TWN Info Service on WTO and Trade Issues (Oct13/02)
2 October 2013
Third World Network  

Panel set on Australia's plain tobacco packaging dispute
Published in SUNS #7663 dated 27 September 2013
 
Geneva, 26 Sep (Kanaga Raja) -- The Dispute Settlement Body (DSB) of the World Trade Organisation (WTO) on Wednesday agreed to establish a panel, at the request of Honduras, to examine certain measures imposed by Australia concerning trademarks, geographical indications and other plain packaging requirements applicable to tobacco products and packaging.
 
This was a second-time request and panel establishment was automatic. A first request for panel establishment was made by Honduras on 19 November 2012, which was rejected by Australia at that first instance.
 
A total of 26 members reserved their third-party rights to the dispute.
 
The panel establishment came after what proved to be a long procedural debate on what Australia raised as a systemic issue, namely, whether a panel request made after a lapse of time (10 months in this instance) from the original panel request could be considered a second-time request subject to automaticity.
 
The DSB chair however ruled that the issue involved interpretation of Article 6.1 of the Dispute Settlement Understanding (DSU), and that it could only be provided by the General Council or Ministerial Conference.
 
[According to trade officials, there are now five disputes filed at the WTO over Australia's plain packaging requirements for tobacco products. A panel was established on 28 September 2012 (but not composed as yet) at the request of Ukraine. The Dominican Republic made a first-time panel request on 17 December 2012, which was rejected by Australia. Requests for consultations, the first step in the dispute settlement process, have been made by Cuba (on 3 May 2013) and Indonesia (on 20 September 2013).]
 
In its communication to the DSB, Honduras said that Australia regulates the appearance of marks and other design features on the retail packaging of tobacco products, as well as on the tobacco products themselves. It regulates the appearance of the brand, business, company or variant name in a standard form, font size and location. It prescribes the colour and the finish of retail packaging for all tobacco products and also prescribes the requirements for wrappers, inserts and onserts.
 
In particular:
 
* The brand, business or company name on the retail packaging must be printed in Lucida Sans typeface in regular font no larger than 14 points in Pantone Cool Gray 2C. The variant name must meet these requirements but cannot be larger than 10 points.
 
* All retail packaging for tobacco products must have a matt finish and be in drab dark brown (Pantone 448C), with the exception of the health warnings, the text of the brand, business, company or variant name and the relevant legislative warnings.
 
According to the Honduran communication, non-cigarette tobacco products, such as cigars, may include a band in Pantone 448C, on which the following marks may appear: the brand, company or business name and variant name; the name of the country in which the cigar was made or produced; and an alphanumeric code.
 
These marks may each appear only once on the band and must be printed in Lucida Sans typeface, no larger than 10 points in regular font in Pantone Cool Gray 2C.
 
Honduras said that these measures regulating the plain packaging and appearance of tobacco products for retail sale appear to be inconsistent with Australia's obligations under several provisions of the TRIPS Agreement, the Technical Barriers to Trade (TBT) Agreement and the GATT 1994.
 
It considers that Australia cannot justify its measures pursuant to either Article 8 of the TRIPS Agreement as necessary to protect human health because they are not consistent with the provisions of the TRIPS Agreement or Article 17 of the TRIPS Agreement as a "limited exception" to the rights conferred by a trademark.
 
According to trade officials, in its statement at the DSB, Honduras reiterated that Australia's plain packaging requirements are incompatible with the TRIPS and TBT Agreements, and are more trade-restrictive than necessary to achieve the declared objective of protecting human health.
 
In its statement at the DSB, Australia said that its tobacco plain packaging measure has been in force since 1 December 2012 and that tobacco plain packaging is a sound, well considered measure designed to achieve a legitimate objective - the protection of public health.
 
The WTO covered agreements recognise the fundamental right of Members to implement measures necessary for the achievement of this objective and provide the necessary flexibilities for Members to do so, it added.
 
While it expected that the public health benefits of its tobacco plain packaging measure will be demonstrated over the longer term, it said that recently released research indicates that the plain packaging measure already appears to be having a positive effect.
 
The study of more than 500 smokers revealed that a majority of those smoking from plain packs: perceived their cigarettes to be lower in quality; tended to perceive their cigarettes as less satisfying than a year ago; were more likely to have thought about quitting at least once a day in the past week; and were more likely to rate quitting as a higher priority in their lives.
 
Australia reiterated that it is a world leader in effective tobacco control strategies and tobacco plain packaging is the next logical step in its long history of tobacco control, adding that it is pleased to note that other WTO Members have announced that they intend to adopt similar measures.
 
Stressing that all WTO Members have to confront the global tobacco epidemic, Australia went on to cite the World Health Organisation's Report on the Global Tobacco Epidemic 2011 which states that "Tobacco use continues to be the leading global cause of preventable death. It kills approximately 6 million people and causes hundreds of billions of dollars of economic damage worldwide each year."
 
The report adds that "If current trends continue, by 2030, tobacco will kill more than 8 million people worldwide each year, with 80% of these living in low- and middle-income countries."
 
In Latin America and the central Caribbean region, tobacco-related deaths are expected to triple from 3.3% of total deaths in 1990 to 9.4% in 2020 - a clear indicator of the increasing proportion of tobacco-related diseases which will be borne by countries such as Honduras.
 
It noted that both Australia and Honduras are parties to the WHO Framework Convention on Tobacco Control and that tobacco plain packaging is recommended in the guidelines for implementation of Articles 11 and 13 of the Convention.
 
Australia emphasised that its tobacco plain packaging legislation does not undermine the protection afforded to trademarks and geographical indications under the TRIPS Agreement. Nor is the measure more trade restrictive than necessary to fulfil its legitimate public health objective.
 
It said that the tobacco plain packaging measure is origin neutral and even-handed in its application, and that it is clearly non-discriminatory. It applies to all tobacco products, regardless of type or origin, and represents best practice in tobacco control.
 
Australia noted that Honduras first requested the establishment of a panel at the 19 November 2012 meeting of the DSB. It had rejected the establishment of a panel at that meeting, as it was entitled to do.
 
"Approximately 10 months have now elapsed since Honduras' request was made. We are not aware of any other instance where such a lengthy period has elapsed between a first panel request made under Article 6.1 of the DSU [Dispute Settlement Understanding] and a party again placing the issue on the DSB agenda."
 
Australia cited Article 6.1 of the DSU, which provides that: "If the complaining party so requests, a panel shall be established at the latest at the DSB meeting following that at which the request first appears as an item on the DSB's agenda, unless at that meeting the DSB decides by consensus not to establish a panel."
 
In Australia's view, the language of Article 6.1 is clear - where a complaining party makes a request for establishment of a panel, a panel shall be established at the latest at the DSB meeting following that at which a request first appears as an item on the DSB's agenda - unless the DSB decides by consensus at that meeting not to establish a panel.
 
This requirement is reflected in long established DSB practice, it said, adding that pursuant to this practice, a second request for panel establishment is made at the next regular session of the DSB following that session at which the request first appears on the DSB's agenda, or at a meeting of the DSB specially convened for the purpose of making a second request.
 
"As we have said, we have not identified any instance where a 10 month delay has occurred between first and second panel requests made in accordance with Article 6.1 of the DSU."
 
According to Australia, the language in Article 6.1 has its origins in paragraph F (a) of the Decision of 12 April 1989 on Improvements to the GATT Dispute Settlement Rules and Procedures.
 
The improvements in the 1989 Decision arose out of Members' concerns to address delays that had sometimes arisen in establishing a panel, principally due to the actions of some respondents in repeatedly blocking requests for the establishment of panels.
 
That is not the case here today, said Australia, adding that indeed, it is the complainant that has taken just over ten months since the matter first appeared on the DSB agenda to again request establishment of a panel - a delay that is completely at odds with established DSB practice.
 
It underlined that neither the language of Article 6.1 nor established DSB practice supports Honduras' assertion that today's request for establishment of a panel, made 10 months after its first request, should be considered to be a request on the basis of which the DSB can validly establish a panel without the responding party's consent.
 
In Australia's view, the principle of automaticity for establishing panels under Article 6.1 is not unlimited and should not allow for first panel requests to remain open indefinitely in the face of lengthy inaction on the part of a complaining party.
 
Such an approach, it added, would create uncertainty both for responding parties and for the system as a whole. It would require a responding party to maintain the resources necessary to defend a dispute indefinitely.
 
This can be a challenge for any WTO Member. For developing country Members with limited resources, this challenge would be even more difficult to meet. It is therefore important that the implications of today's action by Honduras for the system as a whole, rather than just for this particular dispute, are properly considered.
 
On this basis, Australia said it is of the view that the request made today must be considered a first request, and that Honduras is not entitled to expect the automatic establishment of a panel by the DSB.
 
For these reasons, it said that it cannot agree to the request made today. In so doing, it noted that if Honduras wishes to proceed to making a second request, it may do so in 15 days' time, pursuant to the terms of footnote 5 to Article 6.1, and that Australia will not be able to oppose that second request.
 
[Footnote 5 of Article 6.1 states: "If the complaining party so requests, a meeting of the DSB shall be convened for this purpose within 15 days of the request, provided that at least 10 days' advance notice of the meeting is given."]
 
Australia further noted that the request by Honduras relates to the same matter raised by Ukraine at the 28 September 2012 meeting of the DSB. Accordingly, pursuant to Article 9.1 of the DSU, Australia requested that these complaints be heard by a single panel.
 
According to trade officials, a lengthy debate ensued on procedure and "systemic" issues, with some 27 members voicing their views. Overall, most supported Honduras in that it has the right to request the establishment of a panel, as well as on account of the negative consensus rule, trade officials added.
 
In its intervention, the Dominican Republic supported the position of Honduras that, pursuant to Article 6.1 of the DSU, the DSB is required to establish a panel at this, the second meeting at which a request for panel establishment has been made.
 
In the Dominican Republic's view, neither the text, object and purpose of Article
6.1, nor the Members' practice to date under the DSU supports Australia's position that a panel may only be established at the very next DSB meeting following immediately the meeting at which a request for establishment first appeared as an item on the DSB agenda.
 
In its intervention, New Zealand, speaking on the timing and process for the establishment of panels, voiced some sympathy for the views expressed by Australia regarding whether this request should be considered as a first or second panel request.
 
It echoed Australia's comments that it is important that the implications of today's action by Honduras for the system as a whole, rather than just for this particular dispute, are properly considered.
 
It agreed with Australia that the principle of automaticity for establishing panels under Article 6.1 is not unlimited and should not allow for first panel requests to remain open indefinitely in the face of lengthy inaction on the part of a complaining party.
 
According to trade officials, some members proposed a special panel to decide on the interpretation of Article 6.1.
 
But the Chair of the DSB, Ambassador Jonathan Fried of Canada, said that the DSB did not have the authority to interpret the DSU, and that only the General Council and the Ministerial Conference could do so. He said that on the face of what we have today, we don't have a negative consensus, which means that the panel is established automatically.
 
On Australia's request for a single panel to be established to examine this dispute, in light of the fact that a panel had already been established, but not yet composed, to examine the Ukranian complaint over the same issue, trade officials said that Honduras voiced objection to this, arguing that for this to be accepted, there was need for a positive consensus.
 
It also said that the DSU did not force members to establish a single panel for multiple disputes but only provided that option.
 
According to trade officials, another discussion began on this issue, but the Chair again said that members are not here to interpret the DSU. This matter was then left over.
 
Meanwhile, in other actions, the DSB agreed to establish a panel, at the request of Panama, over the imposition by Colombia of a compound tariff relating to the importation of textiles, apparel and footwear from Panama.
 
This was a second-time request and panel establishment was automatic.
 
The European Union, Ecuador, the United States, China, El Salvador, Honduras and Guatemala reserved their third party rights to the dispute.
 
The DSB also agreed to establish a panel, at the second requests of Canada and Mexico, under Article 21.5 of the Dispute Settlement Understanding (DSU), to determine whether measures taken by the US are in compliance with the recommendations and rulings of the DSB in the dispute concerning certain country of origin labelling (COOL) requirements on meat products.
 
The European Union, China, Brazil, Korea, Japan, India and New Zealand reserved their third party rights to the dispute.
 
In other actions, the DSB adopted the panel report in the dispute concerning anti-dumping and countervailing duty measures imposed by China on broiler products from the United States.