Canada: The WTO Rules on Genetically Modified Organisms

A recent World Trade Organization (WTO) interim ruling on the regulation of genetically modified organisms (GMOs), EC-Measures Affecting the Approval and Marketing of Biotech Products, will be of significant interest to companies operating in the food and agricultural sectors. The ruling arises from a dispute initiated in 2003 by the United States, Canada and Argentina against the European Community (EC) over its treatment of GMOs and products containing GMOs. These countries claimed that the EC approval system delayed the commercialization of GMOs, and that some European countries had effectively banned certain genetically modified crops.

The long-awaited ruling may have very broad implications, and not just for the agri-food sector. It signals a WTO preference for science rather than mere concern as a tool of justification of trade-restrictive measures designed to protect health or the environment. The fact that the Panel did not consider the provisions of the Cartagena Protocol on Biosafety in its analysis also raises far-reaching questions about the interplay between the WTO agreements and other international treaties. As the world’s third largest grower and exporter of GMO crops, Canada no doubt stands to benefit from the Panel’s decision.

The case was considered controversial from the outset. At the heart of the dispute is the right of countries, in light of their international trade obligations, to control the introduction into their markets of GMOs. The United States, Canada and Argentina (the "Complaining Parties") were concerned that the EC’s regulatory system for the approval of GMOs was being used to shut out imports of various GMO crops without any scientific basis. The dispute was viewed by some as a contest between the environmentalists’ "precautionary principle" and the more traditional view that hard scientific support is needed to justify banning a product on the basis of health concerns.

The precautionary principle, manifested in the EC regulatory system for GMOs, provides that the mere possibility of harm to human health or the environment is enough to justify precautionary measures, even in the absence of scientific certainty or probability of harm.

The precautionary principle has been endorsed in several international treaties, including the recently concluded Cartagena Protocol on Biosafety, which specifically deals with "living modified organisms resulting from modern biotechnology". (The EC has ratified the Cartagena Protocol, while the United States has not signed on to the treaty, and Canada and Argentina have not ratified it.)

The Measures in Dispute

The Complaining Parties challenged three EC regulatory measures:

1. an alleged moratorium on GMO approvals,
2. the alleged failure to consider new applications for GMO approvals; and
3. GMO-specific bans or restrictions imposed by several European countries.

The Complaining Parties argued that these measures imposed barriers to trade, in breach of several WTO agreements including the Agreement on Agriculture, the GATT 1994, the Agreement on Technical Barriers to Trade, and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS). In the claims under the SPS Agreement, which deals with food safety and animal and plant health regulations, the measures were challenged as inconsistent with both the science-based requirements of the SPS and its procedural requirements.

The WTO Panel narrowed its ruling to address only the claims brought under the SPS. The Panel also made it clear that it would not examine whether biotech products in general are safe or not, or whether they are "like" their conventional counterparts. The Panel also did not consider whether the EC has the right to require the pre-marketing approval of GMOs, as this was not raised by the Complaining Parties. Because the complaint was made prior to the implementation of the EC’s traceability and labelling requirements for products that contain a minimum threshold amount of GMO content, the Panel also did not consider the WTO-legality of these measures.

Regarding the alleged moratorium on the approval of GMOs, the Panel found that the EC had applied a de facto moratorium between June 1999 and August 2003. As a legal matter, this moratorium was considered to be inconsistent with the EC’s obligation under Annex C(1)(a) of the SPS, which requires parties to complete testing and approval procedures without undue delay. The Complaining Parties had argued that the moratorium was inconsistent with numerous other obligations under the SPS, but the Panel ruled against them on all points except that of "undue delay". Because the moratorium had ended after the establishment of the Panel, with the approval of several GMO products, the Panel did not make any recommendations on this point.

Regarding the complaint that the EC had failed to consider specific GMOs for approval, the Panel ruled that the EC had acted inconsistently with its obligation under Annex C(1)(a) to undertake and complete such procedures without undue delay with respect to numerous GMOs. Under the U.S. complaint, the Panel found undue delay in the EC’s consideration of 21 out of 25 specified GMOs. For Canada, the inconsistent treatment was found for all four GMOs identified. For those products that remained outstanding, the Panel recommended that the EC bring its product-specific measures into conformity with its SPS obligations, that is, to commence and complete the approvals process without undue delay.

Finally, regarding the individual European country bans on GMO products, the Panel ruled that bans were not based on risk assessments as required by Article 5.1 of the SPS Agreement, and were therefore inconsistent with the countries’ WTO obligations. The conclusions reached in this aspect of the decision were the only ones in which the Panel found breaches of substantive, rather than merely procedural, provisions of the SPS Agreement. Significantly, the Panel found that the bans were not consistent with Article 5.7 of the SPS, which permits parties to adopt provisional measures (such as product bans) where there is insufficient scientific evidence to assess the risk of the product. The EC scientific committee and competent national authorities had carried out assessments of each of the products in question, and each was approved as safe. These assessments were deemed to be proper risk assessments as defined in the SPS Agreement. The studies relied upon by the individual countries for their bans were found not to constitute sufficient risk assessments and, because acceptable risk assessments were available, Article 5.7 could not be relied upon.

This in turn led the Panel to conclude that these country bans were also inconsistent with Articles 2.2 and 2.3 of the SPS, which prohibit a party from maintaining a restrictive measure without sufficient scientific evidence to justify it (Article 2.2), and from applying such measures in a way to constitute a disguised restriction on international trade (Article 2.3). The Panel recommended that the individual countries bring their safeguard measures into compliance, and remove the bans on the specified GMO products.

The European Union and the United States have reacted very differently to the ruling. In the United States, the reaction to the ruling was that it was an unequivocal victory, sending a strong signal to other countries that it is WTO-illegal to impose restrictions on the import of GMO products, and that it is a warning that the EC cannot now impose a new de facto ban on GMOs. In Europe, the consensus is that the ruling is primarily of "historical interest", as the de facto moratorium has since been lifted. Since new rules were adopted in 2004, the EC has approved nine GMO products for import and sale to Europe. Also, the ruling does not require the EC to alter its strict system for approving GMOs. The true consequences of the decision fall somewhere in the middle.

While the Panel did not pronounce on the validity of the EC’s regulatory system for GMOs, it did rule that bans on GMO products that are not based on risk assessments, as defined in the SPS, are inconsistent with WTO rules. On the other hand, the Panel did not question the right of individual countries to impose bans if new risk assessments support such measures. Regarding the moratorium on approvals of GMO products, the Panel did find that the 1999-2003 moratorium was inconsistent with the SPS Agreement, insofar as it had the effect of unduly delaying the results of the approvals process. The Panel did not suggest that future moratoria would necessarily also be inconsistent. If additional scientific evidence were brought to light that would justify restrictions, the EC would be permitted to impose them, provided decisions were made without undue delay.

There are two potentially significant implications that arise from this decision. First, the decision may be used as precedent for the proposition that the precautionary principle is not a valid basis for measures relating to human and environmental health. Second, it may now be in doubt whether future WTO Panels have to balance WTO rules with obligations created by other international treaties.

The Panel dismissed the EC’s argument that its regulatory procedures were consistent with the precautionary principle. The EC had argued that there was still scientific uncertainty as to the effects of GMOs on human health and environmental well-being and that, under Article 5.7 of the SPS, this permitted precautionary measures such as import restrictions until better evidence is available. The Panel had a different technical interpretation of Article 5.7 but, more importantly, it ruled that the precautionary principle was too controversial and unsettled a concept to be deemed a general principle of law. In this, the Panel relied on the earlier EC – Hormones Appellate Body decision, which also noted that it was unclear whether the precautionary principle had been widely accepted by WTO members as a principle of general or customary international law.

By so ruling, the Panel interpreted the obligations of the SPS agreement without reference to any precautionary principle and reaffirmed that a restrictive measure said to be based on health or environmental concerns will have to be justified by science, and not by mere concerns or desires to be prudent.

If taken as precedent, this position could affect the regulation of many other industries. For example, the EC has proposed draft rules for testing the effects of certain industrial chemicals for their public health consequences. If those rules incorporate the precautionary principle, any resulting restrictions could be challenged for not being based on hard scientific evidence.

The Panel took a firm and arguably inconsistent approach to the effect of other international treaties on its interpretation of WTO rules. The Panel ruled that it only had to rely on other treaties if it found them useful, and that it was under no circumstances obliged to do so. Despite the fact that the Cartagena Protocol, ratified by 132 countries (although, as noted above, not by the Complaining Parties), is a comprehensive agreement specifically addressing genetically modified organisms, the Panel found that it did not need to consider it in interpreting the SPS Agreement. As part of its reasoning, the Panel found that, because the Complaining Parties were not parties to the Cartagena Protocol, the treaty was not applicable in their relations as WTO members.

A significant international legal debate exists regarding the relationship between the WTO and multilateral environmental agreements, such as the Cartagena Protocol. In previous WTO case law, such international agreements have been considered as part of the WTO-compliance analysis. The EC – Biotech ruling may signal that other treaties are only relevant when all parties to the dispute, or even possibly all WTO members, are parties to the other treaties. One strategy to minimize exposure to other countries’ trade restrictions would therefore be to withdraw from, or not sign on to, treaties which contemplate trade-limiting obligations or powers.

The Panel is now receiving comments from the Parties, and is expected to issue its final decision in September. That decision may be appealed to the WTO’s Apellate Body, which may uphold, modify or reverse the Panel’s legal findings. If the EC fails to comply with the recommendations contained in a Panel or Appellate Body Report, the United States, Canada and Argentina may seek and obtain WTO authorization to impose trade sanctions against the EC until it complies with its WTO obligations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.