8.162 We have found above³⁷¹ that the European Communities has not provided evidence of an identifiable risk related to the presence of five of the six hormones at issue for which international standards exist when these hormones are used for growth promotion purposes in accordance with good practice. Accordingly, the European Communities has not established the existence of any identifiable risk against which the EC measures at issue, in so far as they also ban the use of the five hormones when used as growth promoters in accordance with good practice, can protect human life or health. Since we considered above³⁷² that the adoption of a sanitary measure presupposes the existence of an identifiable risk (except as provided in Article 5.7), it is not possible for the European Communities to ban the use of these hormones as growth promoters in accordance with good practice.

8.163 However, even if we would have found that the European Communities met its burden of proving that its measures are based on an assessment of risks in accordance with Articles 5.1 and 5.2 and even if, for that reason, the European Communities could have adopted a measure to achieve its appropriate level of protection against these risks, there would still be a need to examine whether the determination and application of this level of protection is consistent with Articles 5.4 to 5.6. We will, therefore, next examine these provisions.

8.164 The parties to this dispute seem to agree that the establishment of an "appropriate level of sanitary protection" by a Member is a sovereign act, namely, as the definition in paragraph 5 of Annex A of the SPS Agreement provides, the level of protection "deemed appropriate by the Member establishing a sanitary ... measure" (emphasis added). As outlined above³⁷³, we note, however, that Members have agreed, in exercising their sovereign right to set their appropriate levels of protection, to observe the provisions of the SPS Agreement, in particular Articles 5.4 and 5.5 thereof. Furthermore, in choosing a measure to achieve that appropriate level of protection Members have agreed to observe the provisions of Articles 2, 5.1 to 5.3 and 5.6.

8.165 We finally recall our findings reached above on the specific burden of proof under Article 3.3.³⁷⁴ In particular, we found that the burden of proving that the requirements imposed by Article 3.3 (inter alia, consistency with Article 5) are met, in order to justify a sanitary measure which deviates from an international standard, rests with the Member imposing that measure. Since the EC measures examined in this section (relating to all hormones in dispute other than MGA) are not based on existing international standards and need to be justified under the exceptions provided for in Article 3.3, the European Communities bears the burden of proving that the determination and application of its level of protection is consistent with Articles 5.4 to 5.6.

(i) Article 5.4: minimizing trade effects

8.166 Article 5.4 provides the following:

"Members should, when determining the appropriate level of sanitary or phytosanitary protection, take into account the objective of minimizing negative trade effects" (emphasis added).

Guided by the wording of Article 5.4, in particular the words "should" (not "shall") and "objective", we consider that this provision of the SPS Agreement does not impose an obligation. However, this objective of minimizing negative trade effects has nonetheless to be taken into account in the interpretation of other provisions of the SPS Agreement.

(ii) Article 5.5: distinctions in levels of protection

8.167 Article 5.5 provides the following:

"With the objective of achieving consistency in the application of the concept of appropriate level of sanitary or phytosanitary protection against risks to human life or health, or to animal and plant life or health, each Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different situations, if such distinctions result in discrimination or a disguised restriction on international trade. Members shall cooperate in the Committee, in accordance with paragraphs 1, 2 and 3 of Article 12, to develop guidelines to further the practical implementation of this provision. In developing the guidelines, the Committee shall take into account all relevant factors, including the exceptional character of human health risks to which people voluntarily expose themselves" (emphasis added).

8.168 We note, in this respect, the basic obligations contained in Article 2.3:

"Members shall ensure that their sanitary and phytosanitary measures do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail, including between their own territory and that of other Members. Sanitary and phytosanitary measures shall not be applied in a manner which would constitute a disguised restriction on international trade" (emphasis added).

Article 2.3 deals, in general terms, with sanitary measures which discriminate between Members or which are applied in a manner which would constitute a disguised restriction on international trade. Article 5.5, on the other hand, deals more specifically with distinctions in levels of protection (which will normally be reflected in one or more sanitary measures) which result in discrimination or a disguised restriction on international trade.

8.169 We consider that the first part of the first sentence of Article 5.5 ("With the objective of achieving consistency in the application of the concept of appropriate level of sanitary or phytosanitary protection against risks to human life or health, or to animal and plant life or health ..."; emphasis added), unlike the second part, does not impose an obligation upon Members. Consistency is not imposed as an obligation but as an objective which nonetheless has to be taken into account in the interpretation of Article 5.5.

8.170 We further note that the Committee on Sanitary and Phytosanitary Measures, established by Article 12 of the SPS Agreement to "provide a regular forum for consultations", has been given a mandate by Article 5.5, second sentence, to "develop guidelines to further the practical implementation of this provision" and, in so doing, needs to "take into account all relevant factors, including the exceptional character of human health risks to which people voluntarily expose themselves". No such guidelines have to date been developed. However, considering the mandatory wording of the second part of the first sentence of Article 5.5 ("each Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different situations ..."; emphasis added) and the existence of the basic obligations contained in Article 2.3³⁷⁵, we find that the lack of guidelines by the Committee in no way limits the legally binding nature of the second part of the first sentence of Article 5.5.

8.171 The United States argues that the European Communities fails to justify the following differences in regulatory treatment: (i) a ban on natural and synthetic hormones when used for growth promotion purposes as opposed to not setting any limit for residues of the natural hormones present endogenously in untreated meat and other foods (such as milk, cabbage, broccoli or eggs) and residues of these hormones when used for therapeutic or zootechnical purposes; and (ii) a ban on the hormones in dispute when used for growth promotion purposes as opposed to allowing the use of the veterinary drug carbadox as a growth promoter in swine production. Only with respect to the last mentioned difference in treatment does the United States invoke and address Article 5.5.³⁷⁶

8.172 The European Communities rejects these claims, arguing that it does not make distinctions in its levels of protection for different situations and that, even if it were to make such distinctions, these distinctions are justified and do not result in discrimination or a disguised restriction on international trade.³⁷⁷

The three elements contained in Article 5.5

8.173 We next examine the elements that must be assessed to determine if a Member's sanitary measure does not conform to the requirements of the second part of the first sentence of Article 5.5. The relevant part of Article 5.5 reads as follows:

"each Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different situations, if such distinctions result in discrimination or a disguised restriction on international trade".

8.174 The first element contained in Article 5.5 is that the Member concerned adopts different appropriate levels of sanitary protection in "different situations". The second element is that the distinction in levels of protection for the different situations is "arbitrary or unjustifiable". The third element is that the distinction in levels of protection results in "discrimination or a disguised restriction on international trade". In order to find a sanitary measure to be inconsistent with Article 5.5 all three elements need to be present.

8.175 As to the first element, the words "different situations" have been interpreted by the parties as follows. The European Communities argues that "different situations" only covers different situations for the same residue or for different residues where the adverse health effect is the same. According to the European Communities, "different situations" cannot mean that the same level of protection must be applied to similar health hazards, whatever their nature or severity, coming from similar substances. The United States argues that the "different situations" referred to in Article 5.5 of necessity must be comparable situations. It argues, for example, that the purported health risk from carbadox and the hormones in dispute, when used for growth promotion, is in both instances, cancer in humans and that, therefore, the different situations invoked by the United States are comparable.³⁷⁸

8.176 We note that both parties in dispute agree that the scope of "different situations" contained in Article 5.5 includes situations which deal with the same substance as well as situations which involve the same adverse health effect. For this reason, considering the lack of guidelines by the Committee on Sanitary and Phytosanitary Measures and without further defining or limiting the scope of "different situations", we find that, for the purposes of this dispute, we can compare situations where the same substance or the same adverse health effect is involved as "different situations" in the sense of Article 5.5. For the sake of clarity in this particular case, we will hereafter refer to such "different situations" as "comparable situations" since these situations need to be compared for the purposes of Article 5.5 and are, therefore, "comparable".

8.177 The second element contained in Article 5.5 is that the distinction in levels of protection for comparable situations is "arbitrary or unjustifiable".

8.178 The United States argues that, in the absence of any principle or criterion that accounts for the selection of differing levels of sanitary protection, the distinction in the levels of protection is arbitrary and unjustifiable.³⁷⁹ The European Communities argues that Article 5.5 clearly states that "arbitrary or unjustifiable" distinctions are to be avoided if, and only if, they result in discrimination or a disguised restriction on trade. If they do not result in discrimination or a disguised restriction on trade, the European Communities concludes, they are not prohibited by Article 5.5.³⁸⁰

8.179 The third element contained in Article 5.5 is that the distinction in level of protection results in "discrimination or a disguised restriction on international trade".

8.180 The United States has not presented a claim with respect to the term "discrimination"; only with respect to the term "disguised restriction on international trade". The United States argues that "a disguised restriction on international trade" is present in the context of Article 5.5 where a Member claims a legitimate basis for the difference in the chosen levels of protection being compared, but where instead the differing levels of protection are being employed for commercial reasons to restrict trade.³⁸¹ The European Communities argues that the measures in dispute do not result in discrimination and that the fact that sanitary measures affect imports is not a sufficient reason to claim that they restrict trade, or even less, that they discriminate.

8.181 We note, first of all, the relation between this third element of "discrimination or a disguised restriction on international trade" in Article 5.5 and the basic obligations contained in Article 2.3 of the SPS Agreement providing that:

"Members shall ensure that their sanitary and phytosanitary measures do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail, including between their own territory and that of other Members. Sanitary and phytosanitary measures shall not be applied in a manner which would constitute a disguised restriction on international trade" (emphasis added).

We also note the relation between these two provisions and the language of the chapeau of Article XX of GATT which reads as follows:

"Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: ...." (emphasis added).

8.182 With respect to the meaning of "discrimination" and "a disguised restriction on international trade" we recall the conclusions reached by the Appellate Body in its Report on "United States - Standards for Reformulated and Conventional Gasoline" where the terms "arbitrary or unjustifiable discrimination" and "a disguised restriction on international trade", contained in the chapeau of Article XX of GATT, were examined as follows:

" 'Arbitrary discrimination', 'unjustifiable discrimination' and 'disguised restriction' on international trade may, accordingly, be read side-by-side; they impart meaning to one another. It is clear to us that 'disguised restriction' includes disguised discrimination in international trade. It is equally clear that concealed or unannounced restriction or discrimination in international trade does not exhaust the meaning of 'disguised restriction'. We consider that 'disguised restriction', whatever else it covers, may properly be read as embracing restrictions amounting to arbitrary or unjustifiable discrimination in international trade taken under the guise of a measure formally within the terms of an exception listed in Article XX. Put in a somewhat different manner, the kinds of considerations pertinent in deciding whether the application of a particular measure amounts to 'arbitrary or unjustifiable discrimination', may also be taken into account in determining the presence of a 'disguised restriction' on international trade. The fundamental theme is to be found in the purpose and object of avoiding abuse or illegitimate use of the exceptions to substantive rules available in Article XX" (original emphasis).³⁸²

8.183 We further recall the Appellate Body Report on "Japan - Taxes on Alcoholic Beverages" where the Appellate Body found that for an internal tax measure to be inconsistent with the second sentence of Article III:2 of GATT, three separate issues must be addressed so as to give full meaning to the text and context of this provision: (i) the products need to be "directly competitive or substitutable"; (ii) they need to be "not similarly taxed"; and (iii) the dissimilar taxation needs to be "applied ... so as to afford protection to domestic production".³⁸³ The Appellate Body found that the panel had erred in blurring the distinction between the second and third issue by equating dissimilar taxation (i.e., tax difference above a de minimis level) with the separate and distinct requirement of demonstrating that the tax measure "affords protection to domestic production".³⁸⁴ The Appellate Body then concluded the following:

"As previously stated, a finding that 'directly competitive or substitutable products' are 'not similarly taxed' is necessary to find a violation of Article III:2, second sentence. Yet this is not enough. The dissimilar taxation must be more than de minimis. It may be so much more that it will be clear from that very differential that the dissimilar taxation was applied "so as to afford protection". In some cases, that may be enough to show a violation. In this case, the Panel concluded that it was enough. Yet in other cases, there may be other factors that will be just as relevant or more relevant to demonstrating that the dissimilar taxation at issue was applied 'so as to afford protection' ... And, in every case, a careful, objective analysis, must be done of each and all relevant facts and all relevant circumstances to determine 'the existence of protective taxation'. Although the Panel blurred its legal reasoning in this respect, nevertheless we conclude that it reasoned correctly that in this case, the Liquor Tax Law is not in compliance with Article III:2" (emphasis added).³⁸⁵

8.184 We consider the reasoning in both Appellate Body Reports to be equally relevant to the relationship between the three elements contained in Article 5.5. All three elements impart meaning to one another. Nevertheless, in order to give effect to all three elements contained in Article 5.5 and giving full meaning to the text and context of this provision, we consider that all three elements need to be distinguished and addressed separately. However, we also agree that in some cases where a Member enacts, for comparable situations, sanitary measures which reflect different levels of protection, the significance of the difference in levels of protection combined with the arbitrariness thereof may be sufficient to conclude that this difference in levels of protection "result[s] in discrimination or a disguised restriction on international trade" in the sense of Article 5.5 (in line with the argument that the magnitude of the very differential of a dissimilar taxation may be enough to conclude that a dissimilar taxation is applied so as to afford protection, as provided for in the second sentence of Article III:2 of GATT).

8.185 We next examine, in light of the three elements of Article 5.5 outlined above, the distinctions in levels of sanitary protection allegedly made by the European Communities which have been invoked by the United States. In order to conduct our consideration of this dispute under Article 5.5 in the most efficient manner, we first address the alleged differences in treatment provided by the European Communities for the natural hormones in dispute. In this examination we compare the treatment of these hormones when used as growth promoters with both the treatment of these hormones occurring endogenously in meat and other foods (such as milk, cabbage, broccoli or eggs) and when used for therapeutic or zootechnical purposes. In a second step, we address the alleged differences in treatment provided by the European Communities for the natural hormones in dispute as opposed to that of the synthetic hormones at issue. In a third step, we address the alleged differences in treatment provided by the European Communities for all hormones in dispute (other than MGA) when used as growth promoters as opposed to that for carbadox, an antimicrobial growth promoter.

Natural hormones for growth promotion compared to (i) those occurring endogenously in meat and other foods, and (ii) those for therapeutic or zootechnical purposes

1. Comparable situations with different levels of sanitary protection

8.186 This examination involves a comparison of the levels of protection for the same substance, namely, respectively, oestradiol-17b,, testosterone and progesterone, in different situations depending on the origin or use of that substance. Since we have found above that we can compare situations where the same substance is involved as "different" situations (which we refer to as "comparable" situations for the purposes of this dispute) in the sense of Article 5.5³⁸⁶, we find that the treatment of the three natural hormones in dispute when used for growth promotion purposes as opposed to the treatment of these hormones which (i) occur endogenously in meat and other foods and (ii) which have been administered for therapeutic or zootechnical purposes, constitute comparable situations in the sense of Article 5.5.

8.187 The European Communities argues that the origin of these hormones (whether endogenously produced or exogenously administered) causes these hormones to be different, claiming that the hormones present endogenously in meat and other foods have formed part of the human diet for centuries. We note, however, that the European Communities did not submit any evidence in support of its claim that these hormones have different effects. Moreover, all scientific experts advising the Panel have concluded that residues of the three natural hormones present endogenously in meat and other foods or administered for therapeutic or zootechnical purposes are qualitatively the same as the residues of these hormones administered for growth promotion and that if any differences between these hormones could exist (e.g., differences in pathways taken or metabolites), these differences would in any event not have consequences for the potential adverse effects of these hormones.³⁸⁷ Therefore, even if these hormones would not be totally identical substances, they pose, in any event, the same adverse health effect and can, therefore, according to our finding made above³⁸⁸, be considered as comparable situations for the purposes of Article 5.5.

8.188 We next examine whether the European Communities has adopted a different level of protection for these comparable situations.

8.189 With respect to the three natural hormones administered for growth promotion purposes, the European Communities argues that its level of sanitary protection is concerned only with added hormones; in other words, the European Communities does not consider that it is acceptable to expose consumers to any hormones in their food over and above the levels which occur in nature, as any such additional exposure could be a hazard to health.³⁸⁹

8.190 The appropriate level of protection set by the European Communities for natural hormones present endogenously in meat and other foods or administered for therapeutic or zootechnical purposes is an unlimited residue level.³⁹⁰ In other words, the European Communities has not adopted any maximum residue level for these categories of natural hormones.³⁹¹ With respect to oestradiol-17b, when used for therapeutic or zootechnical purposes, this unlimited residue level of protection has recently been confirmed by the European Communities when it adopted the conclusions reached in the 1988 JECFA Report and classified this hormone, when used for therapeutic or zootechnical purposes, as a substance for which MRLs are unnecessary.³⁹² With respect to the two other natural hormones in dispute, progesterone and testosterone, when used for therapeutic or zootechnical purposes, no final decision has as yet been taken by the competent EC authorities.³⁹³

8.191 We thus find that the level of protection adopted by the European Communities for the three natural hormones in dispute when used for growth promotion and that adopted for the same hormones (i) occurring endogenously in meat and other foods and (ii) used for therapeutic or zootechnical purposes, is different ("no residue" level as opposed to an unlimited residue level) and that, therefore, distinctions in levels of protection for these comparable situations exist in the sense of the first element of Article 5.5.

2. "Arbitrary or unjustifiable" difference in levels of sanitary protection

8.192 We next examine whether these two distinctions in levels of protection are "arbitrary or unjustifiable". We first address the distinction made between the three natural hormones when used as growth promoters and the same hormones occurring endogenously in meat and other foods. We then examine the distinction made between the three natural hormones when used as growth promoters and the same hormones when used for therapeutic or zootechnical purposes.

8.193 Natural hormones used as growth promoters as opposed to those occurring endogenously in meat and other foods. The European Communities has not provided any reasons, other than those addressed above, why it has adopted a different level of protection for the residues of these two categories of natural hormones. The European Communities has, in particular, not provided any evidence that the risk related to the natural hormones used as growth promoters is in any way higher than the risk related to natural endogenous hormones. We also recall that the experts advising the Panel concluded that both categories of hormones (either exogenously administered to animals or endogenously present in animals, meat, other foods or human beings) pose the same potential adverse effects.³⁹⁴

8.194 In this respect we further recall the conclusion reached in the 1988 JECFA Report that the total residue level of natural hormones in meat from treated animals (i.e., the combination of natural hormones endogenously present and those added for growth promotion) falls well within the physiological range of levels found in meat from untreated animals, which levels vary according to the sex and age of the animal.³⁹⁵ We also note that, according to data submitted to the Panel, the residue level of natural hormones in many natural products (such as eggs and soya oil) is much higher than the level of residues of these hormones administered for growth promotion as well as the total residue level of these hormones in treated meat.³⁹⁶ In this respect, we further note that Codex has also established MRLs for substances which endogenously occur in natural products.³⁹⁷

8.195 With respect to the potential difficulties in detecting the presence of natural hormones used as growth promoters, we refer to our conclusions reached above³⁹⁸, namely that only under the current EC regime (a ban) does the problem arise of how to distinguish between endogenous and added natural hormones whereas under a regime where one would allow the use of these hormones (with, for example, an MRL or tolerance level for all natural hormones) there would be no need to distinguish endogenous from added natural hormones. We also note that, in any event, the problem of detection would be the same for both natural hormones used as growth promoters and those occurring endogenously in meat and other foods (since the scientific experts stated that both are qualitatively the same³⁹⁹) and can, therefore, not justify a different treatment.

8.196 We finally note that even if some form of justification could be deduced from the arguments submitted by the European Communities, such could not, in any event, justify so significant a difference in levels of protection between a "no residue" level for natural hormones administered for growth promotion and an unlimited residue level for natural hormones endogenously present in meat and other foods.

8.197 We thus find that the European Communities has not met its burden of proving that the distinction it makes in levels of protection for residues of the three natural hormones in dispute when administered for growth promotion purposes and residues of the same natural hormones present endogenously in meat and other foods is justifiable and that, therefore, this particular distinction in levels of protection is "arbitrary or unjustifiable" in the sense of the second element contained in Article 5.5.

8.198 Natural hormones used as growth promoters as opposed to those used for therapeutic or zootechnical purposes. The European Communities argues that the use of the natural hormones for therapeutic and zootechnical purposes occurs on a small scale, is subject to very strict conditions (such as administration by a veterinarian and strict withdrawal periods) and normally only involves cattle intended for breeding, not for slaughter; whereas the use of these hormones as growth promoters occurs on a much larger scale and is more difficult and costly to control.⁴⁰⁰ These differences in use and control, the European Communities argues, ensure that any risk related to the therapeutic or zootechnical use of these hormones is prevented and that in practice a level of "no residue" is achieved, as is the case for the use of these hormones as growth promoters. For these reasons, the European Communities concludes, the distinction in levels of protection is justified.⁴⁰¹

8.199 We note that, according to scientific experts advising the Panel, zootechnical use of these hormones can occur on a large scale and at regular intervals, namely each year for oestrus synchronization of entire herds.⁴⁰² Moreover, even when these hormones are used for therapeutic or zootechnical purposes, all parties and scientific experts advising the Panel agree that some residue level, albeit a very small one, will always remain in the meat when the treated animal is eventually slaughtered.⁴⁰³ Therefore, a "no residue" level cannot in practice be achieved when these hormones are used for therapeutic or zootechnical purposes.

8.200 However, since we have already concluded that the difference in levels of protection imposed in the European Communities for the three natural hormones when used for growth promotion purposes as opposed to those present endogenously in meat and other foods cannot be justified, we consider it unnecessary to decide whether or not the distinction made by the European Communities between natural hormones used as growth promoters and those used for therapeutic or zootechnical purposes is justified.

3. Difference which results in "discrimination or a disguised restriction on international trade"

8.201 We next examine whether the difference in levels of protection between residues of the three natural hormones in dispute when administered for growth promotion purposes and residues of the same natural hormones present endogenously in meat and other foods, results in discrimination or a disguised restriction on international trade within the meaning of the third element of Article 5.5.⁴⁰⁴

8.202 We recall the considerations made above on the relationship between the three elements contained in Article 5.5.⁴⁰⁵ We recall, in particular, that in some cases the significance of the difference in levels of protection for comparable situations combined with the arbitrariness thereof may be sufficient to conclude that this difference in levels of protection results in "discrimination or a disguised restriction on international trade".

8.203 In this case, we note, firstly, the significance of the difference in levels of protection for the three natural hormones in dispute when administered for growth promotion purposes and residues of the same hormones present endogenously in meat and other foods, namely a "no residue" level as opposed to an unlimited residue level. We recall, secondly, that the European Communities has not provided any plausible justification for this significant difference. We note, finally, that this difference in levels of protection results in an import ban (on meat and meat products treated with any of the three natural hormones in dispute for growth promotion purposes) which restricts international trade. For these reasons, we find that the difference in levels of protection imposed by the European Communities for the three natural hormones in dispute when administered for growth promotion purposes and those present endogenously in meat and other foods, results in "discrimination or a disguised restriction on international trade" in the sense of Article 5.5.

8.204 We consider that this finding is further supported by two additional factors. Firstly, we recall some of the objectives (other than the protection of human health) that the European Communities had in mind when enacting or maintaining the EC ban on the use of the natural hormones for growth promotion purposes, as stated in the preambles of the EC measures in dispute⁴⁰⁶ and in the reports of the European Parliament and the opinions of the EC Economic and Social Committee referred to by the European Communities⁴⁰⁷, namely harmonizing the regulatory schemes of the different EC Member States, thereby removing competitive distortions and barriers to intra-Community trade in beef, and bringing about an increase in the consumption of beef, thereby reducing the internal beef surpluses and providing more favourable treatment to domestic producers.

8.205 Secondly, we note that before the EC ban came into force, the percentage of animals treated with any of the hormones in dispute was significantly lower in the European Communities than in the United States. At that time, according to the European Communities, only four or five EC member States allowed the use of some of these hormones. One member State (the United Kingdom) which has replied to the EC's request for information on this issue, indicated that "anecdotal evidence suggests that growth promoting hormones may have been used [in] up to 40% of UK cattle prior to the ban".⁴⁰⁸ On the other hand, according to a table provided by the United States, an average of 70 per cent of all US cattle were, at that time, treated with one or more of these hormones.⁴⁰⁹ By banning the internal sale and import of meat treated with natural hormones for growth promotion purposes (which represents a significantly higher proportion of the total US meat supply than of the total European Communities meat supply) but continuing to allow any level of residues of these natural hormones present endogenously in meat, the European Communities favoured the consumption of domestic meat and, therefore, de facto discriminates against US meat in favour of EC meat. In this sense, the difference in levels of protection in the European Communities for residues of hormones present endogenously in meat and other foods and residues of the same natural hormones when administered for growth promotion purposes could be said to result in "discrimination or a disguised restriction on international trade".

8.206 We thus find that the European Communities has not met its burden of justifying the distinction it makes in levels of protection for residues of the three natural hormones in dispute administered for growth promotion purposes and residues of the same natural hormones present endogenously in meat and other foods, in light of the three elements contained in Article 5.5, and that, therefore, the EC measures in dispute, in so far as they relate to the three natural hormones at issue, are inconsistent with the requirements imposed in Article 5.5.

Synthetic hormones for growth promotion compared to natural hormones

8.207 We next examine the alleged different treatment provided by the European Communities for, on the one hand, two of the three synthetic hormones in dispute for which international standards exist (zeranol and trenbolone)⁴¹⁰ and, on the other hand, the natural hormones in dispute occurring endogenously in meat and other foods.⁴¹¹

1. Comparable situations with different levels of sanitary protection

8.208 In this examination we compare different substances, namely, respectively, zeranol and oestradiol-17b, and trenbolone and testosterone. As outlined above⁴¹², both synthetic hormones at issue are produced to mimic one of the natural hormones in dispute (zeranol mimics oestradiol-17b, and trenbolone mimics testosterone). However, both parties in this dispute and the experts advising the Panel agree that the situations thus compared involve at least the same adverse health effect, namely carcinogenicity.⁴¹³

8.209 Since we decided above that we can compare situations where the same adverse health effect is involved as "different" situations (which we refer to as "comparable" situations for the purposes of this dispute) in the sense of Article 5.5⁴¹⁴, we find that the treatment of zeranol and trenbolone and the treatment of the natural hormones in dispute which occur endogenously in meat and other foods, are comparable situations in the sense of the first element of Article 5.5.

8.210 We next examine whether the European Communities has adopted different levels of protection for these comparable situations.

8.211 With respect to zeranol and trenbolone, the European Communities adopted a "no residue" level as its appropriate level of protection.⁴¹⁵ As outlined above⁴¹⁶, the level of protection in the European Communities for the natural hormones present endogenously in meat and other foods is an unlimited residue level.

8.212 We thus find that the levels of protection adopted by the European Communities for residues of zeranol and trenbolone and that for residues of the natural hormones in dispute which occur endogenously in meat and other foods are different ("no residue" level as opposed to an unlimited residue level) and that, therefore, a distinction in levels of protection for these comparable situations exists in the sense of the first element of Article 5.5.

2. "Arbitrary or unjustifiable" difference in levels of sanitary protection

8.213 We next examine whether this difference in levels of protection is "arbitrary or unjustifiable". The European Communities has not provided convincing evidence that the synthetic hormones (which mimic the natural hormones) are inherently more dangerous than the natural hormones.⁴¹⁷ Most of the evidence referred to by the European Communities to prove potential risks relates to the natural hormones, in particular oestradiol-17b,.⁴¹⁸ According to the scientists advising the Panel, synthetic hormones can also be better detected and controlled than natural hormones.⁴¹⁹ Moreover, the fact that ADIs and MRLs exist for zeranol and trenbolone and not for the natural hormones does not, according to the experts advising the Panel, per se mean that the latter are inherently safer than the former since the international standards for both synthetic and natural hormones reflect essentially the same level of protection, namely a "no appreciable risk" level.⁴²⁰ Therefore, even if there could be valid reasons to subject the natural hormones to a treatment different from the synthetic hormones⁴²¹, the European Communities has not provided justification for so significant a difference in levels of protection as between a "no residue" level (for the synthetic hormones at issue) and an unlimited residue level (for the natural hormones endogenously present in meat and other foods). We recall, in particular, that the European Communities has not provided evidence that the use of zeranol or trenbolone for growth promotion purposes in accordance with good practice (for example, the Codex MRLs) is unsafe.⁴²² In other words, it has not submitted any justification for adopting a "no residue" level, instead of the Codex MRLs.

8.214 We thus find that the European Communities has not met its burden of justifying the distinction it makes in levels of protection for zeranol and trenbolone and the natural hormones in dispute which occur endogenously in meat and other foods. For these reasons, we find that the difference in levels of protection thus made by the European Communities is "arbitrary or unjustifiable" in the sense of the second element contained in Article 5.5.

3. Difference which results in "discrimination or a disguised restriction on international trade"

8.215 We recall the considerations made above on the relationship between the three elements contained in Article 5.5.⁴²³ We recall, in particular, that in some cases the significance of the difference in levels of protection for comparable situations combined with the arbitrariness thereof may be sufficient to conclude that this difference in levels of protection results in "discrimination or a disguised restriction on international trade".

8.216 In this case, we note, firstly, the significance of the difference in levels of protection for zeranol and trenbolone and that for the natural hormones in dispute which occur endogenously in meat and other foods, namely a "no residue" level as opposed to an unlimited residue level. We recall, secondly, that the European Communities has not provided any plausible justification for this significant difference. We note, finally, that this difference in levels of protection results in an import ban (on meat and meat products treated with zeranol or trenbolone) which restricts international trade. For these reasons, we find that the difference in levels of protection imposed by the European Communities for zeranol and trenbolone and that for the natural hormones in dispute which occur endogenously in meat and other foods, results in "discrimination or a disguised restriction on international trade" in the sense of Article 5.5.

8.217 We consider that this finding is further supported by the two additional factors outlined above⁴²⁴, which are equally valid for the distinction in levels of protection made by the European Communities for zeranol and trenbolone and the natural hormones in dispute which occur endogenously in meat and other foods.

8.218 We thus find that the European Communities has not met its burden of justifying the distinction it makes in levels of protection for zeranol and trenbolone and the natural hormones in dispute which occur endogenously in meat and other foods, in light of the three elements contained in Article 5.5, and that, therefore, the EC measures in dispute, in so far as they relate to zeranol and trenbolone, are inconsistent with the requirements imposed in Article 5.5.

The hormones in dispute compared to carbadox

8.219 We next examine the alleged different treatment provided by the European Communities for five of the six hormones in dispute (all but MGA) when used for growth promotion purposes and carbadox. We recall that this agent is an antimicrobial growth promoter used as a feed additive in swine production.

1. Comparable situations with different levels of sanitary protection

8.220 In this examination we compare different substances. However, both parties in this dispute and the experts advising the Panel agree that the situations thus compared involve the same adverse health effect, namely carcinogenicity.⁴²⁵

8.221 Since we have found above that we can compare situations where the same adverse health effect is involved as "different" situations (which we refer to as "comparable" situations for the purposes of this dispute) in the sense of Article 5.5⁴²⁶, we find that the treatment of the five hormones at issue when used as growth promoters as opposed to that of carbadox are comparable situations in the sense of the first element of Article 5.5.

8.222 We next examine whether the European Communities has adopted a different level of protection for these comparable situations.

8.223 The United States argues that the EC level of protection for the hormones at issue when used for growth promotion is different from that for carbadox. The United States submits that with respect to the hormones at issue when used for growth promotion purposes the European Communities has suggested that its appropriate level of protection is "zero risk". With respect to carbadox, the United States argues that it is clear from the fact that the European Communities permits the use of carbadox and the sale and consumption of meat from animals to which carbadox has been administered, that the European Communities is choosing an appropriate level of protection that is less stringent than for the hormones involved in this dispute.⁴²⁷

8.224 With respect to the hormones in dispute when used for growth promotion purposes, the European Communities adopted a "no residue" level as its appropriate level of protection.⁴²⁸ With respect to carbadox, the European Communities argues that, even though these substances are allowed, strict controls, specific characteristics of these substances and the way they are administered, ensure that no residue levels will remain in treated pigs when slaughtered and that, therefore, in the European Communities in practice the same level of protection applies to carbadox as the level adopted for the hormones in dispute, namely a "no residue" level.⁴²⁹

TO CONTINUE WITH EC MEASURES ON MEAT - COMPLAINT BY THE U.S.

³⁷¹ See para. 8.137.

³⁷² See para. 8.161.

³⁷³ See paras. 8.161 ff.

³⁷⁴ See paras. 8.85 ff.

³⁷⁵ See para. 8.168.

³⁷⁶ See para. 4.220.

³⁷⁷ See para. 4.218.

³⁷⁸ See para. 4.220.

³⁷⁹ Ibid.

³⁸⁰ See para. 4.218.

³⁸¹ See para. 4.221.

³⁸² Appellate Body Report on "United States - Standards for Reformulated and Conventional Gasoline", adopted on 20 May 1996, WT/DS2/AB/R, p.25.

³⁸³ Appellate Body Report on "Japan - Taxes on Alcoholic Beverages", adopted on 1 November 1996, WT/DS8/AB/R, p.24.

³⁸⁴ Panel Report on "Japan - Taxes on Alcoholic Beverages", adopted on 1 November 1996, WT/DS8/R, paras. 6.33-34 and 7.1(ii).

³⁸⁵ Appellate Body Report on Japan - "Taxes on Alcoholic Beverages", adopted on 1 November 1996, WT/DS8/AB/R, p.30.

³⁸⁶ See para. 8.176.

³⁸⁷ See answers by experts to Panel Questions 2 and 4, paras. 6.22-6.31 and 6.40-6.50 and opinions of all experts advising the Panel to an oral question asked by the US representative at the joint meeting with experts of 17 February 1997, Transcripts, paras. 77, 79, 84, 85 and 87.

³⁸⁸ See para. 8.176.

³⁸⁹ Ibid.

³⁹⁰ Ibid.

³⁹¹ With respect to hormones administered for therapeutic treatment, the European Communities argues that in practice no residues of these hormones will be ingested by consumers because animals undergoing such treatment are not allowed to be slaughtered. However, the fact is that the European Communities has decided that the adoption of MRLs for these hormone residues is unnecessary and has thus not set any residue limit (see para. 8.190 in fine).

³⁹² See answer by Dr. Arnold to Panel Question 5, para. 6.55.

³⁹³ Ibid., para. 6.56.

³⁹⁴ See para. 8.187 and, in particular, the footnote thereto.

³⁹⁵ See para. 8.62. This conclusion has not been contested by either the parties or experts advising the Panel. For example, according to data submitted to the Panel (the accuracy of which has not been disputed by the parties), the residue level of testosterone in 500 grams of untreated bull meat is 1,560 nanograms as opposed to 35 nanograms in 500 grams of meat from a heifer implanted with testosterone.

³⁹⁶ For example, according to data submitted to the Panel (the accuracy of which has not been disputed by the parties), the residue level of oestradiol-17b equivalents in a 50 to 60 grams hen's egg is 1,750 nanograms (in 10 ml of soybean oil, 20,000 nanograms) as opposed to 11.4 nanograms in 500 grams of steer meat implanted with oestradiol-17b and 75 nanograms in 500 grams of untreated cow meat. In other words, the oestrogen content of 1 hen's egg is equivalent to 76.5 kg of implanted steer beef. In this respect, we also note that a pre-puberty male child naturally produces 41,000 nanograms of oestrogens in 24 hours, an adult man 136,000 nanograms and a pregnant women 20,000,000 nanograms.

³⁹⁷ For example, MRLs have been adopted by Codex for (naturally occurring) cyanide in cassava flour and in Gari (a cassava product).

³⁹⁸ See para. 8.145.

³⁹⁹ See para. 8.187.

⁴⁰⁰ See para. 4.71.

⁴⁰¹ See para. 4.69.

⁴⁰² See answers by experts to Panel Questions 19 and 20, paras. 6.183-6.193.

⁴⁰³ Ibid. See also opinions of all experts advising the Panel on a question by the US representative at the joint meeting with experts of 17 February 1997, Transcripts, paras. 90, 91, 93 and 95 and answers by experts to Panel Question 3, paras. 6.32-6.39 and para. 4.68.

⁴⁰⁴ Since we made no finding on the justifiability of the difference in levels of protection for the natural hormones in dispute when administered as growth promoters and those administered for therapeutic or zootechnical purposes, we do not address, for that additional difference in levels of protection, the third element of Article 5.5.

⁴⁰⁵ See paras. 8.182-8.184.

⁴⁰⁶ Such as preambles 5 and 6 to Directive 88/146/EEC which state, inter alia, the following:

"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 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".

⁴⁰⁷ Such as the Nielsen Report of 1981, the Collins Reports of 1985 and 1989 and the Pimenta Report of 1989 of the European Parliament and the opinions of the EC Economic and Social Committee of 1981 and 1984, outlined in paras. 2.28-2.33. See also Judgment of the Court of Justice of the European Communities in the case C-331/88, "The Queen v. The Minister for Agriculture, Fisheries and Food and the Secretary of State for Health, ex parte: Fedesa and Others", 1990, ECR I-4023, at p. I-4065, para. 25: "... the material made available to the Court ... shows that the possibility of a reduction in surpluses was indeed taken into consideration during the process leading to the adoption of the directive [in casu, Directive 88/146/EEC] ...".

⁴⁰⁸ See para. 4.15, footnote 35.

⁴⁰⁹ See para. 4.9, footnote 25.

⁴¹⁰ As mentioned above, the hormone MGA, for which no international standard exists, will be dealt with in a separate section in paragraphs 8.250 ff.

⁴¹¹ Since we made no finding on the difference in levels of protection for natural hormones administered as growth promoters and those administered for therapeutic or zootechnical purposes (see para. 8.200), we do not address the alleged difference in levels of protection for synthetic hormones administered as growth promoters and natural hormones administered for therapeutic or zootechnical purposes.

⁴¹² See para. 8.4.

⁴¹³ See answers by experts to Panel Question 4, paras. 6.38-6.48. See also Transcripts of joint meeting with experts of 17 February 1997, paras. 342-348.

⁴¹⁴ See para. 8.176.

⁴¹⁵ See para. 4.93.

⁴¹⁶ See para. 8.190.

⁴¹⁷ See also answers by experts to Panel Question 4, paras. 6.40-6.50 and Transcripts of the joint meeting with experts of 17 February 1997, para. 348, where Dr. Lucier stated that in his opinion residues of synthetic hormones are of more concern than those of natural hormones because the risks related to the natural hormones are already there due to those occurring endogenously in the body, whereas residues of the synthetic hormones are new to the body. This difference does not, however, relate to the inherent characteristics of both categories of hormones, but to the fact that one category occurs endogenously in humans, whereas the other does not.

⁴¹⁸ See paras. 4.143 and 4.145.

⁴¹⁹ See answers by experts to Panel Question 22, paras. 6.199-6.202.

⁴²⁰ See, for example, opinion of Dr. Randell, para. 6.76. We also note, in this respect, the opinion of Dr. Arnold, para. 6.45: "The potential risks arising from other than hormonal actions [related to the synthetic hormones] were qualitatively different. These risks were assessed during the review and approval process, and the approved conditions of use eliminated all unacceptable risks".

⁴²¹ See, for example, the Codex standards which have adopted MRLs for the synthetic hormones and not for the natural hormones.

⁴²² See para. 8.15, 137.

⁴²³ See paras. 8.182-8.184.

⁴²⁴ See paras. 8.204 and 8.205.

⁴²⁵ See answers by experts to Panel Question 11, paras. 6.128-6.136 and para. 4.220.

⁴²⁶ See para. 8.176.

⁴²⁷ See para. 4.220.

⁴²⁸ See para. 4.93.

⁴²⁹ EC second submission to the Panel on EC Measures Concerning Meat and Meat Products (Hormones) - Complaint by Canada, pp.9-10, paras. 35-36.