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TWN Info Service on WTO and Trade Issues (Aug10/04)
13 August 2010
Third World Network

Australian ban on New Zealand apples ruled WTO-illegal
Published in SUNS #6986 dated 12 August 2010

Geneva, 11 Aug (Kanaga Raja) -- A dispute panel of the World Trade Organization (WTO) handed down a ruling this week that found nearly 90-year-old Australian measures against the import of apples from New Zealand to be inconsistent with Australia's WTO obligations.

The panel requested Australia to bring the inconsistent measures into conformity with its obligations under the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement).

The ruling is in a nearly 600-page report of the panel made public on 9 August.

New Zealand prevailed in most of its complaints in the dispute with Australia. According to media reports, Australia has announced its intention to launch an appeal.

The dispute was raised in December 2007, and the panel was established in January 2008.

In a background to the dispute, the panel noted that Australia banned the importation of New Zealand apples in 1921, following the entry and establishment of fire blight in Auckland in 1919. In 1986, 1989 and 1995, New Zealand applied for access to the Australian apple market. In each case, its application was rejected.

(The panel explained fire blight as being a plant disease caused by the bacterium Erwinia amylovora, and in apple trees, it infects flowers, young leaves, stems and fruits.)

Following a new request for access to the Australian market filed by New Zealand in January 1999, the Australian Quarantine and Inspection Service (AQIS) initiated the import risk analysis for New Zealand apples, which is the subject of this dispute. The Final Import Risk Analysis Report for Apples (IRA) from New Zealand was issued by Biosecurity Australia, a prescribed agency, in November 2006.

The scope of the risk analysis is the importation of mature apple fruit free of trash, either packed or sorted and graded bulk fruit from New Zealand. In addition to fire blight, European canker and apple leafcurling midge (ALCM), the IRA includes assessments of eight other pests.

(The panel further explains that the European canker is a plant disease caused by the fungus Neonectria galligena, whose primary symptom of infected plants is the production of cankers on limbs and trunks. The ALCM, or Dasineura mali, is a small fly, 1.5-2.5 mm long. The larvae of ALCM feed on the unfurling young leaves of apple trees causing the leaf margins to curl or roll. This can result in reduced shoot and tree growth.)

New Zealand requested the panel to find that the challenged measures, both individually and as a whole, are inconsistent with the obligations of Australia under the following provisions of the SPS Agreement: Articles 2.2 and 2.3, Articles 5.1, 5.2, 5.5 and 5.6, Article 8, and Annex C(1)(a).

In its first written submission to the panel that was highlighted in the panel report, New Zealand identified seventeen specific measures imposed in respect of three pests: fire blight, European canker and ALCM. The measures fall into two categories; those of general application and those specific to each of the three pests. It considered these measures to be inconsistent with Australia's obligations under the SPS Agreement.

New Zealand argued that Australia's measures are "maintained without sufficient scientific evidence". There is no "rational or objective" relationship between those measures and scientific evidence, and therefore they are inconsistent with Article 2.2 of the SPS Agreement. Australia's measures are not based on a "risk assessment" within the meaning of Article 5.1 and Annex A and are therefore inconsistent with Article 5.1 of the SPS Agreement.

Australia's measures were also inconsistent with its obligations under Articles 2.3, 5.2, 5.6, 8, and Annex C(1)(a), said New Zealand.

According to the panel report, during an organizational meeting held by the panel on 19 March 2008, New Zealand expressed its view that expert advice would be an important assistance for the panel in addressing the matter in the dispute.

On 15 September 2008, the panel notified the parties in the dispute that it had decided to seek expert advice in four fields: (a) fire blight, including its potential spread through trade in apples and the phytosanitary measures to be applied to control its spread; (b) European canker, including its potential spread through trade in apples, the climatic conditions for its establishment, and the phytosanitary measures to be applied to control its spread; ( c) ALCM, including its potential spread through trade in apples and the phytosanitary measures to be applied to control its spread; and (d) pest risk assessment, including the use of semi-quantitative methodologies.

Three months later, the panel announced that it had selected a list of seven experts.

Australia raised concerns with specific aspects of the panel's processes for selecting and consulting the scientific experts.

In its ruling, the panel found no evidence that the process of selecting and consulting experts was conducted improperly, that due process in the experts consultation phase of these proceedings was compromised, nor that Australia's procedural rights were in any manner negatively affected in this regard.

In its review of Australia's IRA to determine whether New Zealand had articulated a prima facie case that the IRA is not a proper risk assessment within the meaning of the SPS Agreement, the panel noted that New Zealand argued that Australia's IRA is not a risk assessment within the meaning of Article 5.1 of the SPS Agreement.

According to New Zealand's argument, Australia has not properly evaluated the likelihood of entry, establishment or spread of the three relevant pests, nor has it evaluated that likelihood according to the SPS measures which might be applied. In New Zealand's view, "the conclusions in the IRA do not find sufficient support in the scientific evidence relied upon". To the extent that a proper risk assessment does not exist to support Australia's measures, those measures cannot be said to be "based on" a risk assessment.

According to the panel, New Zealand identified three "fundamental methodological flaws" in Australia's IRA that, in combination, would result in a vastly overestimated probability of entry, establishment and spread of the pests at issue.

The first methodological flaw identified by New Zealand is the IRA's choice of "an inflated maximum value ... for the probability of events with a negligible likelihood of occurring". The second methodological flaw is the "inappropriate use of [a] uniform distribution to model the likelihood of events, particularly those with a 'negligible' likelihood of occurring". The third methodological flaw is "the overestimation of the projected volume of trade" in New Zealand apples.

According to the panel, Australia responded that the IRA is a proper risk assessment under Article 5.1 of the SPS Agreement. New Zealand fails to recognize that risk assessments must confront scientific uncertainty, which may only be resolved or accommodated "through the exercise of expert judgement in accordance with the specific requirements of each case".

According to Australia, the legal question that the panel must consider is not whether New Zealand's "alternative scientific account" is credible or even represents mainstream opinion, but whether Australia's measures are based on an objective and coherent risk assessment.

In its review of the IRA's analysis regarding fire blight, the panel considered several issues including the eight importation steps described in Australia's IRA.

Regarding importation step 1 for fire blight (representing the likelihood that the relevant pest is present in the source orchards), the panel said that New Zealand argues that the IRA's estimation that Erwinia amylovora would be present in 100 per cent of source orchards in New Zealand is incorrect and constitutes a "significant overestimation". In New Zealand's view, this conclusion is "based on a misreading of scientific literature and incorrect assumptions [and is] not supported by the scientific evidence".

The panel said that while the IRA's basis with respect to this importation step comes from respected and qualified scientific sources, the IRA's reasoning in this regard is not coherent and objective and the resulting likelihood assigned to this step is exaggerated.

The panel found that the IRA's estimation that Erwinia amylovora will always be present in the source orchards in New Zealand is not sufficiently supported by the scientific evidence that the IRA relied upon and, accordingly, is not coherent and objective.

In its conclusions on entry, establishment and spread concerning fire blight, the panel found that New Zealand has not successfully made a prima facie case that the IRA's estimation of the likelihood that Erwinia amylovora survives routine processing procedures in the packing house (importation step 4), and that Erwinia amylovora survives palletization, quality inspection, containerization and transportation to Australia (importation step 6), are exaggerated, and that these estimations do not rely on adequate scientific evidence or are not coherent and objective.

The panel found also that the IRA's conclusion that the likelihood that clean fruit is contaminated by Erwinia amylovora during palletization, quality inspection, containerization and transportation (importation step 7) is negligible appears to be coherent and objective.

It found additionally that New Zealand has not made a prima facie case that the IRA's discussion on utility points and estimates of proximity ratings for the combination of each utility point with exposure groups (proximity values), or that the IRA's conclusions regarding the probability of spread, do not rely on adequate scientific evidence or are not coherent and objective.

The panel found, however, that the IRA's estimation that Erwinia amylovora will be always present in the source orchards in New Zealand (importation step 1); that fruit coming from an infected or infested orchard is infected or infested with Erwinia amylovora (importation step 2); that clean fruit from infected or infested orchards is contaminated with Erwinia amylovora during picking and transport to the packing house (importation step 3); and that clean fruit is contaminated by Erwinia amylovora during processing in the packing house (importation step 5); do not find sufficient support in the scientific evidence relied upon and, accordingly, are not coherent and objective.

In the light of these findings and the absence of any separate justification and evidence in the IRA regarding the estimated overall likelihood of importation, the panel found additionally that the IRA's estimation of the overall probability of importation is not supported by adequate scientific evidence and, accordingly, is not coherent and objective.

The panel also noted that a significant part of the IRA's discussions on exposure, establishment and spread of fire blight, rests on a number of assumptions and qualifications. Some of these assumptions and qualifications are not convincing, which leads to reasonable doubts about the evaluation made by the risk assessor. The IRA has not properly considered a number of factors that could have a major impact on the assessment of this particular risk, it added.

Accordingly, the panel found that the reasoning articulated in Australia's IRA, with respect to the likelihood of entry, establishment and spread of fire blight, including the IRA's estimation of the value for the respective probabilities, does not rely on adequate scientific evidence, and, accordingly, is not coherent and objective.

On the alleged methodological flaws in the IRA identified by New Zealand, the panel concluded that the choice of a probability interval of zero to one in one million, and a midpoint (if uniform distribution is used) of 0.5 in one million for events with a "negligible" likelihood of occurring (corresponding to the qualitative descriptor "the event would almost certainly not occur") is not properly justified in the IRA and leads to an overestimation of the probability of entry, establishment and spread of the pests at issue.

Likewise, the panel concluded that the combination of this probability interval for events with a "negligible" likelihood of occurring, with the IRA's use of a uniform distribution to model the likelihood of these events, would tend to result in an additional overestimation of the likelihood of such "negligible" events.

The panel agreed with New Zealand that these two flaws "magnify the assessment of risk, turning what are often the remotest of possibilities into events that are assessed as occurring with some frequency."

The panel however concluded additionally that New Zealand has not successfully made a prima facie case that the IRA's projected volume of trade is necessarily exaggerated and that such exaggeration would result in an overestimated probability of entry, establishment and spread of the pests at issue.

The panel found that, because of the methodological flaws that magnify the assessment of risk, described above, Australia's IRA is not a proper risk assessment within the meaning of Article 5.1 and paragraph 4 of Annex A of the SPS Agreement. These flaws also constitute a failure by the IRA to adequately take into account the available scientific evidence, as required by Article 5.2 of the SPS Agreement.

Accordingly, said the panel, because of these flaws, Australia's requirements regarding fire blight on New Zealand apples are inconsistent with Articles 5.1 and 5.2 of the SPS Agreement. Since the requirements are not based on a risk assessment as provided in Article 5.1 of the SPS Agreement, these measures can also be presumed, more generally, not to be based on scientific principles within the meaning of Article 2.2.

Accordingly, the panel found that Australia's requirements regarding fire blight on New Zealand's apples are, by implication, also inconsistent with Article 2.2 of the SPS Agreement.

The panel also conducted a similar review in the context of the IRA's analysis on European canker, as well as the IRA's analysis on ALCM.

In its overall conclusions with respect to requirements regarding ALCM, the panel found that with respect to its analysis of the likelihood of entry, establishment and spread of ALCM, and of the potential consequences associated with the entry, establishment or spread of ALCM into Australia, Australia's IRA is not a proper risk assessment within the meaning of Article 5.1 and paragraph 4 of Annex A of the SPS Agreement.

The flaws described also constitute a failure by the IRA to adequately take into account factors such as the available scientific evidence, the relevant processes and production methods in New Zealand and Australia, the actual prevalence of viable ALCM, and relevant environmental conditions, as required by Article 5.2 of the SPS Agreement.

Accordingly, Australia's inspection and treatment requirements regarding ALCM on New Zealand apples are inconsistent with Articles 5.1 and 5.2 of the SPS Agreement. It further found that Australia's inspection and treatment requirements regarding ALCM on New Zealand apples are, by implication, also inconsistent with Article 2.2 of the SPS Agreement.

In its conclusions and recommendations, the panel said that Australia's measures at issue regarding fire blight, European canker and ALCM, as well as the requirements identified by New Zealand as "general" measures that are linked to all three pests at issue in the present dispute, are inconsistent with Articles 5.1 and 5.2 of the SPS Agreement and, by implication, these requirements are also inconsistent with Article 2.2 of the SPS Agreement.

However, it further said that New Zealand has failed to demonstrate that the measures at issue in the current dispute are inconsistent with Article 5.5 of the SPS Agreement and, consequentially, has also failed to demonstrate that these measures are inconsistent with Article 2.3 of the SPS Agreement.

It said that Australia's measures at issue regarding fire blight, European canker and ALCM, are inconsistent with Article 5.6 of the SPS Agreement.

New Zealand has failed to demonstrate, however, that the requirements identified by New Zealand as "general" measures that are linked to all three pests at issue in the present dispute, are inconsistent with Article 5.6 of the SPS Agreement.

The panel added that New Zealand's claim under Annex C(1)(a) claim and its consequential claim under Article 8 of the SPS Agreement are outside of the Panel's terms of reference in this dispute.

The panel concluded that, to the extent that Australia's measures at issue regarding fire blight, European canker and ALCM, as well as the requirements identified by New Zealand as "general" measures that are linked to all three pests at issue in the present dispute, are inconsistent with the SPS Agreement, they have nullified or impaired benefits accruing to New Zealand under the WTO Agreements.

The panel recommended that the Dispute Settlement Body request Australia to bring the inconsistent measures as listed above into conformity with its obligations under the SPS Agreement. +

 


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