University of Hamburg & FINEC Master-Program: International Business Administration

EC - Asbestos
Anna Dyakova Gaukhar Dzhymagalieva Olga Nikiforova
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Course: International Economic Law Lecturer: Prof. Dr. Wolfgang Voegeli

Contents
1. 2. 3. 4. 5. 6. 7. 8. Actors and the conflict Economic importance Legal problem Problem treatment by Panel Problem treatment by Appellate Body Differing views (parties, Panel, Appellate Body) Outcome Consequences for the ability of a Member State to regulate

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Definition What is Asbestos?

Widely used, mineral based material Resistant to heat & corrosive chemicals Causes serious health hazard

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Types

(93% of commercial use)

(7% of commercial use)

Chrysotile

Actinolite, Amosite, Anthophyllite, Crocidolite, Richterite, Tremolite

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Uses of Asbestos
Pipe insulation Reinforcement of materials Fireproofing Acoustic and decorative plaster Textiles

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Asbestos-related diseases Catastrophic health effects: Asbestosis Mesothelioma Lung Cancer Other cancers In 20 years 10.000 people will die (UK research)
Use has greatly declined since the late 1970s
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Actors and conflict

Complainant Respondent

Canada

European Communities

Third Parties Brazil Zimbabwe United States

http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds135_e.htm

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DS Mechanism Canada Panel EC

AB

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Agreements and timeline

Agreements cited Timeline
Establishment of the Panel Body
25 November 1998

1. Technical Barriers to Trade (TBT): Art. 2.2 2. GATT 1994: Art. III, XI, XXIII, XXIII:1(b)

Circulation of the Panel Body report Circulation of the Appelate Body report

18 September 2000

12 March 2001

Adoption

5 March 2001

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http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds135_e.htm

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onflict
1. French Dcret 96-1133 (entered into force on 1st January 1997)
prohibition of manufacturing, processing, sale and import of all varieties of asbestos fibres (even though it is a component of any product) exceptions 2. Canada claims WTO 3. EC WTO 4. Panel Body 5. Appelate Body
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French Dcret Prohibition Exceptions

Claims by Canada
chrysotile asbestos safe (= still allowed in France), if properly controlled no ban completely French ban damaged its export trade in chrysotile asbestos (France = protectionist, permitted itself controlled use of domestically-produced asbestos for certain purposes). Art.2 Decree

Decree is a technical regulation obstacle to international trade incompatible () with Art.2.2 of TBT Agr.

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Claims by Canada
Decree violated the principle of non-discrimination (the national treatment provision Art. III, GATT 1994), Decree was contrary to the GATT prohibition on quantitative import restrictions. Art. XI GATT 1994 (general illimination of quantitative restrictions) The French ban nullified or decreased comparative advantages of Canada (Art. XXIII:1(b) of the GATT).

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Claims by EC
Decree is not covered by the TBT Agr. and it complies with the relevant provisions of that Agr. Decree does not establish less favourable treatment for imported products than for like domestic products within the Art. III:4 GATT 1994 or Decree is necessary to protect human health within the Art. XX(b) GATT 1994 Art. XXIII:1(b) of the GATT 1994 does not apply

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Economic importance
1. For Canada: trade issue

2. For the WTO: debate on democracy and legitimacy in the WTO system
Before considering the substantive issues with respect to human health and safety raised by the Appellate Body decision in EC Asbestos, we first consider a preliminary procedural issue which goes to the heart of the emerging debate on democracy and legitimacy in the WTO trading system. This procedural issue is especially acute in the WTO dispute settlement system, where only states are permitted to bring complaints[28] and there is no procedure for the submission of amicus curiae briefs that might be capable of injecting a broader range of social issues into the multilateral trading system.
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The only asbestos mines Canada, Quebec. Quebec 5th largest producer in the world in 2008, behind Russia, China, Kazakhstan, and Brazil Quebec exports 95% of its chrysotile production, mostly to Asian and other poor countries.

French ban damaged its export trade in chrysotile asbestos (France = protectionist, permitted itself controlled use of domesticallyproduced asbestos for certain purposes).

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Economic importance
Introduction of many important refinements in the interpretation and application of GATT
WTO law Civil society
non-protectionist domestic regulations for important policy purposes

External legitimacy

Internal legitimacy

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Amicus Curiae

Panel
amicus curiae briefs

AB

Non-WTO members
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Likeness issue
Art III "National Treatment Obligations, GATT 1994 concerns only internal (not border) measures; prohibits discrimination between domestic and like imported products; (internal taxes and other internal charges, and laws, regulations etc) prevents protection to domestic production Art lll: 2 - internal taxation, GATT 1994 ("like products" (1) + "directly competitive or substitutable products" (2) Atr lll: 4 - internal laws and regulations, GATT 1994 (French Decree N 96-1133 in our case)

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Likeness issue
Art lll: 4 "Three-Tier Test, GATT 1994 1. whether the measure at issue is a "law, regulation or requirement affecting their internal sale, offering for sale, purchase, transformation, distribution or use"; 2. whether the imported and domestic products at issue are "like products"; 3. whether the imported products are accorded "less favourable" treatment than that accorded to like domestic products.

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Like product" Concept

Found in numerous articles of the GATT 1994 Definition (is not defined in the GATT 1994) Meaning and criteria

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Differences in definition of likeness

Physical characteristics Commercial competitiveness Substitutability Functional likeness

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Criteria of likeness

Products end-uses in a given market Consumers tastes and habits, which Change from coutry to country The products properties, nature and quality

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Panel & AB treatment

Panel

TBT

Reversed the Panels finding:

AB

1. Prohibition part of the Decree does not fall within the scope of the TBT Agr.; 2. Exceptions part of the Decree does fall within the scope of the TBT Agr. (was a "technical regulation ) 3. BUT! No claim concerning the compatibility of exceptions part with the TBT Agr. => no conclusion; Decree was partly consistent with the TBT Agreement

1. Measure examination as a whole (prohibitive + permissive parts) 2. Integrated whole was a "technical regulation" (Annex 1.1 TBT Agreement) - characteristics - compliance was mandatory 3. Declined to complete the analysis (no factual basis) 4. TBT Agreement is a specialized legal regime Decree was inconsistent with the TBT Agreement

Panel & AB treatment

Panel

Art. III:4, GATT 1994

Reversed the Panels finding:

AB

1. Health risk is excluded 2. Chrysotile asbestos fibres and fibres substituted are like products 3. Asbestos-cement products and fibro-cement products are like products 4. With respect to the products found to be like, the Decree violates Article III:4 of the GATT 1994
Decree was inconsistent with Art. III:4, GATT

1. Carcinogenic nature (health risks) was a significant factor 2. White asbestos was not a competitor to PCG fibres (polyvinyl alcohol, cellulose and glass)

Decree was consistent with Art. III:4, GATT

Panel & AB treatment

Panel

Art. III:4, GATT 1994

Reversed the Panels finding:

AB

Canada has not satisfied the existence of like products Variable meaning of like products (failure of the dictionary) White asbestos is not like substitute fibres, namely (PCG fibres)

Measure was consistent with Art. III:4, GATT

Panel & AB treatment

Panel

Art. III:4, GATT 1994

AB

Framework for analyzing likeness

Properties, nature + health risks and quality of the products Consumers tastes and habits End-uses of the products Tariff classification
costs

different

different

assessment of all the evidence

Measure was consistent with Art. III:4, GATT

Panel & AB treatment

Panel

Art. XX(b), GATT 1994

AB

French Decree is necessary to protect human life or health

French Decree is necessary to protect human life or health WTO Members have the right to set the level of protection necessary to protect the health against an identified risk Controlled use was not a reasonably available alternative Measure satisfied the conditions of the Art. XX chapeau (unjustifiable discrimination, nor restriction on international trade)

Measure was justified as an exception under Art. XX(b)

Measure was justified as an exception under Art. XX(b)

Panel & AB treatment

Panel

Art.XXIII:1(b), GATT 1994

AB

Canada had failed to substantiate its complaint was left intact Canada has not established that it suffered non-violation nullification or impairment of a benefit within the meaning of Article XXIII:1(b) of the GATT 1994.

WTO Members may seek a mutually satisfactory adjustment when a measure nullifies or impairs a GATT benefit without actually amounting to a GATT violation Complaints could be entertained even where there had been no violation or a prima facie violation had been justified under a GATT exception Claims in the absence of a GATT violation should remain an exceptional remedy Measure was justified Canadas secondXXIII: 1(b) under Art. Pyrrhic victory

Panel & AB treatment

Panel
French Decree is consistent Ruling with the EC obligations under the WTO

AB
French Decree is consistent Ruling with the EC obligations under the WTO

The provisions of the Decree which violate Article III:4 of the GATT 1994 (less favourable conditions) are justified under Article XX(b) (health protection)

Ruling of Panel and AB

EC-Asbestos: measures are necessary to protect human, animal, or plant life (Art XX (b) - exceptions, GATT)

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Outcome
Ban on asbestos products is justified
WTO agreements do give priority to health and safety over trade
First health-based trade ban Great influence on the reasoning and rulings of later panels Shows limits of the WTOs dispute resolution system This ruling was considered a victory for environmentalists
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Consequences
1. Trade liberalisation vs. the civil society 2. Human interests such as health protection may be taken into account 3. Health risk may constitute a legitimate factor in determining likeness 4. Clear limits on the ability of members to use product bans as a means of protecting the health of their citizens 5. May make it difficult to justify zero-risk-tolerance policies toward products whose hazardous nature is less well understood
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Questions for revision

1. What type of measures does Art lll: 4 GATT 1994 apply? 2. What is the concept of "like products"? 3. What criteria need be taken into consideration in determining whether products are "like" under Art lll: 4 ? a) Why a specific definition of 'likeness' is crucial for a governments ability to freely regulate? b) How likeness is interpreted in this case? c) What the potential of the four tests are which the Appellate Body applies? d) Hence, which type of restrictions for international trade to expect?

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Sources
1. EC - Asbestos (Panel Body Report WT/DS135/R, Appelate Body Report WT/DS135/AB/R) 2. Unit VI. National Treatment http://centers.law.nyu.edu/jeanmonnet/courses/wto/docs/Unit_VI._National_Treatment.pdf 3. United Nations Conference on Trade and Development. Dispute Settlement. World Trade Organisation. 3.5 GATT 1994. United Nations. New York and Geneva, 2003. 4. "Like Product": The Differencies in Meaning in GATT Articles I and III by Robert E. Hudec, THOMAS COTTIER & PETROS MAVROIDID, eds., REGULATORY BARRIERS AND THE PRINCIPLE OF NON-DISCRIMINATION IN WORLD TRADE LAW (University of Michigan Press 2000) pages 101-123. Copyright c University of Michigan Press. 5. GATT 1994 6. Technical Barriers to Trade (TBT) THE ASBESTOS CASE AND DISPUTE SETTLEMENT IN THE WORLD TRADE ORGANIZATION: THE UNEASY RELATIONSHIP BETWEEN PANELS AND THE APPELLATE BODY Sydney M. Cone, III*

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Sources
7. New York Law School. Public Law and Legal Theory Research Paper Series No.02-06 June 2002 "The Asbestos Case and Dispute Settlement in the World Trade Organization: The Uneasy Relationship Between Panels and the Appellate Body" by Sydney M.Cone,III. Michigan Journal of International Law, Vol23, No.1, Fall 2001. 8. Risk Analysis, Vol. 24, No. 2, 2004 The WHO/WTO Study on Trade and Public Health: A Critical Assessment Robert Howse 9. The WTO Impact on Internal RegulationsA Case Study of the CanadaEC Asbestos Dispute ROBERT HOWSE and ELISABETH TUERK* RECIEL 10 (3) 2001. ISSN 0962 8797 10. Case Notes WORLD TRADE ORGANIZATION, EUROPEAN COMMUNITIES MEASURES AFFECTING ASBESTOS AND ASBESTOS-CONTAINING PRODUCTS, REPORT OF THE APPELLATE BODY Risk Analysis, Vol. 24, No. 2, 2004 11. The Asbestos Case: A Comment on the Appointment and Use of Nonpartisan Experts in World Trade Organization Dispute Resolution Involving Health Risk, Russellyn S. Carruth1 and Bernard D. Goldstein2 12.The Case for a Global Ban on Asbestos, Joseph LaDou,1 Barry Castleman,2 Arthur Frank

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