PublicationsEC Measures Concerning Meat and Meat Products (Hormones): Critical Case Analysis

July 12, 2020by Manya Ahuja14
FACTS

The Council of European Communities (EC Council), in 1981, adopted a directive (Directive 81/602/EEC) that required the EC member States of the European Communities to ban administration of substances containing an oestrogenic, gestagenic, thyrostatic or androgenic action. This directive further laid down that EC member states were allowed to continue applying their national regulations in force concerning other substances like testosterone, oestradiol-17, trenbolone, progesterone and zeranol, in terms of administration to farm animals for growth-promoting purposes, as the adoption of a decision of the EC council on this matter was still pending. Later in 1988, another directive (Directive 88/146/EEC) was adopted by the EC council to bring these five hormones also under the purview of the general prohibition imposed by the first directive and ban their administration to animals as well. This directive also prohibited the import of animals or meat of animals treated with substances that had oestrogenic, gestagenic, thyrostatic or androgenic action, from third countries. There were two exceptions made to this ban which were provided in a third directive (Directive 88/299/ECC), including administering of testosterone, progesterone, oestradiol-17 and few of their derivatives for therapeutic purposes, and of substances having oestrogenic, gestagenic, or androgenic action, for zootechnical purposes – as authorised in line with EC Directives on veterinary medicinal products. In April 1996, a fourth directive (Directive 96/22/EEC) was adopted by the EC Council (but was to come into force in July 1997) which repealed and replaced the previous three directives to confirm and extend the aforementioned prohibitions.

The United States claimed that by prohibiting the import of animals or meat products derived from animals treated with any of the six hormones mentioned above for promotion of growth in the animals, the EC Council has acted in contravention of Articles 2, 3 and 5 of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), and Articles I and III of the General Agreement on Tariffs and Trade 1994 (The GATT Agreement), among others. These claims were rejected by the European Communities. This dispute was addressed by the WTO Panel. Not pleased with the Panel report, EC Council appealed to the WTO Appellate Body.

ISSUES
  1. Whether a prior violation of a provision of GATT needed to be established to make recourse to the substantive provisions of the SPS Agreement under the same conditions of making recourse to Article XX of GATT?
  2. Whether the ban on importation of meat imposed by the EC Council violated the basic rights and obligations laid down under Article 2 of the SPS Agreement?
  3. Whether the measures adopted by the EC Council violated Articles 3.1 and 3.3 of the SPS Agreement?
  4. Whether the measures resulted in a disguised restriction to trade under Article 5.5?
  5. Whether these measures were inconsistent with Articles 5.1 and 5.2 of the SPS Agreement?
  6. Whether the ban violated Article III:4 of GATT?
  7. Whether there was a subsequent violation of Article I:1 of GATT.
RULES
SPS Agreement
  1. Article 2.3
  2. Article 3.1
  3. Article 3.3
  4. Article 5.1
  5. Article 5.2
  6. Article 5.5
GATT
  1. Article I:1
  2. Article III:4
DSU
  1. Article 21.3(c) 
ANALYSIS
Relationship between the SPS Agreement and GATT:

While addressing the issue regarding the relationship between the SPS Agreement and GATT, the Panel found[1] that there were two requirements which had to be fulfilled in order to apply the SPS Agreement, which are – that the measure in question must be a sanitary or phytosanitary measure; and that the measure in question may affect international trade either directly or indirectly. Since there were no additional requirements to this, the Panel stated that the SPS Agreement contained no specific condition of a prior violation of a GATT provision. It was also observed by the Panel that the distinction pointed out by the EC Council between the ‘procedural’ and ‘substantive’ elements of the SPS Agreement held no basis as there were provisions which were both, procedural and substantial; and also, that as per Article 3.2 of the Agreement, such measures had to be consistent with the provisions of both, GATT and the SPS Agreement, concluding both the agreements to be separate and independent. Whether or not there was a violation of any provision of GATT, violation of the SPS Agreement had to be looked into. The provisions in dispute here, i.e., Article 2 of the SPS Agreement and Articles I and III of GATT, were also, to a large extent, overlapping. Therefore, the Panel first decided to look into the SPS Agreement in the context of this case in order to establish the outcome concerning GATT.

The SPS Agreement:

The main conclusion reached by the Panel was that the ban imposed violated the SPS Agreement, particularly with regards to Article 3.1, and Articles 5.1 and 5.5. It was found that the measures violated Articles 3.1 and 3.2 because they were not based on international standards. The Panel determined[2] that the ‘Codex Standards’ mentioned in its report were, international standards and the EC Council had not based their claims on these, or any other international standards. The measures were also found to be violative of Article 5.5 because they adopted differing protection levels in comparable situations[3] – these were naturally occurring hormones, growth-promoting hormones, those administered for zootechnical and therapeutic purposes, and substances used to promote growth. According to the Panel, this method of providing a chosen level of protection by banning imports of beef treated with hormones from the U.S. and Canada was arbitrary, and it restricted international trade. This Panel also found violations to Articles 5.1 and 5.2 on grounds that there wasn’t sufficient evidence to prove that this measure was built on a risk assessment.

While the Panel held the measure to be acting as a disguised restriction to international trade, the Appellate Body diverged from this opinion on the claim that the intention of this ban was merely to protect consumers within the EU from health risks[4]. It is important to note that EC Council’s entire defence for the ban was based on its mere assumption that treatment of animals or animal meat with hormones increased health risks in humans. A toxicological research report[5]of the National Center for Biotechnology Information (NCBI) from 2010 studies the risk assessment on hormones which were administered to humans and animals orally for conducting tests. The report found that natural steroid hormones like estradiol-17, testosterone, trenbolone, melengestrol acetate, progesterone and zeranol have almost no impact on the health of humans if administered under proper veterinary practices and that synthetic hormones are provided for the protection of human health. It is, therefore, safe to assume that consumption of hormone-treated beef is not harmful to humans, though it might be perceived as harmful by certain consumers within the EU.

Even though the Appellate Body held in favour of the Panel in terms of the risk assessment not being backed by sufficient evidence under Article 3.3, it justified the ban based on potential health risks. This is where the Appellate Body has contradicted itself. As far as risk assessment is concerned, while worries related to health are important to consider, when there is no prima facie consequence of a product on human health, economic factors concerning producer and consumer benefit should also be taken into consideration.

It has been observed that even though such standards may be imposed keeping in mind legitimate concerns about public health and safety, they can result in restriction of trade if designed in a way that it discriminates against imports or if their influence ends up causing such discrimination based on reasons not related to public health and welfare, and the same goes for imposing higher standards on foreign goods, using more stringent measures to test such goods, or labelling them in a manner making such discrimination evident.[6] The consequence of this is that such shutting out of foreign goods leads to increasing prices and reduces variety in local markets, affecting consumers substantially.[7] A 2003 report[8]shows that a large part of the population in the EU is willing to pay more for both, U.S. imported hormone-free meat, and U.S. meat treated with traditional growth-promoting hormones. Not only is such a trade restriction increasing the production cost for American producers who now are under obligation to export only expensive, high quality, hormone-free beef, but also neglecting consumer demand.

GATT:

After finding the EC measures to be inconsistent with Articles 3 and 5 of the SPS Agreement, the Panel found:

  1. That this automatically resulted in a violation of the basic rights and obligations laid down under Article 2 of the Agreement,
  2. That by being inconsistent with the requirements of the SPS Agreement, the ban constitutes a violation of Articles I and III of GATT as well.

Article III:4 of GATT intends to prohibit de-facto or de-jure discrimination between imported and domestic goods. What the Appellate body essentially overlooked, was not only a lack of evidence to show risk assessment leading to an arbitrary restriction on trade but also the absence of justification of such discrimination in practice. It has already been established above that hormone-treated beef is more or less safe for human consumption. It can also not be ignored that without the hormones, U.S. meat can be no different from meat produced domestically in the EU in terms of quality or health risks attached. The problem lies in the implication of this ban which suggests that all U.S. and Canada beef is mostly hormone-treated, whereas EU produced beef and even beef imported from other parts of the world is assumed to be hormone-free.

It is also arbitrary and unjust that beef products from other countries, and also EU’s domestic beef, enjoy certain privileges, advantages or immunities which are not available to US beef imports. This is a prima facie violation of Article I:1.

Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU):

The Appellate Body ordered for EU to establish higher standards, provided that the more stringent of the measures are backed by scientific evidence/risk assessment. While the US had believed this to be a suspension of the ban, the EU sought arbitration under Article 21.3(c) of the DSU to determine a time period for acquiring the required evidence. The EC Council asked for a time period of 39 months, whereas the U.S. claimed that a duration of 10 months was more than enough. The arbitrator finally awarded 15 months to the EC Council as required under Article 21.3(c), and also keeping in mind that such a time period was “reasonable” with regards to “particular circumstances” of the case.[9]

The EU Council, however, failed to comply within the given time frame, which led to another formal arbitration wherein WTO arbitrators determined annual loss to the U.S. due to the declining beef exports and set the retaliation amount at $116.8 million.[10] It is quite a sad state of affairs that the EU would rather allow retaliation measures from the U.S. and Canada than just remove its ban on their beef imports. EU is evidently running away from its obligations by wasting the time of the WTO bodies through time-consuming and costly proceedings.

Production of hormone-treated beef is not limited only to countries like the US and Canada, and nor has the EU Council been successful in furnishing scientific evidence to support any of the health risk claims associated with meat imports from these two countries. EU’s failure to conduct a risk assessment following certified international standards has not only been a violation of Articles 3 and 5 of the SPS Agreement but has also restricted trade in a disguised manner by banning meat imports from the US and Canada on an arbitrary basis. In the absence of an absolute justification of the claims made by the EU Council, the Appellate Body should have considered not only economic factors like consumer demand and welfare of producers abroad, but also the possible intent of the EU Council behind imposing the EC measures. The Appellate body’s decision, in this case, does not result in a just outcome, because it refused to give importance to the need to furnish scientific evidence in a case involving international trade of hormone-treated meat products, resulting in arbitrary and discriminatory restriction to trade. In light of the aforementioned circumstances, the decision of the Panel should have been upheld, and the EC measures should have been done away with, or at least limited, on grounds of lack of sufficient scientific evidence to support EU’s claims.

CONCLUSION

Since the WTO does not have the power to force compliance, the EU has likely been misusing its procedures all along. Even though the EC Council complied with the provisions of the DSU, the delay tactics only helped it turn things in its favour. This could be because the defence of “health risks” was a mere excuse for the EU to stop imports from coming in from the U.S. and Canada. Considering how if the ban is lifted, only allowing high quality, hormone-free beef from these two countries, USA and Canada are likely to increase exports being sent to the EU regardless of the higher production costs owing to increase in prices and tariff quotas. This could lead to local producers within the EU getting affecting because the local produce might not be able to compete with the higher-grade imports from the U.S. and Canada. This theory makes it very easy to debunk EC Council’s claim of “public health and welfare”, and opens up a box of suspicions, particularly fear of international competition.

As established above, the demand for U.S. beef (treated or not) is extremely high in EU nations. Several people feel that hormone-treated meat holds a high health risk, but evidently, some people are relatively unbothered about the administration of natural or synthetic hormones into the meat they buy. Looking through a consumer-oriented frame, an effective idea would be to lift the ban and impose restrictions only to the extent of monitoring the levels of hormones being administered into the animals or animal meat before exportation. The labelling on packaging of these imported meat products could bear the names of the countries they were imported from. This could help make consumers form their independent judgement of what to consume.

The monetary award does little to no good in the long run for the U.S. and Canada. All three of the WTO reports ruled against the EC Council, and yet the ban wasn’t lifted. This wouldn’t have happened if the Appellate Body had been more stringent with regards to violation of the SPS Agreement and ordered the revocation of the EC measures.

Regardless of the result, this whole matter has been exceedingly time-consuming. The Dispute Resolution process is outlined in a way that aims to achieve just and timely decisions with regards to international trade disputes. Since the WTO expects its members to cooperate and comply with its proceedings, such time delays are inevitable. However, being one of the first Dispute Settlement Cases under WTO, it is highly likely to set a strong precedent for newer cases, even if it takes away a chunk of credibility from the WTO dispute resolution process.

REFERENCES-

[1] WTO, EC MEASURES CONCERNING MEAT AND MEAT PRODUCTS (HORMONES) – COMPLAINT BY THE UNITED STATES, WT/DS26/R/USA, pp. 170-171, paras 8.36, 8.37, 8.40

[2] Ibid, p. 180, para 8.77

[3] Ibid, p. 205, para 8.175

[4] WTO, EC MEASURES CONCERNING MEAT AND MEAT PRODUCTS (HORMONES), APPELLATE BODY REPORT, WT/D26/AB/R, p. 100, para 245

[5] Jeong S., Kang D., Lim M., Kang C., Sung H., Risk Assessment of Growth Hormones and Antimicrobial Residues in Meat, Toxicol. Res. 2010 Dec; 26(4): 301–313. doi: 10.5487/TR.2010.26.4.301.

[6] Taylor, C., Walsh, M., & Lee, C. (2003), The U.S./EU Beef Controversy and a Proposed Framework for Resolving Standards Disputes in International Trade, The Journal of Consumer Affairs, 37(1), p. 102

[7] Ibid

[8] Tonsor, G. & Schroeder, T. (2003), European Consumer Preferences for U.S. And Domestic Beef: Willingness to Pay for Source Verification, Hormone-Free, And Genetically Modified Organism-Free Beef, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association), 2003 Annual meeting, July 27-30, Montreal, Canada.

[9] WTO EC Measures Concerning Meat and Meat Products (Hormones) Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes, WT/DS26/15, WT/DS48/13, 29 May 1998, pp. 16-18, paras 43 & 48

[10] Johnson, R., The U.S.–EU Beef Hormone Dispute, Congressional Research Service, January 14, 2015, p. 11

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Madhur Arora

Very well written! great read!

Legal Maxim Team

We are glad it intrigued you.

Suneel Dhar

This is a very logical analysis of the case. We need more such discussions on topics under international trade law, as it is not as popular as other topics like criminal law or constitutional law.

Appreciate you taking out time for this Subject..

Legal Maxim Team

We agree, there is a need to focus on International trade law especially due to the changes made to import regulations during the COVID-19.

Shilpa Kachroo

Great Analysis Mania.. Focus should be now on compliance as it fails and International trade law needs some serious alteration as this violation can be leading to health hazard..

Barkha

Awesum logicall write up. Much appreciated

Lalit zaroo

Wondering if there are any health risks associated with hormone treated meat and if any studies have been published in that regard.

Riya Somani

You can refer to this article for some clarity

https://www.winchesterhospital.org/health-library/article?id=90869

Karan Ravee Mohta

Eye opening. Thank you for this Manya

Riya Somani

Great read 

Priyadarshini Kachroo

Congratulations Manya!! This is a very well-written and described case-analysis and informs us about the challenges of this ongoing debate directly pertaining to international trade law! Much needed.
I can give my take on the translational research aspects. Part of the larger problem is that the literature on “long-term” risk to benefit ratio of these added hormones in general population is still growing and there are either conflicting reports, lack of validation or no clear answers. Despite, there is enough evidence in PubMed concerning the role of these added/synthetic hormones in endocrine disruption, metabolic pathway perturbations and interference with the normal functioning of their naturally occurring forms. So, if international trade law could help ameliorate the guidelines regulating them leading to an improvement in compliance and risk assessment, that would be a huge contribution. Personally, I avoid any produce that is labeled with growth hormones, genetically modified or non-natural here in USA, with the caveat that authenticity of the often-abused labels is itself debatable altogether.

Manya Ahuja

Thank you for your input! Completely agree with you there, the consumer dilemma is absolutely justified due to the possibility of lack of authenticity of labels.

Swati Dhar

Kudos on being so thorough with your research and analysis…I completely agree with your conclusion of labeling every meat/dairy product and letting consumers make the choice. Being a USA based consumer thats exactly what we do…Right from a local farm produce to the bigger brand names…most dairy/meat products are either not labelled (assuming they are treated)or labeled as non treated with rsbt,antibiotics,free range…The choice is ours to make.

Manya Ahuja

Thank you for this!

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