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United States – Certain Measures Affecting Imports of Poultry from China: the fascinating case that wasn't

  • DONALD H. REGAN (a1)
Abstract
Abstract

US–Poultry (China) was the first Panel decision dealing with an origin-specific SPS measure, or with what the United States referred to as an ‘equivalence regime’. More specifically, it was the first instance in which the basis for the challenged measure was the claimed inability of the complainant country to enforce its own food-safety rules. Unfortunately, as the litigation developed, the very interesting novel issues raised by such a measure were not discussed. This essay discusses those novel issues – in particular, what sort of scientific justification or risk assessment should be required for a measure like this, and what SPS Article 4 says about equivalence regimes. The essay also criticizes the Panel's analysis of some of the issues the Panel does discuss, such as the meaning of the ‘appropriate level of protection’ in SPS 5.5 and 5.6, and the relationship between the SPS and GATT XX(b).

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*Email: donregan@umich.edu
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1 WT/DS392/R, adopted 25 October 2010 [hereafter, US–Poultry (China)].

2 Note that even in Australia – Measures Affecting the Importation of Apples from New Zealand, WT/DS367/AB/R, adopted 17 December 2010, despite all the focus on New Zealand, the actual measures were perfectly capable of origin-neutral application, and there was no suggestion that they would not have been applied to apples from any other country or region with similar pest prevalence (and perhaps similar export intensity). Pest prevalence is of course the one origin-specific consideration the SPS requires to be taken into account. SPS Article 6.

3 To have just a few examples from one representative meeting of the SPS Committee, the meeting of 10–11 June, 1998: there was discussion of a Turkish ban on US beef (para. 33), discussion of an EC ban on fish from Tanzania, Kenya, Uganda, and Mozambique (paras. 96–99), and discussion of whether Argentine control measures for citrus canker should be recognized as equivalent to EC measures (para. 31). G/SPS/R/11 (17 August 1998).

4 The recital of facts is based on the Panel Report in US–Poultry (China) except where specific footnotes indicate otherwise, so I have not thought it worthwhile to footnote every assertion.

5 21 U.S.C. § 466.

6 The FSIS made a preliminary determination in June 2006 that China should be certified for export of poultry carcasses, but no draft rule on this was ever published. We shall say no more about poultry slaughtering and poultry carcasses.

7 Early in the litigation, China also complained about Section 743 of the AAA 2010, which actually allowed poultry products from China after the Secretary of Agriculture took certain required steps, and about a supposed ‘moratorium’ on Chinese poultry products constituted by Section 733 (AAA 2008), and Section 727 (AAA 2009), and continuing resolutions both before and (briefly) after the life of Section 727 that continued the restraint on the FSIS. But, in the end, all complaints were abandoned except that against Section 727 of the AAA 2009.

8 Letter of a coalition of exporters to President Obama, 30 April 2009, http://www.republicans.waysandmeans.house.gov/UploadedFiles/Poultry_Document.pdf (last visited 7 November 2011).

9 ‘Comments of the Ad Hoc Coalition for Fair Trade in Agricultural Products with China’ (comments on docket number WTO/DS392/1). This item is available on the website www.regulations.gov, although I was unable to find it by using that website's search function. It can be accessed, on that website, by googling ‘Ad Hoc Coalition for Fair Trade in Agricultural Products with China’ (last visited 8 October 2011).

10 ‘Suggestions on Strengthening Food Safety in the PRC’, ADB Observations and Suggestions Policy note, 21 November 2006, revised 22 January 2007.

11 ‘Advancing Food Safety in China’, United Nations in China, March 2008.

12 See generally the Exhibits attached to the United States First Written Submission.

13 Whether or not American exporters were already lobbying actively in support of China in 2006, food-safety advocates argued that the FSIS rule was rushed through in anticipation of the visit to the United States of President Hu Jintao in April 2006.

14 For this and the rest of this paragraph, see US–Poultry (China), paras. 7.3–7.5.

15 Ibid., para. 7.42 (emphasis in the original).

16 In his very stimulating and useful comments, Jan Bohanes suggests that China's conditional request for SPS consultations might have reflected a preference for litigating under the GATT alone. No doubt, China would have preferred to litigate under the GATT alone if they could get away with their initial claim that Section 727 had only a fiscal purpose; the case would have been over before it began. And notice that even that preference suffices to explain why China did not just lump their initial GATT claim and their hypothetical SPS claims together indiscriminately (although I suggested in the text that China could have requested SPS consultations unconditionally, even while making it clear that they did not regard Section 727 as an SPS measure). But some of Bohanes' comments seem to take off from the idea that China might have preferred to proceed under the GATT alone even if it was established that Section 727 was an SPS measure. That suggestion I find hard to understand. Why not proceed under both agreements? In practice, the SPS seems distinctly more favorable to complainants than GATT XX(b), just as it was intended to be, despite the complainant's nominal burden of proof. In fact, once the United States asserted a food-safety purpose, China did proceed under both agreements, not just under the GATT. And there is no indication in the Panel Report that China was compelled to proceed under the SPS. Doing so appears to have been their own free choice. Of course, China could just have changed their mind, as Bohanes suggests. But we don't need to assume they changed their mind, if we don't assume an initial preference to proceed under the GATT alone against Section 727 considered as an SPS measure.

17 Actually, the United States seems to waver between this claim, that no provision other than Article 4 applies to Section 727, and the weaker claim that some other provisions apply, but not all.

18 US–Poultry (China), paras. 7.136–7.137.

19 Ibid., para. 7.376.

20 Ibid., paras. 7.139–7.141.

21 Ibid., para. 7.128.

22 Ibid., paras. 7.153–7.154. The United States argued that the ban was not effected by Section 727, but rather by the PPIA, which was not challenged (United States First Written Submission, para. 90). But the PPIA (and USDA regulations under it) provided for importation if certain conditions were met; and it was Section 727 that prevented those conditions being met by China for six-and-a-half months. The ban results from the combined effect of the PPIA and Section 727. Hence, in a context where the PPIA is accepted as background, it is perfectly appropriate to regard the ban as flowing from Section 727.

23 I have noted previously that there is one sort of country-specific determination that is explicitly contemplated by the SPS Agreement, namely determinations about the existence of ‘pest-free’ areas (SPS Article 6). But such determinations are amenable to established scientific techniques; and it should be clear that the question of pest-prevalence is a very different sort of question from the question whether China, or any particular Member, is enforcing its food-safety regulations.

24 Appellate Body Report, EC – Measures Concerning Meat and Meat Products (Hormones), WT/DS26 & 48/AB/R, adopted 13 February 1998, DSR 1998:I, 135, para. 187.

25 The Appellate Body might have given us some intimations about this issue in EC–Hormones, but in the end they didn't. They said unequivocally that it was appropriate for the EC to be worried about the risks created by veterinary abuse of hormones for growth purposes, an issue that obviously has something in common with the issue in US–Poultry (China) about whether China enforces its food-safety rules. But in the circumstances of the case, the Appellate Body was able to decide that there was no assessment of this risk without telling us what sort of assessment might suffice. They said ‘the question that arises, therefore, is whether the European Communities did, in fact, submit a risk assessment demonstrating and evaluating the existence and level of risk arising in the present case from abusive use of hormones and the difficulties of control of the administration of hormones for growth promotion purposes, within the United States and Canada as exporting countries, and at the frontiers of the European Communities as an importing country’ (EC–Hormones, para. 207). It is not even clear from this whether what they have in mind is an assessment of the risks created by residues of the magnitude that are likely to result from predictable modes of abuse, or, alternatively, an assessment of the actual prevalence of abuse. And, if the latter, it is not clear whether or not they are calling for an investigation of veterinary practice in the United States and Canada in particular. So they don't even make it clear just what risk is to be assessed; a fortiori they don't tell us how the regulating country must assess it.

26 US–Poultry (China), para. 7.191.

27 Appellate Body Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, 3327.

28 US–Poultry (China), para. 7.244.

29 Ibid., paras. 7.250–7.251.

30 I say ‘normally’ in the text, because this burden-shifting would be inappropriate in connection with origin-specific determinations that are generated by certain sorts of equivalence regime (although the United States' poultry regime is not such a regime). See Section 7 below.

31 Again, everything in this paragraph is subject to the qualification in the previous footnote. See Section 7 below for further discussion of GATT Article I, SPS 2.3, and equivalence regimes.

32 US–Poultry (China), paras. 7.268–7.269.

33 For the sake of completeness, note that the Panel's treatment of the third prong of the 5.5 test also seems inconsistent with the Appellate Body's approach in EC–Hormones, and misuses Australia–Salmon. As to the former, remember that even after finding there was an ‘arbitrary or unjustifiable distinction’ between the ALOPs for artificially introduced growth hormones and for other veterinary drugs like carbadox and olaquindox, the Appellate Body still declined to find a ‘disguised restriction on trade’, seemingly because of the absence of protectionist intent. That was despite the fact that exactly the same ‘warning signals’ were present that the Panel relied on in US–Poultry (China). (Actually, the ‘warning signals’ were even stronger in EC–Hormones than in US–Poultry (China). The difference in ALOPs in EC–Hormones was arguably greater, since it was doubtful that the ALOP for carbadox and olaquindox was even ‘safe’; and the ‘arbitrary and unjustified discrimination’ in EC–Hormones was established independently of the 5.1 violation.) The one ‘additional factor’ that the US–Poultry (China) Panel relied on was the change of position between the FSIS in 2006 and the Congress in 2008; the Panel analogized this to the change between the Draft (1995) and Final (1996) Quarantine Reports in Australia–Salmon. But that attempted analogy ignores two significant differences. First, in US–Poultry (China) it was not a single agency that changed its tune; rather, Congress acted on the FSIS, and it had reasonable grounds for worry that the FSIS had not done its job because of political pressure. And, second, a great deal of relevant evidence of China's failings on food safety had appeared in the time between the FSIS's action and Congress’.

34 It turns out that on the facts of US–Poultry (China), these two conceptions lead to the same ALOP for both 5.5 and 5.6, namely the United States' stated ALOP of ‘safe’. (Remember my argument above that the Panel got the 5.5 ALOP wrong.) But that will not always be true. It is not true in our first hypothetical above, where the 5.6 ALOP is the achieved ALOP, but the 5.5 ALOP is the higher stated ALOP. I suspect the two conceptions of the ALOP will never come apart in practice if the regulator makes the best strategic choice, for litigation purposes, of what ALOP to state, in view of what it knows how to achieve. But to pursue that would be excessive here.

35 Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001, DSR 2001: VII, 3243.

36 United States First Written Submission, paras. 95–97.

37 US–Poultry (China), para. 7.371.

38 There is at least one more important distinction, between regimes that focus on equivalence for specific products and regimes that look for broader systemic equivalence. But we can ignore that distinction for now. See Joanne Scott (2007), The WTO Agreement on Sanitary and Phytosanitary Measures: A Commentary, New York, NY: Oxford University Press Inc., pp. 171–172.

39 To be sure, both Exporter and Importer might like to keep other potential exporters in the dark; but, since there is in fact a change in Importer's SPS standard for milk, that ought in principle to be generally publicized under the transparency obligations.

40 SPS 4.1, first sentence, reads: ‘Members shall accept the sanitary or phytosanitary measures of other Members as equivalent, even if these measures differ from their own or from those used by other Members trading in the same product, if the exporting Member objectively demonstrates to the importing Member that its measures achieve the importing Member's appropriate level of sanitary or phytosanitary protection.’

41 SPS 4.1, second sentence, reads: ‘For this purpose, reasonable access shall be given, upon request, to the importing Member for inspection, testing and other relevant procedures.’

42 SPS 4.2 reads: ‘Members shall, upon request, enter into consultations with the aim of achieving bilateral and multilateral agreements on recognition of the equivalence of specified sanitary or phytosanitary measures.’

43 Both quotes are from United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755, para. 165.

44 Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481, para. 94, and cf. paras. 147, 151.

45 I am grateful to Jan Bohanes for pressing upon me this argument on behalf of the Panel.

46 It is easy, and perhaps natural, to read SPS 4.2 as contemplating mutual recognition, but it does not say so in terms. The TBT Agreement does talk about mutual recognition in Article 6.3 on conformity assessment, but not in the basic ‘equivalence’ provision, 2.7.

47 US–Poultry (China), para. 7.465.

48 Similarly, in United States – Measures Affecting the Production and Sale of Clove Cigarettes, WT/DS406/R, circulated 2 September 2011, adoption/appeal pending, the United States did not rely on GATT XX(b) as a defense to TBT claims. To be sure, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/AB/R, adopted 19 January 2010, has made it clear that GATT Article XX may sometimes be available as a defense outside the four corners of the GATT. But para. 5.1 of the China Accession Protocol is very different from the SPS. The Protocol para. 5.1 partly confirms, and partly adds new obligations to reinforce, China's obligations under GATT Article III. There is nothing to suggest that para. 5.1 intended to radically change the nature of those obligations, as eliminating the Article XX defense would have done. Indeed, the opening words of para. 5.1, ‘Without prejudice to China's right to regulate trade in a manner consistent with the WTO Agreement’, confirm that there was no intention to change the nature of the GATT obligations. In contrast, the SPS Agreement adopted radically new disciplines, and it has its own structure for taking account of permissible regulatory purposes, different from the structure of the GATT. In such circumstances, it would obviously be inappropriate to regard GATT Article XX(b) as providing a defense to SPS violations. Note that the Panel in China – Measures Related to the Exportation of Various Raw Materials, WT/DS394/R and Corr.1, WT/DS395/R and Corr.1, WT/DS398/R and Corr.1, issued 5 July 2011, now on appeal, had no difficulty deciding that GATT Article XX could not be used as a defense to para. 11.3 of the China Accession Protocol; para. 11.3 creates obligations totally unknown to the GATT, and it includes no language corresponding to the opening words of para. 5.1.

49 US–Poultry (China), para. 7.483.

50 For example, the first sentence of the SPS Preamble, and SPS 2.1, 2.2, 2.3, 5.5. The Panel points out also that the early negotiating history of the SPS talks about ‘strengthening’, MTN.GNG/NG5/10 (14 September 1988), or later ‘re-enforcing’, MTN.GNG/NG5/WGSP/1 (9 November 1988), the GATT disciplines in connection with SPS measures. But at this point it was not clear there would be a separate SPS Agreement at all, and this vague language tells us nothing about the precise relationship between the eventual separate SPS Agreement and the GATT.

51 I am indebted here to Joanne Scott.

52 Vienna Convention on the Law of Treaties, Article 31.1.

53 Notice that the Panel's analysis should not be confused with what is in fact a quite distinct approach, namely reading the SPS Agreement to say that no SPS measure shall be found ‘necessary’ under GATT XX(b) unless it satisfies all the requirements of the SPS Agreement. That is not using the SPS as context to establish the ordinary meaning of ‘necessary’; rather it is finding that the SPS stipulates a special meaning for ‘necessary’ under VCLT 31.4. This is conceptually preferable to the Panel's analysis, but to my mind it is only marginally more plausible.

54 I say ‘formally’ because sometimes the burden of going forward shifts to the complainant; for example, this happens at some point with regard to suggesting ‘less restrictive alternatives’.

55 The SPS 3.2 presumption also mentions the GATT, but that is redundancy. The novel part of 3.2 is the presumption that measures that conform to international standards are (in addition to being deemed necessary) presumed to be consistent with the rest of the SPS. From that point on, SPS 2.4 could do any work that is done by the further reference to the GATT in 3.2.

56 My argument does implicitly assume that when we consider the measure under the SPS Agreement, we investigate all plausible SPS violations. To see why, imagine (bizarrely) that the complainant proves the challenged measure is an SPS measure, and claims that it violates SPS Article 8, and mentions no other SPS provision, but also challenges the measure under GATT Article I. Suppose the Panel first considers SPS Article 8, and decides that there is no violation. At this point, the only SPS challenge has been rejected. Does the measure now benefit from the SPS 2.4 presumption, or not? Does the respondent get the benefit of the 2.4 presumption because all the complainant's SPS arguments have failed, or must the respondent prove positively that the measure is SPS-consistent in every way? We could construct quite intricate puzzles around this sort of case, but I shall leave them aside for now. If both the SPS and the GATT are sensibly interpreted (and this requires ‘adjusting’ for the fact mentioned above that the GATT and the SPS have different basic structures with regard to the role of prima facie violations and defenses), there should be no cause for the sort of behavior by a complainant that we imagined to create the puzzle.

57 For example, US–Poultry (China), para. 7.67.

58 See Joanne Scott (2007), The WTO Agreement on Sanitary and Phytosanitary Measures: A Commentary, New York, NY: Oxford University Press Inc., p. 28, discussing Gabrielle Marceau and Trachtman Joel P. (2002), ‘The Technical Barriers to Trade Agreement, the Sanitary and Phytosanitary Measures Agreement, and the General Agreement on Tariffs and Trade: A Map of the World Trade Organization Law of Domestic Regulation of Goods’, 36:5 Journal of World Trade, 811.

59 Regan Donald H. (2007), ‘The Meaning of “Necessary” in GATT Article XX and GATS Article XIV: The Myth of Cost-Benefit Balancing’, 6:3 World Trade Review, 347.

60 United States – Section 337 of the Tariff Act of 1930, BISD 36th Supp. 345 (adopted 7 November 1989), para. 5.26.

61 For the cases up through Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS302/AB/R, adopted 19 May 2005, DSR 2005:XV, 7367, see the discussion in Regan, supra note 58.

62 See discussion above in Section 7.

63 Notice incidentally that neither of these uses of the SPS as context requires us to go beyond the range of possible ‘ordinary meanings’ of the relevant GATT language – unlike the Panel's suggestion that GATT XX(b) simply replicates the SPS in connection with SPS measures.

64 Simon Schropp suggested to me the example of a country that excludes GMOs for both health reasons and moral reasons.

65 See note 47supra.

66 European Communities – Measures Affecting the Approval and Marketing of Biotech Products, WT/DS291 & 292 & 293/R, Add.1 to Add.9, and Corr.1, adopted 21 November 2006, DSR 2006:III-VIII, 847, paras. 7.162–7.171.

67 Of course, I argued in the previous section that there is never any need to consider the GATT at all in connection with an SPS measure. But even the reader who was not persuaded of that can see that the Panel's GATT findings here depended on the 5.1 violation, and that they therefore told us nothing new about what had to be done to make the measure legal.

I am especially grateful to Joanne Scott and Jan Bohanes for very helpful discussion and comments on a draft. Thanks also to Simon Schropp and to other participants in the ALI conference at which this year's cases were discussed. Errors and outrageous suggestions are of course my own.

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