What's wrong with the WTO?
Hormone-Treated Beef Case
Complaints by: U.S. and Canada
EC Measures Concerning Meat and Meat Products (Hormones). Complaint by the United States. Report of the Panel. [WT/DS26/R/USA, 18 August 1997]
EC Measures Concerning Meat and Meat Products (Hormones). Complaint by the Canada. Report of the Panel. [WT/DS48/R/CAN, 18 August 1997]
Appellate Body Report (U.S. and Canada complaints) [WT/DS26/AB/R & WT/DS48/AB/R, 16 January 1998]
Decision by the Arbitrators (U.S. complaint) [WT/DS26/ARB, 12 July 1999]
Decision by the Arbitrators (Canada complaint) [WT/DS48/ARB, 12 July 1999]
"In 1980, as a result of consumer concern over reports of harm caused by eating hormone-treated meat, the EU [European Union] instituted a series of bans on the use of growth hormones in meat production and, subsequently, on the import of meat from animals treated with such hormones. In 1996, the United States and Canada challenged the European ban as a violation of the WTO rules."
"A WTO dispute panel found [the bans] to violate the WTO Agreements [food-safety rules] because the EU had not definitively demonstrated that the beef would cause harm to consumers. While the EU argued that it had the right to protect its citizens against uncertain risks from the hormones, the panel concluded that the WTO rules require proof of such harm before trade can be restricted."
"Despite the Appellate Body's determination that the European hormone ban violated the WTO rules, the EU refused to rescind the ban. As a result, the WTO granted the United States permission to impose $116.8 million in retaliatory trade sanctions each year that the EU maintains its ban."
—Earthjustice Legal Defense Fund
Pesticide Residues Case
Complaint by: U.S.
Japan - Measures Affecting Agricultural Products - Communication from Japan and the United States [WT/DS76/12, 30 August 2001]
Japan - Measures Affecting Agricultural Products - Report of the Appellate Body [WT/DS76/AB/R, 22 February 1999]
Japan - Measures Affecting Agricultural Products - Report of the Panel [WT/DS76/R, 27 October 1998]
In this case, the U.S. challenged Japan's public-health standards requiring testing for pesticide residues in certain imports of fruits and nuts. The testing was required when a poisonous chemical, methyl bromide, was used to fumigate these products against infestation by coddling moths. Because Japan's safety standards were higher than relevant WTO standards, the WTO found that they violated WTO agreements.
A dispute-settlement panel ruled in October 1998 that Japan's requirements for testing of agricultural imports was not based on "sufficient scientific evidence" as required by Article 2.2 of the Agreement on the Application of Sanitary and Phytosanitary Measures. An appellate body upheld the ruling in February 1999. The two countries finally issued a joint letter settling this dispute in August 2001.
Uncooked Salmon Case
Complaint by: Canada
Australia - Measures Affecting Importation of Salmon - Complaint by Canada - Report of the Appellate Body [WT/DS18/AB/R, 20 October 1998]
Australia - Measures Affecting Importation of Salmon - Complaint by Canada - Report of the Panel [WT/DS18/R, 12 June 1998]
Australia - Measures Affecting the Importation of Salmonids - Notification of Mutually Agreed Solution [WT/DS21/10, 1 November 2000]
Australia - Measures Affecting the Importation of Salmonids - Request for the Establishment of a Panel by the United States [WT/DS21/4, 11 May 1999]
In June 1998, a WTO dispute-settlement panel ruled in favor of Canada against Australia's quarantine against imports of uncooked wild salmon, and in October of that year an appellate body upheld the ruling. Australia had imposed the limitation after a 1994 risk assessment found that such imports posed a threat to Australian wild salmon. Roughly 20 bacteria found in Canadian and U.S. salmon but not in Australia, it concluded, posed a risk of spreading to and infecting wild Australian salmon.
The WTO ruling found that Australia's risk assessment was inadequate and not based on sound science. As a result, it said, the ban was "more trade-restrictive than required to achieve its appropriate level of sanitary protection" and exceeded international standards. Because it was arbitrarily and unjustifiably discriminatory, it violated the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS).
This ruling shifted the burden further onto importing countries that want to exclude a product to prove that the product is unsafe, rather than requiring exporting countries to prove that the products they send abroad are safe. It required expensive risk assessment measures to determine precise levels of risk, although health authorities must often adopt protections because the exact level of risk cannot be known. With it, the WTO added yet another precedent that under SPS countries cannot err on the side of caution.
In May 1999, the U.S. filed a related complaint alleging that the Australian prohibition on imports of fresh, chilled, or frozen salmonids appeared to be inconsistent with:
The U.S. complaint was settled with a joint communiqué with Australia in October 2000. It stated that a mutually satisfactory solution had been reached involving amendments to Australia's quarantining policies on uncooked salmonids introduced in May 2000.
Complaint by: Canada
European Communities - Measures Affecting Asbestos and Asbestos-Containing Products - Report of the Appellate Body [WT/DS135/AB/R, 12 March 2001]
European Communities - Measures Affecting Asbestos and Asbestos-Containing Products - Report of the Panel [WT/DS135/R & WT/DS135/R/Add.1, 18 September 2000]
In this challenge brought by Canada against France's ban on chrysotile or white asbestos, a WTO dispute-settlement panel ruled in favor of France. This was the first case in which the WTO upheld national public-health protections. The initial ruling occurred 10 months after the Seattle Ministerial meeting.
The Canadian government argued that French regulations should not have banned asbestos outright when it could have restricted its use, citing an International Organization for Standardization (ISO) standard for regulating asbestos. The ISO is an industry-dominated body, however, and requiring the use of such international standards tends to reduce national standards to the least common denominator.
Canada also charged that France discriminated in favor of asbestos substitutes. It claimed that the French ban "nullifies and impairs" benefits from Uruguay Round tariff concessions. This line of reasoning, had it been accepted, would make it harder to ban dangerous substances after a trade agreement is adopted.
The dispute-settlement panel ruled in September 2000 that the ban was justified to protect the health of French workers under Article XX(b) of the 1994 General Agreement on Tariffs and Trade (GATT), which provides a general exception to WTO rules for measures considered necessary to protect human health. But the panel agreed with Canada that France had discriminated against Canadian asbestos; it concluded that white asbestos and less-dangerous domestic substitute fibers are "like" products as defined by Article III:4 of GATT, which should in principle be accorded the same treatment on the French market. The WTO Appellate Body upheld the ruling on Article XX(b), but reversed the initial panel's decision on Article III:4.
The European Commission called the ruling a "landmark." Canadian asbestos producers protested, however, that the ruling favored affluent countries, who consider asbestos dangerous, over developing countries, where they claimed asbestos cement helps to reduce mortality rates.
Gasoline/Clean Air Act Case
Complaint by: Venezuela and Brazil
United States - Standards for Reformulated and Conventional Gasoline. Appellate Body Report and Panel Report. Action by the Dispute Settlement Body. [WT/DS2/9, 20 May 1996]
"The 1990 [U.S.] Clean Air Act Amendments require the use of reformulated gasoline in areas out of compliance with air quality standards in order to reduce toxic motor vehicle emissions. The EPA [Environmental Protection Agency] … defined the methods that refineries must use in calculating their compliance with the reformulated gasoline requirements.
"Venezuela and Brazil challenged the rule before the WTO. The WTO found the U.S. rule to violate the WTO rules because it treated foreign refineries differently from domestic ones, without any concern for the enforcement and air quality consequences of that ruling. [An appellate panel upheld the ruling of the original dispute-settlement panel.]
"To comply with the WTO decision, EPA changed its regulations to allow foreign refineries to use all alternative methods of calculating their compliance with the gasoline requirements, provided the refineries' governments agree to subject the refineries to U.S. inspection and enforcement authority. … [This change allowed] Venezuelan gasoline with higher concentrations of certain pollutants into the United States."
—Earthjustice Legal Defense Fund
In setting gasoline cleanliness standards, the EPA attempted to be fair to all gas refiners. While it could have set a single standard and forced all producers to meet it, this might have resulted in reduced supply, shortages and higher prices. It opted instead to set a baseline for each refiner and to measure improvement against it. Domestic and foreign producers who had cleanliness data from 1990 used that year as a baseline. Domestic and foreign producers who did not have 1990 data had to match the actual average 1990 contaminant level of those who did.
Venezuela and Brazil, however, complained that a foreign producer without data might have to meet a higher standard than a U.S. producer whose 1990 cleanliness record was poor, and the WTO upheld the complaint.
Automobile Fuel-Efficiency Case
Complaint by: E.U.
GATT, United States - Taxes on Automobiles (DS31/R), Report of the Panel, Oct. 11, 1994. [Pre-WTO, not available on WTO Web site.]
In the wake of 1970s energy crisis, the United States passed Corporate Average Fuel Efficiency (CAFE) standards that were successful in doubling the average fuel economy of passenger cars operating in the U.S. by the early 1990s. These rules contributed to substantially cutting U.S. emissions of greenhouse gases and were consistent with United Nations standards on reducing global warming.
The CAFE standards applied equally to all U.S. and foreign automobile manufacturers. They aimed to reduce emissions by all passenger vehicles sold in the U.S. by requiring that the average fuel-efficiency of all the cars sold by each firm fall below a given figure. For U.S. companies who also imported foreign-made vehicles, it required that both the foreign and the domestic fleets meet the same fuel-efficiency standards.
U.S. car manufacturers complied and began to produce smaller, more fuel-efficient models. But although many European manufacturers had met CAFE standards in the 70s and early 80s, they later shifted to a strategy of exporting more profitable, less fuel-efficient luxury cars to the U.S. market. They voluntarily chose not to comply with the CAFE standards and as a result paid substantial penalties under the law.
In 1993, Europe challenged the CAFE standards under the General Agreement on Tariffs and Trade (GATT, now enforced by the WTO), arguing that their effect was to discriminate against European automobile manufacturers. The GATT panel upheld the challenge, ruling that—regardless of its intent—the requirement that each separate fleet meet the standards had a negative impact on European manufacturers and thus violated GATT non-discrimination rules.
This ruling established an apparent precedent that even if a rule is not discriminatory, a party that chooses not to comply with it and then suffers the consequences can claim discriminatory effect. This perverse logic is an invitation to foreign firms in any country to violate standards designed to protect the environment or people and then claim injury under the WTO.
See also the Greenhouse Gases Controversy. In this dispute, the U.S. and the E.U., on behalf of their auto industries, used similar arguments to challenge Japan's implementation of the Kyoto Protocol on greenhouse gases.
Shrimp/Sea Turtle Case
Complaint by: India, Malaysia, Pakistan and Thailand
United States - Import Prohibition of Certain Shrimp and Shrimp Products. Final Report. [WT/DS58/R, 15 May 1998]
United States - Import Prohibition of Certain Shrimp and Shrimp Products. Report of the Appellate Body. [WT/DS58/AB/R, 12 October 1998]
United States - Import Prohibition of Certain Shrimp and Shrimp Products. Recourse to article 21.5 by Malaysia. [WT/DS58/RW, 15 June 2001]
"In 1989, Congress amended the U.S. Endangered Species Act to prohibit the import of shrimp from countries that do not have sea turtle protections comparable to those of the U.S. [which requires turtle excluder devices in shrimp fishing]. Thailand, Pakistan, India, and Malaysia mounted a trade challenge in the WTO. According to the WTO, the U.S. went too far when it blocked trade because other countries did not have the desired conservation policies in place. …"
"All the countries involved acknowledged the sea turtles are endangered, that it is a legitimate goal to protect the turtles, and that turtle excluder devices are effective and inexpensive. Nonetheless, the United States could not prohibit imports of shrimp from countries that did not require turtle excluder devices unless the other countries agreed to such a requirement. Moreover, the United States had to allow each country an opportunity to prove that its fishing practices did not cause excessive harm to sea turtles. …"
"The U.S. has promised the WTO that it will change its regulations in early December 1999."
—Earthjustice Legal Defense Fund
After the U.S. made the changes in the Endangered Species Act required by the Dispute Settlement Body's November 6, 1998 recommendations, Malaysia continued to assert that the U.S. had not fully complied with the WTO ruling. In a May 16, 2001 ruling, a WTO compliance panel ruled in favor of the U.S. It found that the U.S.'s continuation of the import ban on shrimp and shrimp products was justified under Article XX(g) of the General Agreement on Tariffs and Trade (GATT), which provides a general exception to GATT rules for measures relating to the conservation of exhaustible natural resources.
Tuna/Dolphin Case I
Complaint by: Mexico
GATT, United States - Restrictions on Imports of Tuna (DS21/R), Report of the Panel, Sept. 3, 1991. [Pre-WTO, not available on WTO Web site.]
The U.S. Marine Mammal Protection Act (MMPA) banned from the U.S. market domestic or imported canned tuna caught by purse seine fishing. This method incidentally killed large numbers of dolphins. In a case brought by Mexico, a GATT panel ruled against Section 101(a)(2) of the MMPA. But GATT never adopted the decision, so the ruling never took effect.
The GATT panel interpreted language in Article III that prohibits discrimination between products on basis of where they are produced to also prohibit discrimination on basis of how they are produced. Article III:4 says that "like products" produced domestically and abroad must be given equal treatment, but the panel ruled that the phrase "like products" pertains to products' physical characteristics and that how they are produced, harvested or processed is not relevant. This exclusion could also apply, for example, to child labor in the production of soccer balls.
In 1994, a GATT panel also ruled against the MMPA, this time in favor of Europe (see Tuna/Dolphin Case II).
Tuna/Dolphin Case II
Complaint by: European Community
GATT, United States - Restrictions on Imports of Tuna (DS29/R), Report of the Panel, June 1994. [Pre-WTO, not available on WTO Web site.]
In 1994, following the 1991 ruling against the U.S. in favor of Mexico (Tuna/Dolphin Case I), a GATT panel ruled in favor of Europe against the U.S. Marine Mammal Protection Act (MMPA) dolphin protections.
In 1997, President Clinton finally succeeded in pushing through changes gutting the dolphin-protection provisions of the MMPA in order to comply with the GATT ruling.
Plant and Animal Patents Case
Complaint by: U.S.
India - Patent Protection for Pharmaceutical and Agricultural Chemical Products. Report of the Panel. [WT/DS50/R, 5 September 1997]
India - Patent Protection for Pharmaceutical and Agricultural Chemical Products. Report of the Appellate Body. [WT/DS50/AB/R, 19 December 1997]
In this case, the U.S. challenged an Indian law that, in an effort to keep prices down on pharmaceuticals and other products, excluded plant and animal varieties from patenting. The WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) requires that by 2005 developing countries change their patent laws to allow foreign companies to patent local plant varieties.
Even though the deadline had not yet been reached, the WTO dispute-settlement panel ruled that India was not moving fast enough towards compliance. As a result, India must grant monopolies to foreign corporations on plant and animal varieties based on patents granted by any other WTO member.
Chiquita Banana Case
Complaint by: U.S.
European Communities - Regime for the Importation, Sale and Distribution of Bananas - Complaint by the United States - Report of the Panel [WT/DS27/R/USA, May 22, 1997]
European Communities - Regime for the Importation, Sale and Distribution of Bananas - Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes. [WT/DS27/15, 7 January 1998]
European Communities - Regime for the Importation, Sale and Distribution of Bananas - Recourse to Arbitration by the European Communities under Article 22.6 of the DSU - Decision by the Arbitrators [WT/DS27/ARB, 9 April 1999]
This dispute was initiated by the U.S. government on behalf of Chiquita Brands, a U.S.-based corporation, in response to Europe's Lomé Convention preferences for small banana producers in former European colonies in the Caribbean. Chiquita grows bananas in Latin America and exports them to Europe and the rest of the world.
In the Lomé Convention, the European Union granted its former colonies special low tariffs and quotas on bananas. The Uruguay Round of trade negotiations exempted these preferences from the most favored nation requirements of the General Agreement on Tariffs and Trade. GATT, now enforced by the World Trade Organization, allows rich countries to grant preferential tariffs to poor countries to encourage development.
The economies of most of the Caribbean islands aided by the tariff breaks depend solely on bananas, and most of the banana producers who benefit are small farmers. They cannot compete with the large Latin American plantations of Chiquita Brands and the other agribusiness giants who grow two-thirds of the world's bananas. Chiquita already controls 50 percent of the EU banana market, while Caribbean island producers supply only 8 percent. Without the Lomé preferences, as the prime minister of Santa Lucia has pointed out, these countries "would have little or no possibility of participating in the global trading system."
In 1997, a WTO dispute-settlement panel decided in favor of the the Clinton administration's challenge. Arbitration panels in 1998 and 1999 upheld the original panel's decision.
These WTO rulings striking down the EU-Caribbean arrangement threaten to undermine higher-priority U.S. efforts in the region. "I really do not see why it is in the interest of the United States that poor countries in the Caribbean and elsewhere, which are not able to do anything other than grow bananas, should be driven into more dangerous economic activity such as drug trafficking," commented EU Trade Commissioner Sir Leon Brittan. The commander of U.S. forces in the region, Marine General John Sheehan, concurred: if Caribbean banana producers are deprived of their only means of providing for their families, he said, they will resort to drug dealing or illegal migration.
None of Chiquita's bananas are grown in the United States. Yet CEO Carl Lindner effectively hired the United States government to represent his firm. In 1996, two days after the Clinton administration filed a complaint with the WTO against the EU banana policy, Lindner donated $500,000 to the Democratic Party. A model of bipartisanship, Lindner also showered $350,000 on the Republican National Committee and campaign committees in 1998. One month later, the Republican Senate leadership introduced a bill imposing retaliatory tariffs on the EU.
On April 11, 2001, the U.S. and E.U. reached an agreement to begin to dismantle the barriers to which the U.S. banana companies object. In July 2001, U.S. Trade Representative Robert Zoellick said the U.S. was satisfied with Europe's implementation of the agreement and the Bush administration lifted $191 million worth of retaliatory trade sanctions the U.S. had imposed on the E.U.
Myanmar Sanctions Case
Complaint by: EU and Japan
United States - Measure Affecting Government Procurement - Lapse of Authority for Establishment of the Panel - Note by the Secretariat [WT/DS88/6 & WT/DS/95/6, 14 February 2000]
United States - Measure Affecting Government Procurement - Communication from the Chairman of the Panel [WT/DS88/5 & WT/DS95/5, 12 February 1999]
United States - Measure Affecting Government Procurement - Request for Establishment of a Panel by the European Communities [WT/DS88/3, 9 September 1998]
United States - Measure Affecting Government Procurement - Request to Join Consultations - Communication from Japan [WT/DS88/2, 2 July 1997]
United States - Measure Affecting Government Procurement - Request for Consultations by the European Communities [WT/DS88/1 & GPA/D2/1, 26 June 1997]
The state of Massachusetts passed a government purchasing law in 1996 barring companies doing business with Myanmar from bidding for major public contracts. The military government of Myanmar (formerly Burma) has been recognized by many human-rights groups and the U.S. State Department as an egregious violator of basic human rights.
In 1997, The European Community and Japan initiated dispute-settlement consultations with the U.S., arguing that the Massachusetts legislation violated provisions of the WTO Agreement on Government Purchasing (AGP). They also argued that it was unfair to foreign investors under the WTO Agreement on Trade Related Investment Measures (TRIMS)
The WTO challenge was allowed to lapse in 2000 because two U.S. courts had struck down the Massachusetts law as an unconstitutional restriction by a state of federal foreign-policy prerogatives. The courts also cited the WTO challenge in their rulings. The two cases were filed by the National Foreign Trade Council, a private-sector body which represents many of the most important U.S. multinational businesses.
By Peter Costantini ~ Seattle ~ November 2001