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EUROPEAN COMMUNITIES �
(Continued)
4. Article 2.2 of the TBT Agreement
5.14 Concerning Article 2.2 of the TBT Agreement, Canada argues that the wording
of this provision contains two separate and independent obligations which
indicate that a Member cannot prepare, adopt or apply a technical regulation
with a view to and with the effect of creating an unnecessary obstacle to trade.
Canada submits that the preamble to the EC Regulation at issue states that it is
"likely to improve the profitability of sardine production in the Community, and
the market outlets therefor�". Canada claims that such language reveals that the
EC Regulation has been adopted with a view to creating an unnecessary obstacle
to international trade and that it is therefore inconsistent with Article 2.2 of
the TBT Agreement.
5.15 Moreover, Canada claims that the EC Regulation has been adopted with the
effect of creating an unnecessary obstacle to international trade. In support of
this claim, Canada argues that it can be inferred from the text of Article 2.2
of the TBT Agreement that in order for a measure to be consistent with that
provision, the following should occur:
(a) The objective of the technical regulation must fall within the range of
legitimate objectives set out in Article 2.2 of the TBT Agreement;
(b) the technical regulation must fulfil the objective; and
(c) the technical regulation must not be more trade restrictive than necessary,
taking account of the risks non-fulfilment would create.
5.16 With regard to the two first elements mentioned above, Canada notes that
according to the European Communities, the labelling requirement in Article 2 of
its Regulation has the objective of "ensuring consumer protection through market
transparency and fair competition". Canada further notes that the European
Communities argues that the Regulation at issue intends to protect consumers'
expectations that in purchasing sardines they are purchasingSardina pilchardus,
as they associate sardines with this particular species. In reply to this last
argument, Canada contends that there is no evidence that this is the expectation
of European consumers. Canada claims that, to the contrary, preserved sardines
other thanSardina pilchardus have been successfully marketed as "sardines" in
the European Communities market for over fifty years until the adoption of the
EC Regulation. Canada considers this as evidence that in their perceptions and
behaviour, European consumers have recognized these products as sardines and
that they expect the term "sardines" to include species other than Sardina
pilchardus.
5.17 Canada also asserts that consumers' expectations relate to the culinary and
nutritional characteristics of the processed products. They are concerned with
the organoleptic properties of the canned products such as flesh quality, taste
and smell as well as nutritional content and its suitability for particular
uses. Canada argues that in all relevant attributes, the product of various
species, including Clupea harengus harengus and Sardinops sagax, is
indistinguishable fromSardina pilchardus, as confirmed independently by their
inclusion as "sardines" under the Codex Stan 94.
5.18 Moreover, Canada argues that market transparency is normally associated
with the provision of accurate information that is relevant to consumers to
assist them in making informed purchasing decisions and that the generic term
"sardines" is understood by European consumers to refer to a range of species
that are prepared and packed in a certain way and when preserved, are similar as
to flavour, texture and end use. In Canada's view, the word "sardines" conveys
meaningful information that allows consumers to identify these products and, by
forcing products that had previously been identified by European consumers as
sardines to use a different trade description, the EC Regulation itself misleads
and confuses consumers.
5.19 Canada further submits that while the European Communities does not
explicitly define the term "fair competition", it indicates that the Regulation
at issue is intended to prevent producers of one product from unfairly
benefiting from the reputation associated with another product. Canada argues
that the European Communities' rationale is based on the false premise that the
term "sardines" is only associated with the speciesSardina pilchardus and that
the European Communities has also failed to offer any evidence that the
reputation associated withSardina pilchardus is better than that associated
with other species commonly known as sardines.
5.20 Thus, Canada asserts that the EC Regulation not only fails to fulfil any
credible objective of consumer protection through market transparency and fair
competition, but also actively undermines it.
5.21 With regard to the last element mentioned above, Canada argues that, even
if the EC Regulation did fulfil the objective of consumer protection through
market transparency and fair competition, the EC Regulation is more trade
restrictive than necessary, taking account of the risks non-fulfilment would
create. The language and jurisprudence of the GATT offer guidance to the
interpretation of the TBT Agreement, including Article 2.2. Under Article 2.2, a
measure will be more trade restrictive than necessary if there is a reasonably
available, less trade restrictive alternative measure that fulfils the Member's
legitimate objective and is consistent with the TBT Agreement. The European
Communities' objective can be met in a less trade restrictive manner by allowing
species other thanSardina pilchardus to be marketed as preserved sardines in
accordance with the Codex Standard; that is, by including designations that
inform consumers of the "country, geographic area, the species or the common
name of the species in accordance with the law and custom of the country in
which the product is sold" (for example "Pacific Sardines", "Peruvian Sardines"
or "Canadian Sardines"). Canada recalls that the Appellate Body stated that one
aspect of the determination of whether a WTO-consistent alternative measure is
reasonably available is the extent to which it "contributes to the realization
of the end pursued"; that is, the fulfilment of the stated objective. Canada
argues that the Appellate Body also found that the more vital or important the
common interests or values pursued, the easier it would be to accept as
"necessary" measures designed to achieve those ends. In Canada's view, the
exercise of "taking account of the risks non-fulfilment [of a legitimate
objective] would create" when assessing the necessity of a measure under Article
2.2 of the TBT Agreement can be seen as similar to evaluating the necessity of a
measure under Article XX(b) or (d) of the GATT 1994 in part by considering the
importance of the objective being pursued. Canada argues that the greater the
importance of the objective, the greater the risks non-fulfilment would create.
5.22 Canada claims that in the present case, the EC Regulation is more trade
restrictive than necessary because there is a less trade restrictive
alternative, namely Codex Stan 94, that is reasonably available, consistent with
the TBT Agreement and that would fulfil the European Communities' objective.
Canada argues that a less trade restrictive alternative would be to allow
species other thanSardina pilchardus to be marketed as preserved sardines in
accordance with Codex Stan 94; that is, by including designations that inform
consumers of the "country, geographic area, the species or the common name of
the species in accordance with the law and custom of the country in which the
product is sold"(for example "Pacific Sardines", "Peruvian Sardines" or
"Canadian Sardines").
5.23 Canada concludes that, whether or not the stated objective of consumer
protection is a legitimate objective, the EC Regulation does not fulfil its
objective and is, therefore, an unnecessary obstacle to trade, contrary to
Article 2.2 of the TBT Agreement. Further, the EC Regulation is inconsistent
with Article 2.2 in that it is more trade restrictive than necessary to fulfill
a legitimate objective and has the effect of creating an unnecessary obstacle to
international trade.
5. Article 2.1 of the TBT Agreement
5.24 Canada submits that the EC Regulation violates Article 2.1 of the TBT
Agreement by according less favourable treatment to Peruvian preserved sardines
of the species Sardinops sagax, and other like products, than that accorded to
domestic and imported preserved sardines of the speciesSardina pilchardus.
5.25 In this connection, Canada considers that Peruvian preserved sardines of
the species Sardinops sagax, and Canadian preserved sardines of the species
Clupea harengus harengus are "like" domestic and imported preserved sardines of
the speciesSardina pilchardus:
5.26 In the view of Canada, the different and discriminatory marketing
requirement imposed by the EC Regulation disrupts the conditions of competition
between these like products in favour of domestic and imported preserved
sardines of the speciesSardina pilchardus. Canada argues that exporters have
identified their products as sardines in the European Communities for some time
and have developed customer loyalty for their products; thus, by forcing these
products to be marketed under a different description, the EC Regulation denies
them the traditional identity and image associated with the term "sardines" and
causes confusion among consumers. In addition, Canada argues that by prohibiting
the use of the term "sardines" for all species other thanSardina pilchardus,
the European Communities has altered the conditions of competition in the
European Communities market for preserved sardines and created a monopoly under
that name for its own domestic species and that of a few other countries, such
as Morocco, where the European Communities has made a significant investment in
sardine production.
6. Articles I:1 and III:4 of the GATT 1994
5.27 Canada claims that if the Panel finds that the EC Regulation is not a
"technical regulation" for the purposes of the TBT Agreement, and thus does not
violate Article 2.1 of that Agreement, the EC Regulation is nevertheless
inconsistent with Articles I:1 and III:4 of the GATT 1994 because it accords
less favourable treatment to Peruvian preserved sardines of the species
Sardinops sagax and other like products such as Canadian preserved sardines of
the species Clupea harengus harengus, than that accorded to like sardines of
European Communities origin and those of certain other countries such as
Morocco. Canada argues that the foregoing analysis of "like product" and "less
favourable treatment" under the TBT Agreement applies equally to an analysis
under Articles I:1 and III:4 of the GATT 1994.
5.28 Finally, Canada contends that if the Panel agrees and finds that the EC
Regulation violates the European Communities' obligations under the TBT
Agreement or the GATT 1994, the Panel should not accept Peru's request that,
pursuant to Article 19.1 of the DSU, it suggests that the European Communities
implements its recommendation by extending the use of the term "sardines" only
to Sardinops sagax. According to Canada, panels in other disputes have
consistently declined to suggest ways in which Members found to be acting
inconsistently could implement their recommendations and have deferred instead
to the discretion of Members to decide how best to bring themselves into
conformity. Canada claims that there is no reason in this case why the Panel
should be any less deferential.
5.29 Moreover, Canada argues that even if the Panel did decide to make a
suggestion regarding implementation, any such suggestion would have to be
consistent with the WTO Agreement. A recommendation that the European
Communities extends the use of the term "sardines" to Sardinops sagax alone
would be inconsistent with Articles 2.4, 2.2 and 2.1 of the TBT Agreement and
Articles I:1 and III:4 of the GATT 1994. If the Panel did choose to suggest ways
in which the European Communities should bring the Regulation into conformity
with the WTO Agreement, Canada contends that the suggestion would have to be
based on the Codex Standard and sufficiently broad to encompass all like
products, including the Canadian sardines of the species Clupea harengus
harengus.
B. CHILE
1. Introduction
5.30 Chile submits that it has a direct trade interest in the dispute as a
sardine producer and exporter of marine products to the European Communities,
and that it has a systemic interest in the proper interpretation and
implementation of the WTO Agreements, in particular the TBT Agreement.
5.31 Chile further submits that its request to join the consultations was
rejected by the European Communities, which contended that Chilean exports of
Sardinops sagax were equivalent to only 0.3 per cent of total European
Communities' imports over the last three years. However, Chile notes with
considerable concern that, in one of its written submissions, the European
Communities points out that FAO figures show that Chilean catches of Sardinops
sagax were the largest in the world, even larger than those of Peru. Chile
recalls that Article 4.11 of the DSU indicates that "Whenever a Member other
than the consulting Members considers that it has a substantial trade interest
in consultations being held ... such Member may notify the consulting Members
and the DSB�". This provision adds further that "Such Member shall be joined in
the consultations, provided that the Member to which the request for
consultations was addressed agrees that the claim of substantial interest is
well-founded". Thus, Chile considers that it has a trade interest in the case
brought by Peru before the DSB, given that, were Peru's arguments to be upheld,
part of the Chilean production could gain access to the European market in
conditions which are presently denied. Moreover, Chile considers that this
interest is, in practice, related to the fact that it is one of the main
producers of one species of sardines, as recognized by the European Communities.
In Chile's view, a Member has a substantial trade interest when its exports are
affected, whether positively or negatively, by the measure at issue. In most
cases, such a measure results in the absence of exports, which is neither
equivalent to nor the same as having no trade interest. To the contrary, the
European Communities seems to consider that, to have a substantial trade
interest in this matter, a Member must be marketing its sardines on the European
market, i.e., not be affected by the ban established by the regulation at issue.
On this premise, all Members which, as a result of the EC Regulation, are
prevented from marketing their sardines on the European market would be excluded
from the consultations.
5.32 Chile argues that the EC Regulation is inconsistent with Articles 2.4, 2.2
and 2.1 of the TBT Agreement, as well as with Articles I and III of the GATT
1994.
2. Retroactive application of the TBT Agreement
5.33 With regard to whether a Member is required to bring its technical
regulations into conformity with international standards where they exist, Chile
argues that the harmonization commitment must clearly be fulfilled in respect
not only of future technical regulations but also of those that Members "have �
adopted". Moreover, Article 2.4 of the TBT Agreement covers both the case in
which a relevant international standard exists and that in which its completion
is imminent. Although certain changes were not in force at the time the EC
Regulation came into effect, Article 2.3 of the TBT Agreement indicates that a
regulation shall not be maintained if the objective "can be addressed in a less
trade-restrictive manner".
5.34 With regard to the European Communities' argument that the TBT Agreement,
and in particular Article 2, does not apply to the EC Regulation inasmuch as the
latter predates the entry into force of the WTO Agreements, including the TBT
Agreement, Chile refers to the content of Article XVI:4 of the WTO Agreement.
Chile also submits that nothing restricts this provision to laws, regulations
and administrative procedures passed subsequent to the entry into force of the
WTO Agreement.
5.35 In addition, Chile submits that member States of the European Communities,
by consenting to the development of Codex Stan 94, must have been aware of the
existence of the EC Regulation at issue, which should have been brought into
conformity with the Codex Stan 94. Therefore, Chile considers that following the
logic of Article 2.4 of the TBT Agreement, the EC Regulation must be based on
relevant international standards, namely those adopted by member States of the
European Communities in the Codex Alimentarius Commission. Interpreting Article
2.4 of the TBT Agreement in any other way would render Article XVI:4 of the WTO
Agreement ineffective and redundant. As a final point on this particular issue,
Chile argues that Article 2 of the TBT Agreement is based on the previous Tokyo
Round Standards Code, which contained similar obligations.
3. Article 2.4 of the TBT Agreement
5.36 Chile contends that the international nature of the Codex Alimentarius
Commission cannot be questioned, especially since it is an entity attached to
the FAO and the WHO, both of which are international organizations par
excellence. Furthermore, the standards developed by the Codex Alimentarius
Commission comply with the principles of transparency, openness, impartiality,
relevance and consensus set out in the Decision of the TBT Committee. Chile also
argues that all the member States of the European Communities (which are also
members of the Codex Alimentarius Commission) contributed, by way of consensus,
to the development of Codex Stan 94.
5.37 Chile states that Codex Stan 94 applies to around 20 types of sardines,
including Sardinops sagax. Chile argues that, pursuant to paragraph 6.1.1 of
this internationally accepted standard, it can market its sardines on the
European market under the following names:
5.38 Chile disagrees with the interpretation of the European Communities of
Article 2.4 of the TBT Agreement and argues that the reference in Article 2.4 to
"as a basis for" affords each Member the possibility of adapting an
international standard to its own reality or specific individual circumstances,
without altering the objectives of that international standard, unless it (or
its components) is an ineffective or inappropriate means for the fulfilment of
the legitimate objectives pursued, and in such case the Member should justify
why this is so. The question that arises here is whether Codex Stan 94 is an
effective and appropriate means for the fulfilment of the objectives pursued by
the European Communities. Chile notes that the aim of the EC Regulation at issue
is "to keep products of unsatisfactory quality off the market" and to ensure the
"correct information and protection of the consumer". Chile argues that these
are also the objectives of the Codex Stan 94 which is an effective and
appropriate means to fulfil the objectives set out in the EC Regulation.
4. Article 2.2 of the TBT Agreement
5.39 Chile also claims that the EC Regulation is an unnecessary obstacle to
trade. Chile argues that reserving a trade name exclusively for one particular
species gives it a competitive advantage over other like products because it
imposes the use of names with negative connotations, thus bringing down their
prices and triggering an adverse reaction on the part of the consumers.
C. COLOMBIA
1. Introduction
5.40 Colombia submits that it has a systemic interest in important issues of
principle and in the legal debate introduced by Peru with regard to the TBT
Agreement.
5.41 Colombia agrees with Peru that the limits of competence of any Panel are
its terms of reference pursuant to Article 7 of the DSU. However, Colombia
argues that these terms of reference should be understood in the light of
Articles 10 and 11 of the DSU, which require the Panel to determine the
applicability of the covered agreements, a function which should be fulfilled on
the basis of the arguments put forward by all parties to the dispute, including
those put forward by third parties. In this respect, any attempt to restrict the
rights of third parties to a dispute would not only be inappropriate for the
multilateral trading system but also contrary to the DSU.
2. Retroactive application of the TBT Agreement
5.42 Concerning the European Communities' argument that in pursuance of Article
28 of the Vienna Convention, Codex Stan 94 would not be a relevant international
standard because Codex Stan 94 did not exist at the time the EC Regulation was
enacted, Colombia submits that such an argument lacks any real legal basis and
would have serious implications for the fulfilment of multilateral commitments.
In this connection, Colombia supports Canada's submission concerning the
retroactive application of the TBT Agreement and asserts that, if the
interpretation put forward by the European Communities were to be accepted, the
scope of WTO commitments would be arbitrarily restricted.
5.43 Moreover, Colombia submits that the adoption of Codex Stan 94 subsequent to
the date of entry into force of the EC Regulation does not affect its status as
an international standard given that the obligation established in the TBT
Agreement does not provide for any form of exemption from which a
differentiation of Members' obligations, as of the time when a national
technical regulation comes into effect, can be inferred.
3. Article 2.4 of the TBT Agreement
5.44 In Colombia's opinion, the EC Regulation is inconsistent with Article 2.4
of the TBT Agreement. Colombia further submits that the Codex Alimentarius
Commission is a competent international standardizing body within the meaning of
Articles 1.1 and 2.6 of the TBT Agreement and that Codex Stan 94 is an
international standard.
5.45 Colombia considers that the identification of the elements which would
exempt a country from implementing an international standard because it is an
ineffective or inappropriate means to fulfill a legitimate objective must be
drawn upon the examples set out in Article 2.4 of the TBT Agreement. It is
Colombia's view that Article 2.4, by mentioning climatic or geographical
factors, clearly restricts such exemption from the implementation of an
international standard to objective elements.
5.46 Colombia contends that under Article 2.4 of, and the preamble to, the TBT
Agreement, WTO Members are not authorized to hinder the market entry of a
product by arguing that its quality characteristics are not identical to those
of the products to which its consumers are accustomed. Colombia recognizes the
right of WTO Members to take appropriate measures to prevent consumers from
being misled. However, Colombia argues that the possibility of enacting a
regulation to address such a concern is limited by the TBT Agreement which
states that a regulation should not be discriminatory and should not constitute
a disguised restriction on trade.
4. Article 2.2 of the TBT Agreement
5.47 With respect to Article 2.2 of the TBT Agreement and the elements that must
be established for there to be a violation, Colombia argues that the
determination of whether a technical regulation is more trade-restrictive than
necessary should not be contingent upon a demonstration of trade-restrictive
effects, such as the absence of the product on a given market. In the view of
Colombia, the reading of Article 2.2 of the TBT Agreement in conjunction with
Article 2.4 covers cases where no international standards exist or where they
exist but prove to be ineffective or inappropriate.
5.48 Colombia notes that a particularly significant aspect of the dispute will
be the recommendation on the way in which the decision is to be implemented. If
the arguments advanced by Peru on the inconsistency of the measure with the TBT
Agreement prove successful, it is Colombia's understanding that the Panel report
will have to be implemented through a measure consistent with the multilateral
agreements.
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