Regulation of Market Access

(Contd.)
Sanitary and Phytosanitary Measures
Agreement
• The Agreement’s central purpose is to promote
international trade by limiting use of SPS
measures as disguised barriers to trade.
• The Agreement’s basic rights and obligations
underscore that WTO members have the right to
impose SPS measures as necessary “for the
protection of human, animal or plant life or
health”.
 Contd.
• Members shall ensure that their sanitary and
phytosanitary measures do not arbitrarily or
unjustifiably discriminate between Members when
imposing SPS policies on imported products. Sanitary
and phytosanitary measures shall not be applied in a
manner which would constitute a disguised
restriction on international trade (Article 2.3).
• The Agreement declares that Members shall base
their sanitary or phytosanitary measures on
international standards, guidelines or
recommendations (Article 3.1)
 Contd.
• When a Member imposes Sanitary or phytosanitary
measures that conform to international standards,
guidelines or recommendations, those measures will
automaticaly be “presumed to be consistent with
the relevant provisions of this Agreement”.
• However, members may use measures which result
in higher standards if there is scientific justification
(Article 3.3).
• They can also set higher standards based on
appropriate assessment of risks so long as the
approach is consistent, not arbitrary.
 Equivalence
• 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.
• For this purpose, reasonable access shall be given,
upon request, to the importing Member for
inspection, testing and other relevant procedures.
 The Jurisprudence evolved over SPS Agreement

• EC MEASURES CONCERNING MEAT AND MEAT

PRODUCTS (HORMONES) (AB, 1997):
• EC ban on imports of meat from animals that had
been administered natural or synthetic hormones.
• Exceptions were allowed for hormones that were
used for therapeutic purposes but not hormones
used to promote growth in cows.
• The core issue was whether EC ban concerning six
hormones was ultra vires the SPS Agreement, given
the fact that the Codex Alimentarius Commission did
not prescribe the six hormones as health hazards.
 Contd.
• EC argued that although scientific studies had
suggested no objective risk but there were
incidents that made consumers suspicious of
eating beef administered by hormones.
• The Appellate Body held that a measure can be
based on international standards without
conforming to those standards. As the purpose
of Article 3 is to promote the use of international
standards, while allowing countries to deviate
from those standards if those deviation conform
to Article 5 which pertains to risk assessment.
 Contd.

• AB concurred with the Panel that EC measure

was not based on a risk assessment as
required under Article 5.1.
• Further held that risk assessment need not be
based entirely on research in the physical
sciences , nor must risk assessment examine
only quantitative risks.
• AB held that SPS level required by a country
would be incompatible with Article 5.5 it failed
the following tests:
 Contd.
(1) the country did not require comparable levels
of protection in comparable situations ; (2) the
failure to a apply comparable measures to
comparable situations is arbitrary and unjustified;
and (3) such measures result in discrimination or
disguised restriction on international trade.
• AB found that EC applied different SPS levels in
comparable situations and thus failed the first
test.
• EC ban also failed the second test as the EC could
not justify the difference in treatment.
 Contd.

• However, the AB held that the third test

whether “arbitrary or unjustifiable”
differences in SPS levels harmed trade being
most important the complaint provided
insufficient evidence that the EC measures
failed that test.
 AUSTRALIA – MEASURES AFFECTING
IMPORTATION OF SALMON (AB, 1998)
• The Australian regulation banned importation
of frozen salmon in order to prevent twenty-
four hour fish borne diseases from spreading
into Australian pristine environment.
• Canada argued that the quarantine was
arbitrary as Australia did not apply similarly
strict quarantine measures against other
disease risks.
 Contd.
• AB ruled that Australia's ban on imports of fresh
and frozen Canadian Salmon was not based on an
assessment of risks.
• Three-pronged test applied by the AB: (1)
identification of the diseases and possible biological
and economic consequences of their entry or
spreading: (2) evaluation of the likelihood of entry,
establishment or spreading; and (3) evaluation of
the impact of SPS measures on the likelihood of
entry, establishment or spreading of the diseases.
 Contd.

• AB held that Australia met the first requirement. But

Australia had failed to meet the other two
requirements.
• AB found that the Salmon import ban was a
disguised restriction on trade. Though the Australia
was free to determine its own level of protection, yet
Australia did not apply that high level of protection in
other comparable situations. By allowing imports of
bait or ornamental fish, Australia exposed itself to
greater risk than if had permitted salmon fish.
 Trade-Related Investment Measures
• The TRIMS agreement acknowledges explicitly
that certain measures governing the treatment
of investment have restrictive or distortive
effects on trade in goods.
• No Member shall apply any TRIMS that is
inconsistent with the provisions of Article III or
Article XI of GATT 1994.
• An illustrative list of TRIMS deemed to be
inconsistent with the above articles is
appended to the Agreement. It covers:
 Contd.

(1) Those that require particular levels of local

sourcing by an enterprise (local content requirement);
(2) Those which restrict the volume or value of
imports which an enterprise can buy or use to the
volume or value of products it exports (trade
balancing requirements);
(3) Those which restrict the volume of imports to the
amount of foreign exchange inflows attributable to an
enterprise; and
(4) Those which restrict the importation by an
enterprise of products, whether specified in terms of
the particular type, volume or value of products or of
a proportion of volume or value of local production.
 Contd.
• Prohibited practices under the TRIMs include both
those which are mandatory in nature and those ‘with
which compliance is necessary to obtain an
advantage’.
• The phrase ‘investment measures’ as reflected in the
Agreement indicates that the TRIMs agreement is not
limited to measures taken specifically in regard to
foreign investment.
• Nothing in the Agreement suggests that the
nationality of the ownership of enterprise subject to a
particular measure is an element in deciding whether
that measure is covered by the Agreement.
 Contd.

• TRIMs Agreement is not concerned with

subsidies and internal taxes as such but rather
with local content requirements, compliance
with which may be encouraged through
providing any type of advantage.
 Indonesia — Autos (Panel, 1998)
• Indonesia, arguing that the measures at issue were
not trade-related investment measures, stated that
while its subsidies may, at times, indirectly affect
investment decisions of the recipient of the subsidy
or other parties, these decisions are not the object,
but rather the unintended result, of the subsidy.
• Also that the TRIMs Agreement is basically
designed to govern and provide a level playing field
for foreign investment, and that therefore
measures relating to internal taxes or subsidies
cannot be trade-related investment measures.
• Panel rejected the argument and stated that: “… the
use of the broad term ‘investment measures’
indicates that the TRIMs Agreement is not limited to
measures taken specifically in regard to foreign
investment. … Nothing in the TRIMs Agreement
suggests that the nationality of the ownership of
enterprises subject to a particular measure is an
element in deciding whether that measure is covered
by the Agreement. We therefore find without textual
support in the TRIMs Agreement the argument that
since the TRIMs Agreement is basically designed to
govern and provide a level playing field for foreign
investment, measures relating to internal taxes or
subsidies cannot be construed to be a trade-related
investment measure.
 Contd.
• We recall in this context that internal tax
advantages or subsidies are only one of many types
of advantages which may be tied to a local content
requirement which is a principal focus of the TRIMs
Agreement. The TRIMs Agreement is not concerned
with subsidies and internal taxes as such but rather
with local content requirements, compliance with
which may be encouraged through providing any
type of advantage. Nor, in any case, do we see why
an internal measure would necessarily not govern
the treatment of foreign investment.
 Contd.
• The Panel concluded that the measures were
“aimed at encouraging the development of a
local manufacturing capability for finished
motor vehicles and parts and components in
Indonesia” and that “that there is nothing in
the text of the TRIMs Agreement to suggest
that a measure is not an investment measure
simply on the grounds that a Member does not
characterize the measure as such, or on the
grounds that the measure is not explicitly
adopted as an investment regulation”:
 Developing Country Members

• A developing country Member shall be free to

deviate temporarily from the provisions of
Article 2 to the extent and in such a manner as
Article XVIII of GATT 1994, the Understanding
on the Balance-of- Payments Provisions of
GATT 1994, and the Declaration on Trade
Measures Taken for Balance-of- Payments
Purposes.
 Notification and Transitional Arrangements

• Members, within 90 days of the date of entry into

force of the WTO Agreement, shall notify the
Council for Trade in Goods of all TRIMs they are
applying that are not in conformity with the
provisions of this Agreement.
• Each Member shall eliminate all TRIMs which are
notified under paragraph 1 within two years of the
date of entry into force of the WTO Agreement in
the case of a developed country Member, within
five years in the case of a developing country
Member, and within seven years in the case of a
least-developed country Member
 Contd.

• On request, the Council for Trade in Goods may

extend the transition period for the elimination of
TRIMs notified under paragraph 1 for a
developing country Member, including a least-
developed country Member, which demonstrates
particular difficulties in implementing the
provisions of this Agreement, such as, the
individual development, financial and trade
needs.
 Transparency
• Each Member shall notify the Secretariat of
the publications in which TRIMs may be found,
including those applied by regional and local
governments and authorities within their
territories.