Tamara Mostagousul Haque Issue

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The issue is whether there is a breach of European Unions (EU) WTO obligations if it banned imports of generic modified Santa Monico Grapevine (SMV) from United States (US). US is more likely to be complainant and Germany to be defendant. World Trade Organization (WTO) law can be used only if both parties are WTO members. The US and EU are both WTO members since 1 January 19951 and it is assumed in this case that both parties are WTO members. Santa Monico (SM) is assumed to be the only company that offers SMV in this case.

General Agreement on Tariffs and Trade (GATT) Article I US may file a complaint based on most-favoured-nation2 obligation saying EU does not trade with US as favourable as other WTO member states. To be able to prove EU breached its Article I obligation, US will first has to prove SMV is like a product of other grapevines produced locally and imported by EU. EU may argue that genetically modified (GM) grapevine is different from normal grapevine as it is poisonous to certain insects. The US may raise the point that SMV and other grapevines are most likely to be perceived by end users as identical products as they are substitutable by each other. Thus, the usage of these products is also very similar. SMV and other grapevines are also under the same category of international tariff classification. These evidences have proved SMV is like product of other grapevines. EU can defend itself by arguing that it bans all similar products that bring harm to its countries. Therefore, EU is not only targeting the US but all similar products from member countries. The US is more likely to fail in using this article to complaint EU. However, US may succeed if they found out Germany or EU does not ban similar products from other WTO member countries.

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World Trade Organisation (WTO) http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm Article I of GATT 1947

Tamara Mostagousul Haque Article III

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It is assumed that all EU member countries banned this product based on the statement given (i.e. However Germany has...). National Treatment Obligation3 is not applicable as the measure is a border measure rather than internal measure. However, Article III may apply if Germany is the only EU member country that banned the import of this product. As Germany is a part of EU, the ban becomes an internal measure. In order to prove EU breach its WTO obligations, US will need to prove Germany banned SMV in order to protect sale of domestic produced grapevine4. Article III(2) is not applicable due to the measure that it is not taxes or other charges5. US will then need to prove SMV is treated less-favourably by asking if not question. If not because of the measure, will SMV selling better in EU? The answer is yes and therefore SMV is treated less-favourably. In conclusion, a non-fiscal measure6 is treated SMV less-favourable than other like products in EU. Therefore, Article III(1) and (4) applies and EU breach its National Treatment Obligation if only Germany ban SMV.

EU can defend itself by saying that Article I and III do not apply due to the measure that it is targeting the production process but not the product. However, this measure is targeting both the effect of the product and production process: beef hormone7 case. Therefore, Article I and III applies.

Article XI The US can also argue EU breached its WTO obligations by establishing qualitative restrictions on trade 8 . Measure used by EU is other than duties, taxes, and any other charge which means EU breached this obligation: Shrimp Turtle Case 9 . However, EU can defend itself by raising Article XI(2c)10 saying Article XI(1) does not apply to agriculture products. As the measure is not controlling the quantities of grapevine and SMV is not an animal product, Article XI(2c) does not apply. Even if
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Article III of GATT 1947 Article III(1) of GATT 1947 5 Article III(2) of GATT 1947 6 Article III(4) of GATT 1947 7 EC-Beef Hormone Products Case (1998) [M1.21] 8 Article XI(1) of GATT 1947 9 Shrimp Turtle Case (1998) [M1.43] 10 Article XI(2)(c) of GATT 1947

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the Panel11 agreed that the measure is only targeting production process, Article XI will still apply: Tuna Dolphin Case12.

Article XX EU can argue that this measure is not applied in a manner to restrict trade13 but to protect Germany unique fungus, EU biodiversity balance, and US biodiversity balance. In order to apply this exception, EU must prove to fulfil all three criteria under Article XX. Necessary to is defined as a necessary step in Article XX while relating to as the primary aim of a measure: Tuna Dolphin Case. It is assumed that this Panel allows application of Article XX in protecting other countries natural resources although evidence showed support and oppose: Shrimp Turtle & Tuna Dolphin Case. Reasons raised by EU successfully fulfilled the first criteria of Article XX. Subsection (b) and (g) apply as these reasons fall under protecting animal and plant life and conservation of natural resources. Countries biodiversity balance and fungus can consider as natural resources as referring to Shrimp Turtle Case: Turtle is considered as natural resources. Under second criteria, sub-section (b) does not apply due to the measures that it is not a necessary step to protect EU and US animal and plant life including fungus. US and EU biodiversity balance can be maintained through other solutions. Germany fungus can also be protected through setting up special area for SMV to buffer its effect which is commonly done by governments. Conversely, sub-section (g) will apply if EUs primary aim is to protect natural resources. Germanys primary aim is to protect its unique fungus but not biodiversity in any country. As conclusion, sub-section (g) only applies to the purpose of protecting Germany fungus but not other reasons. EU will also have to prove the measure is not an arbitrary, discriminatory, or disguised of trade measurement to fulfil the requirement of Chapeau. The measure is not an arbitrary discrimination as EU imposed it due to the possible harm to Germany unique fungus. The measure is also not a discriminatory measure as mentioned in Article I. However the measure falls under disguised restriction on trade because EU imposed this measure to protect its trade. Protecting fungus is justified as an excuse to eliminate competition with SMV base on the statement ...imposed a prohibition because the vine poses a threat to its wine industry. In a nut shell, Article XX cannot apply as EU does not fulfil all three criteria of Article XX.

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Article 6 of GATT 1947 Tuna Dolphin Case of GATT 1947 13 Article XX of GATT 1947

Tamara Mostagousul Haque SPS Agreement

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Base on the analysis above, SPS agreement is not applicable in this situation as the measure is not necessary to protect human, animal or plant life. However if Panel decided that the measure is necessary to protect fungus and Article XX (b) applies, US will try to use Sanitary and Phytosanitary (SPS) agreement to flesh out Article XX (b). US will complaint that EU does not fulfil its obligation in SPS agreement. EU can defend itself by saying the measure is a SPS measure and is acceptable under its obligation. For EU to prove this, it must first prove that the measure is consistent with SPS Agreement14. As this measure is applied to ban importation of food to protect EUs plant life and health from pests15, EU does not breach Article 2(1). Secondly, EU has to prove the measure is necessary to protect fungus life and prove that it is base on scientific principles along with maintenance with sufficient scientific justification16. Thirdly, EU has to justified the measure is not arbitrary, unjustified, or disguised restriction on trade. As mentioned above, EUs measure is a disguised restriction on trade. Other than that, US will also argue the measure to protect EUs plant life is not base on international standards, guidelines, and recommendations17 in addition do not comply with the SPS obligation18. EU can still apply Article 3.3 19 and Article 5 20 to argue that it is applying a higher standard of precaution than the international standards. In order to impose a higher standard, EU will need to assess the risk of importing SMV base on international organisations risk assessment techniques21. This standard must also base on available scientific evidence, relevant testing methods, prevalence of specific diseases, relevant ecological and environmental conditions, and other possible treatments (for example quarantine)22. EU decided to impose this standard after taking into account of likelihood of pest, economic factors, potential damage, and cost of control23. If the unique fungus in Germany has been destroyed, harm created to Germany environment and economy is irreversible. Lastly, EU will also have to try to minimise the negative impact on trade24.

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Article 2(1) of SPS Agreement Annex A(1) of SPS Agreement 16 Article 2(2) of SPS Agreement 17 Article 3(1) of SPS Agreement, Article 3(4) of SPS Agreement 18 Article 3(2) of SPS Agreement 19 Article 3(3) of SPS Agreement 20 Article 5 of SPS Agreement 21 Article 5(1) of SPS Agreement 22 Article 5(2) of SPS Agreement 23 Article 5(3) of SPS Agreement 24 Article 5(4) of SPS Agreement

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Other than this, EU can also defend itself by using Article 5.7 25 to argue that the measure is a precautionary principle (PP) to protect it countries. EU can only use PP when importing SMV may bring irreversible harm to EU. In addition, EU has to prove the situation fulfils four elements under Article 5.7. Current situation in Germany suggest that the scientific information is unavailable to prove SMV is harmful to its unique fungus and it is base on pertinent available information. EU will also have to ensure it is undergoing certain test on SMV and reviewed in reasonable period. EU will have to fulfil all requirements of imposing higher standards and PP in order to justify the measure. However, the measure imposed by EU member countries is a disguised restriction on trade and EU will not be able to defend itself even if SPS agreement applies to this case.

Sanction EU is more likely to loss in this dispute settlement. EU can also appeal to Appellate Body26 and adopt the decision of Appellate Body 27 . EU can also request to establish another Panel is there is a disagreement on implementation28. Otherwise, EU can also try to block the adoption of report by getting a consensus blocking from all WTO member countries29. Other than the above, EU will have to accept the decision of the first Panel and review the measure30. If EU does not implement the decision of Panel, US is authorised to have retaliation activities and policies31.

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Article 5(7) of SPS Agreement Article 16 of GATT 1947 27 Article 17 of GATT 1947 28 Article 21(5) of GATT 1947 29 Article 6(1) of GATT 1947, Article 16(4) of GATT 1947, Article 17(14) of GATT 1947 30 Article 21 of GATT 1947 31 Article 22 of GATT 1947