Regulation and Barriers to Trade

As the European Union experience shows, internal regulations may constitute a very significant barrier to trade. The country of import may point to their standards as being in their legitimate interests in maintaining health and safety standards. It may be difficult to draw the line between legitimate regulation and disguised protectionism.

Without a powerful supra-national body and legal system, disguised and de facto restrictions may be readily created. The EU provides powerful, directly-effective freedoms by which the European and domestic courts may invalidate restrictions which have the effect of impeding freedom of movement of goods, persons, services or capital. Ultimately, the EU has harmonised product rules and health and sa

GATT and Barriers to Trade

Originally the GATT contained no specific provisions on health and safety standards, other than the possible violation of the most-favored-nation rule and rule against discrimination. The GATT provides that regulations may be justified on various grounds, including the protection of human and animal health, plant life, conservation of natural resources. Regulations may be invalidated as disguised breaches of the general rules. However, in the absence of a direct right to enforce by private party’s enforcement is severely blunted.

GATT panels have been prepared to find that measures and regulations were not necessary within the meaning of the original GATT provisions and thereby in breach, where less restrictive measures could have been taken, which would have been equally effective.

The level of scrutiny as to the necessity of a measure depends on the importance of the object and interest concerned. Accordingly, less scrutiny is applicable in respect of measures which seek to protect human health and life, than those which seek to protect natural resources. If there is a material contribution to the health and safety object concerned, the test of necessity is likely to be complied with.

A significant margin of appreciation is allowed to state parties. However, there must be a genuine relationship between the objective pursued and the rules or measures in place. The contribution must not be merely marginal or insignificant, particularly so if the measure has a restrictive effect or is an actual or effective trade ban.

The onus is on the state challenging the measure to show that there are less restrictive measures available to achieve the health, safety and environmental objectives concerned.

Technical Barriers to Trade Agreement

The Technical Barriers to Trade Agreement was entered after the Tokyo Round and amended as part of the Uruguay Round. It applies to all technical regulation of products other than those covered by the Sanitary and Phytosanitary Agreement. It covers industrial and agricultural products and applies to all WTO members.

States are responsible for their regional and local governmental and non governmental bodies with regulatory powers.  They must take reasonable measures as may be available to them to secure compliance with their TBT obligations.

States must accord products originating in other states, treatment no less favourable than to like products domestically as regards technical regulation. States must ensure that their technical regulations are not more restrictive than necessary to fulfil a legitimate objective.

States agree not to make regulations more restrictive of trade than necessary. They must take into account the risks that non-fulfillment of the regulatory objective would involve. States must seek and consider alternatives to find the least trade restrictive regulation to deal with the risk concerned.

State regulations may pursue listed legitimate objects provided that they are applied in a manner that it does not constitute arbitrary or unjustifiable discrimination between state members, where the same conditions apply. They must not be a disguised restriction on international trade and must conform to the criteria in the agreement.

The Agreement recognises that no country should be prevented from taking measures necessary to ensure the quality of its exports, or for the protection of human, animal or plant life or health, of the environment, or for the prevention of deceptive practices, at the levels it considers appropriate. This  is subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade. They must be also otherwise in accordance with the Agreement.

The burden is on the party challenging the measure or position to demonstrate that a less restrictive trade measure is available.

Adopting Technical Regulations

States must use the relevant international technical standards, insofar as they exist, as the basis for their own regulations except where they would be appropriate or ineffective for fulfilling legitimate objectives due to factors such as geography, climate or technological ability.

States must give consideration in adopting technical regulations, to accept the regulations of other states as equivalent, provided that they achieve the same objective.

States must design regulations based on the requirements of the product in relation to performance rather than prescribing the design or descriptive elements.

There are notification and publication requirements when state members enact new regulations. They must be published in an accessible format. This is designed to give fair notice of the requirements to producers in other states. This requirement applied to existing regulations.

The agreement provides for a Code of Good Practice for the Preparation Adoption and Application of Standards, which domestic standard setting bodies should follow.

Cases TBT Agreement

Cases under the Technical Barriers to Trade Agreement take a similar approach, to those under the SPS Agreement. The TBT Agreement requires that the relevant international standards should be used, except where they are an ineffective or inappropriate means of achieving the legitimate object.

Measures which are not based on international standards, in particular, where the international standard can be shown to meet the relevant objective, have been found invalid. In a challenge to an EU requirement, a naming of sardines which is limited to subspecies in the North Atlantic, it was argued that the relevant international standards were not complied with. The EU regulations were found not to be based on the international standards and the burden of proof had been met.

The US system of labeling of dolphin safe tuna, which was non-compulsory, but assisted marketing was found contrary to the TBT agreement. It excluded Mexican tuna products while granting access to the US and other country’s producers. It constituted less favourable treatment under GATT. There was no demonstrable, legitimate distinction between each, justifiable by reference to the risks faced by dolphins in the respective areas in which tuna were caught.

However, the appeal body found that Mexico had not demonstrated that the labeling was more restrictive than necessary to fulfill the objective. The alternative measures proposed were less effective than the US measure.

The Sanitary/Phytosanitary Agreement

During the Uruguay Round, the Agreement on Sanitary and Phytosanitary Measures was entered. It applies to all members.

The SPS Agreement provides for measures to protect animal and plant life and health from risks of disease and to protect human and animal life from contaminants, toxins, disease-carrying organisms, additives etc. in food. The state parties agree that measures are to be applied only to the extent necessary to protect human, animal, plant life or health based on scientific principles and with sufficient scientific evidence.

States must not arbitrarily or unjustifiably discriminate between states where identical or similar conditions apply. This also applies to such discrimination between the home state and the territory of another state with similar or identical conditions. The measures must not be applied in a manner which amounts to effective discrimination in trade.

Measures which are put in place in accordance with international guidelines, standards, and recommendations are presumed to be consistent with the Agreement. A higher standard of protection may be provided, where there is scientific justification. States must ensure that the measures are based on an appropriate assessment of the relevant risks. They use risk assessment techniques published by the relevant international organisations.

States must avoid unjustifiable and arbitrary distinctions on the degree of SPS protection in different cases if they would result in discrimination or discrimination in practice on international trade.

In establishing and maintaining measures, states must ensure that they are no more restrictive on trade than necessary to ensure the appropriate level of protection, taking account of technical and economic feasibility. A measure is not more trade restrictive than required unless another measure is reasonably available taking into account technical and economic feasibility that achieves the same level of protection and is significantly less restrictive of trade.

Where a state believes that another state member has enacted or introduced a measure which may constrain imports (of its exports) and is not based on the relevant international standards, it may request and is entitled to be provided with an explanation of the reasons for the measures.

Where the scientific evidence is not sufficient, the state may adopt provisional measures on the basis of the available information. States must obtain necessary information for a more objective assessment and review the measure within a reasonable time.

States must accept the measures of other states as equivalent if the state of export demonstrates objectively to the state of importation that its measures achieve the equivalent and appropriate level of protection. Reasonable access is to be given by the state of import on request to testing, inspection, and other procedures.

States must on request enter consultations in order to achieve agreements on equivalence either on a multi-national or bilateral basis in relation to sanitary and phytosanitary provisions.

The general World Trade Organization dispute resolution procedures apply to the SPS Agreement. See the separate chapter in that regard.

Cases SPS Agreement

In an early reference, it was found that the EU’s ban on growth hormones, which had a significant effect on exports from the US, did not comply with international standards and was not implemented in accordance with the requisite assessment procedure, consistent with the obligations in the Agreement.

However, the appeal body found that the non-conformity with international standards did not place the onus to prove compliance with the alternative risk procedures on the respondent party (the EU, in this case). The burden of non-compliance remained with the complainant. The body found that the scientific evidence was reasonably sufficient to justify the measure.

According to this approach, it was not necessary for a state to undertake a fact-finding exercise or publish a report. It may rely on risk assessments by other countries and states. The appeal body found that where there was scientific controversy or disagreement, a member may base a measure on the minority position or view, provided that it comes from qualified and respected sources. In effect, states are entitled to exercise caution in matters of public health due to catastrophic and irreversible risks.

Later cases suggest that the panel should consider whether the member’s risk assessment is supported by coherent reasoning and respectable scientific evidence and is thereby objectively justifiable. Under this approach, the risk assessment should be based on scientific evidence. It should be documented and transparent.

A state member may apply and maintain provisional sanitary and phytosanitary measures. Where the relevant scientific information is insufficient, the measure may be adopted on the basis of pertinent available information. The member adopting the measure may seek to obtain additional information for a more objective assessment but must review it within a reasonable period of time. The studies which are carried out thereafter must be sufficient risk assessments and be based on sufficient scientific information.

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