IV. ARGUMENTS OF THE PARTIES

1. Relationship between GATT and the SPS Agreement

IV.1 Canada claimed that the SPS Agreement, GATT and the TBT Agreement were agreements of equal status, contained in Annex 1A of the WTO Agreement (as per Article II of the WTO Agreement). Since the SPS Agreement contained rules that were more detailed and more precise than those of the GATT, it was appropriate to examine first the application of the SPS Agreement to the EC measures, followed by GATT.

IV.2 The European Communities considered that the SPS Agreement would apply only if a violation of the Articles of GATT were to be established. The European Communities argued that the SPS Agreement codified, as the last recital of its preamble stated, the desire of Members "to elaborate rules for the application of the provisions of GATT which relate to the use of sanitary or phytosanitary measures, in particular the provisions of Article XX(b)". Furthermore, it was well established GATT law and practice that GATT 1947 did not affect the power of its members to set up a regulatory policy which they deemed necessary in order to protect human, animal or plant health. But the conformity of the measures it applied for that purpose could be reviewed under GATT¹⁵. It was, therefore, admitted that a violation of GATT by a measure should be established first, before recourse to possible justifications (e.g. under Article XX(b)) could be considered. In such an event, the Panel could review the measure but not the underlying policy objective on which it was alleged to be based. The European Communities noted that there were several new provisions in the SPS Agreement that imposed a series of rights and obligations on Members. However, the SPS Agreement reaffirmed the right of Members to adopt or enforce measures the Member deemed to be necessary to protect human, animal or plant health (recitals 1 and 6 of preamble). It could therefore be argued that most of the obligations created by the SPS Agreement were already applied under GATT 1947 through interpretations of Article XX(b) by panel reports and the CONTRACTING PARTIES.

IV.3 The European Communities claimed that Article 2.4 of the SPS Agreement established that SPS measures which conformed to the Agreement were "presumed" to be in accordance with the obligations of the Members "under the provisions of GATT which relate to the use of sanitary or phytosanitary measures, in particular the provisions of Article XX(b)" (emphasis added). Despite the fact that the words "in particular" appeared in Article 2.4, it was hard to imagine other provisions of GATT "which relate to the use of sanitary or phytosanitary measures". Therefore, if the SPS Agreement were to be defined as a self-standing agreement this was not because it interpreted provisions of GATT other that Article XX(b), but only because it laid down additional procedural requirements. The substantive role of the SPS Agreement was to interpret Article XX(b) of GATT; recourse to the substantive provisions of the SPS Agreement could be made only under the same conditions under which recourse could be made to Article XX of GATT, that was only after a violation of another provision of GATT was first established. As far as the additional, procedural obligations laid down by the SPS Agreement, these could be examined by the Panel directly and independently of any need to establish first a violation of the provisions of GATT.

IV.4 Canada disagreed that the substantive mission of the SPS Agreement was "to interpret Article XX(b) of GATT", with the addition of a few procedural rules, and that "... recourse to the substantive provisions of the SPS Agreement could be made only under the same conditions under which recourse could be made to Article XX GATT, that is only after a violation of another provision of GATT was first established". Canada responded that, the SPS Agreement was a self-standing agreement of equal status to the GATT. Article 1 of the SPS Agreement provided that the Agreement "applies to all sanitary and phytosanitary measures which may, directly or indirectly, affect international trade." There was no requirement that a violation of GATT must be established before the SPS Agreement applied. The EC measures had a profound and direct effect on Canadian beef exports to the European Communities, so there was no question that the EC measures directly affected international trade. The European Communities agreed that its measures were subject to the SPS Agreement. Thus, in accordance with the ordinary meaning to be given to the terms set out in Article 1, the only condition for applying the SPS Agreement had been met.

IV.5 Canada further argued that the SPS Agreement was clearly more than just an interpretation of Article XX(b). For example, Articles 3 and 4, on "Harmonization" and "Equivalence" respectively, did not correspond to any provision in the GATT, and were more than "... additional procedural requirements". The broad scope of the SPS Agreement was reflected in the fourth and sixth preambular paragraphs, which stated the desire of the WTO Members to establish "a multilateral framework of rules and disciplines to guide the development, adoption and enforcement of sanitary and phytosanitary measures in order to minimize their negative effects on trade" and to "further the use of harmonized sanitary and phytosanitary measures between Members, on the basis of international standards ...". Finally, the negotiating history confirmed that the SPS Agreement was more than an interpretation of Article XX(b). In the early stages of the Uruguay Round, it had been drafted as a Decision interpreting the GATT 1947, but later evolved to a self-standing agreement in Annex 1A. If the negotiators had intended that the SPS Agreement would be merely an interpretation of Article XX(b), it would have been incorporated into the GATT as an "Understanding on the Interpretation of Article XX(b)", rather than an independent agreement.

2. The SPS Agreement

IV.6Canada noted that historically the EC measures had been motivated by four sets of concerns: (i) anxiety regarding the danger to human health occasioned by the illegal use of substances, such as DES (see paragraph 4.183, footnote 130); (ii) the pressure of public opinion which, under prevailing circumstances, did not distinguish between products or the conditions of their use; (iii) the economic consequences of a "sensationalist campaign",¹⁶ which had resulted in the collapse of the veal market and a sharp decline in beef consumption throughout the European Communities; and (iv) the distortions in the conditions of competition among the EC member States owing to dissimilar provisions and regulations governing the manufacture, distribution and use of substances.¹⁷

IV.7 Canada recalled the terms of reference and conclusions of the Lamming Report (see paragraph 38). Although the Lamming Group was suspended by the EC Commission before it had completed its terms of reference, it had subsequently produced a second report in October 1987, stating that the levels of trenbolone and zeranol and their major metabolites found in edible tissue, following accepted husbandry practices, were substantially below the hormonally effective doses in animal test systems and therefore did not present a harmful effect to health.

IV.8 Canada observed that in its proposal published in June 1984 (COM(84)295 final, see paragraph 39), the EC Commission had set out three conditions for the use of these hormones for growth promoting purposes: they could be administered only by implantation in a part of the animal which would be discarded at slaughter; treated animals had to be identified at the time of implantation; and the implants were to be administered by a veterinarian. Canada argued that the EC Commission's proposal had been rejected by the Economic and Social Committee because of concerns that the EC Commission's proposal would overturn what the Economic and Social Committee had seen to be the two central objectives of both the original Directive and the EC Commission's proposed Directive, which "... make the protection of the consumer's health and economic interests priority objectives".¹⁸

IV.9 Canada claimed that in rejecting the proposal to allow the use of the three natural hormones, the Economic and Social Committee had clearly disregarded the findings of the Scientific Working Group. In support of its position, the Economic and Social Committee had pointed to the fact, that "... on 30 September 1980 the Council undertook unanimously, under the pressure of public opinion, to prohibit the administering of all hormones ... in livestock production".¹⁹ The Economic and Social Committee had also noted that, although consumer groups and workers had long been unequivocally opposed to the use of anabolics, neither farmers' organizations nor meat processors and traders had taken an official stand at the EC level on this issue. Professor Lamming himself, in a presentation in 1986, had been unequivocal in his assessment of the reasons behind the suspension of the Lamming Group and the rejection of the EC Commission proposal based on the Lamming Group's findings with respect to the three natural hormones:

"The British Minister has claimed, and rightly so, that [EC Agriculture Commissioner] Andriessen freely admits that the scientific background or scientific consideration were not taken into account. In other words it was purely a political decision and if you read the speeches that were made in the European Parliamentary debate they are mainly based on the fact the [sic] we have got such a surplus of beef and it costs a heck of a lot to store it, why should we authorize any techniques which are going to increase that productivity. The majority of European parliamentary members could see this as a prevention of an increased production of European beef and that probably motivated them more than the scientific background."²⁰

IV.10 Moreover, the resolution of the European Parliament (February 1988), had stated that "... the Community, with its directives banning hormones, has adopted consistent legislation both in terms of the necessary control of agricultural production and from the point of view of protecting the interests of consumers".²¹ Canada pointed out that the preamble of Directive 88/146/EEC set out the rationales for the prohibition. These were: to harmonize the regulatory schemes of the EC member States; remove competitive distortions and barriers to intra-Community trade; meet consumer anxieties and expectations; and bring about an increase in the consumption of meat products.²² This was keeping with the opinion of the Social and Economic Committee²³, as well as the Resolution of the Parliament of 11 October 1985.²⁴

IV.11 Canada submitted that Sir John Maddox, Editor of Nature and Chairman of the 1995 EC Scientific Conference, had touched on two points that had been at the centre of the argument regarding the EC hormones legislation. He had noted, first, that the 1995 EC Scientific conference had reconfirmed the scientific argument that these hormones "were not damaging to meat-eating consumers".²⁵ Second, his article had highlighted the politicized nature of this debate within the European Communities and how that had been reflected in the composition and proceedings of the 1995 EC Scientific Conference itself. Scientists were outnumbered by participants from bodies such as the European Parliament, the Economic and Social Committee and various lobby groups, all of which had been long-time advocates of the EC measures at issue. In a brief paper forwarded to the European Communities following publication of the proceedings, two Canadian scientists, one of whom had participated in the EC Conference, commented not only were scientists outnumbered by non-scientists but, as noted in the "Report and Conclusions" of the Conference proceedings "... the final plenary session of the whole conference, apart from a brief statement of the principal conclusions by the chairman, was largely dedicated to statements by those not invited as scientist-participants".²⁶ Canada further criticized the exclusion of scientists directly employed by commercial companies with an interest in the sale of growth promoters, despite the fact that these companies "hold much of the proprietary information that is required for review by national regulatory agencies and international bodies such as JECFA"; and argued that since the conference papers represented individual opinions, "[t]he scientific validity of these conference papers does not compare with the expert committee reviews and recommendations of JECFA, or with the regulatory review process in a registering country".²⁷

IV.12 The European Communities responded that the Lamming Group had been dissolved because it was overtaken by events. During the deliberations of the Lamming Group, the EC Council had decided to adopt a level of protection which avoided the presence of any added hormones in meat. This had made the work of that group redundant, which was already late in issuing its report. Professor Lamming's 1987 account of further work undertaken by members of his group on zeranol and trenbolone had, similarly to the conclusions in the 1982 Lamming Report (see paragraph 38), concluded that these substances would probably be safe when used in accordance with "accepted husbandry practice" - a term he had not defined.²⁸ The European Communities contended, furthermore, that these conclusions were based on the unsupported assumption that the carcinogenicity of the substances was related to their hormonal effects and that residues of trenbolone and zeranol and their metabolites did not show "significant genotoxic potential". The European Communities argued that the common theme of this scientific advice, therefore, was that proper systems of control and monitoring would be a pre-requisite for the use of hormones for growth promotion. However, none of these scientific reports had explained what constituted "appropriate conditions of use" nor had they defined what was "good animal husbandry practice". Instead, they had drawn the attention of the EC Commission to the need to lay down the essential conditions concerning use, detection and control of these hormones if they were to be allowed for growth promotion.

IV.13 The European Communities argued that the reported opinion of Professor Lamming, who was relaying information reported to have been made to him by the United Kingdom Minister of Agriculture, did not conform with the official and publicly available views expressed by Mr. Andriessen. The European Communities noted that Mr. Andriessen had said, for example, that "the EC Commission recognizes that some scientists consider that, subject to certain conditions, the hormones could safely be used for fattening purposes in animals. The Commission is, however, of the opinion that these substances must be properly considered as medical substances which are only used for veterinary medical purposes, and only under strict conditions of supervision and control".

IV.14 The European Communities asserted that the historical record clearly demonstrated that the purpose of the EC measures was to protect human and animal health from risks arising from the use of the hormones at issue. The European Communities noted that the European Parliament had banned imports of meat from animals treated with growth promoting hormones primarily because "scientific information about these substances is far from complete and that considerable doubt therefore exists about the desirability of their use and of their effect on human health".²⁹ Serious health concerns had been clearly stated in different MEP reports, including the "Nielsen Report", the "Pimenta Report" and the "Collins Report", and the European Parliament had remained constantly opposed to the authorization of all these hormones for animal growth promoting purposes for reasons of possible hazards to human and animal health.

IV.15 When the EC Commission had first proposed in 1980 to take measures in this area, as well as in 1988, it had found itself facing certain factual, legal and scientific situations. From the factual point of view, consumer concerns over the use of hormones for growth promotion in livestock was very high. Despite the traditionally cautious approach to the regulation of dangerous substances followed by the EC member States, consumer confidence in science and regulators (especially among well-informed consumer organisations and groups) was very low. This factual situation had not changed during the entire period that had preceded the adoption of Directive 96/22/EC; consumer concerns were even higher today.

IV.16 The European Communities noted that from the legal point of view, the use of hormones in animal growth promotion had long been prohibited in most EC member States, but some of them allowed the use of some of these substances under certain conditions.³⁰ With the progressive establishment of the common market, the divergence in the legislation of the EC member States was inhibiting free trade within the European Communities in animals and meat from animals treated with some of these hormones, and distorting the conditions of competition among EC meat producers.

IV.17 Furthermore, the European Communities observed that from the scientific point of view, the situation was very unclear in the early 1980s. The relevant international organizations - FAO, WHO, the Office international des épizooties (OIE) and Codex - had started to seriously examine the safety of these hormones in meat production only during the 1980s. The first substantive and comprehensive scientific report had been published by OIE in 1983. JECFA had discussed and issued a substantive and comprehensive scientific report on these hormones only in 1988. There were two other international reports comprising collective scientific work: the 1984 Scientific Report published by the European Commission (based on the Lamming Report) and the Proceedings of the 1995 EC Scientific Conference. The European Communities stressed, however, that these reports did not constitute the entire body of scientific knowledge on the issue of safe use of these hormones for growth promotion. There were also important studies made by individual scientists, and other specialized institutions like the International Agency for Research on Cancer ("IARC")

IV.18 The European Communities recalled that the EC Commission proposal (COM(84)295 final), which finally had led to the adoption of Directive 88/146/EEC, proposed to allow the use of the three "natural" hormones only under the following conditions in order to safeguard public health:

• only in the form of an implant to be administered in a part of the animal discarded at slaughter (usually the ear);


• to an identified animal only, to allow control of the withdrawal period;


• only by a veterinarian, with all treatments recorded;


• substances allowed to be administered must be on a EC list, clearly setting out conditions of use;


• these substances must be shown to be effective and safe; and


• meat produced from treated animals must be identified as such to the final consumer.

The European Communities indicated that the Economic and Social Committee had based its refusal of the EC Commission proposal COM(84)295 final on the need for scientific evidence and "particular reference to health aspects".³¹ Moreover, the European Parliament had eventually decided to reject the EC Commission proposal, considering that "scientific information about these substances is far from complete and that considerable doubts therefore exist about the desirability of their use and of their effect on human health".³² The proposal of the Commission had also been rejected by the EC Council of Ministers on the additional grounds that the proposal was not technically or economically feasible (see paragraph 4.131).

IV.19 The European Communities indicated that in 1988, following discoveries of significant use of illegal growth-promoting hormonal substances in certain EC member States, the European Parliament had established a "Committee of Enquiry into the Problem of Quality in the Meat Sector".³³ This Inquiry Committee had received submissions from a wide range of scientific experts, organisations and institutions, including meat trade and farmers' organisations, third country producers, the pharmaceutical industry and consumers' organizations. The outcome of the work of the Committee of Enquiry into the Problem of Quality in the Meat Sector, the Pimenta Report, was adopted by the European Parliament on 29 March 1989. The report observed that:

"1. The Inquiry Committee considers that the prohibition of hormonal substances for non-therapeutic (i.e. growth-promoting) purposes, as laid down in Directives 81/602/EEC and 88/146/EEC must be maintained and expanded with the following justifications:


(a) the Inquiry Committee believes that the maintenance and reinforcement of the total ban on the use of hormonal and other growth-promoters is the only way to restore consumer confidence in the meat sector and to clarify this very complex issue for producers and consumers alike;


(b) the Inquiry Committee is convinced that control measures will have to be comprehensive and accepts the opinion of 10 out of 12 national veterinary experts that a total ban will facilitate implementation and control;


(c) the Inquiry Committee takes note of the scientific evidence that has been placed before it, and points out that the conclusions regarding the use of natural and nature-identical hormones rest upon strict conditions of use which it believes cannot in reality be attained. The Inquiry Committee is of the opinion that use of the natural/nature-identical hormones carries the risk of inexperienced application, incorrect dosage and unsupervised injection which could pose a risk to the animal and the consumer. The Inquiry Committee also notes that residual doubts with regard to long-term cumulative and interactive potential carcinogenicity remain. In addition, the Inquiry Committee believes that proven necessity and socio-economic desirability should be criteria of acceptability for the use of (bio)chemical growth promoters in animal-rearing;


(d) the Inquiry Committee does not accept the argument that prohibiting the use for growth-promotion substances to the detriment of the consumer, given that substances are already in circulation which are more effective in promoting weight-gain and that a black market exists even in authorized pharmaceutical substances. The Inquiry Committee therefore believes that protection of public health is best achieved by a total ban;


(e) the Inquiry Committee notes that great pressure to use illegal growth-promoting substances exists in the context of contract fattening on integrated farms and in undertakings established by the processing industry and is therefore of the opinion that legislation should be introduced to strengthen the individual status and responsibilities of such undertakings" (pages 5-6) (emphasis added).

IV.20 The European Communities added that the European Parliament had adopted another important report on the issue of use of hormones for animal growth promotion, the "Collins Report" of 7 February 1989.³⁴ This report noted that the licensing systems for the regulation of veterinary medicines required that a new product satisfy three criteria: safety, quality and efficacy. However, these criteria, which might be satisfactory for therapeutic drugs, were not sufficient for growth promotion products. The Collins Report proposed that the EC veterinary medicine licensing system be adapted to include a "fourth hurdle", entailing an objective socioeconomic and environmental impact assessment. It argued that the social, agricultural and environmental implications of the use of growth and yield promoting pharmaceuticals required a licensing system different from that which existed for these products when used for therapeutic purposes. The same report also found, inter alia, that: "... Whereas the use of growth promotion hormones raises questions not only of public but also of animal health; ... Whereas the Community has a duty to protect the health and defend the interests of its consumers and the farm animals; ... Whereas the Community is opposed to all downward harmonisation of health and hygiene standards with regard to the production and marketing of foodstuffs in the European Community and also at international level".

IV.21 The European Communities rejected Canada's criticism of the 1995 EC Scientific Conference. The comments by Sir John Maddox should be read in the light of his conclusions as Chairman of the Steering Committee which organized the conference and the letter he had sent to EC Commissioner Fischler, in which he stated:

"I have myself been impressed that no single class of growth promoters is at present sufficiently well understood for people to be confident that they know the mechanism by which effects (and side-effects) are produced. While that state of affairs persists, risk-assessment will inevitably remain hesitant, regulation cautious and public opinion suspicious ..."

IV.22 As far as the comments by the Canadian scientists were concerned, the European Communities noted that the 1995 EC Scientific Conference was funded by the EC Commission but organized by an independent steering committee. The EC Commission had not interfered in the design of the programme or nomination of participants. Scientists employed by, or linked to, the pharmaceutical industry had not been excluded and one of them was a workshop chairman. The steering committee had been asked to invite those persons whom they considered would be able to contribute scientific expertise on the subject, regardless of national origin. Furthermore, contrary to what was stated in the Canadian letter, no expertise or information was excluded. The steering committee had made every effort to obtain all relevant information, for example by announcing in international journals the possibilities for non-participating scientists to contribute to the debate. Finally, the European Communities rejected the suggestions that persons other than scientists should not have been invited to participate in the Conference. It was a matter of fact that the use of growth promoting hormones was a matter of concern and controversy and the EC Commission believed that it was right to consult policy makers and consumers as widely as possible on issues such as this.

(a) Article 1.1 of the SPS Agreement

IV.23 Canada recalled that Article 1 provided, in part: "[t]his Agreement applies to all sanitary and phytosanitary measures which may, directly or indirectly, affect international trade". The EC measures had a profound and direct effect on Canadian beef exports to the European Communities.³⁵ The issue was whether the EC measures were sanitary measures within the terms of the SPS Agreement. Recalling that Annex A of the SPS Agreement defined a sanitary or phytosanitary measure to mean, in part, any measure applied "... to protect human or animal life or health within the territory of the Member from risks arising from additives, contaminants, toxins or disease-carrying organisms in foods, beverages or feedstuffs", Canada noted that contaminants included veterinary drug residues.

IV.24 Canada claimed that during WTO consultations, the European Communities had not clearly indicated whether the measures at issue were sanitary measures within the scope of the SPS Agreement or technical regulations within the scope of the TBT Agreement. However, the European Communities had suggested that the legislator's intent could be found in the preambles to the Directives. The preambles to Directive 81/602/EEC³⁶ and Directive 88/146/EEC³⁷ suggested that one purpose of the measures was to address a concern for human health arising from the presence of hormone residues in meat. On this basis, Canada submitted that the EC measures were subject to the disciplines of the SPS Agreement.

IV.25 The European Communities agreed with Canada that the measures challenged were better defined as measures falling within the scope of the SPS Agreement rather than the TBT Agreement. The European Communities noted that an essential link of the SPS disciplines with the regulatory freedom of the parties was that the measures applied were of concern to the SPS Agreement (and the WTO system) only if they affected international trade.

(b) Article 2.1 of the SPS Agreement

IV.26 Canada argued that Article 2.1 set out a limited right to take sanitary or phytosanitary measures:

"Members have the right to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health, provided that such measures are not inconsistent with the provisions of this Agreement."

Canada claimed that since the EC measures were inconsistent with Articles 2, 3, and 5, the European Communities had clearly exceeded this limited right.

IV.27 Canada noted that a resolution of the European Parliament, an opinion of the Economic and Social Committee, and the Directives themselves, ascribed several additional purposes to the EC measures which were not contemplated or sanctioned by the SPS Agreement, such as harmonizing the regulatory schemes of the EC member States and thereby removing competitive distortions and barriers to intra-Community trade, meeting consumer anxieties and expectations, and bringing about an increase in the consumption of meat products (see paragraph 4.6). A consequence of these additional motives was that the EC measures were more trade restrictive than necessary to protect human life and health.

IV.28 Canada argued that in particular with respect to the objective of encouraging intra-Community trade, the EC measures had proven successful.³⁸ The price of this success, however, had been paid by exporters such as Canada, who were effectively eliminated from the EC market as a result of the EC measures with respect to hormones, as shown by the following quantities in metric tons: 1984: 5,664; 1985: 4,853; 1986: 4,696; 1987: 3,836; 1988: 2,339; 1989: 648; 1990: 383; 1991: 162; 1992: 479; 1993: 223; 1994: 537; 1995: 287. As a direct result of the implementation of such measures in January 1989, Canada's exports into the EC market had suffered a 72 per cent decline.³⁹ This was from a level that had already been severely impaired by the implementation of the Third Country Meat Directive in 1987, as a result of which the European Communities had unilaterally abandoned the hitherto accepted practice of mutual recognition of national standards and had insisted that all EC trading partners comply with EC standards. The EC measures at issue and the Third Country Meat Directive had, moreover, both been applied more stringently and more precipitately to third countries than to EC member States.⁴⁰

IV.29 In the case of the EC measures at issue, third countries had to meet the EC measures or cease exports into the European Communities. Internally, however, abuses had continued since the measures had entered into force. Consumer anxieties, far from being addressed by the EC measures, had been exacerbated by persistent reports of illegal use of prohibited substances and the EC measures had failed to increase consumption.

IV.30 Canada claimed that a major problem confronting the European Communities had been an imbalance in production versus consumption. According to a special report produced by the EC Court of Auditors:

"A look at the trend in consumption and production since 1980 reveals that Community production, which, admittedly, is cyclical, has always, even at the lowest point of the cycle, exceeded consumption. This structural imbalance, which has persisted over a decade, is growing worse. The surplus needing to be disposed of every year on the world market has, over the past ten years, represented on average about 6 per cent of Community production, which is tending to grow at slightly less than 0,5 per cent a year."⁴¹

IV.31 In 1992, the European Communities had undertaken to address some of these problems by launching a reform of the CAP. Even so, the Court of Auditors had opined that, in the beef and veal sector, "[i]n the long term, the structural surpluses will continue to be a problem, one which the 1992 CAP reform has failed to remedy in the slightest and whose extent is hardly likely to diminish either, unless corrective measures ... are implemented".⁴²

IV.32 Canada concluded that in the context of persistent over-production and declining consumption, there had been scant incentive within the European Communities to address the trade concerns of its trading partners. The impairment to Canada's trade must be assessed not only against the actual losses it had suffered as a result of the EC measures, but against its increasing export potential, as evidenced by Canada's total exports since the 1980s.

IV.33 The European Communities rejected Canada's argument that the EC measures had been adopted in order to protect production from foreign competition. The reference to the divergence in the legislation of the EC member States which distorted the conditions of competition and affected free circulation of products in intra-EC trade (1st and 2nd paragraphs of Directive 88/146/EEC), was made for the sole purpose of justifying the need to take action at the EC level. Because of its internal constitutional structure, the European Communities was obliged to take action in order to eliminate distortions in the conditions of competition and to increase free intra-EC trade.⁴³ The preamble of the Directive thus clearly explained that the underlying objective was to respond in a harmonized way to the effect of these hormones on human health. This objective, however, was not in itself independent or more important than the objective of safeguarding against risks to human and animal health resulting from the substances at issue. These first three paragraphs of the preamble of the Directive clearly indicated these objectives:

"Whereas the administration to farm animals of certain substances having a hormonal action is at present regulated in different ways in the member States; whereas while their immediate effect on animals from the farmer's point of view is clear, assessments of their effect on human health vary and this is reflected in the regulations governing their use; whereas this divergence distorts the conditions of competition in products that are the subject of common market organizations and is a serious barrier to intra-Community trade;


"Whereas the use of hormonal substances for fattening purposes should therefore be prohibited; whereas the use of certain substances for therapeutic purposes may be authorized but must be strictly controlled in order to prevent any misuse of them."

IV.34 The European Communities further argued that action at the EC level was explicitly permitted by Article XXIV:8(a) of GATT. It submitted that when the European Court of Justice examined the object and purpose of Directive 85/649/EEC (invalidated on procedural grounds and subsequently re-enacted in Directive 88/146/EEC) it had noted that "the aim of the directive, according to the recitals in its preamble, is to protect human health and consumer interests with a view to eliminating the distortion of conditions of competition and bringing about an increase in consumption of the product in question" (emphasis added). The essential aim of the Directive, therefore, was found to be the protection of human health and of consumer interests. This protection was pursued with a view to improving the quality of meat through regulating the conditions for the production and marketing of meat. This objective, which was expected to increase consumption of the products, came within the objective of the Common Agricultural Policy. This justified action at EC level.

IV.35 Furthermore, the European Communities asserted that the historical record clearly demonstrated that the purpose of the EC measures was to protect human and animal health from risks arising from the use of the hormones at issue for animal growth promotion. The European Communities noted that the European Parliament had proposed a ban on imports of meat from animals treated with growth promoting hormones primarily because "scientific information about these substances is far from complete and that considerable doubt therefore exists about the desirability of their use and of their effect on human health".⁴⁴ Serious health concerns had been clearly stated in different MEP reports, including the "Nielsen Report", the "Pimenta Report" and the "Collins Report", and the European Parliament as well as the Economic and Social Committee, had remained constantly opposed to the authorization of all these hormones for animal growth promoting purposes for reasons of possible hazards to human and animal health.

IV.36 The European Communities rejected Canada's reference to the so-called EC third-country meat Directive which it considered to be irrelevant to this case. If Canada had any problems with the conformity of this Directive with the international obligations of the European Communities, it could of course complain to GATT and the WTO, but it had not done so. The increase in the EC intervention stocks of beef was unrelated to the objective and purpose of the challenged measures, because such high intervention stocks of beef did not exist in the EC member States that introduced the prohibition on the use of these hormones as early as 1961; such high intervention stocks of beef did not exist in 1981 when this prohibition was for the first time imposed at EC level; and such high intervention stocks of beef did not exist in April 1996 when the European Communities adopted Directive 96/22/EC which re-enforced the prohibition on the use of these hormones. The European Communities further submitted that the fact that the Directive offered equal access to the EC market for third-country meat was additional proof that there was no protectionist purpose in the EC measures. Statistics showed that the European Communities had continued to import about the same quantities of meat as before the application of the ban, it was, however, meat from animals to which hormones for growth promotion purposes had not been administered. The fact that the Court of Auditors' report found structural surpluses in the Common Agricultural Policy of the European Communities was nothing new.

IV.37 The European Communities argued that the EC legislation in question did not impose a ban on Canadian meat or on meat from any other origin (i.e. it was origin neutral). Canada continued to export fresh meat not destined for human consumption. Canada also exported to the EC hormone-free meat products for human consumption on the basis of a mutually agreed arrangement. Furthermore, as regarded illegal use, the European Communities did not see what relevance this argument had to the case before the Panel. Canada was using the argument, sometimes used in favour of legalising or decriminalising the use of narcotic drugs by humans, to the effect that legalising some drugs discouraged the use of others. Whether or not this was the case was open to debate but it was not relevant to the present dispute. In any case, the European Communities was taking very seriously the situation as regarded potential illegal use of these substances for animal growth promotion. This was evidenced from the stricter provisions on detection, control and illegal use applied in the European Communities. Furthermore, Directive 96/23/EC tightened up controls and increased substantially the sanctions and penalties to be applied to persons found to act contrary to the provisions of EC law.

TO CONTINUE WITH EC MEASURES CONCERNING MEAT AND MEAT PRODUCTS (HORMONES) COMPLAINT BY CANADA

¹⁵ In support of its argument, the European Communities referred to the panel report on "Thailand - Restrictions on Importation of and Internal Taxes on Cigarettes", adopted 5 October 1990, DS10/R.

¹⁶ J.B. Nielsen (1981), "Report drawn up on behalf of the Committee on Agriculture on the proposals from the Commission to the European Communities to the Council ...", European Parliament, Doc. I-840/80 (the "Nielsen Report").

¹⁷ Ibid., Doc. 1-523/80.

¹⁸ "Opinion on the proposal for a Council Directive amending Directive 81/602/EEC concerning the prohibition of certain substances having a hormonal action and of any substances having a thyrostatic action" (1985), EC Official Journal (85/C 44/11) (C 44), p.14.

¹⁹ Ibid., p.15.

²⁰ "Anabolic Growth Promotants and the EEC," supra, note 63, p.11.

²¹ "Resolution on the ban on hormones", 1988 EC Official Journal (C 68) 103.

²² Ibid., The relevant portions of the preamble state:

"Whereas the administration to farm animals of certain substances having a hormonal action is at present regulated in different ways in the member States; whereas while their immediate effect on animals from the farmer's view is clear, assessments on their effect on human health vary and this is reflected in the variations governing their use; whereas this divergence distorts the conditions of competition in products that are the subject of common market organizations and is a serious barrier to intra-Community trade;

"Whereas these distortions of competition and barriers to trade must therefore be removed by ensuring that all consumers are able to buy the products in question under largely identical conditions of supply and that these products correspond to their anxieties and expectations in the best possible manner; whereas such a course of action is bound to bring about an increase in consumption of the product in question."

²³ "Opinion on the proposal for a Council Directive amending Directive 81/602/EEC" (1985), EC Official Journal (85/C44/11) (C 44), p.14.

²⁴ "Resolution closing the procedure for Consultation of the European Parliament on the proposal from the Commission of the European Communities to the Council for a Directive amending Directive 81/602/EEC" (1985), EC Official Journal (C 288), p.158.

²⁵ J.Maddox, "Contention over growth promoters" (1995) 378 Nature 553.

²⁶ Steering Committee, "Report and Conclusions," in 1995 EC Scientific Conference Proceedings (Luxembourg: European Commission, 1996), p.3.

²⁷ J.D. MacNeil & Yong, "Canada's Comments on the EU Scientific Conference, Report and Conclusions, 23 July 1996.

²⁸ Published in The Veterinary Record (24/10/1987, p.389).

²⁹ Point E of Parliament's Resolution, EC Official Journal, No. 288, 11 November 1985, p.158.

³⁰ The European Communities indicated that there was a number of member States (probably 4 or 5) which did allow the use of some of these hormones for growth promotion until their prohibition at EC level. The information on percentages of use, if it was available at all, would only be known to the individual member States which approved the use of the particular substances. At least one member State (the United Kingdom) had indicated that "anecdotal evidence suggests that growth promoting hormones may have been used on up to 40% of United Kingdom cattle prior to the ban".

³¹ "Opinion on the proposal for a Council Directive amending Directive 81/602/EEC concerning the prohibition of certain substances having a hormonal action and of any substances having a thyrostatic action," EC Official Journal (C 44), 15 February 1985, p.14.

³² See point E. of Parliament's Resolution, EC Official Journal, No. 288, 11 November 1985, p.15.

³³ See para. 2.31.

³⁴ European Parliament, Committee on the Environment, Public Health and Consumer Protection, Report on "The USA's Refusal to comply with EC Legislation on Slaughterhouses and Hormones and the Consequences of this Refusal", EP 128 381/B, 7 February 1989, named after its reporter Mr. Collins, MEP.

³⁵ See para. 4.28. The preamble to Directive 81/602/EEC states, in part:

"Whereas, due to the residues that they leave in meat, certain substances with a thyrostatic, oestrogenic, androgenic or gestagenic action may be dangerous for consumers; whereas these substances may also affect the quality of meat;

"Whereas, moreover, the harmless or harmful effects of the use of oestradiol-17b, Progesterone, testosterone, trenbolone and zeranol still have to be examined in detail; whereas, pending the adoption of a decision relating to these substances, the current measures governing them should be maintained as a precautionary measure with due regard for the general provisions of the Treaty."

³⁶ The preamble to Directive 88/146/EEC states, in part:

"Whereas the administration to farm animals of certain substances having a hormonal action is at present regulated in different ways in the member States; whereas while their immediate effect on animals from the farmer's point of view is clear, assessments of their effect on human health vary and this is reflected in the regulations governing their use; whereas this divergence distorts the conditions of competition in products that are the subject of common market organizations and is a serious barrier to intra-Community trade.

... "Whereas these distortions of competition and barriers to trade must therefore be removed by ensuring that all consumers are able to buy the products in question under largely identical conditions of supply and that these products correspond to their anxieties and expectations in the best possible manner; whereas such a course of action is bound to bring about an increase in consumption of the product in question...."

³⁷ Canada claimed that the production- and export-related measures taken under the CAP, the Third Country Directive and the EC measures at issue all combined to encourage intra-Community trade and boost extra-EC exports, while effectively blocking market access for exporting countries such as Canada.

³⁸ Canada noted that, based on a five-year average, the number of treated animals in Canada was approximately 76.8 per cent of those entering the food chain, and the number of untreated animals was 23.2 per cent. However, the percentage of exported meat and meat products that originated from treated animals would have differed from those figures because meat from treated steers and heifers is of higher quality than meat from untreated bulls and dairy cows, and Canada's exports of beef under the Hilton Beef Quota and offal for human consumption would have been constituted, in large part, by meat from treated animals.

³⁹ Canada explained that the EC Third Country Meat Directive required countries exporting to the European Communities to comply fully with EC standards. In contrast, Canada and many other countries required an exporting country to meet equivalent, albeit not necessarily identical, standards. According to Canada, the Directive was applied to third country exporters sooner than to the EC member States. In the case of Canada, the Directive was effective 1986, when a first list of establishments eligible to export under the EC Directive had been drawn up. Even as late as 1991, however, most of the Mediterranean EC member States, as well as France, had not been forced to comply with the standards of the Directive.

⁴⁰ Court of Auditors, Special Report No 3/94 on the implementation of the intervention measures provided for by the organization of the market in beef and veal, together with the commission's replies, (1994), EC Official Journal (C 356) 1, p.11.

⁴¹ Ibid., p.18.

⁴² The European Communities indicated that this obligation resulted from Articles 100 and 100A, in conjunction in this case with Articles 30 and 36 of EC Treaty.

⁴³ Point E of Parliament's Resolution, EC Official Journal, No.288, 11 November 1985, p.158.

⁴⁴ The European Communities indicated that these figures were based on Eurostat statistics. The figures provided by Canada included offal.