The EC–Asbestos Case
Gerald G Sander
- Technical barriers to trade
Published under the auspices of the Max Planck Foundation for International Peace and the Rule of Law under the direction of Rüdiger Wolfrum.
1 European Communities – Measures Affecting Asbestos and Asbestos-Containing Products was a legal dispute arbitrated between 1998 and 2001 by the World Trade Organization (WTO). WTO Members Canada and the European Communities (‘EC’) were involved as plaintiff and defendant. The dispute revolved around the compatibility of the French ban on the import and use of construction materials containing asbestos with free trade regulations. Both arbiters—the Panel and the Appellate Body—examined the ban for possible violations of the TBT Agreement (Technical Barriers to Trade) and the GATT (General Agreement on Tariffs and Trade [1947 and 1994]) and considered the argument that this trade distortion was justified since it was designed to mitigate health risks. This was the first time a party to a WTO arbitration procedure successfully used health protection pursuant to Art. XX (b) GATT as a legitimate justification for restricting international trade.
2 On 1 January 1997 a French Decree came into force banning the production, sale, and import of asbestos and products containing asbestos due to the health risks associated with these goods. Inhaling asbestos can lead to severe illnesses such as asbestosis, lung cancer, or mesothelioma. According to Art. 2 of the Decree, limited and temporary exceptions to the import ban for some products containing Chrysotile are permitted if other less harmful substitutes, for example, PCG, are not available. Canada sought to import products containing asbestos into France and stated that the Decree violated several WTO regulations. Canada requested consultations with the EC on 28 May 1998 according to Art. 4 of the Dispute Settlement Understanding (DSU). When the consultations ended without agreement, Canada requested the establishment of a panel. The Dispute Settlement Body (DSB) agreed on 25 November 1998. Apart from Canada and the EC, the USA, Brazil, and Zimbabwe joined as third parties according to Art. 10 DSU. In preparation for its decision, the Panel consulted experts and non-governmental organizations. They confirmed the severe health risks of asbestos. Furthermore, Amici Curiae Statements were received from private parties.
3 Both the panel and the Appellate Body of 12 March 2001 found no violations of WTO regulations. On 5 April 2001 the DSB accepted both reports.
C. Arguments of the Parties
4 The dispute revolved around Canada’s objection to France’s import ban on products containing Chrysotile. It was argued that, as an illegal non-technical trade barrier, Art. 1 of the Decree violated Art. 2.1, 2.2, 2.4, and 2.8 TBT. Canada also claimed that a violation of the SPS Agreement (Sanitary and Phytosanitary Standards) had occurred, but did not provide further details. Furthermore, by discriminating non-national producers, the Decree violated Art. XI and Art. III:4 GATT and Art. XXIII:1 (b) GATT. In Canada’s view, the ban was unjustified because using Chrysotile fibres in an inert matrix would not pose a health risk. The controlled use of asbestos products was an equally effective measure to reduce health risks, while being less restrictive on trade. Canada therefore asserted that the Decree was not a legitimate measure to protect the general public’s health, but rather a protectionist attempt to shield French manufacturers from foreign competition.
5 By contrast, the EC stated that the Decree did not fall within the scope of the TBT. Regarding the treatment of products of national origin (Most-Favoured-Nation Clause) pursuant to the GATT, products originating in another country would not be treated less favourably than like products of national origin. The import ban was necessary to eliminate proven health risks of asbestos and asbestos-containing products to the general public pursuant to Art. XX (b) GATT.
D. The Panel Report
6 The Panel first clarified the relationship between the three multilateral agreements (TBT, SPS, and GATT 1994) in Annex 1 A of the WTO Agreement, which are all designed to prevent national protectionism.
1. Non-Applicability of the TBT
7 Art. 1.5 TBT states that it is not applicable when the SPS is relevant. The Panel did not deal with the violation of the SPS alleged by Canada because the Decree’s definitions ensure that it does not constitute a health or plant protection regulation according to Art. 1 SPS and Annex A no. 1.
8 The Panel’s analysis of the Decree concluded that, while the exceptions contained in Art. 2 constituted a technical trade barrier according to the definition in Annex 1.1 TBT, the ban itself did not.
9 A technical trade barrier would have to specify the nature of a product or its manufacturing processes and make compliance mandatory. The Panel concluded that the TBT only applied to measures that regulated specific products and made certain technical characteristics a prerequisite for export to a WTO member. The import ban did not satisfy these requirements because it did not set out positive criteria for bringing the products to market.
10 Due to the non-applicability of the TBT, the Panel examined the compatibility of the ban in Art. 1 of the Decree with the GATT 1994.
2. Violation of the Treatment of Products of National Origin in Art. III:4 GATT
11 The Panel concluded that, according to Art. XVI WTO Agreement, the GATT Panel’s case law on the GATT 1947 could be considered under the WTO regime. In this instance, the Panel referred to the Appellate Body’s report on Japan – Taxes on Alcoholic Beverages. According to this report, adopted Panel Reports are an important part of the GATT acquis since they generate legitimate expectations among WTO Members. The Body also concluded that non-adopted Panel Reports on the GATT 1947 are not binding as they have not been accepted by the treaty’s signatories. However, the Panel could take their conclusions into account if it considered them relevant.
12 The Panel had to decide whether the matter fell under Art. XI:1 or Art. III:4 GATT. According to Art. XI:1 GATT, a WTO member is only permitted to impose tariffs or other charges on imported goods. Quotas or comparable regulations are forbidden. According to the principle of the treatment of products of national origin in Art. III:4 GATT, products manufactured on the territory of a WTO Member that are exported to another Member are not to be discriminated compared to domestic like products.
13 According to the Interpretative Note to Art. III GATT, all regulations on the domestic sale, supply, purchase, or use of goods are equivalent to the rules pursuant to paragraph 1 if they apply equally to imported goods and products of national origin and were applied to the imported goods at the time or place of importation. Since this means that they fall under the scope of Art. III, the Panel examined whether Art. 1 of the Decree violated Art. III:4 GATT.
14 The Panel first examined whether Canadian Chrysotile was treated less favourably than French substitutes. The Panel stated that this would be determined by ascertaining whether asbestos and PCG fibres were like products pursuant to Art. III:4 GATT. Like products can be identical as well as similar. As previously clarified in Japan – Taxes on Alcoholic Beverages, likeness should be tested on a case-by-case basis, considering the characteristics of the product, its tariff classification, its end-use, and consumers’ tastes and habits. As the point of reference is the product; manufacturing processes or ethical issues are irrelevant. Differences in health risks of products used for the same purpose would also not justify less favourable treatment on the basis that the products were not alike. This aspect must be examined only in the context of human health protection in Art. XX GATT, otherwise the justification in lit. b is meaningless. Since the discriminatory effect of Art. 1 of the Decree had already been de jure established since substitutes were not banned, the Panel considered that Art. III:4 GATT had been violated. This meant that reviewing Art. XI:1 GATT was unnecessary.
3. Justifying Discrimination Pursuant to Art. XX (b) GATT
15 The Panel then examined, whether the Decree’s discrimination was justified according to Art. XX GATT. As the defending party, the EC carries prima facie the burden of proof regarding necessity of the Decree for health protection.
(a) Protection of Human Health and Life
16 According to Art. XX (b) GATT, national trade restrictions can be justified if they are designed to protect life and human health. However, the Panel pointed out that this could only be the case if the products affected posed a real danger to the health of the general public. A pragmatic assessment should analyse the scientific facts and the measures available to deal with possible threats from the perspective of an objective health-protection policy-maker.
17 The Panel emphasized that the risk of cancer from inhaling Chrysotile has long been recognized by scientific organizations. This was also confirmed by the scientists consulted by the Panel. An objective observer would therefore conclude that asbestos posed a health risk.
18 While Chrysotile encased in cement is not dangerous, its use can release harmful asbestos. Experts concur that there is no threshold of harmlessness for exposure to asbestos. Cement containing Chrysotile would represent a health risk to an objective health-protection policymaker as its use could release carcinogenic asbestos.
(b) Necessity of the National Measure
19 Furthermore, the import ban must be necessary to protect human health pursuant to Art. XX (b) GATT. Here the Panel referred to Thailand – Restrictions on the Importation of and Internal Taxes on Cigarettes, which stipulated that the measure designed to have the least impact on trade should be discerned. The scope of the policy’s protection aims should also be defined. It should then be ascertained, if a measure consistent or less inconsistent with the GATT was available to policymakers.
20 The Panel concluded that the health risks of products containing asbestos warranted the protection afforded by the Decree.
21 The Panel also explored the possibility that this protection aim could be realized by a measure with less impact on trade. The Panel stated that a measure more compatible with the GATT would have to be reasonably available to policymakers. This availability analysis should not be purely theoretical but based on the State’s economic and political situation, taking into consideration the fact that a State would have to design measures to implement its policies. Since France possesses specialized administrative bodies and good working practices, one could expect it to have the capacity to implement its health policy and bear the implementation costs.
22 However, it is unrealistic to expect DIY enthusiasts and those working without professional supervision to exercise controlled use of asbestos-containing products. An objective policymaker would therefore conclude that controlled use does not afford comprehensive health protection.
23 The Panel also rejected Canada’s argument that Chrysotile substitutes posed the same health risks. The health risks of asbestos are internationally recognized, while substitutes do not pose a comparable threat. Scientific certainty regarding the health risks of using substitutes was not required.
24 The Panel concluded that a controlled use of asbestos by construction workers and DIY enthusiasts was not a reasonable alternative to a ban in favour of substitutes.
25 The Decree could thus be compatible if, considering the introductory clause of Art. XX GATT (‘chapeau’), it did not constitute arbitrary and unjustifiable discrimination or a disguised trade restriction.
(c) No Arbitrary and Unjustifiable Discrimination
26 The Panel examined, whether the Decree could be discriminatory. According to the Panel, treating imported goods less favourably than products of national origin constitutes discrimination. However, neither the wording nor the application of the Decree involves any differences in treatment. The Decree states that it applies to products of any origin and the measure’s application and exemptions do not entail discrimination of Canadian products. Examining the measure for arbitrary or unjustifiable discrimination was therefore unnecessary. The Panel concluded that the Decree was not discriminatory.
(d) No Disguised Restriction on International Trade
27 Regarding a disguised restriction on trade, the Panel stated that this term had not yet been properly defined. Previous Panels had concluded that disguised restrictions also applied to those that had not been made public or that had not been issued as a trade measure. This did not apply to the Decree since it had been published before its entry into force according to established practice and was undoubtedly applicable to international trade of asbestos-containing products.
28 However, according to the Panel this definition of disguised restrictions was not exhaustive since the Appellate Body concluded in US – Standards for Reformulated and Conventional Gasoline that it should also include disguised discrimination. The first interpretation of the chapeau could therefore also be considered by the second interpretation. The Panel concluded that the term ‘restriction’ should not be interpreted narrowly. However, no evidence of discrimination was found in this case.
29 In the aforementioned case, the Body also ruled that the chapeau of Art. XX GATT’s requirements could not be subject to the same burden of proof as an alleged violation of GATT provisions, for example, Art. III. The analysis should focus on ‘disguised’ rather than on ‘restriction’ because this is required to examine the compatibility of measures with Art. XX GATT. Pursuant to Art. 31 Vienna Convention on the Law of Treaties (1969), the term ‘disguise’ signifies intent on the part of policymakers. The Panel stated that disguising trade barriers by false recourse to Art. XX (b) GATT would constitute a violation. However, ascertaining a measure’s real aims is difficult. A previous decision by the Appellate Body had stated that protectionism often resulted from the regulation as a whole.
30 Therefore, the Panel examined Canada’s allegations regarding the Decree’s favourable treatment of French Chrysotile-substitute producers. Since the measure did not discriminate according to the chapeau (see para. 28 above), analysing whether this constituted a disguised trade restriction was unnecessary. The Panel was also unable to find evidence of protectionism resulting from the Decree’s structure. The same applied to alleged benefits for French Chrysotile-substitute producers as a result of the import ban. This meant that the Decree complied with Art. XX GATT’s chapeau.
4. Non-Violation Complaint
32 The Panel rejected non-compliance with Art. XXIII:1 (b) GATT, as Canada did not show how France should have refrained from restricting the use of asbestos, despite the fact that this was recommended internationally. Furthermore, States of a similar level of development as France had already banned asbestos since the 1994 Uruguay Round.
5. Overview of the Panel Report
33 The Panel found that:
• the ‘prohibition’ part of the Decree does not fall within the scope of the TBT;
• asbestos-cement products and fibro-cement products are like products according to Art. III:4 GATT; therefore, the Decree violates this Article;
• but the Decree and its application are justified by Art. XX (b) GATT.
E. The Appellate Body’s Decision
34 In its appeal Canada first demanded the withdrawal of the Panel’s conclusion that the part of the Decree concerning the ban of asbestos products was not a technical regulation under the TBT, as opposed to the part containing the exceptions. Instead, the Decree should be considered as a whole, making it incompatible with Art. 2.1, 2.2, 2.4, and 2.8 TBT.
35 Secondly, Canada disagreed with the conclusion that the Decree was necessary to protect life and human health according to Art. XX (b) GATT. The Panel’s findings violated its obligation to guarantee an objective assessment pursuant to Art. 11 DSU. Canada insisted that using asbestos-containing cement did not carry health risks and that less invasive alternatives were available to policymakers. These included controlled use and a ban on products for which this was unfeasible. The Panel’s assessment was based solely on the experts they consulted. However, Canada stated that these experts were not adequately experienced and had not taken Canada’s studies into account properly.
36 The EC joined the case as appellant and demanded that the Panel reverse its finding that Chrysotile and PCG and fibres encased in cement were like products pursuant to Art. III:4 GATT. The Panel was wrong to assume that health risks were irrelevant in the assessment of product likeness according to Art. III:4 GATT and should only be considered when checking for compatibility with Art. XX (b) GATT. Furthermore, the Panel’s argument that additional criteria were unnecessary was unconvincing.
1. Applicability of the TBT
37 The Appellate Body first analysed whether the TBT was applicable to the part of the Decree containing the import ban (Art. 1). This marked the first time that the Body performed an in-depth analysis of the TBT.
38 The Appellate Body stated that the legal nature of the measure could only be determined if it was analysed as a whole. This is because the ban in Art. 1 is relativized by the exceptions in Art. 2 of the Decree. Analysing each part individually would not do justice to the measure’s complexity. The Body thus nullified the separate consideration of the Decree’s ban and exceptions.
39 The Body then examined whether the Decree fell under the definitions in Annex 1 No. 2 TBT. This would be the case if the regulation defined the mandatory characteristics of a product or its manufacturing processes and administrative provisions. These characteristics could be defined positively or negatively, the latter meaning that the products in question were prohibited from exhibiting certain properties. The regulation does not have to refer to products explicitly; they need only be identifiable.
40 The ban in Art. 1 of the Decree stipulated negatively that products were prohibited from containing asbestos. The products to which this regulation applied were not explicitly mentioned in the Decree but could be determined by examining whether they contained asbestos. Compliance is mandatory, as shown by the penalties for non-compliance in Art. 5 of the Decree. The exceptions to the ban contained in Arts 2, 3, and 4 allowed the use of an exhaustive list of asbestos-containing products. These exceptions specify certain characteristics including the administrative provisions to be applied. The Decree as a whole therefore constitutes a technical regulation according to the TBT. The Appellate Body thus nullified the Panel’s assessment that the part of the Decree containing the import ban did not fall under the TBT.
41 The Body then examined whether it could assess Canada’s allegations of violations of the TBT. To facilitate a swift resolution pursuant to Art. 3.3 DSU and since it could not remand a case to the Panel, the Body had previously conducted its own legal analyses. This examination by the Appellate Body was, however, subject to certain restrictions. Firstly, fact finding and the indisputable facts of the Panel’s report should suffice for the Body’s decision making since re-examination only extends to the legal aspects of the Panel’s decision (Art. 17.6 DSU). Secondly, the determinations under re-examination must be closely and logically related to those examined by the Panel. In this case there was no connection to the GATT since the TBT was more specific and contained additional relevant provisions. Furthermore, neither the similarly worded Agreement on technical trade barriers of the Tokyo Round nor the TBT were part of preceding case law.
42 Finally, the Appellate Body could not establish a credible basis for re-examination of the Decree’s compatibility with Art. 2 TBT, as Canada’s claims lacked evidence.
2. Compatibility with the GATT
(a) Violation of Art. III:4 GATT
43 The Appellate Body’s decision stated that product likeness pursuant to Art. III GATT should be interpreted broadly. The four criteria inferred from the Working Party Report on Border Tax Adjustments were merely indicators and not an exhaustive list. The Body disagreed with the Panel’s assessment, that health risks should not be part of an examination of product likeness. An examination of their physical characteristics should also include their toxicity. This should not be ignored until the examination of Art. XX GATT. However, in this case the products did not prove to be alike.
44 However, health risks were not independent criteria; rather they should be considered as part of a product’s physical characteristics. The properties of asbestos made it a carcinogen, while PCG was not unhealthy—or at least significantly less so. The carcinogenic nature of Chrysotile was its defining physical property. This assessment by the Appellate Body rejected the Panel’s finding that accounting for health risks when analysing Art. III:4 GATT reduced Art. XX (b) GATT’s significance. While this could lead to the Article’s reduced application, it did not render it moot. The Panel had not recognized the differences between the physical nature of Chrysotile and PCG and their tariff classification. Furthermore, it had not considered consumer behaviour properly, which also took different health risks into account. This fact was also considered by manufacturers.
45 The Appellate Body thus nullified the Panel’s finding that asbestos and its substitutes were like products. It also reversed the Panel’s finding that cement products containing Chrysotile and PCG were alike since the only difference was the fact that they were encased in cement.
46 The Body then examined the products’ likeness pursuant to Art. III:4 GATT. It concluded that it was not able to rule on the matter as Canada had not provided sufficient evidence for its rejection of the assumption that both fibres were not like products as their physical characteristics differed. This also applied to Chrysotile- and PCG-containing cement products. The Appellate Body was therefore unable to confirm a violation of Art. III:4 GATT.
(b) Application of Art. XX (b) GATT
(i) Presence of a Health Risk
47 The Body also re-examined the Panel’s assessment, that the carcinogenic nature of cement products containing Chrysotile constituted a health risk. In Canada’s view, there was insufficient proof for this conclusion. The Appellate Body first highlighted the Panel’s broad margin of discretion. The Body is only permitted to re-examine the Panel’s choice and weighting of evidence if it exceeded the bounds of its discretion. The Body found no such evidence. All experts questioned in the course of the fact-finding process confirmed the health risks of Chrysotile-containing cement, acknowledged since 1977 by international organizations such as the WHO. The Appellate Body therefore confirmed the Panel’s assessment that the Decree fell within the scope of Art. XX (b) GATT.
(ii) Necessity of the National Measure
48 Regarding the necessity according to Art. XX (b) GATT, the Appellate Body stated that WTO Members have the undisputed right to choose the level of health protection that they consider to be appropriate. The French ban on imports of asbestos with limited exceptions was designed to minimize the health risks associated with asbestos. In the Body’s view, it was irrelevant that the use of PCG also carried health risks, as scientific advisors to the Panel had stated that these risks were less severe than those associated with the use of Chrysotile. A Member State was allowed to halt the spread of a risky product in favour of a less risky product.
49 It should, however, be re-examined, whether controlled use of asbestos constitutes a feasible alternative. Canada argued that an alternative was feasible if its implementation was impossible. However, the Appellate Body stated that additional aspects needed to be taken into account when assessing a measure’s availability. The Body had ruled in Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef that the outcome of the assessment should depend on the suitability of alternatives for achieving specified aims and on the importance of the common interest, which the State sought to protect. The more important the common value pursued, the easier it would be to accept as necessary measures designed to achieve these aims. The French aim of protecting human life and health by eliminating or reducing the well-known and life-threatening effects of asbestos was in the common interest and therefore of vital importance. According to the Body, alternatives with less impact on trade would not achieve the same end.
50 The Body stated that France could not be expected to employ different measures which would not reduce the health risk of asbestos to the same extent. Controlled use of asbestos-containing cement by the construction industry and DIY enthusiasts was not realistic or effective since inhaling even small doses of asbestos was toxic. Therefore, controlled use would not guarantee the desired level of protection and was not a viable alternative to the ban. The Appellate Body therefore upheld the Panel’s finding that the Decree was necessary to protect human life or health according to Art. XX (b) GATT.
3. Objective Assessment as Required by Art. 11 DSU
51 Canada also asserted that the Panel had failed to assess the matter objectively as required by Art. 11 DSU. The Panel did not take a balanced approach when considering the scientific evidence available to it. In effect, this challenged the Panel’s discretion in its weighting of evidence.
52 The Appellate Body had already found that the Panel had not exceeded its discretion when weighting the case evidence. Furthermore, health officials of WTO Members were not compelled to follow majority scientific opinion but could also rely on divergent opinions of other qualified and respected individuals. The Body had previously voiced this opinion in EC – Measures Concerning Meat and Meat Products (EC-Hormones Case).
53 Regarding Canada’s assertion that the experts consulted by the Panel did not have the necessary expertise to advise on the controlled use of asbestos, the Appellate Body stated that the Panel consistently pointed out that it planned to consult these experts on the effectiveness of controlled use. Furthermore, the experts consulted had been subject to a rigorous selection procedure. The Panel was therefore right to assume that the experts it consulted would have the knowledge required to assist it in its fact-finding process. The Body concluded that Art. 11 DSU had not been violated.
4. Non-Violation Complaint
54 Regarding Art. XXIII:1 (b) GATT, the Body upheld the Panel’s finding that the Decree may give rise to a non-violation complaint.
5. Conclusion of the Appellate Body
55 The Body’s report did not recommend, pursuant to Art. 19.1 DSU, that the DSB request that France change its ban, as Canada had not shown that the Decree was incompatible with WTO regulations.
F. Case Assessment
56 The Appellate Body’s ruling is important for interpreting and defining product likeness according to Art. III GATT. The Body’s conclusion regarding the inclusion of harmful or carcinogenic properties in the overall characteristics of a product that define its competitiveness is of particular significance. These harmful characteristics distinguish it from products whose use does not entail the same health risks. These products are not alike and must not be treated the same under WTO regulations. This conclusion has a significant effect on the application of WTO rules and constitutes a substantial development in the interpretation of Art. III GATT. It is also consistent with consumer behaviour as their preferences increasingly include products’ health aspects and the products examined in this case would not be considered alike.
57 Finally, this was the first occasion on which both WTO bodies ruled that a national measure designed to protect human health was justified under Art. XX (b) GATT.
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