreement!is!supposed!to!perform.!In!particular,!it!seems!that! the!AB!ignored!the!TBT!and!decided!on!the!issues!at!stake!according!to!previous! GATT!case!law.!However,!the!TBT!is!about!the!policies!the!Members!adopt!when! they! are! unsatisfied! with! market! outcomes.! In! other! words,! the! TBT! aims! to! ! 4! prevent! that! standards! and! technical! regulations! are! not! used! in! unnecessary! and!discriminatory!manner!vis#à#vis1foreign!suppliers.!The!TBT!Agreement!is!not! about!marketZlikeness.!Instead,!it!is!about!policyZlikeness,!hence!the!test!adopted! by!the!AB!is!not!satisfactory.!! ! A!more!TBTZconsistent!approach!should!respect!the!following!pattern:!! ! (a) First,! the! judges! should! ask! whether! the! measure! under! review! is! the! least! restrictive! option! to! achieve! a! unilaterally! defined! policy! objective.! For!the!sake!of!this!assessment,!the!burden!of!proof!should!be!allocated!as! it! was! the! case! in! the! US#Gambling5!dispute,! i.! e.! the! complainant! should! point! at! a! less! restrictive! option! and! the! defendant! should! demonstrate! why!it!was!not!available!in!that!situation.!!If!the!response!to!this!question! is!positive,!then!there!is!no!reason!to!go!any!further;!on!the!contrary,!in! case!of!a!negative!answer,!the!second!step!would!be!that!of!understanding! whether!the!measure!was!discriminatory!towards!foreign!suppliers.! (b) With! respect! to! “nonZdiscrimination”,! the! role! of! WTO! judges! should! be! that!of!assessing!whether!imported!and!domestic!goods!are!“policyZlike”.! If! the! two! products! are! not! policyZlike,! there! is! no! need! to! proceed! further.! If! the! two! products! are! like! from! a! policy! perspective,! then! the! same!discipline!should!apply!to!both!of!them.! ! As!it!was!said!before,!the!AB!adopted!an!unsatisfactory!methodology.!This!could! have!led,!on!occasion,!to!the!right!outcome,!but!the!case!law!under!review!is!not! useful!for!the!sake!of!certainty!of!law!and!predictability!of!the!system.!We!side! with!the!following!evaluation6.!! ! ! ! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 5!United1States1–1Measures1Affecting1the1Cross#Border1Supply1of1Gambling1and1Betting1Services,! DS! 285![US#Gambling]! 6!Petros!C.!Mavroidis!(2013),!Driftin’!too!far!from!shore!–!Why!the!test!for!compliance!with!the! TBT! Agreement! Developed! by! the! Appellate! Body! is! wrong! and! what! should! the! AB! have! done! instead,!The!World!Trade!Review,!Forthcoming.! ! 5! ! Methodology! Outcome! US#Clove1Cigarettes1 Incorrect! Correct! US#Tuna1II1(Mexico)1 Incorrect! Partially!Correct! US#COOL1 Incorrect! Incorrect! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ! In! US#Clove1 Cigarettes,! the! AB! asked! whether! consumers! would! treat! menthol! cigarettes! and! clove! cigarettes! as! substitutes.! The! judges,! instead,! should! have! asked! whether! the! two! goods! were! policyZlike! and,! hence,! it! could! have! been! even!easier!to!find!that!a!violation!occurred!in!this!case.!Eventually,!however,!the! AB!ended!up!with!a!correct!outcome.! ! The!main!problem!with!the!US#Tuna1II1(Mexico)!case!lies!in!the!identification!of! the!measure!as!a!“technical!regulation”.!Since!compliance!with!the!requirements! for!the!adoption!of!the!“dolphinZsafe”!label!was!not!compulsory!for!selling!tuna! in!the!US,!the!measure!should!have!been!identified!as!a!“standard”.!The!question,! therefore,!should!have!been!whether!the!“dolphinZsafe”!label!was!available!to!all! the! tuna! producers! meeting! the! requirements! irrespective! of! the! particular! fishing!technique!adopted.!Thus!the!“dolphinZsafe”!standard,!although!necessary! to!achieve!the!objective,!was!applied!in!a!discriminatory!fashion,!and!therefore!it! should!have!been!judged!as!TBT!inconsistent.! ! In! US#COOL,! finally,! the! AB! completely! misinterpreted! the! regulation! under! review.! The! AB! considered! the! US! labeling! requirements! for! meat! products! unnecessary! and! discriminatory.! Both! conclusions! are! incorrect:! a! labeling! requirement! cannot! be! considered! unnecessary! just! because! not! all! the! information! required! is! revealed! to! consumers.! What! instead! mattered! in! this! case! was! whether! providing! such! information! was! necessary! for! the! achievement! of! the! statutory! objectives.! Moreover,! contrary! to! what! the! AB! decided,! the! measure! was! not! discriminatory! either,! since! the! burden! was! the! same! for! US! and! foreign! producers! alike! either! on! goods! produced! in! a! single! country!or!on!good!produced!in!more!than!one!country.! ! ! 6! IV.(Concluding(Remarks( ! The!analysis!reveals!some!confusion!by!the!WTO!judges!in!the!interpretation!of! key! provisions! of! the! TBT! Agreement.! WTO! judges! need! to! take! into! deeper! account! the! rationale! for! enacting! the! TBT! agreement! before! adjudicating! the! next!dispute!coming!under!its!aegis.!It!seems!that!the!judges!have!not!followed! the! right! methodology! in! any! of! the! cases! under! analysis,! hence! the! current! approach!does!not!serve!legal!security.! ( ! ! 7!