The roots of this dispute go back into the 1970s, when European consumers became increasingly concerned over the use of growth-promoting hormones in livestock. After suspicion that hormonal irregularities in teenagers had been caused by veal treated with illegal hormones (DES), European consumer organizations called for a boycott of veal.

In 1980, the EC Council of Ministers decided to ban the use of oestrogen, and endorsed a greater harmonization of EC members States’ legislation on veterinary medicines as well as greater control of animal rearing. In 1988, the EC banned the use of six hormones for growth promotion. Included were three natural hormones (oestradiol 17ß, progesterone and testosterone), and three synthetic hormones (trenbolone acetate (TBA), zeranol and melengestrol acetate). The EC also banned imports of meat and meat products unless the exporter could prove that these had not been treated with the banned hormones. The use of the three natural hormones for therapeutic and for herd-management purposes was still authorized.

Disputes under the GATT back to top

In March 1987, the United States raised the issue of the EC ban in the Committee responsible for the Tokyo Round Agreement on Technical Barriers to Trade (“Standards Code”). Bilateral consultations between the United States and the European Communities failed to resolve the dispute. Arguing that the EC ban was not supported by scientific information, the US requested the establishment of a technical experts group to examine the question. This request was denied following the EC response that the use of growth promotants was a process and production method, and as such was not covered by the Standards Code.

In January 1989, the US introduced retaliatory measures in the form of 100% ad valorem duties on a list of products from the EC. The EC consequently asked for a panel, which was blocked by the US. Later in 1989, the EC decided to import some meat certified to have been produced without the use of hormones, and the US withdrew some products from the “retaliation” list.

Disputes under the WTO — the Panel back to top

The United States and Canada both requested the establishment of a panel under the WTO. With the foundation of the WTO, the SPS Agreement had come into force, which provides much more specific rules for sanitary measures like the one under dispute than the old Standards Code. Under the new dispute settlement system of the WTO, no one country could block the establishment of a panel, and in 1996 the US and Canadian panels were established. Once the composition of the US panel had been determined in July 1996, the United States removed its retaliatory measures. The panel members (for both the US and the Canadian case) were Mr. Thomas Cottier (Chairman), a Swiss law professor, Mr. Peter Palecka, a Czech trade diplomat, and Mr. Jun Yokota, a Japanese trade diplomat.

Scientific experts back to top

Both the SPS Agreement and the Dispute Settlement Understanding (DSU) mention the possibility of seeking expert advice in technical cases. Accordingly, the Panel decided to seek advice from six independent experts, including specialists on hormones, veterinary drugs, cancer and on the Codex Alimentarius. The Panel consulted scientific experts chosen in consultation with the parties on the basis of lists of experts provided by Codex, the International Agency for Research on Cancer, and the parties to the dispute.

The Panel, again in consultation with the parties, submitted written questions to each expert. The experts provided their responses, in writing, to those questions they felt qualified to address. The experts also participated in a meeting with the Panel and the parties to discuss their written answers, and to respond to additional questions. A verbatim transcript of this meeting is annexed to the panel report. This procedure for expert advice was also followed in the other two SPS disputes.

Legal issues and findings back to top

Harmonization — Article 3

The Codex Alimentarius Commission had established standards for five of the six hormones in question. Codex found that for the three natural hormones, intake levels did not have to be limited. Codex established safe limits for residues of two of the three synthetic hormones, at levels considered to pose no risk to human health.

According to Article 3.1, Members shall base their measures on international standards. The Panel considered that to be based on an international standard, a measure needed to reflect the same level of protection as the standard. It thus concluded that the ban on imports of hormone-treated meat was not based on the Codex standards, since it achieved a significantly higher level of protection. The Appellate Body decided that “based on” meant that a measure could adopt some, but not necessarily all elements of an international standard. It noted that a Member imposing such a measure does not benefit from the presumption of consistency provided in Article 3.2 for measures which “conform to” international standards.

Under Article 3.3, a Member may establish measures which result in a higher level of protection than that reflected by the international standard if there is a scientific justification, or as a consequence of a Member’s appropriate level of protection. In any case, such a measure has to be consistent with the other conditions of the SPS Agreement, especially as regards scientific assessment of the health risks involved. Thus a measure will only be consistent with Article 3.3 if it meets, inter alia, the requirements of Article 5 regarding risk assessment. Whereas the Panel considered Article 3.3 to be an exception to Article 3.1, the Appellate Body considered Article 3.3 an “autonomous right”. Both the Panel and the Appellate Body found that the EC had violated Article 5 because it had not based its ban on a risk assessment, and had therefore also violated Article 3.

Risk assessment — Articles 5.1 and 5.2

Members have the obligation to base their SPS measures on an appropriate risk assessment. According to the definition in Annex A of the Agreement, in the case of food safety a risk assessment is an evaluation of the potential for adverse effects on human health. The EC had invoked several scientific reports on five of the hormones, and the Panel had accepted that some of these could be considered to be risk assessments. However, none of these studies supported a ban on hormone-treated meat, and the Panel concluded that the EC measure was not based on the scientific evidence submitted.

The Appellate Body confirmed that the EC ban was not based on a risk assessment, and clarified that a rational relationship between the measure and the risk assessment was necessary. With respect to melengestrol acetate (MGA), and to the potential health risks invoked by the EC, the Appellate Body reached the conclusion that no risk assessment had been undertaken.

Consistency — Article 5.5

According to this article, a Member shall avoid arbitrary or unjustifiable distinctions in the levels of protection it applies in different situations if such distinctions result in discrimination or a disguised restriction on international trade. The Panel considered three questions:

are there differences in the levels of protection adopted in different, but comparable situations?
are these differences arbitrary or unjustifiable?
does this result in discrimination or a disguised restriction on trade?

The Panel compared the ban on imports of meat treated with natural or synthetic hormones with the EC tolerance of naturally occurring hormones in untreated meat and other food, such as broccoli or eggs. The Panel found these situations comparable, since they involved the same hormones and therefore the same potential adverse health effects. The levels of protection, however, were different, since in one case there was a ban, while there was no limit on naturally occurring hormones. The Panel found this difference in levels of protection arbitrary or unjustifiable, since the hormones had the same potential carcinogenic effect in both cases, the total residue level of hormones in meat from treated animals fell well within the range of levels found in meat from untreated animals, and the level of endogenous natural hormones in products such as eggs and soya oil was much higher than the level in treated meat. However, the Appellate Body reversed this finding, arguing there was a fundamental difference between added hormones and naturally-occurring hormones in meat or other foods.

Another comparison the Panel made was between the use of hormones for growth promotion purposes, and other veterinary uses for therapeutic or herd management reasons which were allowed in the EC. The Panel noted that often entire herds were treated, for extended periods of time. Since the hormones were the same and the potential adverse health effects of consuming the meat would be the same as in the first comparison, the Panel concluded that it did not need to make a finding on this issue. As the Appellate Body had reversed the Panel’s finding on naturally-occurring hormones, it decided to make a finding on the issue of veterinary uses. It considered that therapeutic uses involved a closer supervision of the correct use of the hormones, and concluded that the differences in the levels of protection were not arbitrary or unjustifiable.

Last, the Panel compared the ban on imports of hormone-treated meat with the use of growth promoters (such as the anti-microbials carbadox and olaquindox) in swine production. Here the Panel found an arbitrary or unjustifiable difference in the levels of protection, since carbadox and olaquindox are known to be carcinogenic, yet the EC allowed their use without setting any maximum residue levels. The Panel reasoned that since this unexplained difference in the levels of protection was quite large, and since this resulted in a ban on imports, there was discrimination or a disguised restriction on trade. There were three additional factors the Panel found to support this finding. First, when the ban on imports was initially introduced, the EC was trying to reduce its beef surpluses by increasing domestic consumption. Second, before the ban on hormone treatment, the percentage of animals treated in Europe was significantly lower than that in Canada and the US. Third, the hormones were used in a sector were the EC was trying to limit surpluses, while carbadox and olaquindox were used in the swine sector, which was free of surpluses. With regard to other growth-promoters, the Appellate Body agreed that the distinction in the levels of protection was arbitrary or unjustifiable, but it did not agree that this resulted in discrimination or a disguised restriction of international trade.

What about precaution?

According to Article 5.7 Members have the right to take provisional measures in cases where relevant scientific evidence is insufficient. Could the EC not have argued that the ban on hormone-treated beef was such a provisional measure? The fact is that the EC did not invoke Article 5.7. It stated explicitly that the import prohibition was not a provisional measure. Instead, the EC invoked the “precautionary principle” as a customary rule of international law or, at least, a general principle of law and argued that Articles 5.1 and 5.2 on risk assessment did not prevent Members from being cautious when setting health standards in the face of conflicting scientific evidence and uncertainty.

The Appellate Body did not take a position on the status of the “precautionary principle” in international law, but it noted that the “precautionary principle” found reflection inter alia in Article 5.7 of the SPS Agreement. The Appellate Body agreed with the finding of the Panel that the “precautionary principle”— to the extent it is not explicitly incorporated in Article 5.7 — does not override the provisions of Article 5.1 and 5.2.

Implementation back to top

When the panel report, as modified by the Appellate Body, had been adopted, the parties could not agree on a “reasonable period of time” to implement. An arbitrator determined that the EC had until 13 May 1999, or 15 months, to implement. The EC then stated that it would not be in a position to comply by May 1999. It had commissioned 17 scientific studies which would take longer than 15 months to conclude. The parties discussed whether possible compensation by the EC or labelling hormone-treated beef could be a solution, but were unable to agree. In the end, the US and Canada requested the right to suspend concessions by raising tariffs on a list of goods from the EC worth US$ 202 million in the US case, and CDN$ 75 million in the Canadian case.

Since the parties could not agree on the amount of suspension of concessions, the EC asked for arbitration. The original Panel evaluated the amount of trade affected annually by the EC ban, and authorized the US to raise 100 percent tariffs on EC products worth US$ 116 million per year. Canada was authorized to suspend concessions with a value of CDN$ 11.3 million per year. As of April 2002, both countries were continuing to apply these tariffs each year, as the EC had not yet brought its measure into conformity with the SPS Agreement.

In January 2005, the European Communities requested the establishment of a panel regarding the United States and Canada's continued suspension of concessions and other obligations in the Hormones case (WT/DS320 and 321). On 22 September 2003, the European Communities adopted a new directive on the hormones at issue and subsequently notified the Dispute Settlement Body that it had fully implemented its recommendations and rulings in the Hormones case. The EC directive provides for a permanent ban on one of the hormones, oestradiol 17ß, and provisional bans on the other five hormones. In this latest dispute, the European Communities questions the right of the United States and Canada to continue suspending concessions in light of its new directive. The Panel is expected to circulate its report in late 2007.

For an update on the state of play of WTO disputes, go to the WTO website at http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm#news.

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