After bananas, it is the turn of hormone beef and Indian mail-box patent mechanism

Recent proceedings at the WTO indicate the possibility of more trade disputes flaring up in a multilateral trading system already racked by a conflict over the EC's banana import and marketing regime. Dissatisfaction with EC import restrictions on hormone-treated beef and India's implementation measures on patents could see the US once again resorting to unilateral measures with regard to determination of compliance with WTO rulings.

by Chakravarthi Raghavan

GENEVA: If anyone in the international trading community had been under any illusions about the US-EC (banana) "truce" at the World Trade Organization (please refer to "Thirty-day 'time-out' on bananas at WTO" on p.5), he or she ought to have been brought back to earth by US-EC exchanges on the new fights ahead.

The US and EC "positioned" themselves for new fights (and possible US retaliation threats) over the EC's intentions on and implementation of, by the 13 May deadline, the WTO ruling on imports of beef from hormone-treated cattle.

The Dispute Settlement Body (DSB) set up panels to hear complaints over the Canadian patent law on pharmaceutical products (that enables others to be ready to launch on the market generic name products when patents expire), a US trade law provision of 1916 on anti-dumping (which the US steel industry has been using) that enables private parties to start harassment litigation against importers, and the Canadian automotive industry (where performance requirements are a condition for imports of new cars).

The DSB, under other business, was also advised that India (and Malaysia, Pakistan and Thailand) have reached an agreement with the US, giving the US 13 months (from 6 November 1998, when the ruling was adopted) to implement the DSB recommendations over the US restrictions on shrimp imports (caught without the US turtle exclusion devices).

On India's implementation of the WTO ruling on patents (mail-box), where India is required to enact by law what is popularly called a "mail-box" mechanism to receive product patent applications in the pharmaceutical and agro-chemical sectors and provide for issuance of single marketing rights, the US took a slightly less strident posture, but complained that India had not "developed" its implementation measures in consultation with the US, and that, in the US' view, certain provisions of the ordinance issued by the President of India did not comply with the TRIPS Agreement.

US "rights" under DSU

Over these last few weeks, as the banana dispute and US retaliation threats had occupied the WTO's attention, US officials have made clear their intentions to exercise their "rights" under the Dispute Settlement Understanding (DSU) on other disputes.

They have made known that the beef-hormone and the Indian "mail-box" issues are next in the queue (for US retaliatory threats), and that the US would have similar recourse to Art. 22.6 (without a prior panel judgement under Art. 21.5 on implementation) to unilaterally determine, under its S. 301 law, whether the other party had implemented the ruling and to announce retaliatory sanctions, before asking the other side to "negotiate" a compromise.

The beef-hormone and patent issues came up under the DSB agenda item about "surveillance" of implementation of DSB recommendations.

The DSB was advised by Indian Ambassador S. Narayanan about the issuance of an ordinance on 8 January to implement the ruling over India's obligations under Art. 70.8 and 70.9 of the TRIPS Agreement, by amending the Patents Act, and that a bill to replace the ordinance would be introduced in the Budget session of Parliament, beginning the fourth week of February.

Amb. Rita Hayes for the US, while appreciating the Indian status report, expressed the US' disappointment at India's not consulting with the US (while developing the implementation measure), but was pleased the two sides would be sitting down to discuss the issue in the second week of February. The US, she added, had "serious concerns" over the new ordinance, and believed that some of its aspects did not comply with the TRIPS Agreement. She, however, hoped that with the consultations, the US concerns could be addressed when Parliament enacts the ordinance into law.

Narayanan, however, insisted that the ordinance provisions were fully compatible with the conclusions and recommendations of the DSB.

Hormone issue acting up

On imports of hormone-treated beef and beef products, the EC, in its report on the status of implementation, noted that the Appellate Body ruling adopted by the DSB had held that the EC ban was not based on a risk assessment, and that while the EC evidence for five of the hormones was relevant and showed existence of risk of cancer, there was not sufficient evidence on the sixth.

In accepting the ruling (and getting a 15-month period, ending 13 May, for implementation), the EC had launched a complementary risk assessment to assess the implications for its import ban. Scientific studies on this were underway.

The EC complained that it had requested from the US, Canada, New Zealand and Australia data on the risk assessment done by them, on the basis of which they had permitted use of these hormones for growth purposes. The US and Canadian authorities had declined to provide the data, which they said had been provided to them in confidence. Australia and New Zealand had not replied at all.

The EC, in the light of its own risk assessment, expected to be in a position to draw conclusions on the relevant EC legislation and fully implement the DSB recommendation. The inter-institutional consultations within the EC (with the EU parliament and so on) were continuing, and the EC intended implementation by 13 May.

In sharp exchanges, the US spoke of the "long history" of the beef- hormone dispute, and said the EC had blocked all attempts to resolve the dispute between 1989-93. While the 15- month time limit for the EC was to bring its measures into compliance with WTO obligations, the US had heard that the EC would not comply by 13 May. Seeking details of the actions the EC proposed to take, US Amb.

Hayes said: "We would like to avoid another difficult situation with the EC over compliance with DSB rulings", but for this both parties must be willing to sit down and work out a mutually acceptable solution. Hayes said the EC had waited six months from June 1998 (when the ruling was adopted) to seek the additional data from the US. The US would provide the additional information which would be "more than adequate for the EC's needs," she added.

Canada, which also won a ruling against the EC ban, also expressed disappointment.

But neither Canada nor anyone else appeared to have made any reference to a recent Canadian assessment of risks from use of these hormones.

[Recently, the Canadian public health authorities, on the basis of an assessment by a panel of veterinary experts, refused approval to the Monsanto TNC to sell the bovine hormone, rbST, on grounds of health risk to the cattle. A second panel of physicians and surgeons has, however, said that rbST posed no carcinogenic risk or antibiotic resistance in humans, only a small potential for allergic reactions.]

The EC, however, insisted that it would comply with the DSB recommendation, and that it hoped to complete its intra- institutional consultations before the 13 May deadline.

The EC complaint against the Canadian patents act, on which a panel was established, relates to the provisions of the Canadian law under which third parties, without the consent of the patent holder, carry out experiments and tests required (proof of safety and bio-equivalency) to obtain marketing approval for the copy of an innovative medicine before the expiry of the relevant patent, and manufacture and stockpile the products for a period of up to six months before patent expiry.

Canadian generic pharmaceutical manufacturers use this provision to be ready with generic name drugs for products whose patents are due to expire and to launch them on the market as soon as the patents expire.

The EC complained that this violated the TRIPS Agreement, while Canada expressed disappointment with the EC complaint, arguing that this was a public-interest measure to bring down pharmaceutical prices. Canada accused the EC of seeking through the panel process to achieve something beyond what was negotiated at the WTO on TRIPS.

Australia, Brazil, Cuba, India, Israel, Japan, the US and Switzerland expressed their third-party interest in the dispute, and thus will have the right to present their views before the panel.


The DSB also set up a panel to rule on the US 1916 trade law provisions about anti-dumping (which are still on the US statute book), which the US steel industry has been using to threaten private parties (importers) with litigation for damage caused by their cheap imports.

The US expressed disappointment over the EC bringing up this dispute over a law that had an obsolete status, but claimed it was consistent with the US obligations.

Japan, Mexico and India reserved their third-party rights.

On Canada's automotive industry measures, panels (sought by Japan and separately by the EC) were established. The Canadian measures in effect provide for "performance requirements" by auto manufacturers to enable them to import motor vehicles duty-free.

The Canadian measures, by legislation and regulations to implement the US-Canada Auto Pact, including the Motor Vehicles Tariff Order 1998, provide for remission of customs duties by specific manufacturers, based on their letters of undertaking. Under these measures, only a limited number of auto manufacturers are entitled to import motor vehicles duty- free into Canada and then distribute them at wholesale and retail distribution levels. The duty-free treatment, Japan complained, was contingent on a Canadian Value Added (CVA) content requirement and a manufacturing and sales requirement.

These provisions, Japan said, violated Canada's obligations under the TRIMs Agreement and under the GATS.

On another complaint, brought by the EC, over countervailing duties on certain hot-rolled lead and bismuth carbon steel imports (from the UK), the US withheld consensus for reference - the panel request only having come up for the first time. Reference would be automatic when the request comes up a second time at the next DSB meeting (tentatively set for 17 February). (Third World Economics No. 203, 16-28 February 1999)

The above article was originally published in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief-Editor.