TWN Info Service on WTO and Trade Issues (Dec10/15)
24 December 2010
Third World Network

DSB adopts rulings in New Zealand apple dispute
Published in SUNS #7064 dated 20 December 2010

Geneva, 17 Dec (Kanaga Raja) -- The Dispute Settlement Body (DSB) of the World Trade Organization (WTO) on Friday (17 December) adopted the report of the Appellate Body and the report of the panel, as modified by the Appellate Body report, with respect to Australian measures affecting the importation of apples from New Zealand.

In a ruling issued on 29 November, the Appellate Body had upheld an earlier panel ruling that found the nearly 90-year-old Australian ban on the importation of apples from New Zealand to be inconsistent with Australia's WTO obligations.

The Appellate Body had recommended that the DSB request Australia to bring its measures, found in the Appellate Body report and in the panel report, as modified by the Appellate Body report, to be inconsistent with the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), into conformity with its obligations under that Agreement.

A dispute panel was established on 21 January 2008 to consider a complaint by New Zealand concerning several Australian measures affecting the importation of apples from New Zealand.

The panel had handed down a ruling on 9 August this year, and found the Australian measures against the import of apples from New Zealand to be inconsistent with Australia's WTO obligations. New Zealand had prevailed on most of its complaints in the dispute with Australia.

The panel had requested Australia to bring the inconsistent measures into conformity with its obligations under the SPS Agreement. (For full details of the panel ruling, see SUNS #6986 dated 12 August 2010.)

In its findings and conclusions, the Appellate Body upheld the panel's finding that the 16 measures at issue, both as a whole and individually, constitute SPS measures within the meaning of Annex A(1) to the SPS Agreement.

It further upheld the panel's finding that Australia's measures regarding fire blight and ALCM (apple leafcurling midge), as well as the general measures relating to these pests, are inconsistent with Articles 5.1 and 5.2 of the SPS Agreement, and that, by implication, these measures are also inconsistent with Article 2.2 of the SPS Agreement.

The Appellate Body found that Australia has not established that the panel acted inconsistently with its duty to conduct an objective assessment of the matter before it, within the meaning of Article 11 of the DSU.

It reversed the panel's finding that Australia's measures at issue regarding fire blight and ALCM are inconsistent with Article 5.6 of the SPS Agreement, but said it is unable to complete the legal analysis of New Zealand's claim under that provision.

It also reversed the panel's finding that New Zealand's claim under Annex C(1)(a) and its consequential claim under Article 8 of the SPS Agreement fall outside the panel's terms of reference. However, it found that New Zealand has not established that the 16 measures at issue are inconsistent with Annex C(1)(a) and Article 8 of the SPS Agreement.

The Appellate Body recommended that the DSB request Australia to bring its measures, found to be inconsistent with the SPS Agreement, into conformity with its obligations under that Agreement.

In its statement at the DSB, New Zealand said that the panel and Appellate Body findings confirm New Zealand's longstanding view that Australia's quarantine measures applied to New Zealand apples are neither based on an appropriate risk assessment nor supported by sufficient scientific evidence.

It added that the findings support New Zealand's position throughout this process: that mature and symptomless apples, subject to a standard border inspection, do not pose a phytosanitary risk.

Noting that following the adoption of the reports, Australia will be under an obligation to bring its measures into conformity with its WTO obligations, New Zealand said that it will be working with Australian officials to find an effective, durable and WTO-consistent solution within a reasonable period of time.

New Zealand also welcomed a media release issued jointly by Australian Ministers immediately following the release of the Appellate Body report, in which Ministers noted the Australian Government's acceptance of the outcome of the case. The Ministers also indicated that Australia would now proceed with a science-based review of the import risk analysis for New Zealand apples.

In its statement, Australia noted that on 30 November, the Australian Government announced its intentions to implement the recommendation and rulings of the DSB in a manner consistent with Australia's WTO obligations.

Australia acknowledged that the Appellate Body reversed the panel's findings on Article 5.6 of the SPS Agreement, as Australia had requested it to do. However, Australia considered that there are aspects of the Appellate Body's reasoning on Article 5.6 that appear problematic, and in particular in relation to the standard of review to be applied by panels in dealing with an Article 5.6 claim.

Australia recalled that in EC-Hormones, the Appellate Body clarified that Article 11 of the DSU "bears directly" on the standard of review to be applied by panels in the assessment of facts in proceedings under the SPS Agreement. The Appellate Body stated that: So far as fact-finding by panels is concerned, their activities are always constrained by the mandate of Article 11 of the DSU: the applicable standard is neither de novo review as such, nor "total deference", but rather the "objective assessment of the facts."

The Appellate Body recalled its statement in relation to Article 11 of the DSU in subsequent reports, including US/Canada - Continued Suspension. In doing so, the Appellate Body did not suggest that its guidance was limited to particular provisions of the SPS Agreement, such as Article 5.1.

However, said Australia, in its report Australia-Apples, the Appellate Body has now said: Caution not to conduct a de novo review is appropriate where a panel reviews a risk assessment conducted by the importing Member's authorities in the context of Article 5.1. However, the situation is different in the context of an Article 5.6 claim. The legal question under Article 5.6 is not whether the authorities of the importing Member have, in conducting the risk assessment, acted in accordance with the obligations of the SPS Agreement. Rather, the legal question is whether the importing Member could have adopted a less trade-restrictive measure. This requires the panel itself to objectively assess, inter alia, whether the alternative measure proposed by the complainant would achieve the importing Members's appropriate level of protection.

According to Australia, in its statement, the Appellate Body has indicated that, while it is appropriate not to conduct a de novo review in the context of Article 5.1, the "situation is different" in relation to an Article 5.6 claim. The Appellate Body appears to have suggested that a panel can conduct a de novo review in relation to an Article 5.6 claim. This would constitute a significant departure from the Appellate Body's long-standing guidance that Article 11 of the DSU precludes such a review.

Australia said that it is concerned that the reasoning of the Appellate Body in this part of its report will create difficulty for a panel in applying Articles 5.1 and 5.6 where a complainant brings claims under both provisions.

In such a case, it may be that the importing party has in its risk assessment considered the alternative measure proposed by the complainant in its Article 5.6 claim, and found that the alternative would not meet its appropriate level of protection. Applying the standard of review relevant to Article 5.1, the panel may find the risk assessment "objectively justifiable", and find no breach of Article 5.1.

However, said Australia, following what the Appellate Body has now said, the panel would need to take a different approach in applying Article 5.6. Rather than determining whether the importing Member's consideration of whether the alternative measure met its appropriate level of protection was objectively justifiable, the panel would need to answer that question based on its own judgement. In exercising its own judgement, the panel might find the proposed alternative measure would meet the importing Member's appropriate level of protection, and thus find a breach of Article 5.6.

In Australia's view, such an outcome would be incongruous: the finding on Article 5.6 would completely undermine the finding on Article 5.1, in the process rendering meaningless the Appellate Body's clear guidance on the interpretation of that provision.

In sum, Australia said that it is concerned that the Appellate Body has introduced a significant element of uncertainty on the standard of review which will make the task of panels more difficult in reviewing Members' compliance with key provisions of the SPS Agreement.

In an intervention, the US, noting that it has closely followed the dispute as a third party, said that it has previously brought a dispute (DS245) relating to apple import restrictions adopted by a Member other than Australia. The US added that it also has an application pending before Australia to allow market access for US apples.

It said that the key finding in this dispute is that Australia's measures restricting imports of apples are inconsistent with Australia's obligations under Articles 2.2, 5.1 and 5.2 of the SPS Agreement.

The US also noted that the Appellate Body did not uphold the panel's findings under Article 5.6 of the SPS Agreement, including the finding that a limitation of apple imports to mature symptomless apples would achieve Australia's appropriate level of protection with regard to fire blight.

With regard to this finding, the US said that the Appellate Body found that the panel had adopted an improper approach to its Article 5.6 analysis, and that the panel's findings were not sufficiently detailed to permit the Appellate Body to complete the Article 5.6 analysis.

Based on a review of the scientific evidence, as well as the findings by this panel and by the panel in DS245, it appears that a measure restricting imports to mature symptomless apples would in fact meet Australia's appropriate level of protection, said the US. +