IV.334 Canada argued that given that beef containing residues of antimicrobial growth promoters and other veterinary drugs was widely available in the EC market, it would not be appropriate, in determining the "likeness" of Canadian and EC beef, to limit the comparison of beef produced with growth promoting hormones to beef from cattle that were raised without the use of antimicrobial growth promoters and other veterinary drugs. Canada had shown (see paragraph 4.259) that the use of antimicrobial growth promoters and other veterinary drugs in the European Communities resulted in the presence of residues in beef sold there. The presence of antibiotic and sulphonamide residues, as well as other residues in meat, had been confirmed in the Communication from the EC Commission to the EC Council. The European Communities themselves, in their grading system of beef, did not distinguish between beef produced with and without growth hormones, or between beef with residues of antimicrobial growth promoters and other veterinary drugs and that without.

IV.335 Canada submitted that given the other residues present in beef produced in the European Communities, Canadian beef produced with the six growth promoting hormones at issue was a "like product" within the meaning of Article III:4 of the GATT as compared to beef produced in the European Communities; and that Canadian beef had been accorded treatment that was less favourable than EC beef, in contravention of Article III:4 of the GATT.

IV.336 The European Communities argued that the measures at issue had their domestic counterpart in the prohibition on the administration of the same types of hormones to animals reared in the European Communities and in the prohibition on the marketing of those animals and of meat from those animals. The measures applied to domestic products had identical scope and were subject to the same exceptions as the measures applied to the imported products. The only difference between the measures applied to domestic products and those applied to imported products was that while the former were applied at the stage of production and sale, the latter were enforced at the point of importation. Furthermore, the measures applied to both domestic and imported products as "products", even if their scope was defined in terms of processes and production methods ("PPMs") rather than in terms of product characteristics. The present case was to be distinguished from the situation considered by the panel report on "US - Restrictions on Imports of Tuna I", in which the panel had reasoned that the Note ad Article III covered only those measures which were "applied to products as such". Yet, according to the panel, the US internal regulations "could not possibly affect tuna "as a product".²⁵¹ In contrast, in the present case the reason for prohibiting the importation of animals which had been treated with certain hormones, and of meat from those animals (as well as their domestic production and sale) was precisely that this treatment, unlike the PPMs for fishing tuna prescribed by the US regulations, modified the physical characteristics and biological composition of the products.

IV.337 The European Communities disagreed with the Canadian interpretation of "like products". In the EC view, a determination of "likeness" must be exclusively based on objective criteria related to the characteristics of the products. The purpose of a regulatory distinction between "like products" might only become relevant in deciding whether a measure which was inconsistent with Article III:4 could be justified under any of the general exceptions provided for under Article XX of the GATT. The European Communities contended that the purpose of the measures at issue was not to afford protection to domestic production but to protect human and animal health, as well as the interests of consumers and, therefore, would not, in conformity with the Canada's own test, infringe Article III:4. Although two products need not be identical in order to be "like" for the purposes of Article III, previous panel reports had taken a consistently narrow approach when interpreting this term. In "EC - Measures on Animal Feed Proteins", the panel had rejected a claim by the United States to the effect that all products used for the purpose of adding proteins to animal feeds were "like". The panel noted, inter alia, that the products concerned had different protein contents and different origins (vegetal, animal or synthetic).²⁵² More recently, the panel report on "Japan - Taxes on Alcoholic Beverages", a case concerning the application of Article III:2, had concluded that:

"... only vodka could be considered as like product to shochu since, apart from commonality of end uses, it shared with shochu most physical characteristics. Definitionally, the only difference is in the media used for filtration. Substantial noticeable differences in physical characteristics exist between the rest of the alcoholic beverages at dispute and shochu that would disqualify them from being regarded as like products. More specifically, the use of additives would disqualify liqueurs, gin and genever; the use of ingredients would disqualify rum; lastly, appearance (arising from manufacturing processes) would disqualify whisky and brandy"²⁵³ (emphasis added).

IV.338 The European Communities reaffirmed its views that meat from animals to which had been administered any of the six hormones at issue for growth promotion had substantially different properties, composition and appearance than meat from animals to which those hormones had not been administered or to which they had been administered only for therapeutic purposes. Moreover, meat from treated animals was perceived by EC consumers as a distinct product. For these reasons, animals treated with hormones for growth promotion, and meat from those animals, could not, in light of the criteria used by previous panel reports, be considered as "like" to other animals, and meat from those animals, for the purposes of Article III:4.

IV.339 The European Communities added that meat from animals treated with any of the hormones at issue for growth promotion was different from meat from untreated animals or from animals treated for therapeutical purposes in several ways. First, the precise mode of action of the prohibited hormones was not yet understood. It could not be excluded, on the basis of the available scientific evidence, that they might act as genotoxic agents that induced permanent genetic mutations in those animals to which they were administered. The presence of residues which were potentially genotoxic rendered the meat unfit for human consumption. Meat which from the sanitary point of view was not allowed to be consumed and hormone-free meat could not under any circumstance be defined to be "like" for the purposes of Article III:4 of GATT. In addition, trenbolone, zeranol and MGA were not naturally produced by animals. Thus, meat from animals to which these hormones had been administered contained residues of hormones which were not found in meat from other animals, including animals treated for therapeutic purposes, to which only natural hormones could be administered. In addition, meat from animals treated with these hormones contained metabolites from these hormones which did not appear in meat from other animals.

IV.340 The European Communities further maintained that meat from animals to which any of the three natural hormones had been administered for growth promotion contained a level of residues which was in excess of the level that it would otherwise contain. Moreover, as admitted by Canada, the residues might be present in different proportions from those found in nature, for example higher levels of male hormones in female animals and vice-versa.²⁵⁴ Furthermore, meat from animals treated with these hormones was more likely to contain an unusually high level of residues than meat from untreated animals, in particular where the hormones had been administered combined in "cocktails" or in disregard of good animal husbandry practices. Obviously, this risk was dominated or reduced when the hormones were administered for therapeutic purposes under veterinary control.

IV.341 In addition, carcasses from animals treated with hormones might differ in fat content, fat composition, water content and connective tissue from those of untreated animals. Combinations of androgens and oestrogens, and androgens alone, decreased fat content and increased water content, whereas combinations of progestagens and oestrogens increased fat content, particularly in male animals. The use of trenbolone and oestrogen decreased the amount of connective tissue and unsaturated fatty acid in muscle. Cocktails of progestagens and oestrogens altered the relative proportions of saturated and unsaturated fat in treated carcases. In general, anabolic steroids had a "partitioning" effect, resulting in the deposition in carcasses of about 8 per cent more protein and 12 per cent less fat.²⁵⁵

IV.342 The European Communities argued that even if animals treated with hormones for growth promotion, and meat thereof, and other animals, and meat thereof, were found to be "like products", its measures would still be consistent with Article III:4 because they afforded identical treatment to imported products and to domestic like products. The European Communities recalled that Canada had advanced two types of arguments in order to justify its claim that beef from animals treated with any of the sixth growth promoting hormones and other beef were "like":

(i) that residues from oestradiol, testosterone and progesterone administered to animals were indistinguishable from residues of these substances naturally produced by animals; and


(ii) that EC meat from untreated animals contained residues of antimicrobial growth promoters and other veterinary drugs.

IV.343 The European Communities argued that the first of these two arguments was flawed. In the first place, it did not account for the presence of residues of the three synthetic hormones in meat from treated animals. These residues were not found in meat from untreated animals and were readily distinguishable from the residues of the three natural hormones. Second, the fact that the residues from administered hormones could not be easily distinguished from the residues of those hormones naturally produced by animals did not mean that there were no differences between the two types of meat. There were substantial differences between them. The technical difficulties to identify the origin of the residues had rendered it necessary for the European Communities to require from importers a certification that animals had not been treated, instead of conducting inspection of meat at its borders, but it did not make the two types of meat "like".

IV.344 The second argument was equally misguided. As the European Communities had demonstrated, hormones and antimicrobial growth promoters and other veterinary drugs were different substances and posed different risks to human health. Consequently, meat which contained residues of antimicrobial growth promoters and other veterinary drugs was not "like" meat which contained residues of administered growth promoting hormones.

IV.345 The European Communities disagreed with the Canadian interpretation of Article III:4. The wording of Article III:4 called for a comparison between the treatment given to "the products of the territory of any contracting party imported into the territory of any other contracting party ..." and the treatment accorded to "like products of national origin ...", and not between the treatment given to "any imported product" and the treatment accorded to "any domestic like product". The ordinary meaning of Article III:4 did not require that a comparison be made on an import-by-import basis, but a comparison of the treatment given to all imported products as a whole vis-a-vis all domestic like products as a whole. In the EC view, the object and purpose of Article III had been made explicit in the general principle set forth in the first paragraph of that Article, which stated that internal taxes and regulations "should not be applied to imported or domestic products so as to afford protection to domestic production". Article III:4 gave effect to this principle with respect to internal regulations, other than tax regulations and mixing regulations, and should be interpreted in conformity with it. Where an internal regulation laid down different requirements for imported and domestic products, it might be assumed that domestic production was "protected" if any imported product received "less favourable treatment".²⁵⁶

IV.346 The European Communities argued that the situation was different where, as in the present case, the internal regulation did not distinguish between imported and domestic products but between different types of like products, irrespective of their origin. The mere fact that an internal regulation accorded more favourable treatment to certain types of like products vis-a-vis other types of like products did not necessarily mean that domestic production of the like product as whole was protected. For that, it would be necessary that those types of like product which were accorded more favourable treatment were inherently or at least predominantly domestic and/or that the types which received less favourable treatment were inherently or at least predominantly imported. This view was supported in the panel report on "US - Measures affecting Alcoholic and Malt Beverages", which stated that:

"The Panel recognized that on the basis of their physical characteristics, low alcohol beer and high alcohol beer were similar. It then proceeded to examine whether, in the context of Article III, this differentiation in treatment of low alcohol beer and high alcohol beer is such "as to afford protection to domestic production". The Panel first noted that both Canadian and United States beer manufacturers produce both high and low alcohol beer. It then noted that the laws and regulations in question in various states do not differentiate between imported and domestic beer as such, so that where a state law limits the points of sale of high alcohol content beer or maintains different labelling requirements for such beer, that law applies to all high alcohol content, regardless of its origin. The burdens resulting from these regulations thus do not fall more heavily on Canadian than on United States producers"²⁵⁷ (emphasis added).

IV.347 Although in the EC view the panel report on "US - Measures affecting Alcoholic and Malt Beverages" erred by ascribing the analysis of the effects of a measure to the determination whether two products were "like" and not exclusively on the characteristics of the products, this panel report confirmed that Article III:4 was not infringed unless a regulatory distinction between like products had the effect of protecting domestic production.

IV.348 With reference to the EC argument that the perception of European consumers was a relevant factor in determining the "likeness" of a product, Canada submitted that this factor was irrelevant. The public authorities of WTO Members had a responsibility to educate the public and to make them aware of scientific facts. If the Panel were to allow "public perception" to become a factor in a "like product" determination, it would open the door to misapprehensions concerning scientific facts becoming the basis of a justification in the WTO for the adoption of discriminatory measures. Such an interpretation would obviously remove any incentive whatsoever for public authorities in the European Communities to make their populations aware of the scientific facts in respect of the six hormones at issue.

IV.349 Canada observed that the 1987 panel report in "Japan - Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages"²⁵⁸ dealt with the issue of the relevance of consumer preferences in a "like product" determination for purposes of GATT Article III:2. The 1987 finding, which was cited with approval by the recent panel on the same subject matter²⁵⁹ was that "... the traditional Japanese consumer habits with regard to shochu provided no reason for not considering vodka to be a 'like' product. ... " Thus, in the context of Article III:2, two panels had expressly rejected the relevance of consumer perception in a "like product" determination. Canada submitted that consumer perception was equally irrelevant in the context of GATT Article III:4.

IV.350 Canada pointed out that the issue of whether regulatory differentiation of "like products" could be justified under Article III:4 was discussed by the panel report on "United States - Standards for Reformulated and Conventional Gasoline".²⁶⁰ Having found that "chemically-identical imported and domestic gasoline are like products under Article III:4",²⁶¹ the panel had to deal with the US argument "that the requirements of Article III:4 [were] met because imported gasoline [was] treated similarly to gasoline from similarly situated domestic parties - domestic refiners with limited 1990 operations and blenders".²⁶² The panel rejected this argument.²⁶³ According to Canada, although the facts in this case were different, it was useful to quote the Panel's caution in response to the US attempt to justify regulatory differentiation:

"Apart from being contrary to the ordinary meaning of the terms of Article III:4, any interpretation of Article III:4 in this manner would mean that the treatment of imported and domestic goods concerned could no longer be assured on the objective basis of their likeness as products. Rather, imported goods would be exposed to a highly subjective and variable treatment according to extraneous factors. This would thereby create great instability and uncertainty in the conditions of competition as between domestic and imported goods in a manner fundamentally inconsistent with the object and purpose of Article III."²⁶⁴

Thus Canada submitted that regulatory differentiation by the European Communities between beef from cattle to which the six hormones at issue had been administered for growth promoting purposes and other beef, i.e., like products, placed the Canadian beef at issue at a competitive disadvantage and as such was inconsistent with Article III:4.

IV.351 In any event, even arguendo accepting the EC reliance on the panel report in "United States -Measures Affecting Alcoholic and Malt Beverages", Canada submitted that the panel report did not support the EC proposition. The European Communities ignored the following paragraph in the same report that directly contradicted their argument:

"The Panel recognized that the treatment of imported and domestic products as like products under Article III may have significant implications for the scope of obligations under the General Agreement and for the regulatory autonomy of contracting parties with respect to their internal tax laws and regulations: once products are designated as like products, a regulatory product differentiation, e.g. for standardization or environmental purposes becomes inconsistent with Article III even if the regulation is not "applied ... so as afford protection to domestic production". In the view of the Panel, therefore, it is imperative that the like product determination in the context of Article III be made in such a way that it not unnecessarily infringe upon the regulatory authority and domestic policy options of contracting parties. The Panel recalled its earlier statement that a like product determination under Article III does not prejudge like product determinations made under other Articles of the General Agreement or in other legislative contexts" (emphasis added).²⁶⁵

IV.352 Canada therefore submitted that Canadian beef and EC beef were "like products" within the meaning of GATT Article III:4 and the European Communities could not, consistent with that provision, ban the importation of Canadian beef produced with the six hormones at issue.

IV.353 The European Communities recalled its previous arguments on Article III and disagreed with Canada's contention that meat treated with hormones and hormone-free meat were like because they "contain comparable residues". It ignored the potential hazards which these residues posed to human and animal health. It was the position of the European Communities that these two types of meat were not like because hormone-treated meat might cause cancer. Indeed, meat containing residues of exogenously administered hormones was not different from meat infected with a disease. The 1987 panel report on "Japan - Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages" referred to "traditional Japanese consumer habits". The wish of the EC consumers to eat hormone-free meat was not a habit and was not traditional. It evolved from a number of examples reported in the European Communities and elsewhere (e.g. Puerto Rico and the United States) of the hazards arising from the use of these hormones, which had been scientifically documented.

(b) Article XI

IV.354 Canada claimed that, in the alternative, the EC import prohibition infringed GATT Article XI, but noted that this claim should only be considered by the Panel if it decided that Article III of GATT did not apply in this case. Article XI of GATT set out the obligations of Members with respect to the general elimination of quantitative restrictions. Article XI:2 provided for limited exceptions to the general prohibition of Article XI:1, none of which were applicable in this case. Thus the European Communities were prohibited from banning the import of beef produced with growth hormones and had infringed Article XI of the GATT.

IV.355 The European Communities responded that the measures at issue were internal regulations within the scope of Article III of GATT. Therefore, Article XI of GATT did not apply.

(c) Article XX

IV.356 Canada claimed that Article XX of the GATT did not justify the infringement demonstrated above of Article III or Article XI.

IV.357 The European Communities submitted that in case the Panel were to find that measures infringed Article III:4, they satisfied the requirements of the SPS Agreement and, consequently, must be presumed to be in accordance with GATT, and in particular with the provisions of Article XX(b).

5. Nullification and impairment

IV.358 Canada claimed that the inconsistency of the EC measures with the SPS Agreement and the GATT, or in the alternative with the TBT Agreement, established a prima facie case of nullification or impairment pursuant to GATT Article XXIII:1(a) and Article 3.8 of the DSU.²⁶⁶ However, even if the Panel were to decide that the EC measures were consistent with the WTO Agreement, the application of the EC measures nullified or impaired benefits accruing to Canada under the WTO Agreement, within the meaning of Article XXIII:1(b) of the GATT 1994. Article XXIII:1(b) had been interpreted in GATT 1947 practice to mean even if a measure was not inconsistent with a provision of the GATT, it might be challenged as nullifying or impairing benefits. Article 26(1) of the DSU made it clear that complaints concerning non-violation nullification and impairment could be made within the new framework of the WTO Agreement. Traditionally, three conditions were required by GATT 1947 panels for determining whether a case of "non-violation" nullification or impairment existed. These conditions were:

(i) the negotiation of a tariff concession;


(ii) the subsequent introduction of a government measure that upset the competitive relationship between the bound product with regard to like or directly competitive imported products; and


(iii) that the measure at issue could not have been reasonably anticipated at the time of the negotiation of the tariff concession.²⁶⁷

IV.359 In the present case, all of the relevant tariff items were subject to tariff concessions by the European Communities.²⁶⁸ These concessions included Canadian access to a tariff rate quota of 11,500 tonnes, with an in quota rate of 20 per cent, for high quality, fresh, chilled or frozen beef allocated to Canada and the United States (the "Hilton beef quota"). ²⁶⁹

IV.360 The Hilton beef quota had originally been granted by the European Economic Community during the Tokyo Round Multilateral Trade Negotiations (contained in the European Economic Community schedule of concessions annexed to the Geneva (1979) Protocol), prior to the events which ultimately led to the EC hormone ban. The Hilton beef quota originally was a 10,000 tonne levy free tariff quota.²⁷⁰ When the Hilton beef quota was established, the European Community had adopted regulations which excluded Canadian high quality beef from its scope, which had led to the establishment of a panel at the request of Canada. The panel had ruled in Canada's favour, and this report had been adopted by the GATT Council in March 1981.²⁷¹ The European Community subsequently amended its regulations to allow Canadian high quality beef access under the Hilton beef quota. As a result of the Uruguay Round Trade Negotiations, the European Communities converted the Hilton beef quota to the tariff rate quota as indicated above. Subsequently, in the Article XXIV negotiations of 1995, due to the accession of Finland, Sweden and Austria to the European Communities, the European Communities increased the Hilton beef quota to 11,500 tonnes.²⁷²

IV.361 Thus, the first requirement of the traditional analysis of GATT 1947 panels had been met. Second, the introduction of the EC measures had upset the competitive relationship between Canadian and EC beef. Third, at the time when Canada had won access to the Hilton beef quota, it could not have reasonably foreseen the introduction of the EC measures. Therefore, Canada claimed that benefits accruing to it under the WTO Agreement had been nullified or impaired.

IV.362 The European Communities responded that Canada failed to meet the minimum requirements provided for in Article 26 of the DSU as regarded a detailed justification of any non-violation complaints. In the present case, Canada's claim of non-violation nullification and impairment was unwarranted for the following reasons:

(i) the "benefits" invoked by Canada only accrued to Canada after the adoption of the measures at issue;


(ii) in any event, the measures could have reasonably been anticipated by Canada at the time when, according to Canada, the benefits accrued; and


(iii) Canada had not provided any justification for its claim that the competitive relationship between domestic and imported products had been upset by the adoption of the measures. In fact, the consistency of the measures with the WTO Agreements cited by Canada presupposed that the measures were not capable of having such an effect.

IV.363 The European Communities argued that the so-called "Hilton beef quota" granted by the European Economic Community during the Tokyo Round had been withdrawn during the Uruguay Round negotiations and replaced by a new package of concessions on the same product. These new concessions had become binding upon the European Communities long after the introduction of the measures at issue. Thus, Canada could not claim that these new concessions had been nullified or impaired by the measures at issue.²⁷³

IV.364 During the Uruguay Round, the European Communities had replaced this tariff quota by an entirely new package of concessions, but it had done so in the context of the new Agreement on Agriculture. Under the Agreement on Agriculture, Members had agreed to achieve specific binding commitments in the areas of market access, domestic support and market competition. The concessions outlined below must therefore be seen as new concessions negotiated in the context of a new Agreement:

• first, variable levies on imports of beef had been eliminated as part of the "tariffication process";


• second, the European Communities had bound the rate of the ordinary customs duties applicable on all imports of beef. The initial bound rate was 20 per cent plus a specific amount ranging from 2763 ECU to 4740 ECU per tonne, depending on the type of beef. The final bound rate was 12.8 per cent plus an specific amount, ranging from 1768 ECU to 2652 ECU per tonne;


• third, the European Communities had opened a 10,000 tonne tariff quota with an in­quota rate of 20 per cent allocated to Canada and the United States.

IV.365 This new package of concessions on imports of beef was substantially different from, and more "valuable" than, the Tokyo Round concessions on the same product. It represented a new concession which had replaced the Tokyo Round concession on the same product and was part of a new "balance of concessions" achieved by the parties during the Uruguay Round. The additional benefits obtained by Canada must be regarded as the counterpart for Canada's own concessions, including the renouncement by Canada to any outstanding non­violation rights with respect to the Tokyo Round tariff quota, which was implicit in Canada's consent to the replacement of the old concession by the new package of concessions.

IV.366 In the EC view, the present case was to be distinguished from the case considered by the panel on EC ­ Oilseeds. In that case, the panel had found that on the occasion of Article XXIV:6 negotiations following the successive enlargements of the Community, the concessions at issue had not been "modified" but rather "extended" to the new EC member States. For this reason, the panel had concluded that, despite the formal modification of the schedules of concessions, the original "balance of concessions" had not been altered. Hence the expectations created when the concessions had been originally granted continued to be protected.²⁷⁴ However, the European Communities argued that the present case differed from the EC ­ Oilseeds case in two fundamental respects. Firstly, in the present case the Uruguay Round tariff concessions on beef were substantially different from the pre­existing concessions on the same product since they were market access concessions as envisaged in Article 4 of the Agreement on Agriculture, a new Agreement. Secondly, the new concessions on beef were granted as part of a negotiated exchange of concessions; in the EC ­ Oilseeds case, only one party was required to make concessions. The findings of the EC ­ Oilseeds panel were therefore inapplicable to the present case.

IV.367 The European Communities argued that in any case, the measures at issue could have reasonably been anticipated by Canada already at the time of the Tokyo Round. Because there existed no international standards, guidelines or recommendations on the use of hormones as growth promoters in 1979, Canada could not reasonably assume that the European Economic Community would not take any measures in order to restrict their use to animals or meat from animals. Sanitary concerns about the use of hormones as growth promoters predated the Tokyo Round. When the Hilton beef quota had been negotiated, Canada was aware that the safety of using hormones as growth promoters was questioned in some scientific circles as well as by consumer organizations and the general public. Canada was also aware that, prompted by those concerns, a majority of EC member States, as well as other countries, had already taken steps to restrict the use of hormones.

IV.368 The European Communities claimed that Canada had not advanced any justification whatsoever for its claim that the EC measures had upset the competitive relationship between domestic products and imports. In this regard, the Canadian submission failed to meet the minimum requirements provided for in Article 26 of the DSU. Unlike "violation" cases, in "non-violation" cases there was no presumption of "nullification and impairment". The burden of proving that the measures at issue had in fact upset the competitive relationship between domestic and imported products lay with Canada.

IV.369 Canada claimed that the Hilton beef quota was not the subject of explicit negotiations between Canada and the European Communities during the Uruguay Round. In the agricultural area the Uruguay Round had made a clear distinction between tariff rate quotas that confirmed pre-existing access rights and new access rights.²⁷⁵ The current tariff rate quota was listed in the Schedule of the European Communities under the heading of "Current Access Quotas".²⁷⁶ Thus the Hilton beef quota clearly fell within the category of quotas under which existing market access opportunities were maintained. Canada argued that even if scientific concerns could have been anticipated in 1979, Canada could hardly have foreseen that the European Communities would adopt the most trade-restrictive measures imaginable, i.e., a total ban on the importation of beef from cattle to which any of the six hormones at issue had been administered for growth promoting purposes. Furthermore, of the EC member States that banned the use of growth promoting hormones before the EC ban came into effect, at least one , Denmark, and possibly others as well, did not prohibit the importation of beef produced with the hormones at issue. Canada had submitted detailed information on the devastating impact of the EC measures at issue on its beef exports to the European Communities (paragraph 4.28).²⁷⁷ Therefore, Canada submitted that the European Communities had nullified or impaired Canada's rights within the meaning of Article XXIII:1(b) of the GATT.

IV.370 The European Communities responded that Canada failed to meet the minimum requirements provided for in Article 26 of the DSU as regards a detailed justification in support of any non­violation complaint. No justification whatsoever was advanced for the claim that the EC measures had upset the competitive relationship between domestic production and imports. As for Canada's argument that the quota of 11,500 tonnes allocated to the United States and Canada was a current access quota and, hence, "falls under the category of quotas under which existing market opportunities were maintained", the European Communities noted that the term "current access" was a term used during the Uruguay Round negotiations for the purpose of drawing up market access commitments, in the context of the Guidelines which had been developed for agriculture negotiations. Such guidelines had become obsolete once the Uruguay Round Schedules were finalized and the Final Act was signed. In fact, the provisions of the Agreement on Agriculture contained no reference to "current access" as a specific kind of commitment, but only referred to "market access commitments" (Article 4.1). The European Communities, therefore, reiterated that the quota contained in the Uruguay Round Schedule was part of a whole new balance of concessions, in the context of a wholly new agreement, the Agreement on Agriculture. With regard to the pretended nullification or impairment of benefits accruing to Canada, the European Communities argued that previous to the Uruguay Round, the only GATT commitment that the European Communities had with respect to the tariff lines concerned was the Tokyo Round commitments on high quality beef tariff quotas, including the 10,000 quota to which Canada successively gained access. No commitment existed for any beef outside of high quality meat. Claims advanced by Canada concerning nullification or impairment of benefits as regarded commitments on the tariff lines mentioned above were, therefore, incorrect. At the time of the negotiation of these concessions, the measures at issue were already in existence.

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

²⁵¹ Panel report on "US - Restrictions on Imports of Tuna I", DS21/R (unadopted), 3 September 1991, 39S/155, 193-195, paras. 5.8-5.14.

²⁵² Panel report on "EC - Animal Feed Proteins", para4.2. The other Panel report dealing with a regulatory measure discriminating between non-identical products is the Panel report on "US - Measures affecting Alcoholic and Malt Beverages". In this case, the panel found that low alcohol and high alcohol beer were "similar" in terms of physical characteristics but were not "like" for the purposes of Article III:4 because the distinction was not applied so as to afford protection to domestic production, BISD 39/206, pp.93-295, paras. 5.70-5.77.

²⁵³ Panel report on "Japan - Taxes on Alcoholic Beverages", para. 6.23.

²⁵⁴ The European Communities noted that, at para. 130 of its first submission to the Panel, Canada admitted that "for the purposes of growth promotion, animals are administered those hormones in which they are deficient. Generally, for growth promotion purposes, males are given oestrogens and gestagens, and females are given androgens".

²⁵⁵ 1995 EC Scientific Conference Proceedings, pp.74-75 and 242.

²⁵⁶ Hence the "no-balancing" principle established by previous Panel reports which have dealt with formally discriminatory internal regulations. See panel report on "United States - Section 337 of the Tariff Act of 1930", adopted on 7 November 1989, 36S/345, 387, at para.5.14; and panel report on "US - Standards for Reformulated Gasoline", WT/DS2/R, paras. 6.14-6.15.

²⁵⁷ Panel report on "US - Measures affecting Alcoholic and Malt Beverages", para. 5.73 .

²⁵⁸ BISD 34S/83, para. 5.7.

²⁵⁹ "Japan - Taxes on Alcoholic Beverages", WT/DS8/R; WT/DS10/R; WT/DS11/R, para.6.23, footnote 103.

²⁶⁰ WT/DS2/R, 29 January 1996.

²⁶¹ Ibid., para. 6.9.

²⁶² Ibid., para. 6.11. The report explains further:

According to the United States, the difference in treatment between imported and domestic gasoline was justified because importers, like domestic refiners with limited 1990 operations and blenders, could not reliably establish their 1990 gasoline quality, lacked consistent sources and quality of gasoline, or had the flexibility to meet a statutory baseline since they were not constrained by refinery equipment and crude supplies.

²⁶³ Ibid., see also paras. 6.13-6.16.

²⁶⁴ Ibid., para. 6.12. The panel report in "United States - Standards for Reformulated and Conventional Gasoline" was the subject of an appeal. The appeal, however, dealt only with issues related to Article XX and did not concern the Panel's conclusions regarding Article III:4. The report of the Appellate Body is contained in WT/DS2/AB/R, 29 April 1996.

²⁶⁵ Panel report on "US - Measures Affecting Alcoholic and Malt Beverages", BISD 39/206, para. 5.72.

²⁶⁶ Previous GATT 1947 panels had determined that a prima facie case of nullification and impairment is established where there is an infringement of obligations under the GATT. The DSU codifies this in Article 3.8 which provides that where obligations under an agreement such as the GATT or the TBT Agreement are infringed, the action is considered prima facie to constitute a case of nullification or impairment.

²⁶⁷ See "EC - Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins", report of the panel adopted on 25 January 1990, BISD 37S/86, paras. 142-154.

²⁶⁸ Uruguay Round Schedule LXXX - European Communities, Part I Most Favoured-Nation Tariff, Section I -Agricultural Products, Section I A Tariffs and Section I B Tariff Quotas, as subsequently modified. Tariff items covered by the EC beef and veal regime are:

02011050; 02012015; 02012035; 02012055; 02012090; 02013000; 02021000; 02022010; 02022030; 02022050; 02022090; 02023010; 02023050; 02023090; 02061010; 02061091; 02061095; 02061099; 02062100; 02062210; 02062290; 02062910; 02062991; 02062999; 02102010; 02102090; 02109041; 02109049; 16025010; 16025090; 16029061; and 16029069.

²⁶⁹ Schedule CXL - European Communities, Part I Most-Favoured-Nation Tariff, Section I - Agricultural Products, Section I B Tariff Quotas.

²⁷⁰ "European Economic Community - Imports of Beef" from Canada, BISD 28S/92.

²⁷¹ Ibid..

²⁷² Therefore, Canada maintained the increase in the Hilton beef quota did not amount to a rebalancing of concessions between Canada and the European Communities. See "EC - Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins", report of the panel adopted on 25 January 1990, BISD 37S/86, para. 145.

²⁷³ The European Communities explained that as regarded Canada, the concessions granted by the European Economic Community during the Tokyo Round negotiations with respect to imports of beef consisted of a 10,000 ton tariff quota for high quality beef with an in-quota rate of 20 per cent. In addition, imports within this quota were free from the variable levy applied at the time by the European Economic Community. No other tariff concessions had been granted by the European Economic Community with respect to imports of beef. Accordingly, imports of beef outside the quota were subject to customs duties and agricultural levies at the rate autonomously established by the European Economic Community.

²⁷⁴ Panel report on "EC - Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal Feed Proteins", adopted 25 January 1990, BISD 37S/86.

²⁷⁵ GATT Press Release NUR 080, 14 December 1993, on the Final Act of the Uruguay Round, p.9.

²⁷⁶ Schedule CXL of the European Communities (Schedule LXXX at the end of the Uruguay Round), Section I - B Tariff Quotas.

²⁷⁷ At the second meeting of the Parties with the panel, Canada produced a table which set forth eleven tariff lines of the European Communities (020610; 02061010; 02062210; 02062910; 02061091; 02062290; 02061099; 02062100; 02062999; 02109049; 16025090; 16029069) with regard to beef products which were bound prior to the Uruguay Round and the trade figures for each of these tariff lines from 1984 through 1995.