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TWN Info Service on WTO and Trade Issues (Nov15/19)
30 November 2015
Third World Network

AB affirms US measures on Mexican tuna WTO-illegal
Published in SUNS #8141 dated 24 November 2015


Geneva, 23 Nov (Kanaga Raja) -- The Appellate Body of the World Trade Organisation (WTO) has found that the United States has not brought its dolphin-safe labelling regime for tuna products into conformity with the recommendations and rulings of the Dispute Settlement Body (DSB).

In a ruling issued on 20 November, the Appellate Body (AB) recommended that the DSB request the United States to bring its measure, found to be inconsistent with the Technical Barriers to Trade (TBT) Agreement and the GATT 1994, into conformity with its obligations under those agreements.

A compliance panel on 14 April 2015 had largely ruled that an amended measure instituted by the United States concerning the importation, marketing and sale of tuna and tuna products from Mexico is inconsistent with its WTO obligations.

Mexico had sought recourse to Article 21.5 of the Dispute Settlement Understanding (DSU) over the alleged failure of the US to implement an earlier WTO ruling on the issue.

On Mexico's claims under Article 2.1 of the TBT Agreement, the compliance panel had concluded that:

* the eligibility criteria in the amended tuna measure do not accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, and are thus consistent with Article 2.1 of the TBT Agreement;

* the different certification requirements in the amended tuna measure accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Article 2.1 of the TBT Agreement; and

* the different tracking and verification requirements in the amended tuna measure accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Article 2.1 of the TBT Agreement.

The panel had also issued several rulings with respect to Mexico's claims under the GATT 1994 (see SUNS #8004 dated 17 April 2015).

The United States and Mexico each appealed certain issues of law and legal interpretations developed in that compliance panel ruling.

ARTICLE 2.1 OF THE TBT AGREEMENT

According to the AB report, the United States and Mexico each appealed certain aspects of the Panel's reasoning and findings under Article 2.1 of the TBT Agreement.

Mexico requests the AB to reverse the Panel's finding that the eligibility criteria in the amended tuna measure are consistent with Article 2.1 of the TBT Agreement, whereas the United States seeks reversal of the Panel's findings that the different certification requirements and the different tracking and verification requirements in the amended tuna measure are inconsistent with Article 2.1 of the TBT Agreement.

Following its analysis, the AB said that it has found that the Panel erred in its analysis of whether the amended tuna measure has a detrimental impact on Mexican tuna products in the US market within the meaning of Article 2.1 of the TBT Agreement.

As regards the Panel's analysis of whether the detrimental impact on Mexican tuna products stems exclusively from a legitimate regulatory distinction, the AB said "we have not found error in the Panel's articulation of the legal standard."

However, the AB said, it has found error in the Panel's "reaffirm[ation]" of the supposed "finding" of the Appellate Body that "the eligibility criteria are even-handed, and accordingly are not inconsistent with Article 2.1 of the TBT Agreement."

"We have further found that, in the light of the circumstances of this dispute and the nature of the distinctions drawn under the amended tuna measure, the Panel erred by failing to consider whether differences in the relative risks of harm to dolphins from different fishing techniques in different areas of the oceans explain or justify the differences in the certification requirements and the tracking and verification requirements applied inside and outside the ETP [Eastern Tropical Pacific Ocean] large purse-seine fishery."

In addition, "we have indicated that, due to the segmented approach that it adopted in its analysis of the different sets of certification and tracking and verification requirements, the Panel did not properly apply the legal test that it had identified as relevant to an assessment of even-handedness, namely, ‘whether the detrimental treatment can be reconciled with, or is rationally related to, the policy pursued by the measure at issue'."

Taken together, the errors that the AB has identified in the two steps of the Panel's analysis of "treatment no less favourable" under Article 2.1 of the TBT Agreement constitute error in the application of that provision to the amended tuna measure, and deprive the Panel's ultimate findings thereunder of a proper legal basis.

Accordingly, the AB reversed the Panel's discrete findings (in paragraph 8.2 of the panel report) that:

(a) the eligibility criteria in the amended tuna measure do not accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, and are thus consistent with Article 2.1 of the TBT Agreement;

(b) the different certification requirements in the amended tuna measure accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Article 2.1 of the TBT Agreement; and

(c) the different tracking and verification requirements in the amended tuna measure accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Article 2.1 of the TBT Agreement.

On completing the legal analysis, the AB concluded that in the absence of a proper assessment by the Panel of the respective risks posed to dolphins inside and outside the ETP large purse-seine fishery, it is unable to complete the legal analysis and assess fully whether all of the regulatory distinctions drawn under the amended tuna measure can be explained and justified in the light of differences in the relative risks associated with different methods of fishing for tuna in different areas of the oceans.

Nevertheless, "we have been able to examine the even-handedness of the labelling conditions applied under the amended tuna measure in certain scenarios that would present comparably high risks to dolphins inside and outside the ETP large purse-seine fishery."

The AB found, in this respect, that aspects of the design of the amended tuna measure reflect a lack of even- handedness.

In particular, the AB considered that the determination provisions do not provide for the substantive conditions of access to the dolphin-safe label to be reinforced by observer certification in all circumstances of comparably high risks, and that this may also entail different tracking and verification requirements than those that apply inside the ETP large purse-seine fishery.

For this reason, it has not been demonstrated that the differences in the dolphin-safe labelling conditions under the amended tuna measure are calibrated to, or commensurate with, the risks to dolphins arising from different fishing methods in different areas of the oceans.

"Since it therefore follows that the detrimental impact of the amended tuna measure cannot be said to stem exclusively from a legitimate regulatory distinction, we find that the amended tuna measure is inconsistent with Article 2.1 of the TBT Agreement."

ARTICLES I, III, AND XX OF THE GATT 1994

The United States requested the AB to reverse the Panel's findings that the certification requirements and the tracking and verification requirements of the amended tuna measure are inconsistent with Articles I: 1 and III: 4.

According to the AB report, the United States claims that the Panel erred in finding that the two sets of requirements under the amended tuna measure: (i) provide an "advantage, favour, privilege, or immunity" to tuna and tuna products from other Members that is not "accorded immediately and unconditionally" to like products from Mexico, in a manner inconsistent with Article I: 1; and (ii) accord "less favourable treatment" to Mexican tuna and tuna products than that accorded to like domestic products, in a manner inconsistent with Article III: 4.

The United States does not advance independent arguments in support of these claims, but rather refers back to the arguments it developed in its challenge to the Panel's alleged errors regarding the detrimental impact of the certification and tracking and verification requirements under Article 2.1 of the TBT Agreement.

In response, Mexico reiterates its claim that, instead of making separate findings of inconsistency with respect to each set of criteria, "the Panel should have analysed the amended tuna measure as a whole" and concluded that the measure is inconsistent with Articles I: 1 and III: 4 of the GATT 1994.

In Mexico's view, the Panel's failure to make findings of inconsistency with Articles I: 1 and III: 4 with respect to the amended tuna measure as a whole amounts to legal error.

The AB said it has identified a number of errors of the Panel's analysis and ultimate findings under the chapeau of Article XX of the GATT 1994 concerning the eligibility criteria, certification requirements, and tracking and verification requirements.

"We do not consider that the Panel properly analysed whether the discrimination that exists is between countries where the same conditions prevail. Having examined the Panel's findings, we consider that, in this dispute, the prevailing conditions between countries are the risks of adverse effects on dolphins arising from tuna fishing practices, and that such conditions are the same for purposes of the analysis of the conformity of the amended tuna measure with the requirements of the chapeau."

With regard to whether the eligibility criteria resulted in arbitrary or unjustifiable discrimination, the AB considered that the Panel's analysis suffered from a similar failing to that arising in its analysis under Article 2.1 of the TBT Agreement, namely, that it categorically concluded that the disqualification of tuna products derived from tuna caught by setting on dolphins is a permissible regulatory distinction without conducting the inherently comparative exercise needed to determine under what circumstances such a distinction would be permissible.

"We also express several concerns in respect of the Panel's analysis of the certification and tracking and verification requirements, including the fact that the Panel did not properly identify the relative risk profiles in different fisheries that would have permitted the Panel to assess whether the regulatory distinctions in the amended tuna measure are, as argued by the United States, calibrated to the different risk profiles in different fisheries."

Furthermore, said the AB, the fact that the Panel conducted a segmented and isolated analysis of the three sets of requirements under the amended tuna measure was also problematic in the context of an analysis under the chapeau of Article XX.

Indeed, a conclusion that a particular element of the amended tuna measure results in arbitrary or unjustifiable discrimination because it is not balanced in relation to particular risk profiles in different fisheries may not be sustainable if other integral elements of the measure are also examined.

This, in the AB's view, underscores the importance of making an assessment of arbitrary or unjustifiable discrimination in respect of relevant elements of the measure, taking into account relevant inter-linkages.

For the foregoing reasons, the AB reversed the Panel's finding (in paragraph 8.5. a of the panel report) that the "eligibility criteria" are applied consistently with the chapeau of Article XX of the GATT 1994, as well as the Panel's discrete findings (in paragraphs 8.5. b and 8.5. c of the panel report) that the "certification requirements" and the "tracking and verification requirements" are each applied inconsistently with the chapeau of Article XX of the GATT 1994.

On completing the legal analysis, the AB said that in the absence of a proper assessment by the Panel of the respective risks posed to dolphins inside and outside the ETP large purse-seine fishery, "we are unable to complete the legal analysis and assess fully whether all of the regulatory distinctions drawn under the amended tuna measure can be explained and justified in the light of differences in the relative risks associated with different methods of fishing for tuna in different areas of the oceans."

"Nevertheless, we have been able to examine whether or not the labelling conditions applied under the amended tuna measure constitute arbitrary or unjustifiable discrimination in certain scenarios that would present comparably high risks to dolphins inside and outside the ETP large purse-seine fishery."

The AB found, in this respect, that aspects of the design of the amended tuna measure are difficult to reconcile with the objective of protecting dolphins from harm.

In particular, the AB considered that the determination provisions do not provide for the substantive conditions of access to the dolphin-safe label to be reinforced by observer certification in all circumstances of comparably high risk, and that this may also entail different tracking and verification requirements than those that apply inside the ETP large purse-seine fishery.

"Thus, the United States has not demonstrated that these aspects of the amended tuna measure do not constitute arbitrary or unjustifiable discrimination within the meaning of the chapeau of Article XX. For all of these reasons, it has not been established that the amended tuna measure is justified under Article XX of the GATT 1994."

Consequently, in addition to finding that the amended tuna measure is inconsistent with Article I: 1, and with Article III: 4, of the GATT 1994, the AB found that it has not been demonstrated that the amended tuna measure is applied in a manner that does not constitute arbitrary or unjustifiable discrimination; and, thus, that the amended tuna measure is not justified under Article XX of the GATT 1994.

In its overall findings and conclusions, the AB, with respect to Article 2.1 of the TBT Agreement, found that the Panel erred in the application of Article 2.1 in its analysis of whether the amended tuna measure modifies the conditions of competition to the detriment of Mexican tuna products in the US market.

It found that the United States has not established that the Panel erred in its articulation of the relevant legal standard for the purposes of assessing whether the detrimental impact of the amended tuna measure on Mexican tuna products stems exclusively from a legitimate regulatory distinction.

It further found that the Panel erred in finding that, in the original proceedings, the Appellate Body settled the issue of whether the eligibility criteria are even-handed; and that the Panel erred in the application of Article 2.1 in its analysis of whether the detrimental impact of the certification requirements and the tracking and verification requirements on Mexican tuna products stems exclusively from a legitimate regulatory distinction.

The AB also found that the United States has not established that the Panel erred in its assessment of whether the determination provisions are even-handed.

It found that neither Mexico nor the United States has established that the Panel acted inconsistently with its duty to conduct an objective assessment of the matter pursuant to Article 11 of the DSU in its analyses of the consistency of the eligibility criteria and the certification requirements with Article 2.1 of the TBT Agreement.

The AB reversed the Panel's finding that the eligibility criteria do not accord less favourable treatment to Mexican tuna products than that accorded to like products from the United States and to like products originating in any other country, and are thus consistent with Article 2.1, as well as the Panel's discrete findings that the different certification requirements and the different tracking and verification requirements each accord less favourable treatment to Mexican tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Article 2.1.

It completed the legal analysis and found that the amended tuna measure modifies the conditions of competition to the detriment of Mexican tuna products in the US market; that such detrimental impact does not stem exclusively from a legitimate regulatory distinction; and, thus, that the amended tuna measure accords less favourable treatment to Mexican tuna products as compared to like tuna products from the United States and other countries and is therefore inconsistent with Article 2.1 of the TBT Agreement.

With respect to Articles I: 1 and III: 4 of the GATT 1994, the AB found that the Panel erred in the application of Articles I: 1 and III: 4 in its analyses of whether the amended tuna measure provides an "advantage, favour, privilege, or immunity" to tuna products from other countries that is not "accorded immediately and unconditionally" to like products from Mexico, in a manner inconsistent with Article I: 1 of the GATT 1994, and of whether that measure accords less favourable treatment to Mexican tuna products than that accorded to like domestic products, in a manner inconsistent with Article III: 4 of the GATT 1994.

It reversed the Panel's discrete findings that the eligibility criteria, the different certification requirements, and the different tracking and verification requirements are each inconsistent with Articles I: 1 and III: 4 of the GATT 1994.

With respect to the chapeau of Article XX of the GATT 1994, the AB found that the Panel erred in the application of the chapeau of Article XX in its analyses of whether the eligibility criteria, the different certification requirements, and the different tracking and verification requirements are each applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail.

It reversed the Panel's finding that the eligibility criteria are applied in a manner that meets the requirements of the chapeau of Article XX, as well as the Panel's discrete findings that the different certification requirements and the different tracking and verification requirements are each applied in a manner that does not meet the requirements of the chapeau of Article XX.

In completing the analysis under the GATT 1994, the AB found that the amended tuna measure is inconsistent with Article I: 1, and with Article III: 4, of the GATT 1994; and that it has not been demonstrated that the amended tuna measure is applied in a manner that does not constitute arbitrary or unjustifiable discrimination and, thus, that the amended tuna measure is not justified under Article XX of the GATT 1994. +

 


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