Presentation - International Trade Relations

Hilary Ross
David Salmon
Luis Sitoe
Dispute Settlement (DS) 26
Brief Background
• The United States (US) and European Union (EU) are
engaged in a long-standing dispute over the EU’s
decision to ban hormone-treated beef exports from the
US in the EU market
– Since 1989, the EU has banned all imports of
hormone treated meat into the EU and generally
restricts meat imports to a limited quantity of nonhormone treated beef
• In 1998, the WTO ruled in favor of the US and the US
began retaliatory tariffs of 100% on selected food
products, which remain in effect to this day
Origin of the Dispute - United
• Growth-enhancing hormones are used widely in beef
production in the United States and other meat-exporting
countries, such as Australia, Canada, Chile, New
Zealand, South Africa and Japan
• Hormones are used because they allow animals to grow
larger and more quickly on less feed, lowering
production costs
• In the US, hormones have been approved for use since
the 1950’s
– Within the US, hormones are now used on
approximately 2/3 of all cattle and 90% of cattle on
Origin of the Dispute – EU
• Beginning in the early 1980s, the European Union (EU)
enacted a full ban on the importation and production of
hormone-treated beef
• The ban reflects the EU’s approach to food safety,
known as the “precautionary principle” of taking
“protective action before there is complete scientific
proof of risk”
US Position
• EU rejection of hormone treated beef is merely a
protectionist measure disguised as a safety issue
• Hormone treated beef is safe
– Numerous studies have concluded its safety, EU
studies have been inconclusive at best
– Many other countries allow for the use of hormone
treated beef (Australia, Canada, Chile, Japan, New
Zealand, South Africa)
• This is a direct violation of the EU’s responsibility under
the SPS agreement
European Union Position
• Hormone treated beef has been linked to carcinogens,
thus it has not been proven safe
• The EU has the right to ban beef imports under the
“precautionary principle” (i.e., the EU may take protective
action before there is complete scientific proof of risk)
– Must protect the health and safety of EU citizens
• The EU has fulfilled its requirements under the SPS
US – EU Beef Hormone Dispute
1981 – EU
restrictions on
hormone treated
beef within the
1986 – 1987
US raises EU
hormone ban
under the
Tokyo Round
of the GATT
Jan 1, 1989 EU enacts a full
ban on all
treated beef
June 1996 – US
requests WTO dispute
1995 –
panel against the EU,
claiming EU ban is
inconsistent with the
including SPS
EU’s WTO obligation
under the SPS
enters into
The Sanitary and Phytosanitary
• Enacted January 1, 1995, as part of Uruguay Round.
• Twofold objective:
– Respects the right of sovereign WTO members to choose a level of
health protection deemed appropriate
• Precautionary Principle- countries may protect their citizens against food safety
risks before risks are actually scientifically proven.
– Ensures that members do not use SPS requirements to enact
“unnecessary, arbitrary, scientifically unjustifiable, or disguised”
restrictions on international trade.
• Allows for food safety and health measure disputes to be
settled within the WTO dispute settlement process.
SPS Article III
• 3.1
– Members should base standards on international
• 5.1
– Members should use the research of international food
and health organizations that scientifically study the risk to
humans, plants, and animals to develop their own
• 5.5
– Members may not set or use their standards arbitrarily to
discriminate against other Members, and if they are found
to have done so they must cooperate in setting
reasonable standards
US – EU Beef Hormone Dispute
June 1996 – US requests WTO
dispute panel against the EU,
claiming EU ban is inconsistent
with the EU’s WTO obligation
under the SPS Agreement
2003- EU finally
publishes studies, claims
it is in compliance
February 1998 – EU loses
appeal but is given 15 months
to conduct risk assessment
August 1997- The
WTO finds the EU’s
ban IS in fact
inconsistent with
2008- Panel finds all
parties at fault,
allows sanctions to
continue on all sides
July 1999- US
implements sanctions
2004-05- EU requests
consultations against US
for old sanctions and
initiates new
proceedings against US
and Canada
2009- USTR
changes list of EU
affected by
Consultations, Proceedings and
• 1998- EU is still found to be in violation of SPS, but is
granted 15 months to prepare a risk assessment of
the original hormones in question
• EU continues ban on hormones during this time
– 1999- Trade concessions in the amount of $116.8 million USD
per year and imposes a 100% ad valorem duty on products
produced by EU nations, including:
– Meat, fish, cheese, tomatoes products, fruit juice, fruits and
vegetables, coffee, mustard, soups and broths, toasted breads
and cocoa products
Consultations, Proceedings and
• In 2003 the EU presents its findings and
concludes that it is necessary to ban one
hormone permanently and five others
– This supposedly brings the EU into compliance with Article
5.7 of SPS
– The provisionary ban might do that, but the fact that the
EU still doesn’t use international risk assessment
guidelines to set standards does not bring it into
compliance with SPS 5.1
Consultations, Proceedings and
• In 2004 the EU calls for new consultations to force
the US to remove its sanctions since the EU came
back into compliance with the WTO (although it did
not remove its ban on any of the hormones)
• In 2005 the EU calls for a dispute settlement panel to
review the case
• In 2008- the panel finds the US and Canada at fault
for not removing sanctions, and the EU at fault for
not providing enough evidence
– Later that year the Appellate Body allows the continuation
of trade sanctions on the EU and also the continuation of
the ban on beef hormones
Consultations, Proceedings and
• 2008- the EU files a new challenge against U.S.
and Canadian sanctions, pre-emptively in
reaction to. . . .
• 2009- the USTR updates the list of EU
products , then delays implementation by two
months to negotiate a settlement
May 2009 Agreement- the end?
• On May 13, 2009, the US and EU signed a
memorandum of understanding (MOU) to resolve the
dispute by increasing market access for US hormone
free beef in exchange for a reduction in import duties
from EU products into the United States
• MOU will be implemented in three phases:
• Phase 1: Expand market access for hormone free US beef to a max of
20,000 metric tons
• Phase 2: Expand market access for hormone-free US beef to 45, 000
metric tons, contingent on the successful implementation of Phase 1
• Phase 3: Maintain market access for 45,000 metric tons of US beef and US
removes import duties of select items under dispute
• The ban affected an estimated $100-$200 million
in lost U.S. exports –less than one-tenth of one
percent of U.S. exports to the EU in 1999;
• WTO panels concluded that the EU ban lacked a
scientific justification, but the EU refused to
remove the ban primarily out of concern that
European consumers were opposed to having this
kind of meat in the marketplace.
Observations (Continued)
• The U.S. hard line is buttressed by concerns
that other countries might adopt similar
measures based on health concerns that lack
a legitimate scientific basis according to U.S.
• Other U.S. interest groups are concerned that
non-compliance by the EU undermines the
future ability of the WTO to resolve disputes
involving the use of SPS measures
Observations (Continued)
• WTO disputes involving the United States have
resulted in greater market access or more
protection of intellectual property rights;
• Hormone case showed, a WTO dispute decision
against a country does not necessarily result in
the timely removal of its trade-restrictive
• The losing country may face higher tariffs or pay
compensation, neither of which is a goal of
dispute settlement;
Observations (Continued)
• Reform of multilateral dispute settlement procedures to
increase the likelihood of compliance:
– U.S. proposal for carouselling of retaliation lists
• promotes the WTO by strengthening the dispute process, but can
undermines the multilateral system through unilateral action;
• If not successful, the domestic industry still faces the restrictive
foreign market, U.S. consumers of imported goods on the retaliation
list have to pay higher prices, and foreign exporters lose sales.
• In any case, continuous changes in retaliation lists could hurt some
U.S. companies, especially small and medium-sized businesses and
importers of items on the lists.
– Aggressive monitoring of compliance, particularly for long
period of implementation;
– Authorization of automatic compensation, and
– Remedies for past damage from violations of WTO obligations;
US – EU Beef Hormone Dispute
• Johnson, Renee and Hanrahan, Charles E. “The U.S. – EU Beef
Hormone Dispute”. Congressional Research Service. January 19,
2010. (
• Sek, Lenore. “Trade Retaliation: The ‘Carousel Approach’”.
Congressional Research Service. March 5, 2002.
• “USTR Announces Agreement With European Union In Beef
Hormone Dispute”. Office of the United States Trade Representative.
February 24, 2010. (
• “WTO Hormone Case”. United States Foreign Agricultural Service:
Mission to the European Union. August 7, 2007.