Whether Richland is in breach of WTO law?
World Trade Law
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Whether Richland is in breach of WTO law?
International trade thrives and depends on the free movement of goods and services to meet the existing demand. Globally, there is a common interest among all the nations to facilitate the free flow of products and fair competition. The aim is to liberalize trade in goods and services across national frontiers. Member states believe that if the free flow of goods is achieved, their respective citizens will have access to the best quality of goods, the most affordable, and healthy products. Additionally, if states can specialize in producing the goods that are most favorable to their geographical positioning and climate, such items can be delivered at the least cost and thus reduce the price while not compromising the quality. States adopted the General Agreement on Tariffs and Trade (GATT) as a framework that regulates international trade to consolidate the above intentions and place binding obligations on member states[1]. Among other measures, GATT prohibited the placement of quotas and tariffs against imports. However, the desire by nations to protect their domestic industries has reversed the benefits achieved. Members cunningly resulted in other measures and technical hindrances to reduce or hamper importation[2]. The Agreement on Technical Barriers to Trade (TBT) was then adopted to address other impediments.
Both Richland and Farland are member states of WTO. Richland enacted the Poultry Regulations Act (PRA) 2018, which prohibits the marketing of poultry treated with any substance other than water. Farland, who exports poultry to Richland, treats its chickens with chlorine. Due to the use of this method of treatment, their chicken is subject to an import ban in Richland. The state passed the PRA after powerful farming associations in the state lobbied for higher standards than those prevalent in other parts of the world. The issue now is whether Richland is in breach of WTO law. The key consideration is placed on Article III and Article XI of the General Agreement on Tariffs and Trade and Article 2.2 of the Agreement on Technical Barriers to Trade.
The state of Richland has a number of obligations under GATT. Article III of GATT provides that a member state shall not enact laws, regulations, and requirements which hamper the offering for sale, distribution, or use of products should not be enforced in a manner that protects the domestic products at the expense of imported products[3]. Under sub-article 4, the code requires that goods from other contracting states shall be granted treatment ‘no less favorable’ than that given to similar domestically manufactured products with regards to legislation, rules, and requirements affecting the sale. Under Sub-article 5, a state should ensure that internal measures such as regulations do not require the use of mixtures, processes, or products that, in essence, ensure that only domestic products are supplied in the markets. Sub-article 7 stipulates that internal rules shall not be selectively applied to external sources of supply. Accordingly, Richland has a duty not to pass laws that discriminate against imports.
Member states have a duty not to put in place measures that restrict the importation of goods from a member state. Article XI of GATT forbids the imposition or maintenance of prohibitions or restrictions by any state on the importation of any good from another contracting state. However, sub-article 2 (c) lays down that a state may restrict the importation of agricultural or fisheries products, where necessary so as to restrict the market supply of similar or substitute domestic products, to remove the surplus of locally manufactured goods, or prevent the production of a product where the import is a raw material[4]. A state that wishes to invoke the provision of subparagraph (c) should issue a public notice of the volume to be imported in a given period of time. The effect of such a restriction should not in any way be schemed to reduce the total of imported products as compared to their substitute or similar domestic goods. It, therefore, follows that a state party to WTO and a member state to GATT cannot unilaterally impose rules that prohibit the importation of products from another member state. The provisions under GATT largely outlaw the use of Tariffs and quotas against member states.
The Agreement on Technical Barriers to Trade (TBT) restricts the use of other measures to curb or constrain importation in addition to the Tariffs and Quotas under GATT. Article 2 paragraph 2.2 of TBT mandates member states to make certain that technical regulations and standards set, prepared, or enforced are not with the aim of or the consequence of imposing unnecessary handles to international trade. A member state is not to make regulations more trade-restrictive than is necessary to achieve a legitimate aim. In doing so, the country must take into consideration the risks that exist if the objective of the regulation is not met. Under the clause, the legitimate objectives include national security concerns, curbing deception and fraud, protection of animal, human and plant health, or the environment. The risk should be evaluated through consideration of scientific and technical research, assessment of related processing technology, or the final consumption of the products. Hence, before a member state like Richland or Farland imposes a regulation or any measures, they have a binding obligation to conduct research on the effects and ensure that the effect of the measures adopted does not restrict international trade.
The central issue in the matter is whether the state of Richland contravened the above obligations as set out under Article III and XI of GATT and Article 2.2 of the TBT. The question can be determined by answer a variety of questions. Whether the measures hinder international trade? Whether the purpose of enacting the rules was a legitimate objective? Whether the measure protects human life? Whether risk assessment for failure to adhere to the standards was assessed? Whether scientific information and the processing technologies were considered in adopting the act? Whether the rules are within the exemptions under Article XI of the GATT? Whether the treatment accorded to poultry products from Farland is less favorable to those in Richland?
The restriction against poultry products imposed by Richland through the PRA, 2018, falls within the scope of restrictions under Article XI of GATT. The Article is to be interpreted in a broadway. In the 1988 Panel Report on “Japan – Trade in Semi-conductors,” it was held that any measure, law or regulation which restricts importation or sale for export of goods is under the scope of the provision irrespective of how it is enacted[5]. Article XI of GATT prohibits the imposition of restrictions that hinders international trade. The measures at issue were imposed through the Poultry Regulations Act (PRA) 2018, an act enacted by the legislature of Richland. PRA thus qualifies as a law or regulation as directly provided for under GATT. The test of whether or not a restriction is prohibited is two folds. First, one determines if it places mandatory restrictions on all persons in the state of Richland, and second, if the implementation of the act depends solely on government action[6]. The act is an instrument enacted by the legislature and is thus binding on all persons in Richland. It shall be implemented by state agencies and therefore meets the two requirements of whether a restriction constitutes a measure under Article XI. Therefore, the enactment of the act was prohibited unless it falls within the exemptions.
Quantitative restrictions of imports are prohibited under Article XI of GATT. The 1991 Panel Report on “United States – Restrictions on Imports of Tuna,” the Panel considered a restriction by the United States on the importation of Tuna[7]. The prohibition was stipulated under the US Marine Mammal Protection Act (MMPA). MMPA denied access to the United States market to vessels fishing yellowfin tuna, whose country of origin does not have the same comparable legal regime of fisheries the mammal[8]s. The Panel in deciding the matter stated that measure, as provided under the act, amounts to a prohibition. Accordingly, it agreed that the imposition of a direct import ban and the provisions of MMPA were in contravention of Article XI: 1. The decision was premised on the nature of the act in that it imposed restrictions, and it required the action of the United States authorities to enforce them. The PRA in every aspect resembles MMPA and is therefore deemed to be contrary to Article XI.
The measures put in place by Richland hamper international trade. Farland previously exported poultry to Richland. After the imposition of the new framework, the chickens from Farland were banned from accessing the Richland market. The free flow of chickens from the state of Farland to Richland was halted. Henceforth, a local consumer in Richland can only access chicken domestically manufactured in Richland. The measures interrupt the flows of goods from one contracting state to another. Besides, it gives domestically manufactured goods monopoly in the market and treats imported chicken less favorable as compared to domestic products contrary to Article III of GATT.
The measures imposed by Richland are not based on the legitimate objective. Article 2.2 of TBT is in place to mitigate the effect of restricting trade[9]. It seeks to strike a balance between the need to facilitate free trade in the world and the inherent desire to protect a state’s citizens from harmful products imported from other countries[10]. The Appellate Body in the United States Tuna matter stated that the examination of any measure begins with an assessment of the legitimacy of the objective. The term “objective” has been defined as “policy objective” which is the underlying purpose that prompts the introduction of the legislation[11]. The objective is ascertained from the information given by the member through a Panel that is not bound by the Member’s submissions[12]. In this matter, the PRA was enacted in response to public concern to safety and after powerful farming associations in Richland advocated for higher standards than those prescribed by other parts of the world.
The public concern about welfare and safety falls within the legitimate objectives. Article 2.2 (c) provides as one of the legitimate objectives the aim of promoting the human health of citizens of member states. From the face of it, this objective is legitimate. In the US – COOL case, it was held that where a member can demonstrate that the objective had the support of citizens and fell within the categories provided, then it is legitimate[13]. However, overwhelming scientific evidence shows that the use of chlorine on poultry products is not hazardous to consumers. Further, the state of Richland uses chlorine to wash bagged salad. It thus defeats the rationale that prohibiting the use of chlorine in poultry products and permitting its use in salad washing protects the health and welfare of the citizens of the public. The US – Tuna II (Mexico) (AB)[14] the Appellate Body appreciated that there could be a disguised objective. It occurs where a legitimate objective is fronted to conceal an underlying objective. The regulations were not entirely enacted to respond to growing concerns. There was a sinister motive by the farming associations to raise the standards above those generally accepted with the effect of secluding imports.
The PRA is also examined to see if the measures are necessary requirements. The Appellate Body has established the test to have two limbs, a relational analysis and a comparative analysis[15]. A relational analysis examines the relevant factors about the PRA. The trade-restrictiveness of the measures, contribution to the legitimate objective, and the nature of the risks are considered[16]. Under the risks, the gravity of the damage that can be caused is examined. The main test with this approach is the suitability test[17]. The Appellate Body held that the contribution of the measure towards the achievement of the legitimate objective should be assessed. In our case, chlorine is said to hinder the detection of pathogens that cause human infections. The pathogens include salmonella. About 0.5% of chicken sold in Richland contain salmonella, while in Farland, the rate is 18%. Similarly, about 6o people contract salmonella in Richland per 100,000 inhabitants, while 370 in Farland are infected per year. The difference is 310 cases in 100, 000 inhabitants. Arguably, the measure only makes a meager contribution towards achieving the legitimate objective of protecting the safety and welfare citizens in Richland as the numbers are negligible. Moreover, cases of illness do not result in death. On a balance of probability, the negative economic effect of the measure is disproportionate to the health benefits the measures introduced.
On the other hand, a comparison analysis involves assessing the regulations introduced in contrast to other possible alternatives that could address the problem. Farland has proposed alternatives, including labeling the chicken as to indicate the method of treatment used and the origin of the product. Comparison is achieved through assessing whether the alternatives are less restrictive than the regulation, whether the alternative would make an equal contribution in achieving the legitimate objective and whether the alternative is readily available[18]. The alternative measure in the present case is less restrictive as it only requires the labeling of products. It allows the continued importation of products to the Richland provided that the stipulated conditions are met. The Panel in the US – COOL case adopted the alternatives of providing consumers with information and adopting labels that protected dolphins[19]. The alternative ensured that customers were not misled about how the tuna was fished. Protection of Dolphins was achieved through labeling tuna products as “dolphin-safe,” thus allowing them to be sold in the market or declining to allow the importation of tuna that was fished in a manner that endangered dolphins. Similarly, the alternative of labeling the chickens according to the method of cleaning use and the origin provide customers with sufficient information to make an informed decision. The measure is not restrictive at all and achieves the objective of addressing the welfare of the people by supplying alternative poultry hence increasing competition, which in turn regulates the price through demand and supply.
` The state of Richland had an obligation to conduct an assessment and ascertain the risks non-fulfillment would create as required under Article 2.2 of TBT. The assessment should be carried out before the measures are adopted. The Appellate Body in the US – COOL (AB) case held that the assessment should consider the nature of the imminent dangers and the gravity of the effects that would result in if the aim of the measures were not met[20]. The member state should weigh the interests at issue and the risks. If the interests at issue are high enough, a state would be cautious in adopting alternative ways that do not achieve the desired objective[21]. Where the interests are a bit low, the expense of erroneously adopting alternative measures would correspondingly be very low. In that scenario, the measures would be unnecessary[22]. The case at hand involves the importation of the poultry. The worst-case scenario is where 301 more people in a 100, 000 people contract salmonella which can be treated. The interests are thus classified as low. The interests being low do not justify the imposition of the most restrictive measures. Therefore, the alternative measures which are the least restrictive should be adopted as the cost of a mistake is very low.
In conclusion, Richland’s new PRA is in contravention of its obligation under WTO and particular contrary to General Agreement on Tariffs and Trade (GATT) Article XI and Article III and Agreement on Technical Barriers to Trade (TBT) Article 2.2. Richland failed to adopt the most restrictive measures of ensuring the safety of its citizens. In addition, the objective of enacting the regulation is not legitimate as it is clouded with nationalistic interest. The introduction of the ban against chicken from Farland reverses the gains made by WTO in creating a liberal market and facilitating the free flow of goods. Further, the state did not conduct a risk assessment, thus failed to adhere to the prescribed procedure. In totality, the measures adopted are not the least restrictive and are thus a breach of its obligations under WTO.
Bibliography
Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres WT/DS332/AB/R (Jun. 12, 2007).
Appellate Body Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products WT/DS381/AB/R (May, 16, 2012).
Appellate Body Reports, United States – Certain Country of Origin Labelling (COOL) Requirements, WT/DS384/AB/R / WT/DS386/AB/R (June 29, 2012
Gaul Samantha. The Technical Barriers to Trade Agreement: a Reconciliation of Divergent Values in the Global Trading System. (91 Chi.-Kent L. Rev. 267 2016) <https://heinonline.org/HOL/LandingPage?handle=hein.journals/chknt91&div=13&id=&page=> Accessed 30th April 2020
Ishakwa Yoshimichi. Plain Packaging Requirements and Article 2.2 of the TBT Agreement. (Research Gate 2014) <https://www.researchgate.net/publication/281237198_Plain_Packaging_Requirements_and_Article_22_of_the_TBT_Agreement> Accessed 30th April 2020
Koul, A.K. WTO General Agreement on trade in Service (GATS). Guide to the WTO and GATT, 537-557. <https://sci-hub.tw/10.1007/978-981-13-2089-7_31> Accessed 30th April 2020
Sykes O. Alan. Regulatory Consistency Requirements in International Trade. (49 Ariz. St. L.J. 821 2017) <https://heinonline.org/HOL/LandingPage?handle=hein.journals/arzjl49&div=29&id=&page> Accessed 30th April 2020
Sanchez Ajejandro & Aneno Karyn Sandra. Article 2.2 of the TBT Agreement: More Complicated than Necessary. (11 Global Trade & Cust. J. 369 2016) <https://heinonline.org/HOL/LandingPage?handle=hein.kluwer/glotcuj0011&div=67&id=&page> Accessed 30TH April 2020
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WORDS: 2, 613.
[1] Koul, A.K. WTO General Agreement on trade in Service (GATS). Guide to the WTO and GATT, 537-557.
[2] Gaul Samantha. The Technical Barriers to Trade Agreement: a Reconciliation of Divergent Values in the Global Trading System. (91 Chi.-Kent L. Rev. 267 2016)
[3] Koul, A.K. WTO General Agreement on trade in Service (GATS). Guide to the WTO and GATT, 537-557.
[4] Ibid 3
[5] Ibid 3 p. 315
[6] 1L/6309, adopted on 4 May 1988, 35S/116, 153-155, paras. 104-109.
[7]Ibid 3 p. 320
[8] 24DS21/R (unadopted), 39S/155, 196, paras. 5.17-5.18.
[9] Wang Anyi. The necessity test in Article 2.2 of the TBT Agreement. (Wageningen University 2019)
[10] Appellate Body Report, United States – Measures Concerning the Importation, Marketing, and Sale of Tuna and Tuna Products, para. 211, WT/DS381/AB/R (May, 16, 2012).
[11] Appellate Body Reports, United States – Certain Country of Origin Labelling (COOL) Requirements,
WT/DS384/AB/R / WT/DS386/AB/R (June 29, 2012).
[12] Ishakwa Yoshimichi. Plain Packaging Requirements and Article 2.2 of the TBT Agreement. (Research Gate 2014)
[13] US – COOL (Panel), Ibid 11, paras. 7.650-7.651.
[14] Ibid 3, para. 313;
[15] of the US – Tuna II (Mexico) (AB), Ibid 10, para. 322
[16] Sykes O. Alan. Regulatory Consistency Requirements in International Trade. (49 Ariz. St. L.J. 821 2017).
[17] Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres, paras. 145, 210, WT/DS332/AB/R (Jun. 12, 2007).
[18] US – Tuna II (Mexico) (AB), ibid 10, paras. 320-322.
[19] the US – Tuna II (Mexico) (Panel), ibid 10, paras. 7.413, 7.425;
[20] Sykes O. Alan. Regulatory Consistency Requirements in International Trade. (49 Ariz. St. L.J. 821 2017)
[21] Sanchez Ajejandro & Aneno Karyn Sandra. Article 2.2 of the TBT Agreement: More Complicated than Necessary. (11 Global Trade & Cust. J. 369 2016)
[22] US – Tuna II (Mexico) (Panel), ibid 10, para. 7.467