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EC–Seal Products: Seals and Sensibilities (TBT Aspects of the Panel and Appellate Body Reports)

  • PHILIP I. LEVY (a1) and DONALD H. REGAN (a2)
Abstract
Abstract

The EC–Seal Products case stemmed from complaints by Canada and Norway against European Union regulations that effectively banned the importation and marketing of seal products from those countries. The EU said it had responded to European moral outrage at the killing of seals. Canada and Norway challenged the regime under various provisions of the Technical Barriers to Trade (TBT) Agreement and the GATT. This article considers TBT aspects of the Panel and Appellate Body decisions. It discusses issues such as whether there is any bright line to be drawn between legitimate and illegitimate purposes in regulation, the proper legal meaning of a ‘technical regulation’, and the interpretation of TBT 2.1.

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Corresponding author
*Email: plevy@thechicagocouncil.org.
**Email: donregan@umich.edu.
References
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1 WT/DS400 & 401/R (adopted as modified 18 June 2014).

2 WT/DS400 & 401/AB/R (adopted 18 June 2014).

3 Charnovitz Steve (1997), ‘Moral Exception in Trade Policy’, The Virginia Journal of International Law, 38: 689.

4 Although there is no previous jurisprudence on GATT XX(a) itself, the discussion of GATS XIV(a) in United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services (Antigua and Barbuda), WT/DS285/R (adopted 22 May 2007) is generally thought to be relevant.

5 This generalization abstracts from potential differences between restrictions under the GATT and TBT.

6 This seems to be a principal source of division between those who are more or less concerned about an expansive interpretation of the ‘moral exceptions’ clause. Those who are comfortable with backup protections against capriciousness are less concerned about allowing a broad range of motives.

7 So as not to take on every conceivable point of conflict, we set aside questions about the cost of informational regulation (e.g. country of origin or content labeling) and assume that regulators could make clear the contents.

8 United States – Measures Affecting the Production and Sale of Clove Cigarettes (Indonesia), WT/DS406/AB/R (adopted 24 April 2012). For a detailed discussion, see Broude et al. (2014), ‘Do you mind if I don't smoke? Products, purpose and indeterminacy in US – Measures Affecting the Production and Sale of Clove Cigarettes’, World Trade Review, 13(2): 357392.

9 United States – Import Prohibition of Certain Shrimp and Shrimp Products (India; Malaysia; Pakistan; Thailand), WT/DS58/AB/R (adopted 6 November 1998), Article 21.5.

10 We are assuming here that regulation is limited to working through effects on domestic consumption, as opposed to through adopting penalties that might alter the behavior of foreign producers who also had interests within the country or through attempting to influence foreign governments.

11 A point of disagreement between the AB and the Panel in EC–Seal Products concerned whether such production history counted as a ‘product characteristic’ or not. The Panel said yes; the AB said no. It was a distinction critical to whether the EU Seal Regime counted as a technical barrier to trade (Panel) or not (AB).

12 This is dealt with in Section 3.1 below.

13 In legal parlance, the distinction is between ‘incorporated PPM's’ (where the process affects the physical constitution of the product) and ‘unincorporated PPM's’ (where it does not). Only the latter are controversial.

14 Maskus Keith (1997), Should Core Labor Standards be Imposed Through International Trade Policy, Policy Research Working Paper No. 1817, Washington, DC: World Bank.

15 Charnovitz Steve (1998), ‘The Moral Exception in Trade Policy’, The Virginia Journal of International Law, 38(Summer): 21.

16 Marwell Jeremy C. (2006), ‘Trade and morality: The WTO public morals exception after gambling’, New York University Law Review, 81: 802, at 815.

17 Wu Mark (2008), ‘Free Trade and the Protection of Public Morals: An Analysis of the Newly Emerging Public Morals Clause Doctrine’, The Virginia Journal of International Law, 33: 215, at 235.

18 Para. 7.457.

19 See Section 7.3.3.1 above.

20 Para. 7.640.

21 This may overstate the ease of reaching agreement, but in an interesting and relevant way. Countries might oppose agreement because they would fear interpretations of a new rule with which they might disagree. This would be an instance of the dangers of anticipated expansive interpretation, as discussed below.

22 Wu, ‘Free Trade and the Protection of Public Morals’, supra note 17, p. 241.

23 Note, for example, common US disdain for proceedings of the UN General Assembly, as well as staunch US defense of its ability to block measure at the IMF.

24 Howse Rob, Langille Joanna, and Sykes Katie (2014), ‘Sealing the Deal: The WTO's Appellate Body Report in EC–Seal Products’, ASIL Insights, 18(12): 4 June 2014, http://www.asil.org/insights/volume/18/issue/12/sealing-deal-wto's-appellate-body-report-ec-seal-products.

25 The decisions spend ample time establishing that there is no real expectation that IC or MRM seal hunts would be more humane.

26 It is interesting to note that the EU public apparently has difficulty striking a balance between the different moral imperatives of protecting seals and supporting indigenous communities. The indigenous community in Greenland – the most likely intended beneficiary of EU Seals Regime exceptions – saw a decline in demand after the adoption of the regime. Even though their products were allowed in, consumers shunned them. See http://arcticjournal.com/politics/494/eu-ban-blamed-rapid-decline-greenland-sealing. This also raises questions that have been neglected in the main text about whether trade action is truly necessary if there is broad moral concern.

27 This somewhat exaggerates the case. Panels have subjected the stated purposes of defendants to scrutiny.

28 For a survey, see Riley John G. (2001), ‘Silver Signals: Twenty-Five Years of Screening and Signaling’, Journal of Economic Literature, 39(2): 432478.

29 There is a nascent literature on incomplete contracts and renegotiation in trade agreements. See, in particular, Giovanni Maggi, and Robert W. Staiger (forthcoming) ‘Optimal Design of Trade Agreements in the Presence of Renegotiation’, American Economic Journal: Microeconomics. While this is one sign of the importance of the issue, the literature is still at a stage at which it is difficult to apply directly to cases such as the one at hand.

30 Kydland Finn E. and Prescott Edward C. (1977), ‘Rules rather than Discretion: The Inconsistency of Optimal Plans’, The Journal of Political Economy, 85(3): 473491.

31 Regulation (EC) No 1007/2009 of the European Parliament and of the Council of 16 September 2009, Official Journal of the European Union, L Series, No. 286 (31 October 2009).

32 Commission Regulation (EU) No 737/2010 of 10 August 2010, Official Journal of the European Union, L Series, No. 216 (17 August 2010).

33 WT/DS135/AB/R (adopted 5 April 2001).

34 EC–Seal Products (Panel), para. 7.103, quoting EC–Asbestos, para. 67.

35 EC–Seal Products (Panel), para. 7.104, quoting EC–Asbestos, para. 71.

36 EC–Seal Products, para. 7.106.

37 EC–Seal Products, n.153 to para. 7.106.

38 This is confirmed by the EC–Seal Products Appellate Body, in para. 5.13.

39 EC–Seal Products, para. 7.110.

40 EC–Asbestos, para. 67.

41 US – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/DS381/AB/R (adopted 13 June 2012).

42 US – Certain Country of Origin Labeling (COOL) Requirements, WT/DS384 & 386/AB/R (adopted 23 July 2012).

43 The suggestion that PPM's are not ‘product characteristics’ within the meaning of TBT Annex 1.1 is perfectly consistent with the argument Rob Howse and I have made that PPM's are relevant to ‘likeness’ in GATT I:1 and III:4. The two issues involve different terms, in different contexts. See Howse Robert and Regan Donald (2000), ‘The Product/Process Distinction – An Illusory Basis for Disciplining “Unilateralism” in Trade Policy’, European Journal of International Law, 11(2): 249289.

44 EC–Seal Products (Panel), para. 7.112.

45 EC–Seal Products (Appellate Body), para. 5.45.

46 Ibid., n. 942 to para. 5.45.

47 Technically, all they do is overturn the Panel's finding that the regime is a technical regulation. They decline to decide whether the regime might be a technical regulation because it lays down a ‘related process [or] production method’, citing the lack of discussion of this issue by the parties or the Panel. But for convenience I shall speak hereafter as if they find that the measure is not a technical regulation.

48 Ibid., para. 5.19.

49 Ibid., paras. 5.30, 5.58 first part.

50 Ibid., para. 5.41.

51 Ibid., para. 5.58 second part.

52 Ibid., para. 5.41.

53 The Appellate Body's confusion could be made more understandable by discussing the peculiar drafting of both the EU's basic regulation and the implementing regulations. But space limitations forbid.

54 EC – Measures Affecting the Approval and Marketing of Biotech Products, WT/DS291 & 292 & 293/R (adopted 21 November 2006), paras. 7.162–7.170.

55 US – Measures Affecting the Production and Sale of Clove Cigarettes, WT/DS406/AB/R (adopted 24 April 2012).

56 I say ‘the Appellate Body's current scheme’, because the Appellate Body's GATT III jurisprudence has been notably unstable. The Appellate Body was generally understood to say in Japan–Taxes on Alcoholic Beverages, WTO/DS8 & 10 & 11/AB/R (adopted 1 November 1996), sec. H.2(c), that regulatory purpose was irrelevant to the existence of violations under GATT III:2. But in Chile–Taxes on Alcoholic Beverages, WT/DS87 & 110/AB/R (adopted 12 January 2000), paras. 62, 71, the Appellate Body told us that regulatory purpose was absolutely relevant under III:2, second sentence, and that Japan–Alcohol had in fact meant precisely that. In EC–Asbestos, para. 99, interpreting GATT III:4, the Appellate Body excluded regulatory purpose from the ‘likeness’ inquiry, saying that ‘likeness’ was a matter of competitive relationship; but they then presented us with a mystery box in their enigmatic paragraph 100 on ‘less favorable treatment’. In Dominican Republic–Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS302/AB/R (adopted 19 May 2005), para. 96, the Appellate Body said explicitly that there was not ‘less favorable treatment’ if the disparate impact was explained by factors unrelated to the foreign origin of the products. Then in US–Clove Cigarettes, n.372 to para. 179, the Appellate Body simply denies that Dominican Republic–Cigarettes was concerned with whether the disparate impact was explained by foreign origin. The US–Clove Cigarettes Appellate Body dismisses one sentence where Dominican Republic–Cigarettes said that explicitly, and they ignore a later sentence in the same paragraph that repeated the point. Instead, they quote a sentence from in between those two sentences about foreign origin. It is true that the sentence the US–Clove Cigarettes Appellate Body quotes did not mention foreign origin; the reason is that it was describing what the other explanation, unrelated to foreign origin, was in the actual case. In sum, history gives us little reason to expect that the Appellate Body's GATT III:4 jurisprudence five years hence will be what it is now. For the full story, and my preferred approach, see Regan Donald (2012), ‘Regulatory Purpose in GATT Article III, TBT Article 2.1, the Subsidies Agreement, and Elsewhere: Hic et Ubique’, in Prevost Denise and Van Calster Geert (eds.), Research Handbook on Environment, Health, and the WTO, Edward Elgar, pp. 4178, at 42–61.

57 I have suggested elsewhere that importing the GATT III:4 criterion of ‘likeness’ into TBT 2.1 was a mistake. Regan, ‘Regulatory Purpose’, supra note 53, at 61–68.

58 See, e.g., EC–Seal Products, Appellate Body, para. 5.125, and the discussion of US–Clove Cigarettes, supra note 53.

59 Some sub-paragraphs of GATT XX, those stated in terms of ‘necessity’, require a least-restrictive-alternative analysis, while others do not. But even when the sub-paragraph does not require least-restrictive-alternative analysis, the Appellate Body has read such a requirement into the chapeau, as in the decision in US–Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R (adopted 6 November 1998), that US-style TED's were not necessary in Malaysian shrimping grounds. So it seems that, one way or another, least-restrictive-alternative analysis is always required under GATT XX. It is not entirely clear whether the EC–Seal Products Panel would do this analysis under question (b)(i) or (b)(ii) above, but there is no reason to doubt that they would regard failure to use a less restrictive alternative as relevant. (This does not make TBT 2.2 redundant, since 2.2 applies even when there is no disparate impact.)

60 One could argue that it does so implicitly when it writes, ‘[W]e did not consider that the evidence before us supports the European Union's position that the EU public attributes a higher moral value to the protection of Inuit interests as compared to seal welfare’ (EC–Seal Products (Panel), para. 7.299. But this is in any case a negative judgment on the idea that the particular resolution of the seals/Inuit conflict represents a formed view of the EU public.

61 Ibid., para. 7.295.

62 Similarly, the Appellate Body's very generous interpretation in US–Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R (adopted 7 April 2005) of ‘public morals or public order’ in GATS XIV(a) was necessitated by their mistaken finding of a XVI:2(a) violation. See Regan Donald (2007), ‘A Gambling Paradox: Why an Origin-Neutral ‘Zero-Quota’ Is Not a Quota Under GATS Article XVI’, Journal of World Trade, 41(6): 12971317, and other articles cited there.

63 The EC–Seal Products Appellate Body, paras. 5.126–5.129, is notably ambivalent about whether this is the case, and whether they care.

64 Brazil – Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R (adopted 17 December 2007).

65 EC–Seal Products (Panel), para. 7.275.

66 See EC–Seal Products (Panel), paras. 7.296–7.298.

67 Brazil–Tyres, para. 227.

68 Note also that in US–Shrimp, there was no question of justifying an exception to the underlying ban; there was no exception. The US–Shrimp Appellate Body's objection to the feature of the measure they were discussing was that the ban itself was overbroad with respect to its purpose; the ban forbade more than the purpose could explain. In effect, the US–Shrimp Appellate Body was complaining about the failure to have an ‘exception’ that was required by the purpose of the ban.

69 Brazil–Tyres, n. 445 to para. 234.

70 Ibid., para. 228.

71 EC–Seal Products (Appellate Body), para. 5.320, and cf. paras. 5.306, 5.321.

72 EC–Seal Products (Panel), para. 7.317.

74 Dominican Republic–Cigarettes, para. 96.

75 EC–Seal Products (Panel), para. 7.315.

76 Ibid., citing COWI, Study on Implementing Measures for Trade in Seal Products, Final Report (January 2010), p. 84.

77 Ibid., para. 7.317.

78 WT/DS58/AB/R (adopted 21 November 2001).

79 EC–Seal Products (Appellate Body), para. 5.337.

80 Ibid., para. 5.337.

81 US – Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/R (adopted 22 October 2001).

82 EC–Trade Description of Sardines, WT/DS231/AB/R (adopted 23 October 2002).

83 US–Tuna II (Mexico), para. 313.

84 Of dubious probative value because most of the respondents were Anglophone, and most of those who favored the ban were from outside the EU. See Perisin Tamara (2013), ‘Is the EU Seal Products Regulation a Sealed Deal? EU and ETO Challenges’, International and Comparative Law Quarterly, 62: 373405, at 394.

85 See Howse Robert and Langille Joanna (2012), ‘Permitting Pluralism: The Seal Products Dispute and Why the WTO Should Accept Trade Restrictions Justified by Noninstrumental Moral Values’, Yale Journal of International Law, 37: 367432.

86 US–COOL (Panel), para. 7.649. The Appellate Body in US–COOL quoted this point from the Panel report, without expressly approving or disapproving; but in context the absence of disapproval suggests approval, since the Appellate Body expressed dissatisfaction with four other specific aspects of the Panel's discussion of the legitimacy of the US's purpose, even while generally upholding the Panel. US–COOL (Appellate Body), paras. 449–452.

87 US–Shrimp, para. 133.

88 There are, of course, important exceptions in the most-favored nation context, for preferential trade areas and general systems of preferences for developing countries.

89 The hard case here, perhaps the case that requires an exception, is where a good-citizen Member radically changes its character, and becomes a systematic violator of international norms, like Burma becoming Myanmar.

90 A final point , that didn't quite fit anywhere. It is often objected that big-country PPM's (or regulations with ‘extra-territorial’ purposes) have disproportionate effects on small countries. That is true. But it is no less true of big country's non-PPM regulations with intra-territorial purposes. Big countries’ decisions have big effects. That is a fact of economic life that the WTO does not attempt to correct for, except by specific provisions about special and differential treatment, transition periods, and the like. The general rules must be for all countries. The litigants here are the EU and Canada (big, rich, highly developed) and Norway (not so big, but rich and highly developed).

91 EC–Seal Products (Panel), para. 7.524.

92 Ibid., para. 7.528.

93 Lest there be doubt, the Panel observed in the 2.2 discussion that the presence of the exceptions reduced the effect of the ban, which makes it less clear that the ban was ‘necessary’ (e.g., para. 7.460). So it would have been even clearer that a ban without exceptions was ‘necessary’.

94 I have not considered whether there is some other way to argue that the EU's behavior is illegal. It may have disappointed some producer expectations; but even that is not clear. Producers could see some time in advance that the exception was not going to be available at the time the ban became effective, and we are given no evidence about how that ‘some time in advance’ compares to the time scale on which they made production decisions.

95 Ibid., para. 7.577.

96 Ibid., para. 7.579 (emphasis in original).

97 The one case we have had no occasion to mention is EC–Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs (Australia), WT/DS290/R (adopted 20 April 2005).

98 It would be an argument for keeping the TBT if the TBT Committee has been a useful institution (a possibility on which I express no view). But it is not clear that we actually need the TBT to get any of the benefits we now get from the TBT Committee.

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