Hormones: European Communities - Measures Affecting Meat and Meat Products Conclusion

Hormones: European Communities - Measures Affecting Meat and Meat Products

Conclusion

The Hormones case is of great importance because it charts the SPS Agreement's path away from reliance on the GATT's discrimination-based regime. In adopting the SPS Agreement, WTO Members recognized that a discrimination-based test is a poor filter for distinguishing between legitimate SPS measures, and those implemented for protectionist purposes -- especially since pest and disease risks vary among Member Countries. Additionally, Members recognized that even non-discriminatory measures have the clear potential to hamper international trade. Thus, while preserving the sovereign right of Members to promulgate the standards necessary to protect human life and health within their borders, the SPS Agreement seeks to root out those measures which are arbitrary in the sense that they do not really serve to advance their purported purpose of protecting life and health. While the SPS Agreement prohibits SPS measures which "arbitrarily or unjustifiably discriminate between Members,"¹¹⁶ this is a weaker non-discrimination obligation than the national treatment obligation imposed by GATT Article III. The SPS Agreement instead relies on the requirement that SPS measures be based on an objective standard -- either an international standard under Article 3.1, or a risk assessment under Article 5.1. Thus, a measure may be invalidated if it lacks an objective basis -- even if the measure is not directly or indirectly discriminatory.

While the Panel's interpretation of the SPS Agreement moved the Agreement far beyond the GATT's discrimination-based regime, the Appellate Body took a much more deferential approach in its interpretation of the SPS Agreement, and in the process gave back much of the ground claimed by the Panel. First, in the context of Article 3.1, the Panel interpreted the requirement that a Member's SPS measures be "based on" an international standard to mean that the measures must "conform to" -- essentially adopt -- the international standard. The Appellate Body rejected the Panel's interpretation, finding instead that much less than identity is required to support a finding that a measure is based on an international standard. Next, as in the context of Article 3.1, the Panel interpreted Article 5.1's requirement that a Member's SPS measures be "based on" a risk assessment to mean that the measures must "conform to" the assessment. The Appellate Body rejected the Panel's "conform to" test, and instead adopted a less stringent alternative: the "rational relationship" test. Although it is not entirely clear, the Appellate Body's analysis suggests that an extremely weak relationship between a measure and a risk assessment will suffice to satisfy the "rational relationship" test. Thus, in the context of both Article 3.1 and Article 5.1, the Appellate Body substantially weakened the ability of the SPS Agreement to distinguish between measures which further the protection of human life and health, and those which do not. In doing so, the Appellate Body denied proper recognition to a fundamental premise underlying the SPS Agreement: that even non-discriminatory measures have the clear potential to hamper international trade. Further, because those measures which do not advance the protection of human life and health are also likely to be protectionist measures in disguise, the Appellate Body's decision also cripples the Agreement's ability to distinguish between valid SPS measures on the one hand, and protectionist measures on the other.

In its determination that Article 5.1's "based on" requirement does not have a procedural aspect, the Appellate Body missed a chance to repair some of the damage it had done in establishing the "rational basis" test. The Panel found that the Article 5.1 test has a procedural aspect -- that the party imposing the measure "actually took into account a risk assessment when it enacted or maintained its sanitary measure."¹¹⁷ The Panel's test promotes harmonization by encouraging Members to evaluate the scientific basis for all their measures, not just those which are later disputed -- and this evaluation will occur at the time of enactment, rather than at the advent of litigation. In contrast to a rigorous substantive test, a procedural test does not guarantee that measures are based on an objective standard; however, a procedural test will tend to lead to this favorable result. On the other hand, according to the Appellate Body's analysis, so long as there is an outwardly verifiable relationship between the measure and a risk assessment, it makes no difference whether the Member imposing the measure ever even read the risk assessment. The Appellate Body's determination encourages Members to gamble by implementing measures as driven by domestic policy considerations -- and without consideration for the measures' impact on international trade -- worrying about justification only in the unlikely event that litigation eventually ensues.

The Appellate Body's analysis under Article 5.5, which marked a further retreat from the objective standard originally enunciated by the Panel, also introduced substantial unpredictability into the analysis under the SPS Agreement. Once the bulwark provided by Articles 3.1 and 5.1 has been rendered ineffective, analysis under the SPS Agreement is left to Article 5.5.¹¹⁸ At best, Article 5.5 provides weak protection against measures which discriminate between Members or result in a disguised restriction on international trade. At worst -- as the Appellate Body's analysis clearly demonstrates -- Article 5.5 transforms the analysis under the SPS Agreement into an unprincipled inquiry into the intent of the Member imposing a measure. The inquiry is not whether the Member imposing a measure discriminated -- but rather whether the Member intended to discriminate. Clearly, once the analysis under Article 5.5 has descended into the morass of intention, the reviewing body's viewpoint regarding a measure -- i.e., whether it is legitimate or protectionist -- becomes outcome determinative.

In conclusion, there are no winners under the Appellate Body's decision in the Hormones case. As discussed above, the SPS Agreement was motivated by recognition that a discrimination-based test is a poor filter for distinguishing between legitimate SPS measures, and those implemented for protectionist purposes; and that even non-discriminatory measures have the potential to hamper international trade. The incorporation of the latter principle in the text of the SPS Agreement creates great potential for facilitating international trade. Although it is not entirely clear,¹¹⁹ the Appellate Body's analysis seems to indicate that a weak relationship between a measure and an objective standard -- either an international standard or a risk assessment -- will be sufficient to satisfy the "based on" requirement. If so, the SPS Agreement's "great potential" will not be realized. Further, the Appellate Body's analysis reveals that once a weak test is accepted in Articles 3.1 and 5.1, the analysis under the SPS Agreement is transformed into an unprincipled inquiry into the intent of the Member imposing a measure -- and such a result seems antithetical to the principles underlying the Agreement.

116 SPS Agreement, Article 2.3 (emphasis added).

117 U.S. Panel Report, para. 8.113; Canada Panel Report, para. 8.116.

118 It should be noted that although neither the Panel nor the Appellate Body reached an analysis Article 2.2 or Article 5.6, these Articles contain positive obligations and therefore are generally applicable to an analysis under the SPS Agreement.

119 Because the Appellate Body was not forced to precisely define the "based on" requirement in either Article 3.1 or Article 5.1, the contours of the requirement can not be known for certain.

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