The February 2015 discovery of a single cow with mad cow disease (BSE) in Alberta, the first Canadian case since 2011, and the decision by some countries to close their borders to Canadian beef, raises the question of whether WTO Members only adopt sanitary and phytosanitary measures (SPS measures) to protect themselves from imported diseases or whether these measures are sometimes used to protect their domestic commercial interests instead.
WTO members have the right to take action to prevent the transmission of disease through imported products. GATT 1994 Article XX(b) allows Members to take action necessary to protect human, animal or plant life or health, but this is an exception to GATT rules that may only be applied to the extent necessary to achieve the legitimate objective of protecting human, animal or plant life or health. In addition, these measures may not be applied in a manner that would constitute arbitrary or unjustifiable discrimination between countries where the same conditions prevail or raise a disguised restriction on international trade. Thus, the purpose of Article XX(b) is to allow Members to protect human, animal or plant life or health without imposing unnecessary restrictions on trade.
The WTO Agreement on the Application of Sanitary and Phytosanitary Measures (the SPS Agreement) expanded on GATT 1994 Article XX(b). SPS Article 2provides that WTO Members have the right to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health, but again only to the extent necessary to protect human, animal or plant life or health and not in a manner that discriminates between countries or raises disguised restrictions on international trade. In addition, SPS Article 2(2) requires that the SPS measure not be maintained without sufficient scientific evidence, except as provided for in SPS Article 5(7), which imports the precautionary principle into the Agreement by allowing members to take action on the basis of available pertinent information when scientific evidence is not available. SPS Article 5 also requires that Members ensure that their SPS measures are based on an assessment of the risks to human, animal or plant life or health. Thus, the SPS Agreement confirmed the requirements of GATT 1994 Article XX(b) and clarified them by specifically referring to requirements for scientific evidence and a risk analysis. Although the SPS Agreement is an improvement over GATT 1994 Article XX(b), there is still a potential for SPS measures to be used to protect commercial interests.
In this case, one Alberta cow was found to be infected with BSE in February 2015. This was the 19th case of BSE found in Canada since 2003 and the first case found since 2011. The cow at issue was identified and disposed of before it could be processed and enter the food chain. This case was discovered and quickly addressed because the procedures put in place by Canadian authorities after the 2003 BSE crisis worked. The Canada Food Inspection Agency (CFIA) is continuing its investigation, but it appears that this single case has been resolved, even if not yet fully explained.
The United States, Canada’s largest beef export market, and Japan have not closed their borders to Canadian beef, which indicates their confidence in Canada’s regulatory system. However, South Korea, China, Peru, Belarus, Taiwan and Indonesia, representing approximately $100 million in annual sales, have closed their markets and there is no indication of when they will re-open.
As noted above, WTO Members have the right to prohibit imports of Canadian beef on the basis that such imports would pose a human or animal health risk, but that right is subject to the limitations imposed by GATT Article XX(b) and the provisions of the SPS Agreement. The measures may only be imposed to the extent necessary to protect human or animal health, taking into account scientific evidence and a risk analysis, and may not be applied so as to protect domestic production from Canadian competition. The underlying problem that the WTO drafters sought to address in the SPS Agreement is that the line between necessary SPS measures and unnecessary trade barriers is not clear and, in many cases, can be easily crossed. The reason why Member States may cross this line should be obvious. The existence of a Free Trade Agreement (FTA) between two countries does not change the competitive relationship between industries in those countries. Domestic industries that could not compete with imported products prior to the FTA will likely find it more difficult to compete in the free trade area after the protections that it had previously relied on had been liberalized to increase trade between the parties. Chief among these are tariffs, which are generally reduced, and subsidies, whose use may be restricted. With tariffs and subsidies no longer available to protect domestic producers, some WTO Members may adopt SPS measures in their place. The result is that as tariffs are reduced to zero, there is a tendency for trade barriers move inland and have taken the form of unnecessary SPS measures.
This is not to say that South Korea, China, Peru, Belarus and Indonesia have prohibited imports of Canadian beef for improper reasons, but the longer it takes for these countries to reopen their markets to Canadian beef the more likely this seems. South Korea, for example, closed its border to Canadian beef in 2003 but re-opened its market in 2012 on the basis of a Protocol negotiated with Canada. The Protocol gives South Korea the right to stop customs clearance of Canadian beef if a new case of BSE is discovered, but requires South Korea to re-open its borders after it determines that Canadian beef does not pose a public health hazard. Admittedly, the CFIA has not yet concluded its investigation, but CFIA officials have been in contact with South Korean officials throughout and have confirmed that the cow at issue was destroyed and did not enter the food chain. Consequently, the scientific evidence available should support the position that Canadian beef does not pose a health risk to Korean cattle. On the other hand, Canadian beef exports to South Korea were approximately $26 million per year when trade was cut off in February, which tends to indicate that Canadian beef displaced Korean beef from this portion of the Korean market. In these circumstances, the longer it takes for South Korean officials to make an assessment of the public health risk posed by Canadian beef, the more likely it appears that South Korea prohibited imports of Canadian beef to protect the commercial interests of the South Korean beef industry rather than to protect human or animal health.
GATT 1994 Article XX(b) and the SPS Agreement provide an important means for WTO Members to protect human, animal or plant life or health by allowing them to prohibit imports without violating WTO obligations. However, the potential that WTO Members will use SPS measures to protect commercial interests remains. Therefore, rather than accept SPS measures at face value, WTO Members and their respective industries should carefully scrutinize SPS measures adopted by other Members and take steps to have those measures set aside if they do not meet the strict requirements of GATT 1994 Article XX(b) and the SPS Agreement.
